Economi final exam
A production possibilities curve shows the: 1.various combinations of goods that can be produced. 2.dollar costs of producing two different goods. 3. prices of different goods that are produced in an economy. 4. amounts of labor and capital needed to produce one good.
1
According to the classical dichotomy, which of the following increases when the money supply increases? 1. The nominal wage 2. The real GDP 3. The real wage 4. The real interest rate
1
Demand is said to be inelastic if 1. the quantity demanded changes only slightly when the price of the good changes. 2. demand shifts only slightly when the price of the good changes. 3. buyers respond substantially to changes in the price of the good. 4. the price of the good responds only slightly to changes in demand.
1
For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? 1. The good is a luxury. 2. The market for the good is broadly defined. 3. The relevant time horizon is short. 4. There are no close substitutes for this good.
1
If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then 1. iowa has a comparative advantage in the production of corn. 2.Iowa has an absolute advantage in the production of corn. 3.Iowa should import corn from Oklahoma. 4. Oklahoma should produce just enough corn to satisfy its own residents' demands.
1
If a surplus exists in a market, then we know that the actual price is 1.above the equilibrium price, and quantity supplied is greater than quantity demanded. 2. above the equilibrium price, and quantity demanded is greater than quantity supplied. 3. below the equilibrium price, and quantity demanded is greater than quantity supplied. 4. below the equilibrium price, and quantity supplied is greater than quantity demanded.
1
If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by definition there is 1. cyclical unemployment amounting to 0.5 percent of the labor force. 2.frictional unemployment amounting to 0.5 percent of the labor force. 3.search unemployment amounting to 0.5 percent of the labor force. 4. structural unemployment amounting to 0.5 percent of the labor force.
1
If the reserve ratio is 5 percent, then $500 of additional reserves would ultimately generate 1. $10,000 of money. 2. $9,500 of money. 3. $2,500 of money. 4. $10,500 of money.
1
In a system of 100-percent-reserve banking, 1. banks do not influence the supply of money. 2. loans are the only asset item for banks. 3. banks do not accept deposits. 4. banks can increase the money supply.
1
In the 1990s Ireland made unemployment benefits less generous. This change would likely have reduced 1. both frictional unemployment and the natural rate of unemployment. 2. frictional unemployment but not the natural rate of unemployment. 3.structural unemployment but not the natural rate of unemployment. 4. both structural unemployment and the natural rate of unemployment.
1
In the simple circular-flow diagram, which of the following is not true. 1.Firms own the factors of production. 2.Households own the factors of production. 3. Households buy all the goods and services that firms produce. 4. Land, labor, and capital flow from households to firms.
1
Making rational decisions at the margin means that people. 1.compare the marginal costs and marginal benefits of each decision. 2. evaluate how easily a decision can be reversed if problems arise. 3. make those decisions that do not impose a marginal cost. 4. always calculate the dollar costs for each decision.
1
Pizza is a normal good if the demand 1. for pizza rises when income rises. 2. for pizza rises when the price of pizza falls. 3. curve for pizza slopes upward. 4. curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.
1
Suppose that the adult population in the country of Atlantis is 115 million. If 80 million people are employed and 5 million are unemployed, then 1. 30 million are not in the labor force. 2. 75 million are in the labor force. 3. 35 million are not in the labor force. 4. 35 million are in the labor force.
1
Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that 1. in order to consume beyond its PPF, the United States should produce more pork than what it requires and export some of it to Mexico. 2. in order to consume beyond its PPF, the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico. 3. in order to consume beyond its PPF, the United States should refrain altogether from producing pork and import all of what it requires from Mexico. 4. Mexico has nothing to gain from importing United States pork.
1
Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the 1. demand for existing shares of the stock and the price will both fall. 2.supply of existing shares of the stock and the price will both fall. 3.demand for existing shares of the stock and the price will both rise. 4.supply of existing shares of the stock and the price will both rise.
1
The demand for grape-flavored Hubba Bubba bubble gum is likely 1. elastic because there are many close substitutes for grape-flavored Hubba Bubba. 2. inelastic because there are many close substitutes for grape-flavored Hubba Bubba. 3. inelastic because the market is broadly defined. 4. elastic because the market is broadly defined.
