Economics Final

T/F - If demand is elastic and price rises, total spending by consumers also rises.

False

T/F - If price rises, demand falls

False

T/F - If the market clears, there is likely to be a shortage

False

T/F - Industry studies are examples of macroeconomic analysis.

False

T/F - Net exports equal about 5 percent of GDP

False

T/F - Supply-side economics favors more government regulation relating to the health and safety of workers

False

T/F - The axes of the production possibilities frontiers are labeled price and quantity

False

T/F - The circular flow model of economic activity assumes that resources are owned by businesses

False

T/F - The implementation lag occurs because it takes time to recognize that a problem exists with the macroeconomy.

False

T/F - The investment component of GDP includes spending on human capital

False

T/F - The problem of resource scarcity has been solved in recent years through advances in technology.

False

T/F - When GDP decreases during the business cycle, the lowest point is called the peak

False

T/F - With international trade, a country is able to produce Outside its production possibilities frontier

False

What are the 5's that shift the demand curve?

Price, Packaging, Product, Promotion, Place

T/F - Balancing the budget over the course of the business cycle results in surpluses in some years and deficits in others

True

T/F - Economic growth is represented on a production possibilities frontier as a shift outward of that frontier

True

T/F - If something happens that leads producers to expect the price to rise in the future, supply will initially shift to the left.

True

T/F - If you decide to buy a Butterfinger candy bar, instead of an equally priced Almond Joy, the opportunity cost of your purchase is the value you would have received from that Almond joy.

True

T/F - Low Employment is widely accepted goal of macro policy

True

T/F - Occam's razor is a principle that is used in the drawing of roadmaps.

True

T/F - Savings is used to finance investment

True

T/F - The tax rate on incremental income is called the marginal tax rate.

True

T/F - The tradeoff between efficiency and equity means that increases in efficiency will often be accompanied by less equity.

True

GDP = C + I + G + X

X = export - imports

Unemployment Rate

...

An example of an automatic stabilizer is A) the U.S. income tax system B) the Internet C) sticky wages D) the full- employment equilibrium

A) the U.S. income tax system

Which of the following is the best example of microeconomics? A) A study of new automobile prices B) Evaluation of the federal budget. C) A statement about what ought to be D) A history of U.S. Inflation.

A) A study of new automobile prices

Savings in the Social Security system consist of A) IOUs B) shares of stock C) mostly hundred- dollar bills D) gold

A) IOUs

Which of the following is NOT an advantage of market allocation of resources over central government allocation of resources? A) Markets distribute income in the most equitable manner possible B) Market prices allocate resources to their highest valued uses C) People out for their own self-interest in the marketplace have more incentive to provide products of value to others than would government because. D) Competition among firms causes products to be produced in the most technologically efficient manner.

A) Markets distribute income in the most equitable manner possible

Which of the following items is the best example of an economic resource? A) A stock certificate B) A one-hundred dollar bill C) A tractor D) A plate of spaghetti and meatballs

C) A tractor

Which of the following is the best example of earning income from human capital? A) Melody takes a job as an interpreter for the hearing impaired B) Josie invests her life savings into her own business, "Jeans by Josephine." C) Seth toils all day in the hot summer sun as a common laborer, just to earn enough money to keep food on the table. D) J.R. kicks up his heels and watches the royalty checks flow in from his oil fields.

A) Melody takes a job as an interpreter for the hearing impaired

By having an efficient economy today, a country's future production possibilities frontier allow the production of A) both more guns and more butter B) more guns, but not more butter C) more butter, but not more guns D) neither more guns nor more butter

A) both more guns and more butter

An increase in the price football tickets would cause the _____ basketball tickets, a substitute, to ____. A) demand for; increase B) supply of; increase C) demand for; decrease D) supply of; decrease

A) demand for; increase

The consumption spending portion of GDP includes A) durable good, nondurable goods, and services B) goods, services, and new houses C) intermediate good, but not final goods D) about 90 percent of all production that occurs in the economy

A) durable good, nondurable goods, and services

Moving down a downward-sloping straight-line demand curve, elasticity A) goes from elastic to unit elastic to inelastic B) goes from elastic to inelastic to unit elastic C) goes from inelastic to unit elastic to elastic D) remains constant at unit elastic throughout

