Final Econ 2301
99. Which of the following is most critical for the maintenance of an efficient and productive economy? a. Money backed by gold or silver b. Steadily rising prices c. An unlimited and unregulated supply of money d. A properly functioning monetary system e. A well-organized barter system
A properly functioning monetary system
2. Which of the following sentences is the best example of scarcity of time? a. Peter buys a hamburger. b. John-Michael wants to spend his money on a new hover board. c. Alexander is doing homework instead of going to the movies with his friends. d. Amanda, a geography teacher, is retired. e. Bill is unemployed.
Alexander is doing homework instead of going to the movies with his friends.
30. Which of the following is likely to shift the demand curve for a normal good to the right? a. A decrease in income, if the good is a normal good b. An increase in the price of a complementary good c. A decrease in the good's price, if the good is normal d. An increase in the good's price, if the good is inferior e. An expectation of a shortage in the future
An expectation of a shortage in the future
44. Since 1990, a major industrial country with the lowest growth rate in per capita GDP has been . a. West Germany b. Italy c. the United States d. Great Britain e. Canada
Italy
19. Which of the following would not describe two-thirds of the for-profit businesses in the United States as measured by the sheer number of firms? a. Small retail businesses b. Small service operations c. Part-time home-based businesses d. Small farms e. Multinational corporations
Multinational corporations
53. Which of the following is true in the short run? a. The aggregate supply curve is horizontal. b. The aggregate supply curve is vertical. c. Per-unit costs do not increase as much as output prices when the price level rises. d. An increase in price per unit results in a decrease in profit per unit. e. Firms' total costs of production decrease as output expands beyond the potential level.
Per-unit costs do not increase as much as output prices when the price level rises.
79. Which of these changes is likely to follow when the Fed purchases U.S. government securities? a. Aggregate demand will decrease. b. The demand for financial securities will increase. c. Rate of interest will increase. d. Planned investment spending will increase. e. Real GDP will decrease.
Planned investment spending will increase.
22. Which of the following is true about government activity in the United States? a. Macroeconomic policy is handled mainly at the state level. b. Higher education is handled mainly at the national level. c. Primary and secondary education is handled mainly at the local level. d. Primary and secondary education is handled mainly at the national level. e. Police and fire protection are handled mainly at the state level.
Primary and secondary education is handled mainly at the local level.
75. Coins in the United States are manufactured and distributed by the: a. Federal Reserve. b. U.S. Mint. c. International Trade Administration d. Federal Bureau of Investigation. e. Comptroller of the Currency.
U.S. Mint.
96. Which of the following is not an example of foreign aid? a. U.S. discount stores purchasing toys from Chinese manufacturers b. The International Monetary Fund extending loans to countries that have trouble with their balance of payments c. The World Bank providing loans and grants to support health and education programs d. The U.S. government providing funds to build an electricity plant in Albania e. The Australian government providing funds to repair highways in Tonga
U.S. discount stores purchasing toys from Chinese manufacturers
57. When net taxes increase and government purchases decrease, ______. a. the price level will rise b. money supply must rise c. the aggregate demand curve shifts leftward d. output and employment increase e. the aggregate supply curve shifts leftward
the aggregate demand curve shifts leftward
29. Sugar and honey are viewed as substitutes for each other in many cooking applications. If the price of sugar rises, we would expect: a. the demand for honey to increase. b. the demand for honey to decrease. c. the quantity demanded of honey to decrease. d. the price of honey to decrease. e. the quantity demanded of honey to increase.
the demand for honey to increase.
65. One way to measure national debt over time is relative to: a. the cash flow of the banking system. b. the economy's production and income. c. credit sales of consumer durables over a year. d. national home sales in large cities. e. the economy's savings.
the economy's production and income.
73. Money is legal tender if: a. people willingly accept it in payment of debts. b. it is backed by gold or silver. c. it is commodity money. d. the government says it is. e. it is in a bank account.
the government says it is.
