which of the following statements is true about scarcity?
a. scarcity refers to the situation in which unlimited wants
exceed limited resources
b. scarcity is not a problem for the
wealthy
c. scarcity is only a problem when a country has too
large a population
a
consider the following statements:
a. car owners
purchase more gasoline froma gas station that sells gasoline at a
lower price than other rival gas stations in the area
b. banks
do not take steps to increase security since they believe it is less
costly to allow some bank robberies than to install expensive
security systems
c. firms produce more of a particular DVD when
its selling price rises
a only.
b. b only.
c. c
only.
d. a and b.
e. a, b, and c.
a, b, and c.
cassies quilts alters, reconstructs and restores heirloom quilts.
Cassie discovers that she would need to add some special fabric that
would cost her $200...
a. she should cut her losses and
sell the quilt now
b. it does not matter what she does; she is
going to take a loss on her project
c. she should purchase the
period fabric, complete the task and then sell the quilt
d. she
should not do anymore work on the quilt because she has already spent
too much time on it and has not been paid for that time
c
increasing opportunity cost along a bowed out production
possibilities frotnier occurs because
a. of inefficient
production
b. of ineffective management by entrepreneurs
c.
some factors of production are not equally suited to producing both
goods or services
d. of the scarcity of factors of production
c
the figure above shows various points on three different production
possibility frontiers for a nation. A movement from X to Y
a. could be due to a change in consumers tastes and
preferences
b. could occur because of an influx of immigrant
labor
c. is the result of advancements in food production
technology only, with no change in the technology for plastic
production
d. is the result of advancements in plastic production
technology only, with no change in food production technology
b
specializing in the production of a good or service in which one has
a comparitive advantage enables a country to do all of the following
except
a. engage in mutually beneficial trade with other
nations
b. increase the variety of products that it can consume
with no increase in resources
c. consume a combination of goods
that lie outside its own production possibility frontier
d.
produce a combination of goods that lie outside its own production
possibility frontier
d
What is the difference between an "increase in demand" and
an "increase in quantity demanded?
a. There is no
difference between the two terms; they both refer to a shift of the
demand curve.
b. An "increase in demand" is
represented by a rightward shift of the demand curve while
an
"increase in quantity demanded" is represented by a
movement along a given demand curve.
c. There is no difference
between the two terms; they both refer to a movement downward along
a
given demand curve.
d. An "increase in demand"
is represented by a movement along a given demand curve, while
an
"increase in quantity demanded" is represented by a
rightward shift of the demand curve.
b
Refer to the figure above. The graph in this figure illustrates an
initial competitive equilibrium in
the market for apples at the
intersection of D1 and S1 (point A). If the price of oranges,
a
substitute for apples, decreases and the wages of apple workers
increase how will the equilibrium
point change?
a.
The equilibrium point will move from A to E.
b. The equilibrium
point will move from A to B.
c. The equilibrium point will move
from A to C.
d. The equilibrium will first move from A to B,
then return to A
a
Which of the following statements is true?
a. An
increase in demand causes a change in equilibrium price; does not
cause a further
change in demand or supply.
b. A decrease
in supply causes equilibrium price to rise; the increase in price
then results in a decrease in demand.
c. If both demand and
supply increase there must be an increase in equilibrium
price;
equilibrium quantity may either increase or
decrease.
d. If demand decreases and supply increases one cannot
determine if equilibrium price will
increase or decrease without
knowing which change is greater.
a
Each point on a demand curve shows
a. The willingness of
consumers to purchase a product at different prices.
b. The
consumer surplus received from purchasing a given quantity of a
product.
c. The economic surplus received from purchasing a given
quantity of a product.
d. The legally determined maximum price
that sellers may charge for a given quantity of a
product.
a
The table above lists the marginal cost of polo shirts by Marko's, a
firm that specializes in
producing men's clothing. If the market
price of Marko's polo shirts is $18
a. Marko's will
produce four shirts.
b. Producer surplus from the first shirt is
$18.
c. Producer surplus will equal $22.
d. There will be a
surplus; as a result, the price will fall to $7
c
Refer to the figure above. Suppose the market is initially in
equilibrium at price P0 and now the
government imposes a tax on
every unit sold. Which of the following statements best
describes
the impact of the tax? For demand curve D0
a. The producer bears a greater share of the tax burden if the
supply curve is S1.
b. The producer bears a greater share of the
tax burden if the supply curve is S0.
