CFA Economics Quiz
Country A has a crawling peg relative to the dollar, country B has a floating rate, and country C is pegged a dollarized economy. Which country offers the least foreign exchange risk for a U.S. tourist?
Country C
Which of the following is least likely a function of the central bank in an economy? -Managing the country's foreign exchange and gold reserves -Acting as the lender of last resort to banks -Deciding on tax policy
Deciding on tax policy
Which of the following is least likely an assumption of perfect competition? -There are a large number of buyers and sellers in the market. -Each producer makes a differentiated product. -There is perfect information.
Each producer makes a differentiated product.
Official reserve assets are most likely to be recorded under which of the following components of the balance of payments? -Current account -Capital account -Financial account
Financial account
The aggregate supply curve in the very short run is most likely:
Flat because output can be adjusted to a certain degree without a corresponding change in prices.
If a decline in aggregate demand causes demand to fall below an economy's potential GDP, the economy experiences:
a recessionary gap.
When the marginal cost curve lies above the average cost curve, it is most likely that:
average cost is rising
Individuals will hold more speculative money balances when:
bond interest rates are low.
Lower than expected inflation is least likely to benefit which of the following? -Retired people on fixed monthly pensions -Borrowers -Lenders
borrowers
The industry demand curve in a perfectly competitive market is most likely:
downward sloping
If employment of the last unit of labor increases total product (TP), it implies that the marginal product (MP) of that unit of labor is:
positive
What happens to the profit-maximizing price for a monopoly when the price elasticity of the product increases dramatically and marginal product costs are unchanged?
price goes down
Gross domestic product is a measure of goods and services:
produced in a country.
QDA = 7,500 - 500PA + 50I + 10PB PA = 4 I = 80 PB = 25 Demand for Good A would most likelybe classified as:
relatively inelastic
Pergolia (a fictional country) subsidies its orchestras, ballet companies, and national circus to encourage them to travel the world. In doing so it is trying to build:
soft power
Which of the following is the overarching objective of most central banks around the world? -Maximum employment -Stable prices -Moderate long-term interest rates
stable prices
The combination of rising prices along with rising unemployment is most likely known as:
stagflation
QDA = 7,500 - 500PA + 50I + 10PB PA = 4 I = 80 PB = 25 Good B is most likely a(n):
substitute for good a
The lag associated with implementation of a discretionary fiscal action is most likely known as:
the action lag
When a country adopts a passive crawling peg regime for their currency, it means:
the currency is allowed to float against another currency within fixed bands.
Which of the following does not cause a decrease in savings? -Increase in exports -Increase in taxes -Decrease in investment
increase in exports
Which monetary policy is the Fed least likely to adopt in an expansion?
increase taxes
Bond market vigilantes are likely to trade actively in the market if:
the monetary authority lacks credibility.
Zen Cycles Inc. charges different prices for cycles for adults and cycles for children, though the same technology is used to manufacture them. Which of the following is the degree of price discrimination used by Zen Cycles?
third degree
The most likely discretionary fiscal policy in a recession is:
to reduce taxes
Which of the following cost curves is least likely U-shaped? -Short-run average fixed cost. -Long-run total cost. -Short-run average variable cost.
Short-run average fixed cost.
Use of a Fischer index when calculating inflation rates most likely mitigates:
The substitution bias
A country's gross domestic product (GDP) is most accurately described as:
The total amount spent on the goods and services produced within an economy over a given period of time.
The government's fiscal balance (G -T) most likely:
Varies negatively with income.
Which of the following is not a factor that allows monopolies to exist? -Significant control over critical resources -Strong brand loyalty -Huge amounts of money
huge amounts of money
An increase in total factor productivity:
is reflected in an increase in output for a given level of productivity.
