Econ 110 Final

(Problem 53) What is the value of the portion of consumer surplus that has been trasnferred to producer suprlus as a result of the price floor? A) $1200 B) $1500 C) $1800 D) $3000

A) $1200

If Y= $12 trillion, C= $8 trillion, I= $2 trillion, G= $2 trillion, TR= $2 trillion, and T= $3 trillion, what is the level of private saving in the economy? A) $3 trillion B) $4 trillion C) $5 trillion D) $8 trillion

A) $3 trillion

(see figure 326) What is the value of the deadweight loss after the imposition of the price floor? A) $600 B) $1800 C) $2700 D) $3300

A) $600

Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2016, then the value of your grandfather's salary in 2016 dollars is approximately A) $84,775 B) $63,830 C) $37,200 D) $26,280

A) $84,775

(Refer to figure 303) What is the opportunity cost of one dozen roses? A) 0.4 dozen orchids B) 2.5 dozen orchids C) 7.25 dozen orchids D) 16 dozen orchids

A) 0.4 dozen orchids

(Problem 252) Given the information above, calculate the GDP deflator in 2016. A) 114 B) 105 C) 95 D) 87

A) 114

If the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will decrease from A) 23.3 years to 17.5 years B) 28.0 years to 21.9 years C) 11.2 years to 10.8 years D) 23.3 years to 20.6 years

A) 23.3 years to 17.5 years

The Stogie Shop, a cigar store in the mall, sells hand rolled cigars for $10 and machine made cigars for $2.50 each. What is the opportunity cost of buying a hand-rolled cigar? A) 4 machine made cigars B) one-quarter of a machine made cigar C) $10 D) $2.50

A) 4 machine-made cigars

IF real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate of real GDP per capita? A) 4.7% B) 10.5% C) 15% D) 21%

A) 4.7%

If the number employed is 190 milion, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is A) 5% B) 5.2% C) 8% D) 10%

A) 5%

How can freedom of the press promote economic growth? A) A free press can act as a watchdog for corruption, increasing chances for economic growth B) A free press can be more easily swayed to report only one side of any issue C) A free press reduces the likelihood that judges will protect private property rights D) A free press does not promote economic growth

A) A free press can act as a watchdog for corruption, increasing chances for economic growth

Which of the following is an example of a worker experiencing frictional unemployment? A) A worker quits his job at the Post Office to find more interesting work B) A computer programmer loses her job because it is outsourced to India C) An employee is laid off because the economy is suffering a recession D) A United Airlines pilot loses her job because of lack of demand for air travel

A) A worker quits his job at the Post Office to find more interesting work

________ a nation's production possibilities frontier represents economic growth A) An outward shift of B) An inward shift of C) Moving up along D) Moving down along

A) An outward shift of

The Industrial Revolutino began in A) England around 1750 B) the United States around 1820 C) France around 1680 D) Germany around 1780

A) England around 175

In a small European country, it is estimated that changing the level of capital from $8 million to $10 million will increase real GDP from $2 million to $3 million. What level of GDP would you expect the economy to be able to reach if spending on capital continued to rise o $12 million, assuming no technological change and no change in the hours of work? A) GDP would increase further, but by less than $1 million B) GDP would increase further by exactly $1 million C) GDP would increase further by more than $1 million D) GDP would increase further by exactly $4 million

A) GDP would increase further, but by less than $1 million

(Problem 17) Which country has a comparative advantage in the production of coconuts? A)Guatemala B) they have equal abilities C) Costa Rica D) neither country

A) Guatemala

(Problem 130) If the U.S. economy is currently at point N, which of the following could cause it to move to point K? A) Households expect future income to decline. B) Household wealth rises. C) The firm's cash flow rises as profits rise. D) Government expenditures increase.

A) Households expect future income to decline.

(see figure 365) According to the figure, at what point is aggregate expenditure greater than GDP? A) J B) K C) L D) none of the above

A) J

We need to privatize the social security program in that State of Kansas is a A) Normative statement B) Positive statement C) Social statement D) Market statement

A) Normative statement

Which of the following countries had the highest GDP per capita in 2014? A) Qatar B) United States C) Japan D) Norway

A) Qatar

If the slope of the per-worker function is 1/2 in a given range, how will a $10,000 increase in capital per hour worked affect real GDP per hour worked in the same given range? A) Real GDP per hour worked will increase by $5000 B) Real GDP per hour worked will increase by $20,000 C) Real GDP per hour worked will increase by $10,000 D) Real GDP per hour worked will decrease by $20,00

A) Real GDP per hour worked will increase by $5,000

Which of the following is a result of governmental price controls? A) Some people win and some people lose B) Price controls benefit poor consumers but harm producers and wealthy consumers C) Price controls increase economic efficiency D) The deadweight loss from price ceilings is greater than the deadweight loss from price floors

A) Some people win and some people lose

(Problem 101) Which of the following is consistent with the graph depicted? A) Taxes are changed so that real interest income is taxed rather than nominal interest income B) an expected recession decreases the profitability of new investment C) the government runs a budget deficit D) technological change increases the profitability of new investment

A) Taxes are changed so that real interest income is taxed rather than nominal interest income

(see figure 320) The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S2 (point E). If the technology to produce motorcycles improves and the number of buyers increases, how will the equilibrium point change? A) The equilibrium point will move from E to A B) The equilibrium point will move from E to B C) The equilibrium point will move from E to C D) The equilibrium point will remain at E

A) The equilibrium point will move from E to A

When aggregate expenditure is less than GDP, which of the following is true? A) There was an unplanned increase in inventories B) Firms spent more on capital goods than they anticipated C) Households bought more new homes than they anticipated D) all of the above

A) There was an unplanned increase in inventories

IF consumers decide to be more frugal and save more of their income, then this will cause A) a shift in the supply curve for loanable funds to the right B) a shift in the supply curve for loanable funds to the left C) a movement to the right along the supply curve for loanable funds. D) a movement to the left along the supply curve for loanable funds

A) a shift in the supply curve for loanable funds to the right

A decrease in the price of pork will result in A) a smaller quantity of pork supplied B) a larger quantity of pork supplied C) a decrease in the demand for pork D) an increase in the supply of pork

A) a smaller quantity of pork supplied

Banks can continue their loans until their A) actual reserves equal their required reserves B) excess reserves equal their required reserves C) actual reserves equal their excess reserves D) actual reserves equal their checking account balances

A) actual reserves equal their required reserves

Which of the following is not one of the three sources of technological change? A) additional amounts of existing capital B) better machinery and equipment C) increases in human capital D) better means of organizing and managing production

A) additional amounts of existing capital

The _________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure, holding constant all other factors that affect aggregate expenditure. A) aggregate demand curve B) savings line C) 45-degree line D) consumption function

A) aggregate demand curve

When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, _______ occurs. A) allocative efficiency B) productive efficiency C) equity D) efficient central planning

A) allocative efficiency

Money is A) an asset that people are willing to accept in exchange for goods and services B) a liability that people are willing to accept in exchange for goods and services C) the income one earns over a period of time D) one's assets net of one's liabilities at any point in time

A) an asset that people are willing to accept in exchange for goods and services

If a decrease in income leads to an increase in the demand for macaroni, than macaroni is A) an inferior good B) a neutral good C) a necessity D) a normal good

A) an inferior good

If a decrease in income leads to an increase in the demand for macaroni, then macaroni is A) an inferior good B) a neutral good C) a necessity D) a normal good

A) an inferior good

Which is part of an economic model? A) assumptions B) norms C) opinions D) preferences of economic agents

A) assumptions

Inflation rate is measured as percentage change in prices from one period to the ________ period. A) base B) next C) past D) all of the above

A) base

Why do some firms choose not to file for a patent and instead try to keep the results of their research a trade secret? A) because firms must disclose information about the product or process being patented in a patent application B) because trade secrets are never divulged C) because a patent only gives the inventor exclusive rights to a product or process for 5 years D) because trade secrets provide the same exclusive legal rights to a product as a patent does

A) because firms must disclose information about the product or process being patented in a patent application

The substitution bias in the consumer price index refers to the idea that consumers _______ the quantity of products they buy in response to price, and the CPI does not reflect this and _________ the cost of the market basket. A) change; overestimates B) change; underestimates C) do not change; overestimates D) do not change; underestimates

A) change; overestimates

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following? A) consume a combination of goods that lies outside its own production frontier B) never have to engage in trade with other nations C) produce a combination of goods that lies outside its own production possibilities frontier D) increase the variety of products that it can produce with a decrease in resources

A) consume a combination of goods that lies outside its own production possibilities frontier

The GDP deflator is a ratio of ______________ prices. A) current to fixed B) fixed to current C) old to new D) new to old

A) current to fixed

Corruption A) curtails economic growth B) raises the rate of growth as bribes enhance income C) is eliminated by foreign direct investment D) acts as a magnet for foreign direct investment

A) curtails economic growth

Compared to prices charged by Uber, traditional taxi companies charge government-regulated prices. These government-regulated prices ______ in the market for shared rides. A) decrease consumer surplus B) increase consumer surplus C) decrease dead weight loss D) decrease producer surplus

