Midterm Review ECN 102 Introduction to Macro Economics (Graphs not included)
Chp. 6 The percentage change in one's real income can be approximated by: A) the percentage change in nominal income minus the percentage change in the price level. B) the percentage change in price level minus the percentage change in nominal income. C) dividing the price level, expressed as an index number, by nominal income. D) dividing real income by the price level, expressed as an index number.
A) the percentage change in nominal income minus the percentage change in the price level.
Chp. 7 An increase in aggregate demand would be most likely caused by a decrease in: A) the tax rates on household income. B) the wealth of consumers. C) consumer confidence. D) expected future prices.
A) the tax rates on household income.
Chp 2. Insurance companies facilitate the transfer of risk from A) those who have a low-risk tolerance to those with high risk-tolerance. B) the insurance companies' owners to the insurance policyholders. C) insurance policyholders to the government. D) those who have a high-risk tolerance to those with low risk-tolerance.
A) those who have a low-risk tolerance to those with high risk-tolerance.
Chp 2. The major virtues of the market system include all of the following, except: A) it provides incentives for greater production and higher incomes. B) it leads to equality in the distribution of income. C) it promotes an efficient allocation of resources. D) it emphasizes the freedom to pursue self-interest.
B) it leads to equality in the distribution of income.
Chp 2. The major virtues of the market system include all of the following, except: A) it provides incentives for greater production and higher incomes. B) it leads to equality in the distribution of income. C) it promotes an efficient allocation of resources. D) it emphasizes the freedom to pursue self-interest.
B) it leads to equality in the distribution of income.
Chp 2. The government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems? A) laissez-faire economy B) mixed-market economy C) pure capitalism D) macroeconomic system
B) mixed-market economy
Chp 3. If a legal price ceiling is set above the equilibrium price: A) a surplus of the product will occur. B) neither the equilibrium price nor the equilibrium quantity will be affected. C) a shortage of the product will occur. D) a black market will evolve
B) neither the equilibrium price nor the equilibrium quantity will be affected.
Chp. 7 The upward slope of the short-run aggregate supply curve is based on the assumption that: A) nominal wages and other resource costs do respond to price level changes. B) nominal wages and other resource costs do not respond to price level changes. C)nominal wages are less than real wages. D) nominal wages are greater than real wages.
B) nominal wages and other resource costs do not respond to price level changes.
Chp. 5 Gross private domestic investment is the value of capital goods and buildings that are produced that year: A) plus the consumption of fixed capital and indirect business taxes. B) plus residential construction and changes in business inventories. C) plus the consumption of fixed capital. D) minus changes in business inventories.
B) plus residential construction and changes in business inventories.
Chp 3. If we say that a price is too high to clear the market, we mean that: A) the price of the good is likely to rise. B) quantity supplied exceeds quantity demanded. C) quantity demanded exceeds quantity supplied. D) the equilibrium price is above the current price.
B) quantity supplied exceeds quantity demanded.
Chp 2. In the circular flow diagram, firms get their ability to pay for the costs of production from the: A) goods and services they get in the product markets. B) revenues they receive for their products. C) incomes they earn for their resources. D) resources they acquire in the resource markets.
B) revenues they receive for their products.
Chp. 5 Economic growth can best be portrayed as a: A) movement from a point near the vertical axis to a point near the horizontal axis on the production possibilities curve. B) rightward shift of the production possibilities curve. C) movement from a point inside to a point outside of the production possibilities curve. D) leftward shift of the production possibilities curve.
B) rightward shift of the production possibilities curve.
Chp 1. The process by which economists test hypotheses against facts to develop theories, principles, and models is called: A) policy economics. B) the scientific method. C) microeconomics. D) the economic perspective.
B) scientific method
Chp 1. Which of the following is not correct? A typical production possibilities curve: A) indicates how much of two products society can produce. B) specifies how much of each product a society will want to produce. C) reveals how much each additional unit of one product will cost in terms of the other product. D) indicates that to produce more of one product, a society must forgo larger and larger amounts of the other product.
B) specifies how much of each product a society will want to produce.
Chp. 5 Economies of scale refer to: A) public investments in highways, schools, utilities, and such. B) the fact that large producers may be able to use more efficient technologies than smaller producers. C) the idea that proprietorships are less bureaucratic and therefore more efficient than corporations. D) the reallocation of labor from less-productive to more-productive uses.
B) the fact that large producers may be able to use more efficient technologies than smaller producers.
Chp 1. Which of the following terms implies the greatest degree of confidence in an economic generalization? A) hypothesis B) theory C) anomaly D) comparison
B) theory
Chp. 5 An example of a public transfer payment is a(n): A) monthly allowance from home for a college student. B) veteran's benefit payment. C) airline pass giving price discounts to senior citizens. D) gift of land from a wealthy relative.