The following information is related to a developing economy: Consumption expenditure = $47 million Government expenditure = $102 million Investment expenditure = $62 million Exports = $77 million Imports = $83 million Taxes = $20 million The country's aggregate demand is closest to:
$205 million
Given a required reserve ratio of 25%, the increase in money supply from a $1,000 deposit into the banking system would be closest to: -$4,000 -$750 -$1,250
$4,000
Given a required reserve ratio of 25%, the increase in money supply from a $1,000 deposit into the banking system would be closest to: -$4,000 -$750 -$1,250
$4000 1/0.25 = 4 1000x4 = 4000
Glen Autos imports raw materials worth $7,000 for manufacturing a car, which it sells to Luxury Cars (a retailer) for $12,000. Luxury Cars sells the car to the final customer for $15,000. Based on the expenditure approach, the amount included in the calculation of GDP is closest to:
$8,000
An individual's demand function for a good is given by QD = 40 - 10P. If there were 100 such individuals in the market, the slope of the market demand curve would be closest to:
-0.001
QDA = 7,500 - 500PA + 50I + 10PB PA = 4 I = 80 PB = 25 The price elasticity of demand for Good A is closest to:
-0.21
A dealer quotes a spot CAD/USD exchange rate of 1.0285 and a 3-month forward exchange rate of 1.0210. The 3-month forward points are closest to:
-75
QDA = 7,500 - 500PA + 50I + 10PB PA = 4 I = 80 PB = 25 Cross-price elasticity of demand for Good A is closest to:
0.026
QDA = 7,500 - 500PA + 50I + 10PB PA = 4 I = 80 PB = 25 The income elasticity of demand for Good A is closest to:
0.41
A trader is provided with the following information: Spot USD/GBP = 1.5142 90-day risk-free rate in the United States = 2.5% 90-day risk-free rate in the United Kingdom = 4.5% Given that the interest rates are quoted on the basis of a 360-day year, the 90-day forward GBP/USD exchange rate is closest to:
0.6637
If the direct quote of the euro/dollar exchange rate is 1.13, which of the following is the indirect quote?
0.88 1/1.13
A dealer quotes a 6-month forward USD/EUR rate of 1.3215 and forward points equal to −44. The spot USD/EUR exchange rate is closest to:
1.3259
The AUD/USD exchange rate is AUD 1.3/USD. If the base currency appreciates by 5%, then the new exchange rate will be:
1.365/usd 1.3(1.05)
The demand function for orange juice is given as: QD = 50 - 4P. The y-intercept of the demand curve is closest to:
12.5
Over a period of 1 year, a country's real GDP increases from $168 billion to $179 billion, and the GDP deflator increases from 115 to 122. The increase in the price level over the year is closest to:
6.09%
Which of the following statements is most accurate? -A country's real GDP is the value of all final goods and services at current prices. -Nominal GDP is calculated by removing the effects of inflation from real GDP. -A country's nominal GDP may change even if there is no change in overall economic activity.
A country's nominal GDP may change even if there is no change in overall economic activity.
In order to eliminate exchange rate risk, a European firm that needs to make a payment in USD in 3 months is most likely to enter into:
A forward contract to purchase USD in 3 months.
Which of the following is least likely a buy-side FX market participant? -A large multinational bank with a global client base that enters into FX transactions -A large hedge fund that accepts and manages FX for profit -A central bank that trades in the FX market to influence the level or trend in the domestic exchange rate
A large multinational bank with a global client base that enters into FX transactions
Consumer behavior can have a significant impact on the current account balance and interest rates through a high level of purchases of imported goods and a low level of purchases of domestic goods. Which of following statements is untrue in this regard? -Excess import purchases cause a current account deficit. -A nation's trading partners save all the capital from the excess imports. -The demand for foreign currency lowers the domestic currency's value.
A nation's trading partners save all the capital from the excess imports.
Which of the following persons is most likely to be classified as unemployed? -A discouraged worker -A person who has just left a job and is about to start a new one -A part-time worker
A person who has just left a job and is about to start a new one
For any particular good, an increase in the price of a complement would most likely result in:
A shift in the demand curve to the left.
The Herfindahl-Hirschman Index (HHI) is constructed by which of the following? -Adding the squares of the market shares of each of the largest N companies -Adding the market shares of each of the largest N companies -Squaring the market shares of each of the smallest N companies
Adding the squares of the market shares of each of the largest N companies
For nations that are members of a Free Trade Area (FTA), which of the following statements is true? -In an FTA, all member countries have similar policies regarding trade with nonmember countries. -An FTA eliminates almost all barriers to trade with each other, but each nation maintains its own policies regarding trade with nonmember countries. -An FTA incorporates all the provisions of a customs union and also allows free movement of factors of production among the member countries.
An FTA eliminates almost all barriers to trade with each other, but each nation maintains its own policies regarding trade with nonmember countries.
A country's GDP is least likely to decline as a result of:
An increase in the country's exports.
