AP Econ Final Review Questions

After graduating from high school, Maria chose to go to college, while Omar chose to work full-time. Which of the following describes the opportunity costs for these decisions? A. Maria's opportunity cost includes the salary she could have earned if she had gone to work B. Maria's opportunity cost is her living expenses while attending college C. Omar's opportunity cost is the salary he will earn from working D. Omar's opportunity cost is the tuition and expenses he would have paid for college E. Omar's opportunity cost is definitely greater than Maria's

A

Assume a closed economy with no government and a marginal propensity to consume of 0.80. Disposable income: | Consumption: $620 | $624 $640 | $640 $660 | $656 $680 | $672 $700 | $688 $720 | $704 $740 | $720 $760 | $736 Dissaving occurs when disposable income is A. $620 B. $640 C. $660 D. $700 E. $1,000

A

Assume both Italy and Greece produce only two goods: wine and olive oil. If Italy holds a comparative advantage in the production of wine, then which of the following statements is NOT true? A. Italy must hold an absolute advantage in the production of wine B. Greece holds a comparative advantage in the production of olive oil C. Italy's opportunity cost of producing one additional unit of wine is lower than Greece's D. Greece's opportunity cost of producing one additional unit of olive oil is lower than Italy's E. If trade is open between them, these countries have an incentive to trade

A

Assume that an economy produces televisions and shoes. Which of the following would cause the production possibilities curve to shift outward? A. An increase in the labor force B. An increase in the prices of both goods C. An increase in the prices of the resources used to produce both goods D. A decrease in the demand for shoes E. A change in consumers' tastes in favor of televisions

A

In which of the following situations is a good not scarce? A. Consumers give up nothing to obtain more of the good B. Consumers can purchase as much of the good as they want at its current market price C. Large quantities of the good are available in the marketplace D. There is a surplus of the good at some positive price E. There is a shortage of the good at some positive price

A

Scarcity exists because A. Human wants exceed the productive capacity of the economy B. Supplies of land and other natural resources are unlimited C. Physical capital does not depreciate D. Population and labor force growth are slowing E. Innovation causes unemployment

A

Structural unemployment is best described as unemployment arising from A. The elimination of jobs as a result from technological change B. An increase in the number of workers searching for better-paying jobs C. An increase in the number of jobs demanding unskilled labor D. The temporary reduction of jobs during a downturn in the business cycle E. The reduction in jobs due to seasonal changes in demand

A

Suppose that in a particular country, nominal gross domestic product (GDP) grew by 8%, and the GDP deflator increased by 10%. The country's growth rate of real GDP would be approximately equal to A. -2% B. -0.8% C. 0.8% D. 2% E. 18%

A

Table: Consumption- $3,000 Government expenditures- $1,000 Gross private domestic investment- $700 Depreciation- $300 Exports- $300 Imports- $500 Indirect Business taxes- $0 Based on the economic figures in the table above, what is the value of gross domestic product, in billions of dollars? A. $4,500 B. $4,700 C. $4,900 D. $5,150 E. $5,950

A

The consumer price index (CPI) is criticized for A. Overstating the true burden of inflation because it does not recognize consumers' ability to substitute goods and services as prices change B. Overstating the true burden of inflation because it recognizes consumers' ability to substitute goods and services as prices change C. Understanding the true burden of inflation because it does not recognize consumers' ability to substitute goods and services as prices change D. Understating the true burden inflation because it recognizes consumers' ability to substitute goods and services as prices change E. Overstating the true burden of inflation because it reflects the prices of both intermediate goods and final goods

A

The loanable funds market is best described as bringing together A. Savers and borrowers B. Investors and borrowers C. Financial institutions and investors D. Savers and lenders E. Banks and savers

A

The short-run Phillips curve shows that A. There is a trade-off between inflation and unemployment B. High rates of unemployment are linked to high rates of interest C. High rates of inflation are linked to high rates of interest D. High rates of interest are consistent with increase in the money supply E. The natural rate of unemployment is unattainable

A

Which of the following best explains the increase in national income that results from equal increases in government spending and taxes? A. Consumers do not reduce their spending by the full amount of the tax increase B. The government purchases some goods that consumers would have purchased on their own anyway C. Consumers believe all tax cuts are transitory D. The increase in government spending causes a decrease in investment E. Consumers are aware of tax increases but not of increases in government spending