A) decrease consumer surplus

Which of the following is not one of the key services provided by the financial system? A) decreasing taxes B) risk sharing C) liquidity D) generating information

A) decreasing taxes

The willingness of consumers to buy a product at different prices is shown on a A) demand curve B) supply curve C) production possibilities frontier D) marginal cost curve

A) demand curve

WHen additions of input to fixed quantity of another input lead to progressively smaller increases in output, we say we are facing A) diminishing returns B) negative returns C) accelerating returns D) decreasing production

A) diminishing returns

Suppose that in 2016, real GDP grew in Estonia by 3% and the population increased by 5%. Therefore, in 2016, Estonia experienced A) economic growth, but not an increase in living standards B) economic growth and an increase in living standards C) no economic growth, but an increase in living standards D) no economic growth and no increase in living standards

A) economic growth, but not an increase in living standards

In the circular flow diagram, the value of total production for an economy __________ the value of total expenditures on final goods and services A) equals B) is greater than C) is less than D) may be greater than or less than

A) equals

One of the basic principles of economics is that trade makes A) everyone better off B) everyone worse off C) some people better off and others worse off D) none of the above

A) everyone better off

Creative destruction means that A) firms develop new products that replace old products in the economy, thereby encouraging economic growth B) economic growth can only be sustained if capital depreciates rapidly C) knowledge capital can be created through a system of government subsidies for education and research and development D) research and development should only be financed if research and development is incremental ( a result of making small changes to existing products)>

A) firms develop new products that replace old products in the economy, thereby encouraging economic growth

The purchase or building by a corporation of a facility in a foreign country is called A) foreign direct investment B) foreign portfolio investment C) foreign capital depreciation D) globally-directed investment

A) foreign direct investment

A student who just graduated from college but has not found a job would most likely be A) frictionally unemployed B) structurally unemployed C) cyclically unemployed D) seasonally unemployed

A) frictionally unemployed

Which of the following policies is designed specifically to directly promote technological change in an economy? A) government subsidization of research and development B) tax incentives to promote investment in 401K plans C) laws to strengthen property rights D) a vaccination program to combat infectious diseases

A) government subsidization of research and development

From 1990-2014, productivity growth in the United States was ______ the growth rates of other high-income countries. A) greater than B) less than C) equal to D) greater than for the first 15 years, then less than

A) greater than

The ___________ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power. A) income B) substitution C) demographics D) ceteris paribus

A) income

During a business cycle expansions, total production _______ and total employment ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

A) increases; increases

An advantage of the establishment survey over the household survey of the labor market is that the establishment survey? A) is based on actual payrolls, rather than on unverified answers. B) includes the number of self-employed persons. C) includes persons employed at newly opened firms. D) provides an estimate of the number of persons unemployed.

A) is based on actual payrolls, rather than on unverified answers.

A firm can fund an expansion of its operations by A) issuing bonds B) buying stock C) paying dividends D) loaning money

A) issuing bonds

The Industrial Revolution A) marked the beginning of significant economic growth in the world B) started in France around the year 1750 C) produced goods exclusively using human or animal power D) had no impact on standards of living in the world

A) marked the beginning of significant economic growth in the world

An explanation for the productivity slowdown from 1974-1995 is A) measurement problems B) creative destruction C) a decline in oil prices D) an increase in labor quality

A) measurement problems

If firms pay what are called "efficiency wages," they pay wages that A) motivate workers to increase their productivity B) are lower than average to maximize profit C) will eventually lower the unemployment rate D) are mandated by the government

A) motivate workers to increase their productivity

Paul Romer, an economist at Stanford University, is most closely associated with what economic theory? A) new growth theory B) labor productivity theory C) the process of creative destruction D) the Communist Manifesto

A) new growth theory

The small group of East Asian countries that experienced high rates of growth in the 1980s and 1990s are referred to as A) newly industrializing countries B) countries with low standards of living C) education-deprived countries D) industrial countries

A) newly industrializing countries

Knowledge capital is _____________ in production and __________. As a result, firms ___________ free ride. A) nonrival; nonexcludable; can B) nonrival; excludable; can C) rival; nonexcludable; cannot D) nonrival; nonexcludable; cannot

A) nonrival; nonexcludable; can

Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about A) one-half to one percentage point B) one to two percentage points C) one quarter percentage point D) one and one-half percentage points

A) one-half to one percentage point

The PPF shows the ______________ combination of goods and services a firm can produce. A_ possible and efficient B) possile and inefficient C) impossible and efficient D) impossible and inefficient

A) possible and efficient

The only way the standard of living of the average person in a country can increase is if _____ increases faster than __________. A) production; population B) population; GDP per capita C) population; production D) populatoin; income

A) production; population

A good measure of the standard of living is A) real GDP per capita B) nominal GDP per capita C) total real GDP D) total nominal GDP

A) real GDP per capita

A critical function of the government in facilitating the operation of a market economy is A) setting up and enforcing private property rights B) producing goods and services for low-income households C) ensuring an equal distribution of income to all citizens D) controlling the market prices of food items

A) setting up and enforcing private property rights

Examples of assets that are included in household wealth would be: A) stocks, bonds, and savings accounts B) stocks, loans owned, and savings accounts C) stocks, bonds, and mortgages D) stocks, credit cards, and savings accounts

A) stocks, bonds, and savings accounts

The improvement in technology will lead to increase in the A) supply B) quantity supplied C) cost of production D) number of firms

A) supply

According to the new growth theory, A) technological change is influenced by economic incentives B) centrally-planned economies are the most efficient C) growth in real GDP per capita occurs only if there are increasing returns D) economic growth is determined by forces outside the control of the market system

A) technological change is influenced by economic incentives

The slope of the consumption function is equal to A) the change in consumption divided by the change in disposable income B) the change in consumption divided by the change in personal income C) the change in disposable income divided by the change in consumption D) the change in national income divided by the change in consumption

A) the change in consumption divided by the change in disposable income

If the price of smartphones was to increase, then A) the demand for smartphones app would decrease B) the demand for smartphone apps would increase C) the quantity of smartphone apps demanded would increase D) the quantity of smartphone apps demanded would decrease

A) the demand for smartphone apps would decrease

If cyclical unemployment is eliminated in the economy, then A) the economy is considered to be at full employment B) the employment rate is below the natural rate of unemployment C) the unemployment rate is above the natural rate of unemployment D) the economy is at less than full employment

A) the economy is considered to be at full employment

Which of the following would you expect to result in faster economic growth? A) the invention of new computers that increase labor productivity B) a decrease in the stock of capital per worker C) a decrease in the average level of education in the economy D) a decrease in research and development spending

A) the invention of new computers that increase labor productivity

(Problem 51) The figure above represents the market for iced tea. Assume that this is a competitive market. At an output of 30,000 units, A) the marginal cost of iced tea is greater than the marginal benefit; therefore, output in inefficiently high B) producers should raise the price to $3 in order to sell the quantity demanded of 30,000 C) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently low D) the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently high.

A) the marginal cost of iced tea is greater than the marginal benefit; therefore, output is inefficiently high

Increasing marginal opportunity cost implies that A) the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts B) the law of scarcity C) the more resources already devoted to any activity, the benefits from allocating yet more resources to that activity decreases by progressively larger amounts D) that rising opportunity costs makes it difficult to produce beyond a certain quantity

A) the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts

The average price of goods and service in the economy is also known as A) the price level B) the inflation rate C) a market basket D) the cost of living

A) the price level

When deflation occurs, A) the real interest rate is greater than the nominal interest rate B) the nominal interest rate is greater than the real interest rate C) the nominal interest rate is equal to the real interest rate and inflation is negative D) the nominal interest rate is equal to the real interest rate and inflation is positive

A) the real interest rate is greater than the nominal interest rate

Suppose a drought resulted in a major reduction in the California lettuce crop. In the market for lettuce, A) the supply curve shifted to the left resulting in an increase in the equilibrium price B) the supply curve shifted to the left resulting in a decrease in the equilibrium price C) the supply curve shifted to the left resulting in a decrease in the equilibrium price D) the demand curve shifted to the right resulting in an increase in the equilibrium price

A) the supply curve shifted to the left resulting in an increase in the equilibrium

If in the market for bananas the supply curve has shifted to the right, then A) the supply of bananas increased B) the quantity of bananas supplied has increased C) the supply of bananas has decreases D) the quantity of bananas supplied has decreased

A) the supply of bananas increased

Which of the following is a normative economic statement? A) tobacco products should be banned in all public places B) the increase in tobacco taxes has caused an increase in the price of cigarettes C) better awareness of health risks has decreased tobacco use D) a reduction in tobacco subsidies has caused the price of tobacco to increase

A) tobacco products should be banned in all public places

Scarcity refers to the situation in which A) unlimited wants exceed limited resources B) unlimited resources exceed limited wants C) a country's population is larger than its resource base D) a nation's poverty level increases faster than its population

A) unlimited wants exceed limited resources

To reduce the bias in the consumer price index, the Bureau of Labor Statistics A) updates the market basket every two years, rather than every 10 years B) updates the market basket every 10 years, rather than every two years C) incorporates substitutions by consumers when prices of specific products rise rapidly D) incorporates substitutions by consumers when prices of specific products fall rapidly

