Economics Midterm (12th Grade)

Cost-push inflation is caused by a. SRAS curve shift to the left b. SRAS curve shift to the right c. AD curve shift to the right d. AD curve shift to the left

a. SRAS curve shift to the left

Which of the following most undermines the ability of a nation's currency to store value? a. a decrease in the purchasing power of the currency b. the use of credit and debit cards are mediums of exchange c. an increase in the prices of federal bonds d. appreciation of the currency in the international money market e. an increase in the supply of foreign currencies in the international money market

a. a decrease in the purchasing power of the currency

Which is the best way to describe the AS curve in the long run? a. always vertical in the long run b. always upward sloping because it follows the Law of Supply c. always horizonal d. always downward sloping e. without more information we cannot predict how it look sin the long run

a. always vertical in the long run

Which is the best way to describe the AS curve in the long run? a. always vertical in the long run b. always upward sloping because it follows the Law of Supply c. always horizontal d. always downward sloping e. without more information we cannot predict how it looks in the long run

a. always vertical in the long run

Which of the following will not cause an increase in the supply of cornflakes? a. an increase in the price of cornflakes b. a cost-saving improvement in the technology of corn production c. a reduction in the price of corn d. the expectation by producers that the price of cornflakes will fall in the future, because they anticipate the release of a government report that claims that oat bran is healthier than cornflakes

a. an increase in the price of cornflakes

The alternation between economic downturns, recessions, and economic upturns and expansions is known as the: a. business cycle b. contractionary cycle c. expansionary cycle d. disequilibrium cycle

a. business cycle

In the measurement of gross domestic, investment includes spending by a. businesses on capital goods and changes in inventories b. businesses on stocks, bonds, and other financial assets c. individual households on stocks, bonds, and other financial assets d. the federal government to purchase bonds issued by the Federal Reserve e. the Federal Reserve to buy government bonds

a. businesses on capital goods and changes in inventories

The consumer price index reflects the: a. changes in the price of goods and services typically purchased by consumers b. level of prices for intermediate goods and services purchased by business c. level of prices for raw materials d. prices of all goods and services computed from the ratio of nominal GDP to real GDP

a. changes in the price of goods and services typically purchased by consumers

If the price of gummy bears increases a little (e.g. 3%), but the decrease in quantity demanded is a lot (e.g. 20%), then the price elasticity of gummy bears is a. elastic b. inelastic c. unitary elastic d. insufficient information

a. elastic

Unemployment that is due to the time workers spend in job search is considered: a. frictional unemployment b. structural unemployment c. cyclical unemployment d. natural unemployment

a. frictional unemployment

Under which of the following conditions would a contractionary fiscal policy be most appropriate? a. high inflation b. high unemployment c. full employment with stable prices d. low interest rates e. a budget deficit

a. high inflation

Which of the following statements about the simple circular flow model of a market economy is correct? a. households are on the demand side of the product market and the supply side of the resource market b. business firms are on the supply side of both the product market and the resource market c. households receive income in the form of wages, and business firms receive income in the form of investment d. exports and investment expenditures are examples of leakage from the circular flow, whereas imports and savings are injections e. circular flow models are used primarily to explain why money is necessary in any economic system

a. households are on the demand side of the product market and the supply side of the resource market

An increase in the price level that is extremely rapid (says 400% per year) is called: a. hyperinflation b. inflation c. deflation d. hyperdeflation

a. hyperinflation

Demand-pull inflation can be caused by a. increased consumption of final goods and services b. increased production costs c. decreased quantity of money d. law of increasing costs

a. increased consumption of final goods and services

The fact that a society's production possibility frontier is curved demonstrates the law of a. increasing opportunity cost b. decreasing opportunity cost c. constant opportunity cost d. concave opportunity cost

a. increasing opportunity cost

Stagflation is a combination of: a. increasing unemployment and increasing inflation b. decreasing unemployment and increasing inflation c. increasing unemployment and decreasing inflation d. decreasing unemployment and increasing inflation

a. increasing unemployment and increasing inflation

Resources are also known as a. inputs b. outputs c. wants d. goods e. services

a. inputs

Opportunity cost a. is measured by how much of one good/service a person has to forgo in order to get some stated amount of another good/service b. measures how many different opportunities you have to spend your money c. measures opportunities in terms of their relative prices d. is the same as money cost e. is not a real cost

a. is measured by how much of one good/service a person has to forgo in order to get some stated amount of another good/service