1
The price elasticity of demand measures 1. buyers' responsiveness to a change in the price of a good. 2. the extent to which demand increases as additional buyers enter the market. 3. the movement along a supply curve when there is a change in demand. 4. how much more of a good consumers will demand when incomes rise.
1
The producer price index measures the cost of a basket of goods and services 1. bought by firms. 2. typically produced in the economy. 3. bought by average consumers. 4. produced for a typical consumer.
1
The source of the supply of loanable funds 1. is saving and the source of demand for loanable funds is investment. 2.is investment and the source of demand for loanable funds is saving. 3.and the demand for loanable funds is investment. 4.and the demand for loanable funds is saving.
1
The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that 1.equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. 2. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits. 3. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs. 4. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits.
1
When the consumer price index rises, the typical family 1. has to spend more dollars to maintain the same standard of living. 2. finds that its standard of living is not affected. 3.can spend fewer dollars to maintain the same standard of living. 4. can offset the effects of rising prices by saving more.
1
Which of the following both increase the money supply? 1. A decrease in the discount rate and a decrease in the interest rate on reserves 2. An increase in the discount rate and an increase in the interest rate on reserves 3.An increase in the discount rate and a decrease in the interest rate on reserves 4.A decrease in the discount rate and an increase in the interest rate on reserves
1
Which of the following is included in GDP? 1. Both the market value of rental housing services and the market value of owner-occupied housing services 2. The market value of rental housing services, but not the market value of owner-occupied housing services 3. Neither the market value of owner-occupied housing services nor the market value of rental housing services 4.The market value of owner-occupied housing services, but not the market value of rental housing services
1
Which of the following items does not provide a store of value? 1. Credit cards 2.All of the answers are correct. 3.Currency 4. Checkable deposits
1
Which of the following price change would affect the GDP deflator but not the CPI? 1. Caterpillar raises the price of the industrial tractors which are manufactured at the Illinois factory. 2. Starbucks raises the price of muffins. 3.Armani raises the price of the Italian jeans that are sold in the US. 4.Bob Rohrman raises the price of second hand Honda Civic cars.
1
Which of the following statements about comparative advantage is not true? 1.Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. 2.The principle of comparative advantage applies to countries as well as to individuals. 3. Economists use the principle of comparative advantage to determine the exporter in a trade. 4. A country may have a comparative advantage in producing a good, even though it lacks an absolute advantage in producing that good.
1
Which of the following statements about the term of a bond is correct? 1. Interest rates on long-term bonds are usually higher than interest rates on short-term bonds. 2. Term refers to the various characteristics of a bond, including its interest rate and tax treatment. 3. The term of a bond is determined entirely by its credit risk. 4. The term of a bond is determined entirely by how much sales commission the buyer of the bond pays when he or she purchases the bond.
1
You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate? 1. Medium of exchange 2.Store of value 3. Unit of account 4. Liquidity
1
A monopoly is a market with one 1. seller, and that seller is a price taker. 2. seller, and that seller sets the price. 3. buyer, and that buyer is a price taker. 4. buyer, and that buyer sets the price.
2
A shortage results when a 1.nonbinding price ceiling is imposed on a market. 2. binding price ceiling is imposed on a market. 3. binding price ceiling is removed from a market. 4. nonbinding price ceiling is removed from a market.
2
An associate professor of physics gets a $200 a month raise. With her new monthly salary she can buy more goods and services than she could buy last year. 1.Her real salary has risen and her nominal salary has fallen. 2. Her real and nominal salary have risen. 3.Her real salary has fallen and her nominal salary has risen. 4.Her real and nominal salary have fallen.
2
Debbie quits her job, which pays $30,000 a year, to finish her college degree. Her annual college expenses are $10,000 for tuition, $2,000 for books, and $700 for food. Her opportunity cost of attending college for the year is 1. 42,700 2. 42000 3. 12700 4.12000
2
Efficiency wages 1. increase productivity and reduce unemployment. 2. increase productivity but increase unemployment. 3. decrease productivity but reduce unemployment. 4. decrease productivity and increase unemployment.
2
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the 1. steeper the demand curve will be. 2. flatter the demand curve will be. 3.further to the right the demand curve will sit. 4.closer to the vertical axis the demand curve will sit.