c. The producer's share of
the tax burden is the same whether the supply curve is S0 or
S1.
d. The producer bears the entire burden of the tax if the
supply curve is S0 and the consumer
bears the entire burden of
the tax if the supply curve is S1.
a. The producer bears a greater share of the tax burden if the supply curve is S1.
a
Which of the following describes how negative externality affects a
competitive market?
a. The externality causes a
difference between the private cost of production and the
social
cost.
b. The externality causes a difference between
the private cost of production and the private
benefit from
consumption.
c. The externality causes consumer surplus to
exceed producer surplus.
d. The externality causes a difference
between the private cost of production and the
equilibrium price.
a
Which of the following best illustrates the free-rider problem?
a. Since no one owns elephants and elephants are valued for
their hide, meat and ivory,
elephants can be hunted to
extinction.
b. For every purchase of a $30 fare card, you are
entitled to five free bus rides.
c. If your neighbors
professionally landscape their front yards, it is likely that the
market
value of your property will increase.
d. All three
homeowners in a quiet cul-de-sac have expressed the desirability of
security
lighting in the common parking area. One of the
homeowners installs the lighting and
asks you to contribute
toward the cost. You choose not to contribute.
d
In England during the Middle Ages each village had an area of pasture
on which any family in the
village was allowed to graze its cows
and sheep without charge. Eventually, the grass in the
pasture
would be depleted and no family's cow or sheep would get enough to
eat. The reason the
grass was depleted was
a. The
area of pasture was nonexcludable and the consumption of the grass
was rival.
b. Due to a policy of neglect on the part of the
English government.
c. It did not get enough rainfall.
d.
Continuing disputes between Saxons and Normans
a
The most important determinant of the price elasticity of demand for
a good is
a. The definition of the market for a
good.
b. The availability of substitutes for the good.
c.
The share of the good in the consumer's budget.
d. Whether the
good is a necessity or a luxury.
b
Assume that legalization of cocaine use led to a large decrease in
its price and only a small
increase in the quantity of cocaine
demanded. Economic analysis would lead one to conclude that
a. Cocaine should be legalized because the benefits of
legalization would exceed the costs.
b. Cocaine should not be
legalized because the benefits are uncertain.
c. Cocaine should
not be legalized on moral grounds since moral benefits and costs can't
be
measured.
d. Legalization is a normative issue. Economic
analysis can be used to contribute to
discussion of this issue
but cannot decide it.
d
Which of the following statements is true?
5
a. The
supply of oil is very elastic over short time periods but becomes
perfectly inelastic
over time. A given shift in supply results
in a greater increase in the price of oil when the
supply of oil
is perfectly inelastic.
b. The supply of oil is very inelastic
over short time periods but becomes more elastic over
time. A
given shift in supply results in a smaller increase in the price of
oil when the
supply is more elastic.
c. The supply of oil
is perfectly inelastic; therefore, as the demand for oil increases
over
time the price of oil increases significantly.
d. Over
short periods of time increases in the demand for oil are greater
than increases in the
supply of oil. Over the long run increases
in the demand and the supply of oil are about
equal. As a
result, the price of oil increases greatly in the short run but is
stable in the
long run.
b
Which type of business is the most difficult to set up?
a. Sole proprietorship
b. Partnership
c.
Corporation
d. There is no difference in the difficulty of establishment
c
The existence of the principal-agent problem
a.
Increases the risk of buying stock in a corporation.
b.
Increases the risk of becoming the sole proprietor of a
business.
c. Implies that managers that have the same incentives
as the board of directors.
d. Does all of the above
a
How much is a bond that pays $50 in coupon payments for 3 years and
$1,000 at the end of the
third year worth if the interest rate is
10%?
a. $876
b. $1,150
c. $1,045
d. $1,000
a
Rob Crusoe and Bill Friday spent their week-long vacation on a desert
island where they had to find
and make their own food. Rob and
Bill spent one day each fishing and picking berries. The
table
above lists the pounds of output Rob and Bill
produced.
