Econ Final

63) The function of money that allows individuals a method to compare the relative value of goods and services is A) medium of exchange. B) unit of accounting. C) store of value. D) liquidity.

B) unit of accounting.

17) For typical goods, supply curves are A) downward sloping. B) upward sloping. C) horizontal. D) vertical.

B) upward sloping.

38) The aggregate demand curve is usually A) vertical. B) Upward sloping. C) Downward sloping. D) horizontal.

C) Downward sloping.

27) Which of the following would most likely be sold in the product markets? A) A new car B) Stocks and bonds C) Iron ore D) Entrepreneurial ability

A) A new car

1) Economics is best defined as the A) study of how people make choices to satisfy their wants. B) study of individual self-interests. C) study of how government can most efficiently raise funds by taxation. D) process by which goods are sold in free markets

A) study of how people make choices to satisfy their wants.

14) If a decrease in the price of good A causes a decrease in demand for good B, the two goods are A) substitutes. B) complements. C) normal. D) inferior.

A) substitutes.

28) The measurement system used by the U.S. government to estimate national income is A) The GDP deflator. B) National income accounting. C) The sum of financial transactions, transfer payments and secondhand goods. D) The sum of consumption plus investment expenditures.

B) National income accounting.

40) A weakening in consumer confidence causes a A) shift of the aggregate demand curve to the right. B) shift of the aggregate demand curve to the left. C) movement up along the aggregate demand curve. D) movement down along the aggregate demand curve.

B) shift of the aggregate demand curve to the left

70) When considering the demand for money curve, the interest rate A) will have a positive relationship with the quantity of money demanded. B) varies negatively with the transactions demand for money. C) is the price of holding money. D) is independent of the opportunity cost of money.

C) is the price of holding money.

8) The difference between scarcity and a shortage is that A) scarcity is caused by poverty and shortages are caused by natural disasters. B) shortages are a type of scarcity caused by natural disasters while scarcity is caused by human errors. C) scarcity always is a part of human life while shortages usually are temporary. D) shortages are always part of human life while scarcity is usually temporary.

C) scarcity always is a part of human life while shortages usually are temporary.

2) Microeconomics is defined as that part of economic analysis that A) studies the behavior of the economy as a whole. B) includes the problems of inflation and unemployment. C) studies individual decision making by households and firms. D) concerns aggregate production and consumption.

C) studies individual decision making by households and firms.

69) The opportunity cost of holding money refers to A) the service fees associated with checking accounts. B) the service fees associated with checking accounts plus the costs undertaken to prevent theft. C) the interest that could have been earned if the money balances had been transferred to an interest-bearing asset. D) the pleasure that would have been received if the money balances had been used to buy a good or service.

C) the interest that could have been earned if the money balances had been transferred to an interest-bearing asset.

65) The opportunity cost of holding money is measured by A) a dollar. B) the price of government bonds. C) the interest yield that could have been earned by holding some other asset. D) the liquidity of interest-bearing assets

C) the interest yield that could have been earned by holding some other asset.

12) The production possibilities curve represents A) the maximum amount of labor and capital available to society. B) the combinations of goods and services among which consumers are indifferent. C) the maximum combination of goods and services that can be produced with fixed resources and technology, given efficient use of the resources. D) the maximum rate of growth of capital and labor in a country.

C) the maximum combination of goods and services that can be produced with fixed resources and technology, given efficient use of the resources.

33) If population growth is greater than the growth of real output, A) Real per capita Gross Domestic Product (GDP) growth will be less than the growth of real Gross Domestic Product (GDP). B) The production possibilities curve is shifting to the left. C) Real per capita Gross Domestic Product (GDP) growth will be greater than the growth of real Gross Domestic Product (GDP). D) Real per capita Gross Domestic Product (GDP) and real Gross Domestic Product (GDP) will be growing at the same rate.

A) Real per capita Gross Domestic Product (GDP) growth will be less than the growth of real Gross Domestic Product (GDP).

