Eco2013 UCF final exam (underwood)

In the market for two bedroom apartments, the price of houses (a substitute for apartments) has gone down. You would expect the equilibrium price of apartments to _____ and the equilibrium quantity sold to ____.

decrease; decrease

Puma and Lima are two countries that both produce bananas and sugar. In Puma each worker in a one-hour period can produce either 14.3 pounds of bananas or 2.81 pounds of sugar. In Lima each worker in a one-hour period can produce either 10.96 pounds of bananas or 6.85 pounds of sugar. Suppose both countries have constant opportunity cost of production and decide to specialize and exchange. The country that specializes in sugar is willing to sell 100 pounds of sugar for at least how many pounds of bananas. Enter a numerical value, rounded to two decimal places, such as 4.56 or 8.20.

Which of the following variables does not affect demand directly?

Which of the following best illustrates the idea of economic growth?

an outward shift of the production possibilities frontier

In the market for pizza, five new restaurants open. You would expect the equilibrium price to _____ and the equilibrium quantity sold to ____.

decrease; increase

All else the same, the law of demand defines an

inverse relationship between price and quantity demanded.

The supply curve illustrates the idea that firms will

increase the quantity supplied of a good when the price of the good rises.

Bill works for a large food service company. In one hour he can make 18 sandwiches or he can make 36 salads. Bill works 8 hours per day. If Bill needs to make 31 sandwiches then how many salads can he make? Round your answer to the nearest whole number.

George is trying to decide how to spend his Sunday afternoon. He could go to the library and study or he could go to the gym and work out. This is

Market equilibrium occurs where

quantity demanded equals quantity supplied.

Which would cause a leftward shift of the demand curve for a normal good?

Income tax rates increase resulting in a loss of disposable income.

The price of a good has gone down. What would be a good explanation of this?

In the market for a particular good there is an excess supply at the current price. Which of the following is likely to occur?

firms will have an incentive to lower the price of the good

A production possibilities frontier illustrates

the different quantities of two goods that can be produced with given resources.

Consider the competitive market for a good called Y that has many buyers and many sellers, where Y is a normal good. Suppose the market is initially in equilibrium. If the average buyer experiences a 5% decrease in income we can expect the equilibrium price for good Y to ___________ and the equilibrium quantity to ____________.

decrease; decrease

According to the law of market forces

price will rise if quantity supplied is less than quantity demanded.

Which would cause a leftward shift of the supply curve?

Suppose you observe that the price of ice cream has gone up. Which of the following would not be a valid explanation of the increase in the price of ice cream?

Consider the competitive market for a good called Y that has many buyers and many sellers, where Y is a normal good. Suppose the market is initially in equilibrium. If there is a 10% decrease in the cost of a key input used to produce good Y we can expect the equilibrium price for good Y to ____________ and the equilibrium quantity to ______________.

decrease; increase

A new study claims organic corn-fed chicken is much healthier than non-organic corn-fed chicken. If numerous people believe this study then in the short term we can expect there to be

an increase in the demand for organic corn-fed chicken.

Bob can produce either 22 units of good X or 46 units of good Y in a day. If Bob wants to produce 5 units of good X then how many units of good Y can he produce? Assume Bob has constant opportunity cost of production. Round to the nearest whole number.

In the market for beef, a severe drought increases the price of corn (animal food). You would expect the equilibrium price of beef to _____ and the equilibrium quantity sold to ____.

increase; decrease

Opportunity cost is defined as

the value of the next best alternative to the chosen activity.

Consider a production possibilities frontier. Which points are efficient?

Mary considers a particular good to be inferior. This means that

an increase in her income will decrease her demand for the good.

Bob can produce either 16 units of good X or 42 units of good Y in a day. What is Bob's opportunity cost of producing one unit of good X? Assume Bob has constant opportunity cost of production. Enter a number rounded to two decimal places such as 3.76.

2.62

Consider the market for gasoline. Which of the following shifts the supply curve for gasoline rightward?

A decrease in the price of a resource used to produce gasoline, such as crude oil.

