Econ Study Final Part 1 (Del)
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Terms in this set (108)
A movement along the production possibilities curve would imply that:
society has chosen a different set of outputs
The simple circular flow model shows that workers, entrepreneurs, and the owners of land and capital offer their services through:
Economics is the study of:
how people, institutions, and society make choices under conditions of scarcity
Which is a factor of production?
What to produce in a market economy is ultimately determined by the:
spending decisions of households
Which situation would most likely cause a nation's production possibilities curve to shift inward?
the destruction from bombing and warfare in a losing military conflict
Another term for capitalism is:
the market system
Are the goods that businesses offer for "free" to consumers also free to society?
No, because scarce resources were used to produce the free goods.
Markets in which firms sell their output of goods and services are called:
Which situation would most likely shift the production possibilities curve for a nation in an outward direction?
an increase in the supply of resources
What is the largest source of earned income for U.S. households?
Wages and salaries
The purpose of the ceteris paribus assumption used in economic analysis is to:
restrict the analysis to the effect of a single economic factor
The Soviet Union economy of the 1980s would best be classified as:
a command system
Over half of U.S. consumer expenditures are for what?
Approximately what percentage of U.S. firms are sole proprietorships?
Which of the following is most likely to be an inferior good?
Black markets are associated with:
price ceilings and the resulting product shortages
An increase in product price will cause:
quantity demanded to decrease
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
If an effective price ceiling is placed on hamburgers then:
the quantity demanded will exceed the quantity supplied.
a black market for hamburger may evolve.
consumers may want government to ration hamburger.
All of these are likely outcomes.
Refer to the above diagram. A surplus of 160 units would be encountered if price was:
At the point where the demand and supply curves intersect:
there is neither a surplus nor a shortage of the product
Refer to the above diagram, which shows three demand curves for coffee. Which would cause the change in the demand for coffee illustrated by the shift from D1to D3?
A decrease in the price of tea
Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived he discovered that hamburgers were on sale for $1, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by:
the income effect
An effective price ceiling will:
result in a product shortage
If a product is in surplus supply, its price:
is above the equilibrium level
In which of the following statements are the terms "demand" and "quantity demanded" used correctly?
When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell
An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:
bicycles are normal goods.
A market is in equilibrium:
if the amount producers want to sell is equal to the amount consumers want to buy
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
The knowledge and skills that make a productive worker are referred to by economists as:
The factor accounting for the largest increase in the productivity of labor in the United States has been:
One major aspect of the socio-cultural-political environment of the United States which has generally been conducive to economic growth is the:
Favorable attitude toward work and risk-taking
Economic growth can best be portrayed as a:
Rightward shift of the production possibilities curve
To avoid multiple counting in national income accounts, only:
Final goods and services should be counted
Which factor has most affected productivity growth since 1929?
Quantity of capital
GDP in an economy is $11,050 billion. Consumer expenditures are $7,735 billion, government purchases are $1,989 billion, and gross investment is $1,410 billion. Net exports are:
The annual growth of U.S. labor productivity:
was greater between 1995 and 2007 than between 1973 and 1995.
The following are national income account data for a hypothetical economy in billions of dollars: government purchases ($940); personal consumption expenditures ($4,920); imports ($170); exports ($133); gross private domestic investment ($640). What is GDP in this economy?
Net exports is a positive number when:
A nation's exports of goods and services exceed its imports
If the secular trend of labor productivity is 3 percent per year, the number of years that it will take for the standard of living to double will be about:
Money spent on the purchase of a new house is included in the GDP as a part of:
The monetary value of all final goods and services produced by the United States economy during a year is:
An example of a final good in national income accounts would be new:
Flowers purchased by homeowner Lenny Davis
"Show me a pastoral society with an untouched environment, an abundance of leisure, and nonsecular values, and I will show you an underdeveloped, poverty-ridden country." This statement is most likely to be made by a(n):
Proponent of economic growth
Which of the following is a private transfer payment?