A

Which of the following helps explain why the demand curve for a normal good is downward sloping? A. The income and substitution effects move the quantity demanded in the same direction B. The income effect moves the quantity demanded in the opposite direction of the substitution effect C. The income effect dominates the substitution effect D. The substitution effect dominates the income effect E. With an increase in income, the consumer decreases consumption of the good

A

Which of the following is always true of an economy operating on its production possibilities frontier? A. Its resources are fully employed B. It is allocatively efficient C. It cannot trade with other nations because it is the most efficient producer of traceable goods D. It will necessarily operate on the same frontier the following year E. It must be a command economy

A

Which of the following is an example of frictional unemployment? A. A person quits a job to search for another job B. A person lacks the skills to fill any of the available jobs C. A person loses a job because of a recession D. A person retires from the workforce E. An unemployed person stops looking for a job

A

Which of the following would generate cost-push inflation? A. An increase in the price of labor B. A decrease in the price of energy C. An increase in household consumption D. A decrease in government spending E. An increase in the money supply

A

A barter economy is different from a money economy in that a barter economy A. Encourages specialization and division of labor B. Involves higher costs for each transaction C. Eliminates the need for a double coincidence of wants D. Has only a few assets that serve as a medium of exchange E. Promotes market exchanges

B

An increase in inflationary expectations will most likely affect nominal interest rates and bond prices in which of the following ways in the short run? A. Nominal interest rates increase, bond prices have no change B. Nominal interest rates increase, bond prices decrease C. Nominal interest rates have no change, bond prices increase D. Nominal interest rates decrease, bond prices increase Nominal interest rates decrease, bond prices decrease

B

An increase in the supply of coffee could be caused by A. A decrease in the price of cream, which is a complement to coffee B. A decrease in the cost of labor used to produce coffee C. An increase in consumer income D. An increase in the demand for coffee E. An increase in the price of coffee

B

An unanticipated decrease in aggregate demand will most likely cause the unemployment rate and the inflation rate to change in which of the following ways? A. Unemployment rate increase, inflation rate increase B. Unemployment rate increase, inflation rate decrease C. Unemployment rate increase, inflation rate has no change D. Unemployment rate decrease, inflation rate increase E. Unemployment rate decrease, inflation rate decrease

B

Assume that Jane's marginal propensity to consume equals 0.8, and that in 2004 Jane spent $36,000 from her disposable income of $40,000. If her disposable income in 2005 increased to $50,000, her consumption spending increased by A. $4,000 B. $8,000 C. $9,000 D. $10,000 E. $14,000

B

Assume that the marginal propensity to consume out of disposable income is 0.8 and that the government taxes all income at a constant rate of 30 percent. If gross income increases by $100, consumption will initially increase by A. $44 B. $56 C. $70 D. $80 E. $100

B

Country | Manufactured good | Service goods A | 100 units | 300 units B | 75 units | 150 units According to the information in the table above, which of the following statements is true if both countries have the same number of workers? A. Country A has both an absolute and comparative advantage in manufactured goods B. Country A has an absolute advantage in manufactured goods but a comparative advantage in service goods C. Country B has a comparative advantage in service goods but no absolute advantage in either good D. Country A has an absolute advantage in service goods but a comparative advantage in manufactured goods E. Country B has an absolute advantage in manufactured goods, but without more information, it is not possible to tell in which product it has a comparative advantage

B

Country | Number of computers | Units of steel A | 100 | 100 B | 20 | 80 The table above indicates the production alternatives of two countries, A and B, which produce computers and steel using equal amounts of resources. If both countries always produce at full employment which of the following statements must be correct? A. Mutually advantageous trade can occur between the two countries when 1 unit of steel from country A is exchanged for 2 computers from Country B B. Mutually advantageous trade can occur between the two countries when 2 units of steel from Country B are exchanged for 1 computer from Country A C. Country A has an absolute and comparative advantage in the production of computers, and Country B has an absolute and comparative advantage in the production of steel D. Country B has an absolute advantage in the production of both commodities, but a comparative advantage in the production of steel E. Country A has an absolute advantage in the production of both commodities, but a comparative advantage in the production of steel

B

Following a prolonged power outage, the price of flashlights normally increases significantly. If cities had passed laws prohibiting price increases for flashlights during power outages such laws would most likely A. Make flashlights more available B. Create a shortage of flashlights C. Shift the demand curve for flashlights to the right D. Shift the supply curve for flashlights to the left E. Have no effect on the availability of flashlights

