Macroeconomics
If you have $100,000 in a 401(k) growing 10% per year on average, how much will this be worth in 35 years when you retire? a) $3,200,000 b) $500,000 c) $800,000 d) $1,600,000
a) $3,200,000
If real GDP increased from $10 billion to $11 billion from the first quarter of 2016 to the first quarter of 2017, but had increased by 4% from the fourth quarter of 2016 to the first quarter of 2017, the BEA would report first quarter of 2017 GDP growth as _____ using the year-over-year method and _____ using the annualized method. a) 10%; 16% b) 10%; 4% c) 40%; 16% d) 40%; 4%
a) 10%; 16%
If frictional unemployment is 2%, structural unemployment is 3%, and cyclical unemployment is 4%, the natural rate of unemployment is: a) 5%. b) 7%. c) 9%. d) 2%.
a) 5%.
Which question would be considered a normative question? a) Should obstacle races be regulated to ensure the safety of its participants? b) How many people participated in obstacle course racing last year? c) How much does an entry into an obstacle course race cost? d) When and where are the major obstacle races held?
a) Should obstacle races be regulated to ensure the safety of its participants?
Using the productivity rates for Spain and Portugal, which statement is TRUE? *Output Per Worker Per Day* Spain - 500 Oranges, 250 Olives Portugal - 400 Oranges, 100 Olives a) Spain has a comparative advantage in olives. b) Both Spain and Portugal have a comparative advantage in olives. c) Both Portugal and Spain have a comparative advantage in oranges. d) Portugal has a comparative advantage in olives.
a) Spain has a comparative advantage in olives.
Which factor would shift the supply of skateboards to the right? a) a large reduction in the price of wheels used to produce skateboards b) an increase in incomes among skateboard enthusiasts c) a new rule banning all skateboards on college campuses d) a decrease in the price of skateboards
a) a large reduction in the price of wheels used to produce skateboards
In the graph, if a price ceiling is set at $4, which of the following would result? $4, 20 units $6, 30 units a) a shortage of 20 units b) a surplus of 40 units c) a surplus of 20 units d) a shortage of 40 units
a) a shortage of 20 units
What is considered a labor resource? a) a trainee b) a sewing machine c) a copier d) mineral deposits
a) a trainee
The portion of the national debt that is not held by the Federal Reserve and government agencies include: a) both the internally and externally held debt. b) only the internally held debt. c) only the externally held debt. d) neither the internally nor externally held debt.
a) both the internally and externally held debt.
Automatic stabilizers have _____ effects during times of economic prosperity and _____ effects during times of economic downturn. a) contractionary; expansionary b) expansionary; contractionary c) contractionary; contractionary d) expansionary; expansionary
a) contractionary; expansionary
Which type of unemployment do economists attempt to resolve using economic policy? a) cyclical unemployment b) structural unemployment c) frictional unemployment d) frictional and cyclical unemployment
a) cyclical unemployment
A temporary rise in the price of agricultural crops due to a drought is likely to cause a(n): a) decrease in the short-run aggregate supply. b) increase in the long-run aggregate supply. c) increase in the short-run aggregate supply. d) decrease in the long-run aggregate supply.
a) decrease in the short-run aggregate supply.
Which one of the following is a reason the crowding-out effect could be mitigated? a) deficit spending used for public investment b) an increase in consumer consumption c) a decrease in tax revenues d) an increase in the saving rate
a) deficit spending used for public investment
Which of the following groups benefits from an unanticipated rise in the inflation rate? a) homeowners with fixed-rate mortgages b) creditors or lenders c) elderly people living on fixed incomes d) workers on contracts without escalator clauses
a) homeowners with fixed-rate mortgages
A bond's price and yield: a) move in opposite directions. b) move in the same direction. c) must sum up to 1,000. d) are usually equal in value.
a) move in opposite directions.
Which of the following components is not used to measure GDP using the income approach? a) net exports b) rental income c) corporate profits d) net interest
a) net exports
The graph we could draw to represent the combinations of two goods that are possible within a given society at full employment is a(n): a) production possibilities frontier. b) cost graph. c) allocation curve. d) efficiency curve.
a) production possibilities frontier.