Which of the following factors will least likely lead to a decrease in the real exchange rate (quoted as DC/FC)? -A decrease in the foreign price level -An increase in the domestic price level -An increase in the nominal exchange rate (DC/FC)
An increase in the nominal exchange rate (DC/FC)
Arsenalina, Chelsonia, and Tottenonia are three counties with differing electoral systems. Citizens in Tottenonia vote to elect their government once every year. In Chelsonia they have an election every 2 years. In Arsenalina citizens vote to elect their government every seven years. In which country might we expect the government to put a higher priority on steps to tackle global warming?
Arsenalina
Which of the following is a leading economic indicator? -Manufacturing and trade sales -Industrial production index -Average weekly hours, manufacturing
Average weekly hours, manufacturing
Inflation is most likely to grow most rapidly during: -Recovery. -Late expansion. -Peak.
peak
Which of the following is least likely a reason for a government to worry about the size of the fiscal deficit relative to GDP? -Government spending may crowd out private investment. -Borrowed funds can be spent on capital investments, which may lead to an increase in the economy's productive capacity. -Hyperinflation may result if the government loses credibility regarding its ability to finance the deficit.
Borrowed funds can be spent on capital investments, which may lead to an increase in the economy's productive capacity.
Lower than expected inflation is least likely to benefit which of the following? -Retired people on fixed monthly pensions -Borrowers -Lenders
Borrowers
Which of the following is most likely regarding the slope of the demand curve for Giffen goods and Veblen goods? -Only Veblen goods have an upward sloping demand curve. -Only Giffen goods have an upward sloping demand curve. -Both Giffen goods and Veblen goods have upward sloping demand curve.
Both Giffen goods and Veblen goods have upward sloping demand curve.
Consider the following statements: Statement 1: Compared to raising direct taxes, indirect taxes are more effective and efficient in generating revenue for the government. Statement 2: Compared to reducing direct taxes, increasing government spending has a more significant impact on aggregate output. Which of the following is most likely? -Both statements are correct. -Both statements are incorrect. -Only one statement is correct.
Both statements are correct.
Consider the following statements: Statement 1: In perfect competition MR = AR = P Statement 2: In imperfect competition MR < AR = P Which of the following is most likely? -Both statements are correct. -Both statements are incorrect. -Only one statement is correct.
Both statements are correct.
Sales and purchases of intangible assets are most likelyto be recorded under which of the following components of the balance of payments? -Current account -Capital account -Financial account
Capital account
In the Heckscher‐Ohlin model of trade, the main factor(s) of production is/are:
Capital and labor.
Which of the following statements is not true regarding the supply and demand characteristics of monopolistic competition? -Demand is relatively elastic at higher prices and lower prices. -The firm will always produce at the output level where MC = MR. -The price that is charged is derived from the market demand curve.
Demand is relatively elastic at higher prices and lower prices.
A country with a large current account deficit:
Depends on overseas investors to finance the deficit, unless it spends its reserves.
A town situated on two unstable tectonic plates with the potential risk for earthquakes produces 90% of the world's supply of touch screen displays. What type of risk is this?
Discrete
The upward-sloping region of a firm's planning curve most likely represents the existence of:
Diseconomies of scale.
Which of the following oligopoly models asserts that decision-making is sequential? -Kinked demand curve model -Cournot assumption -Dominant firm model
Dominant firm model
The demand curve in oligopoly markets is kinked. What is the best description of price behavior to the left of the point at which the demand curve is kinked?
Elastic region
In geopolitics, a sudden or unanticipated risk impacting either a country's cooperative stance, the ability of non-state actors to globalize, or both, is known as:
Exogenous risk.
Which of the following is false? -In a perfectly competitive market, demand is perfectly elastic -Expansion will occur until marginal revenue is equal to marginal cost in a perfectly competitive market. -Expansion will occur until marginal revenue is equal to variable cost in a perfectly competitive market. In perfect competition, at any output above the quantity, where MR = MC, the firm will be generating an economic loss.
Expansion will occur until marginal revenue is equal to variable cost in a perfectly competitive market. In perfect competition, at any output above the quantity, where MR = MC, the firm will be generating an economic loss.
If a country has a massive trade surplus and decides to let its currency appreciate in response to international political pressure, which of the following is most likely to be necessary for the trade surplus to reduce? -Local interest rates need to decline. -Foreigners need to purchase assets in the country. -Citizens of the country need to reduce their savings rate.
