Macroeconomics Final Exam

In 2017, the total population of Africa was estimated to be about 1,250,000,000 people. This number, in billions, is:

1.25

Dependencies between various people's choices reflect the fact that

society has limited resources

Which scenario describes a business that is not following the law of supply?

Automobiles fall in price, and Maria's Autorama Ltd. is now willing to sell more vehicles

Grapes become more expensive in the market. Which of the following can explain the increase in price?

Grape production is the same, but wine production has gone up, which requires more grapes

During 2017 and 2018, nominal GDP in the US grew by 4.3% and the rate of inflation was 1.9%. What was the growth rate of real GDP between the two years?

2.4%

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use raw milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Based on this scenario, can you identify the fixed costs for Amul Food Factory?

The cost of building the factory, purchasing the robotic assembly lines and industrial freezers

If Canadian consumers expect the value of the Canadian dollar to depreciate against the US dollar (the Canadian dollar becomes weaker against the dollar), what impact would we expect this to have on Canadians' demand for American made products?

The demand for American made items would fall

As a part of a market research project, you survey six random people to see how much gas per week they would buy at various prices. The data you collect is in the accompanying table. What is the change in the total demand for gasoline in your survey when the price changes from $2 per gallon to $2.50 per gallon?

The total quantity demanded in the market falls by 14 gallons

Dale is a stay-at-home-parent whose typical day consists of getting the kids ready for school, doing laundry, cooking three meals, and cleaning the house. How are Dale's home activities counted in GDP?

They are not counted

Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does the coffee shop receive when Kevin purchases the latte?

$1

In 1989, a four-year college degree would set you back $26,902. The consumer price index was 123.94 in January 1989. If the current consumer price index is 251.1, what is the cost of the four-year degree in current dollars?

$54,502.92

If India's GDP is approximately $2.597 trillion, and the population is 1.339 billion, what is the approximate GDP per person?

1,940

Jonathan Mendez is deciding whether to study for his economics exam at a café down the street or go to a concert a few cities over. The time spent commuting to the concert is ____ in his opportunity cost calculations and represents a _____ cost.

included; nonfinancial

The government passes a new investment tax credit initiative. Which input in the production function changes, and what is the effect on economic growth in the country?

the capital stock increases, and economic growth is positively affected

Which of the following would be considered part of aggregate output in the US?

the value of cars produced by Toyota in Ohio

What is Iceland's real GDP if its nominal GDP is $25.9 billion (in current US$) and the GDP deflator is 124.5?

$20.8 billion

You are thinking of starting a tutoring service. You already have a part-time job on campus that pays $20 per hour. You think you can tutor fellow students for five hours each Saturday at $25 per hour, and you have already printed $10 worth of flyers to hang on campus for advertising. If you were not tutoring, you could work another five hours at your campus job. How much economic surplus will you generate each week if you start tutoring?

$25

In 1979, when the consumer price index was 72.58, men earned a median income of $11,779 per year. If the consumer price index in 2015 was 236.99, how much was $11,779 in 2015 dollars?

$38,461

In 2017, Canada's GDP was approximately $1.57 trillion, and its population was about 36.96 million. What was Canada's approximate GDP per person in 2017?

$42,590

According to the rule of 70, if GDP per person is growing at a rate of roughly 4%, approximately how many years will it take for average income to double?

18 years

If the local construction company buys an industrial 3D printer, this expenditure is:

investment

In Canada, the Ontario government provides a tax credit to firms that spend on scientific research and experimental development. This tax credit will:

shift these firms' production functions upward through innovation and creative ideas

Paper producers can manufacture both printing and drawing paper. What effect would rising prices for printing paper have on the market for drawing paper?

the supply of drawing paper will decrease

Which people are not counted as part of the official measure of the labor force in the United States? (i) individuals under the age of 16 (ii) retirees (iii) institutionalized people (iv) those who are not working but getting job training

(i), (ii), & (iii)

Which of the following lists only the factors that would cause a decrease in the supply of an item?

A rise in input prices; a decrease in the number of sellers in the market; a rise in the price of a substitute in production

If an economy is a closed economy, then the equation for total spending is:

C + I + G

A new tannery opens in town. Although the tannery brings many new jobs, it is also dumping waste into the river. What shortcoming of GDP measurement does this reflect?