To avoid double-counting output in GDP measures, _____ are excluded in GDP. a) raw materials b) exports c) services such as haircuts d) government spending
a) raw materials
The development of solar panels for home installation has improved due to technological advances and subsidies. These factors shift the supply curve to the _____ and result in the equilibrium price of solar panel installations to _____. a) right; fall b) right; rise c) left; rise d) left; fall
a) right; fall
In the market for online tutoring, there is an increase in the supply of online tutors during finals week, but there is an even larger increase in the demand for online tutors. These events will cause the equilibrium price of online tutoring to _____ and the equilibrium quantity to _____. a) rise; rise b) rise; fall c) fall; fall d) fall; rise
a) rise; rise
Which of the following would be an example of a nonmarket activity? a) taking care of one's elderly parents in one's own home b) searching for lost golf balls on a golf course and selling them on eBay c) opening up a food stand at the local farmer's market d) working a part-time job on weekends to supplement one's income
a) taking care of one's elderly parents in one's own home
In the graph, calculate the value of consumer surplus in this market. $7, 20 Quantity (where lines meet) a) $5 b) $50 c) $240 d) $100
b) $50
In the graph, calculate the value of producer surplus in this market. $7, 20 Quantity (where lines meet) a) $70 b) $60 c) $140 d) $0
b) $60
If the national debt is $55 million and this year's deficit is $5 million, what would the new national debt be? a) $50 million b) $60 million c) $275 million d) $11 million
b) $60 million
Which of the following items would NOT be included in "Investment" in the GDP calculation? a) a company's unsold inventory b) 100 shares of a company stock c) a new home purchase d) equipment for a factory
b) 100 shares of a company stock
If a country increases the amount of goods it imports but its exports remain unchanged: a) AD would shift but in a random direction. b) AD shifts left. c) AD shifts right. d) AD would not shift.
b) AD shifts left.
If business expectations become less favorable, what will likely happen to the AD curve? a) AD does not shift. b) AD shifts left. c) AD shifts right. d) AD decreases to zero.
b) AD shifts left.
Which of the following is not true regarding the informal economy? a) Informal market activities tend to be paid under the table. b) Informal market activities do not contribute to the standard of living of citizens. c) Countries with large informal economies have total output that is less than their official GDP statistics. d) Informal market activities are not reported to the government for tax purposes.
b) Informal market activities do not contribute to the standard of living of citizens.
Which of the following is not possible for two countries who trade computers and automobiles with one another? a) One of the countries has an absolute advantage in the production of both products. b) One of the countries has a comparative advantage in the production of both products. c) One country does not have an absolute advantage in either product but has a comparative advantage in one product. d) One country has an absolute advantage in one product and a comparative advantage in the other product.
b) One of the countries has a comparative advantage in the production of both products.
Which statement is NOT true when a market is in equilibrium? a) Every consumer willing and able to pay for a good is able to do so. b) Sellers have enough inventory to satisfy all buyers and some left over for future demand. c) The market has cleared. d) There is no surplus or shortage.
b) Sellers have enough inventory to satisfy all buyers and some left over for future demand.
Which of the following would be an example of factors that lead to long-run growth? a) electrical workers temporarily laid off being called back to work b) an increase in the percentage of the population earning graduate degrees c) a new store opening up in a shopping mall after a former store had closed last year d) All of these are examples of factors leading to long-run growth.
b) an increase in the percentage of the population earning graduate degrees
The main reason why a production possibilities frontier would have a concave shape is: a) because the rate at which one good can be substituted for another is fixed. b) because as a country specializes in one product, it must give up more of the other. c) because of decreasing opportunity costs d) because consumers face diminishing marginal returns in consumption.
b) because as a country specializes in one product, it must give up more of the other.
In the graph, an increase in quantity demanded would be represented by a change from point a to point _____, while a decrease in demand would be represented by a change from point d to point _____. d0 - A to C d1 - B to D a) c; b b) c; c c) b; c d) b; b
b) c; c
The fact that it takes a very long time for Congress to debate and enact fiscal policies such as a tax cut for low-income households is an example of a(n): a) information lag. b) decision lag. c) recognition lag. d) implementation lag.
b) decision lag.