Use the table above to select the statement that
accurately interprets the data in the table.
a. Rob has
an absolute advantage in picking berries and Bill has an absolute
advantage in
catching fish.
b. Bill has an absolute
advantage in picking berries and Rob has an absolute advantage
in
catching fish.
c. Bill has an absolute advantage in
picking berries and catching fish.
d. Rob has an absolute
advantage in picking berries and catching fish.
b
Use the table above to select the statement that accurately
interprets the data in the table.
a. Bill has a
comparative advantage in catching fish.
b. Rob has a comparative
advantage in picking berries.
c. Rob has a comparative advantage
in catching fish and picking berries.
d. Bill has a comparative
advantage in picking berries.
d
In the real world we don't observe countries completely specializing
in the production of goods
for which they have a comparative
advantage. One reason for this is
a. Comparative
advantage works better in theory than in practice.
b. Some
countries have more resources than other countries.
c. Tastes
for many traded goods are similar in many countries because of
globalization.
d. Production of most goods involves increasing
opportunity costs.
d
Referring to the figure above, what is the area that represents the
deadweight loss as a result of
the quota?
a. G +
H
b. G + H + I + J
c. E + I + J + M
d. E + M
d
. If marginal utility of apples is diminishing and is a positive
amount, consuming one more apple
will cause
a. Total
utility to decrease.
b. A consumer to get no satisfaction from
consuming apples.
c. A consumer's total utility to
increase.
d. A consumer to go beyond her optimal consumption of apples.
c
Referring to the table above listing Jay's marginal utilities for
burgers and Pepsi. Jay has $7 to
spend on these two goods. The
price of a burger is $2 and the price of a can of Pepsi is $1.
What
is Jay's optimal consumption bundle?
a. 1
burger and 2 Pepsis
b. 2 burgers and 3 Pepsis
c. 3 burgers
and 1 Pepsi
d. 3 burgers and 2 Pepsis
b
Suppose Barry is maximizing his utility from consuming used paperback
novels and audio books.
The price of a used novel = $4 and the
price of an audio book = $8. If the marginal utility of the
last
novel was 32 units of utility (utils) what was the marginal utility of
the last audio book
purchased?
a. 2 util.s
b.
12 utils.
c. 16 utils.
d. 64 utils.
d
When a firm experiences a positive technological change
a. The price of a share of the firm's stock rises.
b. The
firm is able to produce more output using the same inputs, or the same
output using
fewer inputs.
c. The value of the firm's assets
rises.
d. The firm will hire additional workers in order to
increase production
b
The level of output at which all economies of scale have been
exhausted is known as
a. Constant returns to
scale.
b. Minimum efficient scale.
c. The economically
efficient output level.
d. Optimal economic size
b
Which of the following is a reason why a firm would experience
diseconomies of scale?
a. To finance an increase in the
size of its plant a firm must borrow more money or sell
more
shares of stock.
b. As the size of the firm increases, it
becomes more difficult to find markets where it
doesn't already
have operations.
c. As the size of the firm increases it becomes
more difficult to coordinate the operations of
its manufacturing
plants.
d. As the size of the firm increases, it must operate in
other countries where differences in
language, customs and laws
increase its average costs
c
A very large number of small sellers who sell identical products
imply
a. The inability of one seller to influence
price.
b. A downward sloping demand for each seller's
product.
c. A multitude of vastly different selling
prices.
d. Chaos in the market
a
The figure above shows the cost and demand curves for a
profit-maximizing firm in a perfectly
competitive market. If the
market price is $30, the firm's optimal output level is
a. 0.
b. 130.
c. 180.
d. 240.
c
If a typical firm in a perfectly competitive industry is incurring
losses, then
a. Some firms will exit in the long run
causing market supply to decrease and market price
to fall
increasing losses for the remaining firms.
b. Some firms will
exit in the long run causing market supply to decrease and market
price
to rise increasing profits for the remaining
firms.
c. Some firms will enter in the long run causing market
supply to increase and market price
to rise increasing profit
for all firms.
d. All firms will continue to lose money.
b
Ordinarily, governments attempt to promote competition in markets.
Why do governments use
patents to block entry into some markets
when this prohibits competition?
a. Patents encourage
firms to spend money on research necessary to create new
products.
b. Politicians sometimes succumb to pressure from
lobbyists to grant favors to businesses
for political
reasons.
c. Patents are an important source of government
revenue.
d. Patents are justified because they are an important
means for creating network
externalities
a
Referring to the figure above, if the monopolist charges price
P for output Q, in order to
maximize profit or
minimize loss in the short run, it should
a. Continue to
produce because price is greater than average variable cost.
b.