Environmental degradation is not counted

Substitutes-in-production

allows a business to have alternative uses of its resources by manufacturing other products using the same inputs

WinSun, a Chinese firm, began producing 3-D printed houses in late 2013. These houses were produced in a fraction of the time it would take to produce a house in the regular way and at a much lower cost. This is an example of:

an advance in technology leading to a rise in productivity

A firm that prepares and mails customer notices on behalf of banks has recently shifted from manually addressing letters to using a computer program that automatically inserts customer addresses and prepares letters. Thus, the production time for each letter has decreased from four minutes to just 30 seconds. This scenario is an example of:

an improvement in technology leading to a rise in productivity

Real GDP in 2016 measures:

current output at base year prices

A new economic report discusses the high probability that sugar prices will rise soon. The expectation of sugar prices rising soon will lead to

decreased supply today and a rise in sugar prices

One of the reasons that ideas can lead to sustainable and long-term economic growth is that they:

do not depreciate with use

Kia Motors announces a plan to produce Kia automobiles in Pakistan. How does this change economic growth in Pakistan?

economic growth increases due to capital accumulation

Which of the following is an inferior good? low quality frozen meals university textbooks restaurant a la carte dinners toll roads

low quality frozen meals

A constant returns to scale production function means that if all inputs are increased by 75%, this should lead to output:

rising by 75%

Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is:

substitution bias

Cedar point amusement park reduces its entry fees. As a result of this price fall,

the quantity demanded will be higher

What happens to the supply curve for new housing when there is a significant amount of new housing construction?

the supply curve will shift to the right

An involuntarily part-time worker is one who:

works part-time but wants to find a full-time job

Which of the following is an example of a durable good? fresh flowers from the florist your haircut your new car a soft drink

your new car

It is a beautiful afternoon, and you are considering taking a leisurely stroll through the park. Your alternatives to walking are streaming a movie that you value at $5, taking a nap that you value at $7, or reading a new book that you value at $12. What is the opportunity cost to you of taking the stroll through the park?

$12

Refer to the diagram of the circular flow of income. The key lessons from this diagram are that: (i) all flows of resources are matched by flows of money. (ii) the market value of total output must be equal to total spending. (iii) total spending must equal total income. (iv) all inputs are provided by businesses.

(i), (ii), and (iii)

The steady state in the Solow growth model occurs when:

investment equals depreciation

Ivan has inherited his grandmother's 1963 Chevy Corvette, which he values at $50,000. He decides that he might be willing to sell it, so he posts it on Craigslist for $55,000. Samantha is interested and willing to pay up to $72,000 for such a car. A voluntary economic exchange _____ between Ivan and Samantha because _____ positive economic surplus from the transaction.

occurs; both Ivan and Samantha receive

Which of the following encourages the development of new ideas and inventions?

patents

Henry Ford's $5 per day wage led to: (i) an increase in the number of workers willing to work at the Ford plant. (ii) workers who were more dedicated to their work. (iii) unemployment. (iv) lower total labor costs.

(i), (ii), (iii), &(iv)

You own and run a bakery. Last month, you purchased $760 worth of flour, eggs, butter, chocolate, and frosting. Using these inputs, you made and sold 12 large wedding cakes for an average price of $525. How much did GDP change?

GDP rises by $6,300

Marie Johnston is a manager at an electronics store and has to decide how many workers to hire. If she hires one worker, her revenue is $800 per day. If she hires another worker, she can make another $600 per day. The marginal benefit of hiring another worker decreases by $200 with each additional hire. Assuming that workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will be her total cost for labor?

She will hire four workers at a total cost of $640

David is looking for a full-time job in the insurance industry. He is able to find only a 10-hour per week job as a fill-in insurance agent. Davis can be described as:

an involuntary part-time worker

You run a factory that makes leather shoes. You opt to pay your workers twice the going wage in order to reduce tardiness and shirking and to increase workers' morale and effort. This scenario is an example of:

an efficiency wage

The U.S. Department of Education sponsors the i3 program (Investing in Innovation), which provides grants to educational institutions and schools that have a proven track record of high student achievement. This is an example of a government program designed to build:

human capital

Structural unemployment can be caused by: (i) efficiency wages (ii) union-determined wages (iii) minimum wage laws (iv) job protection regulations.

(i), (ii), (iii), & (v)

The Industrial Revolution led to: (i) increased intellectual pursuits. (ii) increased production of food. (iii) economic growth. (iv) a rise in inventions.