26) In the factor market, households A) Sell resources. B) Buy resources. C) Are neither buyers nor sellers of resources. D) Are both buyers and sellers of resources.

A) Sell resources.

57) If the government spends exactly what it receives in taxes during a given interval, then the result is A) a balanced budget. B) the gross public debt. C) the net public debt. D) a government budget deficit.

A) a balanced budget.

56) When government revenues exceed government outlays in a particular year, this is called A) a budget surplus. B) a budget deficit. C) the national debt. D) fiscal policy.

A) a budget surplus.

50) Technological progress should lead to A) an outward (rightward) shift in the investment function. B) a downward movement of the investment function. C) an unchanged investment function. D) less saving.

A) an outward (rightward) shift in the investment function.

52) Typical goals for fiscal policy are A) high employment and price stability. B) high prices for consumers and low prices for businesses. C) running high deficits and raising consumer prices. D) increasing the money supply so the government can spend more.

A) high employment and price stability.

59) When the Social Security Administration holds U.S. Treasury Bonds A) interagency borrowing has occurred and the government owes itself. B) there is a balanced budget. C) an entitlement has occurred. D) the gross public debt has increased.

A) interagency borrowing has occurred and the government owes itself.

68) The precautionary demand for holding money arises because A) people want be able to make unexpected purchases or to meet emergencies. B) credit cards charge low interest rates, which makes money more attractive than credit. C) people would rather hold money in the form of time deposits than in the form of hard currency. D) expected transactions are completed more easily with debit cards than with credit cards.

A) people want be able to make unexpected purchases or to meet emergencies.

6) Holding all variables constant but one and assessing the impact of the one variable that has changed is an example of using A) the ceteris paribus assumption. B) an economic model based on unrealistic assumptions. C) a flawed economic model. D) an untestable proposition.

A) the ceteris paribus assumption.

11) Opportunity cost is defined as A) the value of the next-best alternative that must be sacrificed to attain a want. B) the least-costly means to produce output. C) the value of the output currently received by an individual or a corporation. D) the return from a given unit of labor.

A) the value of the next-best alternative that must be sacrificed to attain a want.

60) When foreign residents buy U.S. Treasury securities to finance the budget deficit, A) we can also anticipate an increase in the trade deficit. B) we can also anticipate a decrease in the trade deficit. C) the trade deficit will not be affected. D) the public debt will be reduced.

A) we can also anticipate an increase in the trade deficit.

74) When the U.S. places an import quota on imported sugar, we expect which of the following effects? A. Consumers seek substitutes for sugar and products that use sugar B. Consumers consume more sugar and products that use sugar C. The supply of sugar increases D. Net exports in the U.S. fall

A. Consumers seek substitutes for sugar and products that use sugar

67) What is the most common reason people demand money? A) Each bill and coin is a reflection of important people and events in a nationʹs history. B) People desire to use money as a medium of exchange when they buy goods and services. C) Since very few of us engage in a flow of transactions, money is our financial safety net. D) They demand money to ensure that the nationʹs government will not spend too much.

B) People desire to use money as a medium of exchange when they buy goods and services.

36) The aggregate supply curve A) Shows what each producer is willing and able to produce at each income level. B) Relates planned aggregate production to price level. C) becomes vertical if there is excess production capacity within the economy. D) Shows a negative relationship between the price level and real Gross Domestic Product (GDP).

B) Relates planned aggregate production to price level.

51) Fiscal policy refers to the A) manipulation of the money supply in order to increase the amount of paper currency in circulation. B) adjustment of government spending and taxes in order to achieve certain national economic goals. C) adjustment of national income data to account for price level changes. D) changing the way unemployment data is calculated so as to make it appear that unemployment is lower than it actually is.

B) adjustment of government spending and taxes in order to achieve certain national economic goals.

54) Supply-side economics focuses on tax cuts to stimulate A) aggregate demand by reducing saving. B) aggregate supply by increasing production. C) government spending. D) military research.

B) aggregate supply by increasing production.

62) Money is defined as A) a person's net worth. B) anything people generally accept in exchange for goods and services. C) a by product of a barter economy. D) any financial instrument that is backed by gold.

