ECON 102- FINAL MC
10) Scarcity requires that people must A) make choices. B) compete. C) cooperate. D) trade.
A
12) Allocative efficiency occurs when it is A) not possible to produce more of one good without giving up the production of some other good that is valued more highly. B) possible to produce more of all goods. C) not possible to produce more of one good without giving up the production of some other good that is valued less highly. D) possible to produce more of one good without giving up the production of some other good.
A
12) Scarcity guarantees that A) wants will exceed demands. B) most demands will be satisfied. C) demands will be equal to wants. D) demands will exceed wants.
A
12) Suppose there is an increase in the short-run aggregate supply with no change in the long-run aggregate supply. This situation could be the result of A) a decrease in the money wage rate. B) a technological advancement. C) an increase in the quantity of capital. D) an increase in the price of oil.
A
14) A country produces only pencils and erasers. Pencil production is allocatively efficient if the marginal ________ of a pencil equals the marginal ________ of ________. A) benefit; cost; a pencil B) benefit; benefit; an eraser C) cost; benefit; an eraser D) cost; cost; an eraser
A
14) A nation's investment must be financed by A) national saving plus borrowing from the rest of the world. B) borrowing from the rest of the world only. C) the government's budget deficit. D) national saving only.
A
14) Georgine buys more sweaters when her income increases. For Georgine, sweaters are A) a normal good. B) a complement. C) an inferior good. D) a substitute.
A
16) Demands differ from wants because A) demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good. B) wants imply a decision about which demands to satisfy, while demands involve no specific plan to acquire the good. C) wants require a plan to acquire a good but demands require no such plan. D) demands are unlimited, whereas wants are limited by income. 1
A
16) The 2010 Patient Protection and Affordable Care Act (Obamacare) contains a provision that may require individuals to either purchase private health insurance or pay a tax (see "The Protest Against Market Capitalism" on page 8 in the Parkin textbook). This is an example of A) a mixed economy. B) centrally planned socialism. C) the invisible hand. D) market capitalism.
A
16) The demand for Mexican tomatoes by an American food grocery chain creates a A) supply of U.S. dollars. B) demand for the U.S. dollar. C) supply of Mexican pesos. D) demand for an interest rate differential.
A
16) The percentage of people employed aged 16 years and older divided by the working-age population is known as the A) employment-to-population ratio. B) working-age population ratio. C) labor force participation rate. D) employment rate.
A
18) Cyclical unemployment ________. A) decreases during an expansion B) decreases during a recession C) grows at the same rate as potential GDP D) is zero at a business-cycle trough
A
18) Gross private domestic investment is all purchases of newly produced business capital goods and buildings A) plus the change in business inventories plus residential construction. B) plus fixed investment minus inventory investment. C) minus the change in business inventories. D) plus purchases of capital goods produced in previous years to replace any depreciated capital goods.
A
18) When a good is imported into the United States, a ________is created. A) demand for foreign currencies and a supply of dollars B) supply of foreign currency with no effect on the market for the dollar C) supply of foreign currencies and a demand for dollars D) demand for dollars with no effect on markets for foreign currencies
A
2) The bowed outward shape of the production possibilities frontier in the above figure indicates that A) some resources are better suited for producing computers. B) computer technology is subject to the principle of decreasing costs. C) the opportunity cost of producing more computers decreases as more computers are produced. D) All of the above answers are correct.
A
2) The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a A) medium of exchange. B) store of value. C) standard of deferred payment. D) unit of account.
A
2) The opportunity cost of a good is the same as its A) relative price. B) money price. C) price index. D) none of the above.
A
2) Which of the following is a macroeconomic issue? A) the effect of increasing the money supply on inflation B) the hiring decisions that a business makes C) the purchasing decisions that an individual consumer makes D) the effect of an increase in the tax on cigarettes on cigarette sales
A
20) Frictional unemployment A) is unemployment associated with normal labor turnover. B) is unemployment associated with declining industries. C) is voluntary part-time unemployment. D) includes discouraged workers.
A
20) The above table shows some national income accounting data for a nation. In this nation, gross domestic product is equal to ________ billion. A) $2,300 B) $2,000 C) $2,800 D) $2,500
A
20) Which of the following increases aggregate demand and shifts the AD curve rightward? A) an increase in the quantity of money and a resulting fall in the interest rate B) predictions of a recession that lead to expectations of lower future income C) an increase in the exchange rate that makes imports less expensive D) a fall in the price level
A
21) A change in ________ creates a movement along the aggregate demand curve, while a change in ________ shifts the aggregate demand curve. A) the price level; government expenditures B) foreign income; the foreign exchange rate C) real wealth; human capital D) expected profits; tax rates
A
22) Suppose the exchange rate falls from $1.20 Canadian per U.S. dollar to $1.10 Canadian per U.S. dollar. U.S. exports will ________, U.S. imports will ________, and U.S. aggregate demand will ________. A) increase; decrease; increase B) decrease; increase; increase C) increase; increase; increase D) decrease; increase; decrease
A
24) Labor productivity is A) real GDP per hour of labor. B) real GDP per hour of labor times the number of people. C) the rate of change in real GDP per hour of labor. D) real GDP per hour of labor times the hours of work.
A
24) Structural unemployment is A) associated with the general decline of specific industries. B) almost always short-term in nature. C) associated with the normal changing of jobs in a dynamic economy. D) associated with the general downturns in the economy.
A
24) The aggregate demand curve shows that, if other factors are held constant, the higher the price level, the A) smaller the quantity of real GDP demanded. B) larger consumption expenditure. C) greater the quantity of real GDP demanded. D) None of the above answers is correct.
A
24) Which of the following are major influences on the expected profit from an investment? I. technology advances II. stock market behavior III. accounting practices A) I only B) I and II C) I and III D) II and III
A
25) The aggregate demand curve shows the ________ relationship between the price level and ________. A) negative; the quantity of real GDP demanded B) positive; aggregate labor demand C) positive; the quantity of real GDP demanded D) negative; aggregate labor demanded
A
26) Suppose the United States discovers a way to produce clean nuclear fuel. The effect of this discovery would be to A) shift the U.S. PPF outward. B) shift the U.S. PPF inward. C) force the United States to produce at a point inside its PPF. D) lead the United States to produce less nuclear fuel.
A
28) A decrease in the demand for loanable funds and a leftward shift of the demand for loanable funds curve results from A) decreases in the expected profit. B) tax cuts. C) an increase in the real interest rate. D) technological improvements.
A
30) In the figure above, the shift in the supply curve for U.S. dollars from S0 to S1 could occur when A) the expected future exchange rate rises. B) the current exchange rate falls. C) the expected future exchange rate falls. D) the U.S. interest rate differential decreases.
A
32) Economic growth is shown on the production possibilities frontier as A) an outward shift in the PPF. B) an inward shift in the PPF. C) a movement from one point on the PPF to another. D) the curvature of the PPF.
A
32) In the 1990s, video recordings were made primarily on tapes. However, in the 2000s DVDs became increasingly popular, leading to a sharp decline in video tapes. As a result, many people who manufactured tapes lost their jobs and didn't have the skills necessary to work making DVDs. This occurrence is best consider an example of A) structural unemployment. B) underemployment C) frictional unemployment. D) cyclical unemployment
A
32) Marginal cost is the cost A) that arises from an increase in an activity. B) that arises from the secondary effects of an activity. C) that your activity imposes on someone else. D) of an activity that exceeds its benefit.
A
32) When the nominal interest rate rises, the opportunity cost of holding money A) rises and people hold less money. B) falls and people hold more money. C) rises and people hold more money. D) falls and people hold less money.
A
33) Suppose a deposit in New York earns 6 percent a year and a deposit in London earns 4 percent a year. Interest rate parity holds if the A) U.S. dollar depreciates by 2 percent a year. B) U.K. pound depreciates by 2 percent a year. C) U.S. dollar appreciates by 2 percent a year. D) None of the above answers is correct because interest rate parity requires that the interest rates be the same in both countries.