In the long run, the aggregate price level has: a. no effect on the quantity of aggregate output b. a positive effect on the quantity of aggregate output c. a negative effect on the quantity of aggregate output d. an impact on aggregate output but no impact on employment

a. no effect on the quantity of aggregate output

The unemployment rate measure the percentage of a. people in the labor force who do not have jobs b. people in the labor force who have a part-time job but are looking for a full-time job c. people who do not have jobs and have given up looking for work d. people in the adult population who do not have jobs e. people in the adult population who have temporary jobs

a. people in the labor force who do not have jobs

Investment spending represents spending on: a. productive physical capital, e.g., machines b. stocks c. mutual funds d. corporate bonds

a. productive physical capital, e.g., machines

The aggregate demand curve is downward sloping because as the price level increases a. purchasing power of wealth decreases b. demand for imports decreases c. demand for interest-sensitive expenditures increase d. demand for domestically produced substitute goods increases e. real value of fixed assets increases

a. purchasing power of wealth decreases

One explanation for the downward slope of the aggregate demand curve is that when the price level increases, which of the following will decrease? a. real value of assets (wealth) b. prices of foreign goods c. prices of substitute goods d. expectations of future prices e. government deficit

a. real value of assets (wealth)

Suppose economists have identified several consecutive months of falling output and employment, and forecasts for the next few months are for more of the same. At what point in the business cycle is the economy? a. recession (contraction) b. expansion c. business cycle peak d. business cycle trough

a. recession (contraction)

A decrease in which of the following will increase aggregate demand? a. taxes b. government c. money supply d. wages e. wealth

a. taxes

A decrease in which of the following will increase aggregate demand? a. taxes b. government spending c. money supply d. wages e. wealth

a. taxes

Intermediate goods are not counted in the calculation of GDP because: a. that involves double counting, i.e., goods are counted twice b. these goods are not economic goods c. these are produced in the underground economy d. these goods involve financial transactions

a. that involves double counting, i.e., goods are counted twice

The short-run aggregate supply curve is likely to shift to the left when there is an increase in a. the cost of productive resources b. productivity c. the money supply d. the federal budget deficit e. imports

a. the cost of productive resources

The short-run aggregate supply curve is likely to shift to the left when there is an increase in a. the cost of productive resources (inputs) b. productivity c. the money supply d. the federal budget deficit e. imports

a. the cost of productive resources (inputs)

Gross domestic product has been criticized as a measure of well-being because it fails to take into account which of the following? a. the distribution of income b. the value of services c. the value of intermediate goods d. the value of financial transactions and sales of used items e. the value of government services

a. the distribution of income

Which of the following is TRUE with respect to the short-run aggregate supply and the long-run aggregate supply? a. the economy can be on both curves simultaneously b. if the economy is on the short-run aggregate supply curve, it can not be on the long-run aggregate supply curve c. if the economy is on the long-run aggregate supply curve, it can not be on the short-run aggregate supply curve d. the economy can never be in a position where it rests on both curves simultaneously

a. the economy can be on both curves simultaneously

Monica likes to wear red lipstick, and she always wear blue eye shadow whenever she has red lips. A resource for the eye shadow is a. the person who makes the eye shadow b. Monica's desire (demand) for the eye shadow c. Monica's money used to purchase the eye shadow d. the lipstick, because when she uses red lipstick she also uses blue eye shadow e. the eye shadow itself

a. the person who makes the eye shadow

Which of the following measures is typically used as an indicator of the conditions in the labor market? a. the unemployment rate b. the population growth rate c. the inflation rate d. the trade deficit

a. the unemployment rate

Structural unemployment is: a. unemployment that results when people seeking jobs do not have the education or skills to do the jobs that are available or there are no jobs that need the skills of the people looking for work b. unemployment experienced by those entering the labor force for the first time c. zero when the economy is in full employment d. causes by short run economic fluctuations

a. unemployment that results when people seeking jobs do not have the education or skills to do the jobs that are available or there are no jobs that need the skills of the people looking for work

