Question 1

1. A turnip is an inferior good if

a)an increase in the price of a turnip decreases the quantity of turnips that consumers want to buy.

b)an increase in income increases the demand for turnips.

c)turnips violate the law of demand.

d)turnips are a low quality good.

e)an increase in income decreases the demand for turnips.

Question 2

1. Complete the following sentence. Net exports equals

a)exports plus imports.

b)exports minus imports.

c)imports minus exports.

d)exports divided by imports.

e)foreign borrowing by residents of Canada minus domestic borrowing by nonresidents of Canada.

Question 3

1. The reference base period is 2002. A consumer price index of 122 in 2018 means that

a)prices of consumer goods have more than doubled.

b)if the price of a good was $100 in 2002, its price in 2018 is $122.

c)the market basket of consumer goods that cost $122 in 2002 can be purchased for $100 in 2018.

d)prices of consumer goods have gone up by a factor of 12.2.

e)the average of the prices paid by urban consumers for a fixed market basket of consumer goods and services was 22 percent higher in 2018 than it was on average during 2002.

Question 4

1. Suppose the economy of Econoworld produces only two goods, kayaks and birdseed. In 2017, 20 kayaks are produced and sold for $1,000 each and 10 bags of birdseed are produced and sold for $30 each. The value of nominal GDP in 2017 is

a)$20,300.

b)$300.

c)$20,000.

d)$23,000.

e)20 kayaks plus 10 bags of birdseed.

Question 5

1. The law of supply tells us that other things remaining the same, as the

a)price of gasoline rises, the quantity of gasoline supplied decreases.

b)cost of producing gasoline falls, the supply of gasoline will increase.

c)cost of producing gasoline increases, the price of gasoline rises.

d)supply of gasoline increases, the price of gasoline falls.

e)price of gasoline falls, the quantity of gasoline supplied decreases.

Question 6

1. When a firm decides to produce more hybrid cars and fewer gas guzzlers, it is answering the ________ question.

a)"what"

b)"where"

c)"how"

d)"when"

e)"who"