Econ exam

8. Which of the following is a determining factor in the amount of American exports? A. Comparative advantage of American-made goods over foreign-made goods. B. Comparative advantage of foreign-made goods over American-made goods. C. Any American-made good is superior to any foreign-made good. D. In any industry, American workers are superior to foreign workers.

A. Comparative advantage of American-made goods over foreign-made goods.

12. If the benefit of hiring a worker is exactly equal to the cost of hiring that worker, the firm: A. Should not hire any more since they have maximized profits. B. Should reduce the number of workers hired since they are making a loss. C. Should increase hiring in order to increase profits. D. Should reduce the number hired in order to increase profits.

A. Should not hire any more since they have maximized profits.

23. Economic growth can be measured by: A. Calculating the year-to-year change in Nominal GDP. B. Calculating the year-to-year change in Real GDP. C. Calculating the year-to-year change in GDP deflator. D. Calculating the year-to-year change in Consumer Price Index (CPI).

B. Calculating the year-to-year change in Real GDP.

4. Imports are subtracted to calculate GDP because: A. Americans shouldn't buy imported goods since that kills U. S. jobs. B. Imported goods are not produced within the borders of the U. S. C. Imported goods are usually more poorly made than American-made goods. D. Foreign sellers force Americans to buy imports instead of high-quality American- made goods. E. Options c. and d. are both correct.

B. Imported goods are not produced within the borders of the U. S.

13. The firm has hired the ideal number of workers when it reaches the number where: A. MRP > wage. B. MRP = wage. C. MRP < wage. D. Wage is zero.

B. MRP = wage.

11. When a country exports a good because the world price is higher than a no-trade domestic price, domestic purchases of the good ________ and domestic production of the good _________. A. Increase; increases. B. Increase; decreases. C. Decrease; increases. D. Decrease; decreases.

C. Decrease; increases.

14. If the productivity of its workers increases, the firm should: A. Hire more workers. B. Lay off some of these workers. C. Increase the wages of these workers. D. Decrease the wages of these workers.

C. Increase the wages of these workers.

10. If the benefit of hiring a worker exceeds the cost of hiring that worker, the firm: A. Should not hire any more since they have maximized profits. B. Should reduce the number of workers hired since they are making a loss. C. Should increase hiring in order to increase profits. D. Should reduce the number hired in order to increase profits.

C. Should increase hiring in order to increase profits.

23. After a tariff is imposed, domestic consumers must pay: A. The world market price. B. The no-trade domestic price. C. The world market price plus the tariff. D. The no-trade domestic price plus the tariff.

C. The world market price plus the tariff.

11. If the benefit of hiring a worker is less than the cost of hiring that worker, the firm: A. Should not hire any more since they have maximized profits. B. Should reduce the number of workers hired since they are making a loss. C. Should increase hiring in order to increase profits. D. Should reduce the number hired in order to increase profits.

D. Should reduce the number hired in order to increase profits.

9. The benefit of hiring a worker can be expressed in all of the following ways except: A. Marginal revenue product. B. Dollars coming in per worker. C. Sales revenue received from selling the added products produced. D. The wages of the worker.

D. The wages of the worker.

10. If the externality is __________ it is a third-party _________. A. Positive; benefit. B. Negative; cost. C. Positive; cost. D. Negative; benefit. E. Both options a. and b. are correct.

E. Both options a. and b. are correct.

8. An externality is: a. A cost or benefit arising from an activity that falls on a third party. b. An economic event that has nothing to do with the activity under discussion. c. An unforeseen consequence of an economic decision made by the government. d. An illegal method to increase buyers' benefits and lower sellers' costs.

a. A cost or benefit arising from an activity that falls on a third party.

27. When the Fed buys U. S. government securities in the open market: a. Bank deposits increase and the money supply expands. b. Bank deposits increase and the money supply contracts. c. Bank deposits decrease and the money supply expands. d. Bank deposits decrease and the money supply contracts.

a. Bank deposits increase and the money supply expands.

5. M1 is defined as a measure of the money supply that includes, mainly: a. Checking accounts and currency in the hands of the people. b. Time deposits in banks and currency in the hands of the people. c. Currency in the hands of the people and savings deposits. d. M2 plus checking accounts.

a. Checking accounts and currency in the hands of the people.

