ECON 103 practice questions exam 2

*All of these are considered expansionary fiscal policies EXCEPT a(n)* A. reduction in unemployment compensation B. decrease in personal taxes C. increase in transfer payments D. increase in government spending

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*The opportunity cost of one good is...* A. the quantity of resources that will be used to purchase the next best choice B. the quantity of resources that were used to purchase the next best choice C. the quantity of resources that could be used to purchase the next best choice D. none of the other choices is correct

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*The short-run supply curve slopes upward because...* A. productivity increases at higher price levels B. resource costs increase at higher price levels C. wages increase at higher output levels in the short run D. profits increase at higher price levels

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*Which of these is included in gross domestic private domestic investment?* A. purchases of common stock by investors B. highway construction by a government contractor C. the purchase of a new TV by a household D. an increase in business inventories

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*Given the form of a typical production function, which of these would have the greatest impact on the output of a country?* A. *A* increases by 50% B. *K* increases by 50% C. *L* increases by 50% D. *N* increases by 50%

A. *A* increases by 50%

*There are 15 million people living in Marketstan, of whom 9 million are working and 1 million are actively looking for work. What is the size of Marketstan's labor force?* A. 10 million B. 5 million C. 16 million D. 15 million

A. 10 million

*Suppose the economy is at full employment, and energy prices spike. In the short run, output will _____; in the long run, output will____* A. decrease; remain unchanged B. remain unchanged; increase C. decrease; increase D. remain unchanged; decrease

A. decrease; remain unchanged

*Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded* A. right; increase B. left; decrease C. left; increase D. right; decrease

A. right; increase

*If an economy's GDP will double in 15 years, then its growth rate must be about...* A. 7% B. 4.7% C. 15% D. 10%

B. 4.7%

*Joan is trying to gather information on the membership at her Zen Center. She estimates that it will cost around $1000 to gather the information but expects the information to lead to increased membership revenue of $1,100. Based on this information Joan should...* A. not gather information since it will cost money and the Zen Center is a not-for-profit organization B. gather the info since the net gain will be $100 C. not gather the info since she will only gain $100 D. gather the info regardless of the cost

B. gather the info since the net gain will be $100

*Gasoline is produced from the crude oil. Ceteris paribus, if the supply of the crude oil falls, the equilibrium price of gasoline will _____ and the equilibrium quantity will_______.* A. increase; increase B. increase; decrease C. decrease; decrease D. decrease; increase

B. increase; decrease

*Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% with the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2%...* A. people on a fixed income see the purchasing power of their incomes rise B. debtors gain at the expense of creditors C. creditors gain at the expense of debtors D. there is a redistribution of income from creditors to debtors

C. creditors gain at the expense of debtors

*Which statement about fiscal policy and aggregate supply is correct?* A. fiscal policies that influence aggregate supply increase inflationary pressures as output expands B. the focus of fiscal policy and aggregate supply is to reduce unemployment C. fiscal policies that influence aggregate supply do not always require tradeoffs between price level and output D. fiscal policies that influence aggregate supply take less time to implement than do demand-side fiscal policies

C. fiscal policies that influence aggregate supply do not always require tradeoffs between price level and output

*Which technology most strongly affected the growth in US productivity in recent decades?* A. railroads B. ticker tape C. microcomputers D. petrochemicals

C. microcomputers

*Econia's currency appreciates. This will cause...* A. a movement down along Econia's aggregate demand curve B. a movement up along Econia's aggregate demand curve C. aggregate demand to rise D. aggregate demand to fall

D. aggregate demand to fall

*A solution to the simultaneous emergence of deflation and unemployment is to use policies that shift the aggregate....* A. supply curve to the left B. supply curve to the right C. demand curve to the left D. demand curve to the right

D. demand curve to the right

*Everything else the same, if investment expenditures rise by $300 billion and imports increase by $200 billion, then GDP...* A. does not change B. increases by $500 billion C. increases by $100 billion D. decreases by $100 billion

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*If interest rates fall, the burden of a nation's public debt will _____ and it will be _____ difficult to service its debt* A. rise; more B. fall; less C. fall; more D. rise; less

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*When the economy is underperforming and policymakers pursue expansionary fiscal policy, they express a willingness to trade off _____ output for a _____ price level* A. lower; lower B. higher; lower C. lower; higher D. higher; higher

D. higher; higher

*Suppose the economy is in a recession. To increase demand using discretionary fiscal policy, the government can...* A. reduce interest rates B. raise interest rates C. raise taxes or reduce government spending D. increase government spending or reduce taxes

D. increase government spending or reduce taxes

*Which of these will result if the economy expands beyond the level of full employment?* A. a recession B. unemployment C. lower interest rates D. inflation

D. inflation

*Aggregate supply shifts to the left when...* A. subsidies are higher B. there is a decrease in regulations C. inflation expectations are lower D. input prices rise

D. input prices rise

*If technology is held constant, an increase in capital concurrent with a decrease in labor input causes output to...* A. rise B. stay the same C. fall D. rise, fall, or stay the same

D. rise, fall, or stay the same

*Labor productivity is NOT a major determinant of* A. per capita GDP B. living standards C. economic growth D. the money supply

D. the money supply

*If both the supply of and the demand for a good decrease simultaneously, but the decrease in supply is greater than the decrease in demand, then the equilibrium price _____ and equilibrium output _____.* A. may rise, fall, or stay the same; rises B. rises; falls C. falls; falls D. may rise, fall, or stay the same; falls

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*What would cause the price level to rise and employment to increase?* A. a shift to the right of the aggregate demand curve B. a shift to the left of the aggregate demand curve C. a shift to the left of the short run aggregate supply curve D. a shift to the right of the short run aggregate supply curve

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*Which policy increases productivity?* A. lowering household income taxes B. raising tariffs C. increasing regulations on businesses D. increasing infrastructure spending

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*Suppose the economy is at full employment and a booming stock market encourages consumption spending to rise dramatically. What would be the MOST likely long run impact?* A. real GDP first rises and then falls back to long-run equilibrium B. the price level would not change, but a recession would occur C. the price level would fall, and real GDP would rise D. the price level will fall, and real GDP would fall

A. real GDP first rises and then falls back to long-run equilibrium

*Labor productivity is a major determinant of...* A. the money supply B. living standards C. the size of the labor force D. the skill level of the labor force

B. living standards

*If an expansionary policy pushes output beyond the full-employment level of GDP...* A. the natural rate of unemployment will fall B. production costs will decrease C. the economy will undergo deflation D. the short run aggregate supply curve will shift to the left

D. the short run aggregate supply curve will shift to the left