A) goes from elastic to unit elastic to inelastic

Technological change and additional capital A) increase labor productivity B) decrease labor productivity C) have no effect on labor productivity D) affect labor productivity in unpredictable ways

A) increase labor productivity

Gross investment equals A) net investment plus depreciation B) investment adjusted for the effects of inflation C) a negative component of GDP D) the change in business inventories

A) net investment plus depreciation

Suppose an economy produces only gizmos and widgets. If there is a technological advance in the production of widgets, the economy's production possibilities frontier will shift. A) outward along the widget axis, but not along the gizmo axis B) outward along the gizmo axis, but not along the widget axis C) outward along both axes D) inward along both axes

A) outward along the widget axis, but not along the gizmo axis

In order to gain A) specialize according to comparative advantage B) specialize according to absolute advantage C) find a trading partner with an absolute advantage in something D) find a trading partner with an absolute advantage in anything

A) specialize according to comparative advantage

Macroeconomics looks at A) the "big picture" B) only the government portion of the economy C) only the business portion of the economy D) the behavior of individuals, but not at firms

A) the "big picture"

Assume that used cars are an inferior good and that new cars are a normal good. If consumer incomes increase, the demand for A) used cars will decrease, and the demand for new cars will increase B) used cars will increase, and the demand for new cars will decrease C) both new and used cars will decrease D) both new and used cars will in crease

A) used cars will decrease, and the demand for new cars will increase

Economics is primarily the study of A) Stocks and bonds B) Allocating limited resources to meet unlimited wants C) Methods to eliminate scarcity D) Why consumers want what they do

B) Allocating limited resources to meet unlimited wants

Which of the following is the best example of a positive economic statement? A) New York should repeal its income tax B) An increase in the minimum wage is likely to increase unemployment C) It is unfair to subsidize farmers D) The price of gasoline is just fine!

B) An increase in the minimum wage is likely to increase unemployment

In a capitalist economy, economic activities are coordinated by A) traditions B) Prices C) Government D) Business firms

B) Prices

The idea that the economy should produce its outputs with the least costly combinations of inputs is known as A) allocative efficiency B) Technological efficiency C) Economic efficiency D) equity

B) Technological efficiency

A decrease in supply is illustrated as A) a downward shift in the supply curve B) a shift to the left in the supply curve C) an upward movement along the supply curve D) a downward movement along the supply curve

B) a shift to the left in the supply curve

The difference between the federal budget deficit and the national debt is that the budget deficit represents the A) accumulation of past debts, while the national debt is the amount by which spending exceeds revenues B) amount by which spending exceeds revenues each year, while the national debt represents the accumulation of past deficits and surpluses C) amount of money the country owes that it cannot pay back D) amount of money the United States owes foreign countries, while the budget deficit represents the amount of money the United States owes in total.

B) amount by which spending exceeds revenues each year, while the national debt represents the accumulation of past deficits and surpluses

A country has a comparative advantage in the production of a good if it can produce that good ____ than can other countries. A) with fewer ram materials B) at a lower opportunity cost C) at a higher quality D) with fewer labor-hours

B) at a lower opportunity cost

If research reveals that carrot juice cures cancer, it is likely that A) the supply of carrot juice will increase, which will increase the quantity demanded B) demand for carrot juice will increase, which will increase the quantity supplied C) neither ther demand for carrot juice nor the supply of carrot juice will increase D) both the demand for carrot juice and the supply of carrot juice will increase.

B) demand for carrot juice will increase, which will increase the quantity supplied

Net exports are computed as A) exports minus depreciation B) exports minus imports C) exports minus GDP D) imports minus exports

B) exports minus imports

T/F - Ceteris paribus, if the price of Coca-Cola rises, the quantity sold of Pepsi will fall

False

A loaf of French bread is used by a baker to cut into croutons that are sold to Bridgette. The value of the load of French bread is not counted in GDP because it is a(n) _____ good. The value of the croutons are counted in GDP because they are a(n) _____ good. A) final; intermediate B) intermediate; final C) consumption; investment D) investment; consumption

B) intermediate; final

If a tax collects $1,000 per person, no matter what a person's income might be, then the tax is A) a head tax which is regressive B) progressive C) a user fee D) proportional

