Principles of Macroeconomics ECO 2013 Fall 2009 First Exam Version A

Multiple Choice

Identify the choice that best completes the statement or answers the question.

____ 1. Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen

to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This

illustrates the basic concept that

a. trade can make everyone better off.

b. people face trade-offs

c. rational people think at the margin.

d. people respond to incentives.

____ 2. Efficiency means that

a. society is conserving resources in order to save them for the future.

b. society's goods and services are distributed equally among society's members.

c. society's goods and services are distributed fairly, though not necessarily equally, among

society's members.

d. society is getting the maximum benefits from its scarce resources.

____ 3. Mallory decides to spend three hours working overtime rather than watching a video with her friends. She

earns $8 an hour. Her opportunity cost of working is

a. the $24 she earns working.

b. the $24 minus the enjoyment she would have received from watching the video.

c. the enjoyment she would have received had she watched the video.

d. nothing, since she would have received less than $24 of enjoyment from the video.

____ 4. People are likely to respond to a policy change

a. only if they think the policy is a good one.

b. only if the policy change changes the costs of their behavior.

c. only if the policy change changes the benefits of their behavior.

d. if the policy changes either the costs or benefits of their behavior.

____ 5. For an economist, the idea of making assumptions is regarded generally as a

a. bad idea, since doing so leads to the omission of important ideas and variables from

economic models.

b. bad idea, since doing so invariably leads to data-collection problems.

c. good idea, since doing so helps to simplify the complex world and make it easier to

understand.

d. good idea, since economic analysis without assumptions leads to complicated results that

the general public finds hard to understand.

____ 6. Economic models

a. are constructed to mirror reality as closely as possible, and in this respect economic

models are no different from other scientific models.

b. are constructed to mirror reality as closely as possible, and in this respect economic

models are very different from other scientific models.

c. are simplifications of reality, and in this respect economic models are no different from

other scientific models.

d. are simplifications of reality, and in this respect economic models are very different from

other scientific models.

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Principles of Macroeconomics ECO 2013 Fall 2009 First Exam Version A

Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This illustrates the basic concept that a. trade can make everyone better off. b. people face trade-offs c. rational people think at the margin. d. people respond to incentives. ____ 2. Efficiency means that a. society is conserving resources in order to save them for the future. b. society's goods and services are distributed equally among society's members. c. society's goods and services are distributed fairly, though not necessarily equally, among society's members. d. society is getting the maximum benefits from its scarce resources. ____ 3. Mallory decides to spend three hours working overtime rather than watching a video with her friends. She earns $8 an hour. Her opportunity cost of working is a. the $24 she earns working. b. the $24 minus the enjoyment she would have received from watching the video. c. the enjoyment she would have received had she watched the video. d. nothing, since she would have received less than $24 of enjoyment from the video. ____ 4. People are likely to respond to a policy change a. only if they think the policy is a good one. b. only if the policy change changes the costs of their behavior. c. only if the policy change changes the benefits of their behavior. d. if the policy changes either the costs or benefits of their behavior. ____ 5. For an economist, the idea of making assumptions is regarded generally as a a. bad idea, since doing so leads to the omission of important ideas and variables from economic models. b. bad idea, since doing so invariably leads to data-collection problems. c. good idea, since doing so helps to simplify the complex world and make it easier to understand. d. good idea, since economic analysis without assumptions leads to complicated results that the general public finds hard to understand. ____ 6. Economic models a. are constructed to mirror reality as closely as possible, and in this respect economic models are no different from other scientific models. b. are constructed to mirror reality as closely as possible, and in this respect economic models are very different from other scientific models. c. are simplifications of reality, and in this respect economic models are no different from other scientific models. d. are simplifications of reality, and in this respect economic models are very different from other scientific models.

Figure 2- ____ 7. Refer to Figure 2-1. Which arrow represents the flow of land, labor, and capital? a. A b. B c. C d. D

____ 12. A movement downward and to the right along a demand curve is called a. an increase in demand. b. a decrease in demand. c. a decrease in quantity demanded. d. an increase in quantity demanded. ____ 13. Today's demand curve for gasoline could shift in response to a. a change in today's price of gasoline. b. a change in the expected future price of gasoline. c. a change in the number of sellers of gasoline. d. All of the above are correct. ____ 14. A supply curve slopes upward because a. as more is produced, total cost of production falls. b. an increase in input prices increases supply. c. the quantity supplied of most goods and services increases over time. d. an increase in price gives producers an incentive to supply a larger quantity. ____ 15. An increase in supply is represented by a. a movement downward and to the left along a supply curve. b. a movement upward and to the right along a supply curve. c. a rightward shift of a supply curve. d. a leftward shift of a supply curve. ____ 16. Which of the following changes would not shift the supply curve for a good or service? a. a change in technology b. a change in the price of the good or service c. a change in expectations about the future price of the good or service d. a change in input prices Figure 4- ____ 17. Refer to Figure 4-9. If there is currently a shortage of 20 units of the good, then a. the law of demand predicts that the price will rise by $2 to eliminate the shortage. b. the law of supply predicts that the price will rise by $2 to eliminate the shortage. c. the law of supply and demand predicts that the price will rise by $2 to eliminate the shortage. d. the law of supply and demand predicts that the price will fall by $2 to eliminate the shortage. S D 10 20 30 40 50 60 70 80 90 quantity 2 4 6 8 10 12 14 16 18 20 price