A) updates the market basket every two years, rather than every 10 years

Which of the following is an example of an economic trade-off that a firm has to make? A) whether it is cheaper to produce with more machines or with more workers B) deciding why consumers want its products C) whether or not consumers will buy its products D) deciding what profit margin it desires for its products

A) whether it is cheaper to produce with more machines or with more workers

If households and firms decide to hold less of their money in checking account deposits and more in currency, then initially, the money supply, A) will not change B) will increase C) will decrease D) may increase or decrease

A) will not change

What is investment in a closed economy if you have the following economic data? Y= $10 trillion, C = $5 trillion, TR= $2 trillion, G=$2 trillion A) $2 trillion B) $3 trillion C) $5 trillion D) cannot be determined without information on taxes (T)

B) $3 trillion

If the MPC is 0.5, then a $10 million increase in disposable income will increase consumption by A) $2 million B) $5 million C) $15 million D) $50 million

B) $5 million

Product Quantity Price Shoes 40 $60.00 DVDs 100 18.00 Tomatoes 2,000 1.00 Ketchup 300 4.00 Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals: A) $7400 B)$6400 C) $5800 D) 2440 units

B) $6400

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of Kristy's deposit, Bank A can make a maximum loan of A) $2,000 B) $8,000 C) $10,000 D) $50,000

B) $8,000

Suppose that real GDP for 2015 was $10,000 billion and real GDP for 2016 for 2016 was $9,500 billion. What is the rate of growth of real GDP between 2015 and 2016? A) -10% B) -5% C) -2% D) -1%

B) -5%

(see table 362) Given the consumption schedule in the table above, the marginal propensity to save is A) 0.3 B) 0.4 C) 0.5 D) 0.6

B) 0.4

IF the required reserve ratio is RR, the simple deposit multiplier is defined as A) 1/ (1- RR) B) 1/RR C) 1/RR x change in bank reserves D) 1/(1-RR) x change in bank reserves

B) 1/RR

If real GDP grows by 3% in 2014, 3.2% in 2015, and 2.5% in 2016, what is the average annual growth rate of real GDP? A) 2.6% B) 2.9% C) 3.1% D) 4.2%

B) 2.9%

Consider the following data on nominal GDP and real GDP (values in billions of dollars): The base year used in calculating real GDP is Year Nominal GDP Real GDP 2013 $7,400 $7,537 2014 7,813 7,813 2015 8,301 8,165 2016 8,760 8,516 A) 2013 B) 2014 C) 2015 D) 2016

B) 2014

If you want to earn a real interest rate of 3% on the money you lend, and you expect inflation to be 2%, what nominal rate of interest will you charge? A) 1% B) 5% C) 6% D) 9%

B) 5%

(Problem 35) At a price of $25, how many units will be sold? A) 400 B) 500 C) 600 D) 800

B) 500

(Problem 117) Based on the "catch up line" drawn, poorer countries are more likely to be at a point like ___ where growth in GDP is relatively ______, while richer countries are more likely to be at a point like ______ where growth in GDP is relatively ______. A) A; low; B; high B) A; high; B; low C) B; low; A; high D) B; high; A; low

B) A; high; B; low

(See figure 343) Technological change is illustrated in the per-worker production function in the figure above by a movement from A) A to B B) B to C C) B to A D) D to C

B) B to C

GDP is not a perfect measure of well-being because A) the value of leisure is included in GDP B) GDP is not adjusted for pollution C) GDP is adjusted for changes in crime rates D) GDP is adjusted for increases in drug addiction

B) GDP is not adjusted for pollution

The economic growth model predicts that A) GDP per capita of rich countries will grow more rapidly than in poor countries B) GDP per capita of poor countries will grow more rapidly than in rich countries C) Governments must centrally direct the economy for growth to occur D) GDP per capita of poor countries will never change

B) GDP per capita of poor countries will grow more rapidly than in rich countries

The output of Mexican citizens who work in Texas would be included in the: A) GDP of Mexico B) GNP of Mexico C) GNP of the United States D) Net National Product of the United States

B) GNP of Mexico

Marginal analysis is involving comparing A) MC and AC B) MB and MC C) MB and AC D) MC and VC

B) MB and MC

The opportunity cost of the good on the x-axis is the ______ of the PPF A) Height B) Slope C) y-intercept D) inverse of the slope

B) Slope

(Problem 42) The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A). IF the price of motorcycle engines increases, and the wages of motorcycle workers increase, how will the equilibrium point change? A) The equilibrium point will move from A to E B) The equilibrium point will move from A to B C) The equilibrium point will move from A to C D) The equilibrium point will move first from A to B, then return to A

B) The equilibrium point will move from A to B

The equation of the GDP components is: A) Y=C+I+GX+NX B) Y= C+I+G+NX C) Y= C+G-NX D) none of the above

B) Y= C+I+G+NX

A major source of inefficiency in barter economies is that they require A) a standard of deferred payment to make trade possible B) a double coincidence of wants in exchange C) more liquid stores of value than do monetary economies D) all of the above

B) a double coincide of wants in exchange

An increase in the price of MP3 players will result in A) a smaller quantity of MP3 players supplied B) a larger quantity of MP3 players supplied C) a decrease in the demand for MP3 players D) an increase in the supply of MP3 players

B) a larger quantity of MP3 players supplied

The minimum wage is an example of A) a subsidy for low-skilled workers B) a price floor C) a price ceiling D) a black market

B) a price floor

If inventories decline by more than analysts predict they will decline, this implies that A) actual investment spending was greater than planned investment spending B) actual investment spending was less than planned investment spending C) actual investment spending was equal to planned investment spending D) there is no relationship between actual investment spending and planned investment spending

B) actual investment spending was less than planned investment spending

In the United States in 2013, the bureau of Economic Analysis began counting spending by firms and individuals on developing entertainment products as investment. This change will A) take away from the GDP B) add to the GDP C) not change GDP D) only change GDP if the development occurs within the borders of the United States

B) add to the GDP

What does the term "marginal" mean in economics? A) the edge of a market B) an additional or extra C) illegal D) secondary

B) an additional of extra

If, in response to a decrease in the price of coffee, the quantity of coffee demanded increases, economists would describe this as A) an increase in demand B) an increase in quantity demanded C) a change in consumer income D) an increase in consumers' taste for coffee

B) an increase in quantity demanded

Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease? A) a decrease in the price of tomatoes B) an increase in the price of tomatoes C) an increase in the price of mustard, a substitute for ketchup D) an increase in the price of french fries, a complement for ketchup

B) an increase in the price of tomatoes

The ____ production points on a PPF are the points along and inside the PPF A) allocatively efficient B) attainable C) productively efficient D) unattainable

B) attainable

Economies where goods and services are traded directly for other goods and services are called _____ economies. A) trade B) barter C) direct D) seigniorage

B) barter

The law of demand is the rule that, _________________, as the price of a good or service decreases, the quantity demanded increases. A) crius partus B) cereris paribus C) paribus ceteris D) cyrous parallel

B) ceteris paribus

Economics is the study of _____ people make to attain their goals, given their ______reaources. A) purchases; unlimited B) choices; scare C) income; available D) decisions; household

B) choices; scarce

Trade among nations is based on the: A) absolute advantage B) comparative advantage C) less advantage D) more advantage

B) comparative advantage

To calculate GDP by the expenditure method, one must add A) wages, rents interest, and profits B) consumption spending, investment spending, government spending, and net exports C) consumption spending, investment spending, government spending, and exports D) labor, natural resources, entrepreneurship, and capital

B) consumption spending, investment spending, governmental spending, and net exports

In the long run, a country will experience an increasing standard of living only if it experiences A) a high rate of consumption B) continuous technological change. C) a high rate of labor force growth D) a slow rate of population growth

B) continuous technological change

Which of the following is NOT counted in M1? A) checking account balances B) credit card balances C) coins in circulation D) currency in circulation

B) credit card balances

Deviation of unemployment from natural rate is ______ rate of unemployment A) economic B) cyclical C) frictional D) structural

B) cyclical

If the government implements a price ceiling on insulin, this will A) increase the price consumers will pay for insulin B) decrease the quantity of insulin the manufacturers will be willing to supply C) have to be set above the market equilibrium price to be effective D) encourage manufacturers to produce and sell more insulin to increase their profits

B) decrease the quantity of insulin the manufacturers will be willing to supply

The required reserves of a bank equal its _____ the required reserve ratio. A) deposits divided by B) deposits multiplied by C) loans divided by D) loans multiplied by

B) deposits multiplied by

Labor force is ____ workers in the economy A) employed and laid off B) employed and unemployed C) employed and underemployed D) employed and not employed

B) employed and unemployed

The ratio of the increase in _____ to the increase in _______ is called the multiplier. A) equilibrium nominal GDP; autonomous expenditure B) equilibrium real GDP; autonomous expenditure C) autonomous expenditure; equilibrium real GDP D) induced expenditure; equilibrium real GDP

B) equilibrium real GDP; autonomous expenditure

An economic growth model A) explains changes in nominal GDP per capita in the long run B) explains changes in real GDP per capita in the long run C) explains changes in nominal GDP per captia in the short run D) explains changes in real GDP per capita in the short run

