# Econ 1040 Exam Review

17 Questions | Total Attempts: 14  Settings  Related Topics
• 1.
• A.

(20/80) x 100

• B.

(30/80) x 100

• C.

(20/60) x 100

• D.

(20/100) x 100

• 2.
• A.

84.5

• B.

92.4

• C.

105.0

• D.

108.2

• 3.
If national income increases by \$20 million and consumption increases by \$5 million, the marginal propensity to consume is
• A.

4

• B.

0.75

• C.

0.5

• D.

0.25

• 4.
Ceteris paribus, an increase in interest rates would be represented by a movement from
• A.

• B.

• C.

Point A to point B

• D.

Point B to point A

• 5.
If aggregate expenditure is less than GDP, how will the economy reach macroeconomic equilibrium?
• A.

Inventories will decline, and GDP and employment will rise.

• B.

Inventories will rise, and GDP and employment will rise.

• C.

Inventories will rise, and GDP and employment will decline.

• D.

Inventories will decline, and GDP and employment will decline.

• 6.
Given the equations for C, I, G, and NX below, what is the equilibrium level of GDP? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400
• A.

\$4,333

• B.

\$7,100

• C.

\$8,778

• D.

\$79,000

• 7.
Refer to figure. Suppose that investment spending increases by \$10 million, shifting up the aggregate expenditure line and GDP increases from GDP 1 to GDP 2. IF the MPC is 0.9, then what is the change in GDP?
• A.

\$9 million

• B.

\$10 million

• C.

\$90 million

• D.

\$100 million

• 8.
Imagine that you borrow \$5,000 for one year and at the end of the year you repay the \$5,000 plus \$600 of interest. If the inflation rate was 4%, what was the real interest rate you paid?
• A.

16 percent

• B.

12 percent

• C.

8 percent

• D.

6 percent

• 9.
Suppose your grandfather earned a salary of \$12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2010, then the value of your grandfather's salary in 2010 dollars is approximately
• A.

\$84, 775

• B.

\$63,830

• C.

\$37,200

• D.

\$26,280

• 10.
What is investment in a closed economy if you have the following economic data? Y = \$10 trillion C = \$5 trillion TR = \$2 trillion G = \$2 trillion
• A.

\$2 trillion

• B.

\$3 trillion

• C.

\$5 trillion

• D.

Cannot be determined without information on taxes (T)

• 11.
Serena Haley Bracelets 8 9 Necklaces 16 12 What is Haley's opportunity cost of making a bracelet?
• A.

3 bracelets

• B.

1 1/3 necklaces

• C.

2 necklaces

• D.

3/4 of a bracelet

• 12.
Serena Haley Bracelets 8 9 Necklaces 16 12 Which of the following statements is true?
• A.

Haley has an absolute advantage in making necklaces and Serena in making bracelets

• B.

Haley has an absolute advantage in making bracelets and Serena in making necklaces

• C.

Serena has an absolute advantage in making both products

• D.

Haley has an absolute advantage in making both products

• 13.
Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity. What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be logged?
• A.

D no change, S decreases, P increases, Q increases

• B.

S decreases, D no change, P increases, Q decreases

• C.

D decreases, S no change, P and Q decrease

• D.

D and S decrease, P and Q increase

• 14.
The following equations represent the demand and supply for silver pendants. Qd = 50-2P Qs = -10+2P What is the equilibrium price (P) and quantity (Q - in thousands) of pendants?
• A.

P = \$15; Q = 20 thousand

• B.

P = \$20; Q = 15 thousand

• C.

P = \$10; Q = 30 thousand

• D.

P = \$50; Q = 10 thousand

• 15.
Paul goes to Soprtsmart to buy a new tennis racquet. He is willing to pay \$200 for a new racquet, but buys one on sale for \$125. Paul's consumer surplus from the purchase is
• A.

\$325

• B.

\$200

• C.

\$125

• D.

\$75

• 16.
Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase?
• A.

An increase in the price of butter, a complement for white bread

• B.

A decrease in the price of flour

• C.

An increase in the price of rye bread, a substitute for white bread

• D.

An increase in the price of flour

• 17.
If an increase in income leads to a decrease in the demand for popcorn, then popcorn is
• A.

A neutral good

• B.

A normal good

• C.

An inferior good

• D.

A necessity