EXAM 1 IF the market for sport utility vehicles has excess supply then one can say that Quantity supplied is greater than quantity demanded Suppose a borrower and lender agree to an interest rate on a loan and inflation is expected to be 6 the borrower would be best off if inflation is actually 9 Government purchases include Construction Salary to teacher Purchase of military Holding other factors constant technological process real wage and employment Increase increase 1 In 1929 CPI was 171 and in 1990 CPI is 167 this is evidence of a Deflation 2 Suppose one knows 2 facts the market for prescription drugs experiences chronic shortage and government set price a Government set it too low 3 Demand shifts left for coffee when people find out it causes disease 4 CPI definition 5 The fisher effect is tendency for NOMINAL interest rate to be high when inflation is high 6 Minimum payment willing to accept a Reservation price 7 Market for office workers a Computers are compliments 8 How many workers will be hired if the wage for workers is 70 a As many as long as their value of marginal product is greater than 70 9 The value of intermediate goods is excluded from the measure of GDO in order to 10 Suppose that the market price for hot dogs sold went from 4 50 to 5 then Curly opens a hot a Avoid double counting dog cart He can assume that a Curly s reservation price is greater than 4 50 but no more than 5 11 Globalization the wages of workers in exporting and wages in importing a Raises lowers a Increase increase 12 If computers allow factory workers to manufacture more products per hour real wages of workers will and employment of workers will 13 Increasing wage inequality results when international trade wages for workers in exporting and wages of workers in importing a Higher lower 14 Know who would be employed unemployed not in labor force 15 Shelly purchases a leather purse for 400 one can infer that a Her reservation price was at least 400 16 As a result of a war in Omega refugees flee to Alpha for work The influx of refugees will wage of Alpha and employment in Alpha a Shift supply to right decrease increase 17 When price of item increases buyers tend to purchase less of it a Because substitution and income effects 18 What might cause a demand function to shift to the right 19 The introduction of new tech that increases productivity will a a Increase in price of substitute Increase demand for labor 20 When demand is shifted to the left this market will have an immediate a Excess supply which will cause prices to fall to a new equilibrium 21 An economy produces 500 000 tables values at 100 each They are split among households government exports What is value of GDP 22 the market value of final goods and services produced within a country during a period of 23 If a borrower and lender agree to an interest rate on a loan when inflation is expected to be 7 and inflation rate ends up being 1 the borrower and lender 24 If the CPI equaled 1 in 1995 and 1 65 in 2005 and a typical household income was 35 in a 50 million time is called a GDP gross domestic product a Gains loses 1995 and 40 000 in 2005 income a Decreased 25 Inflation is a measure of the of prices CPI is measure of of prices a Change in level current level 26 Which of following would be included in GDP of US a Plane built in Seattle sold to Air Canada 27 Suppose a jar of orange marmalade is ultimately sold to customer a question about value added for intermediate good 28 a factory worker earned 10 in 1980 cpe was 82 in 1980 and same favtory worker earner 15 in 1990 and cpi was 1 31 the facroty worker hours real wage a decreased from 12 20 to 11 45 29 the four components of GDP are a consumption investment gov murchases net exports 30 the wage paid to workers measure in terms of real purchasing ppower is called a real wage 31 suppose that price of chickens rises sharply compaires to price of turket in response consumers buy more turket a This overstates inflation b c of subsititution bias 32 Which of following activits is counted in GDO 34 Workers whose spells of unemployment are broken up by brief periods of employment or a Cail buys paper to donate to poor children 33 The following table provides date for economy a Know what is counted in GDP withdrawl from the labor force are workers a Chronically unemployed 35 Know how to calculate real GDP 36 A market in disequilibrium would feature a Either excess supply or excess demand