A
34) According to purchasing power parity, a rise in inflation in the United States. relative to the rest of the world will lead to A) an exchange rate depreciation. B) an exchange rate appreciation. C) a balance of payments deficit. D) a balance of payments surplus.
A
34) Use the figure above to answer this question. Suppose the economy is operating at point a. A move to ________ could be explained by ________. A) point c; an increase in the use of credit cards B) point e; an increase in U.S. exports C) point b; an increase in real GDP D) point b; an increase in the nominal interest rate
A
34) Which of the following are included in the supply of loanable funds? I. private saving II. government budget surplus III. international borrowing A) I, II and III B) I and III C) II and III D) I and II
A
35) If the price level in the U.S. is 120, the price level in South Africa is 140, and the nominal exchange rate is 7 South African rands per dollar, then the real exchange rate is A) 6 South African goods per U.S. good. B) 8.4 South African goods per U.S. good. C) 1.4 South African goods per U.S. good. D) 9.8 South African goods per U.S. good.
A
36) A common definition of a recession is a time with A) a decrease in real GDP for two or more successive quarters. B) a decrease in real GDP for two or more successive years. C) a decline in interest rates. D) a decline in the price level.
A
36) Assume the inflation rate falls from 4 percent to 2 percent. This means that A) the price level is increasing more slowly. B) real GDP is decreasing. C) the price level has fallen. D) the economy is experiencing deflation.
A
36) Today, Julie attended her 12:30 Economics class. If she hadn't gone to class, Julie would have gone out to lunch with friends. She had other options; she could have worked or slept in. Julie's opportunity cost of going to class is the A) lunch she gave up. B) income from working, lunch, and sleep she gave up. C) sleep she gave up. D) income from working she gave up.
A
36) Which of the following will shift the supply of loanable funds curve leftward? A) a decrease in disposable income B) a decrease in the real interest rate C) a decrease in expected future income D) a decrease in real wealth
A
38) Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. The opportunity cost of producing a unit of Y is A) 1 unit of X per unit of Y for Agnes and 1/2 unit of X per unit of Y for Brenda. B) 1 hour for Agnes and 2 hours for Brenda. C) 1 hour for Agnes and 1/2 hour for Brenda. D) 1 unit of X per unit of Y for Agnes and 2 units of X per unit of Y for Brenda.
A
38) If capital per hour of labor increases, real GDP per hour of labor A) increases for a given level of technology. B) increases because the level of technology increases. C) decreases because the level of technology decreases. D) decreases for a given level of technology.
A
4) According to the table above, the value of M1 is ________ and the value of M2 is ________. A) $813 billion; $3303 billion B) $813 billion; $2490 billion C) $1,488 billion; $3978 billion D) $805 billion; $2490 billion
A
4) An example of "investment" in computing real GDP using the expenditure approach is the purchase of A) a new set of tools by an auto mechanic, for use in repairing cars. B) computer chips by Dell to put in their personal computers. C) a 100 year old house by a married couple. D) 100 shares of IBM stock.
A
4) In the above figure, which movement illustrates the impact of a rising price level and a constant money wage rate? A) E to F B) E to G C) E to I D) E to K
A
40) In the above figure, which point represents the under use of resources? A) point G B) point K C) point F D) point H
A
41) Which of the following exchange rate policies uses a target exchange rate, but allows the target to change? A) crawling peg B) fixed exchange rate C) flexible exchange rate D) moving target
A
42) A positive statement is A) about what is. B) about what ought to be. C) always true. D) one that does not use marginal concepts.
A
42) Arbitrage in the foreign exchange market, international loans markets, and goods markets results in A) purchasing power parity, interest rate parity and law of one price. B) purchasing power parity, price parity and no round-trip profit. C) purchasing power parity, interest rate parity and round-trip profit. D) purchasing power parity, interest rate parity and price parity.
A
42) In the above figure, the distance between points S and T represents A) a recession. B) a peak. C) a trough. D) an expansion.
A
42) In the table above, country B is producing 4 units of X and 6 units of Y. For country B, the opportunity cost of producing an additional unit of Y is A) 2/3 unit of X per unit of Y. B) 3 units of X per unit of Y. C) 1/2 unit of X per unit of Y. D) 2 units of X per unit of Y.
A
44) Suppose a British bank offers a 3 percent interest rate while a U.S. bank offers a 7 percent interest rate. People must expect the U.S. dollar will A) depreciate 4 percent. B) depreciate 10 percent. C) appreciate 10 percent. D) appreciate 4 percent.
A
44) The figure above shows the U.S. production function. From 1986 to 2008 the United States experienced major advances in technology as well as an increase in the working-age population. The combined effect can best be shown by a A) movement from point W to point Z. C) movement from point W to point X. B) movement from point Y to point X. D) movement from point Y to point Z.
A
44) The use of purchasing power parity prices A) accounts for differences in the prices of the same goods in different countries when measuring real GDP. B) weakens the validity of cross country comparisons of economic welfare. C) increases the amount by which U.S. GDP is larger than that of any other nation. D) decreases the real GDP per person statistics published by the International Monetary Fund.
A
45) A country's balance of payments accounts records A) the international trading, borrowing, and lending positions of a country over a period of time. B) only the goods and services purchases among countries over a period of time. C) the flow of human and non-human capital among countries over a period of time. D) only official transactions between governments over a period of time.
A
46) The data in the table above are the U.S. balance of payments. The current account balance is A) $140 billion. B) -$45 billion. C) $155 billion. D) $170 billion.
A
46) The statement that ________ is a positive statement. A) the price of sugar in the United States is higher than the price in Australia B) more students should study economics C) too many people in the United States have no health care insurance D) the price of gasoline is too high
A
48) Producers of tablet computers will be able to lower the wage rate that they pay to their workers. You are asked to predict the effects on the supply of tablet computers, and the price of a tablet computer. You predict that the supply curve shifts A) rightward, and the price falls. B) rightward, and the price is constant. C) leftward, and the price is constant. D) leftward, and the price rises.
A
48) The biases in the CPI include the A) new goods, quality change, and substitution biases. B) substitution, new goods, and old goods biases. C) old goods, new goods, and quality change biases. D) old goods, unemployment, and inflation biases.
A
48) Which of the following is a positive statement? A) An increase in gas prices leads people to car pool more. B) State lotteries are good methods to use for raising revenues. C) Increased prison sentences are the best way to reduce the crime rate. D) Inflation is a more serious problem than is deflation.
A
5) Which of the following statements is TRUE? A) The long-run aggregate supply curve is vertical. B) The long-run aggregate supply curve is upward sloping. C) The long-run aggregate demand curve is upward sloping. D) The short-run aggregate supply curve is vertical.
A
5) With everything else the same, in the foreign exchange market the A) larger the value of U.S. exports, the greater is the quantity of dollars demanded. B) the higher the exchange rate, the cheaper are U.S.-produced goods and services. C) the lower the exchange rate, the smaller is the expected profit from buying dollars. D) lower the exchange rate, the smaller the amount of U.S. exports.
A
50) Real GDP in 2015 is $10 trillion. Between 2015 and 2016, using 2015 prices, GDP grew 3 percent and using 2016 prices real GDP grew 7 percent. Using the chain-weighted output index method of calculating chained-dollar real GDP, real GDP in 2016 is ________ trillion. A) $10.5 B) $10.1 C) $12.72 D) $11
A
6) At the beginning of the year, Tom's Tubes had a capital stock of 5 tube inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's net investment for the year totaled A) 1 machine. B) 2 machines. C) 3 machines. D) 6 machines.
A
6) During 2014, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2013, real GDP was 105 billion and the population was 0.85 billion. In 2013, real GDP per person was A) $124. B) $135. C) $117. D) $128.
A
6) In the above table, the labor force participation rate is A) 62 percent. B) 55 percent. C) 69 percent. D) 44 percent.