Which of the following equations correctly measures GDP? a. C + I + G + M - X b. C + I + G + X - M c. G + I + G + X + M d. C + I + G - T + TR

b. C + I + G + X -M

Each of the following is true EXCEPT a. CPI: the market basket does not change from year to year; prices vary b. CPI: based on the prices of all goods produced in an economy c. GDP deflator: reflects the prices of all goods and services produced domestically in an economy d. GDP deflator: the quantity of domestically produced goods and esrvices changes from year to year, but the prices do not vary; prices from a base year are used

b. CPI: based on the prices of all goods produced in an economy

The study of economics is primarily concerned with which of the following? a. The testing and modeling of hypotheses under controlled conditions b. The allocation of scarce resources, given unlimited wants c. The fair and equal treatment of all households d. The provision of conclusive answers to public policy issues e. The development of the dynamics of group behavior

b. The allocation of scarce resources, give unlimited wants

A measure of the overall level of prices in the economy is the a. inflation rate b. aggregate price level c. GDP deflator d. indexing the CPI

b. aggregate price level

If during a period of several months we observe the economy to be increasing both its level of output and employment, we could assume that the economy is in: a. a depression b. an expression c. a recession d. a turning point between a recovery and a downturn

b. an expansion

Each of the following will cause the aggregate demand curve to shift to the left EXCEPT a. an increase in personal income taxes b. an increase in the money supply c. an increase in interest rates d. a decrease in government spending e. a decrease in net exports

b. an increase in the money supply

To be counted as unemployed, one must: a. have had a job previously b. be out of work and be actively looking for a job c. have had a job before and be actively looking for work d. actively looking for a job and have at least a high-school degree or its equivalent

b. be out of work and be actively looking for a job

The ______ is the most widely used measure of inflation in the United States. a. producer price index b. consumer price index c. GDP deflator d. national income account

b. consumer price index

Under which of the following conditions would consumer spending most likely increase? a. consumers have large unpaid balances on their credit cards b. consumers' wealth is increased by changes in the stock market c. the government encourages consumers to increase their savings d. social security taxes are increased e. consumers believe they will not receive pay increases next year

b. consumers' wealth is increased by changes in the stock market

Rita also likes to wear red lipstick and blue eye shadow. The red lipstick is a a. resource b. good c. service d. economic agent e. input

b. good

An increase in which of the following will increase aggregate demand? a. taxes b. government spending c. imports d. interest rates e. crowding out

b. government spending

An increase in which of the following will increase aggregate demand? a. taxes b. government spending c. the federal funds rate d. reserve requirements e. the discount rate

b. government spending

A country's government runs a budget deficit when which of the following occurs in a given year? a. the amount of new loans to developing nations exceeds the amount of loans paid off by developing nations b. government spending exceeds tax revenues c. the debt owed to foreigners exceeds the debt owed to the country's citizens d. the amount borrowed exceeds the interest payment on the national debt e. interest payments on the national debt exceed spending on goods and services

b. government spending exceeds tax revenues

Two goods are substitutes a. if the demand for one good increases when the price of the other good falls b. if the demand for one good increases when the price of the other good increases c. only if both are normal goods d. only if one is an inferior good

b. if the demand for one good increases when the price of the other good increases

The demand curve will shift to the left for inferior goods when a. incomes decrease b. incomes increase c. the price of the inferior good decreases d. the price of the inferior good increases

b. income increases

Shoe-leather costs refer to the: a. effect of inflation on the prices of food, clothes, and other necessities b. increased cost of transactions due to inflation c. high price of leather goods d. effect of inflation on transportation costs

b. increased cost of transactions due to inflation

Cost-push inflation is caused by a. increased consumption of final goods and services b. increased production costs c. increased quantity of money d. law of increasing costs

b. increased production costs

All points inside the production possibility frontier represent a. efficient production points b. inefficient production points c. non-feasible production points d. economic growth

b. inefficient production points

If the price of gasoline increases a lot (e.g. 20%), but the decrease in quantity demanded is only a little (e.g. 3%), then the price elasticity of gasoline is a. elastic b. inelastic c. unitary elastic d. insufficient information

b. inelastic

A Production Possibility Frontier (PPF) shows a. the production from given resources is unlimited b. that choosing to produce one good implies sacrificing production of other goods c. that only one good in an economy is affected by the production of another good d. that producing scarce goods affects the production of free goods e. that in reality its not possible to produce more than one good efficiently

b. that choosing to produce one good implies sacrificing production of other goods

Many economists believe that the CPI overstates inflation for each of the following reasons EXCEPT a. immeasurable increased quality of goods and services b. the Bureau of Labor Statistics collects data on the prices of only a few goods and services c. the CPI basket of goods does not change to reflect consumer reaction to changes in relative prices, i.e., substitution: consumers switching to cheaper goods and services d. introduction of new goods and services

b. the Bureau of Labor Statistics collects data on the prices of only a few goods and services