Shut down because price is greater than marginal cost.
c. Shut
down because price is less than average total cost.
d. Continue
to produce because a monopolist always earns a profit.
a
Assume a hypothetical case where an industry begins as perfectly
competitive and then becomes
a monopoly. As a result of this
change
a. Price will be higher, output will be lower and
the deadweight loss will be eliminated.
b. Consumer surplus will
be smaller, producer surplus will be greater and there will be
a
reduction in economic efficiency.
c. Price will be
higher, consumer surplus will be greater and output will be
greater.
d. Consumer surplus will be smaller and producer
surplus will be greater. There will be a
net increase in
economic surplus.
b
Which of the following will prevent firms from engaging in price
discrimination?
a. Yield management
b.
Arbitrage
c. Transactions costs
d. Odd pricing
b
Which of the following is necessary in order for a firm to
successfully practice price
discrimination?
a. The
firm must practice product differentiation.
b. The demand for
the firm's product is inelastic.
c. The firm must be able to
segment the market for the product.
d. The firm's transactions
costs must be zero
b
Movie theaters often charge different people different prices for
admission. Why don't theaters
charge different prices for popcorn
and other food items?
a. Although the elasticity of
demand for admission differs among customers, most people
have
the same elasticity of demand for food items.
b. Concession
stand personnel are too busy to ensure that different people pay
different
prices for food items.
c. Once people are in the
theater, concession stands have monopoly power and can
charge
everyone the same high prices for food.
d. It is
difficult to limit the resale of food items from those who pay low
prices to those who
would have to pay high prices from the
concession stand.
c
The marginal product of labor is
a. The payment made to
workers for their contribution to the output they produce.
b.
Equal to the demand for labor.
c. The change in a firm's revenue
as a result of hiring one more worker.
d. The additional output
a firm produces as a result of hiring one more worker
d
Referring to the figure above, which of the following is true if the
wage rate increases from W0 to
W1?
a. The income
effect is larger than the substitution effect.
b. The
substitution effect is larger than the income effect.
c. The
income effect and the substitution effect are equal.
d. The
supply curve is unit-elastic.
b
The total value to society of having garbage removed is greater than
the value of baseball games.
Why, then, are baseball players paid
more than garbage collectors?
a. Although the total value
of garbage removal is greater than the total value of
baseball,
wages are determined by average values.
b.
Garbage removal results in significant external benefits that are not
captured in the price
paid for garbage removal. As a result,
wages of garbage collectors do not reflect their
social
benefits.
c. There is greater competition in the garbage
collection industry than there is in Major
League
Baseball.
d. Wages do not depend on total values but marginal
values. The marginal revenue product
of baseball players exceeds
the marginal revenue product of garbage collectors
d
One implication of compensating differentials is that laws passed to
protect the health and safety
of workers may not make workers
better off than they were prior to the passages of the laws.
Why
is this so?
a. Workers may suffer from cognitive
dissonance, which means that the perception workers
have that
their jobs are hazardous is not true.
b. If the laws make the
work environment safer, there is no reason to pay workers
a
compensating differential for the risk associated with their
jobs.
c. The principal-agent problem that exists in the
workplace may cause workers to shirk
more after the work
environment becomes safer.
d. In non-competitive markets workers
are unlikely to receive a compensating differential
to
compensate for jobs with extra risk. As a result, after the
laws are passed their wages will
not change.
b
Gross domestic product in the economy is measured by the
a. Total number of goods and services produced in the
economy.
b. Dollar value of all final goods and services produced
in the economy.
c. Total number of goods produced in the
economy.
d. Total number of services produced in the economy.
b
How are intermediate goods treated in the calculation of GDP?
a. Their value is not counted separately, but included as part
of the value of the final good
for which they are an
input.
b. Their value is counted separately, and their value is
also included as part of the value of
the final good for which
they are an input.
c. They are included in the year that they are
produced.
d. They are included only if they are imported.
a
In the circular flow diagram, _____ supply the factors of production,
and _____ goods and
services.
a. Households;
sell
b. Households; buy
c. Firms; sell
d. Firms; buy
b
The largest component of spending in GDP is
a.
Consumption spending.
b. Investment spending.
c. Government
spending.
d. Net export spending.
a
The underground economy can be described as
a.
Production of intermediate goods and services.
b. Economic
production that includes mining.
c. Economic activity that is
hidden from the government to avoid taxes or because
the
activity is illegal.
d. Production of infrastructure
that spurs growth in the rest of the economy.
c
Which of the following would increase disposable income?
a. A decrease in transfer payments received
b. A decrease
in taxes paid
c. A decrease in personal income
d. All of the
above would increase disposable income.
b
The labor force is the sum of
a. Employed workers and
discouraged workers.
b. Employed workers and unemployed
workers.
c. Employed workers and individuals not looking for
work.
d. Employed workers and the working age
population.
e. Unemployed workers and the working age population.
b
The labor force participation rate is defined as
a. The
percentage of the working-age population that is employed.
b.