51. Fluctuations in investment: a. account for almost all of the variability in gross domestic product (GDP) only during expansions. b. account for little of the variability in gross domestic product (GDP). c. account for almost all of the variability in gross domestic product (GDP) only during recessions. d. are larger during expansions than during recessions. e. account for more of the variability in gross domestic product (GDP) than consumption.
account for almost all of the variability in gross domestic product (GDP) only during recessions.
9. Economists generally believe that: a. buyers and sellers have all the information they can use. b. additional information is costly to acquire. c. decision makers have complete knowledge of all the alternatives available. d. economic decisions result from random behavior. e. decision makers never make mistakes.
additional information is costly to acquire.
42. The benefits paid by the largest pension program in the United States are: a. not adjusted for changes in the price level. b. adjusted for changes in the price level. c. revised every five years. d. adjusted for changes in the nominal rate of interest. e. adjusted for changes in the real rate of interest.
adjusted for changes in the price level.
21. Contracts are enforced by: a. the firms that make the contracts through buy-out clauses. b. law firms that specialize in contract enforcement. c. corporations specializing in contract writing and enforcement. d. government through the judicial system. e. both households and firms through customer relations departments.
government through the judicial system.
60. An increase in the federal budget deficit: a. only occurs when there is a deficit in the balance of trade. b. creates deflation. c. decreases aggregate demand. d. decreases the aggregate quantity demanded along a stationary aggregate demand curve. e. raises the equilibrium level of output and employment.
raises the equilibrium level of output and employment.
31. The value of a country's final goods and services after adjusting for changes due to inflation is called its . a. real GDP b. nominal GDP c. disposable income d. net national product e. full employment output
real GDP
59. Which of the following will not increase when net taxes decrease? a. Saving b. Disposable income c. Consumption d. Government expenditure e. GDP
Government expenditure
7. Environmentalists have continually argued for the use of alternatives to fossil fuels to generate energy. Harnessing wind power by setting up wind farms had been one alternative proposed and implemented. As it is now known that these wind farms lead to the slicing and dicing of migratory birds and the decimation of the local bat population, we could say that environmentalists have committed the: a. fallacy of composition. b. fallacy that association is causation. c. fallacy of segmentation. d. mistake of ignoring secondary effects. e. mistake of ignoring the obvious.
mistake of ignoring secondary effects.
24. The difference between fiscal policy and monetary policy is that: a. fiscal policy is a macroeconomic policy but monetary policy is a microeconomic policy. b. monetary policy is a macroeconomic policy but fiscal policy is a microeconomic policy. c. fiscal policy involves regulation of natural monopolies but monetary policy involves the provision of public goods. d. monetary policy involves regulation of the money supply but fiscal policy involves government spending and taxing. e. fiscal policy involves the promotion of competition but monetary policy involves collecting money to pay for taxes.
monetary policy involves regulation of the money supply but fiscal policy involves government spending and taxing.
87. The following graph shows the supply of and demand for baseballs in the United States. If the world price is $3 per baseball and a tariff of $1 per baseball is imposed, then the number of baseballs purchased in the United States is . Figure 17.3 At $4 Supply is 6 and Demand is 10 a. 4,000 b. 6,000 c. 8,000 d. 10,000 e. 12,000
10,000
43. Industrial market countries make up about of the world population but produce more than of the world's output. a. 16 percent; 50 percent b. 40 percent; 75 percent c. 40 percent; 58 percent d. 55 percent; 65 percent e. 38 percent; 55 percent
16 percent; 50 percent
27. In the market for chewing gum, the current price is 50 cents per pack and 100,000 packs are sold. Which of the following events is most likely to result in a new equilibrium price of 60 cents and quantity of 90,000 packs? a. An increase in the price of other kinds of candy b. An increase in the price of the ingredients used to make chewing gum c. A decrease in the number of young people in the population d. An agreement among workers in the chewing gum industry to work for lower wages e. An increase in income of consumers of chewing gum
An increase in the price of the ingredients used to make chewing gum
77. Which of the following is not assumed to be constant along a money demand curve? a. The price level b. The interest rate c. Real GDP d. Nominal GDP e. Individual's tastes and preferences
The interest rate
78. Which one of these statements is correct? a. The lower the interest rate, the higher the opportunity cost of holding assets in the form of money. b. The quantity of money supplied is independent of the interest rate. c. The larger the supply of money, the higher the interest rate, all things equal. d. Travelers checks and government bonds are equally liquid assets. e. The demand for money increases whenever the price level decreases.