B) veteran's benefit payment.
Chp 2. The term consumer sovereignty means that: A) government is responsible for protecting consumers' interests. B) what is produced is ultimately determined by what consumers buy. C) producers have strong control over what consumers buy. D) there are no limits on what consumers may buy in a market system.
B) what is produced is ultimately determined by what consumers buy.
Chp. 5 GDP in an economy is $11,130 billion. Consumer expenditures are $7735 billion, government purchases are $1989 billion, and gross investment is $1410 billion. Net exports are: A) $161 billion. B) +$53 billion. C) -$4 billion. D) -$47 billion.
C) -$4 billion
Chp. 6 The unemployment rate in an economy is 12 percent. The civilian labor force is 50 million. The number of employed workers in the economy is: A) 6 million. B) 42 million. C) 44 million. D) 24 million.
C) 44 million.
Chp. 6 Which of the following groups tends to have the highest unemployment rate? A) White adults B) Hispanic adult men C) African-American teenagers D) Asian adult women
C) African-American teenagers
Chp. 7 Which combination of factors would most likely increase aggregate demand? A) An increase in personal taxes and a decrease in government spending B) An increase in household indebtedness and a decrease in foreign demand for products C) An increase in consumer wealth and a decrease in interest rates D) An increase in business taxes and a decrease in profit expectations
C) An increase in consumer wealth and a decrease in interest rates
Chp 2. Which of the following statements about the right to private ownership is false? A) It enables individuals to obtain, use, and dispose of land and capital resources as they see fit. B) It encourages investment and innovation, and thus fosters economic growth. C) It weakens the incentive to maintain the property that one already owns. D) It extends to intangibles such as pieces of music and computer programs.
C) It weakens the incentive to maintain the property that one already owns.
Chp 3. Which of the following is a consequence of rent controls established to keep housing affordable for the poor? A) The quality of rental housing improves as landlords seek to attract the best tenants. B) Landlords are incentivized to produce and offer more rental units to maintain profits. C) Less rental housing is available than if the rent controls were not in place. D) All of these are consequences of rent controls.
C) Less rental housing is available than if the rent controls were not in place.
Chp. 7 The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation? A) Wage rates have fallen. B)Interest rates have increased. C) Net exports have increased. D)The stock of capital has increased.
C) Net exports have increased.
Chp. 7 Which of the following statements about the multiplier is most accurate? A) The multiplier is rarely associated with changes in investment spending. B) The multiplier only applies to increases in initial spending. C) The multiplier applies to both increases and decreases in initial spending. D) The multiplier only applies to decreases in initial spending.
C) The multiplier applies to both increases and decreases in initial spending.
Chp 2. Which of the following is one of the Five Fundamental Questions? A) Who should appoint the head of the central bank? B) Which products will be in scarce supply and which in excess supply? C) What goods and services will be produced? D) How much should society save?
C) What goods and services will be produced?
Chp 2. Which is an example of barter? A) the purchase of stock on the New York Stock Exchange B) a gift of tuition money from parents to their children C) a person trades a desk for a box of tools D) a person buys clothes at a used clothing store
C) a person trades a desk for a box of tools
Chp 2. Specialization—the division of labor—enhances productivity and efficiency by: A) allowing workers to take advantage of existing differences in their abilities and skills. B) avoiding the time loss involved in shifting from one production task to another. C) all of the means identified in the other answers. D) allowing workers to develop skills by working on one, or a limited number, of tasks.
C) all of the means identified in the other answers.
Chp 1. The slope of a graph that shows a direct relationship is: A) possibly zero. B) either zero or infinite. C) always positive. D) either positive or negative.
C) always positive.
Chp. 5 Critics of economic growth: A) say that its benefits accrue nearly exclusively to white males. B) point out that growth results in greater economic security for workers. C) argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth. D) contend that growth and industrialization reduce pollution
C) argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.
Chp. 7 Suppose that real domestic output in an economy is 300 units, the quantity of inputs is 50, and the price of each input is $9. If productivity increased such that 400 units are now produced with the quantity of inputs still equal to 50, then per-unit production costs would: A) increase and aggregate demand would decrease. B) decrease and aggregate demand would increase. C) decrease and aggregate supply would increase. D) decrease and aggregate supply would decrease.
C) decrease and aggregate supply would increase.
Chp 2. The market system is an economic system that A) emphasizes the government's power to control markets and direct economic activity. B) produces more capital goods than consumer goods. C) gives private individuals the right to own resources used in production. D) produces more consumer goods than capital goods.