The percentage of the working-age population that is
unemployed.
c. The percentage of the labor force that is
employed.
d. The percentage of the labor force that is
unemployed.
e. The percentage of the working-age population in
the labor force
e
Unemployment arising from a persistent mismatch between the skills
and characteristics of
workers and the requirements of jobs is
called
a. Frictional unemployment.
b. Structural
unemployment.
c. Cyclical unemployment.
d. Seasonal
unemployment.
e. Unnatural unemployment.
b
Which of the following is an example of a worker experiencing
cyclical unemployment?
a. A worker that changes jobs to
move closer to her family.
b. An assembly line worker who loses
his job because of automation.
c. A Freightliner employee that
got laid off because of the recession of 2001.
d. A lifeguard
who was hired during the summer season is laid off after summer is
over.
e. A worker quits his job because he does not get along
with his boss.
c
Which of the following explains why many European countries have
unemployment rates that are
higher than in the United
States?
a. Technological change occurs at a faster rate
in Europe, so structural unemployment is
higher in
Europe.
b. European countries offer higher unemployment benefits
than the United States.
c. Firms in European countries offer
employees higher wages and higher benefits than do
firms in the
United States.
d. The minimum wage in Europe is lower than it is
in the United States
b
If the CPI changes from 125 to 120 between 2007 and 2008, how did
prices change between 2007
and 2008?
a. Prices
increased by 5%.
b. Prices decreased by 5%.
c. Prices
increased by 25%
d. Prices decreased by 4%.
d
If consumers purchase fewer of those products that increase most in
price and more of those
products that decrease in price as
compared to the CPI basket, then
a. Changes in the CPI
accurately reflect the true rate of inflation.
b. Changes in the
CPI understate the true rate of inflation.
c. Changes in the CPI
overstate the true rate of inflation.
d. Changes in the CPI are
unrelated to the true rate of inflation.
c
If the nominal interest rate is 6% and the expected inflation rate is
9%, then the real interest rate is
a. 3%
b.
-3%
c. 15%
11
d. 6.67%
b
If inflation increases unexpectedly, then
a. Borrowers
pay a higher real interest rate than they expected.
b. Lenders
receive a lower real interest rate than they expected.
c.
Lenders gain and borrowers gain.
d. Neither borrowers nor
lenders lose
b
The only way the standard of living of the average person in a
country can increase is if _____
increases faster than
_____.
a. Production; population
b. Income;
population
c. Population; production
d. Population; income
b
The best measure of the standard of living is
a. Nominal GDP.
b. Real GDP.
c. Nominal GDP per
capita.
d. Real GDP per capita.
d
If GDP grows at a rate of 3% per year, how long will it take for GDP
to double in size?
a. 21 years
b. 12 years
c. 23 years
d. 35 years
c
What is human capital?
a. A slang term for the underground labor market
b.
Manufactured goods that are used to produce other goods
c.
Accumulated knowledge and skills acquired by a worker
d. The
manager or owner of a business
c
Which one of the following is not considered a financial intermediary?
a. A bank
b. A pension fund
c. An insurance
company
d. A credit counselor
d
Which of the following would increase public savings?
a. An increase in taxes
b. An increase in transfers
c.
An increase in government purchases
d. All of the above would
increase public savings
a
The demand for loanable funds has a _____ slope because the lower the
interest rate, the _____
number of investment projects are
profitable, and the _____ the quantity of loanable funds
demanded.
a. Negative; greater; greater
b. Negative; greater;
lesser
c. Negative; lesser; greater
d. Positive; lesser; lesser
c
A decrease in the real interest rate will
a. Increase consumption and reduce investment.
b. Increase
savings and investment.
c. Decrease investment and government
spending.
d. Increase consumption and investment
d
Which of the following is a true statement about the length of
recessions and expansions in the
United States economy?
a. After 1950, the length of expansions equal the length of
recessions.
b. After 1950, the length of expansions were much
less than the length of recessions.
c. After 1950, the length of
expansions were much longer than the length of recessions.
d.
After 1950, the length of expansions were brief and almost nonexistent.
c
Which of the following accurately describes economic growth and
standards of living between
1,000,000 BC and 1300 AD?
a. Standards of living in 1300 AD were substantially better than
what they were in
1,000,000 BC.
b. Standards of living
substantially decline from 1,000,000 BC to 1300 AD.
c.
