EC140 Lecture Notes - Lecture 7: Diminishing Returns, Supreme Headquarters Allied Powers Europe, Final Good

28 views5 pages

scarlethornet555

31 Jan 2018

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

meghan78 and 39778 others unlocked

EC140 Full Course Notes

Verified Note

21 documents

Document Summary

Lecture 7 output & prices in the short run, january 29th, 2018. The money that people hold can buy fewer goods. Similarly: a fall in prices: value of money held goes up, consumption therefore rise. Desired income goes up that means that there is going to be more production which means the prices will go up. If prices go up, people have assets and can"t buy as much as before you feel poorer (when you feel poorer your consumption falls) No assumption of straight lines aggregate supply and demand are not straight once we add prices. Aggregate expenditure from any level of income how much do ppl want to spend. If prices goes up, consumption falls, expenditure falls, gov"t spending falls aggregate expenditure falls thus gdp falls. Deriving the aggregate demand curve: start with p0 and ae0, downward sloping aggregate demand (ad) curve. Increase prices to p1 increase again to p2.

Related Questions

Microeconomics Multiple choice questions. Please answer all the questions.

1. Scarcity:
A. exists because resources are limited while human wants are unlimited.
B. means we are unable to have as much as we would like to have.
C. will likely be eliminated as technology continues to expand.
D. is not an issue addressed in economics.

2. People are forced to make choices because of:
A. unlimited wants and unlimited resources.
B. limited wants and unlimited resources.
C. unlimited wants and limited resources.
D. limited wants and limited resources.
E. irrational wants and limited resources.

3. Which of the following is closest to the definition of capital?
A. c and e.
B. c and d.
C. Tools, equipment, means of transportation
D. Factories and machinery.
E. Borrowed money.

4. Which one of the following is the most accurate definition of economics?
A. Economics is the study of stocks and bonds.
B. Economics is the study of how people allocate unlimited resources.
C. Economics is the study of how consumers choose to spend their income.
D. Economics is the study of how society chooses to allocate scarce resources.

5. The basic difference between macroeconomics and microeconomics is:
A. microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade.
B. microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms.
C. microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
D. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

6. Which of the following is not a resource?
A. Land.
B. Labor.
C. Money.
D. Capital.

7. Which of the following would an economist classify as capital?
A. 100 shares of Microsoft stock.
B. $50 bill.
C. credit card.
D. lawyer's personal computer.

8. Economics, according to its definition, studies how people:
A. earn and spend money.
B. invest in the stock and bond markets.
C. make choices in the face of scarcity.
D. supply goods in response to demand.

9. Which of the following is the best example of a microeconomic topic?
A. The impact that the money supply has on inflation.
B. The reasons for increases in the price of soft drinks.
C. The effect that federal budget deficits have on the interest rate.
D. The tradeoff between inflation and unemployment.

10. Which of the following is a macroeconomics topic?
A. Wages of textile workers in the Northeast.
B. The cost of producing 10,000 bookcases.
C. The economy's annual growth rate.
D. National demand for fish.
E. Effects of farm subsidies on food prices.

11. An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, Ceteris paribus. The phrase "Ceteris paribus" means that:
A. other relevant factors like consumer incomes must be held constant.
B. the gasoline prices must first be adjusted for inflation.
C. the theory is widely accepted but cannot be accurately tested.
D. consumers' need for gasoline remains the same regardless of the price.

12. An economic model is:
A. a plastic scaled version of the economy.
B. a complete depiction of reality.
C. an abstraction from reality.
D. applicable to consumer behavior but not to producer behavior.
E. not an accepted tool of the economics profession.

13. Which of the following sayings best reflects the concept of opportunity cost?
A. "You can't teach an old dog new tricks."
B. "There is no such thing as a free lunch."
C. "I have a baker's dozen."
D. "There's no business like show business."

14. The opportunity cost of watching television is:
A. all of the alternative programs that appear on other stations.
B. zero because there is no money expenditure involved.
C. the alternative use of the time foregone by watching the program.
D. zero if it benefits you.