A
7) We distinguish between the long-run aggregate supply curve and the short-run aggregate supply curve. In the long run A) real GDP equals potential GDP. B) technology is fixed but it is not in the short run. C) the price level is constant but in the short run it fluctuates. D) the aggregate supply curve is horizontal while in the short run it is upward sloping.
A
8) For a commercial bank, the term "reserves" refers to A) the cash in its vaults and its deposits at the Federal Reserve. B) the net interest that it earns on loans. C) a banker's concern ("reservation") in making loans to an individual without a job. D) the profit that the bank retains at the end of the year.
A
8) The relative price of a good is A) an opportunity cost. B) equal to the price of that good divided by the quantity demanded of the good. C) equal to the money price of that good. D) expressed in dollar amounts.
A
8) Which of the following shifts both the LAS and SAS curves? A) an advance in technology B) a change in the money wage rate C) a change in the price level D) a simultaneous change in both the price level and the money wage rate
A
1) Moving upward along the short-run aggregate supply curve results in a ________ in the price level and ________ in real GDP. A) fall; a decrease B) rise; an increase C) rise; a decrease D) fall; an increase
B
10) When the Fed is ________ it is ________. A) regulating the nation's financial institutions; conducting monetary policy B) adjusting the amount of money in circulation; conducting monetary policy C) issuing government bonds; conducting monetary policy D) adjusting the amount of money in circulation; issuing government bonds
B
12) In September 2014, 32 percent of unemployed workers had been unemployed for 6 months or more. This long-term unemployment is of particular concern because A) the labor force participation rate no longer includes these workers in the measurement since they are long-term unemployed. B) long-term unemployment is the costliest type of unemployment. C) the employment-to-population ratio no longer includes these workers in the measurement since they are long-term unemployed. D) the U-3 unemployment rate no longer includes these workers in the measurement since they are long-term unemployed.
B
12) Suppose Mitsubishi Bank (a Japanese bank) expects the exchange rate to be 125 yen per U.S. dollar at the end of the year. If today's exchange rate is 120 yen per U.S. dollar, Mitsubishi bank A) sells U.S. dollars today because it expects losses from buying U.S. dollars and holding them. B) buys U.S. dollars today because it expects profit from buying U.S. dollars and holding them. C) does not buy or sell any U.S. dollars today because it expects zero profit from buying U.S. dollars and holding them. D) None of the above answers is correct because a foreign commercial bank cannot buy or sell U.S. dollars.
B
12) The country of Kemper is on its aggregate production function at point W in the above figure. If the population increases with no change in capital or technology, the economy will A) move to point such as Z. B) move to point such as X. C) remain at point W. D) move to point such as Y.
B
12) Transfer payments are not included in GDP because A) their market value cannot be accurately determined. B) they are not purchases of goods or services. C) they do not generate additional income. D) their value is included in government expenditure.
B
12) Which part of the Federal Reserve System meets every 6 weeks to determine the nation's monetary policy? A) the Federal Reserve Banks B) Federal Open Market Committee C) Board of Governors D) depository institutions such as commercial banks
B
13) Using the table above, if the current market value of the dollar is 125 francs A) investor A holds francs, but B and C hold dollars. B) all three investors hold francs. C) investor A holds dollars, but B and C hold francs. D) all three investors hold dollars.
B
14) In the above figure, what is the full-employment real wage rate and quantity of hours per year? A) $35 and 100 billion hours per year B) $40 and 60 billion hours per year C) $50 and 100 billion hours per year D) $50 and 40 billion hours per year
B
14) The required reserve ratio A) is higher for banks that make riskier loans. B) is the fraction of a bank's total deposits that is required to be held in reserves. C) is the amount of money that banks require borrowers to reserve in their accounts. D) increases when withdrawals from a bank are made.
B
14) Using the table above, if the current market value of the dollar is 70 francs A) investor A holds dollars, but B and C hold francs. B) all three investors hold dollars. C) investor A holds francs, but B and C hold dollars. D) all three investors hold francs.
B
15) According to the intertemporal substitution effect, when the price level increases, the interest rate A) rises and the quantity of real GDP demanded increases. B) rises and the quantity of real GDP demanded decreases. C) is not affected. D) falls and the quantity of real GDP demanded decreases.
B
15) When the U.S. exchange rate rises, foreign goods become ________ and U.S. imports ________. A) less expensive; decrease B) less expensive; increase C) more expensive; increase D) more expensive; decrease
B
16) If foreigners spend more on U.S.-made goods and services than we spend on theirs A) all U.S. national saving remains in the United States. B) foreigners must borrow from the United States or sell U.S. assets to make up the difference. C) we must borrow from foreigners because of low imports. D) funds flow in from abroad to help finance U.S. investment.
B
18) A decrease in the price of bowling shifts the A) supply curve of bowling balls leftward. B) demand curve for bowling balls rightward. C) supply curve of bowling balls rightward. D) demand curve for bowling balls leftward.
B
18) Use the information in the table above to calculate the value of government saving. A) $15 million B) $5 million C) $45 million D) -$5 million
B
19) A factor determining the supply of U.S. dollars in the foreign exchange market is the A) expected future interest rate in the United States. B) expected future exchange rate. C) U.S. supply of exports. D) expected future interest rate in foreign countries.
B
19) Which of the following would NOT shift the U.S. aggregate demand curve? A) U.S. monetary and fiscal policy B) a change in the quantity of capital in the United States C) an expectation that inflation will be lower in the future D) a change in income in Canada
B
20) If the marginal benefit of consuming another unit of a good is positive, then to reach the allocatively efficient level of output more of the good should be produced and consumed A) no matter what. B) if the marginal benefit of the good is greater than its marginal cost. C) if the total benefit of the good is greater than its total cost. D) as long as the consumer can afford to pay for it.
B
20) Suppose the peso-dollar foreign exchange rate changes from 50 pesos per dollar to 30 pesos per dollar. Then the peso has ________ against the dollar and the dollar has ________ against the peso. A) depreciated; appreciated B) appreciated; depreciated C) appreciated; appreciated D) depreciated; depreciated
B
22) A change in which of the following would NOT shift the supply curve for sneakers? A) an increase in technology for making sneakers B) an increase in the price of sneakers C) an increase in the price of rubber, used to make sneakers D) None of the above, that is, each change shifts the supply curve
B
22) Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares A) the total revenue from sales of printers to the total cost of producing all the printers. B) the extra revenue from selling a few additional printers to the extra costs of producing the printers. C) HP's printers to printers from competing companies, such as Lexmark. D) the extra revenue from selling a few additional printers to the average cost of producing the additional printers.
B
22) The table above shows the balance sheet for Ralph's Bank. If the desired reserve ratio is 15 percent, Ralph's Bank has excess reserves of ________. A) $2,500 B) $50 C) $500 D) $450
B
24) In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when A) the expected future exchange rate increases. B) people expect that the dollar will depreciate. C) the U.S. interest rate rises. D) foreign interest rates fall.
B
26) In the figure above, suppose the economy is initially at point B. Then the interest rate in Japan rises relative to the interest rate in the United States. This change ________ the supply of dollars and the market moves to a point such as ________. A) decreases; A B) increases; C C) decreases; E D) increases; D
B
26) Use the information in the table above to calculate the value of net exports. A) -$10 million B) $10 million C) $30 million D) $0
B
26) When part of the quantity of money is held in currency, then A) the Fed will find it beneficial to increase the discount rate. B) a currency drain occurs. C) there is a higher level of excess reserves. D) the money multiplier will increase in value.
B
28) The aggregate demand curve A) shifts rightward when the price level increases and leftward when the price level falls. B) shifts rightward when taxes are decreased. C) does not shift, unlike market demand curves. D) shifts rightward when foreign incomes decrease and shifts leftward when foreign incomes increase.
