Macroeconomics Principales Exam 1

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By: MacroEconomics 11
January 16, 2010 | Economics - Adolfo Benavides

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True/False/Undetermined Statements

F A Recession and its resulting increase in unemployment is country Z will, ceteris paribus, result in an inward shift of Z's production possibilites curve.
F Alfred Marshall is considered to be the intellectual father of Macroeconomics with his 1936 book titled "The Wealth of Nations"
U A decrease in consumer preferences towards good H coupled with a decrease in the number of H's producers will, ceteris paribus, increase H's equilibrium price.
U A decrease in consumers' income coupled with an increase in the number of firms producing M will, ceteris paribus, decrease M's equalibrium price.
U A decrease in the prices of L's complements coupled with a technological improvement in the production of L will, ceteris paribus, increase L's
F equalibrium price but have an undetermined effect on T's equalibrium quantity.
U A decrease in the prices of economic resources used in the production of good W coupled with an increase in the prices of W's substitutes will, ceteris paribus, increase W's equalibrium price and its equilibrium quantity as well.
T If net investment is negative and if factor income recieved from overseas exceeds factor income paid to the rest of the world, then,ceteris paribus, GDP is lower then GNP
U Since pablo is one the few individuals with a very unique talent, he can command a very high income from the labor market
F A $10 bill is an economic resource since money is part of captial and capital itself is an economic resource.

Part II Explanations

Please select any two statements except number 2 and explain your answer from part 1 above.

Part III Take home question on supply and Demand analysis.

The law of Demand states that, in the short run, there is an inverse relationship between the price of an item and its quantity demanded, ceteris paribus. However, actual figures for the U.S. automobile industry seem to contradict such theory because presently more new cars and sold per year in the United States compared to the 1980s despite much higher car prices today compared to twenty years ago. Please use your understanding of supply and demand analysis to explain this paradox ( contradiction.) please illustrate your answer graphically.