When investors wish to increase their investment activities by using the market for loanable funds: a) demand shifts left. b) demand shifts right. c) supply shifts right. d) supply shifts left.
b) demand shifts right.
The area between which two points on the production possibilities frontier could represent an improvement in productive efficiency? a) from B to C b) from D to B c) from A to B d) from C to B
b) from D to B
"Production efficiency" is described as: a) one country being able to produce more of a good than another country. b) goods and services that are produced using the fewest resources possible. c) the mix of goods and services produced being just what society desires. d) one country having a lower opportunity cost of producing a good than another country.
b) goods and services that are produced using the fewest resources possible.
The provision of Pell Grants and the G.I. Bill are examples of government spending in: a) physical capital. b) human capital. c) technology. d) infrastructure.
b) human capital.
Students who never miss class and study hard generally earn higher grades than those who do not. This is an example of: a) market failure. b) incentives. c) specialization. d) marginal cost.
b) incentives.
What is the single most important factor influencing economic growth for an economy? a) government regulation of big businesses b) increased productivity c) population growth d) reducing the capital-to-labor ratio
b) increased productivity
The most important measure in determining whether a country's national debt is a significant problem is: a) the interest rate paid on the debt. b) interest paid on the national debt as a portion of GDP. c) the size of the debt in nominal terms. d) the proportion of the national debt that is held by government agencies.
b) interest paid on the national debt as a portion of GDP.
Which of the following is NOT an example of an intellectual property right? a) patent b) land deed c) trademark d) copyright
b) land deed
Another way of referring to a market economy is as a: a) ceteris paribus. b) price system. c) demand economy. d) command economy.
b) price system.
China produces many products at the lowest cost possible, even though Chinese consumers do not desire many of these products (e.g., football helmets). China is achieving: a) neither production efficiency nor allocative efficiency b) production efficiency only c) allocative efficiency only d) both production efficiency and allocative efficiency
b) production efficiency only
An example of a less tangible component of a country's infrastructure is: a) refurbished airports. b) property rights. c) high-speed rail tracks. d) a new highway.
b) property rights.
Frictional unemployment is: a) long-term unemployment caused by changes in consumer demand or technology. b) short-term unemployment associated with people who are switching jobs. c) equivalent to the natural rate of unemployment. d) the unemployment that arises due to downturns in the business cycle.
b) short-term unemployment associated with people who are switching jobs.
The graph represents the market for water park admissions. If the price of admission is set at $50, this would result in a _____ of _____ units. $50, 200 quantity $40, 300 quantity (point where lines meet) a) surplus; 400 b) surplus; 200 c) shortage; 200 d) shortage; 400
b) surplus; 200
Which item is NOT an example of a market? a) New York Stock Exchange b) the Internal Revenue Service c) a neighborhood yard sale d) eBay
b) the Internal Revenue Service
Price stickiness refers to: a) when prices of goods and services respond to the stock market. b) when prices are slow to adjust to economic shocks. c) when firms raise their prices as soon as they hear bad news. d) when prices are controlled by government regulations.
b) when prices are slow to adjust to economic shocks.
What is the price of a perpetuity bond with an annual interest payment of $50 if market interest rates are 10%? a) $5 b) $50 c) $500 d) $5,000
c) $500
Suppose the town of Treeville has a population of 200, of which 120 are in the labor force. Of those in the labor force, 100 are employed and 20 are unemployed. The unemployment rate in Treeville is _____. a) 20% b) 60% c) 17% d) 10%
c) 17%
How much faster does it take for a $10,000 investment to increase to $20,000 if the average annual growth rate is 14% compared to 7%? a) At 14%, the investment will double three years faster. b) At 14%, the investment will double two years faster. c) At 14%, the investment will double five years faster. d) At 14%, the investment will double four years faster.
c) At 14%, the investment will double five years faster.