The quantity of money supplied is independent of the interest rate.
15. Leakages cause diversion of income from the domestic spending stream. a. True b. False
True
18. Which of the following did not occur during the Industrial Revolution? a. Production became more reliant on highly specialized equipment. b. A more efficient division of labor was promoted. c. Workers bore much of the costs of production. d. The transaction costs of contracting with individual resource owners were reduced. e. Technological development increased the productivity of most workers.
Workers bore much of the costs of production.
72. The crowding in of private investment is more likely to occur, when . a. there is a depreciation of domestic currency b. interest rates increase significantly c. a contractionary gap exists in an economy d. the deficits lower expectations about economic growth e. an expansionary gap exists in an economy
a contractionary gap exists in an economy
58. If fiscal policy is used to close an expansionary gap, the _____. a. short-run aggregate supply curve shifts leftward and the price level falls b. short-run aggregate supply curve shifts rightward and the price level increases c. short-run aggregate supply curve shifts rightward and the price level falls d. aggregate demand curve shifts leftward and the price level falls e. aggregate demand curve shifts rightward and the price level falls
aggregate demand curve shifts leftward and the price level falls
26. A shortage of textbooks is most likely to cause: a. a decrease in the supply of textbooks. b. a decrease in the demand for textbooks. c. a decrease in the price of paper. d. an increase in the cost of printing. e. an increase in the price of textbooks.
an increase in the price of textbooks.
69. Actual federal budgets are not an accurate measure of discretionary fiscal policy because: a. it is difficult to measure government spending accurately. b. people cheat on their income taxes. c. budget deficits increase during expansions even without changes in fiscal policy. d. budget deficits increase during recessions even without changes in fiscal policy. e. earlier administrations may have contributed to current budget deficits.
budget deficits increase during recessions even without changes in fiscal policy.
28. Other things constant, the demand for a product is the amount that: a. sellers are willing and able to sell at alternative prices. b. buyers purchase over different time periods. c. sellers are willing to sell at a particular price. d. buyers are willing and able to purchase at different prices. e. buyers are willing to consume at a constant price.
buyers are willing and able to purchase at different prices.
100. The most effective mechanism for reducing runs on banks is . a. the discount rate b. deposit insurance c. the reserve requirement d. open-market operations e. the Federal Reserve note
deposit insurance
41. If the CPI is 200, then the price level has since the base year. a. doubled b. quadrupled c. tripled d. increased five times e. increased six times
doubled
5. The basic purpose of economic models is to: a. construct simplifying assumptions about the real world. b. explain reality in all its complexity. c. collect empirical data to support the facts. d. construct situations where controlled experiments can be carried out. e. explain and predict economic events.
explain and predict economic events.
12. Efficiency involves: a. producing output using the least amount of labor. b. producing output using the least amount of capital. c. producing as far inside the production possibilities frontier as possible. d. producing only one out of many possible commodities. e. getting the maximum possible output from available resources.
getting the maximum possible output from available resources.
98. Barter is the direct exchange of goods and services for: a. any kind of money. b. other goods and services. c. either goods or money. d. commodity money. e. foreign currency.
other goods and services.