B) anything people generally accept in exchange for goods and services.

47) The Keynesian model is based on the idea that A) saving depends only on the interest rate. B) both consumption and saving are directly related to disposable income. C) consumption is unrelated to the level of real Gross Domestic Product (GDP). D) both consumption and saving are unrelated to the level of real Gross Domestic Product (GDP).

B) both consumption and saving are directly related to disposable income.

18) An improvement in technology in the production of computers would A) increase the demand for computers. B) increase the supply of computers. C) decrease the demand for computers. D) decrease the supply of computers.

B) increase the supply of computers.

42) According to Keynes, involuntary unemployment is possible because of A) the existence of capital markets. B) long-term labor contracts and the existence of labor unions. C) government interference in the market economy. D) inflation.

B) long-term labor contracts and the existence of labor unions.

5) A simplified representation of the real world that is used to explain economic phenomena is a(n) A) map. B) model. C) assumption. D) implication.

B) model.

9) Physical capital is distinguished from human capital because A) physical capital refers to trained people. B) physical capital refers to equipment and machinery, whereas human capital refers to trained people. C) human capital refers only to day laborers. D) physical capital refers to trained people, whereas human capital refers to equipment and machinery.

B) physical capital refers to equipment and machinery, whereas human capital refers to trained people.

7) In the production of goods and services, trade-offs exist because A) not all production is efficient. B) society has only a limited amount of productive resources. C) buyers and sellers often must negotiate prices. D) human wants and needs are limited at a particular point in time.

B) society has only a limited amount of productive resources.

10) Human capital is A) what people get from physical capital. B) the accumulation of skills, training and education of workers. C) the value obtained from selling stocks and bonds. D) the human resources that perform the function of raising capital.

B) the accumulation of skills, training and education of workers.

78) If the United States sells beef to Japan, the U.S. beef producer is paid with A. Euros, or any other third currency B. Dollars. C. Yen, the Japanese currency D. International monetary credits.

B. Dollars.

77) Which of the following is not necessary to calculate the real exchange rate? A. Domestic price B. Domestic interest rate C. Foreign price D. Nominal exchange rate

B. Domestic interest rate

75) Which of the following is a consequence of a protective tariff on imported steel? A. Net exports fall. B. Income is transferred from steel consumers to steel producers. C. Allocative efficiency is improved. D. Income is transferred from domestic steel to foreign steel producers.

B. Income is transferred from steel consumers to steel producers.

71) Why should countries trade? A. To help them thrive B. To increase output C. To decrease output D. To keep them busy

B. To increase output

4) The potential rewards that are available to an individual if a particular activity is undertaken are known as A) premiums. B) gifts. C) incentives. D) intrinsic values.

C) incentives.

30) GDP does NOT measure the well-being of a nation's residents because it A) Excludes the sale of secondhand goods. B) Excludes the value of intermediate goods. C) Includes the value of final goods and services produced in the economy. D) Excludes nonmarket transactions.

D) Excludes nonmarket transactions.

29) Wheat used for producing bread is A) A final good. B) Not going to generate any employment. C) An intermediate good. D) A durable good.

C) An intermediate good.

32) Which of the following is a negative effect of economic growth? A) Higher inflation B) Higher unemployment C) Environmental pollution D) all of the above

C) Environmental pollution

46) The income-expenditure model of real GDP determination is due to the work of A) Adam Smith. B) J. B. Say. C) John Maynard Keynes. D) Roger Miller.

C) John Maynard Keynes.

39) The real-balance effect implies that when A) The price level decreases, the value of money balances held by individuals, firms, government, and foreigners increases and spending decreases. B) The price level increases, the value of money balances held by individuals, firms, government, and foreigners increases and spending increases. C) The price level increases, the value of money balances held by individuals, firms, government, and foreigners decreases and spending decreases. D) The price level decreases, the value of money balances held by individuals, firms, government, and foreigners decreases and spending decreases.

C) The price level increases, the value of money balances held by individuals, firms, government, and foreigners decreases and spending decreases.