15. Which of the following does not illustrate opportunity cost?
A. If I study, I must give up going to the football game.
B. If I buy a computer, I must do without a 35" television.
C. More consumer spending now means more spending in the future.
D. If I spend more on clothes, I must spend less on food.

16. When deciding whether to buy a second car, marginal analysis indicates that the purchaser should compare the:
A. benefits expected from two cars with the cost of both.
B. additional benefits expected from a second car with the cost of the two cars.
C. dollar cost of the two cars with the potential income that the cars will generate.
D. additional benefits of the second car with the additional cost of the second car.

17. According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study:
A. is positive.
B. outweighs the extra cost.
C. exceeds the benefits of the previous hour of study.
D. will raise your exam score.

1.
John just bought shares of stock in IBM for $10,000 and paid a $90commission to his broker. How did this affect GDP?
A) It had no impact on GDP.
B) GDP increased by $90.
C) GDP increased by $10,000.
D) GDP increased by $9,990.
E) GDP increased by $10,090.
2.
Opportunity cost is the ____ alternative forfeited when a choice ismade.
A) least-valued
B) most highly-valued
C) most convenient
D) most recently considered
3.
If there is an increase in the amount of good B foregone as everyadditional unit of good A is produced, the PPF between A and Bwould
A) be a straight line.
B) be a bowed-outward curve.
C) be a bowed-inward curve.
D) not exist.
4.
Persons who are retired or engaged in own-home housework areconsidered to be in which of the following categories?
A) in the civilian labor force
B) not in the labor force
C) employed
D) unemployed
5.
A recessionary gap exists if (actual) Real GDP is ____ Natural RealGDP.
A) less than
B) greater than
C) equal to
D) b and c
E) none of the above
6.
Decision making "at the margin" means making a choice based on ____of a decision.
A) the total benefits
B) the total costs
C) comparing the total benefits and costs
D) comparing the additional benefits and costs
7.
When Claudia trades $100 for good X, economists assume that sheis
A) trading something of less value to her for something of morevalue to her.
B) trading something of more value to her for something of lessvalue to her.
C) trading something that gives her less utility for something thatgives her more utility.
D) a and c
E) none of the above
8.
An increase in investment at a given price level
A) shifts the AD curve to the right.
B) shifts the AD curve to the left.
C) causes an upward movement along the existing AD curve.
D) causes a downward movement along the existing AD curve.
E) none of the above
9.
If the demand for a good falls by less than the supply of the goodrises, then equilibrium price will ____ and equilibrium quantitywill ____.
A) rise; fall
B) rise; rise
C) fall; fall
D) fall; rise
10.
The CPI was 140 in one year and 144 the following year.Approximately how much did prices rise between the two years?
A) 2.86 percent
B) 2.78 percent
C) 0.03 percent
D) 1.03 percent
E) none of the above
11.
The expenditure approach to measuring GDP sums
A) consumption, investment, government purchases, and netexports.
B) sales, revenues, income, and wages.
C) profits, compensation of employees, consumption, andinvestment.
D) net exports, consumption, wages, and salaries.
12.
Which of the following would not be included in the calculation ofthis year's GDP?
A) a headlight bulb purchased at Joe's Auto Supply by Susan toreplace a burnt out bulb in her car
B) a headlight bulb purchased by Ford Motor Co. from asupplier
C) a headlight bulb produced but not sold this year and thus endingup as inventory
D) none of the above, i.e., all would be included
13.
Suppose the government decides that every family should own its ownhome. To bring this about, the government decides to subsidize thehome-construction industry by giving the home-constructioncompanies $10,000 for every house that they build. As a result ofthis,
A) the supply curve of new houses would shift leftward, since itnow costs $10,000 more for builders to produce a house.
B) the demand curve for new houses would shift rightward, since nowevery family would want to buy a house.