3. The payments in return for labor and capital are ____ , respectively. a. profit and rent b. interest and profit c. rent and wages d. profit and wages e. wages and interest
wages and interest
14. Which of the following is a result of increased real wages in the United States? a. A decrease in the quantity of services demanded by households b. An increase in the opportunity cost of remaining employed in the home c. A decrease in the opportunity cost of working outside the home d. A decline in the number of households providing labor outside the home e. Reduced use of labor-saving devices in households
An increase in the opportunity cost of remaining employed in the home
13. Which of the following is an example of a durable good? a. Food cooked at home b. Food eaten at a restaurant c. High fashion clothing d. Binoculars e. Motor oil
Binoculars
89. Which of the following results in international specialization? a. Differing consumer tastes b. Diseconomies of scale in production c. A high world price for a good d. Diminishing returns to a variable factor of production e. Differences in benefits that consumers and producers get from domestic market exchange
Differing consumer tastes
33. The following table shows an aggregate demand schedule and an aggregate supply schedule. Which of the following is true? Table 5.1 Aggregate Demand (quantity demanded in billions of dollars) Price Level ($) Aggregate Supply (quantity supplied in billions of dollars) 100 150 1,200 200 125 1,000 400 100 800 600 75 600 800 50 400 1,000 25 200 a. Equilibrium output is $1,000, and equilibrium price level is 25. b. Equilibrium output is $800, and equilibrium price level is 50. c. Equilibrium output is $200, and equilibrium price level is 125. d. Equilibrium output is $400, and equilibrium price level is 25. e. Equilibrium output is $600, and equilibrium price level is 75.
Equilibrium output is $600, and equilibrium price level is 75.
67. Which of the following is true of the federal budget process in the U.S.? a. Congress must approve a budget with at least a two-thirds majority vote. b. The federal budget must be balanced each year because the volume of international trade reduces if the government has a surplus or a deficit. c. Most federal outlays are determined by existing laws. d. Congress approves a budget that separates the capital budget and the operating budget. e. Detailed budgeting allows the party in power to reward supporters.
Most federal outlays are determined by existing laws.
35. Which of the following was true of the United States before 1970? a. The government was not responsible for promoting employment, output, and purchasing power. b. Most macroeconomic instability was caused by changes in international oil prices. c. Most macroeconomic instability was caused by shifts of aggregate demand. d. Most macroeconomic instability was caused by the depreciation of the dollar. e. The government was responsible for using monetary policy to correct a depression.
Most macroeconomic instability was caused by shifts of aggregate demand.
38. Which of the following is included as government purchases in gross domestic product (GDP)? a. Social Security payments to elderly citizens b. Welfare benefits distributed to the poor c. Outright grants from government to recipients d. Payments to clerical workers hired by government e. Unemployment compensation benefits
Payments to clerical workers hired by government
48. ______ is an example of an industrial cluster. a. International Trade Union Confederation b. International Workers Association c. International Transport Workers' Federation d. Silicon Valley software makers e. International Affiliation of Writers Guilds
Silicon Valley software makers
20. Which category includes the largest number of firms? a. Sole proprietorship b. Partnership c. Corporation d. S corporation e. Limited partnerships
Sole proprietorship
84. Which of the following is consistent with an active approach to policy? a. The natural rate of unemployment being uncertain b. Wages and prices being relatively quick to adjust c. The short-run aggregate supply curve being slow to shift in the presence of a recessionary gap d. The size of the multiplier being irrelevant e. The aggregate demand curve being slow to shift in the presence of a recessionary gap
The short-run aggregate supply curve being slow to shift in the presence of a recessionary gap
71. Which of the following statements about the tax cut enacted in 1981 is correct? a. The tax cut caused the recession of 1982. b. The tax cut and the recession of 1982 combined to produce one of the largest peace-time deficits ever experienced up to that time. c. The tax cut stimulated a large increase in economic activity and led directly to the balanced budget of 1982. d. The tax cut was opposed by supply-side economists. e. The tax cut was favored by Congress but opposed by the President and passed over his veto.
The tax cut and the recession of 1982 combined to produce one of the largest peace-time deficits ever experienced up to that time.