B

Frictional unemployment occurs when which of the following happens? A. A worker is replaced by robots on factory assembly lines B. A worker voluntarily quits a job search for a better one C. A worker is laid off because of a downturn in economic activity D. A worker undergoes on the job training E. A worker switches from working full-time to part-time

B

Hyperinflation is typically caused by A. High tax rates that discourage work effort B. Continuous expansion of the money supply to finance government budget deficits C. Trade surpluses that are caused by strong protectionist policies D. Bad harvests that lead to widespread shortages E. A large decline in corporate profits that leads to a decrease in production

B

If an unusually cold summer destroyed a large portion of the bee population, the equilibrium price and quantity of honey produced by bees will most likely change in which of the following ways? A. Price increases, quantity increases B. Price increases, quantity decreases C. Price increases, quantity has no change D. Price decreases, quantity decreases E. Price has no change, quantity decreases

B

If the marginal propensity to consume is 0.9, the government increase purchases by $100 and net exports decline by $60, the equilibrium level of RGDP will A. Decrease by up to $400 B. Increase by up to $400 C. Increase by up to $600 D. Decrease by up to $1,600 E. Increase by up to $1,600

B

Inflation occurs when there is a sustained increase in which of the following? A. Real gross domestic product B. The average price level C. The price of any commodity D. Labor productivity E. The unemployment rate

B

Last year both a borrower and a lender expected an inflation rate of 3% when they signed a long-term loan agreement with fixed nominal interest rates of 5%. If the actual inflation rate were lower than expected, then which of the following would be true? A. The borrower would benefit B. The lender would benefit C. The real interest rate would be lower than expected D. The nominal interest rate would be higher than expected E. The nominal interest rate would increase

B

The amount of product Z that must be forgone in order to obtain some amount of product Y is called A. Factor payments B. Opportunity cost C. Marginal product D. Income effect E. Substitution Effect

B

The basic economic problem of all economies is essentially one of deciding how to make the best use of A. Unlimited resources to satisfy unlimited wants B. Limited resources to satisfy unlimited wants C. Unlimited resources to satisfy limited wants D. Limited resources to satisfy limited wants E. Limited resources to provide public goods

B

The official unemployment rate understates the unemployment level in the economy because the official unemployment rate A. Ignores the duration of unemployment B. Ignores unemployed and discouraged workers C. Includes job created by the underground economy D. Excludes all unemployed teenagers E. Excludes frictionally unemployed workers

B

The table below shows the product alternatives of Country A and Country B for producing computers and cars with equal amounts of resources that are fully and efficiently employed Country | Computer | Cars A | 24 | 12 B | 45 | 15 Which of the following is true according to the data in the table? A. Country A has an absolute and comparative advantage in the production of computers B. Country B has an absolute and comparative advantages in the production of computers C. Country B should import computers and export cars D. Since Country B has an absolute advantage in the production of both goods, it will not trade with Country A E. Neither country can benefit from trade

B

Which of the following is a cause of hyperinflation? A. Rapid growth of real gross domestic product B. Rapid growth of the money supply C. Unanticipated decrease in aggregate demand D. Unanticipated increase in aggregate supply E. Unanticipated rise in real interest rates

B

A short-run increase in national income could be caused by a decrease in which of the following? A. Consumption B. Investment C. Imports D. Government spending E. Exports

C

A simultaneous increase in both the demand for and the supply of a good in a market will lead to which of the following changes in the equilibrium price and quantity of a good? A. Price increases, quantity increases B. Price is indeterminate, quantity decreases C. Price is indeterminate, quantity increases D. Price increases, quantity is indeterminate E. Price decreases, quantity increases

C

All of the following changes will shift the investment demand curve to the right EXCEPT A. A decrease in the corporate income tax rate B. An increase in the productivity of new capital goods C. An increase in the real interest rate D. An increase in corporate profits E. An increase in real gross domestic product

C

An increase in the government budget deficit is most likely to result in an increase in which of the following? A. The marginal propensity to consume B. Exports C. The real interest rate D. The money supply E. The simple multiplier