Significant economic growth took place between 1,000,000 BC and 1300
AD.
12
d. No sustained economic growth occurred between
1,000,000 BC and 1300 AD.
d
In the long run, _____ differences in economic growth rates result in
_____ differences in GDP
per capita.
a. Large; small
b. Large; no
c. Small; large
d.
Small; no
c
In the long run, a country will experience an increasing standard of
living only if it experiences
a. A high rate of consumption.
b. Continuous technological
change.
c. A high rate of labor force growth.
d. A slow rate
of population growth
b
According to Joseph Schumpeter, the theory of creative destruction
describes a process by which
a. Some new products unleash a gale of destruction that drives
other new products out of
the market.
b. New products
unleash a gale of destruction that drives old products out of the
market.
c. New products are created by the destruction of
capital.
d. The creation of new products never involves the
destruction of old products
b
To what do economists attribute the rapid growth of labor
productivity in the United States
relative to other countries?
a. The flexibility of U.S. labor markets and the efficiency of
the U.S. financial system.
b. The strict government rules in the
U.S. that regulate a firm's ability to hire and
fire
workers.
c. The low rate of job mobility in the
U.S.
d. The high level of unemployment benefits the U.S. pays
relative to other countries like
Canada.
a
Globalization is positively associated with
a. Poverty.
b. Declining rates of investment.
c.
Declining standards of living.
d. Economic growth
d
If property rights are not enforced in a country,
a. The market
system will still work smoothly.
b. Entrepreneurs are unlikely to
risk their own funds investing in such an economy.
c. That
country's growth rate will not be affected.
d. That country will
growth more rapidly because of the reduction of law suits.
b
The rapid growth of China's economy relative to the United States has
benefited U.S. consumers
because
a. Competition from China
has made jobs harder to find in the U.S.
b. U.S. consumers can
purchase more lower-priced goods made in China.
c. The U.S. has
comparative advantage in more goods than China does.
d. Goods
made in China are always of higher quality than goods made in the U.S
b
A decrease in consumer confidence can put your job at risk if
a.
Consumers expect firms to increase investment in the future.
b.
Aggregate expenditures rise.
c. Aggregate expenditures
fall.
d. Consumers expect their incomes to rise in the future.
c
Aggregate expenditure includes spending on
a. C + I + G
b. C + I + G - NX
c. C + I + depreciation
- NX
d. C + I + G + NX
d
When aggregate expenditure is less than GDP, which of the following
is true?
a. All of the above must be true when aggregate expenditure is
greater than GDP.
b. Firms spent more on capital goods than they
anticipated.
c. Households bought more new homes than they
anticipated.
d. There was unplanned inventory investment
d
The marginal propensity to consume is defined as
a. The change in consumption divided by the change in disposable
income.
b. The change in disposable income divided by the change
in consumption.
c. Disposable income divided by
consumption
d. Consumption divided by disposable income.
a
Referring to the figure above, if the economy is at point L, what
will happen?
a. Inventories have fallen below their desired
level, and firms increase production.
b. Inventories have fallen
below their desired level, and firms decrease production.
c.
Inventories have risen above their desired level, and firms increase
production.
d. Inventories have risen above their desired level,
and firms decrease production
d
If an increase in autonomous consumption spending of $10 million
results in a $50 million
increase in equilibrium real GDP, then
a. The MPC is .8.
b. The MPC is .75.
c. The MPC is
.9.
d. The MPC is .5.
a
What impact does a decrease in the price level in the United States
have on net exports and why?
a. A decrease in the price level reduces net exports because
lower prices raise the value of
the dollar.
b. A decrease in
the price level reduces net exports because lower prices increase
American
spending on imports.
c. A decrease in the price
level increases net exports because lower prices increase the
value
of the dollar.
d. A decrease in the price level
increases net exports by reducing the relative cost of
American goods.
d
The static aggregate demand and aggregate supply curve model helps explain
a. Short term fluctuations in real GDP and the price
level.
b. Long term growth.
c. Price fluctuations in an
individual market.
d. Output fluctuations in an individual market.
a
The aggregate demand curve shows the relationship between the _____
and _____.
a. Inflation rate; quantity of real GDP demanded.
b. Real
interest rate; quantity of real GDP supplied
c. Nominal interest
rate; quantity of real GDP demanded
d. Price level; quantity of
real GDP demanded
d
Spending on the war in Iraq is essentially categorized as government
purchases. How do
increases in spending on the war in Iraq affect
the aggregate demand curve?
a. They will move the economy up along a stationary aggregate
demand curve.
b. They will move the economy down along a
stationary aggregate demand curve.
c. They will shift the
aggregate demand curve to the left.
d. They will shift the
aggregate demand curve to the right.
d
Potential GDP is also referred to as
a. Realized GDP
b. Full-employment GDP
c.