In the following PPF, between which two points would short-run growth be represented? A-B-D A-C a) A to B b) C to D c) B to C d) A to C
c) B to C
Suppose that Costa Rica is able to produce 50,000 pounds of coffee or 10,000 medical devices per day; Vietnam is able to produce 40,000 pounds of coffee or 5,000 medical devices per day. Which statement is TRUE? a) Costa Rica has a comparative advantage in coffee production, while Vietnam has a comparative advantage in the production of medical devices. b) Costa Rica has an absolute advantage in medical device production, while Vietnam has an absolute advantage in coffee production. c) Costa Rica has a comparative advantage in the production of medical devices, while Vietnam has a comparative advantage in coffee production. d) Costa Rica has a comparative advantage in the production of both coffee and medical devices.
c) Costa Rica has a comparative advantage in the production of medical devices, while Vietnam has a comparative advantage in coffee production.
Which of the following persons is considered unemployed? a) Enrique lost his job and has decided to go back to college to finish his degree. b) Sharmila gave birth to a boy and is taking three months of maternity leave from her job. c) Emily has not worked for two months, but still applies for jobs every week. d) All are unemployed.
c) Emily has not worked for two months, but still applies for jobs every week.
The concept of diminishing returns to capital would suggest that an additional unit of capital would be most productive in which of the following countries? a) The additional unit of capital would be equally productive in all three countries. b) Brazil, which has 50 units of capital per worker c) Honduras, which has 20 units of capital per worker d) Canada, which has 100 units of capital per worker
c) Honduras, which has 20 units of capital per worker
Which of these would NOT be considered a factor of production? a) a large copy machine at the office b) college graduates seeking a job c) a bank loan used to start a new business d) mineral deposits
c) a bank loan used to start a new business
If the ultimate goal of fiscal policy aimed at aggregate supply is achieved, what happens to the aggregate price level and aggregate output? a) aggregate price level decreases; aggregate output decreases b) aggregate price level increases; aggregate output increases c) aggregate price level decreases; aggregate output increases d) aggregate price level increases; aggregate output decreases
c) aggregate price level decreases; aggregate output increases
Which of the following factors would most likely shift the SRAS curve to the right? a) an increase in industrial regulations to improve worker safety b) the federal government's ending its subsidy program on hybrid car production c) an increase in the use of truck panels and tails to improve fuel efficiency d) improved consumer expectations in the economy
c) an increase in the use of truck panels and tails to improve fuel efficiency
An effective price ceiling occurs at a price _____ the equilibrium price and causes a _____. a) above; surplus b) below; surplus c) below; shortage d) above; shortage
c) below; shortage
Cash is counted in the money supply as a part of: a) M1 only. b) M2 only. c) both M1 and M2. d) neither M1 or M2.
c) both M1 and M2.
What did Arthur Laffer suggest President Reagan do in the 1980s? a) increase income taxes b) increase corporate taxes c) decrease income taxes d) increase welfare benefits
c) decrease income taxes
If a government collects $550 billion in taxes and spends $700 billion, it would have a: a) surplus of $1,250 billion. b) deficit of $1,250 billion. c) deficit of $150 billion. d) surplus of $150 billion.
c) deficit of $150 billion.
If a country experiences a rise in prices but produces the same quantity of output as in the previous year, its nominal GDP will _____ and its real GDP will _____. a) decrease; increase b) decrease; be unchanged c) increase; be unchanged d) increase; also increase
c) increase; be unchanged
If there is a lack of competition in a market, a market failure results because the quantity of goods sold is ___ than the optimal level while prices are ___ than the optimal level. a) higher; higher b) higher; lower c) lower; higher d) lower; lower
c) lower; higher
Which is considered a land resource? a) a sewing machine b) a copier c) mineral deposits d) an apprentice
c) mineral deposits
With the power of compounding, a $500 deposit in a savings account that earns 3% interest per year will earn how much in total interest after 10 years? a) less than 15% b) between 15% and 30% c) more than 30% d) exactly 30%
c) more than 30%
When an economy uses the most efficient means of farming to grow as much corn as possible, this economy has achieved: a) production efficiency and allocative efficiency. b) neither production efficiency nor allocative efficiency. c) production efficiency but not necessarily allocative efficiency. d) allocative efficiency but not necessarily production efficiency.
c) production efficiency but not necessarily allocative efficiency.