C

Any point made inside a production possibilities curve is A. Better than the points on the production possibilities curve B. Allocatively efficient but technologically inefficient C. Associated with inefficient use or unemployment of some resources D. Associated with movements along the production possibilities curve E. Associated with constant opportunity cost

C

Crowding out is most likely to occur with which of the following changes? A. Decrease in government spending B. Increase in budget surplus C. Increase in budget deficit D. Decrease in the real interest rate E. Decrease int rade deficit

C

For an economy consisting of households and businesses only, which of the following consistent with the circular flow of income and production? A. Households are producers of goods and services and consumers and resources B. Households are users of resources, and businesses are sources of saving C. Households are suppliers of resources and consumers of goods and services D. Businesses are users of taxes, and households are sources of taxes E. Businesses are suppliers of resources and consumers of goods and services

C

If cotton is used to produce towels, an increase in the price of cotton will result in which of the following changes in the towel market? A. A decrease in the demand for towels, which leads to a shortage of towels followed by upward pressure on the price of towels B. A decrease in the demand for towels which leads to a surplus of towels followed by downward pressure on the price of towels C. A decrease in the supply of towels, which leads to a shortage of towel followed by upward pressure on the price of towels D. An increase in the supply of towels, which leads to a surplus of towels followed by downward pressure on the price of towels E. An increase in both the demand and supply of towels, which leads to a surplus of towels followed by upward pressure on the price of towels

C

In the circular flow diagram of a market economy, which of the following supplies the factors of production? A. The business sector B. The government C. The household sector D. Financial sector E. The foreign sector

C

In the short run, government deficit spending will most likely A. Raise the unemployment rate B. Lower the inflation rate C. Raise real interest rates D. Lower private savings E. Raise net exports

C

Last year 17 million tons of beans were sold for $300 per ton. This year 17 million tons of beans were sold for $285 per ton. Which of the following changes in demand and supply could have caused this outcome? A. Demand increased, supply increased B. Demand increased, supply decreased C. Demand decreased, supply increased D. Demand decreased, supply decreased E. Demand increased, supply had no change

C

Suppose that in one week Sam can knit 5 sweaters or make 4 blankets and Rob can knit 10 sweaters or make 6 blankets. Which of the following is true? A. Sam has an absolute advantage in making blankets B. Sam has an absolute advantage In knitting sweaters C. Sam has a comparative advantage in making blankets D. Sam has a comparative advantage in knitting sweaters E. Sam has neither a comparative nor an absolute advantage in knitting sweaters nor making blankets

C

Suppose that personal income is $3,500 billion, personal taxes are $1,000 billion, and depreciation is $500 billion. Disposable income is equal to which of the following? A. $1,500 billion B. $2,000 billion C. $2,500 billion D. $3,000 billion E. There is not enough information to answer the question

C

Suppose that the economy is in the midst of a recession and government policy makers want to increase aggregate demand by $600 billion. If the economy's marginal propensity to consume is 0.75 and there is no crowding out, the government should do which of the following? A. Increase spending by $2,400 billion B. Increase spending by $600 billion C. Increase spending by $150 billion D. Decrease taxes by $150 billion E. Decrease taxes by $600 billion

C

The natural rate of unemployment can be defined as the A. Unemployment rate consistent with accelerating inflation B. Unemployment rate of the least-skilled workers C. Economy's long-run equilibrium rate of unemployment D. Labor force participation rate plus the unemployment rate E. Labor force participation rate minus the unemployment rate

C

The real interest rate earned is the A. Same as the nominal interest rate when inflation is moderate B. Cost of borrowing in current consumer prices C. Cost of borrowing in current producer prices D. Cost of borrowing adjusted for the rate of change in the price level E. Nominal interest rate adjusted for the growth rate of the economy

C

The recent popularity of job search web sites that enable job seekers and potential employers to more efficiently contact each other is most likely to cuause A. A reduction in the labor force participation rate B. A reduction in structural, but not in frictional, unemployment rates C. A reduction in the frictional unemployment rate D. An increase in the overall unemployment rate E. A reduction in cyclical, but not in frictional, unemployment rates

C

The table above shows the quantity of gasoline supplied and demanded at various prices in a country. If the government sets a price floor of $2.75 on a gallon of gasoline, what is the price per gallon? A. $2.75 B. $3.00 C. $3.25 D. $3.50 E. $3.75