2
For which of the following individuals would the opportunity cost of going to college be highest? 1. A student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball. 2. A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree. 3. A student with average grades who has never held a job 4. A promising young mathematician who will command a high salary once she earns her college degree
2
Government purchases include spending on goods and services by 1. federal and state governments, but not by local governments. 2.federal, state, and local governments. 3.the federal government, but not by state or local governments. 4.federal, state, and local governments, as well as household spending by employees of those governments.
2
If the price of natural gas rises, when is the price elasticity of demand likely to be the highest? 1. One month after the price increase 2. One year after the price increase 3.Immediately after the price increase 4.Three months after the price increase
2
In the special case of the 100-percent-reserve banking, the money multiplier is 1. 2 and banks create money 2. 1 and banks do not create money. 3. 1 and banks create money. 4. 2 and banks do not create money.
2
Long-term bonds are 1. less risky than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds. 2. riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds. 3. riskier than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds. 4. less risky than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds.
2
Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's 1. price elasticity of demand for cigarettes is infinite. 2. demand for cigarettes is perfectly inelastic. 3.income elasticity of demand for cigarettes is 0. 4. demand for cigarettes is unit elastic.
2
Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has 1. not affected measured GDP. 2. increased measured GDP by the value added by the restaurant's preparation and serving of the meals. 3. increased measured GDP by the value of the restaurant meals. 4. reduced measured GDP.
2
Suppose that some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were employed? 1. 1.5 million 2. 28.5 million 3. 47.5 million 4. 30 million
2
Suppose the market for money, drawn with the value of money on the vertical axis and the quantity of money on the horizontal axis, is in equilibrium. If the money supply increases, then at the old value of money there is an 1. excess demand for money that will result in a decrease in spending. 2. excess supply of money that will result in an increase in spending. 3. excess supply of money that will result in a decrease in spending. 4. excess demand for money that will result in an increase in spending.
2
The GDP deflator is the ratio of 1. real GDP to nominal GDP multiplied by 100. 2. nominal GDP to real GDP multiplied by 100. 3. real GDP to the inflation rate multiplied by 100. 4. nominal GDP to the inflation rate multiplied by 100.
2
The consumer price index is used to 1. monitor changes in the stock market. 2. monitor changes in the cost of living over time. 3. monitor changes in the level of wholesale prices in the economy. 4. monitor changes in the level of real GDP over time.
2
The economy of Mainland uses gold as its money. If the government discovers a large reserve of gold on their land the 1.demand for money increases, the value of money rises, and prices rise. 2. supply of money increases, the value of money falls, and prices rise. 3.supply of money decreases, the value of money rises, and prices fall. 4.demand for money decreases, the value of money falls, and prices fall.
2
The law of supply states that, other things equal, when the price of a good 1. falls, the supply of the good rises. 2.rises, the quantity supplied of the good rises. 3.rises, the supply of the good falls. 4. falls, the quantity supplied of the good rises.
2
Trade can make everybody better off because it 1. increases cooperation among nations. 2. allows people to specialize according to comparative advantage. 3. requires some workers in an economy to be retrained. 4. reduces competition among domestic companies.
2
Two of the economy's most important financial intermediaries are 1. banks and the bond market. 2. banks and mutual funds. 3.the stock market and the bond market. 4.suppliers of funds and demanders of funds.
2
When colonists in Virginia used tobacco as money, their money 1.had no intrinsic value. 2. was commodity money. 3.was fiat money. 4.had no store of value.
2
When conducting an open-market sale, the Fed 1. buys government bonds, and in so doing decreases the money supply. 2. sells government bonds, and in so doing decreases the money supply. 3.sells government bonds, and in so doing increases the money supply. 4. buys government bonds, and in so doing increases the money supply.
2
When ranking movies by nominal box office receipts, what important fact is overlooked? 1. Movies and DVD are complements. 2. Prices, including those for movie tickets, have been rising over time. 3. More people go to movies now than in the past. 4.There are no good substitutes for movies currently.
2
Which of the following changes would not shift the demand curve for a good or service? 1. A change in income. 2. A change in the price of the good or service. 3.A change in expectations about the future price of the good or service. 4.A change in the price of a related good or service.
