ECON 151 Quizzes

A buyer of a newly-issued bond A. is a borrower of funds B. is a lender of funds C. is purchasing ownership in the institution that issues the bonds D. must be a producer and not a consumer

B

A country has a comparative advantage if it can produce a good or service A. at a higher opportunity cost than can other nations. B. at a lower opportunity cost than can other nations. C. by using less resources than other nations. D. that lies outside its production possibilities curve.

B

A decrease in the price of milk (an ingredient of ice cream) will result in a(n): A. shift of the supply curve of ice cream to the left. B. shift of the supply curve of ice cream to the right. C. lower price of ice cream, and thus an increase in the demand for ice cream. D. increase in the demand for ice cream and a decrease in the supply of milk.

B

According to the marginal decision rule, if marginal benefit: A. exceeds marginal cost, an activity should be reduced. B. is less than marginal cost, an activity should be reduced. C. is equal to marginal cost, an activity should be reduced. D. exceeds marginal cost, net benefit is maximized.

B

A change in the price level, all other things unchanged, causes A. a movement along the aggregate demand curve B. a shift of the aggregate demand curve C. both a movement along the aggregate demand curve and a shift in the curve D. no change in the value of assets held in the form of money

A

A market price floor for wheat: A. increases the price paid by consumers. B. decreases the price paid by consumers. C. decreases the price received by farmers. D. does not change the price received by farmers.

A

A resident of San Diego, California, owns and operates a garage across the U.S.-Mexican border in Tijuana, Mexico. The value of the garage services produced at the shop would be counted in _____. A. U.S. GNP B. Mexico's GNP C. U.S. GDP D. U.S.'s net exports

A

An increase in demand, all other things unchanged, will result in a(n) ________ in the equilibrium price and a(n) ________ in the equilibrium quantity. A. increase; increase B. decrease; decrease C. decrease; increase D. increase; decrease

A

An increase in the capital stock would shift the production function _______ A. upward B. downward C. no change D. to the left

A

An unemployed person is: A. a person without a job who is actively seeking and available for work. B. one who is eligible to work but chooses not to work. C. one who is physically disabled and is unable to work. D. a person who is looking for a job that better suits his qualifications than his current job.

A

Government purchases are defined as: A. the sum of purchases of goods and services from firms by government agencies and the total value of output produced by government agencies. B. the sum of purchases of goods and services from firms by the government and the value of transfer payments made to government to its citizens. C. the sum of purchase of final goods and service from firms by government agencies and the payment of interests on loans undertaken by the government. D. the purchase of final goods and service from firms by government agencies excluding the value of output produced by government agencies.

A

If the U.S. has a capital account surplus, it means that A. foreigners purchase more of U.S. assets than U.S. residents purchase foreign assets. B. U.S. exports of capital goods exceed its imports of capital goods. C. U.S. residents purchase more foreign assets than foreigners purchase U.S. assets. D. the quantity supplied of U.S. financial assets exceed the quantity demanded.

A

If there is a recessionary gap in the economy, discretionary fiscal policy would likely involve an action to A. shift the aggregate demand curve to the right. B. shift the aggregate demand curve to the left. C. shift both the aggregate demand curve and aggregate supply curve to the right. D. shift both the aggregate demand curve and aggregate supply curve to the left.

A

The balance between spending flows into a country and spending flows out of that country is called a country's A. current account. B. capital account. C. foreign exchange. D. spending account

A

The ease with which an asset can be converted to money is its A. liquidity. B. adaptability. C. accessibility. D. rigidity.

A

The inflation rate can be measured as A. the annual percentage change in the implicit price deflator from one year to the next. B. the change in the average price level from one year to the next. C. the change in the implicit price deflator from one year to the next. D. the change in the consumer price index from one year to the next.

A

The long-run aggregate supply curve is vertical at A. potential output. B. the actual level of real output. C. the actual level of nominal output. D. 100% employment of the labor force.

A

The purchases of U.S. products by the citizens of Mexico are: A. counted as U.S. exports. B. counted as U.S. imports. C. considered Mexico's exports. D. considered as an income transfer from the U.S. to Mexico.