C) gives private individuals the right to own resources used in production.
Chp. 6 A cumulative wage-price spiral that produces a rapid increase in the price level of over 100 percent can be characterized as: A) demand-pull inflation. B) anticipated inflation. C) hyperinflation. D) cost-push inflation.
C) hyperinflation.
Chp. 7 If the U.S. dollar appreciates in value relative to foreign currencies, then this will: A) decrease aggregate supply. B) cause a movement along the aggregate demand curve. C) increase aggregate supply. D) increase aggregate demand.
C) increase aggregate supply.
Chp 3. Assume product A is an input in the production of product B. In turn product B is a complement to product C. We can expect a decrease in the price of A to: A) decrease the supply of B and decrease the demand for C. B) increase the supply of B and decrease the demand for C. C) increase the supply of B and increase the demand for C. D) decrease the supply of B and increase the demand for C.
C) increase the supply of B and increase the demand for C.
Chp. 5 Network effects are: A) the change in real GDP resulting from a change in investment or government spending. B) increases in demand resulting from products being mentioned positively in a television program. C) increases in the value of a product to each user, including existing users, as the total number of users rises. D) reductions in per-unit production cost as firms learn by doing.
C) increases in the value of a product to each user, including existing users, as the total number of users rises.
Chp. 3 If a product is in surplus, its price: A) is in equilibrium. B) will rise in the near future. C) is above the equilibrium level. D) is below the equilibrium level.
C) is above the equilibrium level.
Chp 1. The four factors of production are A) labor, capital, entrepreneurial ability, and money. B) land, labor, capital, and money. C) land, labor, capital, and entrepreneurial ability. D) labor, capital, technology, and entrepreneurial ability.
C) land, labor, capital, and entrepreneurial ability.
Chp. 6 A high unemployment rate most likely means that there is a: A) low rate of interest in the economy. B) high rate of inflation in the economy. C) large GDP gap in the economy. D) small GDP gap in the economy.
C) large GDP gap in the economy.
Chp 3. The demand for most products varies directly with changes in consumer incomes. Such products are known as: A) complementary goods. B) inferior goods. C) normal goods. D) competitive goods.
C) normal goods.
Chp. 6 The GDP gap measures the amount by which: A) actual GDP exceeds potential GDP. B) nominal GDP exceeds real GDP. C) potential GDP exceeds actual GDP. D) actual GDP exceeds national income.
C) potential GDP exceeds actual GDP.
Chp 2. "For whom is a given mix of goods and services to be produced? How, in other words, are the society's outputs to be distributed among its members?" In a market economy, this question is resolved primarily in the: A) public sector through the mechanism of central planning. B) money market through borrowing and saving by households and businesses. C) private sector through the earning and spending of income. D) business sector through the mechanism of advertising.
C) private sector through the earning and spending of income.
Chp 3. The law of supply indicates that: A) consumers will purchase less of a good at high prices than they will at low prices. B) producers will offer more of a product at low prices than they will at high prices. C) producers will offer more of a product at high prices than they will at low prices. D) the product supply curve is down-sloping.
C) producers will offer more of a product at high prices than they will at low prices.
Chp 1. According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because A) people are irrational. B) people are greedy. C) productive resources are limited. D) human beings are inherently insecure.
C) productive resources are limited
Chp. 6 When a group of workers finds that their job skills and work experience have become obsolete and are not needed by industry, this type of unemployment is: A) cyclical. B) frictional. C) structural. D) search.
C) structural
Chp 3. Suppose that in 2008, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2009, 600,000 Mustangs were sold at an average price of $22,500 per car. These statements: A) suggest that the demand for Mustangs decreased between 2008 and 2009. B) constitute an exception to the law of demand in that they suggest an upsloping demand curve. C) suggest that the demand for Mustangs increased between 2008 and 2009. D) suggest that the supply of Mustangs must have increased between 2008 and 2009.
C) suggest that the demand for Mustangs increased between 2008 and 2009.
Chp. 7 The magnification of small changes in spending into larger changes in output and income is produced by: A) the average propensity to save. saving. C) the multiplier effect. D) the average propensity to consume.
C) the multiplier effect.
Chp. 5 A distinguishing characteristic of public transfer payments is that: A) they are used to subsidize the major transportation carriers to reduce transportation costs. B) there is a tax on the amount of the subsidy above a certain income level. C) the recipients make no contribution to current production in return for them. D) they are counted as part of government purchases in the calculation of the gross domestic product.
C) the recipients make no contribution to current production in return for them.