Foreigners need to purchase assets in the country.
How does geopolitical risk differ between those in Group I and those in Group II? Group I: USA, Russia, Australia, and China Group II: Western Europe, Japan, and Turkey
Group I is self-sufficient in geopolitical resources; Group II is reliant on other countries.
Which of the following is most likely to have the most significant impact on the standard of living in an economy? -Quantity of labor -Quantity of capital relative to labor -Growth in technology
Growth in technology
Which of the following is least likely to cause the aggregate demand curve to shift to the left? -Appreciation of the domestic currency -Higher taxes -Higher global economic growth
Higher global economic growth
If economic data indicates that an increase in aggregate demand is expected to take the economy into an inflationary gap, which of the following strategies should an investor pursue? -Increase investment in defensive companies -Increase investment in commodities -Increase investment in fixed-income securities
Increase investment in commodities
The most likely impact of a move by a government to adopt a tight fiscal policy and an easy monetary policy will be, if wages and prices are constant, to:
Increase private‐sector demand.
Typically, the marginal product of labor:
Increases initially, then reaches its peak, and later declines.
Personal income least likely includes:
Indirect business taxes.
Which of the following most accurately describes the relationship between marginal product (MP) and average product (AP)? As the quantity of labor increases: -Initially MP exceeds AP, and later AP exceeds MP. -Initially AP exceeds MP, and later MP exceeds AP. -MP intersects AP from above through its minimum point.
Initially MP exceeds AP, and later AP exceeds MP.
Which of the following is not regarded as a state actor? -National governments -Political organizations -International Monetary Fund (IMF)
International Monetary Fund (IMF)
Total factor productivity:
Is a multiplier that quantifies the amount of output growth that cannot be explained by the increases of labor and capital.
If a currency appreciates relative to another currency, which of the following is true? -It costs more of the other currency to purchase the appreciating currency. -It costs less of the other currency to purchase the appreciating currency. -It depends on which currency is the base currency and which is the price currency.
It costs more of the other currency to purchase the appreciating currency.
Changes in unit labor costs are usually considered to be a:
Lagging economic indicator.
What are the three aspects of geopolitical risk affecting portfolio management decisions that analysts look at?
Likelihood, velocity, and size of impact.
The two components of the neutral rate of interest are most likely:
Long-run expected inflation and the real growth rate of the economy.
The marginal productivity of capital is most likely:
Lower in developed economies compared to developing economies.
Which of the following cost curves is least likely to shift if there is an increase in the firm's fixed costs? -TC -MC -AFC
MC
The balance of payments is:
Made up of the current account, capital account, and financial account.
In the short run, a firm that is operating in monopolistic competition will produce a quantity of products where:
Marginal revenue equals marginal cost.
Which of the following is not a common objective of capital restrictions imposed by governments? -The government may impose ownership restrictions on strategic industries such as defense and telecommunications. -The government may forbid foreign investment in certain industries to protect domestic companies from foreign competition and to protect jobs. -Market exchange rates are used to achieve policy objectives in times of macroeconomic crises.
Market exchange rates are used to achieve policy objectives in times of macroeconomic crises.
Which of the following is most accurate? When the barriers to entry are low: -Market supply will decrease. -Market price will decrease. -Equilibrium quantity traded in the market will decrease.
Market price will decrease.
In perfect competition, the price of the product is most likely determined by:
Market supply and demand.
Which of the following statements is true? -Maximum profit can be computed by comparing costs of production with cash received from consumers -Maximum profit can be computed by comparing the cost of the unit with the quantity demanded -Maximum profit is equal to total revenue less total costs.
Maximum profit is equal to total revenue less total costs.
Which of the following is most likely to result in a flatter aggregate demand curve? -Investment expenditure is insensitive to interest rates. -Money demand is sensitive to interest rates. -Money demand is insensitive to income.
Money demand is insensitive to income.
The fact that central banks seem to believe that monetary policy does have a real impact on macroeconomic variables goes against the concept of:
Money neutrality.
Which of the following is most likely an advantage of monopolistic competition compared to perfect competition? -More choice -Excess capacity -Markup
More choice
Which of the following oligopoly models asserts that firms make their output decisions after considering the responses of their rivals? -Nash equilibrium -Cournot assumption -Dominant firm model
Nash equilibrium
In a monopolistically competitive market, what happens to a firm's profits when demand is less than average cost?
