Practice Midterm #1 – Flashcards
Unlock all answers in this set
Unlock answersquestion
In which of the following countries will the national government have the greatest influence with respect to the nation's economy? A. China B. Cuba C. Canada D. Chile
answer
B. Cuba
question
In a discussion of economies, which of the following would exert the most influence on an individual firm's decision to hire workers? A. Wage levels B. The macroeconomy C. The firm's income D. Household income
answer
B. The macroeconomy
question
Which of the following best denotes the reason for the existence of substantial black markets?
answer
A command economy.
question
The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves ___________ spending?
answer
Governemt
question
Macroeconomic topics do not usually include:
answer
the profit maximizing decisions of an individual manufacturer.
question
Macroeconomics primarily examines:
answer
broad issues such as national output, employment, and inflation.
question
Which of the following statements most likely lies withing the real of macroeconomics?
answer
Due to an economic recession, manufacturing firms began implementing layoffs of their workforce.
question
Which of the following lies primarily within the realm of macroeconomics? A. a study of the demand for gasoline B. a study of how tax cuts stimulate aggregate production C. an analysis of supply and demand conditions in the electricity market D. a study of the impact of "mad cow" disease on the price of beef worldwide
answer
B. A study of how tax cuts stimulate stimulate aggregate production.
question
Macroeconomics:
answer
Is concerned with the expansion and contraction of the overall economy.
question
The basic difference between macroeconomics and microeconomics is that:
answer
Microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).
question
Which of the following best characterizes the circular flow of income? A. Businesses buy resources from the government, and households buy goods and services from businesses. B. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. C. The government purchases resources from businesses and households and then sells goods and services to businesses and households. D. Households buy factors of production from businesses, and businesses buy goods and services from households.
answer
B. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.
question
In the circular flow diagram model:
answer
Businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households. Households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses.
question
Regardless of whether you are looking through the microeconomics microscope or the the macroeconomics telescope, the fundamental subject material of the interconnected _____________ doesn't change.
answer
economy
question
Philosophers draw distinction between positive statements, which describe the world as it is, and _________________s, which describe how the world should be.
answer
normative statement
question
As depicted in _____________, it is necessary to give up some of one good to gain more of the other good.
answer
the production possibilities frontier (PPF).
question
Why is there scarcity?
answer
Because our unlimited wants exceed out limited resources.
question
Scarcity implies that:
answer
It is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available
question
"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:
answer
$44
question
The opportunity cost of an action:
answer
Is subjective valuation that can be determined only by the individual who chooses the action.
question
Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.
answer
marginal analysis
question
The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.
answer
utility
question
The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible.
answer
budget constraint
question
The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:
answer
- The economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. - The production possibilities frontier shifts outward due to an improvement in technology. But not as a result if the economy moving along the production possibilities in the direction of a greater quantity of defense.
question
As a person receives more of a good, the _______ from each additional unit of the good declines.
answer
marginal utility
question
In many cases, it is reasonable to refer to the ________________ as the price.
answer
opportunity cost
question
Economists refer to this pattern, the ___, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines.
answer
law of diminishing marginal utility
question
The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display ___________.
answer
allocative efficiency
question
Any given demand or supply curve is based on the ceteris paribus assumption that ___________________.
answer
all else is held equal
question
A demand curve shows the relationship between price and _____________ on a graph.
answer
quantity demanded
question
In economics, the demand for a good refers to the amount of the good that people:
answer
will buy at various prices
question
When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________.
answer
quantity supplied
question
The demand schedule for a good:
answer
Indicates the quantities that will be purchased at alternative market prices.
question
If new manufacturers enter the computer industry, then (ceteris paribus):
answer
The supply curve shifts to the right.
question
A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the __________________ .
answer
supply curve to the right
question
______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.
answer
Price floors
question
If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
answer
Goods X and Y are complement goods.
question
As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.
answer
technology
question
Which of the following will not result in a rightward shift of the market supply curve for labor? A. a decrease in non-wage income B. an increase in the working-age population C. an increase in labor productivity D. an increase in immigration
answer
C. An increase in labor productivity
question
In contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular.
answer
price ceilings
question
Since Baltimore passed the first _______________ in 1994, several dozen cities enacted similar laws in the late 1990s and into the 2000s.
answer
living wage law
question
In the United States, a typical credit card interest rate ranges from ________ per year.
answer
12% to 18%
question
The labor ____________ curve(s) will shift _______________ if there is an increase in productivity or an increase in the demand for the final product.
answer
demand; right
question
The United States has approximately ___________ credit card holders.
answer
180 million
question
Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _____________.
answer
the rise of global markets
question
Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel?
answer
There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.
