Intro Macroeconomics Honors
Intro Macroeconomics Honors ECON 2110
University of Memphis
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This 9 page Class Notes was uploaded by Melvina Lubowitz on Friday October 23, 2015. The Class Notes belongs to ECON 2110 at University of Memphis taught by Michael Gootzeit in Fall. Since its upload, it has received 87 views. For similar materials see /class/228413/econ-2110-university-of-memphis in Economcs at University of Memphis.
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Date Created: 10/23/15
con 2110 Review1 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question mposrm mpovm 92510 PM a b c d e a b c d e The basic problem of economics arises when there are unlimited resources available to ful ll society39s limited wan 5 True False did not exist 2 The study of economics would be super uous if demand ca ital corporations pro t scarcity Economics is the study ofthe markets for stocks and bonds the study of choice under conditions of scarcity exclusively the study of business rms fundamentally the same as sociolog applicable only when scarcity is not a problem 4 Individuals must make choices because resources are scarce and wants are limited resources and wants are unlimited assets and wealth are distributed unevenly ces are scarce and wants are unlimited inflation usually outpaces income growth 5 Under capitalism individua scarce time but not scarce spending powe scarce spending power but not scarce time neither scarce time nor scarce spending power both scarce time and scarce spending power a low material standard of living ls are forced to make choices due to I 6 The economic behavior of government is constrained by limited budgets the absence of prices on most government output moral philosophy of the communit low voter participation rates political self interest 7 The knowledge that students gain while in college is referred to by economists as human capital a True b a b c d e False 8 The term capital as used by economists refers to the physical space in which production occurs the time allocated to producing goods and services nancial securities such as stocks and bonds longlasting tools used to produce goods and services 9 Macroeconomics focuses on the behavior of economic agents such as the consumer a business rm or a speci c market a True b False 10 Ifthe president of Chile commented that quotthe crime rate in Chile is currently too highquot this would be an example of a normative statement a True b False 11 Economists tend to disagree primarily over positive statements about the economy a True b False 12 Which ofthe following is the study of what quotshould bequot ratherthan the study of what quot a positive economics b law and economics c microeconomics d development economics e normative economics 13 The opportunity cost of any activity can be measured by the a value ofthe best alternative that is given up b price or monetary costs of the activity c level of technology d time needed to select among various alternatives e fringe benefits associated with the activity 14 Grant has four hours oftime to divide between studying for a physics exam and a geology exam Figure 81 shows his estimates of the grades on a scale of0 to 100 that he could earn from studying a particular number of hours on each subject fhe plans on spending two hours studying each subject what would be his opportunity cost of 5 Due to resource scarcity a some economic activities have an opportunity cost b all economic activities have an opportunity cost c no economic activities have an opportunity cost d economic activities have opportunity costs equal to their market prices e economic activities have opportunity costs generally lower than their market prices 16 Combinations of goods on the production possibilities curve a are unattainable without additional resources b can b produced using currently available resources and technology c re ect minimum normative value allocations d will meet society39s needs but not its wants e are attainable only through international trade 17 Combinations of goods outside the production possibilities curve are unattainable given society39s technology an ources are combinations that have already been consumed go beyond basic necessities result from involuntary unemployment are the result of economic recessions 92510 57m 18 Assume that US agricultural land is used eitherto raise cattle for beef orto grow wheat Figure 83 represents the production possibility frontier for beef and wheat Production at point H is una ainable given current y available technology and resources b attainable by more fully employing already available resources c attainable by using better technology which is already available d attainable if beef production drops to zero e attainable if all available resources are used to produce wheat 19 Production is technically ef cientwhen a the maximum possible outpu is being produced from a given collection ofinputs b people are working their hardes c no more capital can be substituted for labor d technological innovation is no longer desirab e e workers perform their duties at the expected level even if they are physically capable of doing more 20 The world39s total output will be greater the more selfsuf cient each ofthe world39s economies becomes b False Econ 2110 Sample Review 2 Multiple Choice Identin the letter of the choice that best completes the statement or answers the question 1 