5. In the basic circular flow: a. Consumer spending becomes business sales revenue. b. Consumer spending becomes household income. c. Consumer spending becomes business expenses. d. Business expenses become consumer spending.

a. Consumer spending becomes business sales revenue.

32. Which of the following is not applicable to an entrepreneur? a. Entrepreneurs are risk averse. b. Entrepreneurs will change a process to lower costs or to eliminate waste. c. Entrepreneurs identify a want or need that is inadequately satisfied. d. Entrepreneurs will suffer losses if unsuccessful.

a. Entrepreneurs are risk averse.

37. If last year's CPI was 120 and this year's CPI was 126, then the inflation rate over the past 12 months: a. Is 5 percent. b. Is 6 percent. c. Is 1.05 percent d. Is 246 percent.

a. Is 5 percent.

4. Business firms ________ goods and services in the _________ market. a. Sell; product. b. Sell: resource. c. Buy; resource. d. Buy; product.

a. Sell; product.

24. In the market for land: a. Supply is usually fixed and demand can change. b. Supply can change and demand is usually fixed. c. Both supply and demand are usually fixed. d. Neither supply not demand are usually fixed.

a. Supply is usually fixed and demand can change.

8. The money supply is defined as: a. The amount of money that people can access. b. All coins and currency in existence. c. Money in banks and at the Federal Reserve. d. The amount of money people wish to hold.

a. The amount of money that people can access.

20. One way to describe the labor-leisure trade-off is: a. The more hours you work, the higher value you place on the next leisure hours foregone. b. The fewer hours you work, the higher value you place on the abundant number of leisure hours available. c. The goal is to work no hours at all so as to enjoy complete leisure time. d. The goal is to work as many hours as possible in order to eliminate the boredom of too many leisure hours.

a. The more hours you work, the higher value you place on the next leisure hours foregone.

17. The opportunity cost of increasing one's work hours is: a. The value the worker places on the foregone leisure time. b. The lost wages one could have earned at a second job. c. The value the worker places on the additional commute time. d. The additional expenses incurred of working the extra hours.

a. The value the worker places on the foregone leisure time.

19. Qualifying for a high-skilled job is harder than qualifying for a low-skilled job for all of the following reasons except: a. The work is more physically difficult. b. Formal training is required. c. It takes a long time to become qualified. d. There is usually some licensing requirement.

a. The work is more physically difficult.

33. Since the goal of an entrepreneurial firm is to maximize profits, it is generally true that the entrepreneur will: a. Want to minimize the creation of waste products. b. Not be interested in eliminating waste. c. Take shortcuts that reduce product quality to increase sales and lower costs. d. Minimize wages that are paid to the workers.

a. Want to minimize the creation of waste products.

22. The reason the money multiplier exists is that: a. When a borrower spends the money, it becomes someone else's deposit. b. When a borrower spends the money, it no longer gets used in the economy. c. The borrower usually does not spend the money he borrows. d. When the seller deposits the money borrowed, his bank may not make a loan on it.

a. When a borrower spends the money, it becomes someone else's deposit.

18. The term "supply of labor" says that: a. Within limits, if wages rise, the number of qualified workers who want to work rises, and vice versa. b. Within limits, if wages rise, the number of qualified workers who want to work rises, but not vice versa. c. If wages rise in one particular job category, the number of unqualified workers being hired for that job will increase. d. If wages rise in one particular job category, the number of unqualified workers being hired for that job will decrease.

a. Within limits, if wages rise, the number of qualified workers who want to work rises, and vice versa.

27. The United States has a very high tariff in place on imported sugar. As a result: a. American sugar producers cut back production. b. American candy manufacturers have moved their plants to Canada. c. American housewives are guaranteed only high quality sugar is for sale. d. American-produced Cokes contain sugar while Mexican-produced Cokes contain high fructose corn syrup.

b. American candy manufacturers have moved their plants to Canada.

3. Which of the following is the correct way to calculate GDP? a. C+I+X+M-G=GDP b. C+I+G+X-M=GDP c. C-I-G+X+M=GDP d. C-I-G-X +M=GDP

b. C+I+G+X-M=GDP

16. When the minimum wage is increased with no corresponding increase in worker productivity or product demand, firms will: a. Lay off some of their high skilled, high-experienced workers. b. Lay off some of their low-skilled, low-experience workers. c. Switch from high-skilled workers to low-skilled workers. d. Simply pay the higher wages with no change in the numbers hired.

b. Lay off some of their low-skilled, low-experience workers.

