ECO2013 Midterm Exam - Assignment Essays

question

A nation has a population of 300 million people. Of these, 80 million are retired, in the military, in institutions, or under 16 years old. There are 210 million who are employed and 10 million who are unemployed. What is the unemployment rate?

answer

4.5 percent :
300 mil - 80 mil = 10/220

question

The rate of unemployment when the economy is at its potential output is called the:

answer

Natural Rate of unemployment

question

Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:

answer

Structural

question

The industries or sectors of the economy in which business cycle fluctuations tend to affect output the most are:

answer

Capital Goods and Durable Consumer Goods

question

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

answer

Expansion

question

During periods of full employment the :

answer

unemployment rate for African-Americans is about twice the rate for whites.

question

If the annual inflate rate is 5 percent a year, about how many years will it take for the price level to double?

answer

A. 10 years
B. 12 years
C. 14years

question

A college graduate using the summer following graduation to search for a job would best be classified as :

answer

a part of frictional unemployment

question

If actual GDP is $340 Billion and there is a positive GDP gap of $20 billion, potential GDP is:

answer

$320 Billion = 340mil -20 mil

question

In which of the following cases would real income rise?

answer

Nominal income rises by 2 percent, and the price level remains unchanged.

question

Suppose the total monetary value of all final goods and services PRODUCED in a particular country in 2008 is $500 billion and the total monetary value of final goods and services SOLD is $450 billion. We can conclude that:

answer

GDP in 2008 is $500 billion

question

If depreciation (consumption of Fixed capital) exceeds domestic investment, we can conclude that:

answer

Net investment is negative

question

Real GDP measures:

answer

Current output at base year prices

question

Real GDP and Nominal GDP differ because the real GDP:

answer

has been adjusted for changes in the price level.

question

The GDP tends to :

answer

understate economic welfare because it does not take into account increases in leisure.

question

The monetary value of all final goods and services produced by the United States economy during a year is :

answer

GDP

question

Which would be considered an investment according to economists?

answer

The construction of a new computer chip factory by Intel

question

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment($320); imports($35); exports($22); personal consumption expenditures($2,460); and, government purchases($470). What is GDP in this economy? :

answer

$3,237 billion

question

GDP in an economy is $4600 billion. Consumer expenditures are $3500billion, government purchases are $900billion, and gross private domestic investment is $400 billion. net exports are :

answer

4600 - 3500 - 900 - 400 = -200 billion

question

A consumer price index attempts to measure changes in:

answer

The price of a select market basket of goods and services

question

Real gross domestic product:

answer

will increase if there is an increase in the level of output

question

Suppose that real GDP increases by 5% while the population of a country increases by 7%. Then :

answer

output per person necessarily decreases

question

Which of the following is the best example of financial investment?

answer

A retiree purchases Google stock

question

In economics, the word "Shocks" refers to :

answer

situations where firms' expectations are unmet

question

Higher oil prices are most likely to lead to

answer

a negative supply shock

question

The business cycle depicts:

answer

short-run fluctuations in output and employment

question

Which of the following statements is most accurate about advanced economies?:

answer

Economies experience a positive growth trend over the long run, but experience significant variability in the short run.

question

Before the period of modern economic growth:

answer

rates of population growth virtually matched rates of output growth.

question

What is the difference between financial investment and economic investment? :

answer

Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

question

If an economy wants to increase its current level of investment, it must:

answer

sacrifice current consumption

question

Consumer surplus arises in a market because:

answer

Some consumers are willing to pay more than the equilibrium price but do not need to do so

question

Negative externalities arise:

answer

when firms "use" resources without being compelled to pay for their full costs.

question

Rivalry and excludability are the main characteristics of :

answer

Private Goods

question

The market system does not produce public goods because:

answer

private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them

question

A demand curve for public good is determined by:

answer

summing vertically the individual demand curves for the public good

question

Cost-benefit analysis attempts to :

answer

compare the benefits and costs associated with any economic project or activity

question

At the optimal quantity of a public good:

answer

marginal benefit equals marginal cost.

question

An important problem in evaluating public projects through the use of cost-benefit analysis is that:

answer

positive and negative externalities associated with such projects may be difficult to measure.

question

From the economists' perspective, "market failures" basically arive when :

answer

Demand and supply do not accurately reflect all the benefits and all the costs of production

question

When the production of a product creates external costs greater than external benefits, a market economy will :

answer

Allocate too many resources to production of the product.

question

The law of demand is illustrated by a demand curve that is :

answer

Downward sloping

question

Which would cause a decrease in the quantity of computers supplied?