A

The relationship between the price of a good and the quantity people are willing and able to purchase is: A. demand B. supply C. equilibrium D. disequilibrium

A

The value of goods and services purchased by households during a particular period is called: A. personal consumption. B. private investment. C. gross domestic purchases. D. net imports.

A

When the Fed buys bonds in the open market, we can expect A. investment and net exports to rise. B. investment will rise and net exports to fall. C. investment will fall and net exports to rise. D. investment and net exports fall.

A

When the net benefits of all economic activities are not maximized, economists say the allocation of resources is _______ . A.inefficient B.incorrect C. efficient D. poorly done

A

Whenever a choice is made A. the cost of that choice could be referred to as opportunity cost B.the cost is easy to measure in dollar terms C. a free good must be involved D. scarcity is not a problem

A

Which of the following generates a demand for U.S. dollars in the currency market? A. Japanese tourists go shopping in Barney's of New York B. A Japanese businesswoman sells her U.S. government bonds. C. An American citizen buys Japanese Yen for her trip to Japan. D. A restaurant in Kansas imports Kobe beef from Japan.

A

Which of the following illustrates the medium-of-exchange function of money? A. writing a check to buy a new Volkswagen B. noting that the price of a $20,000 Volkswagen is 16,000 euros C. keeping $20,000 in cash in your mattress instead of buying a new Volkswagen D. driving your $20,000 Volkswagen to a friend's house

A

Which of the following is a cost of economic growth? A. the sacrifice of current consumption B. inflation in consumption goods C. the sacrifice of future consumption D. excessive depletion of a nation's human capital

A

Which of the following is a market in which banks lend reserves to one another? A. federal funds market B. required reserve market C. discount market D. open market

A

Which of the following is an example of cyclical unemployment? A. An autoworker is temporarily laid off from an automobile company due to a decline in sales B. A geologist is permanently laid off from an oil company due to a new technological advancement C. A worker at a fast-food restaurant quits work to attend college D. A real estate agent leaves a job in Texas and searches for a similar, higher paying job in California

A

Which of the following result from a change in the money supply brought about by an open market purchase? A. lower interest rate, increased demand for investment B. higher interest rate, increased demand for investment C. lower interest rate, decreased demand for investment and net exports D. higher interest rate, decreased demand for investment and increased demand for net exports

A

Which of the following will decrease the short-run aggregate supply? A. An increase in wages B. An increase in the labor force C. A decrease in net exports D. A decrease in the personal income tax rates

A

Which of the following will not cause a change in aggregate demand? A. An increase in an economy's price level B. An increase in the amount of investment demanded by firms at each price level C. An increase in consumer wealth D. An increase in the price level of a foreign economy

A

Aggregate demand is defined as A. the demand for goods and services generated by all sectors in the economy, holding price level constant. B. the relationship between the total quantity of goods and services demanded and the price level, all other determinants of spending unchanged. C. the relationship between the total quantity of goods and services demanded and the supply of factors of production, all other determinants of production unchanged. D. the relationship between the total quantity of goods and services demanded and the income level, all other determinants of spending unchanged.

B

All other things unchanged, an increase in personal income tax rates will A. shift the aggregate demand curve to the right. B. shift the aggregate demand curve to the left. C. make the aggregate demand curve flatter. D. make the aggregate demand curve steeper.

B

Economic growth can be achieved through A. a decrease in the supply of labor. B. an increase in the production of capital goods. C. a decrease in the labor force participation rate. D. a reduction in expenditures on research and development.

B

Goods that are produced in a particular period but not sold in the current period: A. are included in consumption estimates. B. are called inventories and are included in gross private investment. C. are excluded from the current year's GDP and included in GDP in the year they are sold. D. are classified as intermediate goods.