In the market for a good, there is an increase in demand and a decrease in supply. You would expect the equilibrium price to _____ and the equilibrium quantity sold to ____.

increase; uncertain

The scarcity principle applies to

the allocation of all resources.

In the market for a good, there is an increase in demand. You would expect the equilibrium price to _____ and the equilibrium quantity sold to ____.

increase; increase

In the market for pizza, the price of hamburgers (a substitute for pizza) has gone up. You would expect the equilibrium price of pizza to _____ and the equilibrium quantity of pizza sold to ____.

increase; increase

John works part-time for a moving company and earns $206 each weekend. Next weekend he has to go to his friend's wedding and this will cost him a total of $300. If he goes to the wedding he will not be able to work. What is John's opportunity cost of going to the wedding? Enter a whole number with no dollar sign.

Vietnam and Ecuador both produce shrimp and wheat. Vietnam can produce 80 thousand pounds of shrimp or 40 thousand bushels of wheat in a year. Ecuador can produce 60 thousand pounds of shrimp or 20 thousand bushels of wheat in a year. Ecuador's opportunity cost of producing one bushel of wheat is equal to ______

pounds of shrimp. Vietnam's opportunity cost of producing one bushel of wheat is equal to _______

pounds of shrimp. The two countries decide to specialize and trade with each other. The country that produces wheat will sell one bushel of wheat for no less than _______ pounds of shrimp. The other country will pay no more than ________ pounds of shrimp for the one bushel of wheat. Enter whole numbers.

Two countries each produce only chicken and vegetables. Mexico can produce either 20 thousand pounds of chicken or 40 thousand pounds of vegetables per year. Nicaragua can produce either 25 thousand pounds of chicken or 100 thousand pounds of vegetables per year. Each country wants to consume 7 thousand pounds of chicken per year and as many pounds of vegetables as they can produce with the remaining resources. In this case (with no specialization and trade) Mexico will consume __________ pounds of vegetables and Nicaragua will consume _________

pounds of vegetables. Suppose the countries completely specialize and they decide to trade 9 thousand pounds of chicken for 27 thousand pounds of vegetables. After trade, Mexico can consume _________

thousand more pounds of chicken and __________

thousand more pounds of vegetables in comparison to the pre-trade consumption. After trade, Nicaragua can consume ___________ thousand more pounds of chicken and __________thousand more pounds of vegetables. Enter whole numbers only.

To compare the well being of people in countries A and B it is best to compare

Suppose that the GDP deflator grew by 10 percent from last year to this year. This means that overall: {calc}

You have a job earning $53503 per year. If the CPI increases from 116 to 136 then how much of a raise do you need in order to avoid experiencing a decrease in your purchasing power? Round to the nearest whole number.

A good in the U.S. costs $5. The same good costs 60 pesos in Mexico. If the official exchange rate is 15 pesos per dollar then the American travelling to Mexico will feel like the good is _____ in Mexico than in the United States. This suggests prices in Mexico are _______ than prices in the United States.

Assume the growth rate of real GDP falls from 4% to 2%. This means that

Which counts in the investment category of GDP?

i. Firm X buys a new computer for the office

ii. John buys a newly constructed house

iii. A restaurant buys some fish to create a special menu item

iv. Bill takes $5,000 from his savings account and buys stock in Firm B

i and ii

Nominal GDP increased from $12.5 trillion in 2005 to $14 trillion in 2009. This means that:

A GDP deflator of 112 means:

A country aims to double real GDP per capita in the next 10 years. This means that on average real GDP per capita must grow at ____ per year.

A Chinese restaurant buys 100 cups of rice for a total of $10; they buy soy, fish and oyster sauces for a total of $20; they buy assorted vegetables for $40. They create 50 meals with these ingredients and sell each one for $5. How much does this process contribute to GDP?

$250

In 1976 a movie ticket was $4 and the price index was 56. In 2009 a move ticket was $9 and the price index was 228. Based on this information:

John is a farmer who grows apples. In the current year John produces 100 pounds of apples, 20 of which he sells directly to consumers for $1 per pound, and 80 of which he sells to Betty's Pie Company for 75 cents per pound. Betty's pie company makes 80 pies with the apples and sells them all for $5 each. What is the value of GDP in this simple economy?