49) The marginal propensity to consume (MPC) can best be defined as that fraction of A) real disposable income that is consumed. B) real disposable income that is not consumed. C) a change in real disposable income that is spent. D) a change in real disposable income that is saved.

C) a change in real disposable income that is spent.

3) An economic system is A) the universe of all resources. B) a way to create new resources. C) a mechanism to allocate scarce resources. D) an organization that generates profits.

C) a mechanism to allocate scarce resources.

43) A reduction in nominal wages will cause which of the following? A) a movement along the short-run aggregate supply curve B) a shift of both the short-run and long-run aggregate supply curves C) a rightward shift in the short-run aggregate supply curve D) a leftward shift in the short-run aggregate supply curve to shift to the left

C) a rightward shift in the short-run aggregate supply curve

64) The requirement for a double coincidence of wants occurs when A) there is inflation. B) there is deflation. C) a system of barter is used. D) the medium of exchange is liquid.

C) a system of barter is used.

44) An inflationary gap occurs when A) aggregate demand falls, but other things remain constant. B) short-run aggregate supply falls, but other things remain constant. C) the short-run equilibrium level of real GDP is greater than long-run aggregate supply. D) the short-run equilibrium level of real GDP is less than long-run aggregate supply.

C) the short-run equilibrium level of real GDP is greater than long-run aggregate supply.

58) The public debt is A) an excess of government spending over government revenues during a given time period. B) a situation in which the government's spending is exactly equal to the total taxes and other revenues it collects during a given time period. C) the total value of all outstanding federal government securities. D) all federal government debt irrespective of who owns it.

C) the total value of all outstanding federal government securities.

20) The rate of unemployment is calculated as the number of A) unemployed workers divided by the number of employed workers. B) people in the civilian labor force divided by the number of unemployed. C) unemployed divided by the number of people in the civilian labor force. D) employed workers divided by the number of unemployed workers.

C) unemployed divided by the number of people in the civilian labor force.

76) What do we call the number that represents the nominal value of currency in two countries? A. Interest rate B. Output C. Exchange rate D. Price

C. Exchange rate

31) The term "economic" growth refers to increases in A) Resources use. B) Nominal income. C) Satisfaction. D) Productive capacity.

D) Productive capacity.

80) If the Japanese economy suffers a deep, prolonged recession, in what ways woulld U.S. net exports, the value of the dollar, and the value of the yen change, respectively? A. decrease, increase, increase B. decrease, decrease, decrease C. decrease, decrease, increase D. increase, decrease, increase

C. decrease, decrease, increase

41) The idea that supply creates its own demand is known as A) the law of supply. B) the law of demand. C) Keynes' law. D) Say's law.

D) Say's law.

48) Which of the following theories predicts that current consumption increases when a person expects an increase in future income? A) The life-cycle theory of consumption B) The permanent income hypothesis C) The Keynesian theory of consumption D) All of the above

D) All of the above

66) Which of the following is a factor influencing the demand for money? A)Transactions demand B) Precautionary demand C) Asset demand D) All of the above are correct

D) All of the above are correct

35) What did Malthus say about population growth? A) Population growth is the key to a nation's economic growth. B) Population growth is not a problem if food production keeps up, and Malthus predicted that it would. C) Population growth is a huge problem if housing and medical care don't also increase. D) The population would grow faster than food supplies, which would be a recipe for disaster.

D) The population would grow faster than food supplies, which would be a recipe for disaster.

25) The simple circular flow of income shows that the total income in an economy equals A) Total profits earned by firms. B) All taxes paid by households. C) The total amount of money supplied by the government. D) Total expenditures.

D) Total expenditures.

22) Cyclical unemployment occurs when A) individuals enter the labor market and make the rounds of potential employers. B) individuals with skills no longer valued in the domestic labor market cannot find employment. C) individuals give up the search for employment. D) a downturn in economic activity decreases employment.

D) a downturn in economic activity decreases employment.