15. If wages rise with no increase in productivity or product demand, the firm will: a. Hire more workers. b. Lay off some workers. c. Eliminate the product being produced. d. Expand production of the product.

b. Lay off some workers.

23. As the minimum wage rises, firms will ________ low-skilled workers and ____________. a. Hire more; hire fewer high-skilled workers. b. Lay off; automate or outsource that work. c. Lay off; cover the added cost by increasing prices. d. Hire more; cover the added cost by increasing prices.

b. Lay off; automate or outsource that work.

31. In the benefit-cost decision for the acquisition of capital: a. Lower interest rates will cause fewer investment projects to qualify. b. Lower interest rates will cause more investment projects to qualify. c. Higher interest rates will cause more investment projects to qualify. d. Higher interest rates will enable the firm to borrow more funds at a lower cost.

b. Lower interest rates will cause more investment projects to qualify.

25. The minimum payment the landowner will accept to put his land into use is called: a. Minimum wage. b. Normal rent. c. Economic rent. d. A lease payment.

b. Normal rent.

24. Imposing a tariff on a good leads to a ______ in the price of the good and ________ in imports. a. Rise; an increase. b. Rise; a decrease. c. Fall; an increase. d. Fall; a decrease.

b. Rise; a decrease.

1. Households ________ resources in the _________ market. a. Sell; product. b. Sell: resource. c. Buy; resource. d. Buy; product.

b. Sell: resource.

35. A small special interest group can obtain a benefit from the government because: a. It is vital to continuing economic growth that they get that benefit. b. The cost associated with that benefit will be spread out over a large number of taxpayers. c. The benefit will be spread out over a large number of taxpayers. d. The cost of providing such a benefit is nearly zero.

b. The cost associated with that benefit will be spread out over a large number of taxpayers.

29. The cost of capital is: a. Lost productive time. b. The interest rate that has to be paid to borrow funds. c. Foregone expenditures on land or labor resources. d. The depreciation of the capital goods.

b. The interest rate that has to be paid to borrow funds.

6. Manufacturers of a public good will not initiate construction because: a. They know government will not pay for the construction of the public good. b. They cannot see any satisfactory way to get the public good's users to pay for it. c. There is no way to make a profit constructing the public good. d. They do not have the expertise to construct the public good.

b. They cannot see any satisfactory way to get the public good's users to pay for it.

21. A tariff is: a. Any subsidy used to increase trade. b. A tax imposed on exports. c. A tax imposed on imports. d. A tax imposed on both exports and imports. e. Any non-tax action used to restrict trade.

c. A tax imposed on imports.

27. From an economics standpoint, capital can best be defined as: a. Money in the bank. b. Funds borrowed to finance purchases. c. All human-made products used in production of goods and services. d. Intellectual property used in production.

c. All human-made products used in production of goods and services.

19. Concerning GDP, the term "nominal" means _________ and the term "real" means_________. a. With the effects of inflation removed; as measured. b. With the effects of inflation removed; with the effects of unemployment removed. c. As measured; with the effects of inflation removed. d. With the effects of unemployment removed; with the effects of inflation removed.

c. As measured; with the effects of inflation removed.

29. To finance any budget deficit, the US Treasury Department must: a. Print more money. b. Reduce government spending. c. Borrow by offering government securities to the public. d. Shift funds from the Defense Department to the Health and Human Services Department.

c. Borrow by offering government securities to the public.

2. Business firms ________ resources in the _________ market. a. Sell; product. b. Sell: resource. c. Buy; resource. d. Buy; product.

c. Buy; resource.

14. The three policy tools that the Fed can use to carry out monetary policy are setting the: a. Prime rate; open market operations; and setting the excess reserve ratio. b. Prevailing interest rate; setting the discount rate; and open market operations. c. Discount rate; open market operations; and setting the required reserve ratio. d. Discount rate; determining the marginal tax rate; and setting the required reserve ratio.

c. Discount rate; open market operations; and setting the required reserve ratio.

26. Any amount received above the minimum payment the landowner will accept to put his land into use is called: a. A government subsidy. b. Normal rent. c. Economic rent. d. A lease premium.

c. Economic rent.

22. The largest source of federal government income is: a. Corporate income taxes. b. Excise taxes on luxury goods. c. Personal income taxes. d. Social Security taxes.

c. Personal income taxes.