Which of the following is a correct example of marginal analysis? Donna Karan produces dresses, shoes, and tights. She will produce more dresses if... a. the demand for dresses increases b. the added benefit of producing more dresses exceeds the additional cost of producing them c. the sales of her shoes and tights increase, indicating she could also sell more dresses d. the cost of materials decreases e. the economy is growing

b. the added benefit of producing more dresses exceeds the additional cost of producing them

Crowding out is best described as which of the following? a. the decrease in full-employment output caused by an increase in taxes b. the decrease in consumption or private investment spending caused by an increase in government spending c. the decrease in government spending caused by a decrease in taxes d. the increase in the amount of capital outflow caused by the increase in government spending

b. the decrease in consumption or private investment spending caused by an increase in government spending

Changes in investment or government spending will lead to a change in which of the following? a. price level b. the level of output and employment c. interest rates d. the aggregate supply curve e. the demand for money, unless the economy slips into a liquidity trap

b. the level of output and employment

Potential output is: a. the level of real GDP that exists when the economy is experiencing only cyclical unemployment b. the level of real GDP that the economy would produce if all prices, including nominal wages, were fully flexible c. the level of real GDP that exists when the actual rate of unemployment is zero d. the level of real GDP that the economy would produce if all prices, including nominal wages, were sticky

b. the level of real GDP that the economy would produce if all prices, including nominal wages, were fully flexible

If real gross domestic product is increasing at 3 percent per year and nominal gross domestic product is increasing at 7 percent per year, which of the following is necessarily true? a. unemployment is increasing b. the price level is increasing, i.e., there is inflation c. exports exceed imports d. the economy is in a recession e. the government is running a budget deficit

b. the price level is increasing, i.e., there is inflation

A production possibility frontier illustrates that ______ facing an economy that _______ only two goods. a. prices; sells b. trade-offs; produces c. trade-offs; consumes d. shortages; produces

b. trade-offs; produces

The presence of discouraged workers in the economy tends to: a. overestimate the official unemployment rate, i.e., the number of unemployed is actually lower b. underestimate the official unemployment rate, i.e., the number of unemployed is actually higher c. lower the number of people who are seasonally unemployed d. increase the number of people who are structurally unemployed

b. underestimate the official unemployment rate, i.e., the number of unemployed is actually higher

The most painful effect of a recession is: a. inflation b. unemployment c. money neutrality d. liquidity trap

b. unemployment

A good is inferior if a. when income increases, the demand remains unchanged b. when income increases, the demand decreases c. when income increases, the demand increases d. income and the demand are unrelated

b. when income increases, the demand decreases

Demand-pull inflation can be caused by a. SRAS curve shift to the left b. SRAS curve shift to the right c. AD curve shift to the right d. AD curve shift t the left

c. AD curve shift to the right

A change in which of the following will cause the short-run aggregate supply curve to shift? I. The price level II. Government spending III. The cost of all inputs a. I only b. II only c. III only d. I and II only e. I, II, and III

c. III only

The "other things equal" assumption means a. the statement following it is a positive one b. all relevant factors (independent variables) except one change when studying an economic effect c. all relevant factors (independent variables) except one remain unchanged when studying an economic effect d. scarcity depends on the situation e. there is insufficient information to solve the problem

c. all relevant factors (independent variables) except one remain unchanged when studying an economic effect

Which of the following would most likely cause a rightward shift in an economy's aggregate supply curve? a. an increase in interest rates b. a tax increase of 50 cents per gallon for gasoline c. an across-the-board reduction of wages in the manufactoring sector d. the passage of legislation mandating a reduction in automobile pollution e. the shutdown of plants and movement of production of goods abroad

c. an across-the-board reduction of wages in the manufacturing sector

Which of the following would most likely cause a rightward shift in an economy's aggregate supply curve? a. an increase in interest rates b. a tax increase of 50 cents per gallon of gasoline c. an across-the-board reduction of wages in the manufacturing sector d. the passage of legislation mandating a reduction in automobile pollution e. the shutdown of plants and movement of production of goods abroad

c. an across-the-board reduction of wages in the manufacturing sector

Menu costs of inflation are the: a. costs associated with money being a less reliable unit of measurement b. costs of transactions associated with avoiding the inflation tax c. costs associated with businesses changing prices d. revenue the government gets from printing money

c. costs associated with businesses changing prices

Which of the following would cause the official unemployment rate to understate the problem of unemployment? a. workers receiving unemployment compensation b. cyclically unemployment workers c. discouraged workers d. recent college graduates looking for work e. retirees