B) explains changes in real GDP per capita in the long run

When firms benefit from the results of research and development that they didn't pay for, we say firms A) are litigious B) free ride C) invest knowledge capital D) maintain a level playing field

B) free ride

The increased generosity of unemployment insurance programs in Canada as compared to the United States should A) decrease the duration of unemployment in Canada as compared to the United States B) increase the duration of unemployment in Canada as compared to the United States C) have no impact on the duration of unemployment in Canada D) raise the duration of unemployment in the United States

B) increase the duration of unemployment in Canada as compared to the United States

Economic decline happens when the PPF shifts A) outward B) inward C) outside D) none of the above

B) inward

The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as: A) technology B) labor productivity C) real GDP D) human capital

B) labor productivity

For a good to be included in the GDP, it must be produced A) officially B) legally C) publicly D) totally

B) legally

If inflation increases unexpectedly, then A) borrowers pay a higher real interest rate than they expected B) lenders receive a lower real interest rate than they expected C) lenders gain and borrowers lose D) neither borrowers nor lenders lose

B) lenders receive a lower real interest rate than they expected

Fiat money has A) little to no intrinsic value but is backed by the quantity of gold held by the central bank B) little to no intrinsic value and is authorized by the central bank or governmental body C) value, because it can be redeemed for gold by the central bank D) a great intrinsic value that is independent of its use as money

B) little to no intrinsic value and is authorized by the central bank or governmental body

The Federal Reserve's narrowest definition of the money supply is A) M10 B) M1 C) M2 D) M3

B) m1

One cost of inflation is A) merit cost B) menu cost C) max cost D) max cost

B) menu cost

The branch of economics which studies how households and firms make choices, interact in markets, and how government attempts to influence their choices is called A) macroeconomics B) microeconomics C) positive economics D) normative economics

B) microeconomics

Durable good is a good that can be used for A) one period B) more than one period C) two periods D) service

B) more than one period

Globalization is defined as the process of countries becoming ________ open to foreign trade and ___________ open to foreign investment. A) more; less B) more; more C) less; more D) less; less

B) more; more

Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that A) people are rational B) people respond to economic incentives C) optimal decisions are made at the margin D) equity is more important than efficiency

B) people respond to economic incentives

The supply curve has a A) negative slope B) positive slope C) perfect slope D) undetermined slope

B) positive slope

Every society faces economic trade-offs. This means: A) some people live better than others do B) not everyone can have enough goods to survive C) producing more of one good means less of another good can be produced D) society's output cannot be made available to all

B) producing more of one good means less of another good can be produced

The change in price of the same good or service cases a change in A) demand B) quantity demanded C) shift D) growth

B) quantity demanded

In a market economy, those who are willing and able to buy what is produced A) receive what the government allows them to receive B) receive most of what is produced C) receive no more than everyone else in the market D) solely determine what is produced

B) receive most of what is produced

The period between a business cycle peak and a business cycle trough is called A) expansion B) recession C) diffusion D) recalculation

B) recession

The basic principal in economic studies is A) trade-off B) scarcity C) money D) efficiency

B) scarcity

If the Federal Open Market Committee wants to decrease the money supply through open market operations it will A) buy U.S Treasury securities B) sell U.S. Treasury securities C) increase the discount rate D) decrease the discount rate

B) sell U.S. Treasury securities

Shortage happens when quantity supplied is _________ quantity demanded. A) greater than B) smaller than C) equal to D) none of the above

B) smaller than

The _________ the reserve ratio, the ________ the money multiplier. A) smaller; smaller B) smaller; larger C) larger; larger D) none of the above are correct

B) smaller; larger

The GDP is not a perfect measure of standard of living because it does not take ______ of increasing production into account A) social classes B) social problems C) social surplus D) social shortage

B) social problems

Natural rate of unemployment is the sum of: A) cyclical and fictional B) structural and frictional C) frictional and efficiency D) none of the above

B) structural and frictional

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called A) frictional unemployment B) structural unemployment C) cyclical unemployment D) seasonal unemployment

B) structural unemployment

In a perfectly competitive market; the buyer and sellers are price A) makers B) takers C) neutral D) fixers

B) takers

(Problem 100) Which of the following is consistent with the graph depicted? A) an expected recession decreases the profitability of new investment B) technological change increases the profitability of new investment C) the government runs a budget surplus D) households become spendthrifts and begin to save less

B) technological change increases the profitability of new investment

The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect A) it is more likely that an incumbent president will be re-elected. B) that stock prices are more likely to fall. C) that jobs are less difficult to find. D) that investors will be more optimistic about the economy.

B) that stock prices are more likely to fall.

Comparative advantage means A) the ability to produce more of a product with the same amount of resources than any other producer B) the ability to produce a good or service at a lower opportunity cost than any other producer. C) the ability to produce a good or service at a higher opportunity cost than any other producer. D) compared to others you are better at producing a product

B) the ability to produce a good or service at a lower opportunity cost than any other producer

Comparative advantage means A) the ability to produce more of product with the same amount of resources than any other producer B) the ability to produce a good or service at a lower opportunity cost than any other producer C) the ability to produce a good or service at a higher opportunity cost than any other producer D) compared to others you are better at producing a product

B) the ability to produce a good or service at a lower opportunity cost than any other producer

What does the PPI measure? A) the average change in the prices paid for all goods produced in the economy over a given year B) the average of the prices received by producers of goods and services at all stages of the production process C) the level of production of goods and services generated in the economy in a given year D) the difference between the prices consumers pay for goods and services and the prices producers pay for goods and services

B) the average of the prices received by producers of goods and services at all stages of the production process

Liquidity refers to A) the ease with a stock can be traded for a bond B) the ease with which a financial security can be traded for cash C) the number of times a dollar changes hands in the creation of GDP in an economy D) the number of shares of stock a corporation issues

B) the ease with which a financial security can be traded for cash

U.S. net export spending falls when A) the price level in the United States falls relative to the price level in other countries B) the growth rate of U.S. GDP is faster than the growth rate of GDP in other countries C) the value of the U.S. dollar decreases relative to other countries D) the inflation rate is lower in the United States relative to other countries

B) the growth rate of U.S. GDP is faster than the growth rate of GDP in other countries

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause A) the unemployment rate to decrease B) the labor force participation rate to decrease C) the number of discouraged workers to increase D) no change in the unemployment rate

B) the labor force participation rate to decrease

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause: A) the unemployment rate to decrease B) the labor force participation rate to decrease C) the number of discouraged workers to increase D) no change in the unemployment rate

B) the labor force participation rate to decrease

A consumer is willing to purchase a product up to the point where A) he spends all of his income B) the marginal benefit is equal to the price of the product C) the quantity demanded is equal to the quantity supplied D) he is indifferent between consuming and saving

B) the marginal benefit is equal to the price of the product

The production possibilities frontier shows A) the various products that can be produced now and in the future B) the maximum attainable combinations of two products that may be produced in a particular time period with available resources C) what an equitable distribution of products among citizens would be. D) what people want firms to produce in a particular time period

B) the maximum attainable combinations of two products that may be produced in a particular time period with available resources

Suppose that nominal GDP in 2016 was less than real GDP in 2016. Given this information, we know for certain that A) the price level in 2016 was greater than the price level in the base year. B) the price level in 2016 was less than the price level in the base year C) real GDP in 2016 was less than real GDP in the base year D) real GDP in 2016 was greater than real GDP in the base year

B) the price level in 2016 was less than the price level in the base year

The substitution effect of a price change refers to A) the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes. B) the shift of a demand curve when the price of a substitute good changes C) the movement along the demand curve due to a change in purchasing power brought about by the price change D) the shift in the demand curve due to a change in purchasing power brought about by the price change,

B) the shift of the demand curve when the price of a substitute good changes

The more excess reserves banks choose to keep, A) the larger the deposit multiplier B) the smaller the deposit multiplier C) the higher the required reserve ratio D) the lower the required reserve ratio

B) the smaller the deposit multiplier

If the United States lifts the embargo on Cuban products, what will happen in the U.S. market for Cuban cigars? A) the supply curve will shift to the left. B) the supply curve will shift to the right C) the demand curve will shift to the right D) the demand curve will shift to the left

B) the supply curve will shift to the right

At macroeconomic equilibrium A) total investment equals total inventories B) total spending equals total production C) total consumption equals total production D) total taxes equal total transfers

B) total spending equals total production

The statement "This Dell laptop costs $1200" illustrates which function of money? A) medium of exchange B) unit of account C) store of value D) standard of deferred payment

B) unit of account

Buyers will bear the entire burden of a unit tax if the demand curve for a product is A) horizontal B) vertical C) downward sloping D) upward sloping

B) vertical

An increase in the equilibrium price for a product will result A) When the quantity of the product demanded exceeds the quantity supplied B) when there is a decrease in supply and an increase in demand for the product. C) when there is a decrease in supply and a decrease in demand for the product D) when there is an increase in demand and an increase in the number of firms producing the product