B
28) Which of the following is NOT one of the factors that influences the supply of a product? A) expected future prices B) income C) technology D) number of suppliers
B
30) An increase in labor productivity shifts the labor ________ curve ________. A) supply; leftward B) demand; rightward C) demand; leftward D) supply; rightward
B
31) In the figure above, the shift in the supply curve for U.S. dollars from S0 to S2 could occur when A) the current exchange rate falls. B) the expected future exchange rate falls. C) the current exchange rate rises. D) the expected future exchange rate rises.
B
32) A business cycle is A) the cyclical movement in the interest rates. B) the pattern of short-run upward and downward movements in total output. C) the cyclical change in the nation's balance of trade. D) the increase in consumer spending that accompanies an increase in disposable income.
B
32) In the above figure, new expectations of booming business conditions and a higher expected profit will A) make the demand for loanable funds curve become horizontal. B) shift the demand for loanable funds curve rightward. C) shift the demand for loanable funds curve leftward. D) have no effect on the demand for loanable funds curve.
B
34) In the figure above, Joe is producing at point A. Joe's opportunity cost of producing one shirt is A) 5 pairs of pants per shirt. B) 2 pairs of pants per shirt. C) 3/5 of a pair of pants per shirt. D) 5/3 of a pair of pants per shirt.
B
34) The four parts of the business cycle occur in the following order A) expansion, trough, peak, recession. B) recession, trough, expansion, peak. C) recession, trough, peak, expansion. D) expansion, trough, recession, peak.
B
36) Human capital is the A) technology used by humans to produce GDP. B) skill and knowledge accumulated by humans. C) plant and equipment produced by humans and not by machines. D) machinery used by humans to produce GDP.
B
36) In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in financial innovation such as the introduction of ATMs? A) The demand for money curve would shift rightward to MD2. B) The demand for money curve would shift leftward to MD0. C) There would be a movement upward along the demand for money curve MD1. D) There would be a movement downward along the demand for money curve MD1.
B
38) In the above figure, suppose the demand for dollars temporarily increases so that the demand curve shifts to D1. To maintain the target exchange rate, the Fed A) can buy dollars. B) can sell dollars. C) must violate interest rate parity but not purchasing power parity. D) cannot maintain the target exchange rate.
B
38) In the figure above, an increase in the monetary base would create a change such as a A) movement from point a to point b along the supply of money curve MS0. B) shift from the supply of money curve MS0 to the supply of money curve MS1. C) movement from point b to point a along the supply of money curve MS0. D) shift from the supply of money curve MS1 to the supply of money curve MS0.
B
39) If a nation's central bank increased domestic interest rates, the nation's exchange rate would change if the country's exchange rate was a A) a crawling peg. B) a flexible exchange rate. C) a fixed exchange rate. D) a nominally fixed exchange rate.
B
4) Economists point out that scarcity confronts A) the rich but not the poor. B) both the poor and the rich. C) the poor but not the rich. D) neither the poor nor the rich.
B
4) Slowdonia's current growth rate of real GDP per person is 1 percent a year. Approximately how long will it take to double real GDP per person? A) 35 years B) 70 years C) 10 years D) 100 years
B
4) When people who are holding the money of some other country want to exchange it for U.S. dollars, they ________ U.S. dollars and ________ that other country's money. A) demand; demand B) demand; supply C) supply; demand D) supply; supply
B
40) In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF0. What happens if real wealth decreases? A) The supply of loanable funds curve would shift leftward to a curve such as SLF1. B) The supply of loanable funds curve would shift rightward to a curve such as SLF2. C) Nothing; the economy would remain at point a. D) There would be a movement to a point such as b on supply of loanable funds curve SLF0.
B
40) The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that A) bond prices fall and so the interest rate falls. B) people buy bonds and the interest rate falls. C) the money market is in equilibrium. D) people sell bonds and the interest rate falls.
B
43) In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D2. To maintain the target exchange rate, the Fed A) must violate both interest rate parity and purchasing power parity. B) can buy dollars. C) can sell dollars. D) cannot maintain the target exchange rate.
B
44) Anna and Maria produce shirts and ties. The figure above shows Anna's PPF and Maria's PPF. Anna and Maria can achieve the gains from trade if Anna produces ________ and Maria produces ________. A) only ties; shirts and ties B) ties; shirts C) shirts; ties D) shirts and ties; only ties
B
44) Which of the following is a positive statement? A) Corporations should be more socially responsible. B) People buy more of a good or service when its price falls. C) The distribution of income is fair. D) The government ought to provide health care to everyone.
B
46) At the end of last year, the CPI equaled 120. At the end of this year, the CPI equals 132. What is the inflation rate over this year? A) 12 percent B) 10 percent C) 6 percent D) None of the above answers are correct because more information is needed to calculate the inflation rate.
B
46) For consumers, goods A and B are complementary goods. The cost of a resource used in the production of A decreases. As a result A) the equilibrium price of B will fall and the equilibrium price of A will rise. B) the equilibrium price of B will rise and the equilibrium price of A will fall. C) the equilibrium prices of both A and B will rise. D) the equilibrium prices of both A and B will fall.
B
46) If an economy has a velocity of circulation of 3, then A) the quantity of money is 3 times real GDP. B) in a year the average dollar is exchanged 3 times to purchase goods and services in GDP. C) the quantity of money is $3 for every dollar of GDP. D) nominal GDP is 1/3 the size of the quantity of money.
B
46) In order for societies to reap the gains from trade, it is necessary to A) achieve productive efficiency. B) define and enforce property rights. C) distribute resources equally. D) foster economic growth.
B
46) Using the data in the above table, gross private domestic investment equals A) $260. B) $460. C) $250. D) some amount that cannot be determined without more information.
B
47) A small country is an international borrower and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international borrowing ________. A) does not change; does not change B) does not change; decreases C) does not change; increases D) increases; does not change
B
48) The term "market" refers to A) locations where buyers and sellers physically meet. B) any arrangement that enables buyers and sellers to get information and trade with one another. C) trading arrangements that have been approved by the government. D) physical structures only.
B
50) Activities that encourage faster growth are A) taxes on saving that serve to encourage more spending and less saving. B) investment in new capital and human capital. C) high levels of consumption and low levels of savings. D) developing trade barriers to protect national industries.
B
50) The table above gives some of the entries in the national income and product accounts. The government sector has a ________, and the private sector has a ________. A) surplus of $50 billion; deficit of $25 billion B) surplus of $50 billion; surplus of $25 billion C) deficit of $50 billion; deficit of $25 billion D) deficit of $50 billion; surplus of $25 billion
B
6) An example of a question that might be explored in microeconomics is to determine A) why the U.S. economy has grown more rapidly than the Japanese economy. B) the number of workers employed by Intel. C) the total employment within the U.S. economy. D) savings by the household sector.
B
6) The price of a DVD rental is $1.50 and the price of a downloaded movie is $1.00. If the price of a DVD rental increases by $0.50, the relative price a downloaded movie A) does not change. B) falls. C) rises. D) might change but more information is needed.
B
8) Fundamental economic problems basically arise from A) turmoil in the stock market. B) our wants exceeding our scarce resources. C) the fact that society has more than it needs. D) the unequal distribution of income.
B
8) Suppose that a bond promises to pay its holder $100 a year forever. If the price of the bond increases from $1,000 to $1,250, then the interest rate on the bond A) rises from 8 percent to 10 percent. B) falls from 10 percent to 8 percent. C) does not change because it is not affected by the price of the bond. D) falls from 10 percent to 6 percent.
B
10) If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the unemployment rate is A) 7.1 percent. B) 6.6 percent. C) 9.1 percent. D) 10 percent.
C
10) The above table shows production points on Sweet-Tooth Land's production possibilities frontier. What is the opportunity cost of one chocolate bar if Sweet-tooth Land moves from point C to point D? A) 10 cans of cola per chocolate bar B) 1/3 can of cola per chocolate bar C) 3 cans of cola per chocolate bar D) 30 cans of cola per chocolate bar
C
10) This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is ________ and its net investment is ________. A) $1.0 billion; $0.7 billion B) $1.0 billion; $1.3 billion C) $1.3 billion; $1.0 billion D) $1.3 billion; $1.6 billion
C
10) Transfer payments A) refer to all payments made to households by governments. B) are included in the government expenditure category in gross domestic product. C) refer to payments made by the government that are not made to purchase a good or service. D) are made by households to firms in exchange for goods and services.
