Economics Final
If the U.S. has a trade deficit in its trade with China:
a.China benefits from the trade, but the U.S. loses b.The U.S. benefits from the trade, but China loses c.Both nations benefit from the trade C
Which of the following statements is true?
a.Consumption is the largest component of GDP b.Imports are added to GDP c.Exports are subtracted from GDP d.All of the above A
Which of the following statements is true?
a.Government purchases is the largest component of GDP b.Government purchases includes transfer payments c.Net exports equals exports minus imports d.All of the above C
In the short run, how will an increase in aggregate demand most likely affect the overall price level and real GDP?
a.Price levels will decrease and Real GDP decrease. b.Price levels will decrease and Real GDP increase c.Price levels will increase and Real GDP increase. d.Price levels will increase and Real GDP decrease. C
Which of the following is a normative statement?
a.The Consumer Price Index for 2003 was 184.0 b.The Federal Reserve System should focus on price level stability c.The Federal Reserve System should focus on maintaining full-employment d.Both b. and c. above D
If the federal government decides to decrease spending on national defense:
a.Total Expenditures will decrease b.Total Expenditures will increase c.Aggregate demand will increase d.Both b. and c. above A
The lowest phase of the business cycle is:
a.Trough b.Peak c.Expansion d.Contraction A
The phase of the business cycle when Real GDP is increasing is:
a.Trough b.Peak c.Expansion d.Contraction C
The phase of the business cycle when Real GDP is decreasing is:
a.Trough b.Peak c.Expansion d.Contraction D
The unemployment rate will be affected by:
a.a 15-year-old who lands a job with a lawn mowing service b.a discouraged worker who is no longer looking for work c.a 14-year-old television star who is dropped from her show d.None of the above D
An increase in aggregate demand could be caused by:
a.a decrease in tax rates that increases disposable income b.a decrease in expected rates of return on investment c.a decrease in the exchange rate for the dollar d.Both a. and c. above D
According to Marx's criticism of classical theory:
a.a market economy will not automatically adjust to Natural Real GDP b.a market economy will be unstable because of inadequate demand c.a market economy causes consumers to have excessive income d.Both a. and b. above D
A tariff is:
a.a tax on an imported good b.a legal limit on the quantity of a good that may be imported c.Both of the above d.Neither of the above A
A quota is:
a.a tax on an imported good b.a legal limit on the quantity of a good that may be imported c.Both of the above d.Neither of the above B
Real GDP is GDP:
a.adjusted for changes in the quality of production b.adjusted for changes in the price level c.adjusted for changes in leisure time d.All of the above B
If Total Expenditures increases:
a.aggregate supply will increase b.aggregate demand will increase c.aggregate supply will decrease d.aggregate demand will decrease B
In determining how to use their resources, resource owners are motivated by:
a.altruism b.self-interest c.patriotism d.benevolence B
Ned hires Barney to landscape Ned's front yard. The new landscaping increases the value of Ned's house and also increases the value of Homer's house next door. This is an example of:
a.an external benefit b.an external cost c.opportunity cost d.transaction cost A
Music City sells a stereo to Homer. Homer plays the stereo so loudly that Ned can't sleep. This is an example of:
a.an external benefit b.an external cost c.opportunity cost d.transaction cost B
A benefit or a cost of an activity that affects third parties is:
a.an externality b.consumer's surplus c.producer's surplus d.transaction cost A
An increase in the overall costs of production will cause:
a.an increase in SRAS b.a decrease in SRAS c.no change in SRAS d.All of the above are possible B
Which of the following will cause an increase in consumption?
a.an increase in interest rates b.a decrease in taxes that increases disposable income c.an increase in stock prices that increases household wealth d.Both b. and c. above D
A decrease in short-run aggregate supply could be caused by:
a.an increase in wage rates b.an increase in the prices of nonlabor inputs c.an adverse supply shock d.All of the above D
Which of the following is classified as investment in national income (GDP) accounting?