(i), (ii), (iii), and (iv)

Which of the following is (are) included in investment?(i) military spending (ii) the purchase of an aircraft by a domestic airline (iii) the purchase of $45,000 worth of bonds (iv) the purchase of $32,000 worth of stock (v) social security payments (vi) the construction of a highway by the federal government

(ii) only

The aggregate production function Y=f(L,H,K) shows that economic growth can occur if: (i) labor force participation rates fall (ii) human capital stays constant (iii) education and worker skills improve (iv) the depreciation rate increases

(iii) only

In December of 2018, West Virginia reported a civilian labor force of 784,574 people. The number of employed people was 744,178. What was the unemployment rate?

5.1%

You purchase a certificate of deposit that earns an advertised rate of 1.75% interest per year. What is your real rate of return if the actual inflation rate is 1.9%?

-0.15%

You open a savings account that pays 0.75% interest a year. What is your real rate of return if the inflation rate is 1%?

-0.25%

Meredith has purchased a guaranteed income certificate (GIC) in Canada. This financial instrument pays her 1% interest per year. However, inflation during the same year is 2%. What was Meredith's real interest rate on her GIC?

-1%

Which of the following is an example of hyperinflation?

An economy experiences inflation of more than 7,500% in one year.

Small differences in economic growth rates can lead to large differences in standards of living. Why is this the case?

Because of the cumulative effects of small differences in growth rates on real GDP over hundreds of years

What happens to the equilibrium price and quantity when demand decreases and at the same time supply increases, but the demand shift is relatively larger than the supply shift?

Both the equilibrium price and quantity will fall.

Sarah Sandoval is a coffee farmer trying to decide how many tons of coffee to produce. She can sell each ton of coffee for $2,500. The cost of producing the first ton of coffee is $500, for the second ton, it's $1000. For each additional ton of coffee produced, the marginal cost increases by $500. How many tons of coffee should Sarah produce, and what is the total cost of her coffee production?

She will produce five tons at a total cost of $7,500

What is the process that a manager can follow to estimate the total market demand for the US?

Survey some representative customers, find the total quantity demanded for those customers, scale up the quantities demanded to represent the entire market, and then plot the market demand curve

With the advent of cloud computing, different units within a business now share data much more easily. The sharing of data with their suppliers and distributors is also much more streamlined. This is an example of:

a rise in technology leading to an increase in efficiency

Southeast Asian countries experience high temperatures and high humidity during the monsoon seasons. This makes working conditions difficult. Because air conditioners are expensive and consume a lot of electricity, an alternative air cooler called an Eco-cooler was invented. This device does not use electricity, is made from readily available soda bottles, and works by funneling air into a room. This scenario is an example of:

a technological innovation that can increase labor productivity and thus increase economic growth

Graphically, shortages will always occur:

at prices below the equilibrium price.

Spending on rebuilding an interstate highway connecting New York City and Hartford, Connecticut, is an example of:

government expenditure

The rational rule for sellers says that a seller should sell one more unit of an item if the price is:

greater than or equal to the marginal cost

The law of diminishing returns means that production functions:

have slopes that increase at a decreasing rate

The Gross Domestic Product tends to overstate economic well-being in the US because it:

includes expenditures to offset or correct pollution problems

Jonathan Mendez is deciding whether to study for his economics exam at a café or go to a concert with friends tonight. The cost of the concert ticket that he purchased yesterday is ____ in his opportunity cost and represents a _____ cost.

not included; sunk

The CPI changes from 100 to 125. This means that:

overall prices are now 25% higher than they used to be

The Producer Price Index is an index that tracks the:

price that businesses pay over time for the inputs used in the production process

Technological advancement is NOT represented by:

the adoption of an existing technology by new firms

What would you expect to happen to the demand for a luxury good today, if the government announces it will stop taxing that luxury good next year?

the demand for the luxury good will shift to the left today

Rose Riley's parents have booked a family trip to Aspen, Colorado, during her spring break. They have agreed to pay for everything except her plane ticket. Rose's friends recently decided to drive to Destin, Florida, for spring break. Rose must now decide whether to join her parents in Aspen or drive to the beach with her friends. The opportunity costs of joining her parents in Aspen include each of the following EXCEPT

the nonrefundable deposit her friends paid for the beach house in Destin

Even if inflation exists, your purchasing power from one period to the next will stay intact if:

your pay rise exactly matches the rate of inflation