When39 39 quot 39 L to buy and sell 39 they form an a economy b market c production possibilities ontier d s pply curve e demand curve In a perfectly competi ive market a there can be few or many buyers and sellers b the price can be driven upward by suppliers holding back on goods and services c each participant is too small to affect the market price d 39 39 is needed 39 39 for consumers e resources are allocated by a central authority 3 Because price and quan ity demanded are inversely related a the demand curve is usually upwardsloping b buyers purchase more ofthe good as the price rises c the supply curve must be rising d price and quantity supplied must be positively related e the demand curve is usually downwardsloping 4 The demand curve for Beanie Baby dolls shows the quantity of dolls demanded a by suppliers ofthose dolls b by US consumers c at the equilibrium price for Beanie Baby dolls d at each level of income e at each possible price of Beanie Baby dolls 5 Each point along the market demand curve shows a the quantity ofthe good that rms would be willing and able to supply at a speci c price b the relationship between the price ofthe good and total quantity demanded at a series of prices c the opportunity cost ofsupplying a given quantity ofgoods to the market d 39 ule ood quotan quota r 39 r e how population changes affect he quantity demanded at a speci c price Figure 31 shows the market demand schedule for compact disks lfthe price per disk rises 39om 10 to 12 the a demand will decrease by 22 million disks b quantity demanded will decrease by 22 million disks c supply will rise by 28 million disks d antity demanded will decrease by 35 million disks e demand curve will shilt to the lelt A decrease in the price ofa particular good with all other variables constant causes a a shilt to a different demand schedule with higher quantities demanded b s iltto a 439 with lower quot c a movement along a given demand curve to a lower quantity demanded d a movement along a given demand curve to a higher quantity demanded e no movement along a given demand curve unless supply also changes 5339 503105 napo39nl a 03105 99957 8 Which ofthe following could explain a movement 39om point F to point G in Figure 32 Assume that the good epresented is an inferior good r all ofthe following are correct an increase in buyers39 incomes a decrea n increase in the price of the 90 an increase in the price ofa complement se in the expected future price ofthe good od 9 In Figure 24 the equilibrium price is 10 The demand curve for a product will shift rightward when the price ofa subs itute decreases True False 11 lfthe demand for new automobiles fails when income falls automobiles are said to be normal goods True False lfthe price of ground beef falls the demand for hamburger buns will increase because the two goods are substitutes decrease because the two goods are complements decrease because the two goods are substitutes increase because the two 900 s are complements not change unless the price of hamburger buns also changes An increase in buyers39 incomes increases thequantity demanded ofa good decreases the quantity demanded ofa good 39 es the increasest for an inferior he de good decreases the quantity demanded ofa normal good 14 Which ofthe following is assumed constant along the demand curve for gasoline the price ofgasoline and the prices ofrelated goods 9997 3195 503105 mszosml 3195 9997 15 a change in deman the price ofgasoline buyers39 incomes and tastes all variables affecting demand other than the price of gasoline all variables affecting demand other than the supply of gasoline buyers39 incomes and tastes but not the prices of related goods In Figure 25 a movement 39om point G to point H would represent d the Impa t fa decrease in the price ofa substitute good higher prices for the inputs used to produce this product a change in demand plus a change in quantity demanded a change in quantity demanded 16 Which ofthe following best de nes quantity supplied a w ulu quot 39 g39 the amount ofa good sellers will be able to sell in a given set ofcircumstances the various amounts ofa ood sellers would like to sell over various sets ofcircumstances the amount ofa good sellers would like to sell ifthey could choose the price for which it sold the amount ofa good that sellers would be able to sell ifthey could choose the price for which it sold Ofthe following which is true ofthe relationship between the quantity ofa good supplied and its price s as price increases the quan ity supplied usually decrease u umluly as price increases supply increases when demand increases so will su they always meet at the point of equilibrium in the market What do supply and demand curves have in common they both usually slope upward they both show a relationship between quantity and price they both usually slope downwar they can bot shilt in response to changes in income or wealth neither ofthem is in uenced by the size ofthe population The law of supply states that the quantity supplied ofa good and 19 the price ofa key input are inversely related its price are inversely related the price ofa 39nput are positively related its n39ce are positively related the price ofan alternate good are positively related 20 If quot quot quot 39 39 quot and 39 quot39 buy more the supply and demand curves will both shilt to the right True False con 2110 Sample Review 3 Multiple Choice Identi the letter of the choice that best