85. The rational expectations school advocates: a. Monetarism. b. Keynesianism. c. the use of fiscal policy. d. the use of monetary policy. e. a passive approach to policy.
a passive approach to policy.
74. The actions of the Fed: a. must be approved by the president and Congress. b. must be approved by the president alone. c. must be approved by Congress alone. d. are not subject to approval by any branch of government. e. are subject to the approval of the electorate.
are not subject to approval by any branch of government.
86. The world price of a good refers to the quantity of one good exchanged for a unit of another good. a. True b. False
False
95. Poor economies tend to have high education levels and high literacy rates. a. True b. False
False
94. Studies by the World Bank have emphasized that countries that have adopted trade liberalization policies have been successful. a. True b. False
True
39. If a firm hires labor for $8,000, pays rent of $4,000, buys raw materials for $13,000 from another firm, earns profits of $1,200, and sells its output for $31,000, the value added by the firm is . a. $4,800 b. $10,000 c. $18,000 d. $25,000 e. $26,200
$18,000
76. If a bank has $1 million in assets and $50,000 in net worth, its liabilities must equal: a. $50,000. b. $1,050,000. c. $50 million. d. $1,000,000. e. $950,000.
$950,000. (Remember: (assets=net worth + liabilities) 1 million= 50,000 + x )
90. The General Agreement on Tariffs and Trade (GATT) was established in: a. 1870 to protect U.S. industries and decrease world trade. b. 1921 to manage legal and accounting requirements for U.S. tariffs and quotas. c. 1947 by 23 countries to reduce trade restrictions. d. 1973 to increase trade restrictions, after OPEC significantly raised oil prices. e. 1990 to develop a free trade zone across 50 states.
1947 by 23 countries to reduce trade restrictions.
66. The growth-reducing effects of high public debt are transmitted entirely through high real interest rates on that debt. a. True b. False
False
68. Between 1990 and 2000, expenditures by the federal government on defense as a proportion of total federal spending increased. a. True b. False
False
81. Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap. a. True b. False
False
83. An economy that self-corrects a recessionary gap will experience falling nominal wages, rising real wages, and falling output. a. True b. False
False
61. Which of the following best illustrates the use of discretionary fiscal policy? a. Congress providing $1 billion in relief aid for hurricane victims b. Congress appropriating $400 million to help the needy and the appropriation being financed by a tax on wealth c. Income tax receipts being smaller because of a decline in real GDP during a recession d. The Federal Reserve tightening credit when it receives news of accelerating inflation e. Congress passing a bill authorizing $2 billion in additional spending when it receives news of a deepening recession
Congress passing a bill authorizing $2 billion in additional spending when it receives news of a deepening recession
70. Which of the following is not a possible implication of federal budget deficits? a. Crowding out b. Increased interest rates c. Inflation d. Increased trade deficits e. Depreciation of the dollar
Depreciation of the dollar
16. A command economic system does not need to be concerned with what to produce, how to produce things, or who will get the goods and services produced. a. True b. False
False
47. A group of musicians performing at a concert for charity in New York is an example of a cluster in economics. a. True b. False
False
50. The only way standard of living can increase is through increases in labor productivity. a. True b. False
False
54. In the figure given below, when aggregate supply is AS, the equilibrium output and price level will be Y2 and P2. a. True b. False
False
6. The fallacy of composition is the error of believing that a cause and effect relationship exists between two events that are associated in time. a. True b. False
False
17. The most common form of business organization in the United States is the sole proprietorship. a. True b. False
True
34. Stagflation is a situation with high unemployment rates, high inflation rates, and little or no growth in the economy. a. True b. False
True
40. Construction workers at times face high rates of unemployment because their work is both seasonal and subject to wide swings over the business cycle. a. True b. False
True
56. Discretionary fiscal policy works by shifting the aggregate demand curve. a. True b. False
True
64. The U.S. federal debt as a percentage of GDP is currently on the rise. a. True b. False
True
82. Advocates of the active approach believe that discretionary government policy can restore economic stability and improve economic performance. a. True b. False
True
91. In a fixed exchange rate system, rates are maintained by the central bank's ongoing purchases and sales of currencies. a. True b. False
True
63. If people base their spending decisions more on permanent income than current income, then: a. consumption spending will be more responsive to a temporary change in income than a change in permanent income. b. shifts in aggregate supply will be less predictable than if spending was based on current income. c. consumption spending will fluctuate more widely than if such spending was determined by current income. d. shifts in short-run aggregate supply will be more predictable than if spending was based on current income. e. attempts to fine-tune the economy with temporary tax rate adjustments will be less effective.