answer

A decrease in the demand for computers

question

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n):

answer

increase in the supply of gasoline

question

A schedule which shows the various amounts of a product producers are willing and able to produce at each price in a series of possible prices during a specified period of time is called:

answer

Supply

question

If the quantity supplied of a product is less than the quantity demanded, then :

answer

There is a shortage of the product

question

If the market price is above the equilibrium price:

answer

A surplus will occur and producers will produce less and lower prices

question

A competitive market will :

answer

Achieve an equilibrium price

question

A product market is in equilibrium :

answer

Where the demand and supply curves intersect.

question

A headline reads "Storms destroy half of the lettuce crop." This situation would lead to an :

answer

Increase in the price of lettuce and decrease in quantity purchased.

question

Government-set price floors and price ceilings :

answer

Interfere with the rationing function of price in a free market

question

Which statement best described a command economy?:

answer

The production and allocation of goods and services is determined primarily through government

question

Which statement is correct?:

answer

Freedom of choice and enterprise are essential elements of the market system

question

In a competitive economy, prices:

answer

All of the above; Influence consumers in their purchases of goods and services. Influence business in their purchases of economic resources. Influence workers in making occupational choices.

question

The competitive market system :

answer

encourages innovation because successful innovators are rewarded with economic profits.

question

Which is not one of the Five Fundamental Questions?:

answer

What goods and services should be produced by the government?

question

The idea that firms and resource suppliers in seeking to further their own self-interests in a competitive market economy also simultaneously promotes the public or social interest is a description of :

answer

The "invisible hand"

question

Which of the following is a limitation of the simple circular flow model? :

answer

The determination of product and resource prices is not explained.

question

Households and buisinesses are:

answer

Sellers in the resource and product markets respectively

question

The influential book written by Adam Smith was :

answer

The Wealth of Nations

question

The circular flow model:

answer

Illustrates the interdependence of business and consumers

question

Economics is a social science concerned with:

answer

The best use of scarce resources to achieve the maximum satisfaction of economic wants.

question

A person should consume more of something when its marginal :

answer

Benefit exceeds its marginal cost

question

the process of developing hypothesis, testing them against facts, and using the results to construct theories is called:

answer

The scientific method

question

Which is an illustration of microeconomic question?

answer

Will a new type of television set increase the number of buyers?

question

A schedule or curve that shows the various combinations of two products a consumer can purchase with a specific amount of money income is:

answer

A budget line

question

Which of the following is real capital? :

answer

A construction crane

question

A point inside a production possibilities curve best illustrates:

answer

Unemployment

question

A normative statement is one that :

answer

is based on value judgements.

question

The problems of aggregate inflation and unemployment are:

answer

major topics of macroeconomics

question

On a production possibilities curve, the single optimal or best combination of output for any society:

answer

Depends upon the preferences of society

1 of 70

question

answer

4.5 percent :
300 mil - 80 mil = 10/220

question

The rate of unemployment when the economy is at its potential output is called the:

answer

Natural Rate of unemployment

question

answer

Structural

question

The industries or sectors of the economy in which business cycle fluctuations tend to affect output the most are:

answer

Capital Goods and Durable Consumer Goods

question

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?

answer

Expansion

question

During periods of full employment the :

answer

unemployment rate for African-Americans is about twice the rate for whites.

question

If the annual inflate rate is 5 percent a year, about how many years will it take for the price level to double?

answer

A. 10 years
B. 12 years
C. 14years

question

A college graduate using the summer following graduation to search for a job would best be classified as :

answer

a part of frictional unemployment

question

If actual GDP is $340 Billion and there is a positive GDP gap of $20 billion, potential GDP is:

answer

$320 Billion = 340mil -20 mil

question

In which of the following cases would real income rise?

answer

Nominal income rises by 2 percent, and the price level remains unchanged.

question

answer

GDP in 2008 is $500 billion

question

If depreciation (consumption of Fixed capital) exceeds domestic investment, we can conclude that:

answer

Net investment is negative

question

Real GDP measures:

answer

Current output at base year prices

question

Real GDP and Nominal GDP differ because the real GDP:

answer

has been adjusted for changes in the price level.

question

The GDP tends to :

answer

understate economic welfare because it does not take into account increases in leisure.

question

The monetary value of all final goods and services produced by the United States economy during a year is :

answer

GDP

question

Which would be considered an investment according to economists?

answer

The construction of a new computer chip factory by Intel

question

answer

$3,237 billion

question

GDP in an economy is $4600 billion. Consumer expenditures are $3500billion, government purchases are $900billion, and gross private domestic investment is $400 billion. net exports are :

answer

4600 - 3500 - 900 - 400 = -200 billion

question

A consumer price index attempts to measure changes in:

answer

The price of a select market basket of goods and services

question

Real gross domestic product:

answer

will increase if there is an increase in the level of output

question

Suppose that real GDP increases by 5% while the population of a country increases by 7%. Then :

answer

output per person necessarily decreases

question

Which of the following is the best example of financial investment?