19) The term "unemployment" is best described as the total number of A) people not working. B) people who have been laid off and have stopped looking for work. C) adults who work fewer hours than they wish to work. D) adults who are looking for work but have not found a job.

D) adults who are looking for work but have not found a job.

34) Proponents of the new growth theory argue that which of the following is a determinant of economic growth? A) An effective system of patent protection B) The quality and size of the nation's educational system C) The proportion of income that goes into research and development D) all of the above.

D) all of the above.

37) The long run aggregate supply curve (LRAS) also represents A) The full-information level of output. B) The full-employment level of output. C) The full-adjustment level of output. D) all of the above.

D) all of the above.

61) In a barter system, we would expect to see A) many different units of money. B) money and goods exchanged for each other. C) wide-spread financial institutions. D) goods traded directly for other goods and services.

D) goods traded directly for other goods and services.

55) The permanent income hypothesis implies that the effect of a temporary tax cut on economic activity A) is greater than the effect of a permanent tax cut. B) is the same as the effect of a permanent tax cut. C) can be greater than or smaller than the effect of a permanent tax cut, depending on how the tax cut affects the government. D) is smaller than the effect of a permanent tax cut.

D) is smaller than the effect of a permanent tax cut.

16) According to the law of supply, A) people buy more of a good when the price increases. B) people buy less of a good when the price decreases. C) producers provide more of a good when the price decreases. D) producers provide less of a good when the price decreases.

D) producers provide less of a good when the price decreases.

21) A lifeguard who is out of work in the winter is A) frictionally unemployed. B) structurally unemployed. C) cyclically unemployed. D) seasonally unemployed.

D) seasonally unemployed.

53) The Laffer curve shows a relationship between A) inflation rates and unemployment rates. B) interest rates and investment spending. C) price level and real Gross Domestic Product (GDP). D) tax rates and tax revenues.

D) tax rates and tax revenues.

23) Inflation is best described as a situation in which A) relative prices are changing. B) some prices are rising faster than others. C) relative prices are changing, but the purchasing power of the dollar is unchanged. D) the average of all prices are on a sustained rise over a period of time.

D) the average of all prices are on a sustained rise over a period of time.

24) The consumer price index shows A) the current cost of a basket of goods. B) the relative price of necessities. C) the price of goods in the future. D) the cost of today's goods expressed in terms of the cost of goods in a base year.

D) the cost of today's goods expressed in terms of the cost of goods in a base year.

15) Adding the quantities demanded by all consumers at every price will yield A) the market-clearing price. B) the number of consumers. C) the total substitution effect from a price change. D) the market demand curve.

D) the market demand curve.

13) In economics, "demand" refers to A) the intensity of desire for a good. B) the amount of a good people need rather than the amount they want. C) the satisfaction a good will provide a person. D) the quantities of a good that people will buy at various prices.

D) the quantities of a good that people will buy at various prices.

45) A recessionary gap occurs when A) aggregate demand falls, but other things remain constant. B) short-run aggregate supply falls, but other things remain constant. C) the short-run equilibrium level of real GDP is greater than the level consistent with the long-run aggregate supply curve. D) the short-run equilibrium level of real GDP is less than the level consistent with the long-run aggregate supply curve.

D) the short-run equilibrium level of real GDP is less than the level consistent with the long-run aggregate supply curve.

72) If there are two producers and two products, which of the following cannot happen? A. A producer has an absolute advantage on one product B. A producer has the comparative advantage on both products C. A producer has the comparative advantage on one product D. A producer has an absolute advantage on both products

D. A producer has an absolute advantage on both products

73) When a country imports more than it exports, what is the value of the net exports? A. Need more information B. Zero C. Positive D. Negative

D. Negative

79) If the U.S. dollar and Chinese yuan are traded in flexible currency markets, which of the following causes an appreciation of the dollar relative to the Chinese yuan? A. Lower interest rates in the U.S. relative to China B. Lower price levels in China relative to the U.S. C. Growing American preference to consume more Chinese made goods D. Rising per capita GDP in China.

D. Rising per capita GDP in China.