attempts to fine-tune the economy with temporary tax rate adjustments will be less effective.
8. Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he: a. would be correct only when the economy was in a recession. b. has committed the fallacy that association is causation. c. has ignored the secondary effects. d. has committed the fallacy of composition. e. would be correct only when the United States enjoyed economic growth.
has committed the fallacy that association is causation.
97. Most developing countries are in trouble whenever oil prices rise because . a. they are the major exporters of oil and their export income falls b. it causes political instability in the countries c. it causes an increase in frictional unemployment d. higher oil prices drain the developing countries of foreign exchange e. it causes deflation in domestic economies.
higher oil prices drain the developing countries of foreign exchange
37. The gross domestic product (GDP) of an economy for a particular year is likely to increase if . a. workers go on longer vacations during that year b. the length of an average work week decreases c. homeowners hire lawn care services rather than maintaining the lawns themselves d. people cook food at home instead of buying restaurant meals e. the sale of illegal drugs increases
homeowners hire lawn care services rather than maintaining the lawns themselves
45. Productivity measures: a. how efficiently resources are turned into goods and services. b. how efficiently goods and services are consumed by the consumers. c. the level of skills embodied in a unit of labor. d. the ratio of inputs to a specific amount of output. e. the availability of resources in an economy.
how efficiently resources are turned into goods and services.
32. Long-term growth in production in an economy can be partially explained by: a. improvements in the rules of the game that facilitate production and exchange. b. the peaks and troughs of the business cycle or economic fluctuations. c. trade surpluses that lead to accumulations of precious metals. d. federal government budget deficits. e. a gradual but consistent increase in the price level.
improvements in the rules of the game that facilitate production and exchange.
62. Figure 11.1 shows the relationship between the price level and the real GDP. If the government wants the economy to be at full employment, it should . Figure 11.1 (Hint: SRAS and AD fall short of equilibrium) a. increase taxes b. decrease transfer payments c. decrease government purchases d. wait for the SRAS curve to shift to the left e. increase its purchases
increase its purchases
80. In an economy in which real output grows at an average rate of 3 percent per year, a 7 percent average rate of growth in the money supply would result in a(n): a. inflation rate of 4 percent, if velocity of money in circulation is constant. b. inflation rate of -4 percent, if velocity of money in circulation is constant. c. $7 increase in the price level each year. d. $7 decrease in the price level each year. e. increase in the velocity of money in circulation.
inflation rate of 4 percent, if velocity of money in circulation is constant. (Real=Nominal-Inflation) (can't be neg b/c not deflation)
10. If you enjoy playing golf, the opportunity cost of cleaning your room: a. is greater on sunny days than it is on rainy days. b. is the same on sunny days as it is on rainy days. c. is smaller on sunny days than it is on rainy days. d. does not change with weather conditions. e. is equal to the opportunity cost of any other chore you have to do that day.
is greater on sunny days than it is on rainy days.
55. According to classical economists, government intervention is: a. necessary to maintain a stable price level in the long run. b. necessary to maintain a stable price level in the short run. c. necessary to maintain full employment in the long run. d. necessary to maintain full employment in the short run. e. not necessary to maintain full employment.
not necessary to maintain full employment.
