1. The law of demand states that, other things remaining the same, the higher the price of a good,

the ____,

A) smaller is the quantity of the good demanded.

B) smaller is the demand for the good.

C) larger is the demand for the good.

D) larger is the quantity of the good demanded.

2. People buy more of good 1 when the price of good 2 rises. These goods are ____.

A) normal goods.

B) substitutes.

C) complements.

D) inferior goods.

3. California Moon Drops (red grapes) and Washington Concord grapes are substitutes for juice. A drought in California destroyed a good portion of the grapes, ceteris paribus, we have ____,

A) the price of both Moon Drops and Concord and will fall.

B) the price of Moon Drops will fall, and the price of Concord will increase.

C) the price of both Moon Drops and Concord will increase.

D) the price of Moon Drops increase, the price of Concord will fall.

4. The price of a cheese, which is used in making pizza, increases. In the market for pizza you would expect that ____,

A) the demand for pizza would increase and the price of pizza would increase.

B) the supply of pizza would increase and the price of pizza would decrease.

C) the demand for pizza would decrease and the price of pizza would fall.

D) the supply of pizza would decrease and the price of pizza would increase.

5. A movement along the demand curve to the left may be caused by a ____,

A) fall in the price of inputs.

B) fall in the number of substitute goods.

D) rise in income.

D) decrease in supply.

6. The quantity supplied of a good is ____.

A) the same thing as the quantity demanded at each price.

B) equal to the difference between the quantity available and the quantity desired by all consumers and producers.

C) the amount that producers are planning to sell at a particular price during a time period.

D) the amount the firm would sell if it faced no resource constraints.

7. Which of the following is an example of a final good or service?

A) wheat a bakery purchases to make bread

B) a GPS purchased by UPS to track shipments.

C) lumber purchased by a construction company for building houses

D) coffee beans Starbucks purchases to make coffee

8. Which of the following is an example of an intermediate good?

A) the pizza sauce Pizza Hut purchase to make pizzas to sell

B) the dough you buy to fix yourself a pizza for dinner

C) the chocolate you buy to make yourself some cookies

D) lumber you buy to build a house for your dog

9. Which of the following would be counted in 2019's GDP?

A) the value of a stock you bought in 2019

B) the value of a TV that was produced in 2018 but not sold until 2019

C) the bonus check a real estate agent gets from his/her company in 2019

D) the value of a treasury note sold by the federal government

10. Gross domestic product measures ____.

A) the total spending of everyone in the economy.

B) the value of all output in the economy.

C) the total income of everyone in the economy.

D) all of the above

2. Job markets

(a) Suppose the Federal government raised the minimal wages above its equilibrium. What would happen to the quantity supplied and quantity demanded for labor in the market. You can use either supply-demand diagrams or your language to explain the possible consequence.

(b) Use your real-world experience to discuss what factors could potentially prevent the equilibrium of the quantity supplied and the quantity demanded in the aggregate labor market. Please give two possible factors and show how they could stop the equilibrium in a framework of wage, quantity supplies and quantity demanded.

3. Time-series Graph (you can use spreadsheet to make the graphs)

The table as below presents the Real Disposable Personal Income (per capita, chained 2012 dollars) from 1981 to 1990.

1) Transform the real income of dollar values (the 2^nd column) into natural logarithm (ln) values (the 3^rd column). An example is given in the year 1981. You may use calculator, spreadsheet or other devices to calculate the ln values.

Year

Real Income

ln (Real Income)

1981

21849

1982

22113

1983

22669

1984

24016

1985

24518

1986

25219

1987

25548

1988

26508

1989

27027

1990

27250

2) Plot the time-series graphs of Real Income and ln (Real Income) with respect to Year in two separate graphs. That is the Y-axis value should be the real income in Graph 1 and ln (real income) in Graph 2. And the X-axis should be Year in both graphs.

4. After reading the article assigned, "A Historical Look at The Components of U.S. GDP: 1929 to 2011", think about the following questions.

1) What happened to consumer spending, government spending and business spending during WWII? And why?

2) Recall the three approaches we have done in class for calculating GDP. Which approach is used (implicitly) in this article to measure US GDP?

3) According to the author, what is the most efficient way if the US government try to stimulate the economy?

4) Recent data tell us that consumer spending slowed down as 2019 ended. Is that true, according to your experience? How changes of consumer spending would affect US GDP?