question
A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will:
answer
Shift to the right, decreasing the price of the drug.
question
How do apple growers react to the news of medical research findings that suggest that eating apples leads to greater health benefits than were previously known?
answer
They increase the quantity of apples supplied.
question
Whenever there is a surplus at a particular price, the quantity sold at that price will equal:
answer
The quantity demanded at that price.
question
In 2010, Americans had about _____ outstanding in credit card debts not paid on time.
answer
$900 billion
question
Final goods or services used to compute GDP refer to:
answer
Goods and services purchased by the ultimate users.
question
Consumption is the purchase of goods and services by:
answer
Households.
question
The value of what businesses provide to other businesses is captured in the final products at the end of the __________ chain.
answer
production
question
___________ is a small category that refers to the goods produced by one business that have yet to be sold to consumers, and are either still sitting in warehouses and on store shelves.
answer
Inventories
question
Which of the following is included in the calculated Gross Domestic Product?
answer
A local ice cream store sells $17,000 worth of cones and sundaes on July 1.
question
Which of the following is not included in GDP?
answer
Cash income paid to a day laborer that is not reported to the tax authorities
question
To compare the GDP of two different countries with different currencies, it is necessary to use _________________________.
answer
an exchange rate
question
___________ is about two-thirds of the demand side of GDP, but it moves relatively little over time.
answer
Consumption
question
Durable goods and non-durable goods comprise approximately ________ of the supply side of the GDP.
answer
45%
question
Which of the following is included in GDP calculations? A. sales revenue received from a yard sale B. cash income received by a self-employed landscaper that is not reported to the IRS C. a crisp $50 bill received on your birthday D. the university tuition paid to enroll in a course
answer
D. The university tuition paid to enroll in a course.
question
Which of the following is included in GDP? A. revenue from the sale of a three-year old car B. the fees charged for a stock broker's services C. the receipts from a sale of land D. the value of lawn care service provided by a sixteen-year-old as part of his weekly chores
answer
C. The receipts from a sale of land.
question
GDP in the United States in 2012 was about __________.
answer
$16.2 trillion
question
Investment (I) includes:
answer
The amount spent on new factories and machinery.
question
Middle-income countries, which include much of Latin America, Eastern Europe, and some countries in East Asia, have per capita GDP in the range of ___________.
answer
$6,000 to $12,000
question
Which of the following is true? A. A depression is a recession that is mild and relatively brief. B. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude. C. The timing of business fluctuations is regular and therefore easily predictable. D. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low.
answer
B. The expansions and contractions of real world business cycles last varying lengths and often differ in magnitude.
question
For most high-income countries of the world, GDP _________________ over time.
answer
has risen gradually
question
On the demand side of GDP, consumption by _____________ is the largest component of GDP, accounting for about two-thirds of the GDP in any year.
answer
households
question
Ethiopia has a GDP of $8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate per capita GDP for each country.
answer
Ethiopia = $145.00 Costa Rica = $2250.00
question
The Czech Republic has a GDP of 2,000 billion koruny. The exchange rate is 20 koruny per U.S. dollar. The Czech population is 20 million. Calculate the per capita GDP of the Czech Republic in U.S. dollars.
answer
$5.000
question
Once every __________, the Census Bureau does a comprehensive survey of housing and residential finance.
answer
10 years
question
On the supply side of the GDP, Structures account for around ________ of U.S. GDP.
answer
7%
question
The change in inventories, a component of aggregate supply, comprises roughly _____ of GDP.
answer
0.5%
question
During the last two centuries, the average rate of growth of GDP per capita in the leading industrialized countries has averaged about _________ per year.
answer
2%
question
In the long run, the most important source of increase in a nation's standard of living is:
answer
High rate of economic growth.
question
A nation can achieve higher economic growth if:
answer
It devotes more resources to research and development.
question
_________ is output per hour in the business sector.
answer
Productivity
question
When discussing economic growth, it is often useful to focus on ____________, to avoid studying changes in the size of GDP that represent only having more people in the economy, and focus on those increases in GDP which represent an actual rise in the standard of living on a per person basis.
answer
GDP per capita
question
Of the world's population of 6.7 billion people, _________ are scraping by on incomes that average less than $2 per day.
answer
5 billion
question
Which of the following is most likely to contribute to economic growth as measured by GDP per capita?
answer
Increased capital formation.
question
To achieve a high standard of living, a nation should:
answer
Promote economic growth.
question
Country Able and Country Baker initially have the same real GDP per capita. Country Able experiences no economic growth, while Country Baker grows at a sustained rate of 7 percent. In 12 years, Country Baker's GDP will be approximately ___________ that of Country Able.
answer
double
question
In the long run, the most important source of increase in a nation's standard of living is a:
answer
High rate of economic growth.
