Macroeconomics Final Exam

Front 1

A country should specialize in producing the goods for which

Back 1

it has an comparative advantage.

Front 2

For a given question to be considered an economic question, it must involve

Back 2

An exchange in the market

Front 3

John collects aluminum cans and sells them to a recycling firm to make extra cash. Each can he finds earns him 10 cents. He also has an open offer to help out his friend who has a landscaping business. Each hour he works for his friend he is paid $10 per hour. John works 5 hours a day and experience has shown that he finds more cans the more hours he spends searching based on the following schedule: He finds 250, 410, 520, 600, or 660 cans in total if he works 1, 2, 3, 4, or 5 hours respectively. Given that John can devote all 5 work hours to either activity, or he can divide the hours between activities, what is the largest amount of income he can earn for all 5 hours?

Back 3

72$

Front 4

Snap and Bolt are two countries that both produce bananas and sugar. In Snap each worker in a one-hour period can produce either 13.61 pounds of bananas or 6.69 pounds of sugar. In Bolt each worker in a one-hour period can produce either 13.21 pounds of bananas or 3.13 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 _____ pounds of bananas.

Back 4

203.44

Front 5

A country has constant opportunity cost of production. If they devote all of their resources to the production of blankets they can produce a total of 691 per week. If they devote all of their resources to the production of t-shirts they can produce a total of 226 shirts per week. What is the opportunity cost of producing 1 t-shirt?

Back 5

3.06

Front 6

The price of gas rises during the summer because more people take vacations and so they drive more miles. This is best represented by:

Back 6

an upward moving along the supply curve

Front 7

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

Back 7

the cost of the key input used to produce the good has declined

Front 8

Bill and Ted have a pizza shop. In one hour Bill can make 10 pizzas or he can deliver 4 pizzas. In one hour Ted can make 15 pizzas or he can deliver 5 pizzas. They both work 8 hours a day and can make or deliver the quantities of pizza given above in any given hour. Based on this information, Bill should _____ and Ted should ______.

Back 8

deliver pizza: make pizza

Front 9

All else the same, the law of demand defines a

Back 9

negative relationship between price and quantity demanded

Front 10

A production possibilities frontier illustrates

Back 10

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

Front 11

During the holiday season airline tickets are most expensive and at the same time more people choose to fly. This can be explained by

Back 11

an increase in the demand for tickets

Front 12

The equilibrium price and quantity of a good have both increased. Which of the following is a valid explanation?

Back 12

demand increased

Front 13

Which of the following would cause the equilibrium price of a good in a college town to fall?

Back 13

the price of another good that substitutes for this good falls

Front 14

Which of the following would shift the demand curve for laptop computers to the right?

Back 14

all college students are now required to own a laptop

Front 15

Many consumers believe goods X and Y are complements. An increase in the price of good X will cause

Back 15

a decrease in demand for good Y

Front 16

The price of gas rises during the summer because more people take vacations and so they drive more miles. This is best represented by:

Back 16

a rightward shift of the demand curve

Front 17

The supply curve is upward sloping because

Back 17

higher prices encourage firms to devote more resources in producing that good

Front 18

When the price of good A rises, consumers buy less of good B and more of good C. Which goods are complements?

Back 18

A and B

Front 19

A farmer is trying to decide how many gallons of water to apply to his cotton crop. He should apply more water as long as

Back 19

the marginal benefit of water is at least as great asthe as the marginal cost of water

Front 20

Consider a production possibilities frontier. Which points are efficient?

Back 20

points of the frontier

Front 21

Leslie can produce 2 pairs of pants in an hour and Jane can produce 3 pairs of pants in an hour. It must be the case that

Back 21

Jane has the absolute advantage of producing pants

Front 22

Which of the following would shift the supply curve for laptop computers to the right?

Back 22

a reduction in the cost of producing the computers influences the decrease in the selling price

Front 23

Suppose you observe that the price of ice cream has gone up. Which of the following would be a valid explanation of the increase in the price of ice cream?

Back 23

there are a few ice cream stores in the area

Front 24

The supply curve illustrates that firms

Back 24

increase in the quantity supplied of a good when the input costs rise

Front 25

You have been offered an extra shift at work this Friday and this will allow you to earn an extra $100. Your friend has invited you to go to Disney the same day and this will cost you $120. What is the implicit cost of going to Disney?

Back 25

100$

Front 26

Opportunity cost is defined as

Back 26

the value of the best next alternative of the chosen activity

Front 27

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% increase 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 __________. Please answer increase or decrease or uncertain.

Back 27

increase: decrease

Front 28

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

Back 28

the value of real GDP per capita in each country

Front 29

If nominal GDP is growing at 5% per year, the inflation rate is 2% per year, and population growth is -1% per year then real GDP per capita is growing at ___ percent per year.

Back 29

4

Front 30

Net exports is defined as

Back 30

exports minus imports

Front 31

The investment category of GDP has three components. They are

Back 31

new purchases of new capital, residential investment, and inventory investment

Front 32

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.

Back 32

fewer: lower

Front 33

A basket of goods and services purchased by an average urban consumer has a cost of $200 in 2012, $210 in 2013, and $220.50 in 2014. You may assume the base year is 2012. The inflation rate between 2012 and 2013 was _____.

Back 33

5%

Front 34

The income approach to computing GDP calculates

Back 34

wages + interest + rent +profits

Front 35

GDP is best defined as

Back 35

the market value of all final goods and services produced during a given year

Front 36

If the value of the GDP deflator is 232 then

Back 36

the inflation rate between the base year and the current year is 132%

Front 37

A basket of goods and services purchased by an average urban consumer has a cost of $200 in 2012, $210 in 2013, and $220.50 in 2014. You may assume the base year is 2012. The inflation rate between 2012 and 2013 was _____ the inflation rate between 2013 and 2014.

Back 37

the same as

Front 38

When we add up the value of consumption, investment, government purchases, and net exports this is known as the

Back 38

expenditure approach

Front 39

A price index is a measure of

Back 39

a current value relative to a base value