B) progressive

The opportunity cost of new city police contract is A) the amount of money it takes in order to provide the city with the most highly qualified personnel B) the value of the other goods and services that the city and taxpayers will be forced to give up in order to pay for the contract C) the cost to victims of crimes that the new contract would prevent D) the value of the opportunities that city policemen acquire by accepting it

B) the value of the other goods and services that the city and taxpayers will be forced to give up in order to pay for the contract

U.S. economic growth A) has generally been characterized by a 5 percent or more growth rate since the 1960's B) varied with each president C) was on a downward trend in the 1990's, but has recently reversed its course. D) is no longer considered an important economic goal

B) varied with each president

The three basic questions an economy must answer are? A) why produce; how much to produce; who to produce it? B) what to produce; how much to produce it; who to consume it? C) what to produce; why produce; how to produce? D) when to produce; how to produce; what to produce?

B) what to produce; how much to produce it; who to consume it?

If a nation's production possibilities indicate that 1,000,000 battle tanks and 6,000,000 houses could be produced, or alternatively, 750,000 tanks and 8,000,000 houses could also be produced, the opportunity cost of each additional house would be A) 250,000 tanks B) 8 tanks C) 0.125 tanks D) 2,000,000 houses

C) 0.125 tanks

When added together, the employer share and the employee share of the Social Security tax total just over _______ percent of an individual's wages A) 5 B) 10 C) 15 D) 24

C) 15

Applying the rule of seventy-two, it would take _____ years for GDP to double at steady growth rate of 3 percent in GDP A) 216 B) 72 C) 24 D) 3

C) 24

The corporate income tax takes about _____ percent of corporate profits. A) 10 B) 20 C) 30 D) 50

C) 30

Which event is most likely to result in an increase in the price of a Whopper hamburger at Burger King? A) French fries go up in price B) New competing hamburger restaurants open C) Beef prices increase D) Scientists declare that hamburgers are a health hazard

C) Beef prices increase

Money in the economy today A) Is needed in order for barter to occur B) Is primarily commodity money C) Facilitates the circular flow of economic activity D) is an economic resource along with land, labor, capital, and entrepreneurship

C) Facilitates the circular flow of economic activity

Efficiency means A) Resources are distributed in a fair manner B) All material wants are satisfied C) No one can be made off, except at someone else's expense D) technology does not change

C) No one can be made off, except at someone else's expense

When a country can produce a good with lower resources than any other country, the country has A) a comparative advantage B) a resource advantage C) an absolute advantage D) an unfair advantage

C) an absolute advantage

An upward-sloping supply curve means that A) consumers will wish to purchase more at higher prices B) consumers will wish to purchase more at lower prices C) business firms will wish to sell more at higher prices D) business firms that lower their prices will desire to sell more

C) business firms will wish to sell more at higher prices

The concept of a mixed economy refers to a mixture of A) Positive and normative economics B) microeconomics and macroeconomics C) government and free markets D) command with control

C) government and free markets

Making decisions at the margin is about A) all-or-nothing choices. B) Choices involving money C) incremental choices D) normative economics

C) incremental choices

Personal security accounts would be financed by A) employers B) government C) individuals D) small- to medium- sized firms, but not large corporations

C) individuals

Laissez faire is the term for? A) the philosophy that hard work is bad for a person B) government command-and-control policies C) let it be D) a partnership between government and business

C) let it be

when there is an initial shortage, market prices eventually reach equilibrium because A) supply increases B) price decreases C) price increases D) equilibrium output falls

C) price increases

The benefit principle and the ability-to-pay principle refer to A) whether a tax is progressive or regressive B) principle of tax efficiency C) principle of tax equity D) legal principles that question the constitutionality of Social Security

C) principle of tax equity

As a nation develops economically, its production possibilities frontier A) remains stable B) shifts inward C) shift outward D) becomes steeper, but does not shift

C) shift outward

Suppose a new technique is discovered that is expected to result in cars and houses of the future obtaining all of their energy requirements from roof-mounted solar panels. In the present-day market for oil, it is most likely that A) demand would shift to the right B) demand would shift to the left C) supply would shift to the right D) supply would shift to the left

