Question 3(Multiple Choice Worth 3 points)

If consumer confidence decreases then aggregate demand will

increase and output and price level will increase as well.

decrease and output and price level will decrease as well.

increase and output will increase but price level will decrease.

increase and output will decrease but price level will increase.

decrease and output will decrease but price level will increase.

Question 4(Multiple Choice Worth 3 points)

Which of the following scenarios will cause a leftward shift of aggregate demand?

Profit expectations soar.

Consumer debt increases.

Disposable personal income increases.

Interest rates decrease.

Exports increase.

Question 5(Multiple Choice Worth 3 points)

Suppose the wages of the cafeteria workers on campus increase by 10% forcing the price of meals to increase at the same time your scholarship income doubles. (Cafeteria meals are an inferior good.) How will these changes impact the quantity and price levels in the cafeteria food market?

Quantity / Price

Increase / Indeterminate

Increase / Decrease

Decrease / Indeterminate

Decrease / Increase

Indeterminate / Decrease

Question 6(Multiple Choice Worth 3 points)

A production possibilities curve that is concave from the origin shows that

supply increases when demand increases.

demand for both goods changes as you increase demand for one good.

as you increase demand for one good, you must give up demand for the other good.

as you increase production of one good, you must give up increasing units of the other good.

as you increase demand for one good, you must give up supply of the other good.

Question 7(Multiple Choice Worth 3 points)

Katie Dough is a successful dentist and a wonderful pastry chef. She earns $800 a day on average in her dental practice. Her friends often cajole her into preparing mouth-watering pastries for their weekend card parties rather than using the catering service that charges the group $100 to prepare the pastries. If she makes the pastries, she must find time in her busy day to do so instead of practicing dentistry. Should Katie agree to make pastries for her friends?

No, because the opportunity cost of dentistry is higher than the opportunity cost of creating pastries.

Yes, because Katie has a comparative advantage in creating pastries.

No, because Katie can do both equally well and has an absolute advantage in both.

Yes, because she enjoys making the pastries for her friends.

Yes, because the opportunity cost of dentistry is higher than the opportunity cost of creating pastries.

Question 8(Multiple Choice Worth 3 points)

If real GDP grew at 3.5% last year and prices increased by 3% over the same time period then

the average consumer is better off.

the average consumer is worse off.

the average consumer is unaffected.

the average producer is unaffected.

the average producer is worse off.