B) when there is a decrease in supply and an increase in demand for the product

If the required reserve ratio is 10 percent, an increase in bank reserves of $1000 can support an increase in checking acoount deposits (including the original deposit) in the banking system as a whole of up to A) $100 B) $1000 C) $10,000 D) $100,000

C) $10,000

Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is aggregate expenditure? A) $15 million B) $23 million C) $25 million D) $27 milllion

C) $25 million

(Problem 49) Kendra's marginal benefit from consuming the second ice cream cone is A) $6.50 B) $6.00 C) $3.00 D) $2.25

C) $3.00

(see figure) Kendra's marginal benefit from consuming the second ice cream cone is A) $6.50 B) $6.00 C) $3.00 D) $2.25

C) $3.00

(Problem 249) Consider the data shown above for Vicuna, a country that produces only two products: oranges and shirts. Real GDP for Vicuna for 2013 using 2015 as the base year equals A) $4620 B) $5200 C) $5650 D) $5850

C) $5650

(Problem 244) Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals A) 3090 units B) $7250 C) $8750 D) $9750

C) $8750

A general formula for the multiplier is A) 1/ (1- MPS) B) 1/MPC C) 1/MPS D) 1/ (MPS-1)

C) 1/MPS

What is the GDP deflator in 2016 if 2016 is the base year? 2011 2016 Product Quantity Price Quantity Price Camera 100 $10 120 $12 Legal services 50 15 45 20 Books 200 40 210 45 A) 120 B) 118 C) 100 D) 87

C) 100

If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is A) 12.5 B) 80 C) 125 D) 800

C) 125

(Problem 263) Consider the following values of the consumer price index for 1996, 1997, and 1998: the inflation rate for 1997 was equal to: A) 1.2 percent B) 2.0 percent C) 2.5 percent D) 4.0 percent

C) 2.5 percent

(Problem 6) Calculate the area of the triangle A. A) $8.4 million B) $6.3 million C) $3.15 million D) $2.1 million

C) 3.15 million

According to the quantity theory of money, if the money supply grows at 6%, real GDP grows at 2%, and the velocity of money is constant, then the inflation rate will be A) 8% B) 6% C) 4% D) 2%

C) 4%

If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, how many workers are in the labor force? A) 1 million B) 20 million C) 475 million D) 481 million

C) 475 million

If real GDP per capita measured in 2009 dollars was $6000 in 1950 and $48,000 in 2016, we would say that in the year 2016, the average American could buy ______ times as many goods and services as the average American in 1950. A) 1/8 B) 4 C) 8 D) 12

C) 8

(Problem 50) What area represents the decrease in producer surplus when the market price falls P2 to P1? A) C+E B) A+C+E C) A+B D) B+D

C) A+B

Which of the following countries does not come close to the free market benchmark? A) Japan B) France C) Cuba D) United States

C) Cuba

Which of the following causes the unemployment rate to understate the true extent of joblessness? A) Many full time workers really want to be part time workers. B) Persons who collect unemployment benefits report themselves to be searching for a job. C) Discouraged workers are not counted as unemployed. D) A drug dealer reports herself as unemployed.

C) Discouraged workers are not counted as unemployed.

In a small economy in 2016, aggregate expenditure was $800 million while GDP that year was $850 million. Which of the following can explain the difference between aggregate expenditure and GDP that year? A) Aggregate expenditure is always less than GDP in developed countries B) Firm investment in inventories was less than anticipated in 2016 C) Firm investment in inventories was greater than anticipated in 2016 D) Aggregate expenditure is always less than GDP in developing countries

C) Firm investment in inventories was greater than anticipated in 2016

The best meaure of a country's standard of living iS A) GDP per labor hour. B) GDP per unit of capital C) GDP per capita D) total nominal GDP

C) GDP per capita

If planned aggregate expenditure is less than total production, A) actual inventories will equal planned inventories B) firms will experience an unplanned decrease in inventories C) GDP will decrease D) the economy is in equilibrium

C) GDP will decrease

(Problem 20) In the circular flow diagram, economic agents M represent A) factor markets B) product markets C) firms D) households

C) Households

(Problem 129) If the economy is at point L, what will happen? A) Inventories have fallen below their desired level, and firms decrease production. B) Inventories have fallen below their desired level, and firms increase production C) Inventories have risen above their desired level, and firms decrease production D) Inventories have risen above their desired level, and firms increase production.

C) Inventories have risen above their desired level, and firms decrease production

If aggregate expenditure is greater than GDP, how will the economy reach macroeconomic equilibrium? A) Inventories will decline, and GDP and employment will decline B) Inventories will rise, and GDP and employment will decline C) Inventories will decline, and GDP and employment will rise D) Inventories will rise, and GDP and employment will rise

C) Inventories will decline, and GDP and employment will rise

Which of the following is one of the most important benefits of money in an economy? A) Money allows for the exchange of goods and services B) Money allows for the accumulation of wealth C) Money makes exchange easier, leading to more specialization and high productivity D) Money encourages people to produce all of their own goods (self-sufficiency) and therefore increases economic stability

C) Money makes exchange easier, leading to more specialization and high productivity

If government saving is negetive, then A) T>TR B) G>T C) T-TR<G D) Y+TR<C-T

C) T-TR< G

Which of the following describes a characteristic of a perfectly competitive market? A) There are many buyers but few sellers. B) There are many sellers but few buyers C) There are many buyers and sellers D) Equilibrium is achieved when demand for the product sold in the market equals the supply

C) Ther are many buyers and sellers

Which of the following is an example of human capital? A) a computer B) a factory building C) a college education D) a software program

C) a college education

(see figure 317) If the current market price is $25, the market will achieve equilibrium by A) a price increase, increasing the supply and decreasing the demand B) a price decrease, decreasing the supply and increasing the demand C) a price decrease, decreasing the quantity supplied and increasing the quantity demanded D) a price increase, increasing the quantity supplied and decreasing the quantity demanded

C) a price decrease, decreasing the quantity supplied and increasing the quantity demanded

Hurricane Katrina damages a large portion of refining and pipeline capacity when it swept through the Gulf coast states in August 2005. As a result of this, many gasoline distributors were not able to maintain normal deliveries. At the pre-hurricane equilibrium price (i.e., at the initial equilibrium price), we would expect to see A) a surplus of gasoline B) the quantity demanded equal to the quantity supplied C) a shortage of gasoline D) an increase in the demand for gasoline

C) a shortage of gasoline

Labor unions cause unemployment because the union contract wage is set A) below the market wage, causing a shortage of labor. B) below the market wage, causing a surplus of labor. C) above the market wage, causing a surplus of labor. D) above the market wage, causing a shortage of labor.

C) above the market wage, causing a surplus of labor.

A central bank can help stop a bank panic by A) raising the required reserve ratio B) calling in consumer loans C) acting as a lender of last resort D) decreasing income taxes

C) acting as a lender of last resort

An unplanned increase in inventories results from A) an increase in planned investment B) a decrease in planned investment C) actual investment that is greater than planned investment D) actual investment that is less than planned investment

C) actual investment that is greater than planned investment

Labor force participation rate measures percentage of ___ in the labor force. A) employed B) unemployed C) adult population D) all of the above La

C) adult population

If the price of prime rib falls, the income effect due to the price change will cause A) an increase in the demand for prime rib B) an increase in the demand for flank steak, a substitute for prime rib C) an increase in the quantity of prime rib demanded D) an increase in the quantity of prime rib supplied

C) an increase in the quantity of prime rib demanded

Which of the following would increase the unemployment rate? A) a law making it illegal to work more than 35 hours per week B) a cut in unemployment compensation C) an increase in unemployment insurance payments D) a decrease in the minimum wage

C) an increase in unemployment insurance payments

The consumer price index is the A) cost of a market basket of goods and services typically consumed in the base year B) cost of a market basket of goods and services typically consumed in the current period C) average of the prices of the goods and services purchased by a typical urban family of four D) average of the prices of new final goods and services produced in the economy over a period of time

C) average of the prices of the goods and services purchased by a typical urban family of four

Investment spending includes spending on A) stocks B) food C) changes in business inventories D) transfer payments

C) changes in business inventories

Which of the following describes the accuracy of the Consumer Price Index? A) Changes in the CPI accurately reflect the true rate of inflation B) Changes in the CPI understate the true rate of inflation C) Changes in the CPI overstate the true rate of inflation D) Changes in the CPI are unrelated to the true rate of inflation

C) changes in the CPI overstate the true rate of inflation

The response of investment spending to an increase in the government budget deficit is called A) expansionary investment B) private dissaving C) crowding out D) income minus net taxes

C) crowding out

The equilibrium quantity is the quantity that appears in the market at the A) demand price B) supply price C) equilibrium price D) none of the above

C) equilibrium price

During a _______ many firms experience increased profits, which increases _________ and investment spending. A) expansion; government spending B) recession; cash flow C) expansion; cash flow D) recession; business confidence

C) expansion; cash flow

IF a vineyard wants to raise funds to purchase a new bottling machine, it does so in the A) product market. B) alcoholic beverages market. C) factor market. D) output market

C) factor market

Actual real GDP will be above potential GDP if A) firms are producing below capacity B) firms are producing at capacity C) firms are producing above capacity D) inflation is rising