B

If Dave can produce 200 large pizzas per hour and 0 medium pizzas per hour or 0 large pizzas per hour and 100 medium pizzas per hour and faces a linear production possibilities curve for his store, the opportunity cost of producing an additional medium pizza is ______ large pizzas. A. 0.5 B. 2 C. 100 D. 200

B

If a buyer's willingness to pay for a new Honda is $20,000 and she is able to actually buy it for $18,000, her consumer surplus is A. $0 B. $2,000 C. $18,000 D. $20,000

B

If steak and potatoes are complements, when the price of steak goes up, the demand curve for potatoes: A. shifts to the right B. shifts to the left C. stays the same D. shifts to the right and then moves right back

B

If the Fed buys U.S. government bonds from the public, it A. decreases the volume of reserves in the banking system and the money supply tends to grow. B. increases the volume of reserves in the banking system and the money supply tends to grow. C. increases the volume of reserves in the banking system and the money supply tends to fall. D. decreases the volume of reserves in the banking system and the money supply tends to fall.

B

If the cost of a market basket is $200 in 2016 and $230 in 2017, the price index for 2017 using 2016 as the base year is _____. A. 1.00 B. 1.15 C. 1.30 D. 2.00

B

Net benefit can be maximized by equating: A. total benefit to total cost. B. marginal benefit to marginal cost. C. marginal benefit to total cost. D. total benefit to marginal cost.

B

Rent controls set a price ceiling below the equilibrium price and therefore: A. quantity supplied exceeds the quantity demanded. B. quantity demanded exceeds the quantity supplied. C. a surplus of rental units will result. D. poor people will obviously and clearly be helped.

B

Social Security payments to U.S. citizens are considered: A. transfer payments and are included in GDP. B. transfer payments and are not included in GDP. C. income and are included in GDP. D. income and are not included in GDP.

B

Suppose the Fed conducts an open market sale of $50 million in government securities. If the required reserve ratio is 20%, what is the maximum change in the money supply? Assume that banks try not to hold excess reserves and there is no currency withdrawal from the banking system. A. maximum increase in money supply = $250 million B. maximum decrease in money supply = $250 million C. maximum increase in money supply = $50 million D. maximum decrease in money supply = $50 million

B

The gross national product (GNP) of the U.S. measures: A. the market value of final goods and services sold in the U.S. during a particular period. B. the market value of final goods and services produced using factors of production owned by U.S. residents during a particular period. C. the market value of goods and services produced anywhere in the world, by U.S. citizens and foreigners residing in the U.S. during a particular period. D. the market value of goods and services produced in the U.S. by foreigners residing in the U.S. during a particular period.

B

The long run in macroeconomic analysis is a period A. in which wages and some other prices are sticky. B. in which full wage and price flexibility and market adjustment have been achieved. C. greater than 12 months. D. in which the capital stock is held constant.

B

The price of cotton rises. What happens in the market for cotton shirts? A. The equilibrium price falls and the equilibrium quantity rises. B. The equilibrium price rises and the equilibrium quantity falls. C. The equilibrium price and quantity rise. D. The equilibrium price and quantity fall.

B

The skills, training, and education possessed by workers contribute to economic growth A. by increasing saving. B. by increasing the quality of labor. C. by increasing the quantity of labor. D. by increasing real wages.

B

The term "crowding out" refers to the phenomenon that occurs when increased government spending A. raises the price level and reduces consumption. B. leads to higher interest rates which reduces private investments. C. leads to higher bond prices which decreases the demand for Treasury bonds. D. leads to increased budget deficits that ultimately warrant increases in income taxes.

B

Use the rule of 72 to determine how long it takes for real GDP to double if real GDP grows at 3% per year. A. 12 years B. 24 years C. 36 years D. 72 years

B

When the Fed _______ governments bonds it _______ bank reserves. A. sells; increases B. buys; increases C. buys; decreases D. issues new; increases

B

When the Fed sells bonds in the open market, we can expect the A. interest rates to fall. B. interest rates to rise. C. exchange rate to fall and interest rates to rise. interest rates to rise. D. exchange rate and interest rates to fall.