c. discouraged workers

The official unemployment rate (U3) ignores: a. people with professional jobs b. people who work on commission c. discouraged workers who have given up looking for a job d. people with professional jobs, people who work on commission and discouraged workers who have given up looking for a job

c. discouraged workers who have given up looking for a job

Suppose the inflation rate from 2010 to 2011 was 5% and inflation rate from 2011 to 2012 was 3%. Which of the following occurred? a. hyperinflation b. deflation c. disinflation d. price level decline

c. disinflation

Each of the following is a factor of production EXCEPT a. factory b. coat c. girl shopping for shoes d. girl starting a new business e. farmer

c. girl shopping for shoes

When the price of makeup falls, the quantity for makeup increases because a. makeup is considered a necessity for most girls b. makeup buyers are not sensitive to price changes c. girls are able to buy more makeup d. makeup is an inferior good e. makeup manufacturers need the extra business

c. girls are able to buy more makeup

Crowding out due to government borrowing occurs when a. lower interest rates increase private sector investment b. lower interest rates decrease private sector investment c. higher interest rates decrease private sector investment d. a smaller money supply increases private sector investment e. a smaller money supply decreases private sector investment

c. higher interest rates decrease private sector investment

The production possibility frontier illustrates that: a. the economy will automatically end up at full employment b. an economy's productive capacity increases proportionally with its population c. if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced d. economic production possibilities have no limit

c. if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced

if marginal propensity to consume is 0.9, the government increases purchases by $100, the equilibrium level of real gross domestic product will a. decrease by up to $9,000 b. increase by up to $9,000 c. increase by up to $1,000 d. decrease by up to $1,000 e. increase by up to $100

c. increase by up to $1,000

An increase in government expenditure will most likely a. reduce the price level b. reduce the level of nominal gross domestic product c. increase real gross domestic product d. shift the short-run aggregate supply curve to the right e. shift both the aggregate demand curve and the long-run aggregate supply curve to the left

c. increase real gross domestic product

In the "paradox" of thift": a. firms that are pessimistic about the future lay off the most saving-conscientious workers b. when families and business are feeling pessimistic about the future, they spend more today c. increased saving by individuals can hurt the overall economy d. profligate behavior during economic tough times has large negative consequences for society

c. increased saving by individuals can hurt the overall economy

The major difference between real and nominal gross domestic product (GDP) is that real GDP a. excludes government transfer payments b. excludes imports c. is adjusted for price-level changes d. measures only the value of final goods and services that are consumed e. measures the prices of a market basket of goods purchased by a typical urban consumer

c. is adjusted for price-level changes

When the United States government engages in deficit spending to battle a recession, that spending is primarily financed by a. decreasing taxes b. borrowing from the World Bank c. issuing (selling) new treasury bonds d. buying treasury bonds e. depreciating the value of the dollar

c. issuing (selling) new treasury bonds

An increase in which of the following is consistent with an outward shift of the production possibilities curve? a. transfer payments b. aggregate demand c. long-run aggregate supply d. income tax rates e. exports

c. long-run aggregate supply

An increase in supply means that (c.p.) a. more will be supplied at a lower price than before b. more will be supplied at a higher price than before c. more will be supplied at the same price as before d. less will be supplied at a higher price than before

c. more will be supplied at the same price as before

All points outside the production possibility frontier represent: a. efficient production points b. inefficient production points c. non-feasible production points d. economic growth

c. non-feasible production points

The typical supply curve illustrated that: a. other things equal, the quantity supplied for a good is inversely related to the price of a good b. other things equal, the supply of the good creates its own demand for the good c. other things equal, the quantity supplied for a good its positively related to the price of a good d. price and quantity supplied are unrelated

c. other things equal, the quantity supplied for a good its positively related to the price of a good

