Macro Final

All of the following are costs of inflation EXCEPT _____ costs. A) menu B) shoe-leather C) unit-of-account D) minimum wage

D) minimum wage

(Figure: The Market for Hybrid Cars) Look at the figure The Market for Hybrid Cars. What area represents consumer surplus if there is a binding price floor at P1? A) a B) a + b C) a + b + c D) a + b + d

A) a

Which is NOT a source of comparative advantage? A) In general, France has absolute advantage over Italy in production of goods and services. B) The United States' technology for computer chip design is more advanced than India's. C) Hawaii has a more favorable climate to grow pineapple than Italy. D) In the market for lumber, Canada has many more trees than England.

A) In general, France has absolute advantage over Italy in production of goods and services.

Which is most likely a macroeconomic, not microeconomic, question? A) Is the national unemployment rate rising or falling? B) Are consumers buying more bottled water and less fruit juice? C) Are salaries for nurses rising or falling? D) Should a tax be levied on each ton of carbon dioxide a factory emits?

A) Is the national unemployment rate rising or falling?

If the actual inflation rate is less than the expected inflation rate (which means there is unexpected decrease of inflation rate), it will _____ lenders and _____ borrowers. A) benefit; hurt B) hurt; benefit C) not affect; benefit D) benefit; not affect

A) benefit; hurt

(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. The movement from curve 1 to curve 2 indicates: A) economic growth. B) a change from unemployment to full employment. C) a decrease in the level of technology. D) instability.

A) economic growth.

According to the Heckscher-Ohlin model, Brazil will have a comparative advantage in producing oranges if the factors _____ in the production of oranges are _____. A) intensive; abundant B) intensive; imported C) that are scarce; imported D) intensive; inexpensive

A) intensive; abundant

A binding price ceiling is designed to: A) keep prices below the equilibrium level. B) increase the quality of the good. C) prevent shortages. D) increase efficiency.

A) keep prices below the equilibrium level.

A simplified representation that is used to study a real situation in economics is called a(n): A) model. B) production possibility frontier. C) assumption. D) trade-off.

A) model.

Falling inventories typically indicate _____ unplanned inventory investment and a _____ economy. A) negative; growing B) negative; slowing C) positive; growing D) positive; slowing

A) negative; growing

Actual investment equals planned investment: A) plus unplanned investment. B) minus unplanned investment. C) times unplanned investment minus inventory investment. D) none of the above.

A) plus unplanned investment.

The most likely reason that the government implements a _____ is because it feels the price is too high for _____. A) price ceiling; consumers B) price floor; consumers C) price ceiling; producers D) price floor; producers

A) price ceiling; consumers

If real GDP falls while nominal GDP rises, then this indicates prices on average have: A) risen. B) fallen. C) stayed the same. D) Real GDP cannot rise when nominal GDP falls

A) risen.

Economists say that long-run economic growth is almost entirely due to: A) rising productivity. B) population growth. C) a democratically elected government. D) a balanced budget

A) rising productivity.

GDP is the: A) total market value of all final goods and services produced in an economy in one year. B) total accumulated wealth of an economy. C) volume of all dollar transactions made in an economy in one year. D) dollar amount of all sales made in the economy in one year.

A) total market value of all final goods and services produced in an economy in one year.

Which of the following is a positive economic statement? A) Government has grown too large and should be reduced. B) There has been an increase in the rate of inflation. C) Government should be subject to the same rules as all other institutions. D) Women should be paid as much as men for the same work.

B) There has been an increase in the rate of inflation.

Suppose that the nominal rate of interest is 8% and the inflation rate is 4%. The real rate of interest is: A) 3%. B) 4%. C) 10%. D) 7%.

B) 4%.

Which of the following best describes demand? A) A change in demand is a movement along the demand curve, and a change in quantity demanded is a shift in the demand curve. B) A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve. C) Both a change in quantity demanded and a change in demand are shifts in the demand curve, only in different directions. D) Both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions

B) A change in quantity demanded is a movement along the demand curve, and a change in

If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 pairs, and Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that _____ has an absolute advantage in _____. A) Laurence; programs but not in sunglasses. B) Laurence; both programs and sunglasses. C) Carrie Anne; programs but not in sunglasses. D) Carrie Anne; both programs and sunglasses.

B) Laurence; both programs and sunglasses.

Suppose that supply increases and demand decreases. What is the most likely effect on price and quantity? A) The price will increase, but quantity may increase, decrease, or stay the same. B) The price will decrease, but quantity may increase, decrease, or stay the same. C) The price will decrease and quantity will decrease. D) The price will increase and quantity will increase

B) The price will decrease, but quantity may increase, decrease, or stay the same.

. A minimum price that the government guarantees farmers will receive for a particular crop is: A) a price ceiling. B) a price floor (price support). C) a deficiency price. D) an export price (export subsidy).

B) a price floor (price support).

Which of the following will raise the price of milk? A) a shift to the right of the supply curve for milk B) a shift to the right of the demand curve for milk C) an increase in the number of milk suppliers D) a decrease in the number of milk buyers

B) a shift to the right of the demand curve for milk

If the supply and demand curves intersect at equilibrium price $47, then any price above that would result in: A) a shortage. B) a surplus. C) equilibrium. D) an increase in demand.

B) a surplus.

