Intro to Macroeconomics

Exam 2
Version B
Name: ____________________
Table 6-1 Consider the following oil markets.
Quantity
Quantity
Price
Demanded
Supplied
$20

2400

$30

2000

200

$40

1600

400

$50

1200

600

$60

800

800

$70

400

1000

$80

1200

1. Refer to Table 6-1. Which of the following is equilibrium price in the market?
a. $80
b. $70
c. $60
d. $50

2. Refer to Table 6-1. Which of the following price ceilings would be binding in this market?
a. $80
b. $70
c. $60
d. $50

3. Refer to Table 6-1. Suppose the government imposes a price floor of $30 on this market. What will be the
a.

size of the surplus in this market?

0 units

b.

200 units

c.

1800 units

d.

2000 units

Figure 6-23

4. Refer to Figure 6-23. The tax is levied on ________.

a.
b.
c.

sellers
buyers
both buyers and sellers

5. Refer to Figure 6-23. The price paid by buyers after the tax is imposed is
a. $3.
b. $4.
c. $5.
d. $6.
6. Refer to Figure 6-23. The size of tax is _______.
a.
b.
c.
d.

$3.
$4.
$5.
$6.

7. Refer to Figure 6-23. The consumers tax burden is _______.

a.
b.
c.
d.

$1.
$3.
$4.
$5.

8. Refer to Figure 6-23. The governments tax revenue is _______.

a.
b.
c.
d.

$3.
$6.
$15.
$18.

Table 23-12
A country produces only ice cream and cake in the quantities and prices listed below. Use 2011 as the base
year.
Price of Ice Cream
Year

Quantity of Ice
Cream

Price of Cake

Quantity of Cake

2011

$2.00

200

$10

40

2012

$2.30

250

$14

50

2013

$2.75

280

$18

80

9. Refer to Table 23-12. Calculate nominal GDP in the year 2012.

a.
b.
c.
d.

$1,275
$1,000
$2,210
$1,360

10. Refer to Table 23-12. Calculate real GDP in the year 2012.
a.
b.
c.
d.

$1,275
$1,000
$2,210
$1,360

11. Refer to Table 23-12. Calculate the GDP deflator for the year 2012.
a.
b.
c.
d.

100
127.5
162.5
200

12. Refer to Table 23-12. Calculate the inflation rate for 2012.
a.
b.
c.
d.

0%
27.5%
62.5%
100%

Scenario 24-6
Consider a small nation of ten people idolizes the TV show American Idol. All they produce and consume
are karaoke machines and CDs. CPI basket is {50 Karaoke Machine and 100 CDs}.
Price
Karaoke Machine
2010
$100
2011
$120

Price
CD
$10
$12

13. Refer to Scenario 24-6. Find the cost of a basket of goods in 2010.
a.
b.
c.
d.

$5,000
$6,000
$7,000
$7,400

14. Refer to Scenario 24-6. Using 2010 as the base year, what is the CPI in 2011?
a.
b.
c.

83.33
100
120

15. Refer to Scenario 24-6. Using 2010 as the base year, what is the inflation rate in 2011?
a.
b.
c.
d.

0%
17%
20%
25%

16. When the government imposes a binding price ceiling it causes a surplus of the goods.
a.
b.

True
False

17. Consider the global oil market. Which of the following lead to decreases in the demand for oil?
a.
b.
c.
d.

The OPEC fails to reach an agreement to decrease output.

The United States has increased its oil produce.
Consumers use alternative energy sources.
More people start driving bigger cars, which consume more gas per mile.

18. Consider the global oil market. Which of the following lead to decreases in supply?
a.
b.
c.
d.

Cold weather continues in the United States.

The OPEC fails to agree decreases in oil supply.
More consumers drive hybrid cars.
Saudi Arabia is not influenced by political turmoil.

19. Consider two cars manufactured by Chevrolet in 2014. During 2014, Chevrolet sells one of the two cars
to Emily for $20,000. The second automobile, with a market value of $19,000, is unsold at the end of
2014 and it remains in Chevrolets inventory. Which of the following is the GDP in 2014?
a. $20,000
b. $37,000
c. $38,000
d. $39,000

20. When an American household purchases a bottle of Italian wine for $100,
a.

U.S. consumption does not change, U.S. net exports decrease by $100, and U.S. GDP decreases by
$100.

b.

U.S. consumption does not change, U.S. net exports increase by $100, and U.S. GDP increases by
$100.

c.

U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does
not change.

d.

