Economics

Which of the following is one of the Five Fundamental Questions? -Which products will be in scarce supply and which in excess supply? -Who should appoint the head of the central bank? -How much should society save? -What goods and services will be produced?

What goods and services will be produced?

National income accountants can avoid multiple counting by: -including transfer payments in their calculations. -only counting final goods. -counting both intermediate and final goods. -only counting intermediate goods.

only counting final goods.

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of: -2 percent -4 percent -6 percent -10 percent

10 percent

If the Consumer Price Index for a certain year is 120, this means that the average price of consumer items in that year was: -20% higher than the average price in the base period 1982-84 -About $120 per basket of consumer goods and services -120% higher than the average price in the base period 1982-84 -20% higher than the average price of the preceding year

20% higher than the average price in the base period 1982-84

The Great Recession occurred in: -1970-74 -1985-87 -1992-94 -2007-09

2007-2009

A nation's average annual real GDP growth rate is 2.5%. Based on the "rule of 70", the approximate number of years that it would take for this nation's real GDP to double is: -175 years -40 years -28 years -17.5 years

28 years

When economists describe "a market," they mean: -A place where stocks and bonds are traded -A communication network that allow individuals to keep in touch with each other -A hypothetical place where the production of goods and services takes place -A system that allows buyers and sellers to interact with one another

A system that allows buyers and sellers to interact with one another

Because economic generalizations are simplifications from reality, they are impractical and useless. T/F

False

Cost-push inflation increases real output and employment. T/F

False

Macroeconomics explains the behavior of individual households and business firms; microeconomics is concerned with the behavior of aggregates or the economy as a whole. T/F

False

Normative statements are expressions of facts. T/F

False

The invisible hand refers to the many indirect controls that the federal government imposes in a market system. T/F

False

Unanticipated inflation benefits creditors and savers. T/F

False

A fall in the price of milk, used in the production of ice cream, will: -Decrease the supply of ice cream -Increase the supply of ice cream -Cause a movement along the supply curve of ice cream -Have no effect on the supply of ice cream

Increase the supply of ice cream

Which of the following is a measure of economic growth that is most useful for comparing living standards? -Growth in nominal GDP -Decreases in the rate of unemployment -Increases in real GDP per capita -Increases in real GDP

Increases in real GDP per capita

The natural rate of unemployment: -Means that the economy will always operate at that rate -Means that the economy will always realize its potential output -Is equal to the total of frictional and structural unemployment -Is a fixed unemployment rate that does not change over time

Is equal to the total of frictional and structural unemployment

If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the near future, then this would cause a(n): -Rightward shift in the current supply of corn -Movement up along the current supply curve of corn -Leftward shift in the current supply of corn -Movement down along the current supply curve of corn

Leftward shift in the current supply of corn

Which of the following is a distinguishing feature of laissez-faire capitalism? -Public ownership of all capital. -Central planning. -Minimal government intervention. -A circular flow of goods, resources, and money.

Minimal government intervention

A recession is a decline in: -The inflation rate that lasts six months or longer -The unemployment rate that lasts six months or longer -Real GDP that lasts six months or longer -Potential GDP that lasts six months or longer

Real GDP that lasts six months or longer

The Great Recession that started in 2007 was triggered by shocks in which of the following economic sectors? -Gold market and stock market -International trade and foreign exchange markets -Real estate and financial markets -Consumer and government spending

Real estate and financial markets

Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers? -The GDP Price Index -The Consumer Price Index -The Retail Trade survey -The Wholesale Price Index

The Consumer Price Index

A result of a fall in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of: -The income effect -The substitution effect -Diminishing marginal utility -Consumer sovereignty

The income effect

Other things being equal, the law of demand suggests that as: -The demand for iPads increases, this will cause the price to increase -Income increases, the quantity of iPads demanded will increase -The price of iPads decreases, the quantity demanded will increase -The price of iPads decreases, the quantity demanded will decrease

The price of iPads decreases, the quantity demanded will increase

Assume that there are four consumers A, B, C, and D, and the prices that each of them is willing to pay for a glass of lemonade is, respectively, $1.50, $1.20, $1.00, and $0.90. If the actual price of lemonade is $1.00 per glass, then consumer surplus in this market will be $0.70. T/F