completes the statement or answers the question WEDPST yup057 WEDPST a b WEDPST b a C 1 GDP is measured and reported each month month but reported at an annual rate ear quarter quarter but reported at an annual rate 2 When people buy land their purchases are included in GDP True False Gross domestic product GDP is 7 the total value of all goods and services produced for the marketplace during a given year within the nation39s borders the total value of all nal goods and services produced for the marketplace during a given year by a nation39s citizens and businesses the total value of all final goods and services produced for the marketplace during a given year Within a nation39s bor ers the total value of all goods and services produced for the marketplace during a given year by a nation39s citizens and businesses the total value of all goods services and inputs produced for the marketplace during a given year within a nation39s borders 4 Which ofthe following would be counted inUS GDP the purchase of an old house the purchase of a new textbook the purchase of a 1000 government savings bond washing your car in the drivewa the purchase of 50 shares of IBM stock 5 Which of the following is a ow variable all ofthe cars registered in the US the number of unemployed workers this week your total net worth yesterda the government debt this year a salary of 4000 per month example ofa service counted in this year39s GDP is buying shampoo to give your pet a ba cleaning your house trimming your own hair hiring a gardener to weed your garden polishing your friend39s car as a friendly gesture 7 Transfer payments are included in government budgets as spending but are not included in the government purchases category of GDP True False 8 Which of the following would be classi ed as private investment spending a family39s purchase of a new home an automobile producer39s purchase of steel for use in building new cars a paper company39s purchase of tim er a household39s purchase of ATampT stock the government39s purchase of a new of ce building 9 Which of the following four elements contribute to GDP in the expenditure approach consumption spending private investment government purchases net exports consumption spending business investment government purchases imports consumption of services private investment government consumption exports d e WEDPST WEDPST WEDPST a b c d e consumption of goods private investment government investment government consumption consumption of durable goods private investment government purchases net exports 10 Personal consumption spending now comprises approximately what fraction of GDP onethird onesixth three quarter s onequarter onehalf 11 Which of the following describes the relationship between GDP and government spending government spending GDP consumption private investment exports imports government spending GDP consumption private investment exports imports government spending GDP consumption private investment exports imports government spending GDP consumption private investment exports imports government spending GDP consumption private investment exports imports 12 Which of the following is are included inprivate investment spending both c and e all of the following business purchases of plant and equipment new home construction changes in business rms39 inventory stocks 13 Which of the following would be included in the expenditures approach to calculating US GDP wage and salary payments to U S workers interest paid on borrowed funds government payments of social security bene ts purchases of new trucks by Federal Express wage payments to US citizens working outside the US 14 Using the table below calculate GDP Consumption spendm 1000 Wages and salaries 800 Rent 3 100 Government purchases 3 200 Pro t 3 300 Exports 3 400 Interest 3 250 Private investment spending 3 400 lm orts 550 Based on the above information GDP in this year was a 1450 b 2000 c 2550 d 2900 e 4000 15 The factor payments measure of GDP a can be expressed as GDP C 1 G NX b is found by summing all expenditures on nal goods and services during the year c calculates how much value was added at each stage of production d is found by summing all interest rent pro t and wages and salaries generated during the year e calculates how much workers paid for goods and services during the year 7 16 Real GDP is nominal GDP a plus depreciation b adjusted for changes in the price level c minus depreciation d minus taxes e minus in ation 51057 17 We need to calculate real GDP because it is a much better measure of economic behavior than nominal GDP the value of the dollar is increasrng it allows us to make comparisons between countries nominal GDP has no theoretical foundation e nominal GDP ignores in ation 18 The United States will always have unemployment a b WEDPST WEDPST True False 19 Yuan recently completed his college degree and is entering the labor market for the rst time He has been submitting applications and has been interviewed twice in the last two weeks but so far has not found a job Yuan could be classi ed as frictionally unemployed seasonally unemployed structurally unemployed cyclically unemployed not yet in the labor force 20 All else equal what is likely to happen to the unemployment rate during a recession it increases as GDP increases it decreases as GDP remains the same it increases as GDP decreases it decreases as cyclical unemployment decreases it decreases as GDP decreases