Econ quizzes PDF

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macroeconomics quizzes questions and answers...

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GDP DEFLATOR = NOMINAL/REAL x 100 GDP GROWTH RATE = 2ND YEAR/1ST YEAR MINUS 1 X 100 Nominal interest rate = price 2 – price 1 divided by price 1 x 100 Real interest rate = CPI 2 – CPI 1 divided by CPI 1 x 100 NOW subtract this from the nominal interest rate!!!! Quizzes Consider the circular flow diagram. Households supply the factors of production and demand goods and services. True When a professor gives pop quizzes that can only be taken in class on the day they are given, this is an incentive for students to come to class. True When a country experiences economic growth the production possibilities frontier will shift inwards towards the origin. False When you stand in line for 20 minutes to buy groceries, the value of that time is: Implicit cost John maintains a "cash stash" that he uses to pay for entertainment. Presently he has $200 in his cash stash. Suppose John gives up a shift at work so he can go to Disney World with a friend. He spends $150 from his cash stash at Disney. He would have earned $80 during the shift at work, and this $80 would have been added to his cash stash. John's opportunity cost of going to Disney is $ 230 Suppose John goes to work instead of going to Disney. At the end of the workday he will have $ 280 The opportunity cost of an item is what you give up to get that item. True In economics there are positive statements and normative statements. The following is an example of a normative statement: “Students should be able to attend community college for free, just like public school (K – 12) is free.” True A production possibilities frontier identifies the dollar cost of producing a good or service in an economy. False In deciding how to spend an hour of his time, John has identified four activities he can choose from. The opportunity cost of choosing activity A is defined as the benefit he would have received from all of the other activities. False Economics is best defined as the study of how society manages its scarce resources. True The opportunity cost of buying a new car is best measured as: the $20,000 you paid for the car plus the value of the time you spent searching for the car. If it costs $120,000 for the airline company to fly the 200-seat plane across the country, then they should never sell a ticket for less than $600. False You buy a $100 ticket to a theme park and once inside you can ride on as many rides as you want at no extra cost. In this case, the opportunity cost of going on each ride will be zero. False

When people make decisions they compare marginal benefit to marginal cost. True When you pay $20 for a pizza we call this an explicit cost. True Joe spends $20,000 during his two semesters in college on rent, food, books, tuition, and entertainment. Joe’s opportunity cost of attending college for the two semesters is $20,000. False In a given amount of time John can produce either 40 pounds of vegetables or 10 pounds of chicken. In the same amount of time George can produce either 25 pounds of vegetables or 5 pounds of chicken. In this simple economy if John and George decide to specialize and exchange with each other then we can expect ten pounds of chicken to trade for at least 40 pounds of vegetables but not more than 50 pounds of vegetables. Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods. True A country should specialize in producing the goods for which it has the highest opportunity cost. False A country can produce either 18 pounds of fish or 8 bushels of corn. What is the opportunity cost of producing one bushel of corn? Enter a number rounded to two decimal places. 2.25 Sam can brew 5 gallons of root beer in an hour or he can make 4 pizzas in an hour. Ben can brew 7 gallons of root beer in an hour or he can make 5 pizzas in an hour. Sam's opportunity cost of making a pizza is 1.25 gallons of root beer. Ben's opportunity cost of making a pizza is 1.4 gallons of root beer. Enter numbers rounded to two decimal places. Consider the following production possibilities table that shows different combinations of two goods that can be produced with given resources:

A

Shirts 0

Corn 16

B

2

12

C

4

8

D E

6 8

4 0

When the country moves from point A to point B, the opportunity cost of producing 1 shirt is 2 bushels of corn.