C
11) The higher the exchange rate today, the A) greater the quantity of U.S. dollars demanded in the foreign exchange market today. B) greater is the expected profit from buying U.S. dollars today and holding them. C) smaller is the expected profit from buying U.S. dollars today and holding them. D) smaller is the expected profit from buying foreign currency today and holding it.
C
14) The Occupy Wall Street movement advocates A) following the teachings of Adam Smith. B) centrally planned socialism. C) a shift away from market capitalism. D) a shift towards more market capitalism.
C
14) Which of the following shifts the short-run aggregate supply curve? I. changes in the size of the labor force II. changes in the money wage rate A) I only B) II only C) both I and II D) neither I nor II
C
16) A new 2015 Honda Civic produced in 2015 and purchased in 2016 is A) part of GDP in 2016. B) not part of GDP in either year because it was produced in one year and sold in another year. C) part of GDP in 2015. D) part of GDP in both 2015 and 2016.
C
16) The U.S. employment-to-population ratio peaked in 2000 and in 2012 fell to 58 percent, a level not seen since the early 1980s. This fall in the employment-to-population ratio ________ the equilibrium quantity of labor and ________ potential GDP. A) decreases; increases B) increases; increases C) decreases; decreases D) increases; decreases
C
16) When the Fed lowers the federal funds rate, it can lead to A) a decrease in demand deposits. B) the Fed selling government securities. C) an increase in lending by banks. D) a decrease in the quantity of money.
C
18) An increase in the population and hence the supply of labor causes a A) surplus of labor at the original real wage rate and the real wage rate will rise. B) shortage of labor at the original real wage rate and the real wage rate will rise. C) surplus of labor at the original real wage rate and the real wage rate will fall. D) shortage of labor at the original real wage rate and the real wage rate will fall.
C
18) Resource use is allocatively efficient A) whenever marginal cost exceeds marginal benefit. B) when the maximum possible quantity is being produced. C) when marginal benefit equals marginal cost. D) whenever marginal benefit exceeds marginal cost.
C
18) The Fed buys $100 million of government securities from Bank A. What is the effect on the Federal Reserve's balance sheet? A) Securities increase by $100 million and reserves of Bank A decrease by $100 million. B) Securities decrease by $100 million and reserves of Bank A increase by $100 million. C) Securities increase by $100 million and reserves of Bank A increase by $100 million. D) Securities increase by $100 million and Federal Reserve notes (currency) decrease by $100 million.
C
2) Discouraged workers ________ counted as officially unemployed because they ________. A) are not; are not qualified to work B) are; are not working C) are not; are not actively seeking work D) are; are still in the labor force
C
2) In January 2015, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the equipment fell by 30 percent. During 2015, Tim spent $200,000 on new machines. During 2015, Tim's gross investment totaled A) $1 million. B) $900,000. C) $200,000 D) $300,000.
C
2) Suppose real GDP for a country is $13 trillion in 2015, $14 trillion in 2016, $15 trillion in 2017, and $16 trillion in 2018. Over this time period, the real GDP growth rate is A) negative. B) constant. C) decreasing. D) increasing.
C
2) Suppose there is a temporary increase in the price of oil. This is represented by A) a leftward shift of the SAS and the LAS curve. B) a rightward shift of the SAS curve. C) a leftward shift of the SAS curve. D) a leftward shift of the LAS curve.
C
20) Consider the demand curves for soft drinks shown in the figure above. Suppose the economy is at point a. What of the following could result in a movement to point b? A) a decrease in the price of bottled water B) an increase in the opportunity cost of soft drinks C) an increase in the price of bottled water D) a decrease in the relative price of a soft drink
C
20) If you lend a dollar for a year and at the end of the year the price level has risen by 10 percent A) the purchasing power of your loan has remained constant over the year regardless of the interest rate at which you lent it. B) the purchasing power of your loan has risen over the year regardless of the interest rate at which you lent it. C) you must have earned a nominal interest rate of 10 percent to maintain the purchasing power of your loan. D) you must have earned a nominal interest rate of 5 percent to maintain the purchasing power of your loan.
C
20) The above table gives the initial balance sheet for Mini Bank. Mini Bank's actual reserve ratio equals ________. A) 33.3 percent B) 20 percent C) 25 percent D) 12.5 percent
C
20) When the population increases with no change in labor productivity, employment ________ and potential GDP ________. A) decreases; increases B) decreases; decreases C) increases; increases D) increases; decreases
C
21) In the foreign exchange market, an increase in the world demand for U.S. exports shifts the A) supply curve for U.S. dollars rightward. B) supply curve for U.S. dollars leftward. C) demand curve for U.S. dollars rightward. D) demand curve for U.S. dollars leftward.
C
22) Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus, due to increased demand for world travel. As a result A) only the demand curve for Indian rupees shifts rightward. B) only the demand curve for European euros shifts rightward. C) the demand curve for European euros and the supply curve for Indian rupees both shift rightward. D) the demand curve for European euros shifts rightward and the supply curve for Indian rupees shifts leftward.
C
22) An increase in labor productivity ________ the real wage rate and an increase in population ________ the real wage rate. A) lowers; lowers B) lowers; raises C) raises; lowers D) raises; raises
C
22) If the nominal interest rate is 7 percent and the inflation rate is 1 percent, the real interest rate is approximately A) -6 percent. B) 7 percent. C) 6 percent. D) 8 percent.
C
22) In the above figure, if 2 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources. A) marginal cost of a computer exceeds the marginal benefit of a computer, so fewer computers B) marginal cost of a computer exceeds the marginal benefit of a computer, so more computers C) marginal benefit of a computer exceeds the marginal cost of a computer, so more computers D) marginal benefit of a computer exceeds the marginal cost of a computer, so fewer computers
C
22) Suppose the economy is experiencing frictional unemployment of 1 percent, structural unemployment of 3 percent and cyclical unemployment of 4 percent. What is the natural unemployment rate? A) 5 percent B) 7 percent C) 4 percent D) 3 percent
C
23) In the figure above, the shift in the demand curve for U.S. dollars from D0 to D1 could occur when A) the U.S. interest rate decreases. B) foreign interest rates increase. C) people expect that the dollar will appreciate. D) the expected future exchange rate falls.
C
24) During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is A) $4,300. B) $3,300. C) $10,300. D) $6,000.
C
26) As the price of a pound of peanuts falls, the A) supply of peanuts increases. B) quantity of peanuts supplied increases. C) quantity of peanuts supplied decreases. D) supply of peanuts decreases.
C
26) People base their labor supply on the ________ because they care about ________. A) money wage; a surplus of labor B) money wage; the amount of labor firms demand C) real wage; what their earnings will buy D) real wage; the equality of money wages and the price level
C
26) The unemployment rate is at the natural unemployment rate when A) structural unemployment equals zero. B) frictional unemployment equals zero. C) cyclical unemployment equals zero. D) all types of unemployment equal zero.
C
27) In the figure above, the shift in the supply curve for U.S. dollars from S0 to S1 could occur when A) the expected future exchange rate falls. B) the U.S. interest rate differential decreases. C) the U.S. interest rate differential increases. D) the current exchange rate falls.
C
28) An increase in the currency drain A) results in an increase in deposits. B) results in an increase in required reserves. C) decreases the size of the money multiplier. D) leads to an increase in excess reserves.
C
28) Marginal cost is the A) cost of all forgone alternatives. B) cost of an activity minus the benefits of the activity. C) cost of an increase in an activity. D) total cost of an activity.