The supply curve is upward-sloping because higher prices induce a. consumers to buy more b. consumers to buy less c. producers to supply more d. producers to supply less

c. producers to supply more

The long-run growth rate of an economy will be increased by an increase in all of the following EXCEPT a. capital stock b. labor supply c. real interest rate d. rate of technological change e. spending on education and training

c. real interest rate

The long-run growth rate of an economy will increase (the PPC will shift out) by an increase in all of the following EXCEPT a. capital stock b. labor supply c. real interest rate d. rate of technological change e. spending on education and training

c. real interest rate

Which of the following events will most likely cause an increase in both the price level and real gross domestic product? a. the prime rate increases b. exports increase c. income taxes increase d. crude oil prices decrease e. inflationary expectation decrease

c. real interest rate

The intersection of the aggregate supply curve and the aggregate demand curve occurs at the economy's equilibrium level of a. real investment and the interest rate b. real disposable income and unemployment c. real national output (GDPr) and the price level d. government expenditures and taxes e. imports and exports

c. real national output (GDPr) and the price level

The intersection of the aggregate supply curve and the aggregate demand curve occurs at the economy's equilibrium level of a. real investment and the interest rate b. real disposable income and unemployment c. real national output and the price level d. government expenditures and taxes e. imports and exports

c. real national output and price level

Which of the following best explains why transfer payments are not included in the calculation of gross domestic product? a. transfer payments are used to pay for intermediate goods, and intermediate goods are excluded from gross domestic product b. transfer payments area government expenditure, and government expenditures are excluded form gross domestic product c. recipients of transfer payments have not produced or supplied goods and services in exchange for these payments d. recipients of transfer payments are usually children, and income earned by children is excluded in gross domestic product e. recipients of transfer payments are sometimes not citizens of the United States

c. recipients of transfer payments have not produced or supplied goods and services in exchange for these payments

Which of the following best explains why transfer payments are not included in the calculation of gross domestic product? a. transfer payments are used to pay for intermediate goods, and intermediate goods are excluded from gross domestic product b. transfer payments area government expenditure, and government expenditures are excluded from gross domestic product c. recipients of transfer payments have not produced or supplied goods and services in exchange for these payments d. recipients of transfer payments are usually children, and income earned by children is excluded in gross domestic product e. recipients of transfer payments are sometimes not citizens of the United States

c. recipients of transfer payments have not produced or supplied goods and services in exchange for these payments

Goods are scarce if and only if a. they have a high price b. they have a low price c. the amount people want exceeds the amount available at a zero price d. the government interferes with the market e. none of the above

c. the amount people wants exceeds the amount available at a zero price

When Ina decides to buy a $200 pair of high heels instead of a $400 dress to wear to the prom, her opportunity cost is a. $400 b. $200 c. the dress d. the high heels e. going to the movies instead of the prom

c. the dress

Federal budget deficits occur when a. more money is being spent on entitlement programs than has been allocated b. the Internal Revenue Service spends more than it collects in taxes in a given year c. the federal government spends more than it collects in taxes in a given year d. high levels of unemployment use up tax collections e. interest payments on the national debt increase from one year to the next

c. the federal government spends more than it collects in taxes in a given year

Which of the following transactions would represent an addition to a nation's current gross domestic product? a. Ms. Smith purchases a share of stock in an automobile company b. a retailer increases her stock of imported shoes c. the government increases its domestic purchases of food for use by public schools d. a corporation sells shoes from last year's inventory e. a mother sells her car to her daughter

c. the government increases its domestic purchases of food for use by public schools

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 national debt d. the money supply e. the spending multiplier

c. the national debt

The cost arising from the way inflation makes money a less reliable unit of measurement are known as: a. shoe-leather costs b. menu costs c. unit-of-account costs d. medium of exchange costs

c. unit-of-account costs

If the price of chokers increases 10% and the quantity demanded decreases 10%, then the price of elasticity of chokers is a. elastic b. inelastic c. unitary elastic d. insufficient information

c. unitary elastic

Which of the following is true according to the circular flow model? a. Firms are suppliers in both the products and factor markets. b. Firms are demanders in the product markets and suppliers in the factor markets. c. Households are demanders in both the product and factor markets. d. Households are demanders in the product market and suppliers in the factor markets. e. The government is a demander in the product market only.

d. Households are demanders in the product market and suppliers in the factor markets.

For an economy with a straight- line production possibilities curve, which of the following must be true? I. The opportunity cost of producing another unit is constant. II. Resources are completely adaptable to alternative uses. III. Resources are used efficiently a. I only b. II only c. III only d. I and II e. II and III

d. I and II

In a mixed economy, what to produce and how much to produce are determined by a. A central planning agency b. A private planning agency c. An international planning agency d. Markets and the government e. Large corporations and small entrepreneurs

d. Markets and the government

The value of which of the following is counted in the United States gross domestic product? a. clean air b. child care a father provides for his child c. an automobile produced in Sweden by a United States firm d. a car produced in the United States and sold in Europe e. Medical services not provided due to preventive healthcare