answer

A retiree purchases Google stock

question

In economics, the word "Shocks" refers to :

answer

situations where firms' expectations are unmet

question

Higher oil prices are most likely to lead to

answer

a negative supply shock

question

The business cycle depicts:

answer

short-run fluctuations in output and employment

question

Which of the following statements is most accurate about advanced economies?:

answer

Economies experience a positive growth trend over the long run, but experience significant variability in the short run.

question

Before the period of modern economic growth:

answer

rates of population growth virtually matched rates of output growth.

question

What is the difference between financial investment and economic investment? :

answer

Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

question

If an economy wants to increase its current level of investment, it must:

answer

sacrifice current consumption

question

Consumer surplus arises in a market because:

answer

Some consumers are willing to pay more than the equilibrium price but do not need to do so

question

Negative externalities arise:

answer

when firms "use" resources without being compelled to pay for their full costs.

question

Rivalry and excludability are the main characteristics of :

answer

Private Goods

question

The market system does not produce public goods because:

answer

private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them

question

A demand curve for public good is determined by:

answer

summing vertically the individual demand curves for the public good

question

Cost-benefit analysis attempts to :

answer

compare the benefits and costs associated with any economic project or activity

question

At the optimal quantity of a public good:

answer

marginal benefit equals marginal cost.

question

An important problem in evaluating public projects through the use of cost-benefit analysis is that:

answer

positive and negative externalities associated with such projects may be difficult to measure.

question

From the economists' perspective, "market failures" basically arive when :

answer

Demand and supply do not accurately reflect all the benefits and all the costs of production

question

When the production of a product creates external costs greater than external benefits, a market economy will :

answer

Allocate too many resources to production of the product.

question

The law of demand is illustrated by a demand curve that is :

answer

Downward sloping

question

Which would cause a decrease in the quantity of computers supplied?

answer

A decrease in the demand for computers

question

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n):

answer

increase in the supply of gasoline

question

A schedule which shows the various amounts of a product producers are willing and able to produce at each price in a series of possible prices during a specified period of time is called:

answer

Supply

question

If the quantity supplied of a product is less than the quantity demanded, then :

answer

There is a shortage of the product

question

If the market price is above the equilibrium price:

answer

A surplus will occur and producers will produce less and lower prices

question

A competitive market will :

answer

Achieve an equilibrium price

question

A product market is in equilibrium :

answer

Where the demand and supply curves intersect.

question

A headline reads "Storms destroy half of the lettuce crop." This situation would lead to an :

answer

Increase in the price of lettuce and decrease in quantity purchased.

question

Government-set price floors and price ceilings :

answer

Interfere with the rationing function of price in a free market

question

Which statement best described a command economy?:

answer

The production and allocation of goods and services is determined primarily through government

question

Which statement is correct?:

answer

Freedom of choice and enterprise are essential elements of the market system

question

In a competitive economy, prices:

answer

All of the above; Influence consumers in their purchases of goods and services. Influence business in their purchases of economic resources. Influence workers in making occupational choices.

question

The competitive market system :

answer

encourages innovation because successful innovators are rewarded with economic profits.

question

Which is not one of the Five Fundamental Questions?:

answer

What goods and services should be produced by the government?

question

answer

The "invisible hand"

question

Which of the following is a limitation of the simple circular flow model? :

answer

The determination of product and resource prices is not explained.

question

Households and buisinesses are:

answer

Sellers in the resource and product markets respectively

question

The influential book written by Adam Smith was :

answer

The Wealth of Nations

question

The circular flow model:

answer

Illustrates the interdependence of business and consumers

question

Economics is a social science concerned with:

answer

The best use of scarce resources to achieve the maximum satisfaction of economic wants.

question

A person should consume more of something when its marginal :

answer

Benefit exceeds its marginal cost

question

the process of developing hypothesis, testing them against facts, and using the results to construct theories is called:

answer

The scientific method

question

Which is an illustration of microeconomic question?

answer

Will a new type of television set increase the number of buyers?

question

A schedule or curve that shows the various combinations of two products a consumer can purchase with a specific amount of money income is:

answer

A budget line

question

Which of the following is real capital? :

answer

A construction crane

question

A point inside a production possibilities curve best illustrates:

answer

Unemployment

question

A normative statement is one that :

answer

is based on value judgements.

question

The problems of aggregate inflation and unemployment are:

answer

major topics of macroeconomics

question

On a production possibilities curve, the single optimal or best combination of output for any society:

answer

Depends upon the preferences of society

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