C

The table below shows the number of hours it takes from Kim to install a computer or to paint a garage and for Maria to install a computer or to paint a garage | Kim | Maria Install computer | 2 hrs. | 4 hrs Paint garage | 10 hrs | 12 hrs If tasks are assigned according to comparative advantage, which of the following is true? A. Kim should perform both tasks B. Maria should perform both tasks C. Kim should install computers and Maria should paint garages D. Kim should paint garages and Maria should install computers E. Kim and Maria should both install computers

C

The value of which of the following would be included in the United States gross domestic product? A. Time spent volunteering at a local hospital B. A United States savings bond received as a birthday gift C. A movie ticket purchased at a local theater D. A new handbag made in Italy by a United States firm E. A used car sold at the same price paid for it

C

When purchasing her house, Ms. Jones took out a 15 year mortgage loan from a local bank at a fixed interest rate of 7%. The rate of expected inflation at the time was 3%. If the actual rate of inflation was 4.5%, which of the following is true? A. The bank gained because the real rate of interest increased by 1.5% B. The bank gained because the real rate of interest became 3.5% C. The bank lost because the real rate of interest decreased by 1.5% D. Ms. Jones gained because the nominal rate of interest increase by 1.5% E. Ms. Jones lost because the nominal rate of interest became 3.5%

C

Which of the following best defines opportunity cost? A. It is the cost of producing those goods most desired by a given economy B. It is the cost of the input mix that will lead to the greatest rate of growth for a given company C. It is the amount of one product that must be given up in order to produce an additional unit of another product D. It is the use of the least-cost method of production E. It is the cost of labor used in the production process

C

Which of the following best describes the law of demand? A. The price of a good increases when the demand for the good increases B. The price of a good decreases when the supply of the good decreases C. When the price of a good increases, its demand decreases D. When the price of a good decreases, its quantity demanded increases E. Demand creates its own supply

C

Which of the following describes a typical business cycle in the correct sequence? A. Peak, trough, recession, and expansion B. Peak, trough, expansion, and recession C. Peak, recession, trough, and expansion D. Peak, recession, expansion, and trough E. Peak, expansion, trough, and recession

C

Which of the following individuals is considered officially unemployed? A. Chris, who has not worked for more than three years and has given up looking for work B. Kim, who is going to school full-time and is waiting until graduation before looking for a job C. Pat, who recently left a job to look for a different job in another town D. Leslie, who retired after turning 65 only five months ago E. Lee, who is working 20 hours per week and is seeking full-time unemployment

C

Which of the following is most likely to increase the real interest rate in Country Z? A. Country Z's central bank purchases government securities from banks and citizens B. Country Z reduces government expenditures C. Country Z is viewed as having increased political and economic risk D. Country Z's citizens increase their savings in anticipation of needed retirement income E. Country Z introduces a tax on consumption goods

C

Which of the following will most likely happen in the market for good X if the price of good X decreases? A. The supply of good X will decrease B. The demand for good X will increase C. The quantity demanded for good X will increase D. The demand will decrease and the supply will increase E. The quantity supplied for good X will increase

C

Which of the following will most likely lead to a decrease in inflationary expectations? A. A decrease in the marginal propensity to save B. A decrease in imports C. A decrease in the money supply D. An increase in the government budget deficit E. An increase in the prices of raw materials

C

Which of the following would shift a country's production possibilities curve inward? A. A reduction in the country's inflation rate B. A reduction in the country's real interest rate C. A reduction in the size of the country's labor force D. An increase in the typical retirement age in the country E. An increase in the country's cyclical unemployment rate

C

A country's infrastructure refers to its A. Natural resources B. Private financial institutions C. Proportion of population with postsecondary education D. Public capital goods such as highways E. Internal, as opposed to external, debt

D

An increase in the price of a key input will cause the aggregate demand curve and the short-run aggregate supply curve to change in which of the following ways? A. AD shifts to the right, AS shifts to the right B. AD shifts to the left, AS shifts to the left C. AD shifts to the left, As doesn't shift D. AD doesn't shift, AS shifts to the left E. AD doesn't shift, AS shifts to the right

D

An increase in which of the following is most likely to increase long-run economic growth? A. Interest rate B. Income tax rate C. Marginal propensity to consume D. Investment in human capital E. Money demand

