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Macro Semester Final

Terms in this set (63)

Resources are
scarce for households and scarce for economies.
What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?
scarcity
Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that
people face tradeoffs.
When society requires that firms reduce pollution, there is
a tradeoff because of reduced incomes to the firms' owners and workers.
Efficiency means that
society's goods and services are distributed equally among society's members.
The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that
equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
For which of the following individuals would the opportunity cost of going to college be highest?
A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree
You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should
compare the cost of staying one more semester to the benefits of staying one more semester.
Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should
sell the ticket because the marginal benefit exceeds the marginal cost.
An economy's production of two goods is efficient if
it is impossible to produce more of one good without producing less of the other.
Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that
the nation is not using all available resources or is using inferior technology or both.
The production possibilities frontier provides an illustration of the principle that
people face trade-offs.
The bowed-outward shape of the production possibilities frontier can be explained by the fact that
the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.
The most obvious benefit of specialization and trade is that they allow us to
consume more goods than we otherwise would be able to consume.
If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then
Iowa has a comparative advantage in the production of corn.
If Shawn can produce more donuts in one day than Sue can produce in one day, then
Shawn has an absolute advantage in the production of donuts.
If Korea is capable of producing either shoes or soccer balls or some combination of the two, then
Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.
Suppose that in Australia, it takes 2 hours to harvest 10 bushels of apples and 4 hours to harvest 10 bushels of tomatoes. Suppose a worker in Brazil can harvest 10 bushels of apples in 4 hours or 10 bushels of tomatoes in 5 hours.
Which country has the absolute advantage in producing apples?
Australia
Suppose that in Australia, it takes 2 hours to harvest 10 bushels of apples and 4 hours to harvest 10 bushels of tomatoes. Suppose a worker in Brazil can harvest 10 bushels of apples in 4 hours or 10 bushels of tomatoes in 5 hours.
Which country has the absolute advantage in producing tomatoes?
Australia
Suppose that in Australia, it takes 2 hours to harvest 10 bushels of apples and 4 hours to harvest 10 bushels of tomatoes. Suppose a worker in Brazil can harvest 10 bushels of apples in 4 hours or 10 bushels of tomatoes in 5 hours.
Continue with the scenario above, which country has the comparative advantage in producing apples?
Australia
Considering the scenario above, which of the following exchange ratios benefits both countries in trade?
10 apple for 7 tomatoes
A competitive market is a market in which
no individual buyer or seller has any significant impact on the market price.
An increase in the price of a good will
decrease quantity demanded.
If something happens to alter the quantity demanded at any given price, then
the demand curve shifts.
The price elasticity of demand measures
buyers' responsiveness to a change in the price of a good.
Demand is said to be inelastic if
the quantity demanded changes only slightly when the price of the good changes.
If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a
20 percent decrease in the quantity demanded.
Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,
the equilibrium quantity decreases, and the equilibrium price is unchanged.
A price ceiling is
a legal maximum on the price at which a good can be sold.
If a price ceiling is not binding, then
there will be no effect on the market price or quantity sold.
A shortage results when a
binding price ceiling is imposed on a market.
Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,
a shortage of treadmills will develop.
When a tax is levied on a good, the buyers and sellers of the good share the burden,
regardless of how the tax is levied.
If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as
T × Q.
When society gets the most it can from its scarce resources, then the outcome is called
Efficient
If the amount of resources available to the local economy increases, or there are improvements in technology, then the production possibility frontier will:
shift outward.
A production possibilities frontier is bowed outward when
he opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.
The law of demand states that, other things equal, when the price of a good
falls, the quantity demanded of the good rises
Which of the following changes would not shift the demand curve for a good or service?
a. A change in income
b. A change in the price of the good or service c. A change in expectations about the future
d. A change in the price of a related good or service
B
Which of the following would shift the demand curve for gasoline to the right?