Negative economic profits
Net exports most likely vary: -Positively with income and the domestic price level. -Positively with income but negatively with the domestic price level. -Negatively with income and the domestic price level.
Negatively with income and the domestic price level.
Which of the following schools of macroeconomic thought is least likelyto advocate leaving the economy alone to adjust on its own? -Austrian school of thought -Neoclassical school of thought -Neo-Keynesian school of thought
Neo-Keynesian school of thought
The CNY/EUR exchange rate is 7.08. If the interest rates in China and the euro zone are 4% and 2%, respectively, which of the following is most likely to happen in the forward market? -Both CNY and EUR will appreciate by 2%. -Only EUR will depreciate by 4%. -Only CNY will depreciate by 2%.
Only CNY will depreciate by 2%.
Consider the following statements: Statement 1: An increase in the diffusion index implies that an analyst can be less confident that the index represents broader movements in the overall economy. Statement 2: Lagging economic indicators are used to identify the condition of the economy in the past. Which of the following is most likely? -Only Statement 1 is correct. -Only Statement 2 is correct. -Both statements are correct.
Only Statement 2 is correct.
The process of evaluating portfolio outcomes across potential circumstances or states of the world to help teams understand the level of risk exposure is known as:
Scenario analysis.
Consider the following statements: Statement 1: An increase in unit labor cost (ULC) implies that inflationary pressures on the economy are easing. Statement 2: Demand-pull inflationary pressures on the economy are generally analyzed based on capacity utilization levels. Which of the following is most likely? -Only Statement 1 is correct. -Only Statement 2 is correct. -Both statements are incorrect.
Only Statement 2 is correct.
Consider the following statements: Statement 1: Option contracts are contracts that, in return for an upfront premium or fee, give the purchaser the right, but not the obligation, to make an FX transaction at some pre-specified future date at an exchange rate agreed upon today. Statement 2: Futures contracts are standardized contracts that trade on OTC markets. Which of the following is most likely? -Only Statement 1 is incorrect. -Only Statement 2 is incorrect. -Both statements are correct.
Only Statement 2 is incorrect.
Consider the following statements: Statement I: A country can have a current account deficit and consume more than it produces if it lends the shortfall to foreigners. Statement II: In an open economy, savings can be used for domestic and foreign investment. Which of the following is most likely? -Only Statement I is correct. -Only Statement II is correct. -Both statements are correct.
Only Statement II is correct.
Consider the following statements: Statement 1: Transactions and precautionary money balances are positively related to overall GDP. Statement 2: Speculative money demand is negatively related to the perceived risk of financial assets. Which of the following is most likely?
Only statement 1 is correct
An increase in nominal wages in an economy is most likely to shift:
Only the short‐run aggregate supply curve to the left.
Which of the following is least likely to improve the chances of successful collusion among firms in an oligopoly? -Order sizes are large and orders are received more frequently. -Firms in the industry produce similar products. -There are fewer firms in the industry.
Order sizes are large and orders are received more frequently.
Changes in which of the following variables are least likely to affect the external sector? -GDP growth differentials -Currency movements -Orders for durable goods
Orders for durable goods
A firm's shutdown point occurs at the quantity of output where:
P < AVC
A firm's breakeven point occurs where:
P = ATC
Which of the following is most likelyregarding the relationship between price (P), marginal cost (MC), and marginal revenue (MR) at the profit-maximizing output level for a firm in perfect competition? -MC ﹤ MR ﹤ P -P = MC = MR -P ﹥ MC = MR
P = MC = MR
The absolute number of forward points is most likely:
Positively related to the term of the forward contract and positively related to the interest rate differential.
Consumption expenditure more likelyvaries:
Positively with income but negatively with taxes.
Which of the following is most likely, in the long run, in perfect competition? -Price equals marginal cost. -Price is greater than marginal revenue. -Price is greater than average total cost.
Price equals marginal cost.
High velocity geopolitical risk is least likely to affect:
Private equity
Based on the equation of equality of expenditure and income, which of the following conditions is most likely to finance a government's fiscal deficit? -Private sector saving exceeds private sector investment and exports exceed imports. -Private sector investment exceeds private sector saving and imports exceed exports. -Private sector saving exceeds private sector investment and imports exceed exports.
