Quiz Q's 217

The incomes of consumers decrease in the market for an inferior good. As a result,

demand increases, equilibrium price rises and equilibrium quantity rises.

When consumers have a longer time to adjust to a change in price,

demand tends to be more elastic.

The cost of equipment that businesses use to produce a product increases in a market. As a result,

supply decreases, equilibrium price rises and equilibrium quantity falls.

n a market, several businesses go bankrupt and stop producing a product. As a result,

supply decreases, equilibrium price rises and equilibrium quantity falls.

Gross domestic product is the sum of

consumption, investment, government purchases, and exports, minus imports

The incomes of consumers increase in the market for an inferior good. As a result,

demand decreases, equilibrium price falls and equilibrium quantity falls

The incomes of consumers decrease in the market for a normal good. As a result,

demand decreases, equilibrium price falls and equilibrium quantity falls.

The elasticity of demand is

the amount that quantity changes in response to a change in price

An annual inflation rate of 4.5% would mean

the average of the prices in the market basket are 4.5% higher this year than last year.

The assumption that businesses are price takers means that

they must set their prices in line with what the market will bear

The natural rate of unemployment appears to be about

5%

If banks are charging an interest rate of 8%, and the expected inflation rate is 2%, the real interest rate is

6%

After you graduate you get a job paying $40,000 per year. Over the following three years a price index rises from 100 to 110. To maintain the purchasing power of your salary, how much must you be paid after three years? (Type your answer as a 5-digit number. Do not use a "$" sign.)

Correct Answer: Correct 44,000

How does nominal GDP differ from real GDP

Nominal GDP is measured in current prices, meaning the prices from the year the GDP is measured, while real GDP is measured in constant prices, meaning the prices from a "base year"

When price rises,

a business can make more profits by increasing production, even if less efficient resources must be used

Inflation is

a rise in the price level from one year to the next

An interest rate is

an added percentage that a borrower must repay a lender in addition to the amount borrowed

In the definition of Gross Domestic Product, the word "value" means

he quantity of each product produced is multiplied by its price, and added to GDP

Discouraged workers are

not counted as unemployed or as part of the labor force, because they have stopped searching for work

Demand is "elastic" if

quantity changes a lot when price changes.

Widgets and gadgets are substitute goods. The price of widgets increases. As a result,

the demand for gadgets increases, equilibrium price rises and equilibrium quantity rises

The population of a town decreases. As a result, in the market for houses,

the demand for houses decreases, equilibrium price falls and equilibrium quantity falls.

The unemployment rate is calculated as

the number of unemployed people as a percentage of the labor force

If there is a shortage in a market

the price is too low, so businesses produce less than consumers want to buy

If nominal GDP declines from one year to the next either

the price level has decreased, or output has decreased, or both

The core rate of inflation excludes

the prices of energy and food because they are especially volatile.

In a market, if the price is higher than the equilibrium price

the quantity supplied exceeds the quantity demanded, so there is a surplus