a.building a new factory b.buying a 10-year-old house c.depositing money in a bank d.purchasing corporate stocks and bonds A
Investment spending will increase if:
a.businesses become more optimistic about future returns b.interest rates increase c.Both of the above d.Neither of the above A
To produce as much consumer satisfaction as possible with the limited resources available, all goods should be produced:
a.by the least cost method of production that will satisfy consumer demand b.by the method of production that will generate the most jobs c.Both of the above d.Neither of the above A
If interest rates increase:
a.consumption will decrease b.investment will decrease c.Both of the above d.Neither of the above Not A
An outward shift of the production possibilities frontier is an indication of:
a.declining productivity b.unemployment c.declining unemployment d.economic growth D
Anyone who does not have a paying job and is not actively seeking employment is:
a.employed b.unemployed c.not in the labor force d.All of the above are possible C
The largest category in the market basket that is used to calculate the CPI is:
a.food and beverages b.transportation c.housing d.medical care C
Joyce graduates with a degree in industrial engineering in May. After searching for three months, Joyce lands a job as an industrial engineer with a heavy equipment manufacturer. While Joyce was looking for work, she was:
a.frictionally unemployed b.structurally unemployed c.cyclically unemployed d.Not in the labor force A
Joyce loses her job with the heavy equipment manufacturer due to new technology that decreases the need for industrial engineers. She searches for a job for six months, but finds that there are no openings for industrial engineers. While Joyce was looking for work, she was:
a.frictionally unemployed b.structurally unemployed c.cyclically unemployed d.Not in the labor force B
Joyce is laid off from her job with the heavy equipment manufacturer due to a decrease in the demand for heavy equipment caused by a recession. She searches for a job for five months and then is rehired by her old employer when the economy begins to recover. While Joyce was looking for work, she was:
a.frictionally unemployed b.structurally unemployed c.cyclically unemployed d.Not in the labor force C
After looking for work as an industrial engineer for six months, Joyce gives up and goes back to college to become an architect. While Joyce is a full-time student she is:
a.frictionally unemployed b.structurally unemployed c.cyclically unemployed d.Not in the labor force D
Free international trade:
a.gives consumers access to a greater variety of goods b.increases the competition faced by domestic producers c.Both of the above d.Neither of the above C
The basic economic problem is scarcity because:
a.good jobs are always scarce b.money is always scarce c.human wants are limited and resources are unlimited d.human wants are unlimited and resources are limited D
Developed ability that increases a person's productivity is:
a.human capital b.entrepreneurship c.technology d.All of the above A
If per capita output quadruples in the next fifty years:
a.human wants will still exceed the production possible with the limited resources available b.all economic problems will be solved c.everyone will be able to consume as much as they want d.Both b. and c. above A
An investment will be made:
a.if the interest rate exceeds the expected rate of return b.if the expected rate of return exceeds the interest rate c.if the expected rate of return equals the interest rate d.All of the above B
Nominal GDP may increase:
a.if there is an increase in production b.if there is an increase in the price level c.even if Real GDP decreases d.All of the above D
An increase in the price level is:
a.inflation b.deflation c.monetarism d.profitism A
Self-sufficiency:
a.involves producing and trading according to comparative advantage b.yields a very low standard of living c.Both of the above d.Neither of the above B
Something that changes the benefit or cost associated with an action:
a.is an incentive b.will cause rational people to respond c.Both of the above d.Neither of the above C
A technological advance that destroys jobs:
a.is bad news for the workers whose jobs are destroyed b.is good news for society because it makes economic growth possible c.Both of the above d.Neither of the above C
The ideal quantity of total output:
a.is called Natural Real GDP b.yields an unemployment rate of zero c.Both of the above d.Neither of the above A
Determining the "what to produce" question by consumer demand:
a.is consistent with the goal of trying to produce as much consumer satisfaction as possible with the limited resources available b.assumes that the best judge of any consumer's satisfaction is that consumer c.Both of the above d.Neither of the above C
The value of the dollar:
a.is fixed by the gold standard b.increases over time because of inflation c.decreases over time because of inflation d.None of the above C
According to classical economic theory, a market economy:
a.is self-regulating b.will automatically adjust to the natural unemployment rate c.will automatically adjust to Natural Real GDP d.All of the above D
The ability to produce more output per resource:
a.is technological advance b.is a source of economic growth c.increases productive capacity d.All of the above D
Technological advance:
a.is the ability to produce more output per resource b.is a source of economic growth c.increases productive capacity d.All of the above D