Which of the following is a form of U.S. public debt? a) private bank mortgages b) loans from relatives c) savings bonds d) stocks
c) savings bonds
For which of the following situations would the yield curve most likely predict that a recession will occur? a) short-term interest rate = 0%; long-term interest rate = 5% b) short-term interest rate = 3%; long-term interest rate = 3% c) short-term interest rate = 4%; long-term interest rate = 3% d) short-term interest rate = 2%; long-term interest rate = 4%
c) short-term interest rate = 4%; long-term interest rate = 3%
Which of the following would not be included in official GDP measures? a) the purchase of books on how to live a healthier life b) the cost of installing environmentally friendly solar panels c) the lost wages from taking time off work due to bad air pollution d) the value of a country's exports
c) the lost wages from taking time off work due to bad air pollution
In which market is government most likely to intervene to prevent a market failure? a) the market for designer clothing b) the jewelry market c) the restaurant market d) the market for college education
c) the restaurant market
If the government raises taxes, what will this do to the AD curve? a) AD shifts right. b) AD would not shift. c) AD would shift but in a random direction. d) AD shifts left.
d) AD shifts left.
While Steve is cleaning out his garage, he finds an old surfboard that he no longer needs. As he walks to the dumpster to throw it out, his neighbor John asks if he could have it. John offers Steve a 6-pack of beer (worth $10) in exchange, which Steve happily accepts. Steve has achieved a producer surplus of: a) $0, since he was just going to throw out the board. b) $50, because that's what the surfboard was likely worth. c) $5, because Steve and John benefited equally from the $10 transaction. d) $10, the value of the beer he received.
d) $10, the value of the beer he received.
If a country's GDP is $200 million, and its total population is 10,000, but only 8,000 of these people work, the country's per capita income is: a) $11,111. b) $100,000. c) $25,000. d) $20,000.
d) $20,000.
Jackie finds a pair of jeans that she likes but the price tag is missing. She is willing to buy it as long as it's not more than $100. The cashier informs Jackie that the price is $72. Jackie buys the jeans, and therefore achieved a consumer surplus of: a) $0 because the jeans were not actually discounted. b) $72, the price that she actually paid. c) $100 because that is what she was willing to pay. d) $28, the difference between what she was willing to pay and the price.
d) $28, the difference between what she was willing to pay and the price.
If a farmer can grow 100 tubs of grapefruit or 250 tubs of oranges per acre of land, what is the opportunity cost of growing one orange? a) 0.4 of an orange b) 2.5 grapefruits c) 2.5 oranges d) 0.4 of a grapefruit
d) 0.4 of a grapefruit
If an economy is growing at 10%, how long will it take for $1,000 to turn into $4,000? a) 21 years b) 28 years c) 7 years d) 14 years
d) 14 years
Which of these would be least likely to increase economic growth? a) An expansion of financial aid options to college students. b) An increase in investment in infrastructure such as new roads and rail lines. c) Protecting intellectual property rights (such as patents) to provide incentives for innovation. d) An increase in tariffs to protect domestic industries from foreign competition.
d) An increase in tariffs to protect domestic industries from foreign competition.
Which of the following is true about hyperinflation? a) Hyperinflation can be stopped by printing larger denominations of paper currency. b) Hyperinflation occurs when the inflation rate exceeds 1,000% per year. c) There have been no cases of hyperinflation in the world in the last two decades. d) Financial assets in a hyperinflated currency quickly become worthless.
d) Financial assets in a hyperinflated currency quickly become worthless.
Which headline would be LEAST likely to be studied in macroeconomics? a) Economic Growth Rises Slow and Steady b) Unemployment Falls to a 7-Year Low c) The Fed Raises Interest Rates d) GM Expands Car Sales in China
d) GM Expands Car Sales in China
At the end of the term, Vicky wants to sell her economics textbook for at least $25, otherwise she would keep it. George is looking to buy a textbook because he's taking the class next term, and he is willing to pay at most $60. If Vicky agrees to sell the textbook to George for $45: a) George's consumer surplus is $20 and Vicky's producer surplus is $15. b) George's consumer surplus is $60 and Vicky's producer surplus is $25. c) George's consumer surplus is $45 and Vicky's producer surplus is $45. d) George's consumer surplus is $15 and Vicky's producer surplus is $20.
d) George's consumer surplus is $15 and Vicky's producer surplus is $20.