A check for $100 sent by a parent to a daughter at college
The case against economic growth is often made using which of the following arguments?
Economic growth permits us to "make a living," but it does not provide us with "the good life".
In the expansion phase of a business cycle:
Employment and output increase
From an economic perspective, when a student decides to attend another year of college, the student has concluded that the marginal:
benefits of attending college are greater than the marginal costs.
Along a production possibilities curve, an increase in the production of one type of good can be accomplished only by:
decreasing the production of the other type of good.
Data from the registrar's office at Gigantic State University indicate that over the past twenty years tuition and enrollment have both increased. From this information we can conclude that:
school-age population, incomes, and preferences for education have changed over the twenty-year period.
A worker who loses a job at a call center because business firms switch the call center to another country is an example of:
Which represents an expenditure in the circular flow of domestic output and national income?
The payment of military salaries by the government
Some economists prefer to use the term business fluctuations rather than business cycles to describe the historical growth record in the United States because:
Cycles imply regularity while fluctuations do not
College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start their careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:
If there is a shortage of product X:
the price of the product will rise.
Price ceilings and price floors:
interfere with the rationing function of prices.
Assuming the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, the unemployment rate is:
Exports less imports may be defined as:
Which industry or sector of the economy would least likely be affected by the business cycle?
If an economy is producing at a point inside a production possibilities curve:
resources are unemployed.
Consumer sovereignty and "dollar votes" are most related to which fundamental question about a competitive market system?
What goods and services will be produced?
Which would not be characteristic of a capitalist economy?
government ownership of the factors of production
The primary focus of the study of economics is with:
making the most efficient use of scarce productive resources.
Negative economic growth can be shown as a:
Leftward shift of the production possibilities curve
The recurrent ups and downs in the level of economic activity extending over several years are a description of:
A business cycle
A statement that is often used to describe demand-pull inflation is:
"Too much money chasing too few goods"
The money income of households consists of the sum of:
wages plus rents plus interest plus profits.
A recession is a decline in:
GDP that lasts six months or longer
GDP is the market value of:
All final goods and services produced in an economy in a given year
Which of the following would not shift the demand curve for beef?
a reduction in the price of cattle feed
If the secular trend of labor productivity is 3 percent per year, the number of years that it will take for the standard of living to double will be about:
GDP tends to underestimate the productive activity in the economy because it excludes the value of output from:
The underground economy
Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be:
0F and 0C respectively.
Assuming conventional supply and demand curves, changes in the determinants of supply and demand will:
in all likelihood alter both equilibrium price and quantity.
Which of the following would be included in a given year's GDP calculations?
a. The herbs that you grow in your garden for family consumption.
b. Your services for helping your sister mow her lawn.
c. The money you receive when you sell your macroeconomics textbook at the end of the course.
Explain why they are or are not included in GDP.
a. Not included - does not pass through the market
b. Not included - possibly trade by barter; transaction does not pass through the market
c. Not included - resold goods do not count towards GDP
Discuss three features or characteristics of the Market System.
Private Property, Freedom of Enterprise and Choice, Self-Interest, Competition, Markets and Prices, Technology and Capital Goods, Specialization, Use of Money, Active, but Limited, Government.
What effect will each of the following have on the supply of auto tires?
a. A technological advance in the methods of producing tires.
b. A decline in the number of firms in the tire industry.
c. An increase in the price of rubber used in the production of tires.
a. Supply will increase because the technological advance allows the tire manufacturers to produce more tires using the same amount of inputs.
b. Supply will decrease because there are fewer firms in the industry.
c. Supply will decrease because the increase in the price of rubber results in an increase in production costs. Thus, each firm will need to charge a higher price at each level of output (or supply less at each price).
Suppose that the demand and supply schedules for rental apartments in the city of Gotham are as given in the table below.