d. a car produced in the United States and sold in Europe

Which of the following individuals is classified as unemployed? a. a fifteen-year-old high school student who is looking for a babysitting job b. a laid-off computer programmer who has given up looking for a new job c. a parent who works in an after-school day care center for 15 hours a week d. a recent college graduate who is looking for her first job e. a mayor who lost an election and retired

d. a recent college graduate who is looking for her first job

A decrease in aggregate demand will result in a. a decrease in voluntary unemployment b. a decrease in the natural rate of unemployment c. a decrease in aggregate supply d. an increase in unplanned inventories e. an increase in the rate of inflation

d. an increase in unplanned inventories

A price index includes each of the follow EXCEPT a. a base year b. measures the cost of purchasing a market basket of output across different years c. is normalized to 100 for the base year d. can only measure price changes of domestically produced goods

d. can only measure price changes of domestically produced goods

Which of the following is not true concerning the consumer price index? The consumer price index: a. reflects changes in the prices of goods typically purchased by consumers b. contains thousands of goods and services c. is calculated by the Bureau of Labor Statistics d. changes only in the base year, every 5-7 years

d. changes only in the base year, every 5-7 years

Which of the following is not a determinant of supply? a. expectations regarding future prices b. the technology of production c. the cost of production d. consumer tastes

d. consumer tastes

A recessionary gap would be at which position on the business cycle? a. peak b. trough c. expansion d. contraction

d. contraction

In the long run, nominal wages are: a. sticky downward but flexible in an upward direction b. sticky upward but flexible in a downward direction c. sticky in both an upward and downward direction d. flexible because contracts and informal agreements are renegotiated in the long run

d. flexible because contracts and informal agreements are renegotiated in the long run

An aggregate output level lower that potential output means: a. low inflation b. high inflation c. low unemployment d. high unemployment

d. high unemployment

As a measure of economic welfare, gross domestic product underestimates a country's production of goods and services when there is an increase in a. the production of military goods b. the production of antipollution devices c. crime prevention services d. household production (e.g., babysitting) e. legal services

d. household production (e.g., babysitting)

Which of the following is not true according to the circular flow model? a. firms are suppliers in both the product and factor markets b. firms are demanders in the product markets and suppliers in the factor markets c. households are demanders in both the product and factor markets d. households are demanders in the product markets and suppliers in the factor markets e. the government is a demander in the product market only

d. households are demanders in the product markets and suppliers in the factor markets

Which of the following represents an outflow of funds form a domestic economy, i.e., what would cause money to leave the country? a. exports b. government tax collections c. government transfer payments d. imports

d. imports

An increase in which of the following would cause the aggregate demand curve to shift to the left? a. consumer optimism b. population c. cost of resources d. income taxes e. net exports

d. income taxes

When aggregate income increases by a given amount, savings will a. remain the same b. decrease by the amount of the change in income c. increase by the amount of the change in income d. increase by less than the amount of the change in income e. increase by more than the amount of the change in income

d. increase by less than the amount of the change in income

A recession leads to all of the following EXCEPT: a. higher unemployment b. reduced output c. reduced income and living standards d. increased business investment

d. increases business investment

The purpose of indexing (COLA: Cost of living adjustment) Social Security payments to the CPI is to: a. increase corporate profits b. justify continued government funding of the Bureau of Labor Statistics c. avoid the privatization of Social Security d. maintain the purchasing power of retirees

d. maintain the purchasing power of retirees

In a mixed economy, what to produce and how much to produce are determined by a. a central planning agency b. a private planning agency c. an international planning agency d. markets and government e. large corporations and small entrepreneurs

d. markets and government

Recessions are periods when: a. output rises b. the aggregate price level rises c. the unemployment rate is falling d. output and unemployment are falling

d. output and unemployment are falling

A decline in available resources will cause the PPF to a. expand outward b. become more curved c. become less curved d. shift inward e. have no effect

d. shift inward

An industry historically used employees with specific skills. If this industry experiences technological advances that require new skills, there will most likely be a. cyclical unemployment b. frictional unemployment c. seasonal unemployment d. structural unemployment e. no change in umemployment

d. structural unemployment

Which of the following best describes human capital? a. the number of workers in the labor force b. the physical capital used by workers c. the financial assets owned by workers d. the training and education of workers e. the spending by business for worker recruitment

d. the training and education of workers

The natural rate of unemployment is achieved when: a. the actual rate of unemployment is equal to zero b. the natural rate of unemployment is equal to the actual rate of unemployment c. the quantity of labor supplied is equal to the quantity of labor demanded d. there is not cyclical unemployment

d. there is no cyclical unemployment

Comparative advantage implies that a. no country should specialize completely in the production of any one good b. every country should try to export more than it imports c. developing countries should import raw materials and export manufactured goods d. two countries should benefit from trade unless both have equal opportunity costs in every good e. countries should impose tariffs to protect their domestic industries

d. two countries should benefit from trade unless both have equal opportunity costs in every good