Politico-economic GDP
d. Balanced-budget GDP
b
The short run aggregate supply curve has a(n) _____ slope because as
prices of _____ rise, prices
of _____ rise more slowly.
a. Positive; final goods and services; inputs
b. Infinite;
final goods and services; inputs
c. Positive; inputs; final goods
and services
d. Infinite; inputs; final goods and services
b
Referring to the figure above, suppose the economy is at point A. If
investment spending
increases in the economy, where will the
eventual long run equilibrium be?
a. A
b. B
c. C
d. D
c
Referring to the figure above, given the economy is at point A in
year 1, what will happen to the
unemployment rate in year 2?
a. It will rise.
b. It will fall.
c. It will remain
constant.
d. Not enough information to answer the question
a
In the dynamic aggregate demand and aggregate supply model, inflation
occurs if
a. AD shifts out/right faster than AS.
b. AD shifts
out/right slower than AS
a
Money is
a. An asset that people are willing to accept in exchange for
goods and services.
b. A liability that people are willing to
accept in exchange for goods and services.
c. The income one
earns over a period of time.
d. One's assets net of one's
liabilities at any point in time.
a
When a grocery store accepts your $5 bill in exchange for bread and
milk, the $5 bill serves as a
a. Medium of exchange.
b. Unit of account.
c. Store of
value.
d. Standard of deferred payment.
a
Which of the following is an asset for a bank?
a. Deposits of its customers.
b. Short-term
borrowing.
c. Shareholders' equity.
d. Loans.
d
A bank holds its reserves as _____ and _____.
a. Securities; loans
b. Securities; deposits at the Federal
Reserve
c. Vault cash; deposits at the Federal Reserve
d.
Vault cash; loans
c
A cash withdrawal from the banking system
a. Decreases reserves
b. Decreases deposits.
c.
Decreases excess reserves.
d. All of the above are correct
c
A central bank can help stop a bank panic by
a. Raising the required reserve ratio.
b. Calling in
consumer loans.
c. Acting as a lender of last resort.
d.
Decreasing income taxes
c
Which of the following is (are) responsible for managing the money
supply in the United States?
a. The Federal Reserve Bank of New York.
b. The twelve
Federal Reserve Banks.
c. The Federal Open Market
Committee.
d. The Board of Governors.
c
If the Fed buys U.S. Treasury securities, then this
a. Increases reserves, encourages banks to make more loans, and
increases the money
supply.
b. Decreases reserves, causes
banks to reduce their loans, and decrease the money supply.
c.
Decreases reserves, causes banks to reduce their loans, and increases
the money supply.
d. Increases reserves, causes banks to reduce
their loans, and increases the money supply.
a
Hyperinflation is caused by
a. A constant increase in the money supply.
b. A high rate
of growth in the money supply.
c. Real GDP growing more rapidly
than the money supply.
d. The money supply growing more slowly
than GDP
b
The US unemployment rate is:
a. 3% or less.
b. More than 3% but less than or equal to
6%.
c. More than 6% but less than or equal to 9%.
d. More
than 9%
c
The US real growth rate is:
a. 3% or less.
b. More than 3% but less than or equal to
6%.
c. More than 6% but less than or equal to 9%.
d. More
than 9%.
a
The US inflation rate is:
a. 3% or less.
b. More than 3% but less than or equal to
6%.
c. More than 6% but less than or equal to 9%.
d. More
than 9%
a
With respect to external trade, compared to the rest of the countries
in the world, the US is
a. Large exporter and our external balance is positive.
b.