C) firms are producing above capacity

The purchase by an individual or firm of stock or bonds issued in another country is called A) foreign exchange arbitrage B) foreign direct investment C) foreign portfolio investment D) global stock exchange

C) foreign portfolio investment

Countries that are more globalized tend to have A) lower levels of real GDP per capita B) a higher likelihood of war or revolution C) higher growth rates in real GDP per capita D) lower levels of foreign direct investment

C) higher growth rates in real GDP per capita

Which of the following is not directly counted in GDP? A) investment expenditures B) government purchases C) intermediate goods D) consumer goods

C) intermediate goods

Which of the following increases labor productivity? A) an increase in the aggregate hours of work B) decreases in the availability of computers and factory buildings C) inventions of new machinery, equipment, or software D) a decline in the health of the population

C) inventions of new machinery, equipment, or software

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population? A) unemployment rate B) discouraged worker ratio C) labor force participation rate D) the ratio of minimum wage to inflation

C) labor force participation rate

Your grandfather tells you that he earned $7000/year in his first job in 1961. You earn $35,000 in your first job in 2016. You know that average prices have risen steadily since 1961. You earn A) 5 times as much as your grandfather B) more than 5 times as much as your grandfather in terms of real income C) less than 5 times as much as your grandfather in terms of real income D) less than 5 times as much as your grandfather in terms of nominal income

C) less than 5 times as much as your grandfather in terms of real income

The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called A) public economics B) microeconomics C) macroeconomics D) normative economics

C) macroeconomics

The three main monetary policy tools used by the Fed to manage the money supply are A) interest rates, tax rates, and government spending B) tax rates, government purchases, and government transfer payments C) open market operations, discount policy, and reserve requirements D) open market operations, the exchange rate of the dollar against foreign currencies, and government purchases

C) open market operations, discount policy, and reserve requirements

In the United States, currency includes A) gold, silver, and paper money B) checking and savings account deposits C) paper money and coins in circulation D) traveler's checks

C) paper money and coins in circulation

The nominal interest rate equals the real interest rate __________ the inflation rate. A) times B) divided by C) plus D) minus

C) plus

Decreases in the price level will A) lower consumption because goods and services are less affordable B) raise consumption because goods and services are more affordable C) raise consumption because real wealth increases D) lower consumption because real wealth decreases

C) raise consumption because real wealth increases

The assumption that people are ______ is one of the basic assumptions in economic studies. A) emotional B) generous C) rational D) smart

C) rational

On the 45-degree line diagram, the 45-degree line shows points where real aggregate expenditure equals A) unplanned investment B) planned investment C) real GDP D) nominal GDP

C) real GDP

An increase in the real interest rate does which of the following? A) reduces the demand for loanable funds B) reduces saving C) reduces consumption spending D) increases the demand for loanable funds

C) reduces consumption spending

Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will A) increase B) decrease C) remain constant D) not change in a way that can be predicted

C) remain constant

Suppose the reserve ratio is RR. Then, A) required reserves=RR x actual reserves B) required reserves=RR x excess reserves C) required reserves=RR x deposits D) required reserves= RR x loans

C) required reserves=RR x deposits

An increase in demand and supply by the same size will cause the price of the good to A) increase B) decrease C) stay the same D) all of the above

C) stay the same

The Fed was established in 1913 to A) prevent inflation by decreasing the money supply B) stimulate the economy by increasing bank reserves C) stop bank panics by acting as a lender of last resort D) prevent bad loans by requiring banks to hold reserves

C) stop bank panics by acting as a lender of last resort

A farm worker gets paid today in money, but plans to spend the money next week. This illustrates which function of money? A) medium of exchange B) unit of account C) store of value D) standard of deferred payment

C) store of value

The CPI is not a perfect measure of inflation because ______: A) sublime B) structural C) substitution D) subset

C) substitution

The processes used to produce goods and services describes A) innovation B) entrepreneurship C) technology D) capital

C) technology

Which of the following is not a reason why the Industrial Revolution occurred when and where it did? A) the British government was committed to upholding private property rights B) the British government was able to eliminate arbitrary increases in taxes C) the British government was able to more easily seize wealth D) institutional changes by the British government helped protect wealth

C) the British government was able to more easily seize wealth

What is the name of the organization that defines business cycle peaks and troughs in the United States? A) the Bureau of Labor Statistics B) the Federal Reserve C) the National Bureau of Economic Research D) the National Peak and Trough Committee

C) the National Bureau of Economic Research

Human capital refers to A) the money people have B) the machines workers have to work with C) the accumulated skills and training workers have D) the wealth people have

C) the accumulated skills and training workers have

Net worth is A) a measure of a firm's profits B) part of stockholders' equity C) the difference between a firm's assets and liabilities D) listed on the asset side of a firm's balance sheet

C) the difference between a firm's assets and liabilities

Opportunity cost is defined as A) the benefit of an activity B) the monetary expense associated with an activity C) the highest valued alternative that must be given up to engage in an activity D) the total value of all alternatives that must be given up to engage in an activity

C) the highest valued alternative that must be given up to engage in an activity

Potential GDP is defined as A) the maximum of GDP that the economy can produce. B) the amount of GDP produced if there is no frictional unemployment C) the level of GDP attained when all firms are producing at capacity D) the amount of GDP produced if there is no structural unemployment

C) the level of GDP attained when all firms are producing at capacity

All of the following are true statements about the multiplier except: A) the multiplier rises as the MPC rises B) the smaller the MPS, the larger the multiplier C) the multiplier is a value between zero and one D) the multiplier effect occurs when autonomous expenditure changes.

C) the multiplier is a value between zero and one

By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis, economists assume that the most important determinant of the demand for a good is A) consumer income B) consumer tastes and preferences C) the price of the good D) the quality of the good

C) the price of the good

The nominal interest rate will be less than the real interest rate when A) the rate of inflation is positive but decreasing B) the rate of inflation is positive and increasing C) the rate of inflation is negative D) the real interest rate is negative

C) the rate of inflation is negative

Equilibrium in the loanable funds market determines A) the nominal interest rate B) the current interest rate C) the real interest rate D) the expected interest rate

C) the real interest rate

The circular flow model demonstrates A) the role of the government in overseeing the market system B) how shortages and surpluses are eliminated in a market C) the roles played by households and firms in the market system. D) how demand and supply for goods and services are brought into equilibrium

C) the roles played by housegolds and firms in the market system

Suppose that the labor movement has a revival in the United States and the majority of workers join labor unions. As a result we would expect A) the labor force participation rate to fall B) the unemployment rate to fall C) the unemployment rate to rise D) no change in the unemployment rate or labor force participation rate

C) the unemployment rate to rise

The quantity theory of money was derived from the quantity equation by asserting that A) real output was fixed B) the money supply was fixed C) the velocity of money was fixed D) the velocity of money was zero

C) the velocity of money was fixed

If inflation is positive and is perfectly anticipated, A) those that borrow money lose B) those that lend money lose C) those that hold paper money lose D) no one in the economy loses

C) those that hold paper money lose

The government purchases do not include the A) money transfer B) transfer purchases C) transfer payments D) military expenditure

C) transfer payments

Commodity money is a good A) used as money that has no secondary use B) that is designated as money by law C) used as money that also has value independent of its use as money D) used as money that has no intrinsic value

C) used as money that also has value independent of its use as money

The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is A) positively sloped B) negatively sloped C) vertical D) horizontal

C) vertical

The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is A) positively sloped B) negatively sloped C) vertical D) horizontal

C) vertical

Published in 1776, _________ was written by Adam Smith. A) "The General Theory of Employment, Interest, and Money" B) "The Communist Manifesto" C) "The Declaration of Economics" D) "An Inquiry Into the Nature and Causes of the Wealth of Nations"

D) "An Inquiry Into the Nature and Causes of the Wealth of Nations"

(Problem 132) Suppose that investment spending increases by $10 million, shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2. If the MPC is 0.9, then what is the change in GDP? A) $9 million B) $10 million C) $90 million D) $100 million

D) $100 million

(see figure 329) How much of the tax is paid by buyers? A) $8 B) $5 C) $4 D) $3

D) $3

(see figure 326) What is the value of producer surplus after the imposition of the price floor? A) $3,000 B) $3,600 C) 4,200 D) $4,500

D) $4,500

(Refer to figure 305) If the economy is currently producing at point E, what is the opportunity cost of moving to point B? A) 26 thousand forks B) 20 thousand forks C) 60 thousand spoons D) 0 spoons

D) 0 spoons

(see 252) Assume the market basket for the consumer price index has three products- cokes, hamburgers, and CDs- with following values in 2011 and 2016 for price and quantity: the consumer price index for 2016 equals: A) 75 B) 93 C) 108 D) 121

D) 121

During which of the following periods was growth in GDP per capita the strongest? A) prior to 500 A.D. B) 500 A.D. to 1800 A.D. C) 1800-1900 A.D. D) 1900-2000 A.D.

D) 1900-2000 A.D.