2
Which of the following changes would not shift the supply curve for a good or service? 1.A change in production technology 2. A change in the price of the good or service 3. A change in expectations about the future price of the good or service 4. A change in input prices
2
Which of the following events would cause the price of oranges to fall? 1. There is a shortage of oranges. 2. The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges. 3. The FDA announces that bananas cause strokes, and oranges and bananas are substitutes. 4. At the current price, quantity demanded is greater than quantity supplied.
2
Which of the following is included in M2 but not in M1? 1.Traveler's checks 2. Savings deposits 3.Demand deposits 4. Currency
2
Which of the following would shift the demand curve for gasoline to the right? 1. A decrease in the price of gasoline 2. An increase in consumer income, assuming gasoline is a normal good 3.An increase in the price of cars, a complement for gasoline 4. A decrease in the expected future price of gasoline
2
According to the assumptions of the quantity theory of money, if the money supply increases by 5 percent, then 1.nominal and real GDP would rise by 5 percent. 2.neither nominal GDP nor real GDP would change. 3.nominal GDP would rise by 5 percent; real GDP would be unchanged. 4.nominal GDP would be unchanged; real GDP would rise by 5 percent.
3
Currently you purchase ten frozen pizza per month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, frozen pizzas are 1. a substitute good. 2.a normal good. 3. an inferior good. 4. a complementary good.
3
For a good that is a luxury, demand 1.tends to be inelastic. 2. cannot be represented by a demand curve in the usual way. 3. tends to be elastic. 4.has unit elasticity.
3
If a binding price floor is imposed on the video game market, then 1. a shortage of video games will develop. 2.the demand for video games will decrease. 3. a surplus of video games will develop. 4.the supply of video games will increase.
3
If muffins and bagels are substitutes, a higher price for bagels would result in 1. an increase in the demand for bagels. 2. a decrease in the demand for bagels. 3. an increase in the demand for muffins. 4. a decrease in the demand for muffins.
3
If the Apple corporation sells a bond it is 1. selling shares of ownership indirectly to the public. 2.borrowing indirectly from the public. 3.borrowing directly from the public. 4.selling shares of ownership directly to the public.
3
If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is 1. 200,000. 2. 2,000. 3. 32,000. 4. 12,500.
3
In a closed economy, what remains after paying for consumption and government purchases is 1.private saving. 2. national disposable income. 3. national saving. 4. public saving.
3
In the long run, money demand and money supply determine 1. the real interest rate but not the value of money. 2. the value of money and the real interest rate. 3. the value of money but not the real interest rate. 4.neither the value of money nor the real interest rate.
3
John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes, 1. M1 and M2 stay the same. 2. M1 increases by $2,500 and M2 decreases by $2,500. 3. M1 increases by $2,500 and M2 stays the same. 4. M1 decreases by $2,500 and M2 increases by $2,500.
3
Minimum wages create unemployment in markets where they create a 1. surplus of labor. Unemployment of this type is called frictional. 2. shortage of labor. Unemployment of this type is called structural. 3. surplus of labor. Unemployment of this type is called structural. 4. shortage of labor. Unemployment of this type is called frictional.
3
Octavia does not currently have a job, but she has applied for several jobs in the previous week. Eve is an unpaid stay-at-home mom who has not searched for work in recent years. Who does the Bureau of Labor Statistics count as "not in the labor force"? 1.Octavia but not Eve 2.Neither Octavia nor Eve 3. Eve but not Octavia 4. Both Octavia and Eve
3
Suppose a basket of goods and services has been selected to calculate the CPI and Year 1 has been selected as the base year. In Year 1, the basket's cost was $50; in Year 2, the basket's cost was $52; and in Year 3, the basket's cost was $55. The value of the CPI in Year 3 was 1. 90.9. 2. 105.0. 3. 110.0. 4. 104.0.
3
Suppose private saving in a closed economy is $12b and investment is $10b. 1. Public saving must equal $2b. 2. National saving must equal $12b. 3. The government budget deficit must equal $2b. 4.The government budget surplus must equal $2b.