a. A decrease in the price of gasoline
b. An increase in consumer income, assuming gasoline is a normal good
c. An increase in the price of cars, a complement of gasoline
d. All of the above
B
The price elasticity of demand measures
buyers' responsiveness to a change in the price of a good
Demand is said to be price elastic if

a. the price of the good responds substantially to changes in demand.
b. buyers do not respond much to changes in the price of the good.
c. buyers respond substantially to changes in the price of the good.
d. demand shifts substantially when income changes.
C
If a 10% decrease in price for a good results in a 20 percent increase in quantity demanded, the price elasticity of demand is

a. 0.75 b. 1.25 c. 2.00 d. 1.00
C
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the
a. Steeper the demand curve will be
b. Flatter the demand curve will be
c. Further to the right the demand curve will sit d. Closer to the vertical axis the demand curve will sit
B
The inflation rate is defined as the
a. price level in an economy.
b. change in the price level from one period to the next.
c. percentage change in the price level from the previous period.
d. price level minus the price level from the previous period.
C
The CPI is a measure of the overall cost of the goods and services bought by
a. a typical consumer, and the CPI is computed and reported by the Department of the Treasury.
b. typical consumers and typical business firms, and the CPI is computed and reported by the Department of the Treasury.
c. a typical consumer, and the CPI is computed and reported by the Bureau of Labor Statistics. d. typical consumers and typical business firms, and the CPI is computed and reported by the Bureau of Labor Statistics.
C
In the CPI, goods and services are weighted according to
a. how long a market has existed for each good or service.
b. the extent to which each good or service is regarded by the government as a necessity.
c. how much consumers buy of each good or service.
d. the number of firms that produce and sell each good or service.
C
The CPI differs from the GDP deflator in that
a. the CPI is a price index, while the GDP deflator is an inflation index.
b. CPI accounts for the introduction of new goods
c. increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator.
d. increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator.
C
One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called
a. Price-change neglect
b. Unmeasured quality change
c. Substitution bias
d. Relative bias
C
The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as
a. Investment
b. Government spending
c. Consumption of services
d. Consumption of durable goods
C
Which of the following is included in the calculation of GDP?
a. The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.
b. The purchase of a new edition of a foreign textbook that was produced in a different nation.
c. The purchase of ink and paper supplies by a textbook company for the production of new textbooks.
d. The purchase of a used textbook from a friend who took the same class last year.
A
To say that a price ceiling is nonbinding is to say that the price ceiling
a. results in a surplus.
b. is set above the equilibrium price.
c. causes quantity demanded to exceed quantity supplied.
d. is set below the equilibrium price.
B
he goal of rent control is to
a. facilitate controlled economic experiments in urban areas.
b. help landlords by assuring them a low vacancy rate for their apartments.
c. help the poor by assuring them an adequate supply of apartments.
d. help the poor by making housing more affordable.
D
The deadweight loss from a tax is likely to be smallest when
a. Supply is inelastic and demand is inelastic
b. Supply is elastic and demand is elastic
c. Supply is elastic and demand is inelastic
d. Supply is inelastic and demand is elastic
A
If real GDP is $2200 billion, the GDP deflator is 110, nominal net exports are $100 billion, nominal investment is $200 billion, and nominal government expenditures are $400 billion, what is nominal consumption?
a. $1300 b. $1720 c. $1520 d. $1500
B
Are the following included in U.S. GDP? (1) The price paid by a German tourist when staying at a New York hotel. (2) The price paid by an American tourist when staying at a Berlin hotel.
a) Both are included in U.S. GDP.
b) Neither is included in U.S. GDP
.c) Only the price paid by a German tourist when staying at a New York hotel is included in U.S. GDP.
d) Only the price paid by an American tourist when staying at a Berlin hotel is included U.S. GDP.
C
Suppose country A sells $100 million worth of goods and services to country B. Country B sells $50 million worth of goods and services to country A. These are the only two countries in Macroworld. Net exports in country:
a) B equal −$50 million.
b) A equal $150 million.
c) A equal − $150 million.
d) B equal $50 million.
B
Income spent on imported goods:
a) represents income that has leaked across national borders.
b) must be subtracted from spending data to calculate an accurate value for domestic production.
c) is income that is not spent on domestically produced goods and services.
ALL ARE CORRECT
Both the market value of final goods and the market value of intermediate goods are included in GDP. (True or false)
False
If the GDP deflator were 140 this year and 138 last year, then the inflation rate would be computed as ((140-138)/140)X100 (True or False)
False
Real GDP takes____ into account
Inflation
In your country, there are 24 million people in the labor force. A total of 21.5 million people are employed. What is the unemployment rate in your country?
a) 10.4% b) 2.5% c) 89.6% d) 21.5%
A
Which of the following individuals can be counted as unemployed?
a) Darren, a 10-year-old child
b) Nazma, a stay-at-home mom
c) Moesha, a full-time college student
d) Carl, who works part time at the Olive Garden but would prefer more hours
NONE ARE CORRECT
Verified questions
question
"When comparing two sample means, the $t$-test should be used only when the sample sizes are less than 30." Comment.
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question
Through radio and television, the defendant’s stores advertised a “top quality . . . Queen Anne Console Magic Stitcher” sewing machine, along with a sewing chair, for the “close-out price of just $29.50.” Under the sales plan, a “lead person” would accept the customer’s order, taking a deposit as small as 25 cents. After that, a demonstrator would visit the customer and “kill the sale” by having the machine jam in use. The demonstrator would also say that the customer could lose an eye if the machine jammed. Then the demonstrator would attempt to “step-up” the sale and persuade the customer to buy a higher-priced machine. In about 19 months, only 26 of the advertised machines were sold, although 10,951 customers entered into conditional sales contracts for such machines. The 26 advertised machines were sold at a time when the defendants had received complaints from a television station and the Better Business Bureau. The defendants were prosecuted for conspiring to sell merchandise by means of deceptive and misleading advertising. The prosecutor gave evidence that the defendants never intended to sell the advertised machines, which actually cost them$45 each. Are the defendants guilty as charged? (People v. Glubo, Exelbert, Epstein, and Atlantic Sewing Stores, Inc., 158 N.E.2d 699)
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question
An information technology analyst thinks that they are losing customers on their website who find the checkout and purchase system too complicated. She adds a one-click feature to the website, to make it easier but finds that only about $10 \%$ of the customers are using it. She decides to launch an ad awareness campaign to tell customers about the new feature in the hope of increasing the percentage. She doesn't see much of a difference, so she hires a consultant to help her. The consultant selects a random sample of recent purchases, tests the hypothesis that the ads produced no change against the alternative that the percent who use the one-click feature is now greater than $10 \%$, and finds a $\mathrm{P}$-value of $0.22$. Is the conclusion appropriate? Describe. a) There's a $22 \%$ chance that the ads worked.
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finance
Use the following selected data from Business Solutions's income statement for the three months ended March 31, 2016, and from its March 31, 2016, balance sheet to complete the requirements below: computer services revenue, $\$ 25,307$; net sales (of gopds), $\$ 18,693$; total sales and revenue, $\$ 44,000$; cost of goods sold, $\$ 14,052$; net income, $\$ 18,833$; quick assets, $\$ 90,924$; current assets, $\$ 95,568$; total assets, $\$ 120,268$; current liabilities, $\$ 875$; total liabilities, $\$ 875$; and total equity, $\$ 119,393$. **Required** 1. Compute the gross margin ratio (both with and without services revenue) and net profit margin ratio (round the percent to one decimal). 2. Compute the current ratio and acid-test ratio (round to one decimal). 3. Compute the debt ratio and equity ratio (round the percent to one decimal). 4. What percent of its assets are current? What percent are long term (round the percent to one decimal)?
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