If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years? A) 270% B) 50% C) 5% D) 2.7%

D) 2.7%

Growth in real GDP per hour worked in the United States was slowest during what period of time? A) 1900-1949 B) 1950-1973 C) 1974-1995 D) 2006-2014

D) 2006-2014

If an economy is growing at a rate of 2.5% per year, how long will it take the economy to double in size? A) 60 years B) 43 years C) 36 years D) 28 years

D) 28 years

Imagine that you borrow $1000 for one year and at the end of the year you repay the $1000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid? A) 17 percent B) 10 percent C) 7 percent D) 3 percent

D) 3 percent

If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest? A) -9.5% B) -3.5% C) 1.5% D) 3.5%

D) 3.5%

(Problem 294) Using marginal analysis, how many hours should Eva extend her bakery's hours of operations? (see figure) A) 2 hours B) 3 hours C) 4 hours D) 5 hours

D) 5 hours

If real GDP per capita in the United States is $8000 in 2016, and if real GDP per capita is $12,000 in 2026, what is the total percent change in the growth rate of GDP per capita between 2016 and 2026? A) 3.33% B) 5% C) 33% D) 50%

D) 50%

If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is A) 5.2% B) 60% C) 76% D) 80%

D) 80%

(Problem 31) An increase in the price of a complement would be represented by a movement from A) A to B B) B to A C) D1 to D2 D) D2 to D1

D) D2 to D1

(Problem 18) If two countries specialize and trade, who should export cell phones? A) There is no basis for trade between the two countries. B) Estonia C)They should both be importing cell phones D) Finland

D) Finland

For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries? A) Switzerland has the comparative advantage in chocolate B) Switzerland has the comparative advantage in watches C) Germany has the comparative advantage in watches and chocolates D) Germany has the comparative advantage in watches

D) Germany has the comparative advantage in watches

(Figure 310) Which two arrows in the diagram depict the following transaction: Stanley purchases the novel, "Night of Sorrows" for his summer reading pleasure. A) J and M B) J and G C) K and M D) K and G

D) K and G

The M2 measure of the money supply equals A) savings account balances plus small-denomination time deposits plus traveler's checks B) savings account balances plus small-denomination time deposits plus noninstitutional money market find shares. C) M1 plus savings account balances plus small denomination time deposits. D) M1 plus savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares

D) M1 plus savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares

If the CPI changes from 125 to 120 between 2015 and 2016, how did prices change between 2015 and 2016? A) Prices increased by 5% B) Prices decreased by 5% C) Prices increased by 25% D) Prices decreased by 4%

D) Prices decreased by 4%

(See graph 315) A decrease in the number of firms in the market would be represented by a movement from A) A to B B) B to A C) S1 to S2 D) S2 to S1

D) S2 to S1

(Problem 41) Prices of smartphones (assume that this is a normal good) have fallen inrecent years. Over this same period, the price of the components used to produce smartphones has also fallen and consumer incomes have risen. Which of the following best explains the falling prices of smartphones? A)The supply curve for smartphones has shifted to the right while the demand curve for smartphones has shifted to the left. B) The demand curve for smartphones has shifted to the right more than the supply curve has shifted to the right. C) The demand curve and the supply curve for the smartphones have both shifted to the left. D) The supply curve for smartphones has shifted to the right more than the demand curve has shifted to the right.

D) The supply curve for smartphones has shifted to the right more than the demand curve has shifted to the right.

Which of the following explains the changes in the U.S. adult male labor force participation rate since 1948? A) More men are joining the military as compared to the past B) More men are retiring later in life as compared to the past C) Fewer men consider themselves discouraged workers as compared to the past D) Younger men are remaining in school longer as compared tothe past

D) Younger men are remaining in school longer as compared tothe past

Which of the following advances contributed to the "new economy" the mid-1900s? A) the increased use of the Internet in selling products and services B) expanded cell phone use C) the lower cost and increased availability of laptop computers D) all of the above

D) all of above

Which of the following can explain why some countries have not experienced relatively high growth rates in real GDP per capita despite relatively low initial levels of real GDP per capita? A) Many of these developing countries do not have a function court system that enforces laws. B) Countries that are relatively poor are more likely to experience wars and revolutions C) Countries that are relatively poor are likely to have a lower quality of health care D) all of the above

D) all of the above

Which of the following would encourage economic growth through increases in the capital stock? A) a change from an income tax to a consumption tax B) an increase in household saving C) a decrease in the government deficit D) all of the above

D) all of the above

The nominal GDP of the U.S. in 2015 was approximately $17.3 trillion. This means that A) the value of output in 2015 was around $17.3 trillion B) total income in 2015 was around $17.3 trillion C) total spending in 2015 was around $17.3 trillion D) all of the above are true

D) all of the above are true

Which of the following will increase aggregate expenditure in the United States? A) an increase in the value of the dollar B) an increase in the price level C) an increase in interest rates D) an increase in government purchases

D) an increase in government purchases

An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in A) an increase in the equilibrium quantity of peanuts and no change in the equilibrium price B) an increase in the equilibrium price of peanuts and no change in the equilibrium quantity C) an increase in the equilibrium price of peanuts; the equilibrium quantity may increase or decrease D) an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease

D) an increase in the equilibrium quantity of peanuts, the equilibrium price may increase or decrease

An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in A) an increase in the equilibrium quantity of peanuts and no change in the equilibrium price. B) an increase in the equilibrium price of peaunuts and no change in the equilibrium quantity; C) an increase in the equilibrium price of peanuts; the equilibrium quantity may increase or decrease D) an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease

D) an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease

An outward shift of a nation's PPF can occur due to A) a reduction in unemployment B) a change in the amounts of one good desired C) a natural disaster like a hurricane or bad earthquake D) an increase in the labor force

D) an increase in the labor force

Electric car manufacturers want to sell more electric cars at a higher price. Which of the following events would have this effect? A) technological advancement in the production of electric car batteries. B) an increase in the number of manufacturers of electric cars C) a decrease in the price of lithium, which is used in the electric car batteries. D) an increase in the price of gasoline

D) an increase in the price of gasoline

In economics, money is defined as A) the total value of one's assets in current prices. B) the total value of one's assets minus the total value of one's debts, in current prices C) the total amount of salary, interest, and rental income earned during a year. D) any asset people generally accept in exchange for goods and services

D) any asset people generally accept in exchange for goods and services

A good can serve as money only if A) the government mandates that the good must be accepted in payment of debts B) it is declared by authorities to be legal tender C) it has intrinsic value or if it is backed by precious metals D) citizens accept the good as a means of payment for transactions and debts

D) citizens accept the good as a means of payment for transactions and debts

Investment, as defined by economists, would include the purchase of a A) corporate bond B) government bond C) share of stock in ExxonMobil D) computer by an accounting firm

D) computer by an accounting firm

To increase the money supply, the Fed could A) raise the discount rate B) decrease income taxes C) raise the required reserve ratio D) conduct an open market purchase of Treasury securities

D) conduct an open market purchase of Treasury securities

Which of the following would be the best measure of the cost of living? A) real GDP B) real GDP per person C) GDP deflator D) consumer price index

D) consumer price index

The BLS produces data on unemployment from a regular survey of households called the A) establishment survey B) labor survey C) survey of economic indicators D) current population survey

D) current population survey

There is often a trade-off between A) productive efficiency and allocative efficiency B) limited and unlimited resources C) voluntary and involuntary exchanges D) economic efficiency and economic equity

D) economic efficiency and economic equity

Globalization is positively associated with A) poverty B) declining rates of investment C) declining standards of living D) economic growth

D) economic growth

A worker is hired in a A) goods and services market B) product market C) government market D) factor market

D) factor market

The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects. A) government B) households C) banks D) firms

D) firms

Gross domestic product understates the total production of final goods and services because of the omission of A) exports B) inflation C) intermediate goods D) household production

D) household production

The percent increase in the CPI from one year to the next is a measure of the A) GDP deflator B) unemployment rate C) real interest rate D) inflation rate

D) inflation rate

Which of the following is not a function of the Federal Reserve System, or the "Fed"? A) acting as a lender of last resort B) acting as a banker's bank C) performing check clearing services D) insuring deposits in the banking system

D) insuring deposits in the banking system

Adam Smith's ______ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole. A) comparative advantage model B) survival of the fittest theory C) Utopian society D) invisible hand

D) invisible hand

A final good is one that A) is used in the production of another good B) is a natural resource used to produce a good C) is purchased as an input in the production process D) is purchased by its final user

D) is purchased by its final user

A commercial bank like Comercia creates money by A) printing paper money B) earning profits C) selling corporate bonds D) making loans

D) making loans

The additional cost to a firm of producing one more unit of a good or service is the A) minimum cost B) total cost C) opportunity cost D) marginal cost

D) marginal cost

To affect the market outcome, a price floor A) must be set above the black market price B) must be set above the legal price C) must be set above the price ceiling D) must be set above the equilibrium price

D) must be set above the equilibrium price

The purchase by a foreign government of an airplane produced in the United States is included in U.S. A) consumption expenditures B) investment expenditures C) government purchases D) net exports

D) net exports

(Problem 281)Which of the following is consistent with the graph depicted? A) An expected expansion increases the profitability of new investment B) the government runs a budget surplus C) there is a shift from an income tax to a consumption tax D) new government regulations decrease the profitability of new investment