____ 18. If the demand for a product increases, then we would expect a. equilibrium price to increase and equilibrium quantity to decrease. b. equilibrium price to decrease and equilibrium quantity to increase. c. equilibrium price and equilibrium quantity both to increase. d. equilibrium price and equilibrium quantity both to decrease. ____ 19. Which of the following events will definitely cause equilibrium price to fall? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase ____ 20. Suppose the price of gasoline decreased from $3.00 per gallon to $2.00 per gallon. This would cause a _________. (A modified Aplia homework question) a. movement up to the right along the supply curve for gasoline. b. movement down to the left along the supply curve for gasoline. c. rightward shift in the supply curve for gasoline. d. leftward shift in the supply curve for gasoline. ____ 21. Suppose national data for the United States in 2003 was as follows (in $billions): Consumption: $7, Investment: $1, Government Spending: $2, Exports: $1, Inports: $1, What was the value of Gross Domestic Product in the United States for 2003? (A modified Aplia Homework question) a. $12,519 billion b. $10,446 billion c. $10,971 billion d. $11,713 billion ____ 22. To compute GDP, we a. add up the wages paid to all workers. b. add up the costs of producing all final goods and services. c. add up the market values of all final goods and services. d. take the difference between the market values of all final goods and services and the costs of producing those final goods and services. ____ 23. Which of the following examples of production of goods and services would be included in U.S. GDP? a. Samantha, a Canadian citizen, grows sweet corn in Minnesota and sells it to a grocery store in Canada. b. Ian, an American citizen, grows peaches for his family in the back yard of their Atlanta home. c. Leo, an American citizen, grows marijuana in his Seattle home and sells it to his friends and neighbors. d. None of the above examples of production would be included in U.S. GDP. ____ 24. Which of the following is included in the investment component of GDP? a. households’ purchases of newly constructed homes b. net additions to firms’ inventories c. firms’ purchases of capital equipment d. All of the above are correct.

____ 29. Refer to Table 23-4. In 2007, Dachsland’s a. nominal GDP was $585, real GDP was $780, and the GDP deflator was 75. b. nominal GDP was $585, real GDP was $825, and the GDP deflator was 70.9. c. nominal GDP was $1100, real GDP was $780, and the GDP deflator was 141.0. d. nominal GDP was $1100, real GDP was $825, and the GDP deflator was 133.3. ____ 30. The economy's inflation rate is the a. price level in the current period. b. change in the price level from the previous period. c. change in the gross domestic product from the previous period. d. percentage change in the price level from the previous period. ____ 31. In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct? a. The base year is always the first year among the years for which computations are being made. b. It is necessary to designate a base year only in the simplest case of two goods; in more realistic cases, it is not necessary to designate a base year. c. The value of the consumer price index is always 100 in the base year. d. The base year is always the year in which the cost of the basket was highest among the years for which computations are being made. ____ 32. Suppose the price index was 110 in 2004, 120 in 2005, and 125 in 2006. Which of the following statements is correct? a. The economy experienced inflation between 2004 and 2005 and between 2005 and 2006. b. The inflation rate was positive between 2004 and 2005, and it was negative between 2005 and 2006. c. The inflation rate was higher between 2005 and 2006 than it was between 2004 and 2005. d. All of the above are correct. Table 24- The table below pertains to Iowan, an economy in which the typical consumer’s basket consists of 3 pounds of pork and 4 bushels of corn. Year Price of Pork Price of Corn 2008 $20 per pound $12 per bushel 2009 $25 per pound $18 per bushel ____ 33. Refer to Table 24-2. If 2008 is the base year, then the CPI for 2009 was a. 73.5. b. 100. c. 136.1. d. 147. ____ 34. The substitution bias in the consumer price index refers to the a. substitution by consumers toward new goods and away from old goods. b. substitution by consumers toward a smaller number of high-quality goods and away from a larger number of low-quality goods. c. substitution by consumers toward goods that have become relatively less expensive and away from goods that have become relatively more expensive. d. substitution of new prices for old prices in the CPI basket of goods and services from one year to the next.

____ 35. You know that a candy bar cost five cents in 1962. You also know the CPI for 1962 and the CPI for today. Which of the following would you use to compute the price of the candy bar in today's prices? a. (^) five cents (1962 CPI / today's CPI) b. (^) five cents ((today's CPI - 1962 CPI)/1962 CPI) c. (^) five cents (today's CPI / 1962 CPI) d. (^) five cents today's CPI - five cents 1962 CPI.

Principle of Macroeconomics - 40 Multiple Choice Questions with Answers | ECO 2013, Exams of Introduction to Macroeconomics

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Partial preview of the text

Download Principle of Macroeconomics - 40 Multiple Choice Questions with Answers | ECO 2013 and more Exams Introduction to Macroeconomics in PDF only on Docsity!

Principles of Macroeconomics ECO 2013 Fall 2009 First Exam Version A

Principles of Macroeconomics ECO 2013 Fall 2009 First Exam Version A

Answer Key

1. B

2. D

3. C

4. D

5. C

6. C

7. C

8. B

9. C

10. C

11. A

12. D

13. B

14. D

15. C

16. B

17. C

18. C

19. C

20. B

21. C

22. C

23. A

24. D

25. B

26. C

27. B

28. C

29. C

30. D

31. C

32. A

33. C

34. C

35. C

36. D

37. C

38. C

39. C

40. C