True

Continued losses in an industry will cause some firms to reduce output or eventually leave the industry. T/F

True

If nominal GDP is 150 and the GDP price index is 200, real GDP is 75. T/F

True

Nominal GDP measures a nation's output in current year prices. T/F

True

One major reason for sticky prices could be that firms selling final goods and services do not want to annoy customers with frequently changing prices. T/F

True

The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment. T/F

True

The supply factors of economic growth are those factors that shift a country's production possibilities curve. T/F

True

The wants of consumers are expressed in the product market with "dollar votes." T/F

True

There tends to be a high positive correlation between the rate of productivity growth and the rate of economic growth. T/F

True

Total output for an economy is basically equal to total work-hours multiplied by labor productivity. T/F

True

When the total consumer and producer surplus is at a maximum, the deadweight loss in the market is zero. T/F

True

A worker would be hurt least by inflation when the: -Worker anticipates inflation and increases savings at the bank -Worker is protected by a cost-of-living adjustment clause in an employment contract -Worker is protected by fixed annual increases in wages and benefits in an employment contract -Government increases the level of social security retirement benefits to correct for the effects of anticipated inflation

Worker is protected by a cost-of-living adjustment clause in an employment contract

Unemployment describes the condition where: -equipment and machinery are going unused. -a person cannot get a job but is willing to work and is actively seeking work. -a person does not have a job, regardless of whether or not he or she wants one. -any resource sits idle.

a person cannot get a job but is willing to work and is actively seeking work.

Answer the question on the basis of the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3 respectively. Prod. Tech. _1 _ 2 _ 3_ 4_ Labor 4 3 2 5 Capital 2 3 5 1 Refer to the information. If the price of product A is $0.50, the firm will realize: -an economic profit of $4. -an economic profit of $2. -an economic profit of $6. -a loss of $3.

an economic profit of $2.

Inflation is defined as: -an increase in the overall level of prices. -the rate of growth in nominal GDP. -a situation where all prices in the economy rise simultaneously. -the growth phase of the business cycle.

an increase in the overall level of prices.

A person should consume more of something when its marginal: -benefit exceeds its marginal cost. -cost exceeds its marginal benefit. -cost equals its marginal benefit. -benefit is still better.

benefit exceeds its marginal cost.

Real GDP per capita is found by: -adding real GDP and population. -subtracting population from real GDP. -dividing real GDP by population. -dividing population by real GDP.

dividing real GDP by population.

In a market economy a significant change in consumers' desire for product X will: -alter the profits or losses received by suppliers of product X. -cause a reallocation of scarce resources. -cause some industries to expand and others to contract. -do all of these.

do all of these.

Barter: -is the major means of exchange in centrally planned economies. -accounts for over 30 percent of the dollar volume of all exchange in the U.S. economy. -entails the exchange of goods for goods. -is used to circumvent the problem of a lack of coincidence of wants among potential buyers and sellers.

entails the exchanges of goods for goods

Net exports are: -that portion of consumption and investment goods sent to other countries. -exports plus imports. -exports less imports. -imports less exports.

exports less imports

According to economists, economic self-interest: -is a reality that underlies economic behavior. -has the same meaning as selfishness. -means that people never make wrong decisions. -is usually self-defeating.

is a reality that underlies economic behavior.

The Latin term "ceteris paribus" means: -that if event A precedes event B, A has caused B. -that economics deals with facts, not values. -other things equal. -prosperity inevitably follows recession.

other things equal

The two basic markets shown by the simple circular flow model are: -capital goods and consumer goods. -free and controlled. -product and resource. -household and business.

product and resource

Economics may best be defined as the: -interaction between macro and micro considerations. -social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity. empirical testing of value -judgments through the use of logic. -study of why people are rational.

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

A fundamental difference between the command system and laissez-faire capitalism is that, in command systems: -the division of output is decided by central planning rather than by individuals operating freely through markets. -all economic decisions are made by the government, whereas there is no government in laissez-faire capitalism. -scarcity does not exist, whereas it does in laissez-faire capitalism. -money is not used, whereas it is in laissez-faire capitalism.

the division of output is decided by central planning rather than by individuals operating freely through markets.