Q: The law of increasing additional cost is illustrated by the bowed-out shape of the production possibilities curve. Which equation best represents the opportunity cost of producing more corn?

$$\text{Opportunity Cost} = \frac{\text{Change in Cloth}}{\text{Change in Corn}}$$

Q: Suppose the price index in 2002 was 154 and in 2003 it was 161. What is the inflation rate between 2002 and 2003?

$$\frac{161 - 154}{154} \times 100 = 4.55\%$$

Q: Which equation correctly calculates the price index for a market basket in a given year?

$$\text{Price Index} = \frac{\text{Current Year Price}}{\text{Base Year Price}} \times 100$$

Question 1

Refer to the production possibilities curve shown in the first image. If society is currently operating at point 'f', what does this indicate about resource utilization?

Accepted Answer

Resources are being underutilized, and society could produce more of both goods.

Question 2

Which point on the production possibilities curve (first image) represents an unattainable combination of goods given current resources and technology?

Accepted Answer

Point 'h'

Question 3

The law of increasing additional cost is illustrated by the bowed-out shape of the production possibilities curve. Which equation best represents the opportunity cost of producing more corn?

Accepted Answer

$$	ext{Opportunity Cost} = \frac{	ext{Change in Cloth}}{	ext{Change in Corn}}$$

Question 4

Refer to Panel A in the fourth image. If the demand curve shifts from $$D_1 to$$ $$D_2$$, what does this represent?

Accepted Answer

An increase in demand for Good A.

Question 5

In the supply and demand diagram (seventh image), what happens if the price is set at $$P_2$$?

Accepted Answer

There is a surplus equal to the difference between points A and F.

Question 6

Refer to the sixth image. If the price of plastic (an input for cellphones) increases, which graph best shows the effect on the supply of cellphones?

Accepted Answer

Graph D

Question 7

If the demand for rice and the supply of rice both increase simultaneously, what is the most likely outcome for equilibrium quantity and price?

Accepted Answer

Equilibrium price may rise, fall, or stay the same, but equilibrium quantity will rise.

Question 8

Which panel in the third image best demonstrates the law of demand?

Accepted Answer

Panel A

Question 9

Suppose the price index in 2002 was 154 and in 2003 it was 161. What is the inflation rate between 2002 and 2003?

Accepted Answer

$$\frac{161 - 154}{154} 	imes 100 = 4.55\%$$

Question 10

If nominal GDP in 2020 is $$9,250$$ billion and the price level index is $$120 ($$base year 2010 = 100), what is the real GDP for 2020?

Accepted Answer

$$\frac{9,250}{1.20} = 7,708$$

Question 11

Which of the following is NOT counted as unemployed according to the study materials?

Accepted Answer

A 22-year-old aspiring actress currently without any show business employment, but working temporarily as a waitress while she auditions for acting jobs.

Question 12

Which equation correctly calculates the price index for a market basket in a given year?

Accepted Answer

$$	ext{Price Index} = \frac{	ext{Current Year Price}}{	ext{Base Year Price}} 	imes 100$$

Question 13

If the nominal interest rate is 7% and the expected inflation rate is 3%, what is the real interest rate?

Accepted Answer

$$7\% - 3\% = 4\%$$

Question 14

Which of the following would NOT allow society to move to point 'h' in the production possibilities curve (first image)?

Accepted Answer

More efficient use of current resources.

Question 15

Which of the following is an example of a factor of production, but NOT money?

Accepted Answer

Money

Question 16

If an economy is operating at a point inside the production possibilities curve, what does this imply?

Accepted Answer

Resources are being inefficiently utilized.

Question 17

Which of the following best describes the concept of division of labor?

Accepted Answer

Each worker specializes in a specific task to increase productivity.

Question 18

Which equation represents the calculation of real GDP?

Accepted Answer

$$	ext{Real GDP} = \frac{	ext{Nominal GDP}}{	ext{Price Index}} 	imes 100$$

Step-by-Step Guidance for ECON-2301 Macro Midterm (Chapters 1–4)

Study Guide - Practice Questions

Study Guide - Flashcards