Macro exam 1 & 2
A very simple economy produces three goods: movies, burgers, and bikes. The quantities produced and their corresponding prices for 2017 and 2020 are shown in the table. What is real GDP in 2020, using 2017 as the base year?
$6,360
Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals
$8,750.
The table reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. The real average hourly earnings for 1965 in 1982-1984 dollars equal
$8.28.
If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate is
-3%.
Consider the data on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 2020 equals
108.5.
If real GDP perc capita grows at a rate of 5%, approximately how long will it take for real GDP per capita to double?
14 years
Assume the market basket for the consumer price index has two products, meat and potatoes, with the following values in 2013 and 2020 for price and quantity: The Consumer Price Index for 2020 equals
141.
If the economy is currently producing at point X, what is the opportunity cost of moving to point W?
3 million tons of steel
Consider the values of the consumer price index for 2019 and 2020. The inflation rate for 2020 was equal to
3.9%.
If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is
80%.
If an increase in the price of Good A causes the demand for Good B to decrease, this means
A and B are complements.
____ behavioral assumption about humans was that people usually act in a rational, self-interested way.
Adam Smith's
Assume that supply increases greatly and demand increases slightly. Which of the following will happen?
Equilibrium price will fall and equilibrium quantity will rise.
The table shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. If the two countries specialize and trade, who should export lumber?
Estonia
Which of the following is a positive economic statement?
If the price of gasoline rises, a smaller quantity of it will be bought.
Which of the following will discourage investment and slow economic growth?
Monetary instability and high inflation
Assume prices in the economy increase over time. In years before the base year
Real GDP is greater than nominal GDP.
Economic choice is the result of
Scarcity
Which of the following is a positive economic statement?
The minimum wage law causes unemployment.
Which of the following is a macroeconomics question?
What determines the unemployment rate?
Trade-offs force society to make choices when answering what three fundamental questions?
What goods and services to produce; how will these goods and services will be produced; and who receives them?
Farmers can plant either corn or soybeans in their fields. Which of the following would cause the supply of soybeans to increase?
a decrease in the price of corn
If a decrease in income leads to in a decrease in the demand for ice cream, then ice cream is
a normal good.
Structural unemployment is the result of
a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs.
Hurricane Katrina damaged a large portion of refining and pipeline capacity in August 2005. As a result, many gasoline distributors were not able to maintain normal deliveries. What happened after the hurricane but at the initial equilibrium price? At the pre-hurricane (initial) equilibrium price, we would expect to see
a shortage of gasoline.
Hurricane Katrina damaged a large portion of refining and pipeline capacity when it swept through the Gulf coast states in August 2005. As a result of this, many gasoline distributors were not able to maintain normal deliveries. At the pre-hurricane equilibrium price (i.e., at the initial equilibrium price), we would expect to see
a shortage of gasoline.
If, in response to a decrease in the price of coffee, the quantity demanded of coffee increases, economists would describe this as
an increase in quantity demanded.
Economic models
are simplified versions of reality.
The ____ production points on a production possibility curve are the points along and inside the production possibility frontier.
attainable.
In a market economy, who decides what goods and services will be produced?
consumers and producers
When actual inflation is less than expected inflation
borrowers lose and lenders gain.
The period of expansion ends with a ____ and the period of recession ends with a ____.
business cycle peak; business cycle trough
The total amount of physical capital available in a country is know as the country's
capital stock.
One of the most fundamental concepts in economics is that
changes in incentives influence behavior in predictable ways.
Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?
consume a combination of goods that lies outside its own production possibilities frontier
The size of the underground economy would tend to decrease if the government of a country
decreased government regulations on businesses.
There is often a trade-off between
economic efficiency and economic equity.
Gross domestic product understates the total production of final goods and services because of the omission of
household production
Studies have shown that drinking one glass of red wine per day may help prevent heart disease. Assume this is true, and a fungal disease destroys a large portion of the grape harvest of California vineyards. In the market for red wine, these two developments would
increase demand and decrease supply, resulting in an increase in the equilibrium price and an uncertain effect on the equilibrium quantity of red wine.
During the recession phase of the business cycle
interest rates are usually falling.
The purchase of a new house is included in
investment expenditures.
A supply curve
is a curve that shows the relationship between the price of a product and the quantity of the product supplied.
The measure of production that values production using current prices is called
nominal GDP.
A full-time student who is not working is categorized as
not in the labor force.
If the production possibilities frontier is linear, then
opportunity costs are constant as more of one good is produced.
Economists assume that
optimal decisions are made at the margin.
The nominal interest rate equals the real interest rate ____ the inflation rate.
plus
In terms of economic growth, the key measure of the standard of living is
real GDP per capita
A critical function of the government in facilitating the operation of a market economy is
setting up and enforcing private property rights.
If the citizens of a country were to work harder and take less leisure time, it would
shift the production possibilities frontier outward.
Increasing opportunity cost along a bowed out production possibilities frontier occurs because
some factors of production are not equally suited to producing both goods or services.
According to the World Bank, Albania does one of the worst jobs as a country enforcing the rule of law. The consequence of a weak rule of law is
strong property rights enforcement leading to greater investment.
If advances in robotics, automation, and artificial intelligence lead to the elimination of jobs, and the people who held those jobs need to learn new skills to find new jobs, those people would be considered
structurally unemployed
The broadest measure of the price level that includes all final goods and services is
the GDP deflator.
When economists say the demand for a product has decreased, they mean
the demand curve has shifted to the left.
The opportunity cost of taking an on-line history class is
the knowledge and enjoyment you receive from taking the class. equal to the highest value of an alternative use of the time and money spent on the class.
Potential GDP refers to
the level of GDP attained when all firms are producing at capacity.
What two factors are the keys to determining labor productivity?
the level of technology and the quantity of capital per hour worked
The production possibilities frontier shows
the maximum attainable combinations of two products that may be produced in a particular time period with available resources
"A decrease in the number of manufacturers caused a decrease in the supply of sailboats. As a result. ____."
the price of sailboats increased and the quantity demanded of sailboats decreased.
An example of an intermediate good would be
the rims on a new car.
Gross domestic product is calculated by summing up
the total market value of final goods and services produced in the economy during a period of time.
Suppose in 2022, you purchase a house built in 2014. Which of the following would be included in the gross domestic product for 2022?
the value of the services of the real estate agent
The price of a good will tend to fall when
there is excess supply of the good.
The table shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens. What is Jack's opportunity cost of mowing a lawn?
two-thirds of a garden cultivated
Scarcity refers to the situation in which
unlimited wants exceed limited resources.