D

Assume a closed economy with no government and a marginal propensity to consume of 0.80. Disposable income: | Consumption: $620 | $624 $640 | $640 $660 | $656 $680 | $672 $700 | $688 $720 | $704 $740 | $720 $760 | $736 The marginal propensity to save for this economy is A. 4.0 B. 1.0 C. 0.8 D. 0.2 E. 0

D

Assume that Linda deposits in her checking account the $1,000 cash she was keeping at home for an emergency. If the required reserve ratio is 0.20, what is the maximum change in the money supply from her deposit? A. $1,000 B. $1,250 C. $2,000 D. $4,000 E. $5,000

D

Assume that people like onions on their hamburgers. If the supply of hamburgers decreases, the demand for onions will most likely A. Remain unchanged because hamburgers and onions are different goods B. Increase because hamburgers and onions are substitutes C. Increase because hamburgers and onions are complements D. Decrease because hamburgers and onions are complements E. Decrease because hamburgers and onions are substitutes

D

Assume that the marginal propensity to consume is 0.90. As a result of an increase in the tax rates, the government collects an additional $20 million. What will be the impact on gross domestic product (GDP)? A. GDP will increase by a maximum of $200 million B. GDP will increase by a maximum of $180 million C. GDP will decrease by a maximum of $200 million D. GDP will decrease by a maximum of $180 million E. GDP will decrease by a maximum of $20 million

D

If the marginal propensity to consume is 0.75, then a $100 increase in investment will result in a maximum increase in equilibrium real gross domestic product of A. $40 B. $100 C. $133.33 D. $400 E. $500

D

If two nations specialize according to the law of comparative advantage and then trade with each other, which of the following would be true? A. A smaller number of goods would be available in each trading nation B. Total world production of goods would decrease C. Everyone within each nation would be better off D. Each nation would increase its consumption possibilities E. One nation would gain at the expense of the other nation

D

If unemployed workers become discouraged and give up trying to find work, the number of workers employed and the unemployment rate would change in which of the following ways? A. Number of workers employed decreases, unemployment rate decreases B. Number of workers employed decreases, unemployment rate increases C. Number of workers employed decreases, unemployment rate has no change D. Number of workers employed has no change, unemployment rate decreases E. Number of workers employed has no change, unemployment rate increases

D

Real Disposable Income | Consumption $18,000 | $22,000 $26,000 | $25,000 According to the income and consumption schedules shown above, the marginal propensity to consume is A. 1.33 B. 0.90 C. 0.80 D. 0.75 E. Decreasing as real disposable income increases

D

Suppose that in an economy with lump-sum taxes and no international trade rate, autonomous investment spending increases by $2 million. If the marginal propensity to consume is 0.75, equilibrium gross domestic product will change by a maximum of A. $0.5 million B. $1.5 million C $2.0 million D. $8.0 million E. $15.0 million

D

The consumer price index (CPI) measures the A. Value of current gross domestic product in base-year dollars B. Prices of all consumer goods and services produced in the economy C. Prices of selected raw materials produced by firms D. Prices of a specific groups of goods and series purchased by consumers E. Prices of imports, but not exports

D

The unemployment rate is calculated as A. The number of people not working divided by the population B. The number of people not working divided by the number of people working both full-time and part-time C. The number of people working part-time but actively seeking full-time employment divided by the number of people in the labor force D. The number of people not working but actively seeking employment divided by the number of people in the labor force E. The number of people in the labor force divided by the population

D

When an economy is in equilibrium at potential gross domestic product, the actual unemployment rate is A. Equal to the cyclical rate B. Greater than the natural rate C. Less than the natural rate D. Equal to the natural rate E. Equal to zero

D

Which of the following changes in the demand for the supply of a good would necessarily lead to a decrease in the equilibrium quantity of the good in the market in the short run? A. Demand increase, supply decrease B. Demand increase, supply no change C. Demand decrease, supply increase D. Demand decrease, supply decrease E. Demand no change, supply increase

D

Which of the following statements is true of unanticipated inflation? A. It decreases the economic well-being of all members of society proportionately B. It decreases the economic well-being of all members of society equally C. It increases the economic well-being of net creditors D. It increases the economic well-being of net debtors E. It increases the economic well-being of workers with long-term labor contracts

D

Which of the following will cause the supply curve for shoes to shift to the right? A. An increase in the price of socks, assuming that shoes and socks are compliments B. A decrease in the price of sandals, assuming that shoes and sandals are substitutes C. An increase in the wages of shoe workers D. An increase in the number of firms producing shoes E. A decrease in the income of consumers, assuming that shoes are normal goods