Private sector saving exceeds private sector investment and imports exceed exports.
Which of the following is not affected by geopolitical risk? -Economic growth -Product risk -Interest rates
Product risk
Aggregate supply plays a crucial role in which of the following business cycle theories?
Real business cycle theory
When a country runs a balance‐of‐trade deficit, using the expenditure approach, the trade deficit will:
Reduce gross domestic product (GDP).
Which of the following is least likely a characteristic of monopolistic competition? -Low barriers to entry -Product differentiation -Small number of firms
Small number of firms
Which of the following is the overarching objective of most central banks around the world? -Maximum employment -Stable prices -Moderate long-term interest rates
Stable prices
An increase in which of the following is least likely to cause the aggregate supply curve to shift to the left? -Nominal wages -Business taxes -Subsidies
Subsidies
Under which of the following types of trade restrictions is the welfare loss to the importing country most likely to be minimized? -Tariffs -Quotas -Voluntary export restraints
Tariffs
Which of the following measures of industry concentration is most likelyto reflect the impact of mergers in the top tier on competition within the industry? -Cross-sectional regression analysis -The N-firm concentration ratio -The HH-Index
The HH-Index
A decline in the USD/EUR exchange rate from 1.3425 to 1.3150 most likely implies that:
The USD has appreciated by 2.09%.
What is the primary objective of the World Bank?
The World Bank's main objective is to fight poverty and enhance environmentally sound economic growth.
Under perfect competition, if a business' average revenue is greater than or equal to the average variable cost, what is true in the short run?
The business should continue to operate.
Which of the following best describes a credit cycle? -The changing availability and pricing of credit -Changes in credit that correspond with changes in GDP -The expansion and contraction of credit terms and property prices
The changing availability and pricing of credit
Which of the following is not true about the concentration ratio? -The concentration ratio for a monopoly is 100%. -The concentration ratio for a perfectly competitive industry is 0%. -The concentration ratio can only either be 100% or 0%.
The concentration ratio can only either be 100% or 0%.
When a country adopts a fixed parity regime for their currency, it means:
The country can decide what level of reserves to hold.
A dealer offers an exchange rate of JPY/USD = 78.95−79.20. This least likely implies that:
The dealer is willing to buy JPY for 78.95 dollars.
Which of the following statements is most accurate regarding the government expenditure multiplier and the tax multiplier? -The effects of the government expenditure multiplier outweigh those of the tax multiplier, which makes the balanced budget multiplier positive. -The effects of the government expenditure multiplier are less significant than those of the tax multiplier, which makes the balanced budget multiplier negative. -The effects of the government expenditure multiplier exactly offset those of the tax multiplier, which makes the balanced budget multiplier equal zero.
The effects of the government expenditure multiplier outweigh those of the tax multiplier, which makes the balanced budget multiplier positive.
For exchange rates to play a major role in adjusting trade imbalances:,
The elasticity of demand for imports and exports should be relatively high.
Which of the following is least likely a desirable property of an ideal exchange rate regime: -The exchange rate should be left to float freely. -The currencies should be fully convertible. -The countries should be able to undertake independent monetary policies to pursue domestic objectives.
The exchange rate should be left to float freely.
Which of the following factors does not increase the chance of collusion in oligopolistic markets? -There are a small number of firms in the industry. -The firms produce dissimilar products. -The firms have similar cost structures.
The firms produce dissimilar products.
Which of the following is not a characteristic of a competitive monopoly? -There are a large number of buyers and of sellers. -The products offered by each seller are similar but not identical. -There are high barriers to entry and exit.
There are high barriers to entry and exit.
Which of the following statements is true? -A kinked demand curve assumes that there is only one demand curve for a business. -There are limited real‐world evidences for a kinked demand curve model. -The kinked demand curve model predicts that there will never be price stability under an oligopoly.
There are limited real‐world evidences for a kinked demand curve model.
Which of the following is most likely a consequence of perfect price discrimination? -The output produced by a monopoly that can engage in perfect price discrimination is greater than the output that would be produced were the industry perfectly competitive. -There is no consumer surplus if a monopoly engages in perfect price discrimination. -Perfect price discrimination results in a deadweight loss to society.
There is no consumer surplus if a monopoly engages in perfect price discrimination.