When the country moves from point C to point D, the opportunity cost of producing 1 shirt is 2 bushels of corn. Sam can brew 5 gallons of root beer in an hour or he can make 4 pizzas in an hour. Ben can brew 7 gallons of root beer in an hour or he can make 5 pizzas in an hour. Who has an absolute advantage in making pizza? Ben Who has a comparative advantage in making pizza? Sam If the resources used to produce two goods are specialized, then the production possibilities frontier has a bowed-out shape. true If there are constant opportunity costs of production then the production possibilities frontier is a straight line. true Bill and Fred bake cookies and pies. Bill's opportunity cost of baking 1 pie is 5 cookies. Fred's opportunity cost of baking 1 pie is 7 cookies. If both parties are to benefit from trade then we can expect 1 pie to sell for: 6 cookies England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 30 scones per hour or 2 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 4 sweaters per hour. Who will produce sweaters? Scotland Suppose that in a week an American worker can produce 60 shirts or 4 computers and a Canadian worker can produce 60 shirts or 5 computers. The country that specializes in computers will trade 1 computer in exchange for at least 12 shirts. The country that buys the computer will pay not more than 15 shirts. Enter whole numbers. If John can produce a good in less time than Fred then he has an absolute advantage in producing that good. True Two countries produce two goods and they each have 3 million hours of labor. Consider the table that shows the quantity produced per labor hour:

Alpha

Shirts 4

Corn (bushels) 12

Beta

2

10

If each country specializes in the good for which it has a comparative advantage then in total the two countries can together produce 12 million shirts and 30 million bushels of corn. Enter whole numbers. Consider the following production possibilities table that shows different combinations of two goods that can be produced with given resources: Shirts

Corn

A

0

20

B

10

15

C D

20 30

10 5

E

40

0

Based on the table, which is true? Opportunity cost is constant When countries specialize in producing certain goods and then freely exchange those goods for other goods with different countries, what is the advantage? Each country can consume at a point outside their production possibilities frontier.

Latasha can read 30 pages of economics in an hour. She can also read 20 pages of sociology in an hour. She spends 4 hours per day studying. Her opportunity cost of reading 10 pages of sociology is 15 pages of economics. Her opportunity cost of reading 18 pages of economics is 12 pages of sociology. Enter whole numbers. Consider the production possibilities frontier for a country that produces cars and wheat:

In the absence of trade, if this country chooses to produce 6 million cars then they will also be able to produce 200 million bushels of wheat. Enter a whole number. Suppose the country specializes in wheat production and trades 100 million bushels of wheat in exchange for 8 million cars. They will be able to consume 250 million bushels of wheat. Enter a whole number.

Two countries can each produce clothing and computers. If the two countries decide to specialize and exchange then all consumers, workers, and firms will benefit and experience gains from trade. False A decrease in the supply of a good can be expected to cause increase____ in the equilibrium price of the good and _decrease___ in the equilibrium quantity of the good bought and sold, all else the same. Coal and natural gas are substitutes. If the price of natural gas falls, then the demand for coal will fall. True During a recession (downturn) in the economy firms lay off workers and the unemployment rate rises. During these times we can expect the demand for normal goods to _decrease__ and the demand for inferior goods to _increase___. Which of the following would cause an increase in the equilibrium price of a good? Fewer firms are producing this good. Suppose people believe the price of gas will increase next week. This is most likely to cause today's demand for gas to increase.

Good weather in Central and South America increases the supply of coffee beans by 25%. This can be expected to cause _decrease______ in the price of coffee due to a shift of the __supply___ curve. All else the same, when the demand for a good or service rises, then equilibrium price will tend to also rise true All else the same, when the supply of a good or service rises, then equilibrium price will also tend to rise. False Suppose the quantity demanded of a good is smaller than the quantity supplied of a good. We can expect: the price of the good to decrease If quantity demanded is greater than quantity supplied then the current market price is too low. True Assume apples and oranges are substitutes for consumers. A winter freeze destroys half the orange crop. In the market for apples, we can expect an increase in the demand for apples.

Many consumers consider goods X and Y to be complements. If there is an increase in the price of good X, then (all else the same) in the market for good Y there will be a shift in the supply curve to the left. False The four variables below affect the amount of a good people choose to buy. Changes in all of these variables cause the demand curve to shift EXCEPT a change in the price of the good

An increase in supply is represented by a rightward shift of the supply curve.