11. A good example of a negative externality is _________. a. Elementary school. b. Rain. c. Pollution. d. An inoculation program.

c. Pollution.

24. When the tax rate decreases as income increases, the system is: a. Broken. b. Fair. c. Regressive. d. Progressive.

c. Regressive.

7. A firm's demand for workers is derived from: a. Government regulations mandating the hiring of a diverse group of employees. b. The need to have personnel on the shop floor to operate the equipment located there. c. The demand for the firm's products. d. The supply of the firm's products.

c. The demand for the firm's products.

9. As it pertains to money, liquidity can be defined as: a. The value that any asset has. b. The amount of money an asset can be turned into upon sale. c. The ease with which an asset can be spent. d. The difficulty of acquiring a particular asset.

c. The ease with which an asset can be spent.

30. The benefit of capital is: a. Having a shop floor full of new equipment. b. Not needing land or labor resources any more. c. The expected added earnings that will occur when the new equipment is operational. d. The need to hire more workers.

c. The expected added earnings that will occur when the new equipment is operational.

5. All of the following groups lose in protected international trade, except: a. U. S. consumers. b. Foreign low-cost importers. c. U. S. high-cost producers. d. International transporters.

c. U. S. high-cost producers.

15. Concerning negative externalities, government can respond by: a. Forcing the producer to internalize the cost. b. Prohibit the producer from making the good. c. Rewarding the producer for reducing the external cost. d. All of the above. e. None of the above.

d. All of the above.

28. A firm usually finances the acquisition of capital by: a. Borrowing funds from financial institutions. b. Using previously earned profits (also known as retained earnings). c. Requiring the government to provide the capital goods. d. Both options a. and b. are correct. e. None of the above is correct.

d. Both options a. and b. are correct.

6. In the basic circular flow: a. Business sales revenue becomes consumer spending. b. Consumer spending becomes household income. c. Consumer spending becomes business expenses. d. Business expenses become household income.

d. Business expenses become household income.

3. Households ________ goods and services in the _________ market. a. Sell; product. b. Sell: resource. c. Buy; resource. d. Buy; product.

d. Buy; product.

8. The demand for a firm's products is called a _______ demand while the demand by the firm for workers is called a ______ demand. a. Derived; direct. b. Direct; indistinct. c. Derived; mandated. d. Direct; derived.

d. Direct; derived.

39. The unemployment rate is calculated by ___________________ and then multiplying by 100: a. Dividing the number unemployed by the total population. b. Dividing the number unemployed by the number employed. c. Dividing the number employed by the number unemployed. d. Dividing the number unemployed by the number in the labor force.

d. Dividing the number unemployed by the number in the labor force.

21. Unemployment is usually ______ for low-skilled jobs and _______ for high-skilled jobs. a. Low; also low. b. Low; high. c. High; also high. d. High; low.

d. High; low.

13. The Federal Reserve conducts monetary policy, which is best defined as: a. International lending to needy governments. b. Lending to the U. S. government when it runs a budget deficit. c. Holding deposits for commercial banks to facilitate the payments system. d. Manipulating the size and growth of the money supply to improve economic performance.

d. Manipulating the size and growth of the money supply to improve economic performance.

3. A public good is _______ in consumption and _________. a. Rival; exclusionary. b. Rival; non-exclusionary. c. Non-rival; exclusionary. d. Non-rival; non-exclusionary.

d. Non-rival; non-exclusionary.

18. When the Fed conducts open market operations, it is buying or selling: a. Capital equipment for the banking system. b. Contracts to print more paper money or mint mew coins. c. Newly issued government securities just issued by the U. S. Treasury Department. d. Previously issued government securities that circulate in publicly traded bond markets.

d. Previously issued government securities that circulate in publicly traded bond markets.

22. When demand for workers in each skill field increases, wages rise _______ in low-skilled jobs and _________ for high-skilled jobs. a. Fast; also fast. b. Fast; slowly. c. Slowly; also slowly. d. Slowly; fast.

d. Slowly; fast.

1. The dollar value of all final goods and services produced within the nation's borders in one year is a measurement of: a. Total production. b. Total expenditures. c. Total income. d. Gross Domestic Product (GDP). e. All of the above.

e. All of the above.

28. Which of the following actions by the Federal government is more politically palatable? a. Increased spending. b. Decreased spending. c. Increased taxes. d. Decreased taxes. e. Options a. and d. are both correct.

e. Options a. and d. are both correct.