3
Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000, and taxes equal 3,000. What are private saving, public saving, and national saving? 1. 2,000, 1,000, and 2,000, respectively. 2. −2,000, 1,000, and 2,000, respectively. 3.2,000, −1,000, and 1,000, respectively. 4. 1,000, 2,000, and 3,000, respectively.
3
The existence of money leads to 1. a higher standard of living, but not to greater specialization. 2.greater specialization in production, but not to a higher standard of living. 3.greater specialization and to a higher standard of living. 4. neither greater specialization nor to a higher standard of living.
3
The labor force equals the 1. number of people employed. 2.adult population. 3. number of people employed plus the number of people unemployed. 4. number of people employed plus the number of people unemployed plus teenagers between ages 14 and 16 who work at least 10 hours a week.
3
The supply of money increases when 1.the interest rate increases. 2.money demand increases. 3. the Fed makes open-market purchases. 4. the price level falls.
3
Two common measures to calculate the inflation rate are 1. the cost of living index and nominal GDP. 2. the real GDP and the consumer price index. 3. the GDP deflator and the consumer price index. 4. the nominal GDP and the real GDP.
3
What would happen to the equilibrium price and quantity of lattés if consumers' incomes rise and lattés are a normal good? 1. Both the equilibrium price and quantity would decrease. 2. The equilibrium price would increase, and the equilibrium quantity would decrease. 3. Both the equilibrium price and quantity would increase. 4.The equilibrium price would decrease, and the equilibrium quantity would increase.
3
When computing the opportunity cost of attending a concert you should include. 1.neither the price of the ticket nor the value of your time. 2. the value of your time, but not the price you pay for the ticket. 3.the price you pay for the ticket and the value of your time. 4. the price you pay for the ticket, but not the value of your time.
3
When the Fed decreases the discount rate, banks will 1. borrow less from the Fed and lend less to the public. The money supply decreases. 2. borrow less from the Fed and lend more to the public. The money supply increases. 3. borrow more from the Fed and lend more to the public. The money supply increases. 4. borrow more from the Fed and lend less to the public. The money supply decreases.
3
When the market for money is drawn with the value of money on the vertical axis and the quantity of money on the horizontal axis, the money demand curve slopes 1. downward, because at higher price people want to hold less money. 2. upward, because at higher prices people want to hold less money. 3.downward, because at higher prices people want to hold more money. 4. upward, because at higher prices people want to hold more money.
3
Which of the following events would cause both the equilibrium price and equilibrium quantity of potatoes to increase if potatoes are an inferior good? 1. Greater government restrictions on agricultural chemicals 2.Fewer government restrictions on agricultural chemicals 3. A decrease in consumer income 4. An increase in consumer income
3
Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts? 1. A decrease in the price of wool shirts and an increase in the price of raw cotton 2. An increase in the price of wool shirts and an increase in the price of raw cotton 3. A decrease in the price of wool shirts and a decrease in the price of raw cotton 4.An increase in the price of wool shirts and a decrease in the price of raw cotton
3
Which of the following is an example of a positive, as opposed to normative, statement? 1. Welfare payments should be increased because they lead to a better world for everyone. 2. When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency. 3. Prices rise when the government prints too much money. 4. Decreasing inflation should be a top priority since inflation is more harmful to the economy than unemployment.
3
Which of the following is not correct? 1. The wedge between the buyers' price and the sellers' price is the same, regardless of whether the tax is levied on buyers or sellers. 2. A tax places a wedge between the price that buyers pay and the price that sellers receive. 3. Taxes levied on sellers and taxes levied on buyers are not equivalent. 4.In the new after-tax equilibrium, buyers and sellers share the burden of the tax.
3
Which of the following is not included in M1? 1. Currency 2. Traveler's checks 3. Savings deposits 4. Demand deposits
3
Which of the following statements is correct? 1. When a corporation sells stock as a means of raising funds it is engaging in debt finance. 2.The owners of bonds sold by the Microsoft Corporation are part owners of that corporation. 3.The expected future profitability of a corporation influences the demand for that corporation's stock. 4. Perpetuities are short-term bonds.
3
A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can, given the reserve requirement. 1. It has $80 in reserves and $9,920 in loans. 2. It has $1,250 in reserves and $8,750 in loans. 3. It has $8,000 in reserves and $2,000 in loans. 4. It has $800 in reserves and $9,200 in loans.