Which of the following shifts the supply curve rightward? a decrease in the price of materials used to produce the good

Each point on the supply curve represents

the lowest price for which sellers can profitably sell another unit of the good.

A hurricane hits the state of Florida and destroys half the orange crop. We can expect the price of oranges in the upcoming year to increase due to a shift in the supply curve. True Consider the supply curve for coffee. All else the same, an increase in the number of coffee producers will cause a rightward shift of the supply curve. true Consider the supply curve for coffee. All else the same, an increase in the price of coffee will cause a leftward shift of the supply curve. false An increase in the demand for a good can be expected to cause __increase ___ in the equilibrium price of the good and __increase___ in the equilibrium quantity of the good bought and sold, all else the same. The price of a normal good has increased. Which of the following could have led to the increase in price? Select all of the correct answers. there was an increase in the number of buyers in this market the average cost of producing this good increased by 20%

The four categories of expenditure (spending) in the economy are wages, rent, interest, and profit. False When your parents pay your tuition bill to UCF this counts in the investment spending category of GDP. False When the government pays social security to elderly people, this counts as: a transfer payment. We can use the GDP deflator to calculate the inflation rate in the economy. True A firm produces 100 units of a good in the year 2017 and sells 90 of the units to consumers. The firm does not sell the remaining 10 units until next year. The 90 units that are sold count in what category of GDP? consumption How do we count the 10 units that are not sold this year? investment A period during which real GDP declines is called a recession. True George hires a real estate agent to help him sell the house he has lived in for the past five years. Since the house is used, no part of the sale will count in this year's GDP. false A farmer grows wheat and sells it to the miller for $83. The miller turns the wheat into flour and sells it to the baker for $120. The baker turns the flour into bread and sells it to consumers for $185. What is the value added by the baker? Enter a whole number with no other characters. 65 The government pays social security benefits to your grandfather every month. When your grandfather spends his entire social security check on groceries at the supermarket this counts as:consumption spending

In a given year, nominal GDP is $421 and real GDP is $375. Find the GDP deflator. Enter a number rounded to two decimal places. 112.27 GDP increased from $16.38 trillion to $16.94 trillion. What was the growth rate of GDP? Enter a number rounded to two decimal places. Do not enter any other characters. 3.42 When Toyota produces cars in the United States this does count in GDP even though Toyota is not an American company. True The largest component of GDP is investment spending. False When a private individual sells the house they have lived in for the past 10 years directly to another individual, this does not count in GDP. True In the economy, income earned when producing new final goods and services must equal expenditure on the new final goods and services. true Capital goods are goods that will be used in the future to produce more goods and services. True Consider the following information about a simple country that produces two different goods:

Year

Price Milk

Price Quantit Quantit Cere y y Milk Cereal al

2014

$4

200

2015

$4.25 250

$5.50 330

2016

$4.50 300

$6.00 350

$5

300

Real GDP in 2014 was $ 2300 , in 2015 it was $ 2650 , and in 2016 it was $ 2950 . Enter numbers rounded to two decimal places as necessary. Assume 2014 was the base year. If the price of a banana is twice the price of an apple, then the sale of a banana contributes twice as much to GDP as the sale of an apple. True If the average wage paid to the worker was $20 in the year 1990 and $30 in the year 2000, then the average worker in the year 2000 must have been better off in terms of purchasing power. False The inflation rate measures the percentage change in the price index. true