B

Which of the following is an example of an intermediate good or service? A. The purchase of a new yacht by a boating enthusiast B. The purchase of lumber by a construction company C. The salaries paid to military personnel D. The salary earned by a construction worker

B

Which of the following statements is true regarding expansionary fiscal policy? A. It leads to an increase in the supply of bonds by the Treasury. B. It leads to a rise in interest rates. C. It leads to an increase in net exports. D. It tends to reduce to size of government.

B

Which of the following will increase the short-run aggregate supply? A. An increase in wages B. A decrease in the price of capital C. An increase in government spending on education D. An increase in consumption spending

B

Which of the following would shift the production function upward? A. an increase in the price of oil B. an increase in the availability of a natural resource C. a decrease in the supply of labor D. an increase in the nominal wage rate

B

A newspaper article recently stated that there are 45.06 million people over the age of 16 who have completed college education. Of this number, 36.21 million are in the labor force and 35.44 million are employed. What is the unemployment rate for this group of people above the age of 16? A .2.44% B. 2.17% C. 2.13% D. 1.71%

C

All of the following are sources of economic growth except A. increases in human capital. B. an increase in the savings rate. C. an increase in consumption spending to stimulate production. D. increases in physical capital

C

All of the following are sources of the impact lag except A. it takes some time for the deposit multiplier process to work itself out. B. firms need some time to respond to the monetary policy with respect to their investment plans. C. it takes time for the Fed to formulate a policy that best addresses a problem in the economy. D. a monetary change is likely to affect the exchange rate, but that translates into a change in net exports only after some delay.

C

Freema withdraws $1,000 from her checking account to purchase a $1,000 time-deposit. As a result of her transaction, A. M1 and M2 decrease. B. M1 decreases and M2 increases. C. M1 decreases and M2 is unaffected. D. M1 and M2 are unaffected.

C

Gross domestic income (GDI) is defined as: A. the income of all the workers in an economy who have provided human capital in the production process during a particular period. B. the income of all workers in the private sector of an economy during a particular period. C. the total income generated in an economy by the production of final goods and services during a particular period. D. the total non-wage benefits of all the workers in private sector.

C

High school athletes who skip college to become professional athletes A. obviously do not understand the value of a college education B. usually do so because they cannot get into college C. understand that the opportunity cost of attending college is very high D. are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high school athletes

C

In order to maximize net benefit, consumers and firms evaluate each activity at the: A. average. B. top. C. margin. D. end.

C

In the long run, an increase in aggregate demand, all other things unchanged, will cause the price level to A. increase and potential output to increase. B. decrease and potential output to decrease. C. increase and potential output to remain stable. D. decrease and potential output to remain stable.

C

In the short run, the equilibrium price level and the equilibrium level of total output are determined by the intersection of A. the aggregate demand, the short-run aggregate supply and the long-run aggregate supply curves. B. the short-run aggregate supply and the long-run aggregate supply curves. C. the aggregate demand and the short-run aggregate supply curves. D. the aggregate demand and the long-run aggregate supply curves.

C

Mike really likes hot-dogs. When hot-dogs are on sale at $0.25, mike buys 12 hot-dogs for the week. When the price goes up to $0.50, mike buys 8 hot dogs. What is the slope of mikes demand curve: A. -0.25 B. -4 C. -0.0625 D. 1

C

Suppose Congress increases the corporate profit tax rates. This is an example of A. discretionary fiscal policy of the expansionary variety. B. automatic fiscal policy of the expansionary variety. C. discretionary fiscal policy of the contractionary variety. D. automatic fiscal policy of the contractionary variety.

C

Suppose in 2017, nominal GDP in a country Clarendon was $12,840 billion and real GDP was $10,560 billion. Calculate the value of the GDP deflator, in the way A. 21.59 B. 82.24 C. 121.59 D. 177.57

C

The Consumer Price Index is NOT used: A. to determine the purchasing power of people's nominal incomes. B. to measure changes in the cost of living. C. to measure the average price level of all final goods and services produced. D. to compute the U.S. inflation rate.

C

The natural rate of unemployment: A. reduces during recessions. B. is the same as cyclical unemployment. C. includes frictional and structural unemployment. D. is the level where the quantity of labor demanded is more than the quantity of labor supplied

C

The price of eggs might go up because: A. of an increase in the price of bacon. B. the supply of eggs increased. C. the price of chicken feed increased. D. the demand for eggs fell.

