26 Jul HOW DOES THIS INCREASED PESSIMISM AFFECT THE AGGREGATE DEMAND CURVE?
Who in a modern mixed economy decides what good Show more Question 1 Consider the following economic agents: Who in a modern mixed economy decides what goods and services will be produced with the scarce resources available in that economy? the government producers consumers consumers and producers the government consumers and producers 2 points Question 2 Every society faces economic trade-offs. This means some people live better than others do. not everyone can have enough goods to survive. producing more of one good means less of another good can be produced. societys output cannot be made available to all. 2 points Question 3 Human capital refers to the money people have. the machines workers have to work with. the accumulated skills and training workers have. the wealth people have. 2 points Question 4 Cassies Quilts alters reconstructs and restores heirloom quilts. Cassie has just spent $800 purchasing cleaning and reconstructing an antique quilt which she expects to sell for $1500 once she is finished. After having spent $800 Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively she can sell the quilt as is now for $900. What should she do? She should cut her losses and sell the quilt now. It does not matter what she does; she is going to take a loss on her project. She should purchase the period fabric complete the task and then sell the quilt. She should not do anymore work on the quilt because she has already spent too much time on it and has not been paid for that time. 2 points Question 5 An example of a factor of production is a car produced by an auto manufacturer. a worker hired by an auto manufacturer. a loan granted to an auto manufacturer. the automobiles exported by an auto manufacturer. 2 points Question 6 Figure 2-5 Refer to Figure 2-5. If the economy is currently producing at point X what is the opportunity cost of moving to point W? 3 million tons of steel 19 million tons of steel 5 million tons of paper 9 million tons of paper 2 points Question 7 Figure 2-1Refer to Figure 2-1. ________ is (are) inefficient in that not all resources are being used. Point A Point B Point C Points A and C 2 points Question 8 Figure 2-1Refer to Figure 2-1. ________ is (are) technically efficient. Point A Point B Point C Points B and C 2 points Question 9 Figure 2-8 Figure 2-8 shows the production possibilities frontiers for Costa Rica and Guatemala. Each country produces two goods pineapples and coconuts.Refer to Figure 2-8. Which country has a comparative advantage in the production of coconuts? Guatemala They have equal productive abilities. Costa Rica neither country 2 points Question 10 Table 2-4Table 2-4 shows the output per day of two gardeners George and Jack. They can either devote their time to mowing lawns or cultivating gardens. Refer to Table 2-4. What is Georges opportunity cost of mowing a lawn? half a garden cultivated two lawns mowed two-thirds of a garden cultivated. one and a half lawns mowed 2 points Question 11 The recession of 2007-2009 would most likely be represented in a production possibilities frontier graph by a point inside the frontier. a point outside the frontier. a point on the frontier. an intercept on either the vertical or the horizontal axis. 2 points Question 12 At market equilibrium demand equals supply. quantity demanded equals quantity supplied. surpluses are greater than shortages. shortages are greater than surpluses. 2 points Question 13 Figure 3-2Refer to Figure 3-2. A technological advancement would be represented by a movement from A to B. B to A. S1 to S2. S2 to S1. 2 points Question 14 Figure 3-4Refer to Figure 3-4. At a price of $25 how many units will be sold? 400 500 600 800 2 points Question 15 Figure 3-4Refer to Figure 3-4. If the price is $25 there would be a surplus of 300 units. there would be a shortage of 300 units. there would be a surplus of 200 units. there would be a shortage of 200 units. 2 points Question 16 Figure 3-7Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for coffee. What happens in this market if buyers expect the price of coffee to rise? Panel (a) Panel (b) Panel (c) Panel (d) 2 points Question 17 Table 3-1Refer to Table 3-1. The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi) and the rest of the market. If the price of Kona coffee rises from $4 to $5 the market quantity demanded would decrease by 35 lb. increase by 115 lb. increase by 35 lb. decrease by 115 lb. 2 points Question 18 An example of an intermediate good would be the bread that goes into a sub sandwich that is sold by Quiznos. the soda pop sold by Quiznos. a sub sandwich sold by Quiznos. the potato chips sold by Quiznos. 2 points Question 19 Gross domestic product is calculated by summing up the total quantity of goods and services in the economy. the total quantity of goods and services produced in the economy during a period of time. the total market value of goods and services in the economy. the total market value of final goods and services produced in the economy during a period of time. 2 points Question 20 If prices in the economy rise then the purchasing power of a dollar rises. the purchasing power of a dollar stays constant. the purchasing power of a dollar declines. the purchasing power of a dollar cannot be determined. 2 points Question 21 Table 8-6Refer to Table 8-6. Consider the table of production and price statistics for a small economy in 2013. If the economy only produces the four goods listed below what is GDP for 2013? $428000 $267000 $24000 $1424 2 points Question 22 A student who just graduated from college but has not found a job would most likely be frictionally unemployed. structurally unemployed. cyclically unemployed. seasonally unemployed. 2 points Question 23 Except for recessions the duration of unemployment for the typical person lasts less than six months. six to nine months. over nine months. over one year. over five years. 2 points Question 24 Which of the following describes a situation in which the person is hurt by inflation? a retiree whose pension is adjusted for inflation a person who borrows money during a period when inflation is under-predicted a person who lends money during a period when inflation is over-predicted a person paid a fixed income during an inflationary period 2 points Question 25 Workers in high-income countries have ________ to work with than do workers in low-income countries. less physical capital more physical capital more labor more labor and less physical capital 2 points Question 26 Which of the following will result in an increase in labor productivity? a decrease in the number of people attending institutions of higher education a decline in the amount of human capital per worker an increase in technology a decline in the capital stock per hour worked 2 points Question 27 The best measure of the standard of living is nominal GDP. real GDP. nominal GDP per capita. real GDP per capita. 