$420

Suppose that the GDP deflator grew by 10 percent from last year to this year. This indicates that the growth rate in real GDP was 10 percent:

A country aims to double real GDP per capita in the next 10 years. If the rate of population growth in the country is 1% per year then this means that real GDP must grow at ____ per year.

8%

Firm C produces 1,000 pounds of cotton at a cost of 50 cents per pound. They sell all of the cotton to Firm S for 75 cents per pound. Firm S makes 1,000 t-shirts with the cotton for a total cost of $1.50 per t-shirt. They sell all of the shirts to Firm R for $2.00 each. Firm R sells 950 of the t-shirts to consumers for $10 each and the total cost of producing each shirt is $8 each. There are no other firms in this simple economy. All income in the economy is either profit income or wage income. Do not enter dollar signs, and enter whole numbers only. The value of consumption is $________ and the value of investment is $ ________.

.

If GDP has a value of $250 million and the population is 5,000 then the GDP per capita is:

$50,000

An individual makes $69863 per year. If they move to a city where prices are on average 20 percent lower, and they continue to make the same salary, then what is their purchasing power parity adjusted income? Round to the nearest whole number.

Inventory is:

the stock of goods that a company produces now, but keeps to sell at a future time.

A country wants its real GDP per capita to grow at a rate of 2.5% per year. If the rate of population growth in the country is 1% per year and the inflation rate is 2% per year then this means that nominal GDP must grow at ____ per year.

5.5%

John earns a salary of $75,000 per year. His company has been struggling over the past 3 years so none of the employees have received a pay raise. At the same time, the inflation rate has been positive during each of the three years. John is likely to feel like he can buy _____ goods and services and therefore his real salary will be ____ than his nominal salary.

fewer; lower

A price index measures:

Transfer payments are:

spending that transfers resources from the government to individuals.

Which counts in the government spending category of GDP?

i. City J pays $2 million for garbage service

ii. The federal government pays $2 million in social security payments

iii. A state government pays $2 million to unemployed workers

iv. The federal government paid $2 million to build a new road

Gross domestic product is:

At the end of the year, Ford realizes it has overproduced Fiestas, because 2,500 of them are left unsold. How is this accounted for in that year's GDP?

The cars are considered inventory and their value will increase investment.

Suppose that in 1960 Joe's grandfather had a starting salary of $20,000 per year. In 2013 Joe graduated from college, got a job, and had a starting salary of $40,000. Which of the following is true?

you need to know the CPI value in each of the two years to figure out who is better off.

Jane earned $50,000 at her job 10 years ago and today she earns $60,000. Which of the following is true? She is better off in real terms today as long as the inflation rate was less than ___ percent across the ten-year period.

20

Firm C produces 1,000 pounds of cotton at a cost of 50 cents per pound. They sell all of the cotton to Firm S for 75 cents per pound. Firm S makes 1,000 t-shirts with the cotton for a total cost of $1.50 per t-shirt. They sell all of the shirts to Firm R for $2.00 each. Firm R sells 950 of the t-shirts to consumers for $10 each and the total cost of producing each shirt is $8 each. There are no other firms in this simple economy. All income in the economy is either profit income or wage income. Do not enter dollar signs, and enter whole numbers only. The value added by Firm S is $__________ and the value of profit earned by firm S is $___________.

.

The CPI (consumer price index) changes from 120 to 129. If your boss wants to give you a raise equal to the rate of inflation plus 2% then he should give you a raise equal to

9.5%

When the government pursues expansionary fiscal policy we can expect the unemployment rate to ____ and the inflation rate to ____.

decrease; increase

The consumption function for a small economy is C = 800 + 0.8Y, where Y is income and C is consumption spending. If government spending on new goods and services increases by $100 million then we can expect equilibrium output to increase by

$500 million

When the price level rises, people's purchasing power will _____ and there will be a _____ the aggregate demand curve.

decrease; upward movement along

Suppose consumers are less confident about the health of the economy and are feeling less optimistic about the possibility of pay increases at work. This can be expected to cause a shift of the _______ curve and a movement along the ______ curve.