C
28) The above table shows answers given by people interviewed in the Current Population Survey. Which people are structurally unemployed? A) A, B, and C B) A, B, C, and D C) B and C. D) A, B, and D
C
3) In the above figure, which point corresponds to an increase in technology? A) Figure A B) Figure B C) Figure C D) Figure D
C
30) Due to the recession in 2008, firms decreased their profit expectations. As a result, there was a ________ shift in the ________ loanable funds curve. A) rightward; demand for B) rightward, supply of C) leftward; demand for D) rightward; supply of
C
30) The above figure shows the market for oil. Because of the development of a new deep sea drilling technology the A) demand curve does not shift, and the supply curve shifts from S2 to S1. B) demand curve shifts from D1 to D2 and the supply curve shifts from S1 to S2. C) demand curve does not shift, and the supply curve shifts from S1 to S2. D) demand curve shifts from D1 to D2 and the supply curve does not shift.
C
30) When economic growth occurs, the A) economy moves along its production possibilities frontier. B) production possibilities frontier becomes steeper. C) production possibilities frontier shifts outward. D) production possibilities frontier shifts outward but no longer limits the amount that can be produced.
C
30) Which of the following items is NOT part of government expenditure on goods and services in the GDP accounts? A) drapes to brighten up the president's office B) new computer hardware for use by the IRS C) Social Security expenditures D) gasoline purchases for government car pools
C
32) If the labor market is in equilibrium and then the labor supply curve shifts rightward A) the equilibrium wage rate will rise. B) there will be a shortage of labor at the original equilibrium wage rate. C) there will be a surplus of labor at the original equilibrium wage rate. D) there will be a surplus of jobs at the new equilibrium.
C
34) At a price of $10 in the above figure, there is A) a shortage of 200 units. B) a surplus of 200 units. C) a surplus of 400 units. D) a shortage of 400 units.
C
34) The marginal benefit is the A) additional gain from one more unit of an activity minus the additional cost from one more unit of the activity. B) loss of the highest-valued alternative. C) additional gain from one more unit of an activity. D) additional cost from one more unit of an activity.
C
34) When a worker quits a job to look for a better job A) structural and cyclical unemployment increase. B) underemployment. C) frictional unemployment increases. D) cyclical unemployment.
C
36) Suppose the Fed wants to fix the U.S. dollar/Mexican peso rate at 11 pesos per dollar under a fixed exchange rate policy. If the exchange rate falls to 10 pesos per dollar, the Fed can A) sell dollars. B) attempt to freeze all sales of dollars. C) buy dollars. D) any of the above actions could take place.
C
36) Two countries produce only two goods: teapots and coffeepots. The table above gives their production possibilities. A) Sweet Pansy has a comparative advantage in teapots. B) Both have a comparative advantage in teapots. C) Blue Violet has a comparative advantage in teapots. D) Sweet Pansy has an absolute advantage in teapots.
C
37) If the Fed wants to depreciate the dollar against the yen, the Fed will A) increase the demand for dollars by selling yen. B) increase the supply of dollars by selling yen. C) increase the supply of dollars by buying yen. D) decrease the supply of dollars by selling yen.
C
38) Making a choice at the margin means A) waiting until the last minute to make a choice. B) letting someone else choose for you. C) deciding to do a little bit more or a little bit less of an activity. D) making a choice by comparing the total benefit and the total cost.
C
38) The existence of a shortage A) means resources are being allocated efficiently. B) pushes the price down. C) pushes the price up. D) is impossible in a market economy.
C
38) Which of the following is TRUE? I. As the real interest rate increases, people increase the quantity they save II. The supply of loanable funds curve is downward sloping III. As disposable income increases, the supply of loanable funds curve becomes steeper. A) I and III B) II and III C) I only D) III only
C
4) The opportunity cost of a hot dog in terms of hamburgers is the A) ratio of the slope of the demand curve for hot dogs to the slope of the demand curve for hamburgers. B) money price of a hot dog minus the money price of a hamburger. C) ratio of the money price of a hot dog to the money price of a hamburger. D) ratio of the slope of the supply curve for hot dogs to the slope of the supply curve for hamburgers.
C
40) The initial supply and demand curves for a good are illustrated in the above figure. If there are technological advances in the production of the good, then the new equilibrium price for the good A) is more than $6. B) is $6. C) is less than $6. D) could be less than, equal to, or more than $6.
C
40) Which of the following directly creates growth in labor productivity? I. Growth in capital per hour of labor II. Technological change III. Population growth A) I only B) II only C) I and II D) I and III
C
42) In the above figure, the initial supply of loanable funds curve is SLF0 and the initial demand for loanable funds curve is DLF0. An increase in the expected profit would A) have no effect on either the demand for loanable funds curve or the supply of loanable funds curve. B) shift the supply of loanable funds curve rightward to a curve such as SLF1, and shift the demand for loanable funds curve rightward to a curve such as DLF1. C) only shift the demand for loanable funds curve rightward to a curve such as DLF1. D) only shift the supply of loanable funds curve rightward to a curve such as SLF1.
C
42) On-the-job-training is an example of A) increasing labor force participation. B) investment in physical capital. C) investment in human capital. D) technological change.
C
44) An example of the new goods bias in the CPI is the A) introduction of higher quality brakes as standard equipment on new cars. B) decreasing popularity of SUVs as the price of gasoline has risen. C) introduction of hybrid automobiles, vehicles that were not made until recently. D) switch from traditional car dealerships to low-cost Internet car buying services.
C
44) Using the above figure, suppose that roses are a normal good. If there is an increase in income A) we cannot predict what will happen to the equilibrium quantity. B) the equilibrium quantity will decrease below 10 dozen roses. C) the equilibrium price will rise above $25 per dozen roses. D) we cannot predict what will happen to the equilibrium price.
C
46) The crowding-out effect refers to A) private investment crowding out government saving. B) government spending crowding out private spending. C) government investment crowding out private investment. D) private saving crowding out government saving.
C
46) Which of the following has NOT been one of the primary sources of economic growth over the last 200 years? A) discoveries of new technology B) investment in human capital C) resource conservation D) investment in new capital
C
48) The chain-weighted output index method of calculating chained-dollar real GDP compares A) prices at different points in time using a sample of goods that is representative of goods purchased by households. B) quantities produced in different years with the prices that prevailed during the year in which the output was produced. C) compares the quantities of goods produced in consecutive years using prices in both years and averaging the percentage changes in the value of output. D) quantities produced in different years using prices from a year chosen as a reference period.
C
49) If the world real interest rate falls, then a country that is an international lender A) does not change the amount of its lending. B) increases the amount of its lending. C) decreases the amount of its lending. D) None of the above answers is correct because lending might increase, decrease, or not change.
C
50) According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in ________. A) the growth rate of real GDP B) the growth rate of potential GDP C) the price level D) the inflation level
C
50) Suppose that last year the Consumer Price Index was 124; this year it is 130.7. What was the inflation rate between these years? A) 5.1 percent B) 6.7 percent C) 5.4 percent D) 30.7 percent
C
50) The Ricardo-Barro effect says that A) government budget deficits resulting from an increase in government expenditure have no effect on investment but government deficits resulting from a decrease in taxes crowd out investment. B) government budget deficits crowd out private investment and thereby lower the real interest rate. C) government budget deficits have no crowding out effect because taxpayers increase their savings to match the quantity of loanable funds demanded by the government. D) government budget deficits cause households to save more in anticipation of higher taxes, which causes higher real interest rates.
C
50) Which of the following is TRUE regarding markets? I) Economists define a market as a geographic location where trade occurs. II) A market enables buyers and sellers to get information about each other and to buy and sell from each other. III) Markets coordinate decisions through prices. A) I only B) I and III C) II and III D) I, II and III
C
7) When the U.S. exchange rate falls, U.S. goods become ________ to foreign residents and U.S. exports ________. A) more expensive; decrease B) more expensive; increase C) less expensive; increase D) less expensive; decrease
C
8) Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 1 euro per 10 yuan, the price of this airplane to China Airlines is A) 10.52 million yuan. B) 10 million yuan. C) 950 million yuan. D) 9.5 million yuan.