question
Which of the following best describes the relationship between economic growth and literacy?
answer
Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.
question
____________ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s.
answer
Industrial Revolution
question
Which of the following did not result in economic growth?
answer
Many citizens emigrating from Zimbabwe when a politically repressive regime took office.
question
Which of the following factors contribute to economic growth?
answer
The discovery of new oil reserves.
question
Some recent economic research has suggested that African countries' economic growth may have been limited by __________________ .
answer
geography and climate
question
Some prominent members of the slow-economic growth country club include a high- income country like _________.
answer
Germany
question
In certain African countries like Niger, Tanzania, Nigeria, and Sudan, for example, GDP per capita at the start of the 2000s was still less than $___________.
answer
300
question
In the early 2000s, the illiteracy rate for girls between the ages of 15 and 24 was __________ and the illiteracy rate for males in this age group was ______________.
answer
78%; 75%
question
During the Great Depression of the 1930s, the unemployment rate reached more than _________ of the labor force.
answer
25%
question
A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:
answer
Frictionally employed.
question
If a nation's labor force receives a significant influx of young workers:
answer
The natural rate of unemployment is likely to increase.
question
The most significant real economic cost of high unemployment is:
answer
The potential goods and services that might have been produced but weren't.
question
Women composed __________ of the paid workforce in 1900 and 50% of the paid workforce in 2010.
answer
18%
question
In November 2010 the labor force in Siouxtown, was 14,800. There were 14,483 persons employed. The local unemployment rate:
answer
Was 2.1%
question
______________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate.
answer
Efficiency wage theory
question
Freelife, New Hampshire has a labor force of 78,567 persons and employment of 74,382. The unemployment rate for the city is:
answer
5.3%
question
Which of the following statements is incorrect? A. Employment insurance compensation encourages longer job searches, which may lead to a better match between jobs and employees. B. Employment insurance compensation increases the opportunity cost of being unemployed. C. The typical employment insurance compensation is roughly one third of one's latest salary for up to 26 weeks. D. Demand and supply curves for labor are constantly shifting.
answer
B. Employment insurance compensation increases the opportunity cost of being unemployed.
question
Through good economic years and bad, many European economies had unemployment rates hovering near _________ since the 1970s.
answer
10%
question
Frictional unemployment occurs when:
answer
a worker decides to quit one job to seek a different job.
question
A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as:
answer
Cyclically unemployed.
question
The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave and the least- attractive workers, with fewer employment alternatives, are more likely to stay.
answer
adverse selection of wage cuts
question
Each month the Census Bureau carries out the Current Population Survey (CPS) (which has been carried out every month since 1940). A total of __________ households are contacted every month.
answer
60,000
question
Insofar as government public policy is concerned, the best way to battle unemployment would be __________________.
answer
minimize recessions
question
The unemployment rate may underestimate the true extent of unemployment if: A. many part-time employees would like to work fulltime, but are unable to get the additional work.
answer
Many part-time employees would like to work fulltime, but are unable to get the additional work.
question
The unemployment rate may underestimate the true extent of unemployment if:
answer
Many people become discouraged and cease looking for work.
question
A university student who is enrolled in school fulltime and not seeking employment is considered:
answer
Out of labor force.
question
The extent of _______________________ will depend on how easy it is for workers to learn about alternative jobs, which may reflect the ease of communications about job prospects in the economy.
answer
frictional unemployment
question
While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices.
answer
ongoing rise
question
Inflation implies that the level of all prices _____________________.
answer
increase
question
The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _____________.
answer
inflation rate
question
The basket of goods in the Consumer Price Index consists of about _________ products; that is, several hundred specific products in over __________ broad-item
answer
80,000; 200
question
The Producer Price Index is based on prices paid for supplies and inputs by:
answer
Producers of goods and services.
question
The ____________________ is based on the prices of merchandise that are exported or imported.
answer
International Price Index (IPI)
question
The situation where the buying power of money in terms of goods and services increases is called:
answer
Deflation.
question
Which of the following is the name used to describe the price index that consists of intermediate goods and finished goods?
answer
Producer Price Index
question
With regard to the economy, the term negative inflation is synonymous with which of the following?
answer
Deflation
question
Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be?
answer
993/30 x 74 = 2,449.4 ♒︎ 2,449
question
Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract?
answer
COLA plus 2.4%
question
In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had ___________________ which guaranteed that their wages would keep up with inflation.
answer
cost of living adjustments
question
The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices.
answer
overstate
question
A payment is said to be ______________ if it is automatically adjusted for inflation.
answer
indexed
question
A demand curve shows the relationship between price and _____________ on a graph.
answer
quantity demanded