C) supply would shift to the right

An average tax rate is A) additional taxes owed as a percentage of total income B) total taxes owed C) total taxes owed as a percentage of total income D) the percentage of income not collected in taxes

C) total taxes owed as a percentage of total income

The two most important sources of revenue for local governments are sales taxes and A) personal income taxes B) corporate income taxes C) social security taxes D) property taxes

D) property taxes

School voucher plans are likely to do all of the following EXCEPT A) Increase the amount of control that parents have over schools B) threaten the job security of teachers in the public schools C) violate the constitutional separation between church and state D) increase the amount of educational choices available

C) violate the constitutional separation between church and state

In response to the inefficient use of resources in China in the days of Mao Tse-Tung, recent Chinese policy has emphasized. A) Egalitarianism B) Central Planning C) Free Internet Access D) Market incentives

D) Market incentives

Which of the following would be most likely to shift the demand for widgets? A) a change in the price of widgets B) Unionization of the widget industry C) Discovery of a valuable use for by-products generated in the production of widgets D) a new report that widgets prices are expected to increase in the future.

D) a new report that widgets prices are expected to increase in the future.

Command-and-control economies are characterized by A) reliance upon free markets B) adherence to the principles of capitalism C) economic freedom D) government decision making

D) government decision making

Capital formation is also referred to as A) property rights B) technology C) the real interest rate D) investment

D) investment

The federal budget deficit A) has not existed since 1997 B) is the accumulation of all federal debts C) equals the national debt minus the budget surplus D) is the amount by which government spending exceeds its revenue over the course o a year.

D) is the amount by which government spending exceeds its revenue over the course of a year.

An efficient tax A) distorts relative prices B) changes peoples' behaviors C) is paid entirely by employers D) may not be equitable

D) may not be equitable

Efficiency in taxation A) is less important than equity in taxation B) is best exemplified by the progressivity of the income tax C) is increased when a tax also more equitable D) often involves a tradeoff with equity

D) often involves a tradeoff with equity

A production possibilites frontier shows combinations of A) inputs that can produce a specific quantity of output B) outputs that people consume C) outputs that can be achieved as technology improves D) outputs that can be achieved in a given time period with all available resources employed using current technology

D) outputs that can be achieved in a given time period with all available resources employed using current technology

T/F - An economy will grow faster when it chooses to produce more consumer goods and fewer capital goods.

False

The gasoline tax A) is used to fund various government programs B) is the best example of a progressive tax C) seems to satisfy the ability-to-pay principle D) reflects the benefit principle, since those who pay the tax tend to receive the benefits

D) reflects the benefit principle, since those who pay the tax tend to receive the benefits

Investment equals A) saving - taxation B) saving + taxation C) saving + taxation + government consumption D) saving + taxation - government consumption

D) saving + taxation - government consumption

The invisible hand of the marketplace refers to the tendency for A) government to control the economy behind the scenes B) pollution and other side effects of market activities to harm the economy C) producers to conspire with each other, so as to get as much money as possible out of consumers pockets D) sellers out for their own self-interests to provide the most valuable assortment of products at the lowest possible prices.

D) sellers out for their own self-interests to provide the most valuable assortment of products at the lowest possible prices.

Demand and supply curves are drawn assuming ceteris paribus, which means A) consumers and producers care only about money B) that product is the only product in existence C) to ignore all assumptions D) that all other things are held constant

D) that all other things are held constant

The law of demand states that consumers A) must not buy more than they need B) must not waste what they buy C) must pay for what they buy D) will buy more as the price falls

D) will buy more as the price falls

T/F - A progressive tax is any tax that takes more money from the rich than from the poor.

False

T/F - Adam Smith's concept of the invisible hand is that the free marketplace functions better when the hand of government guides it.

False

T/F - Higher real interest rates shift the investment demand curve to the left

False

Bond =

Loan

Velocity of money

Number of times changes

Assets - Liability =

Owner equity

Transfer spending is

Social Security and unemployment

T/F - A chained price index links quantities in one year to the next

True

T/F - A tax on saving shifts the supply curve of saving to the left, thus increasing the real interest rate

True

T/F - Aggregate demand will increase in response to a fiscal stimulus

True