C
1) The term "foreign currency" refers to foreign I. coins II. notes III. bank deposits A) II only B) II and III only C) I and II only D) I, II, and III
D
10) Real GDP per person in the country of Flip is $10,000, and the growth rate is 10 percent a year. Real GDP per person in the country of Flap is $20,000 and the growth rate is 5 percent a year. When will real GDP per person be greater in Flip than in Flap? A) never B) in 10 years C) in 2 years D) in 15 years
D
10) The lower the exchange rate today, ceteris paribus, the A) smaller the quantity of U.S. dollars demanded in the foreign exchange market today. B) smaller is the expected profit from buying U.S. dollars today and holding them. C) greater is the expected profit from buying foreign currency today and holding it. D) greater is the expected profit from buying U.S. dollars today and holding them.
D
10) The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bag of corn chips? A) $3 B) 33¢ C) 1/3 bottle of soda per bag of corn chips D) 3 bottles of soda per bag of corn chips
D
10) The short-run aggregate supply curve shifts when I. the full-employment quantity of capital changes. II. technology advances. A) I only B) II only C) neither I nor II D) I and II
D
11) Which of the following changes does NOT shift the long-run aggregate supply curve? A) a rise in number of college graduates in the labor force B) a decrease in the labor force C) a tax hike that reduces the capital stock D) a fall in the price level
D
12) Entrepreneurs directly do all of the following EXCEPT A) face risks that arise from making business decisions. B) create new ideas about what and how to produce. C) make business decisions. D) decide for whom goods and services are produced.
D
12) Investment is financed by which of the following? I. Government spending II. National saving III. Borrowing from the rest of the world A) I, II, and III C) I and III only B) I and II only D) II and III only
D
13) In the above figure, which part corresponds to a fall in the money wage rate? A) Figure A B) Figure B C) Figure C D) Figure D
D
14) In the table above, the size of the labor force is A) 80 million. B) 40 million. C) 46 million. D) 42 million.
D
14) Net investment is the A) value of software and other network related products. B) profit or loss in the stock market. C) value of the depreciated capital multiplied by the changes in the price level. D) total amount of gross investment minus depreciation.
D
16) Marginal benefit is the benefit ________ one more unit of the good and ________ of the good increases. A) of producing; decreases as production B) of producing; increases as production C) from consuming; increases as consumption D) from consuming; decreases as consumption
D
16) The U.S. fiscal policy implemented in 2008 was an attempt to A) decrease interest rates in order to stimulate business investment and consumption expenditure, and thereby increasing AD. B) decrease the exchange rate in order to boost net exports, and thereby increasing AD. C) give billions of dollars to businesses and low- and middle-income Americans in order to stimulate business investment and consumption expenditure, and thereby increasing SAS. D) give billions of dollars to businesses and low- and middle-income Americans in order to stimulate business investment and consumption expenditure, and thereby increasing AD.
D
17) In the above figure, if the economy is at point a, an increase in ________ will move the economy to ________. A) expected future income; point c B) expected future income; point d C) real wealth from the fall in the price level; point b D) real wealth from the fall in the price level; point c
D
17) In the foreign exchange market, the supply curve for dollars slopes upwards because A) supply curves always slope upwards. B) as the exchange rate rises, more dollars are supplied since the profit from selling dollars falls. C) as the exchange rate rises, imports become more expensive, and more dollars are supplied to pay for the imports. D) as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports.
D
18) Samantha goes to college to become an engineer. This is an example of an A) increase in entrepreneurship. B) investment in physical capital. C) increase in labor. D) investment in human capital.
D
18) Which of the following increases aggregate demand? A) an increase in taxes B) an increase in the exchange rate C) a decrease in government expenditures D) an increase in the quantity of money
D
2) GDP equals A) aggregate income. B) aggregate expenditure. C) the value of the aggregate production in a country during a given time period. D) all of the above.
D
2) Last year the exchange rate between U.S. dollars and Mexican pesos was 10 pesos per dollar. Today is it 11 pesos per dollar. Here, the dollar ________ against the peso, and the peso ________ against the dollar A) depreciated; appreciated B) depreciated; depreciated C) appreciated; appreciated D) appreciated; depreciated
D
20) When an economy produces more houses and fewer typewriters, it is answering the ________ part of one of the two big economic questions. A) "how" B) "for whom" C) "where" D) "what"
D
22) Last year in the country of Nerf imports equaled exports. Nerf's GDP was $500 million, its consumer expenditure was $380 million, and its investment was $20 million. Nerf's government expenditure on goods and services were ________. A) $900 million B) zero C) $500 million D) $100 million
D
23) In the above figure, the economy initially is at point B. Then price level rises by 10. The wealth effect will help A) move the economy to point A. B) move the economy to point D. C) keep the economy to point B. D) move the economy to point C.
D
24) Good A and good B are substitutes in production. The demand for good A decreases, which lowers the price of good A. The decrease in the price of good A A) decreases the demand for good B. B) increases the demand for good B. C) decreases the supply of good B. D) increases the supply of good B.
D
24) In the country of Darrowby, net domestic income at factor cost is $2.0 million. Gross domestic product is $3.0 million, and depreciation is $0.5 million. Indirect taxes less subsidies ________. A) cannot be calculated B) are $1 million C) are -$0.5 million D) are $0.5 million
D
24) Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 15 percent. How many loans can Bank A create at Bank A? A) zero, because Bank A has no excess reserves B) $850 C) $200 D) $50
D
24) Technological progress makes the production possibilities frontier A) become more linear and less bowed. B) become less linear and more bowed. C) shift inward toward the origin. D) shift outward from the origin.
D
25) In the above figure, suppose the economy is initially at point A. The interest rate in Japan rises relative to the interest rate in the United States. As a result, there will be a change from point A to a point such as ________. A) point B B) point C C) point D D) point E
D
26) If the real interest rate increases from 3 percent to 5 percent A) the supply of loanable funds curve will shift rightward. B) the nominal interest rate will also increase. C) the demand for loanable funds curve will shift rightward. D) there will be a movement up along the demand for loanable funds curve.
D
26) The AD curve shows the sum of A) the price level, employment, and real GDP. B) consumption expenditure, investment, the price level, and real GDP. C) consumption expenditure, investment, and real GDP. D) consumption expenditure, investment, government expenditures on goods and services, and net exports.
D
26) The loss of the highest-valued alternative defines the concept of A) marginal benefit. B) entrepreneurship. C) scarcity. D) opportunity cost.
D
27) The U.S. aggregate demand curve shifts leftward if A) the exchange rate falls. B) the economic conditions in Europe improve so that European incomes increase. C) there is a tax cut. D) the Federal Reserve increases the interest rate.
D
28) If the Federal Reserve increases interest rates A) the demand curve for U.S. dollars and the demand curve for European euros both shift rightward. B) the demand curve for U.S dollars shifts leftward and the demand curve for European euros shifts rightward. C) the demand curve for U.S. dollars shifts leftward and the supply curve of U.S. dollars shifts rightward. D) the demand curve for U.S. dollars shifts rightward and the supply curve of U.S. dollars shifts leftward.
D
28) The demand for labor curve A) shifts rightward when the real wage rate rises. B) is upward sloping and the supply curve of labor is downward sloping. C) is upward sloping because productivity of labor diminishes as more workers are employed. D) is downward sloping because productivity of labor diminishes as more workers are employed.
D
28) The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between A) economic growth and technological change. B) the future production of capital goods and future consumption of goods. C) satisfying today the needs of the poor and the wants of the wealthy. D) current consumption and future consumption.
D
28) Using the information in the table above, net exports equals A) $650 billion. B) $1,370 billion. C) $70 billion. D) -$70 billion.
D
29) If the European Central Bank increases interest rates A) the demand curve for European euros shifts leftward and the supply curve of European euros shifts rightward. B) the demand curve for European euros and the demand curve for U.S. dollars both shift rightward. C) the demand curve for European euros shifts leftward and the demand curve for U.S. dollars shifts rightward. D) the demand curve for European euros shifts rightward and the supply curve of European euros shifts leftward.