D) new government regulations decrease the profitability of new investment

Credit Card balances are A) part of M1 B) part of M2 C) part of M3 D) not part of the money supply

D) not part of the money supply

If the production possibilities frontier is linear, then A) opportunity costs are decreasing as more of one good is produced B) it is easy to efficiently produce output C) opportunity costs are increasing as more of one good is produced D) opportunity costs are constant as more of one good is produced

D) opportunity costs are constant as more of one good is produced

The Bureau of Labor Statistics would categorize a retiree who is not working as A) employed B) unemployed C) a discouraged worker D) out of the labor force

D) out of the labor force

Full employment is not considered to be zero unemployment, because A) some cyclical unemployment always exists B) some people do not want a job C) there are not enough jobs for everyone who wants one D) people do not find jobs instantaneously

D) people do not find jobs instantaneously

Long-run economic growth requires all of the following except A) technological change B) increases in capital per hour worked C) governmental provision of secrure property rights D) political instability

D) political instability

IF prices are rising on average, then A) real GDP will always be equal to nominal GDP. B) real GDP will be greater than nominal GDP in the tears after the base year C) real GDP will be less than nominal GDP in the years before the base year D) real GDP will be greater than nominal GDP in the years before the base year

D) real GDP will be greater thannominal GDP in the years before the base year

The GDP is the market value of goods and services produced by _____ of a country. A) nationals B) foreigners C) visitors D) residents

D) residents

Which of the following functions of money would be violated if inflation were high? A) unit of account B) store of value C) medium of exchange D) standard of deferred payment

D) standard of deferred payment

The key idea of the aggregate expendiutre model is that in any particular year, the level of GDP is determined mainly by A) investment spending B) export spending C) government spending D) the level of aggregate expenditure

D) the level of aggregate expenditure

The unemployment rate is A) the percentage of the labor force that is employed. B) the percentage of the number employed that is unemployed. C) the percentage of the working-age population that is unemployed. D) the percentage of the labor force that is unemployed.

D) the percentage of the labor force that is unemployed.

You earned $30,000 in 2007 and your salary rose to $80,000 in 2016. the CPI rose from 82 to 202 between 2007 and 20161, which of the following is true? A) there was deflation between 2007 and 2016 B) the purchasing power of your salary fell between 2007 and 2016. C) the purchasing power of your salary remained constant between 2007 and 2016 D) The purchasing power of your salary increased between 2007 and 2016

D) the purchasing power of your salary increased between 2007 and 2016

Which of the following is evidence of a shortage of chocolate? A) Firms lower the price of chocolate B) The price of chocolate is raised in order to increase sales. C) the equilibrium price of chocolate falls due to a decrease in demand. D) The quantity of chocolate demanded is greater than the quantity supplied.

D) the quantity of chocolate demanded is greater than the quantity supplied.

If, in a competitive market, marginal benefit is greater than marginal cost, A) the net benefit to consumers from participating in the market is greater than the net benefit to producers B) the government must force producers to lower price in order to achieve economic efficiency C) the quantity sold is greater than the equilibrium quantity D) the quantity sold is less than the equilibrium quantity

D) the quantity sold is less than the equilibrium quantity

Suppose the demand curve for a product is downward sloping and the supply curve is upward sloping. If a unit tax is imposed in the market for this product, A) sellers bear the entire burden of the tax. B) the tax burden will be shared among the government, buyers, and sellers C) buyers bear the entire burden of the tax D) the tax burden will be shared by buyers and sellers

D) the tax burden will be shared by buyers and sellers

Gross Domestic Product is calculated by summing up A) the total quantity of goods and services in the economy B) the total quantity of goods and services produced in the economy during a period of time C) the total market value of goods and services in the economy D) the total market value of final goods and services produced in the economy

D) the total market value of final goods and services produced in the economy during a period of time

When the labor market is at full employment A) there is only cyclical unemployment in the economy. B) there is only structural unemployment in the economy. C) the unemployment rate is 0%. D) there is no cyclical unemployment in the economy.

D) there is no cyclical unemployment in the economy

Which of the following is not one of the four main categories of spending identified by John Maynard Keynes? A) consumption B) planned investment C) government purchases D) transfer payments

D) transfer payments

Real GDP is GDP in a giver year A) adjusted only for anticipated inflation B) adjusted only for unanticipated inflation C) valued in the prices of that year D) valued in the prices of the base year

D) valued in the prices of the base year

Net Export is calculated as _________________. A) Import- Export B) Export- Import C) Outputs- Inputs D) Inputs- Outputs

Exports- Imports

"An increase in the price of oranges will increase the demand for grapefruits." This statement is an example of a normative economic statement True False

False

A person's wealth is the same as his income. True False

False

A positive technological change will cause the quantity of a good supplied to increase True False

False

A series of bank runs in a country should have no effect on M1 as money simply moves from checking deposits to currency. True False

False

Aggregate expenditure includes consumption spending, unplanned investment spending, government purchases, and net exports. True False

False

An economy without money would have no exchanges of goods and services. True False

False

An increase in the price level in the United States will reduce imports and increase exports. True False

False

As population declines, scarcity eventually disappears. True False

False

Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the country. True False

False

Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling price to remain competitive. True False

False

Efficiency wage is another name for the minimum wage. True False

False

Eliminating frictional unemployment would be good for the economy. True False

False

Examining conditions that could lead to inflation in an economy is an example of a microeconomics topic True False

False

For developed countries like the United States, GDP will always exceed GNP. True False

False

Human capital refers to the percentage of the working-age population in the labor force. True False

False

If Blake can pick more cherries in one hour than Cody, then Blake had a comparative advantage in cherry picking. True False

False

If nominal GDP is less than real GDP, then the GDP deflator will be greater than 100. True False

False

If the CPI falls from 142 to 140 between two consecutive years, this implies that prices fell by 2% between those two years True False

False

If the demand for a product decreases and the supply of the product does not change, equilibrium price and equilibrium quantity will both increase. True False

False

Inflation usually increases during a recession and decreases during an expansion. True False

False

It is possible for a market for a good to experience a surplus and a shortage at the same time. True False

False

Liquidity increases as we move from the M1 to the M2 definition of the money supply. True False

False

Optimal decisions are made at the point where marginal benefit is maximized. True False

False

Over the last decade in the United States, services have become a smaller fraction of GDP relative to goods. True False

False

Potential GDP is the maximum output a firm is capable of producing. True False

False

Producer surplus is the difference between the highest price someone is willing to pay and the price he actually pays. True False

False

Rent control is an example of a price floor. True False

False

Residential investment includes spending by firms on office buildings. True False

False

The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss. True Flase

False

The inflation rate measures the average prices of goods and services in the economy. True False

False

The purchase of stocks and bonds in another country is known as foreign direct investment. True False

False

The size of the underground economy as a percent of GDP is larger in the United States as compared to poorer countries such as Zimbabwe. True False

False

There is a shortage of every good that is scare. True False

False

Transfer payments are subtracted from national income to get to personal income. True False

False

When net exports equal zero, the economy is in macroeconomic equilibrium. True False

False

When voluntary exchange takes place, only one party gains from the exchange. True False

False

The marginal propensity to consume measures the average amount of wealth that a consumer spends in a given period of time. True False

Flase

The division of the burden of a tax between buyers and sellers in a market is called tax incidence. True False

Tru

"The distribution of income should be determined by the government" is an example of a normative economic statement. True False

True

A cash withdrawal reduces deposits, reserves, and excess reserves in the banking system. True False

True

A rising price level decreases consumption by decreasing the real value of household wealth. True False

True

A welding machine is an example of a factor of production if it is being used to produce automobiles. True False

True

An increase in population results in a n increase in demand. True False

True

Developing countries with large informal sectors tend to have firms that invest less in capital equipment True False

True

Financial markets and financial intermediaries comprise the financial system. True False

True

If a country produces only two goods, it is possible to have an absolute advantage in the production of both goods. True False

True

If a country produces only two goods, then it is not possible to have a comparative advantage in the production of both those goods. True False

True

If consumers believe the price of hybrid vehicles will decrease in the future, this will cause the demand for hybrid vehicles to decrease now. True False

True

If inflationary expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant. True False

True

If planned aggregate expenditure is less than real GDP, some firms will experience unplanned increases in inventories. True False

True

If the rate of growth in real GDP exceeds the rate of growth in the money supply, the quantity theory of money predicts a price deflation. True False

True

Macroeconomic equilibrium can occur at any point on the 45 degree line. True False

True

Market equilibrium occurs where the quantity supplied is equal to the quantity demanded True False

True

One drawback of the patent system is that firms must disclose to the public information about the product or process. True False

True

One reason why many low-income countries experience low rates of growth is because of low rates of saving and investment in those countries. True False

True

Technological change is the key to sustaining economic growth. True False

True

The Fed can change the money supply more quickly by using open market operations as compared to discount policy. True False

True

The costs to firms of changing prices are called menu costs True False

True

The household survey asks adults about their employment status and is used to compile the monthly unemployment rate. True False

True

The larger the MPS, the smaller the value of the multiplier. True False

True

The natural rate of unemployment consists of frictional unemployment plus structural unemployment. True False

True