C) the demand curve for new houses would shift leftward.
D) the supply curve of new houses would shift rightward, sincebuilders would be willing to produce and sell more houses at eachgiven price.
E) c and d
14.
Which set of changes will raise demand?
A) an increase in income (assuming demand is for a normal good), adecline in wage rates, and a rise in the per-unit tax placed on theproduction of a good
B) an increase in the number of buyers, a decline in the price of asubstitute, and an increase in the prices of relevantresources
C) an increase in the price of a substitute, a decrease in theprice of a complement, and an increase in expected (future)price
D) a decline in the number of buyers, an increase in the price of acomplement, and a decline in a per-unit tax placed on theproduction of a good
E) none of the above
15.
Both country 1 and country 2 are located on their respectiveproduction possibilities frontiers (PPFs), but country 1 producestwice the output that country 2 produces. It follows that
A) country 1's PPF lies further to the right than country 2'sPPF.
B) country 1 has a smaller population than country 2.
C) country 1 has a bigger population than country 2.
D) country 1 is efficient and country 2 is inefficient.
E) none of the above
16.
Suppose aggregate demand is too low to bring about the Natural RealGDP level. A Keynesian policy prescription would call for a(n) ____to close this recessionary gap.
A) increase in government spending
B) decrease in government spending
C) increase in taxes
D) decrease in taxes
E) a or d
17.
The structural unemployment rate is 3.1 percent, the frictionalunemployment rate is 2.1 percent, and the current unemployment rateis 4.9 percent. The economy is in
A) a recessionary gap producing less than Natural Real GDP.
B) an inflationary gap producing more than Natural Real GDP.
C) long-run equilibrium.
D) an inflationary gap producing Natural Real GDP.
E) a recessionary gap producing more than Natural Real GDP.
18.
A fall in the price level changes the purchasing power of money.This is relevant to the ____ effect.
A) international trade
B) real balance
C) aggregate demand
D) interest rate
E) aggregate supply
19.
An economic policy initiative results in the AD curve shifting tothe right. As a result,
A) the price level will rise.
B) the price level will stay constant.
C) the price level will fall.
D) Real GDP will rise in the short run.
E) a and d
20.
Which of the following is consistent with the classical position onwages and prices?
A) Wages and prices are sticky in the downward direction.
B) Wages are sticky in the downward direction, but prices areflexible.
C) Wages and prices are flexible.
D) Prices are sticky in the downward direction, but wages areflexible.
21.
If the bottom half of all U.S. income tax payers were allowed tostop paying the income tax entirely and the top 50% continued topay as they do now, tax revenues to the government would drop byabout
A) 3.6 percent.
B) 10.2 percent.
C) 13.9 percent.
D) 33.3 percent.
22.
Which of the following is most nearly consistent with Say'slaw?
A) When a person produces one good, he or she plans to demand othergoods.
B) When a person produces a good, he or she plans to sell it.
C) When a person buys a good, he or she plans to pay for it withmoney.
D) When a person goes to work, he or she plans to produce.
23.
The economy was at point A producing 100X and 200Y. It moved topoint B where it produces 200X and 300Y. It follows that
A) point A may have been a point below the economy's PPF, whilepoint B may lie on the PPF.
B) the economy's PPF could have shifted outward and point A was apoint on the economy's old PPF.
C) the economy has moved from one point on its PPF to another pointon the same PPF.
D) a or b
E) a or c
24.
The condition in an economy that makes a "rationing device" anecessity is the fact that
A) the economy is organized around free markets.
B) the economy is centrally planned by the government.
C) scarcity exists.
D) there are fewer types of goods than there are people in theeconomy.
25.
Expansionary fiscal policy actions include ____ government spendingand/or ____ taxes, while contractionary fiscal policy actionsinclude ____ government spending and/or ____ taxes.
