Exam 2

The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is

price

The demand curve shows the relationship between:

price and quantity demanded

The law of demand states, other things equal,

price and quantity demanded are inversely related

Banks and other financial institutions:

promote economic growth by helping to direct household saving to businesses that want to invest.

If we say that a price is too high to clear the market, we mean that:

quantity supplied exceeds quantity demanded

When economists refer to "investment," they are describing a situation where:

resources are devoted to increasing future output

If products C and D are close substitutes, an increase in the price of C will:

shift the demand curve for D to the right

If the price of gasoline increases significantly, then we'd expect the demand curve for large trucks and SUVs to

shift to the left

If the price of product L increases, the demand curve for close-substitute product J will:

shift to the right

Shocks

situations in which they were expecting one thing to happen but then something else happened

economic investment

spending that pays for the production of newly created capital goods like factories..

An increase in the price of product B leads to an increase in the demand for product C. This indicates that products B and C are

substitute goods

Real GDP measures

value of final goods and services produced within the borders of a country, adjusted for price changes.

An increase in the price of a product will reduce the amount of it purchased because

consumers will substitute other products for the one whose price has risen

Savings are generated whenever:

current income exceeds current spending.

The relationship between quantity supplied and price is ______ and the relationship between quantity demanded and price is ______.

direct; inverse

A surplus indicates that the quantity demanded is greater than the quantity supplied at that price (T/F)

false

Along a supply curve, product price and producer surplus are inversely related (T/F)

false

Any person without a job is considered to be unemployed. (T/F)

false

Buying 100 shares of Google stock is an example of economic investment(T/F)

false

Economists and policymakers are generally more concerned about nominal GDP than real GDP. (T/F)

false

If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment(T/F)

false

Real GDP is calculated using current prices of outputs (T/F)

false

Shocks occur when actual events do match expectations. (T/F)

false

Surpluses drive market prices up; shortages drive them down. (T/F)

false

The business cycle is primarily concerned with changes in the level of overall prices over time. (T/F)

false

Toothpaste and toothbrushes are substitute goods(T/F)

false

Business cycle

fluctuation in output and employment

Higher rates of unemployment are linked with:

higher crime rates as the unemployed seek to replace lost income.

A market is in equilibrium

if the amount producers want to sell is equal to the amount consumers want to buy.

Suppose that goods A and B are close substitutes. If the price of good A falls, then we would expect an

increase in the quantity demanded A and a decrease in the quantity demanded B

Which of the following would and economist consider to be investment?

Boeing builds a new factory Oprah buys a $10 million home from a fellow celebrity A stockbroker buys $10,000 shares of Starbucks stock All of these choices are correct ANSWER: Boeing builds a new factory

Which of the following is an example of a demand shock: A) Hurricane Harry knocks out oil drilling platforms in the Gulf of Mexico B) Floods in the Midwest destroy crops C) The federal government unexpectedly requires automobile producers to raise fuel efficiency standards D) Consumers become worried about job loss and buy fewer goods and services than expected

Consumers become worried about job loss and buy fewer goods and services than expected

At the end of the summer driving season, the demand for gasoline typically declines. This is an example of a negative demand shock. (T/F)

False

In 2017, China's GDP per person was almost as high as that of the United States(T/F)

False

If an economy wants to increase its current level of investment, it must

Sacrifice current consumption

Higher unemployment rates are linked with higher crime rates and higher rates of physical and mental illness (T/F)

TRUE

financial investment

The purchase of a financial asset or real asset or the building of such assets in the expectation of financial gain. EX) stock purchasing

If the newspapers report that there is a shortage of strawberries, it must mean that the current price of strawberries Is below the equilibrium price. (T/F)

True

In order to achieve modern economic growth, a nation's output must grow faster than its population (T/F)

True

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by

a change in buyer tastes

If two goods are complements:

a decrease in the price of one will increase the demand for the other.

Unemployment describes the condition where:

a person cannot get a job but is willing to work and is actively seeking work.

Inflation is defined as

an increase in the overall level of prices

Markets, viewed from the perspective of the supply and demand model:

assume many buyers and many sellers of a standardized product

If the price of Pepsi decreases, other factors constant, then we'd expect to see a consequent shift of the demand curve for

coke to the left

Increased present saving

comes at the expense of reduced current consumption.

Blu-ray players and Blu-ray discs are:

complementary goods

Running shoes and staplers are

independent goods.

If there is a surplus of a product, its price:

is above the equilibrium level.

A market

is an institution that brings together buyers and sellers

Which of the following is most closely related to recessions?

negative real growth in output

The term "recession" describes a situation where

output and living standards decline

Other things equal, which of the following might shift the demand curve for gasoline to the left? A) the discovery of vast new oil reserves in Montana B) the development of low-cost electric automobile C) an increase in the price of train and air transportation D) a large decline in the price of automobiles

the development of low-cost electric automobiles

Macroeconomics is mostly focused on

the economy as a whole

If there is a shortage of product X, and the price is free to change:

the price of the product will rise

When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls and fewer adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls?

the substitution effect

A government subsidy per unit of output increases supply (T/F)

true

A government tax per unit of output reduces supply. (T/F)

true

Along a demand curve, product price and consumer surplus are inversely related (T/F)

true

Citizens living in the richest nations today have material standards of living that are on average more than 50 times higher than people living in the poorest countries (T/F)

true

If there is a surplus in a market, competition among the sellers will drive the price down (T/F)

true

Inflation refers to an increase in the overall level of prices (T/F)

true

Savings are generated when current consumption is less than current income(T/F)

true

The development of a new production technique that lowers the cost of producing 3-D movies will shift the supply curve of 3-D movies to the right. (T/F)

true