C

What is the difference between a change in aggregate supply and a change in aggregate output supplied? A. A change in aggregate supply is represented by a movement along the aggregate supply curve in response to a price change, while a change in aggregate output supplied is represented by a shift of the aggregate supply curve in response to a change in a determinant of aggregate supply other than the price level. B. A change in aggregate supply is represented by a shift of the aggregate supply curve in response to a change in the actual price level, while a change in aggregate output supplied is represented by a movement along the aggregate supply curve in response to a change in the expected price level. C. A change in aggregate supply is represented by a shift of the aggregate supply curve in response to a change in a determinant of aggregate supply other than the price level, while a change in aggregate output supplied is represented by a movement along the aggregate supply curve in response to a change in the price level. D. There is no difference between the two terms

C

Which of the following is an example of a tariff? A. A limit on the total number of Hondas that can be imported from Japan. B. A regulation specifying that each imported Honda must meet certain emission exhaust guidelines C. A tax of $500 on each Honda imported from Japan D. A tax of 10% of the value of each Honda purchased in Japan

C

Which of the following is classified as spending on investment? I. new residential construction II. business spending on new equipment III. business spending on structures such as office buildings IV. purchase of government bonds A. II and III only B. II, III, and IV only C. I, II, and III only D. I, II, III, and IV

C

Which of the following is not a function of the Federal Reserve System? A. It acts as a central bank. B. It acts as a banker to banks. C. It determines tax levels in conjunction with the U.S. Treasury. D. It sets monetary policy.

C

Which of the following statements is true regarding interest rates and quantity of investment demanded? A. Higher rates of interest raise the opportunity cost of investment and therefore increase the quantity of investment demanded. B. Higher rates of interest lower the opportunity cost of investment and therefore reduce the quantity of investment demanded. C. Higher rates of interest raise the opportunity cost of investment and therefore reduce the quantity of investment demanded.

C

Which of the following would shift the demand curve for new textbooks to the right? A. A decrease in the price of paper. B. A fall in the price of used textbooks. C. An increase in college enrollments. D. A fall in the price of new textbooks.

C

A maximum price set below the equilibrium price is a: A. demand price. B. supply price. C. price floor. D. price ceiling.

D

A movement along the short-run aggregate supply curve in response to a change in the price level is called a A. determinant of aggregate supply. B. revealed cost on aggregate supply. C. change in aggregate supply. D. change in the aggregate quantity of goods and services supplied.

D

All of the following statements are true about the short-run aggregate supply curve except A. it is a graphical representation of the relationship between production and the price level. B. it is a result of the stickiness or inflexibility of some prices and wages. C. it is upward-sloping. D. it is drawn holding price level constant.

D

Demand is best defined as the: A. amount of a commodity that buyers would be willing and able to purchase at a specific price. B. price that buyers would be willing and able to pay for a specific quantity of a good. C. relationship between the price of a good and the quantity people are able to purchase, all other things unchanged. D. relationship between the price of a good and the quantity people are willing and able to purchase, all other things unchanged.

D

Economists define economic growth as A. changes in real GDP from year to year that occur as aggregate demand and short-run aggregate supply change. B. an increase in the standard of living of a nation. C. an increase in nominal GDP combined with price stability. D. the process through which the economy's potential output is increased.

D

Economists refer to a market where buying and selling take place at prices that violate government price regulations as A. A restricted market B. An outlaw market C. A clean market D. A Black market

D

Given the demand equation P=10-2Q, if 4 units of a good are consumed what is the consumer surplus? A. $2 B. $4 C. $8 D. $16

D

If the consumer price index falls from 140 to 135 in a year, what is the deflation rate? A. 5.00% B. 9.25% C. 10.37% D. 3.57%

D

In 2003, Congress passed a substantial cut in income taxes. The Federal Reserve also lowered interest rates. How can these two actions be categorized? A. Both actions can be categorized as fiscal policy. B. Both actions can be categorized as monetary policy. C. The tax cut can be categorized as monetary policy and the lowering of interest rates can be categorized as fiscal policy. D. The tax cut can be categorized as fiscal policy and the lowering of interest rates can be categorized as monetary policy.