The consumer price index is calculated as: (the cost of a basket of goods in the base year/the cost of the basket of goods in the current year) x 100. False John’s wage increases from $200 per day in year Y to $260 per day in year Z. At the same time, the CPI increases from 100 to 142. John is better off in year Z because his real income is higher. False The inflation rate is measured by calculating the percentage change in the consumer price index. True You deposit $500 in a savings account and one year later you have $560. At the same time, the CPI increases from 120 to 126. The nominal interest rate is 12 % and the real interest rate is 7 %. If the consumer price index increases from 121 to 163 then in percentage terms you would like to have a cost of living adjustment equal to how much? Enter a number rounded to two decimal places. 34.71 Old – new divided by old x 100 If the price index increases from 120 to 130 then the inflation rate during the past year was 10%. False The GDP deflator is used to calculate the inflation rate. True The purchasing power of the $20 bill increases over time due to inflation. False If the price index has a value of 100 in year X, then year X must be the base year true The inflation rate between the years 2000 and 2001 was 4.3%. Based on this information, a basket of goods that cost $145 in the year 2000 would now cost how much in the year 2001? Enter a number rounded to two decimal places. 151.24 take the inflation rate and multiply it by the original price, then add that number onto the original price If your bank pays you an interest rate of 6% and the inflation rate is 2% then your real rate of return is 8%. False The consumer price index increased from 120 to 132. If you received a raise equal to 11% during this time period then your real income has decreased. False The consumer price index for the year 2010 will always be calculated as: (the cost of the basket of goods in the year 2010/the cost of the basket of goods in 2009) x 100. Fasle Suppose the fixed basket of goods used to calculate the CPI consists of 5 units of good A, 3 units of good B, and 2 units of good C. From year 1 to year 2 the prices of the goods changed as shown in the table. Year 1 is the base year.

Price in

Price in

year 1

year 2

Good A

$2.50

$2.70

Good B

$3.60

$3.78

Good C

$5.75

$5.98

The cost of the basket in year 1 is $ 34.80 . The cost of the basket in year 2 is $ 36.80 . Year 1 is 5(a year 1) + 3(b year 1) + 2(year 1) and same for year 2 Every month, the Bureau of Labor Statistics calculates the consumer price index. true If the price index has a value of 122 then the inflation rate during the past year was 22%. False The average person spends about 42% of their income on housing. True If your employer gives you a raise that is equal to the inflation rate, then your real salary will have increased. False Suppose the fixed basket of goods used to calculate the CPI consists of 5 units of good A, 3 units of good B, and 2 units of good C. From year 1 to year 2 the prices of the goods changed as shown in the table. Year 1 is the base year. Price in year 1

Price in year 2

Good A

$2.50

$2.70

Good B

$3.60

$3.78

Good C

$5.75

$5.98

The value of the CPI in year 1 is 100 .

The value of the CPI in year 2 is 105.75. find basket cost of year 1 and divide by basket cost of year 2 then times by 100 The inflation rate between the two years is 5.75 % Each month you spend $500 buying coffee. If the price of coffee increases from $2 to $3, what happens to your purchasing power? Decreases The inflation rate is measured by calculating the percentage change in the consumer price index. True If the average wage paid to the worker was $20 in the year 1990 and $30 in the year 2000, then the average worker in the year 2000 must have been better off in terms of purchasing power. False If your employer gives you a raise that is less than the inflation rate, then your real salary will have declined. True Productivity is measured by calculating the growth rate of real GDP. False Bill’s nominal income in 1990 was $1,397 per month. The CPI had a value of 144 in 1990 and had a value of 235 in 2017. What is Bill’s real income in 1990, measured in 2017 dollars? Enter a number rounded to two decimal places with no dollar sign. 2279.83 In 1988 the value of RGDP was $8,474.492 billion, the population was 244.499 million, and the number of people employed was 115,060 measured in thousands. Calculate employment as a percentage of the population. Round to the nearest whole number. Do not enter a percent sign. 47 Retired people who are still capable of working are part of the adult population and are part of the labor force. False According to the Bureau of Labor Statistics, you are considered to be unemployed if you have no job. False In 2011, the Bureau of Labor Statistics (BLS) announced that of all adult Americans, 139.37 million were employed, 13.94 million were unemployed, and 86.31 million were not in the labor force. The adult population is how many million? Enter a number rounded to two decimal places. 239.6...