A) increasing; increasing; decreasing; decreasing
B) decreasing; decreasing; increasing; increasing
C) increasing; decreasing; increasing; decreasing
D) decreasing; increasing; increasing; decreasing
E) increasing; decreasing; decreasing; increasing
26.
A price ceiling is a government-mandated
A) minimum price below which legal trades cannot be made.
B) maximum price above which legal trades cannot be made.
C) minimum price above which legal trades cannot be made.
D) maximum price below which legal trades cannot be made.
27.
In year 1 the CPI is 144.1, and in year 2 the CPI is 151. IfSarah's salary was $33,500 in year 1, what salary in year 2 wouldcause her to exactly "keep up with inflation"?
A) $50,585
B) $48,274
C) $40,508
D) $35,104
28.
One measure of the inflation rate is the
A) sum of the CPIs of adjacent years.
B) percentage change in the CPI of adjacent years.
C) percentage change in the Real GDP of adjacent years.
D) GDP minus the Real GDP in a year.
29.
Expansionary fiscal policy is ineffective if
A) there are idle resources in the economy.
B) the MPC is less than 0.60.
C) the government has a budget surplus.
D) there is complete crowding out.
E) a and d
30.
Suppose the economy goes from a point on its unchanging PPF to apoint down and to the left of it. This could be due to
A) a gain of resources.
B) a loss of resources.
C) technological improvement in the production of both goods.
D) a new law that interferes with economic efficiency.
31.
A decrease in the price of electricity will cause
A) a movement down the SRAS curve.
B) a movement up the SRAS curve.
C) a leftward shift in the SRAS curve.
D) a rightward shift in the SRAS curve.
E) no change regarding the SRAS curve
32.
Which of the following is an example of crowding out?
A) A decrease in the rate of growth of the stock of money decreasesGDP.
B) A deficit causes an increase in interest rates, which causes adecrease in investment spending.
C) An increase in tariffs causes a decrease in imports.
D) A decrease in government housing subsidies causes an increase inprivate spending on housing.
33.
A rightward shift in the demand curve for tennis balls could becaused by
A) a fall in the price of tennis balls.
B) a fall in the price of tennis rackets.
C) a rise in the price of tennis lessons.
D) a fall in income, assuming tennis balls are a normal good.
34.
Here is a consumption function: C = C0 + MPC(Yd). If MPC is 0.80,then we know that
A) as Yd rises by $1, Co rises by $0.80.
B) as Yd rises by $1, C rises by $0.80.
C) Yd rises by $0.80.
D) as C0 rises by $0.80, Yd rises by $1.
35.
Suppose a drop in stock prices makes people feel less wealthy. Thiswould cause ____ the economy's AD curve.
A) movement down along
B) movement up along
C) a rightward shift of
D) a leftward shift of
36.
An economy is producing its Natural Real GDP when the rate ofunemployment is equal to the ____ unemployment rate.
A) frictional
B) structural
C) sum of the frictional unemployment rate and the structural
D) seasonal
E) cyclical
37.
Who would be most likely to agree that "People do not always savemore as interest rates rise"?
A) a classical economist
B) John Maynard Keynes
C) an efficiency wage theorist
D) a and b
E) a, b, and c
38.
The U.S. income tax is currently a ____ tax.
A) progressive
B) proportional
C) regressive
D) proactive
39.
The question of U.S. budget deficits and their impact on the U.S.economy is dealt with in the study of
A) microeconomics.
B) managerial economics.
C) macroeconomics.
D) consumer economics.
40.
John Maynard Keynes believed that wages may be inflexible in thedownward direction. Consequently, an economy
A) could get stuck in long-run equilibrium.
B) could get stuck in a recessionary gap.
C) could get stuck in an inflationary gap.
D) would always produce more than Natural Real GDP.
E) b and c

lilacbear730

EC140 Lecture Notes - Lecture 7: Diminishing Returns, Supreme Headquarters Allied Powers Europe, Final Good

EC140 Full Course Notes

Document Summary

Get access

Related Documents

EC140 Lecture 8: EC-140 Lecture 8

EC140 Lecture Notes - Lecture 9: Aggregate Demand, Aggregate Supply, Diminishing Returns

EC140 Lecture Notes - Lecture 8: Aggregate Demand, Price Level, Aggregate Supply

Related Questions