D

In the long run, sustained inflation is due to A. a one-time increase in money growth. B. a continuous increase in aggregate demand. C. the rising price of oil. D. a continuous increase in the money growth rate.

D

Scarcity is defined as? A. The reward or penalty that encourages or discourages an action B. A previously incurred and irreversible cost C. Pleasure you get from dressing up on Halloween D. Inability to satisfy all our wants

D

The Fed seldom uses the reserve requirement ratio to influence the money supply. What is the reason for this? A. It is difficult and costly for the Fed to monitor compliance. B. Reserves in excess of a certain amount will not be covered by the Federal Depository Insurance Corporation. C. The Fed would like to discourage banks from making loans indiscriminately and therefore sets just one standard. D. Frequent manipulation of reserve requirements would require bankers to constantly adjust their lending policies to changing requirements, which could be destabilizing for financial markets.

D

The U.S. and Canada are major trading partners. Suppose the Canadian dollar rises sharply in value against the U.S. dollar. At the same time, strong income growth in the U.S. increases the demand for Canadian exports. What happens to Canada's net exports if strong income growth in the U.S. has a stronger effect than that of the Canadian dollar appreciation? A. The effect on net exports is indeterminate. B. Net exports must necessarily fall. C. Net exports will remain constant. D. Net exports must necessarily rise.

D

The value of GDP differs from the value of GNP because: A. net exports are excluded from GDP but included in GNP. B. government purchases are excluded from GDP but included in GNP. C. production in a country employs only factors of production owned by its residents. D. production in a country usually employs factors of production owned by residents of other countries.

D

There is equilibrium in the market when: A. supply and demand are equal B. price is established where the supply and the demand curve intersect C. all that suppliers wish to sell and demanders wish to buy at the given price are the same D. all of the above are correct

D

Unemployment that results from a mismatch between worker qualifications and the characteristics employers require is called _____ unemployment. A. cyclical B. frictional C. natural D. structural

D

Using the aggregate demand-aggregate supply model, predict what happens in the short run when the consumer confidence index falls as consumers become pessimistic about their economic prospects. A. The aggregate supply curve shifts right; the aggregate demand curve is not affected; price level decreases; real GDP increases. B. The aggregate supply curve shifts left; the aggregate demand curve is not affected; price level increases; real GDP decreases. C. The aggregate demand curve shifts right; the aggregate supply curve is not affected; price level and real GDP increase. D. The aggregate demand curve shifts left; the aggregate supply curve is not affected; price level and real GDP decrease.

D

Vikram, an Indian national working for Microsoft in New York, sends $300 every month to his elderly parents who live in Bangalore, India. This activity will: A. increase India's GNP and decrease U.S. GNP. B. decrease U.S. GNP but does not affect U.S. GDP. C. increase U.S. GNP and India's GNP. D. not affect the GDP or GNP of either country.

D

What are the four sources of aggregate demand? A. Consumption, private investment, taxes, and expenditures B. Consumption, private investment, wage increases, and government expenditures C. Consumption, private investment, expenditures, and net exports D. Consumption, private investment, government purchases, and net exports

D

Which of the following is an interest rate that is set directly by the Fed? A. the discount rate B. the prime lending rate C. the required reserve rate D. the federal funds rate

D

Which of the following is not a component of gross private domestic investment spending? A. An increase in business inventories B. The extensive renovation of an old factory building C. A consumer's purchase of a brand new condominium D. The purchase of stock in the General Electric Company

D

Which of the following is not a determinant of investment demand? A. Producers' expectations about the level of economic activity B. A decline in consumers' confidence in the economic outlook C. The quantity of capital stock D. Household wealth

D

Which of the following will not increase the productivity of labor? A. technological improvements to enhance labor B. an increase in the capital stock used by labor C. improvements in education D. an increase in the size of the labor force

D