4
A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to 1. $8. 2. $920. 3. $92. 4.$80.
4
A competitive market is a market in which 1.an auctioneer helps set prices and arrange sales. 2. there are only a few sellers. 3. the forces of supply and demand do not apply. 4. no individual buyer or seller has any significant impact on the market price.
4
A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute 1. $150 to GDP. 2. $400 to GDP. 3. between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. 4.$250 to GDP.
4
An increase in the price of a good will 1. increase demand. 2. decrease demand. 3. increase quantity demanded. 4. decrease quantity demanded.
4
As long as prices are rising over time, then 1. the real interest rate is positive. 2. the nominal interest rate is a better indicator than the real interest rate of how fast the purchasing power of your bank account is changing over time. 3. the real interest rate exceeds the nominal interest rate. 4. the nominal interest rate exceeds the real interest rate.
4
GDP is defined as the 1. value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. 2.value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. 3.value of all goods and services produced within a country in a given period of time. 4. value of all final goods and services produced within a country in a given period of time.
4
Goods and services produced at home 1.are excluded from GDP while most goods and services produced illegally are included in GDP 2. and goods and services produced illegally are included in GDP. 3. are included in GDP while most goods and services produced illegally are excluded from GDP. 4. and goods and services produced illegally are excluded from GDP.
4
If Korea is capable of producing either shoes or soccer balls or some combination of the two, then 1. Korea should specialize in the product in which it has an absolute advantage. 2. it would be impossible for Korea to have an absolute advantage over another country in both products. 3. it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. 4. Korea should export the product in which it has an comparativeadvantage.
4
If the demand for donuts is elastic, then a decrease in the price of donuts will 1. decrease total revenue of donut sellers. 2. not change total revenue of donut sellers. 3. There is not enough information to answer this question. 4.increase total revenue of donut sellers.
4
If the government removes a tax on a good, then the price paid by buyers will 1.increase, and the price received by sellers will increase. 2. decrease, and the price received by sellers will decrease. 3. increase, and the price received by sellers will decrease. 4.decrease, and the price received by sellers will increase.
4
If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a 1.40 percent decrease in the quantity demanded. 2. 0.2 percent decrease in the quantity demanded. 3. 5 percent decrease in the quantity demanded. 4. 20 percent decrease in the quantity demanded.
4
In the 1970s, in response to recessions caused by an increase in the price of oil, the central banks in many countries increased their money supplies. The central banks might have done this by 1.selling bonds on the open market, which would have raised the value of money. 2.purchasing bonds on the open market, which would have raised the value of money. 3.selling bonds on the open market, which would have raised the value of money. 4. purchasing bonds on the open market, which would have lowered the value of money.
4
In the circular-flow diagram, in the markets for 1. the factors of production, households and firms are both buyers. 2.goods and services, households and firms are both sellers. 3. the factors of production, households are buyers and firms are sellers. 4. goods and services, households are buyers and firms are sellers.
4
Social Security payments are 1. excluded from GDP because they are not private pensions. 2. included in GDP because they represent potential consumption. 3. included in GDP because they represent current income. 4.excluded from GDP because they do not reflect the economy's production.
4
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2017. Suppose the price index was 17.6 in 1944 and 218.4 in the current year. Refer to Scenario 24-1. Josh Holloway's current year income in 1944 dollars is 1. $26,059. 2. $149,009. 3. $11,528. 4. $16,923.
4
Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result, 1.buyers' total expenditure on the good is unchanged. 2. the equilibrium quantity and the equilibrium price both are unchanged. 3. the equilibrium price increases, and the equilibrium quantity is unchanged. 4. the equilibrium quantity decreases, and the equilibrium price is unchanged.
4
Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a 1. shortage to exist and the market price of roses to increase. 2. shortage to exist and the market price of roses to decrease. 3. surplus to exist and the market price of roses to increase. 4. surplus to exist and the market price of roses to decrease.
4
Suppose there are only two people in the world. Each person's production possibilities frontier also represents his or her consumption possibilities when 1. neither person faces trade-off. 2. the frontiers are straight lines. 3. the frontiers are bowed out. 4. they choose not to trade with one another.