D
3) If 100 Japanese yen buy more U.S. dollars today than yesterday, the dollar has ________ and the yen has ________. A) depreciated; depreciated B) appreciated; appreciated C) appreciated; depreciated D) depreciated; appreciated
D
30) Jill, an economics student, has already spent 5 hours cleaning her room. In deciding whether or not to continue cleaning for another hour, she applies the economic principle of A) scarcity. B) ceteris paribus. C) productivity. D) choosing at the margin.
D
30) Structural unemployment is the result of A) normal labor market turnover. B) a slowdown in the rate of economic expansion. C) irresponsible workers with poor work habits. D) technological change or foreign competition.
D
30) The quantity of real money demanded is A) proportional to the price level B) negatively related to the price level. C) positively related to the price level. D) independent of the price level.
D
32) The figure illustrates the market for pens. The equilibrium quantity is A) 2 pens a month. B) between 400 and 600 pens, but it is impossible to be precise. C) 5 pens a month. D) 500 pens a month.
D
32) Which of the following will lead to an appreciation of the U.S. dollar against the British pound? A) an increase in U.S. demand for British imports B) an increase in British interest rates C) a decrease in British demand for U.S. assets D) an increase in British demand for U.S. imports
D
34) The more education that workers have, the ________ is their human capital and the ________ is their productivity. A) smaller; smaller B) smaller; higher C) larger; smaller D) larger; higher
D
36) When there is a shortage in the market, the quantity sold is A) less than the quantity bought. B) greater than the quantity supplied. C) less than the quantity supplied. D) equal to the quantity supplied.
D
38) In 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexter's CPI is 2012. What is the CPI in 2012? A) 320 B) 3.20 C) 1.00 D) 100
D
38) Real GDP A) grows at a constant 3 to 4 percent per year. B) fluctuates from year to year but is always below potential GDP. C) can be called potential GDP when it is adjusted for price changes. D) fluctuates around potential GDP.
D
4) At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another point along the same PPF, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a pizza between these points is ________ per pizza. A) 10/7 of a sandwich B) 7/10 of a sandwich C) 1/3 of a sandwich D) 3 sandwiches
D
4) Between September 2013 and September 2014 the number of discouraged workers decreased from 852,000 to 698,000. Assuming the change resulted from discouraged workers starting to make specific efforts to find a job again, this change creates A) a decrease to the U-3 unemployment rate. B) a decrease in the labor force participation rate. C) no change to the U-3 unemployment rate. D) an increase to the U-3 unemployment rate.
D
4) If the economy's capital stock increases over time A) depreciation is less than zero. B) depreciation exceeds gross investment C) gross investment equals depreciation. D) net investment is positive.
D
40) Comparative advantage is A) the ability to perform an activity at a zero opportunity cost. B) the ability to perform an activity at a higher opportunity cost than anyone else. C) another name for absolute advantage. D) the ability to perform an activity at a lower opportunity cost than anyone else.
D
40) If the People's Bank of China adopted a flexible exchange rate policy A) the yuan would depreciate. B) the U.S. dollar would appreciate. C) the yuan-U.S. dollar exchange rate would rise. D) the U.S. dollar would depreciate.
D
40) In 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexter's CPI is 2012. What is the CPI in 2013? A) 59 B) 102 C) 129 D) 169
D
40) On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is A) not clear because not enough information is given. B) zero because you do not have to pay money to use the library. C) working out at the gym, having breakfast with friends, and sleeping late. D) working out at the gym.
D
42) In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion A) less money than the quantity supplied and bond prices will fall. B) more money than the quantity supplied and bond prices will fall. C) more money than the quantity supplied and bond prices will rise. D) less money than the quantity supplied and bond prices will rise.
D
42) In the table above, what inflation rate belongs in space B? A) 8.3 percent B) 17.0 percent C) -4.0 percent D) 6.8 percent
D
42) The above figures show the market for gasoline. Which figure(s) shows the effect of a new U.S. tax on oil that suppliers must pay? A) Figures A and C B) Figures B and D C) Figure A only D) Figure C only
D
44) In the short run, when the Fed increases the quantity of money A) the demand for money increases. B) bond prices fall and the interest rate rises. C) the supply of money curve shifts leftward. D) bond prices rise and the interest rate falls.
D
44) When a government has a budget surplus, the surplus A) must be subtracted from private saving to get total saving. B) crowds-out private saving. C) increases the world real interest rate. D) helps finance investment.
D
48) A small country is an international lender and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international lending ________. A) increases; does not change B) increases; decreases C) does not change; does not change D) does not change; increases
D
48) In the absence of the Ricardo-Barro effect, an increase in the government deficit results in a ________ real interest rate and a ________ equilibrium quantity of investment. A) lower; lower B) lower; higher C) higher; higher D) higher; lower
D
48) The quantity of money in an economy is $9 million, and the velocity of circulation is 3. Nominal GDP in this economy is ________. A) $9 million B) $3 million C) $6 million D) $27 million
D
48) Which of the following ideas apply to the neoclassical growth theory? I. The rate of technological change influences the rate of economic growth. II. Technological change promotes saving and investment. III. Convergence of economic growth rates across countries A) I only B) III only C) I and II D) I, II and III
D
50) The above figures show the market for oranges. Which figure shows the effect of great growing conditions that produce an above-average sized crop? A) Figure A B) Figure B C) Figure C D) Figure D
D
50) Which of the following is NOT a normative statement? A) The distribution of income is fair. B) Corporations should be more socially responsible. C) The government ought to provide health care to everyone. D) People buy more of a good or service when its price falls.
D
6) Checks are NOT money because they A) are not backed by either gold or silver. B) have value in exchange but little intrinsic value. C) are issued by banks, not by the government. D) are merely instructions to transfer money.
D
6) Gross domestic product is the A) total amount that buyers spent on the final goods and services produced in a country during a specific time. B) total amount of income earned in producing the final goods and services in a country during a specific time. C) value of the final goods and services produced in a country during a specific time. D) All of the above answers are correct.
D
6) In the macroeconomic long run A) regardless of the price level, the economy is producing at potential GDP. B) the economy is at full employment. C) real GDP equals potential GDP. D) All of the above are correct.
D
6) Sam's production possibilities frontier has good A on the horizontal axis and good B on the vertical axis. If Sam is producing at a point inside his frontier, then he A) is fully using all his resources. B) values good A more than good B. C) values good B more than good A. D) can increase production of both goods with no increase in resources.
D
6) The demand curve for U.S. dollars slopes downward because as the dollar ________ U.S. goods become ________ expensive to foreign residents, so they purchase fewer U.S. goods, and the quantity of dollars demanded decreases. A) depreciates; more B) appreciates; less C) depreciates; less D) appreciates; more
D
8) Gross investment equals net investment plus A) dividends paid to the owners of the company. B) capital gains. C) capital. D) depreciation.
D
8) In 2011, Armenia had a real GDP of $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. What was Armenia's economic growth rate from 2011 to 2012? A) 8.3 percent B) 3.8 percent C) 0.38 percent D) 9.0 percent
D
8) The opportunity cost of producing a unit of consumption at point b in the figure ________ point a. A) is greater than at B) is the same as C) cannot be compared with D) is less than at
D
8) Using the information in the table above, calculate the employment-to-population ratio. A) 50 percent B) 23.2 percent C) 75 percent D) 65 percent
D
9) Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 1 euro per 9 yuan, the price of this airplane to China Airlines is A) 85.5 million yuan. B) 10.6 million yuan. C) 11.11 million yuan. D) 855 million yuan.
D
9) The curve labeled A in the above figure will shift rightward when A) the quantity of capital increases or the price level rises. B) technology increases or the price level increases. C) the quantity of capital increases or the price level falls. D) technology increases or the quantity of capital increases.
D