Small exporter and our external balance is positive.
c. Large
exporter and our external balance is negative.
d. Small exporter
and our external balance is negative.
a
An economic policy is politically efficient when:
a. Both the benefit and burden of the policy are limited to
clearly defined groups.
b. Both the benefit and burden of the
policy are diffused among the members of a large
poorly-defined
group.
c. The benefit of the policy is limited to a clearly
defined group but the burden is diffused
among the members of a
large poorly-defined group.
d. The benefit of the policy is
diffused among the members of a large poorly-defined group
but
the burden is limited to a clearly defined group.
c
It is very unlikely that a government policy will be:
a. Both economically and politically efficient.
b. Both
economically and politically inefficient.
c. Economically
efficient but politically inefficient.
d. Economically
inefficient but politically efficient.
a
Economist John Maynard Keynes (and President Obama) argue that an
increase in government
spending will lead to an increase in
short-term GDP while economist Alan Walters argued:
a. (The same as Keynes) that an increase in government spending
leads to an increase in
short-term GDP.
b. (The opposite of
Keynes) that an increase in government spending leads to a decrease
in
short-term GDP.
c. That an increase in government
spending may lead to an increase or decrease in shortterm
GDP
depending on the level of cyclical unemployment.
d. That an
increase in government spending may lead to an increase or decrease in
shortterm
GDP depending on the level of private sector confidence.
d
If Walters analysis is an accurate description of the US situation in
2009 then the government
should:
a. Increase government spending.
b. Decrease tax
rates.
c. Increase government borrowing to finance microeconomic
job programs.
d. All of the above.
e. None of the above.
b
The national security argument for imposing tariffs or a quota may be
valid but actually executing
this policy requires answering the
following questions:
a. Determining which industries are truly essential for national
security.
b. Determining which products can be obtained from
long-term allies.
c. Determining the most efficient means of
maintaining domestic production.
d. All of the above.
e.
None of the above
d
Maintaining US tariffs or quotas on imports as negotiating chips is:
a. Hurts foreign producers more than domestic (US)
consumers.
b. Hurts domestic (US) consumers more than foreign producers
b
For a future event to be a matter of risk, it is necessary that:
a. It is a well-defined event.
b. The event is not
uncertain.
c. There is a sufficient sample size.
d. All of
the above.
e. Both (a) and (c) but not (b)
e
Which of the following is most likely a matter of risk?
a. Likelihood that an asteroid will strike the earth
tomorrow.
b. Likelihood that it will rain tomorrow.
c.
Likelihood that the US will engage in a war with another country
within the next six months.
d. Likelihood that there will be a
"nuclear meltdown" within the next six months.
b
The characteristics of a successful entrepreneur are:
a. Ability
b. Willingness
c. Power to give financial
guarantees
d. All of the above
d
An entrepreneur operates a business - bringing together the factors
of production - to produce
goods and services.
a. True
b. False
a
Adam Smith's three requirements for economic growth and development are:
a. Adequate provision of public goods such as roads.
b.
Universal elementary education.
c. Strong labor unions to
represent workers' interests.
d. All of the above.
e. None
of the above.
e
Economists spend a more time studying perfectly competitive markets
than monopolistic markets
because:
a. Perfectly competitive markets support more long-term research
and development than monopolies.
b. Perfectly competitive markets
tend to produce at the minimum average total cost.
c. More US
industries are perfectly competitive than monopolistic.
d. All of
the above are true.
d. None of the above is true
b
In any market, the largest amount of a good/service will be actually
purchased when:
a. There is a price floor in the market.
b. There is a
price ceiling in the market.
c. There is neither a price floor
nor a price ceiling.
c
In any market, the largest amount of a good/service will be actually
purchased when:
a. There is a price floor in the market.
b. There is a
price ceiling in the market.
c. There is neither a price floor
nor a price ceiling.
c
Your accountants and engineers tell you that you can produce 200 oil
rig drill bits for an average
total cost of $300 each OR you can
produce 201 oil rig drill bits for an average total cost of
$301
each. Since your customers have only ordered 200 oil rig
drill bits for delivery in 2010, you
decide that, next year, you
will produce only 200 oil rig drill bits. However, in March 2010,
a
new customer asks if you would increase your production to 201
oil rig drill bits so that he can
buy one. Obviously, you would
like to sell a 201st oil rig drill bit for as much as possible
but
what is the MINIMUM price that you would be willing to accept
to sell a 201st oil rig drill bit?
a. $302
b. $502
c. $702
d. More than $702
b
Since 1970, air quality has improved dramatically in the US. Why?
a. A long-term reduction in high altitude winds has reduced
cross border pollution.
b. Clean air is a normal good and incomes
have increased since 1970.
c. Technological change has made it
cheaper to prevent air pollution.
d. All of the above
e.
Answers (b) and (c) but not (a)
e