4
The law of demand states that, other things equal, when the price of a good 1.falls, the demand for the good rises. 2. rises, the quantity demanded of the good rises. 3. rises, the demand for the good falls. 4. falls, the quantity demanded of the good rises.
4
The measure of the money stock called M1 includes 1. wealth held by people in their savings accounts. 2. wealth held by people in money market mutual funds. 3. everything that is included in M2 plus some additional items. 4.wealth held by people in their checking accounts.
4
The opportunity cost of an action is: 1. the monetary payment the action required. 2. the cost of all alternative actions that could have been taken, added together. 3. the total time spent by all parties in carrying out the action. 4. the value of the best opportunity that must be sacrificed in order to take the action.
4
When constructing a production possibilities frontier, which of the following assumptions is not made? 1. The technology available to firms is given. 2.The economy produces only two goods or two types of goods. 3. Firms produce goods using factors of production. 4. The quantities of the factors of production that are available are increasing over the relevant time period.
4
When the price level falls, the number of dollars needed to buy a representative basket of goods 1.increases, so the value of money falls. 2. increases, so the value of money rises. 3.decreases, so the value of money falls. 4.decreases, so the value of money rises.
4
When the quantity demanded has increased at every price, it might be because 1. the number of buyers in the market has decreased. 2. income has increased, and the good is an inferior good. 3. the costs incurred by sellers producing the good have decreased. 4. the price of a complementary good has decreased.
4
Which of the following causes the price paid by buyers to be different than the price received by sellers? 1.Nonbinding price control 2. Binding price ceiling 3. Binding price floor 4. Tax on the good
4
Which of the following functions as both a store of value and a medium of exchange? 1. Cash and stocks 2. Stocks but not cash 3. Neither cash nor stocks 4. Cash but not stocks
4
Which of the following is not a determinant of the demand for a particular good? 1. The prices of related goods 2.Income 3. Tastes 4. The prices of the inputs used to produce the good
4
Which of the following is not a determinant of the price elasticity of demand for a good? 1. The time horizon 2. The availability of substitutes for the good 3. The definition of the market for the good 4. The steepness or flatness of the supply curve for the good
4
Which of the following is not a function of money? 1.Medium of exchange 2.Unit of account 3. Store of value 4.Protection against inflation
4
Which of the following is not correct? 1. The producer who requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good. 2.The producer who gives up less of other goods to produce Good X has the smaller opportunity cost of producing Good X. 3. The producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good. 4. The gains from specialization and trade are based not on comparative advantage but on absolute advantage.
4
Which of the following would shift the supply of Green Bay Packers football jerseys to the left? 1. The Green Bay Packers make it to the Super Bowl. 2. The price of the jerseys increases by $15. 3. The technology of sewing machines used to make the jerseys improves. 4. The cost of the fabric used to make the jerseys increases.
4
Who of the following is not included in the Bureau of Labor Statistics' "employed" category? 1.Those who were temporarily absent from work because of vacation 2.Those who worked as unpaid workers in a family member's business 3.Those who worked in their own business 4.Those waiting to be recalled to a job from which they had been laid off
4
The discount rate is 1. the interest rate that banks charge on overnight loans to other banks. 2. the interest rate banks receive on reserve deposits with the Fed. 3. one divided by the difference between one and the reserve ratio. 4.the interest rate the Fed charges banks.
4.
Which of the following is likely to have the most price elastic demand? 1. Pants 2. Blue jeans 3.Clothing 4.Tommy Hilfiger jeans
4.
Demand is inelastic if the price elasticity of demand is greater than 1. T/F
False
Economics is the study of how society allocates its unlimited resources. T/F
False
Government policies that improve equality usually increase efficiency at the same time. T/F
False
Assumptions can simplify the complex world and make it easier to understand. T/F
True
Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories. T/F
True
The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living. T/F
True
With careful planning, we can usually get something that we like without having to give up something else that we like. T/F
false
The adage, "There ain't no such thing as a free lunch," means all costs are included in the price of a product. 1. people face tradeoffs. 2.the cost of living is always increasing. 3.even people on welfare have to pay for food 4. all costs are included in the price of a product.
people face tradeoffs