Which of the following statements regarding monopolistic competition and pure monopoly is least accurate? -They are both protected by high entry barriers. -Both markets have downward‐sloping demand curves. -Both will expand production if marginal revenues are higher than marginal costs.
They are both protected by high entry barriers.
Which of the following must be estimated? -Nominal GDP. -Labor productivity. -Total factor productivity.
Total factor productivity.
Which of the following statements about absolute and comparative advantage between two nations is untrue? -Absolute advantage is a country's ability to produce goods at lower costs than its trading partners -Comparative advantage is the ability to produce goods at lower opportunity costs. -Trade liberalization can lead to lower inflation-adjusted GDP.
Trade liberalization can lead to lower inflation-adjusted GDP.
Consider the following statements: Statement 1: For a normal good, income elasticity of demand is always positive. Statement 2: For an inferior good, income elasticity is always negative. Which of the following is most likely? -Both statements are incorrect. -Both statements are correct. -Only one statement is correct.
both statements are correct
Consider the following statements: Statement 1: If close substitutes are easily available for a particular good, own-price elasticity of demand for the good will be relatively high. Statement 2: If a relatively large proportion of a person's income is spent on a particular good, own-price elasticity of demand for that good is most likely relatively high. Which of the following is most likely? -Both statements are incorrect. -Both statements are correct. -Only one statement is correct.
both statements are correct
Which of the following is least likely to be included in the calculation of GDP? -Capital gains -By-products of the production process that can be sold in the market -Owner-occupied rent
capital gains
If price is less than average total cost but greater than average variable cost, in the short run, the firm is most likelyto:
continue to produce
A risk of an economic union is:
crises contagion.
Purchases of goods and services are most likely to be recorded under which of the following components of the balance of payments?
current account
Which of the following is least likely a function of the central bank in an economy? -Managing the country's foreign exchange and gold reserves -Acting as the lender of last resort to banks -Deciding on tax policy
deciding on tax policy
There are currently four airline companies in the United States, and one of them is contemplating decreasing its prices to capture market share. In an oligopolistic competitive market, what will the other three firms likely do with their prices?
decrease them
A government's fiscal deficit can be financed by:
foreign lending in the form of a trade deficit.
Gross National Product (GNP) excludes goods and services produced by:
foreigners within the country.
When a government issues a trade tariff versus a trade quota, what is its expectation for growth in tax revenue?
goes higher
If the top two companies in an industry were to each grow their market share from 20% to 25% and the two other top firms' market share remained unchanged at 10%, the change in the Herfindahl‐Hirschman Index (HHI) value relative to the N‐firm concentration ratio value would be:
higher
A central bank is planning to sell massive amounts of its own currency on global FX markets. As a result of these action, exports most likely will:
increase
For a linear demand curve, at the price where elasticity equals 2.5, decreasing prices will most likely: -increase total revenue. -Have no effect on total revenue. -Decrease total revenue.
increase total revenue
There are currently four airline companies in the United States, and one of them is contemplating raising its prices to increase profits. In an oligopolistic competitive market, what will the other three firms likely do with their prices?
keep them the same
Which of the following oligopoly models asserts that there is a break in the marginal revenue curve and small changes in marginal cost do not result in a change in the profit-maximizing level of output? -Kinked demand curve model -Cournot assumption -Dominant firm model
kinked demand curve model
Fiscal multipliers under a combination of government spending and monetary accommodation are likely to be:
larger than if there was no monetary accommodation.
Firms in perfect competition will most likely increase their total output until:
marginal cost = price
Keynesians and Monetarist both agree that:
monetary policy should be used to combat economic recessions.
Exports and imports are:
netted out, exports less imports, and then added to GDP.
Consider the following statements: Statement 1: Transactions and precautionary money balances are positively related to overall GDP. Statement 2: Speculative money demand is negatively related to the perceived risk of financial assets. Which of the following is most likely? -Both statements are correct. -Only Statement 1 is correct. -Only Statement 2 is correct.
only statement 1 is correct
Consider the following statements: Statement 1: A government is said to have a trade deficit if its expenditure exceeds net taxes. Statement 2: An economy must finance a trade deficit by borrowing from the rest of the world. Which of the following is most likely? -Only Statement 1 is incorrect. -Only Statement 2 is incorrect. -Both statements are correct.
only statement 1 is incorrect