Technological advance:
a.is the ability to produce more output per resource b.only leads to economic growth if it does not destroy jobs c.Both of the above d.Neither of the above A
The ideal quantity of total output:
a.is the one that will result in the natural unemployment rate b.is called Natural Real GDP c.will occur automatically, according to classical economic theory d.All of the above D
When an economy is operating efficiently:
a.it is producing inside its production possibilities frontier b.it can produce more of one good without producing less of another c.it is producing the maximum output with the available resources and technology d.All of the above C
When an economy is operating efficiently:
a.it is producing on its production possibilities frontier b.it is producing the maximum output with the available resources and technology c.if can produce more of one good only by producing less of another d.All of the above D
Unemployed labor is a problem because:
a.it reduces the total amount that can be produced in the economy b.wage income is the primary source of income for most households c.Both of the above d.Neither of the above C
At the optimal level of an activity:
a.its marginal benefit must be greater than its marginal cost b.its marginal benefit must be equal to zero c.its marginal benefit must be equal to its marginal cost d.None of the above C
Producing according to comparative advantage:
a.means producing where one has a lower opportunity cost than other producers b.leads to a higher standard of living c.Both of the above d.Neither of the above C
In comparing total output from different years:
a.nominal GDP gives a fair comparison b.Real GDP gives a fair comparison c.Both of the above d.Neither of the above B
The value of the best alternative surrendered when a choice is made is:
a.opportunity cost b.alternative expense c.marginal benefit d.residual cost A
According to classical economic theory:
a.over the course of the business cycle, Real GDP may deviate from Natural Real GDP b.any deviations from Natural Real GDP will require government intervention to correct c.Both of the above d.Neither of the above A
In economics;
a.people are assumed to be totally unpredictable b.people are assumed to behave rationally c.people are assumed to respond to incentives d.Both b. and c. above D
Job destruction caused by technological advance:
a.permanently increases the unemployment rate b.frees up labor for new types of production c.Both of the above d.Neither of the above B
In the U.S. economy, the primary rationing device is:
a.political connections b.random draw c.luck d.dollar price D
Which of the following is not one of the macroeconomic goals?
a.price level stability b.full employment c.trade surplus d.economic growth C
Determining the "for whom to produce" question by the distribution of income means that:
a.resource owners have the incentive to develop their resources so that they will produce maximum consumer satisfaction b.all resource owners will have a nearly equal share of income c.resource owners have the incentive to direct their resources to their most valuable use d.Both a. and c. above D
The study of how individuals and societies use their limited resources to try to satisfy their unlimited wants is:
a.scarcity b.politics c.economics d.history C
Economic growth:
a.shifts the production possibilities frontier outward b.can be caused by an increase in the quantity of resources c.can be caused by an advance in technology d.All of the above D
The basic measure of total output is:
a.standard of living b.gross domestic product c.trade surplus d.disposable income B
Entrepreneurs:
a.start new businesses b.are generally motivated by the goal of profit-maximization c.bear the risk of loss d.All of the above D
According to Say's Law:
a.supply creates its own demand b.demand creates its own supply c.the act of consumption leads to an equivalent amount of production d.Both b. and c. above A
According to Say's Law:
a.supply creates its own demand b.the act of production leads to equivalent income to resource owners c.there will always be sufficient demand to purchase as much as is supplied d.All of the above D
Minerals, fossil fuels, and other naturally occurring resources are categorized as:
a.technology b.land c.capital d.None of the above B
Produced goods that are used in the production of other goods are:
a.technology b.land c.capital d.None of the above C
The special skill involved in organizing labor, land, and capital for production is:
a.technology b.politics c.entrepreneurship d.management C
Using dollar price as the rationing device means:
a.that resources will be rationed to the use that is most highly valued by consumers b.that goods will be rationed to the consumers who are willing and able to pay the most for them c.Both of the above d.Neither of the above A
Using dollar price as the rationing device means:
a.that resources will be rationed to the use that is most highly valued by consumers b.that goods will be rationed to the consumers with the best political connections c.Both of the above d.Neither of the above A
When nations engage in trade according to comparative advantage:
a.the buying nation gains from trade and the selling nation loses b.the selling nation gains from trade and the buying nation loses c.a nation benefits from trade only if it has a trade surplus d.both nations gain from trade D
Which of the following will cause net exports to decrease?