(Figure: The Market for Loanable Funds II) Look at the figure The Market for Loanable Funds II. If the interest rate is lower than 8%, the quantity supplied of loanable funds will _____ the quantity of loanable funds demanded. A) be greater than B) be less than C) equal D) The quantity

B) be less than

Monetary policy attempts to affect the overall level of spending through: A) changes in the inflation rate. B) changes in the quantity of money and the interest rate. C) changes in tax policy or government spending. D) discretionary regulation of profits and wages.

B) changes in the quantity of money and the

When the economy is at the natural rate of unemployment, then _____ is zero. A) actual unemployment B) cyclical unemployment C) frictional unemployment D) structural unemployment

B) cyclical unemployment

Both price ceiling and price floor will _______ the total quantity of products traded in the market. A) increase B) decrease C) not change D) none of the above

B) decrease

If goods A and Z are complements, an increase in the price of good Z will: A) increase the demand for good A. B) decrease the demand for good A. C) decrease the demand for good Z. D) decrease the demand for both good A and good Z.

B) decrease the demand for good A.

10. To be classified as unemployed, a person must be: A) not working. B) not working and actively looking for a job in the past four weeks. C) not working or working part-time but wishing to be working full-time. D) not working and actively looking for a job in the past four weeks or discouraged and not actually looking for a job.

B) not working and actively looking for a job in the past four weeks

. The standard of living in a country can be best measured by: A) nominal GDP per capita. B) real GDP per capita. C) the productivity growth rate. D) the business cycles.

B) real GDP per capita.

The savings-investment spending identity says that: A) each person in the economy must invest as much as he or she saves. B) savings and investment spending are equal for the economy as a whole. C) savings must equal government investment for the economy as a whole. D) each person in the economy must save as much as he or she invests.

B) savings and investment spending are equal for the economy as a whole.

(Figure: Strawberries and Submarines) Look at the figure Strawberries and Submarines. Suppose the economy is operating at point G. This implies that: A) the economy can move to a point such as C only if it improves its technology. B) the economy has unemployment and/or inefficiently allocates resources. C) the economy lacks the resources to achieve a combination such as C. D) none of the above.

B) the economy has unemployment and/or inefficiently allocates resources.

Scenario: Aggregate Consumption Equation Suppose that the aggregate consumption function is given by the equation C = 200 + 0.8YD, where C represents consumption and YD represents disposable income. 22. (Scenario: Aggregate Consumption Equation) Look at the scenario Aggregate Consumption Equation. If disposable income increases by $300, aggregate consumption will increase by: A) $0. B) $200. C) $240. D) $440.

C) $240.

The role of the government can explain growth differences among countries. All of the following are government actions that contribute to differences in growth EXCEPT: A) an active role in building infrastructure. B) significant cost sharing for higher education. C) excessive intervention in business practices and licensing. D) emphasis on research and development projects

C) excessive intervention in business practices and licensing.

The aggregate price level is the: A) average price of shares on the stock market. B) average price of inputs. C) overall level of prices. D) same as the average price of gasoline.

C) overall level of prices

A key theme fundamental to all of economics is that: A) wants are limited. B) the United States is a rich country, but we are simply not aware of it. C) people have unlimited wants but limited means/resources to satisfy them. D) resources are unlimited.

C) people have unlimited wants but limited means/resources to satisfy them.

. We are forced to make choices because of: A) exploitation. B) efficiency. C) scarcity. D) the margin.

C) scarcity.

. If all of the households and businesses start saving more during economic hard times, then aggregate income will fall, hurting everyone in the economy. This is known as: A) the quantity theory. B) the crowding-out. C) the paradox of thrift. D) the permanent income hypothesis.

C) the paradox of thrift.

Macroeconomics deals with: A) bits and pieces of the economy. B) how a business unit should operate profitably. C) the working of the entire economy or large sectors of it. D) how individuals make decisions.

C) the working of the entire economy or large sectors of it.

During a recession: A) unemployment and the growth rate of real GDP both decrease. B) unemployment decreases and the growth rate of real GDP increases. C) unemployment increases and the growth rate of real GDP decreases. D) there is no relation between unemployment and the growth rate of real GDP.

C) unemployment increases and the growth rate of real GDP decreases.

Which of the following will NOT increase the productivity of labor? A) technological improvements B) an increase in the capital stock C) improvements in education D) an increase in the size of the labor force

D) an increase in the size of the labor force

A business cycle is a: A) very deep and prolonged economic downturn. B) period in which output and employment are rising. C) period in which output and employment are falling. D) short-run alternation between economic upturns and downturns.

D) short-run alternation between economic upturns and downturns.

Opportunity cost is: A) about half of the monetary cost of a product. B) the dollar payment for a product. C) the benefit derived from a product. D) the value of the best alternative forgone in making any choice.

D) the value of the best alternative forgone in making any choice.

Free international trade between countries: A) should be based on absolute advantage. B) will allow wealthy countries to exploit less developed nations. C) will reduce the total production. D) will allow for greater levels of consumption than without trade

D) will allow for greater levels of consumption than without trade

Which of the following would NOT be included in this year's GDP? A) the production of a television show B) the purchase of a new hybrid truck C) the hiring of a new schoolteacher D) your purchase of your neighbor's house, which was built in 1994

D) your purchase of your neighbor's house, which was built in 1994