Instructions PART 1: Read the following paragraphs, once read, establish if you agree with the premise or not, remember to explain why or why you do not agree, you must use the APA (form) to justify your answer, be brief your answer may NOT exceed one paragraph.

Situation #1: For consumers as a group, Quiznos sandwiches are normal goods and Subway sandwiches are inferior goods. But I like the taste of Subway sandwiches better than the taste of Quiznos sandwiches, so to me Quiznos sandwiches are inferior products and Subway sandwiches are normal products. Do you agree with the person's reasoning?

2. How do markets eliminate surpluses and shortages? Define the concept of Surplus and shortage before establishing how it is eliminated

Part II. Multiple choice: select the best alternative that you consider to be the correct one.

1. In the short run, macroeconomic analysis focuses on ________, while in the long run, the focus is on ________.

a) fiscal policy; monetary policy

B) short-term economic growth; population demographics

C) unemployment; inflation

D) the economic cycle; long-term economic growth

2. ________ refers to alternating periods of economic expansion and economic recession in an economy. A) Tax policy B) Labor productivity C) The business cycle D) Positive economic analysis

3. The process by which productivity raises the average standard of living is called a) Long-term economic growth. B) labor productivity. C) analysis of population growth. D) the hypothesis of economic prosperity

4. Suppose the economy is in equilibrium with zero output gap and the actual inflation rate equals the expected inflation rate. If the economy experiences a positive demand shock, the output gap ________ and the inflation rate ____________ A) increase; increase B) increase; diminish C) decrease; increase D) decrease; diminish

5. Suppose the economy is in equilibrium with zero output gap and the actual inflation rate equals the expected inflation rate. If the economy experiences a negative demand shock, the output gap ________ and the inflation rate ________. A) increase; increase B) increase; diminish C) decrease; increase D) decrease; diminish

6.It is generally considered that the best measure of the standard of living is A) labor productivity. B) the average length of a typical business cycle. C) the labor force participation rate. D) Real GDP per capita.

7. China has recently been experiencing rapid economic growth, and current Chinese real GDP per capita is: A) approximately equal to real GDP per capita in the United States. B) still significantly less than real GDP per capita in the United States. C) on par with real GDP per capita in most high-income countries. D) still at a level equivalent to real GDP per capita in the world's poorest countries.

8. Underlying fluctuations in real GDP due to the business cycle are reflected in fluctuations in A) inflation. B) population growth. C) the labor force. D) Real GDP per capita.

9. Using the following graph below, Assume that the economy is in equilibrium at 1 = 0. All other things being equal, a decrease in the growth rate of productivity will result in a movement from point ________ to point ________.

Inflation rate, IT PC, C A PC D B Y,= 0 Output gap, Y (percent deviation from potential GDP)