Suppose the marginal propensity to consume is 0.8. If government spending increases by $20 million then we can expect equilibrium output to increase by ___.

People who retire early but are still physically and mentally capable of work are classified as:

part of the working age population but not part of the labor force

The economy is currently suffering from the effects of a negative demand shock. If the government takes no action, then in the long run we would expect the price level to ____ and output to ______.

decrease : return to its level of potential output

Suppose the economy is currently producing a level of output that is $25 million dollars below its level of potential GDP. All else the same, to stimulate output back to its potential level, Congress should vote to

The state of California is considering increasing the minimum wage to $15 per hour. If this proposal passes we would expect that the increase in the minimum wage would lead to a(n) ____ in the quantity of workers demanded and a(n) _____ in the quantity of workers supplied.

decrease; increase

Suppose 5,000 discouraged workers begin to look for jobs. In this case the number of people in the working age population will be ______ and the number of people in the labor force will be ______.

unchanged; higher

When the economy is in an expansionary phase, real GDP is growing _____ potential GDP. During expansionary phases, production costs will tend to _____.

Suppose that in 1990 20% of college students either had part time jobs or were looking for part time jobs. In 2010 30% of college students either had part time jobs or were looking for part time jobs. All else the same, from 1990 to 2010 we would expect to see the labor force participation rate ______.

All else the same, when the baby boom generation starts to retire in large numbers we can expect wages to ____ due to a shift in ______.

The consumption function for a small economy is C = 750 + 0.60YD, where YD is disposable income and C is consumption spending. If the government decreases taxes by $100 million then we can expect equilibrium output to increase by how many millions of dollars?

Suppose the marginal propensity to consume is 0.8. The government spending multiplier is equal to ____.

5

The economy is currently suffering from the effects of a positive supply shock. If the government takes no action, then in the long run we would expect the price level to ____ and output to ______.

increase; return to its level of potential output

In the short run, a decrease in aggregate demand will ___ the price level and ____ the level of output.

decrease; decrease

Brazil is in the midst of a severe drought. We can expect this has caused the price level to ____ and the level of output to ____.

increase; decrease

A new technology increases the world supply of accessible oil and natural gas by 20%. Does this cause a shift of aggregate demand or aggregate supply?

aggregate supply

Suppose oil prices increase by 50%. In the short run you would expect equilibrium output to ___ and the equilibrium price level to ____.

decrease; increase

Suppose the economy has been in an expansionary phase for the past 8 quarters. During this time it is likely that wages have been ____ due to a shift in _____.

During a recession the tax revenue collected by the government will _____, transfer payments paid by the government will ____, and the budget balance will _____.

Suppose real GDP has been growing at a slower than average rate for the past 6 quarters. The unemployment rate is likely to be _____ the natural rate of unemployment and the price level is likely to ______.

higher than; decreasing

Expansionary fiscal policy can be expected to shift

the aggregate demand curve to the right.

Bob graduates from college and begins to look for a job. After 2 months he finds a job. This is an example of _____.

Which of the following would lead to an increase in consumption spending?

an increase in the value of people's houses and financial assets

When the price level changes we can expect all components of GDP to change except

government spending

If firms are less confident about the state of the economy then investment spending by firms will _______ and the _____ curve will shift to the left.

There are 7 million unemployed people and 143 million employed people in an economy. The unemployment rate is equal to:

4.67%

An increase in the growth rate of output (real GDP) around the world leads to a 10% increase in US exports. Does this cause a shift of aggregate demand or aggregate supply?

aggregate demand

A country is in the midst of a recession. If the government successfully pursues expansionary fiscal policy then in the long run we would expect the price level to ______. If the government does not pursue expansionary fiscal policy then in the long run we would expect the price level to ______.

Suppose there has been an increase in aggregate demand. In the long run, the price level will _____ and the level of output will ________.

increase; return to the level of potential output

{calc} When the government increases spending by $50 million we can expect equilibrium output (real GDP) to ________ by ________ $50 million.

increase; more than

The amount by which consumption increases when income increases is called

the marginal propensity to consume.