2 points Question 28 The federal budget deficit can be reduced by raising taxes. raising government spending. raising transfer payments. higher interest rates. 2 points Question 29 Potential GDP refers to the level of GDP attained when all firms are producing at capacity. the level of GDP attained by the country with the highest growth in real GDP in a given year. the difference between the highest level of real GDP per quarter and the lowest level of real GDP per quarter within any given year. the extent to which real GDP is above or below nominal GDP. 2 points Question 30 If real GDP in a closed economy is $40 billion consumption is $20 billion and government purchases are $10 billion what is investment? $10 billion $30 billion $40 billion $70 billion 2 points Question 31 During the expansion phase of the business cycle which of the following eventually increases? production employment income All of these 2 points Question 32 According to the World Bank Albania does one of the worst jobs as a country enforcing the rule of law. The consequence of a weak rule of law is difficulty in attracting investment and low economic growth. a decrease in cash transactions and increased efficiency. more risk taking on the part of entrepreneurs and greater economic investment. strong property rights enforcement leading to greater investment. 2 points Question 33 All of the following policies are ways for a country to promote long-run economic growth except increasing vaccinations against infectious diseases. undergoing political reform to decrease corruption. enacting stronger laws to protect property rights. imposing stricter regulations to limit foreign direct investment. 2 points Question 34 Developing countries with low saving rates and poor levels of health and education are likely to experience high levels of foreign direct investment. easy access to financial backing from banks. rapid growth in household incomes. low rates of growth in real GDP per capita. 2 points Question 35 Enforcing property rights in an economy will cause the market system to work less efficiently. decrease the level of foreign portfolio investment. encourage corruption and expand the underground economy. raise the level of investment. 2 points Question 36 Table 11-1Refer to Table 11-1. Based on the table above which country has a higher standard of living and why? Sweden has a higher standard of living because their GDP is higher. Ireland has a higher standard of living because their GDP per capita is higher. Sweden has a higher standard of living because their GDP per capita is higher. Ireland has a higher standard of living because growth in GDP is greater in Ireland than in Sweden. 2 points Question 37 Which of the following policies are designed specifically to directly promote technological change in an economy? government subsidization of research and development tax incentives to promote investment in 401K plans laws to strengthen property rights a vaccination program to combat infectious diseases 2 points Question 38 All of the following are components of aggregate expenditure except consumption spending. net export spending. actual investment spending. government spending. 2 points Question 39 An increase in Social Security payments will increase consumption spending. increase investment spending. increase government spending. increase export spending. 2 points Question 40 Equations for C I G and NX are given below. If the equilibrium level of GDP is $32000 what will the new equilibrium level of GDP be if government spending increases to 2500?C = 5000 + (MPC)YI = 1500G = 2000NX = -500 $32500 $34000 $38000 $42000 2 points Question 41 Figure 12-3Refer to Figure 12-3. Suppose that government spending increases shifting up the aggregate expenditure line. GDP increases from GDP1 to GDP2 and this amount is $200 billion. If the MPC is 0.8 then what is the distance between N and L or by how much did government spending change? $16 billion $40 billion $200 billion $1000 billion 2 points Question 42 If disposable income falls by $40 billion and consumption falls by $30 billion then the slope of the consumption function is 1.33. 0.75. 0.4. 0.3. 2 points Question 43 The consumption function describes the relationship between consumption spending and national income. consumption spending and aggregate income. consumption spending and disposable income. consumption spending and personal income. 2 points Question 44 A negative supply shock in the short run causes the aggregate supply curve to shift to the left. the price level to fall. unemployment to fall. equilibrium real GDP to rise. 2 points Question 45 All of the following would be considered a positive addition to household wealth except the equity in ones home. 500 shares of Google stock. the balance in your savings account. a credit card balance. 2 points Question 46 Figure 13-3Refer to Figure 13-3. Suppose the economy is at point A. If investment spending increases in the economy where will the eventual long-run equilibrium be? A B C D 2 points Question 47 If full-employment GDP is equal to $4.2 trillion what does the long-run aggregate supply curve look like? It is a horizontal line at $4.2 trillion of GDP. It is a vertical line at a level of GDP below $4.2 trillion. It is a vertical line at $4.2 trillion of GDP. It is a vertical line at a level of GDP above $4.2 trillion. 2 points Question 48 Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short run? Aggregate demand will rise the equilibrium price level will rise and the equilibrium level of GDP will rise. Aggregate demand will rise the equilibrium price level will fall and the equilibrium level of GDP will rise. Aggregate demand will fall the equilibrium price level will fall and the equilibrium level of GDP will fall. Aggregate demand will fall the equilibrium price level will rise and the equilibrium level of GDP will fall. 2 points Question 49 Stagflation occurs when inflation rises and GDP rises. inflation falls and GDP rises. inflation rises and GDP falls. inflation falls and GDP falls. 2 points Question 50 The impact of Hurricane Katrina on consumers in the economy was to make them very pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve? This will move the economy up along a stationary aggregate demand curve. This will move the economy down along a stationary aggregate demand curve. This will shift the aggregate demand curve to the left. This will shift the aggregate demand curve to the right. Show less
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