$2500 10,000 15,000
2000 12,500 12,500
1500 15,000 10,000
1000 17,500 7500
500 20,000 5000
a. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied?
b. If the local government can enforce a rent-control law that sets the maximum monthly rent at $1500, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?
c. Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2500 per month. If the government can enforce that price floor, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?
a. The market equilibrium price is determined by the relationship quantity supplied equals quantity demanded. To find the equilibrium price, we find the price where the quantities are equal, which occurs at the rent (price) of $2,000. The equilibrium quantity at this price is 12,500 apartments.
b. If the government imposes a maximum rent of $1,500, the quantity of apartments supplied equals 10,000 and the quantity of apartments demanded equals 15,000. Thus, there is a shortage of 5,000 apartments (= 15,000 (demand) - 10,000 (supply)). The amount of apartments actually rented will be determined by supply here. There are only 10,000 available for rent, so only 10,000 will be rented
c. If the government imposes a minimum rent of $2,500, the quantity of apartments supplied equals 15,000 and the quantity of apartments demanded equals 10,000. Thus, there is a surplus of 5,000 apartments (= 15,000 (supply) - 10,000 (demand)). The amount of apartments actually rented will be determined by demand here. There are only 10,000 households that want to rent, so only 10,000 will be rented.
Which event would most likely increase aggregate demand?
A depreciation of the dollar
An increase in aggregate demand is most likely to be caused by a decrease in:
the tax rates on household income.
Other things being equal, a reorganization of the OPEC cartel to permit it to increase world oil prices by 70 percent would most likely have which effect?
It would shift the aggregate supply curve left
The aggregate demand curve is the relationship between the:
Price level and the purchasing of real domestic output
Which would be one of the factors that increase aggregate demand?
An increase in consumer wealth
A decline in the quantity of real output demanded along the aggregate demand curve is a result of a(n):
Increase in the price level
The upward slope of the short-run aggregate supply curve is based on the assumption that:
Nominal wages and other resource costs do not respond to price level changes
The labels for the axes of an aggregate supply curve should be:
Real domestic output for the horizontal axis and price level for the vertical axis
The magnification of small changes in spending into larger changes in output and income is produced by:
The multiplier effect
Refer to the above graph. This economy is at equilibrium:
(Graph shows two intersecting lines. They intersect at P2 and Q2)
Price level P2 and output Q2
An aggregate supply curve shows the:
Level of real domestic output which will be produced at each possible price level
Cost-push inflation occurs because of a:
Leftward shift in the aggregate supply curve
An increase in productivity will:
Increase aggregate supply
The intersection of the aggregate demand and aggregate supply curves determines the:
Equilibrium level of real domestic output and prices
An expansionary fiscal policy may be:
Partially offset by the crowding-out effect
One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy:
Is not subject to the timing problems of discretionary policy
Which is an important consequence of the public debt of the United States?
It leads to fewer incentives to bear risk and innovate
One timing problem with fiscal policy to counter a recession is an "administrative lag" that occurs between the:
Time the need for the fiscal action is recognized and the time that the action is taken
A Federal budget deficit exists when:
Federal government spending exceeds tax revenues
Expansionary fiscal policy is so named because it:
is designed to expand real GDP.
When changes to taxes and spending occur in the economy without explicit action by the Federal government, such policy is:
As the economy declines, the collection of personal income tax revenues automatically falls. This relationship best describes how the progressive income tax system:
Provides built-in stability for the economy
Which is an example of an automatic stabilizer? As real GDP decreases, income tax revenues:
Decrease and transfer payments increase
Which is regarded as an automatic stabilizer in the economy?
The progressive income tax
Discretionary fiscal policy refers to:
changes in taxes and government expenditures made by Congress to stabilize the economy.
One timing problem with fiscal policy to counter a recession is an "operational lag" that occurs between the:
Time fiscal action is taken and the time that the action has its effect on the economy
In 2010, the public debt was about
The crowding-out effect works through interest rates to:
Decrease the effectiveness of expansionary fiscal policy
Fiscal policy refers to the:
manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.