U.S. consumption increases by $100, U.S. net exports do not change, and U.S. GDP increases by
$100.

21. In a simple circular-flow diagram, total income and total expenditure are
a.

never equal because total income always exceeds total expenditure.

b.

seldom equal because of the ongoing changes in an economys unemployment rate.

c.

equal only when the government purchases no goods or services.

d.

always equal because every transaction has a buyer and a seller.

22. In a simple circular-flow diagram, firms

a.

purchase resources from households.

b.

purchase the output produced by households.

c.

receive income by selling resources to households.

d.

All of the above are correct.

23. 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.

24. Which of the following items is the one type of household expenditure that is categorized as investment
rather than consumption?
a. spending on education
b.

the purchase of stocks and bonds

c.

the purchase of a new house

d.

the purchase of durable goods such as stoves and washing machines

25. Which of the following is included in government spending?

a.

unemployment benefits a state pays

b.

Social Security payments the U.S. government makes

c.

the services of a U.S. government attorney valued at the cost of her salary

d.

All of the above are correct.

26. Which of the following does add to US GDP?

a.
b.
c.
d.

Air France buys a plane from Boeing, he U.S. aircraft manufacturer.

General Motors builds a new auto factory in North Carolina
The city of New York pays a salary to a policemen.
All of the above

27. If in some year real GDP was $25 billion and the GDP deflator was 68, what was nominal GDP?
a.

$2.72 billion.

b.

$17 billion.

c.

$36.8 billion.

d.

$43 billion.

28. Which of the following agencies calculates the CPI?

a.

the National Price Board

b.

the Department Of Weight and Measurements

c.

the Bureau of Labor Statistics

d.

the Congressional Budget Office

29. What basket of goods and services is used to construct the CPI?
a.

a random sample of all goods and services produced in the economy

b.

the goods and services that are typically bought by consumers as determined by government surveys

c.

only food, clothing, transportation, entertainment, and education

d.

the least expensive and the most expensive goods and services in each major category of consumer expenditures

30. The consumer price index was 96 in 2012 and 100 in 2013.
Statement1: the typical family spent fewer dollars to maintain the same standard of living in 2012
compared to 2013.
a.
b.

Statement 1 is true
Statement 1 is false

31. When the consumer price index increases, the typical family can spend ____ dollars to maintain the same
standard of living.
a.
b.
c.

Fewer
More
The same amount of

32. Which of the following problems can be relevant to the problems in the construction of the CPI led by the
a.

invention of pocket-sized computers?

substitution bias

b.

introduction of new goods

c.

unmeasured quality change

d.

income bias

33. An increase in the price of imported coffee shows up

a.

in the consumer price index and in the GDP deflator.

b.

in the consumer price index, but not in the GDP deflator.

c.

in the GDP deflator, but not in the consumer price index.

d.

in neither the consumer price index nor in the GDP deflator.

34. A decrease in the price of domestically produced industrial robots will be reflected in
a.

both the GDP deflator and the consumer price index.

b.

neither the GDP deflator nor the consumer price index.

c.

the GDP deflator but not in the consumer price index.

d.

the consumer price index but not in the GDP deflator.

35. Statement2: Suppose GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5trillion, and public
saving is $0.2trillion. Assuming this economy is closed, calculate consumption.
a. 1.3
b. 0.7
c. 6
d. 8

36. Statement2: Suppose GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5trillion, and public
saving is $0.2trillion. Assuming this economy is closed, calculate government spending.
a. 1.3
b. 0.7
c. 6
d. 8

37. When you spend $200 paycheck to buy stock in AT&T, saving increases by $200.
a.
b.

True
False

38. If the Apple corporation sells a bond it is

a.
b.
c.
d.

Borrowing from the public

Selling shares of ownership to the public
None of the above
Both a and b

39. A mutual fund

a.

is a financial market where small firms mutually agree to sell stocks and bonds to raise funds.

b.

is funds set aside by local governments to lend to small firms who want to invest in projects that are
mutually beneficial to the firm and community.
sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high
interest to obtain credit.
is an institution that sells shares to the public and uses the proceeds to buy a selection of various types
of stocks, bonds, or both stocks and bonds.

c.
d.

40. Which of the following is not correct?

a.

Purchases of capital goods are excluded from GDP.

b.

In a closed economy net exports are zero.

c.
d.

National saving is the sum of private saving and public saving.

Gross domestic product is both total income in an economy and total expenditures on the economys
output of goods and services.