What information does the National Bureau of Economic Research use to declare that a recession has begun? a) It focuses on devaluations in the national currency relative to other countries. b) It focuses on increases in the unemployment rate. c) It focuses on changes in major stock market indices. d) It focuses on turning points in key economic indicators.
d) It focuses on turning points in key economic indicators.
If AD shifts right as the economy booms, and then SRAS shifts left, what happens to inflation? a) It stays the same, b) It decreases. c) It falls to zero. d) It increases
d) It increases
In a depressed economy with a MPC of 0.75, what effect will a $100 increase in government spending have on equilibrium GDP? a) It will raise it by $250. b) It will raise it by $750. c) It will reduce it by $250. d) It will raise it by $400.
d) It will raise it by $400.
Which of the following persons is considered part of the labor force? a) Jamal, who just graduated from college and is backpacking in Europe for six months b) Tessa, an 8-year-old who sells lemonade on the sidewalk for 50 cents a glass c) Mary, who works as a librarian in prison because she poisoned her cheating boyfriend d) Joe, a senior in high school who works part-time on weekends at the ice cream shop
d) Joe, a senior in high school who works part-time on weekends at the ice cream shop
What are the two common measures of the money supply in use today? a) M2 and M3 b) M0 and M2 c) M0 and M1 d) M1 and M2
d) M1 and M2
If mergers between firms increase throughout the economy, what would happen to the SRAS curve? a) SRAS would not change. b) SRAS would disappear. c) SRAS shifts right. d) SRAS shifts left.
d) SRAS shifts left.
Which of these is not a problem caused by an effective price ceiling being placed on the price of electricity? a) a misallocation of resources b) a reduced effort to improve quality of service c) a shortage of electricity d) a reduction in deadweight loss
d) a reduction in deadweight loss
Which of the following reasons does not contribute to a higher level of unemployment? a) a lack of labor mobility as people choose to remain in their hometown b) a reduction in economic activity due to a recession c) the existence of efficiency wages d) a reduction in union bargaining activities
d) a reduction in union bargaining activities
Which of these has the highest liquidity? a) house b) stocks c) savings accounts d) cash
d) cash
Which of the following is NOT considered an example of one of the four main factors of production? a) mineral deposits b) construction cranes c) internship programs d) cash bonds
d) cash bonds
When a large factory closed in the town of Greenville, income fell for many residents. As a result, demand for normal goods would _____ and demand for inferior goods would _____. a) increase; increase b) increase; decrease c) decrease; decrease d) decrease; increase
d) decrease; increase
Which retirement plan does NOT involve individuals managing their accounts by choosing the preferred risk-level of invested assets? a) 403(b) plans b) employer-sponsored 401(k) c) IRAs d) employer-provided pension plans
d) employer-provided pension plans
The supply curve represents the _____ price at which a firm is willing to _____. a) maximum; sell various quantities of a good b) minimum; pay for inputs c) maximum; pay for inputs d) minimum; sell various quantities of a good
d) minimum; sell various quantities of a good
Which of the following sequences is in the correct order according to the business cycle? a) peak; trough; recovery; recession b) peak; recession; recovery; trough c) peak; trough; recession; recovery d) peak; recession; trough; recovery
d) peak; recession; trough; recovery
Suppose that a major drought causes a 30 percent reduction in the peanut harvest. If there is no change in demand, this event would cause a _____ at the original equilibrium price, and the equilibrium price will therefore _____ and the equilibrium quantity will _____. a) surplus; fall; fall b) shortage; rise; rise c) surplus; fall; rise d) shortage; rise; fall
d) shortage; rise; fall
The MOST common way in which economists model a problem is by: a) avoiding assumptions as much as possible in order to avoid misrepresenting reality. b) using case studies to analyze individual real-life examples of problems. c) making sure as many details and facts are included. d) simplifying the model down to its basic relevant elements.
d) simplifying the model down to its basic relevant elements.
Production levels to the right of the production possibilities frontier are: a) efficient. b) inefficient. c) attainable. d) unattainable.
d) unattainable.
When economists warn about the crowding-out effect, they are referring to: a) when prices set too low lead to large crowds. b) when a firm earns a high profit over the past month. c) when banks run out of money to lend. d) when government borrowing reduces private investment.
d) when government borrowing reduces private investment.