a.the dollar appreciates versus the Japanese yen b.the economy of Japan grows rapidly c.Both of the above d.Neither of the above A
If Real GDP is equal to Natural Real GDP:
a.the economy is in a recessionary gap b.the economy is in an inflationary gap c.the economy is in long-run equilibrium d.All of the above are possible C
If Real GDP is less than Natural Real GDP:
a.the economy is in a recessionary gap b.the economy is in an inflationary gap c.the shortage of labor will cause wage rates to rise d.Both b. and c. above A
If Real GDP is greater than Natural Real GDP:
a.the economy is in a recessionary gap b.the economy is in an inflationary gap c.the shortage of labor will cause wage rates to rise d.Both b. and c. above D
If Real GDP is less than Natural Real GDP:
a.the economy is in a recessionary gap b.the surplus of labor will cause wage rates to fall c.according to classical economic theory, wage rates will fall until Natural Real GDP is restored d.All of the above Not A
To be counted as employed:
a.the job must be full-time b.the worker must be 16 years old or older c.Both of the above d.Neither of the above B
When a nation engages in international trade according to comparative advantage:
a.the nation benefits overall b.domestic producers who face increased competition from imports may suffer losses c.Both of the above d.Neither of the above C
When a trade restriction is imposed on an imported good:
a.the nation imposing the restriction receives a net gain b.income is redistributed from domestic consumers to domestic producers c.Both of the above d.Neither of the above B
As production of a good increases:
a.the opportunity cost of producing the good will increase b.resources that are less well suited for producing the good will have to be used c.Both of the above d.Neither of the above C
When output is measured as the sum of Total Expenditures:
a.the result is GDP b.the result is national income c.the result is net exports d.None of the above A
When output is measured as the sum of all payments to resource owners:
a.the result is GDP b.the result is national income c.the result is net exports d.None of the above B
According to classical economic theory, an inflationary gap is automatically closed by:
a.the shortage of labor will cause wage rates to rise b.the increase in wage rates will shift the SRAS curve to the left c.the SRAS curve will shift to the left until Real GDP equals Natural Real GDP d.All of the above D
The natural unemployment rate is:
a.the sum of frictional, structural, and cyclical unemployment b.the lowest unemployment rate that can be sustained without causing increasing inflation c.zero d.Both a. and b. above B
According to classical economic theory, a recessionary gap is automatically closed by:
a.the surplus of labor will cause wage rates to fall b.the decrease in wage rates will shift the SRAS curve to the right c.the SRAS curve will shift to the right until Real GDP equals Natural Real GDP d.All of the above D
Net exports will increase if:
a.there is a decrease in foreign Real GDP b.the exchange rate for the dollar depreciates c.Both of the above d.Neither of the above B
Net exports will decrease if:
a.there is a decrease in foreign Real GDP b.the exchange rate for the dollar depreciates c.Both of the above d.Neither of the above Not B
When the economy is performing at its best:
a.this is called "full employment" b.the unemployment rate will be zero c.there will still be some unemployment d.Both a. and c. above D
In a competitive market, the self-interest of resource owners will cause resources to be directed:
a.to a use that harms society b.to their most convenient use c.to the use that is most highly valued by consumers d.in a random way C
The basic goal in dealing with the problem of scarcity is:
a.to satisfy all human wants b.to decrease human wants until they are consistent with the resources available c.to produce as much consumer satisfaction as possible with the limited resources available d.Both a. and b. above C
The basic economic problem is:
a.unemployment b.poverty c.scarcity d.inequality C
Classical economic theory:
a.was introduced by Adam Smith in the book "An Inquiry into the Nature and Causes of the Wealth of Nations" b.was the predominant theory in industrialized nations from the time of Adam Smith until the "Reagan Revolution" of the 1980s c.Both of the above d.Neither of the above Not C
A trade is beneficial to a person:
a.when that person values what is received in the trade more than what is given up b.only if the other party to the trade suffers a loss c.Both of the above d.Neither of the above A
The problem of scarcity:
a.will never be solved b.could be solved now with the proper economic policies c.will certainly be solved within 100 years if technology continues to advance at the current rate d.Both b. and c. above A