An increase in government spending will most likely result in a decrease in the a. real level of output b. price level c. interest rate d. unemployment rate e. government's budget deficit

d. unemployment rate

The demand curve is downward-sloping because a. as income rises, people spend more b. the higher the price of a good, the better its quality c. a higher price brings more buyers d. when price increases, quantity demanded decreases e. the demand curve is not downward-sloping; it slopes upward

d. when price increases, quantity demanded decreases

The demand curve is downward-sloping because a. as income rises, people spend more b. the higher the price of a good, the better its quality c. a higher price brings in more buyers d. when price increases, quantity demanded decreases e. the demand curve is not downward-sloping; it slopes upward

d. when price increases, quantity demanded increases

Which of the following would NOT be included in this year's GDP? a. the production of a live television show in Austin b. the purchase of a new work truck made in Detroit c. the hiring of a new police officer in Houston d. your purchase of your neighbor's 2001 Toyota which was made in San Antonio

d. your purchase of your neighbor's 2001 Toyota which was made in San Atonio

An opportunity cost is entailed in which of the following decisions? I. A student decides to attend college full-time. II. A family uses its $20,000 savings to purchase an automobile. III. A farmer decides to grow more wheat and less corn. a. I only b. II only c. III only d. I and II only e. I, II, and III

e. I, II, and III

Changes in which of the following factors would affect the growth of an economy I. Quantity and quality of human and natural resources II. Amount of capital goods available III. Technology a. I only b. I and II only c. I and III only d. II and III only e. I, II, and III

e. I, II, and III

Changes in which of the following factors would affect the growth of an economy? I. Quantity and quality of human and natural resources II. Amount of capital goods available III. Technology a. I only b. I and II only c. I and III only d. II and III only e. I, II, and III

e. I, II, and III

A contractionary supply shock would most likely result in a. an increase in aggregate demand b. an increase in national income c. an increase in gross domestic product d. a decrease in the general price level e. a decrease in employment

e. a decrease in employment

A contractionary supply shock, which moves the SRAS to the left, would most likely result in a. an increase in the money supply b. an increase in national income c. an increase in gross domestic product d. a decrease in the general price level e. a decrease in employment (an increase in unemployment)

e. a decrease in employment (an increase in unemployment)

Economic growth is best defined as a. a reduction in the infant mortality rate b. a decrease in the unemployment rate c. an increase in the labor force participation rate d. a short-run increase in gross domestic product without inflation e. a sustained increase in real gross domestic product per capita

e. a sustained increase in real gross domestic product per captia

Which of the following is included in the computation of gross domestic product? a. government transfer payments, such as unemployment benefits b. purchases of used goods, such as used cars c. child care tasks performed by househusbands d. total value of business inventories e. additions to business inventories

e. additions to business inventories

A high marginal propensity to consume implies which of the following? a. a small change in consumption when income changes b. a high savings rate c. a high marginal tax rate d. an equilibrium level of income near full employment e. low marginal propensity to save

e. low marginal propensity to save

An increase in which of the following is most likely to cause the short-run aggregate supply curve to shift to the left? a. consumers' incomes b. the money supply c. government spending d. the optimism of business firms e. the per unit cost of production

e. the per unit cost of production

If the nominal gross domestic product (GDP) of the nation of Hypothetica increased in 2007 relative to the previous year, it must be true that in Hypothetica in 2007? a. both the price level and the real GDP have increased b. neither the price level nor the real GDP have increased c. the price level increased by a larger percentage than did the real GDP d. the price level increased by a smaller percentage than did the real GDP e. the price level and/or the real GDP has increased

e. the price level and/or the real GDP has increased

Which of the following statements exemplifies the concept of structural unemployment? a. new entrants into the labor force have trouble finding jobs b. workers are laid off because aggregate demand has declined c. workers are laid off because aggregate demand has declined d. workers are fired because consumers have reduced their total expenditures e. workers are fired because their skills are no longer in demand

e. workers are fired because their skills are no longer in demand