D

With an increase in the real interest rate, consumption and real gross domestic product will most likely change in which of the following ways? A. Consumption increases, RGDP increases B. Consumption increases, RGDP decreases C. Consumption decreases, GDP increases D. Consumption decreases, RGDP decreases E. Consumption has no change, RGDP increases

D

With an increase in the real interest rate, consumption and real gross domestic product will most likely change in which of the following ways? A. Consumption increases, real gross domestic product increases B. Consumption increases, real gross domestic product decreases C. Consumption decreases, real gross domestic product increases D. Consumption decreases, real gross domestic product decreases E. Consumption has no change, real gross domestic product increases

D

Year 1: RGDP- $100 billion, NGDP- $70 billion Year 2: RGDP- $120 billion, NGDP- $120 billion Year 3: RGDP- $130 billion, NGDP- $150 billion Which of the following can be concluded from the data above? A. The base year for the price index was year 1 B. The base year for the price index was year 3 C. The economy was producing higher quality goods in years 2 and 3 than in year 1 D. The economy was experiencing inflation during years 2 and 3 E. The economy was experiencing deflation during years 1, 2, and 3

D

A change in which of the following can affect the long-run economic growth of a country? I. The quantity and quality of a country's labor force II. Technology III. Spending on capital goods A. I only B. III only C. I and II only D. II and III only E. I, II, and III

E

A simultaneous increase in inflation and unemployment could be explained by an increase in which of the following? A. Consumer spending B. The money supply C. Labor productivity D. Investment spending E. Inflationary expectations

E

A simultaneous increase in inflation and unemployment would be explained by an increase in which of the following? A. Consumer spending B. The money supply C. Labor productivity D. Investment spending E. Inflationary expectations

E

For which of the following sets of unemployment and inflation rates will a central bank be most reluctant to increase the rate of growth in the money supply? A. Unemployment rate- 10%, inflation rate- 2% B. Unemployment rate- 10%, inflation rate- 5% C. Unemployment rate- 10%, inflation rate- 10% D. Unemployment rate- 5%, inflation rate- 5% E. Unemployment rate- 5%, inflation rate- 10%

E

If a change in aggregate demand results in a recession, the price level and real output will change in which of the following ways in the short run? A. Price level has no change, real output increases B. Price level increases, real output has no change C. Price level increases, real output decreases D. Price level decreases, real output has no change E. Price level decreases, real output decreases

E

If the federal government decreases its expenditures on goods and services by $10 billion and decreases taxes on personal incomes by $10 billion, which of the following will occur in the short run? A. The federal budget deficit will increase by $10 billion B. The federal budget deficit will decrease by $10 billion C. Aggregate income will remain the same D. Aggregate income will increase by up to $10 billion E. Aggregate income will decrease by up to $10 billion

E

Table: Year- 1929, CPI-20 Year-1984, CPI- 100 Year-1995, CPI- 120 The table above shows the consumer price index for selected years. On the basis of these data, how much did it cost in 1995 to buy the same goods and services that cost $50 in 1929? A. $25 B. $100 C. $125 D. $250 E. $300

E

The consumer price index (CPI) is designed to measure changes in the A. Spending patterns of urban consumers only B. Spending patterns of all consumers C. Wholesale price of manufactured goods D. Prices of all goods and serves produced in an economy E. Cost of select market basket of goods and services

E

The shifting of a country's production possibilities curve to the right will most likely cause A. Net exports to decline B. Inflation to increase C. The aggregate demand curve to shift to the left D. The long-run aggregate supply curve to shift to the left E. The long-run aggregate supply curve to shift to the right

E

Which of the following best describes an economy at full employment? A. The rate of unemployment is zero B. There is only structural and cyclical unemployment C. There is only cyclical unemployment D. There is cyclical, but not structural unemployment E. There is frictional, but not cyclical unemployment

E

Which of the following explains why a production possibilities curve is often represented as concave (bowed out) from the origin? A. The law of demand B. The law of supply C. Constant returns to scale D. Decreasing opportunity cost E. Increasing opportunity cost

E

Which of the following represents a leakage from the circular flow in an economy? A. Consumption spending B. Government spending C. Investment spending D. Unemployment benefits E. Imports

E