4. As resources are scarce, a. opportunity costs are zero. b. people must make choices among alternatives. c. all human wants and desires can be satisfied. d. resource prices are fixed. e. commodities are free.
people must make choices among alternatives.
52. The aggregate expenditure line is drawn on a graph that measures: a. real GDP on the horizontal axis and aggregate expenditure on the vertical axis. b. aggregate expenditure on the horizontal axis and real GDP on the vertical axis. c. consumption on the horizontal axis and aggregate expenditure on the vertical axis. d. aggregate expenditure on the horizontal axis and consumption on the vertical axis. e. investment on the horizontal axis and aggregate expenditure on the vertical axis.
real GDP on the horizontal axis and aggregate expenditure on the vertical axis.
23. The table below shows taxes paid for various incomes. According to the information in the table below, the tax system is: Table3.3 Taxable income $1,000 $3,000 $9,000 $27,000 Taxes $100 $200 $400 $800 a. progressive through all levels of income. b. proportional throughout all levels of income. c. regressive throughout all levels of income. d. based on the benefits-received principle. e. proportional only between income levels $1,000 and $3,000.
regressive throughout all levels of income.
46. An increase in the quantity of capital per worker would: a. rotate the per-worker production function outward. b. rotate the per-worker production function inward. c. shift the per-worker production function downwards. d. shift the per-worker production function upwards. e. result in a rightward movement along the current per-worker production function.
result in a rightward movement along the current per-worker production function.
49. Critics argue that U.S. industrial policy: a. currently focuses only on developing the airlines industry. b. discourages spending on basic research in universities. c. should shift from a military to a civilian focus. d. gives foreign industries an advantage over domestic producers. e. provides too much protection to domestic industries.
should shift from a military to a civilian focus.
93. One difference between arbitrageurs and speculators is that: a. arbitrageurs buy and sell foreign exchange; speculators do not. b. speculators only buy foreign exchange but do not sell it. c. arbitrageurs take more risks than do speculators. d. speculators take more risks than do arbitrageurs. e. arbitrageurs buy foreign exchange in the hope that its value will increase.
speculators take more risks than do arbitrageurs.
36. The Reagan tax cut of 1981 was an attempt to: a. stimulate aggregate supply. b. stimulate aggregate demand. c. stabilize the value of the U.S. dollar. d. increase demand for U.S. exports. e. reduce the federal budget deficit.
stimulate aggregate supply.
88. Economies of scale in the production of a good implies that: a. the long-run average cost of production rises as the scale of operation expands. b. the marginal cost of production falls below zero as the scale of operation contracts. c. the long-run average cost of production falls as the scale of operation expands. d. the long-run average cost of production remains the same as the scale of operation increases. e. the marginal output decreases as the amount of a factor of production is incrementally increased.
the long-run average cost of production falls as the scale of operation expands.
92. An exchange rate is: a. the rate at which goods are traded between countries. b. the rate at which the central bank of a country gives loans to commercial banks. c. the rate at which commercial banks give loans to individuals. d. the price of one currency in terms of another. e. the price at which one good trades for another.
the price of one currency in terms of another.
25. A tax is said to be progressive if: a. the absolute size of the tax (in dollars) increases as income increases. b. the wealthy pay a smaller percentage of their income than the poor. c. the average tax rate falls as income rises. d. the proportion of income paid as taxes increases as income increases. e. the proceeds are used to pay for liberal political programs.
the proportion of income paid as taxes increases as income increases.
1. The fact that people have unlimited wants means that: a. they always want more of at least one good. b. each person has an unlimited desire for every good. c. labor unions demand wage increases. d. selfish people are not concerned about others. e. people buy goods without regard to what they can afford.
they always want more of at least one good.
11. Opportunity cost is defined as the: a. dollar cost of what is purchased. b. value of all alternatives not chosen. c. value of the best alternative not chosen. d. difference between the benefits from a choice and the benefits from the next best alternative. e. difference between the benefits from a choice and the costs of that choice.
value of the best alternative not chosen.