Chp 2. Which of the following would be primarily determined in the resource markets? A) the number of home-Internet connections installed B) the airfares charged by airlines for family vacations C) the wage rates for computer programmers and engineers D) the amount of money in circulation issued by the government
C) the wage rates for computer programmers and engineers
Chp 1. The optimal allocation of resources is found: A) where the marginal benefit is at its greatest. B) at every point along a production possibilities curve. C) where MB = MC. D) where the marginal cost is at its lowest.
C) where MB = MC.
Chp. 6 The economy has an annual inflation rate of 3.5 percent. It will take approximately how many years for the price level to double? A) 30 years B) 10 years C) 25 years D) 20 years
D) 20 years
Chp. 6 In an economy, 35 million workers are employed, the labor force is 50 million, and total population is 70 million. The unemployment rate is: A) 25 percent. B) 50 percent. C) 15 percent. D) 30 percent.
D) 30 percent.
Chp. 7 Which would most likely increase aggregate supply? A) A decrease in net exports B) A decrease in subsidies for businesses C) An increase in the degree of excess capacity D) A decrease in the prices of resources
D) A decrease in the prices of resources
Chp. 7 Which event would most likely increase aggregate demand? A) An appreciation of the dollar B) A decrease in the price level that results in a foreign purchases effect C) A decrease in the national incomes in foreign nations D) A depreciation of the dollar
D) A depreciation of the dollar
Chp. 5 Which does not contribute directly to the production of the domestic output of an economy? A) A soldier. B) An insurance agent. C) A police officer. D) A full-time student.
D) A full-time student.
Chp 3. Which of the following statements is correct? A) If demand increases and supply decreases, equilibrium price will fall. B) If supply decreases and demand remains constant, equilibrium price will fall. C) If demand decreases and supply increases, equilibrium price will rise. D) If supply increases and demand decreases, equilibrium price will fall.
D) If supply increases and demand decreases, equilibrium price will fall.
Chp. 5 Which would be considered an investment according to economists? A) The purchase of newly issued shares of stock in Microsoft B) The sale of government bonds by the nation's central bank C) The purchase of shares of stock by Fidelity, a mutual fund company D) The construction of a new computer chip factory by Intel
D) The construction of a new computer chip factory by Intel
Chp 3. Which of the following is most likely to be an inferior good? A) Luxury automobiles B) Steak C) Ocean cruises D) Used clothing
D) Used clothing
Chp 2. The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions? A) How will the system accommodate change? B) What will be produced? C) How will the output be produced? D) Who will get the output?
D) Who will get the output?
Chp 3. Assume the demand schedule for product C is down-sloping. If the price of C falls from $2.00 to $1.75: A) a smaller quantity of C will be demanded. B) the demand for C will increase. C) the demand for C will decrease. D) a larger quantity of C will be demanded.
D) a larger quantity of C will be demanded.
Chp. 7 If the dollar appreciates in value relative to foreign currencies: A) the quantity of real domestic output demanded increases. B) the quantity of real domestic output demanded decreases. C) aggregate demand increases. D) aggregate demand decreases.
D) aggregate demand decreases.
Chp. 7 When national income in other nations decreases, aggregate: A) supply increases. B) demand increases. C)supply decreases. D) demand decreases.
D) demand decreases.
Chp. 6 Inflation caused by an increase in aggregate spending is referred to as: A) cost-push inflation. B) hyperinflation. C) demand-push inflation. D) demand-pull inflation.
D) demand-pull inflation.
Chp 2. "Creative destruction" in a market system is brought about by: A) striking workers. B) regulation by the government. C) money-based trade. D) entrepreneurship.
D) entrepreneurship.
Chp. 6 Periods of extreme hyperinflation are the result of: A)severe recessions. B) oil price shocks. C) stock market price bubbles. D) excessive monetary expansions by government.
D) excessive monetary expansions by government.
Chp 3. A normal good is one: A) whose amount demanded will decrease as its price decreases. B) whose amount demanded will increase as its price decreases. C) whose demand curve will shift leftward as incomes rise. D) for which the consumption varies directly with incomes.
D) for which the consumption varies directly with incomes.
Chp 3. An increase in the price of product A will: A) reduce the demand for substitute product B. B) reduce the demand for resources used in the production of A. C) increase the demand for complementary product C. D) increase the demand for substitute product B.
D) increase the demand for substitute product B.
Chp. 5 Money spent on the purchase of a new house is included in the GDP as a part of: A) the consumption of private fixed capital. B) personal saving. C) personal consumption expenditures. D) investment.
D) investment.
Chp. 5 Gordon James is a person who sells narcotics "on the street." This type of illegal activity: A) would be considered double counting in calculating GDP. B) causes GDP to be overstated. C) is estimated and included in GDP figures. D) is excluded from GDP figures.
D) is excluded from GDP figures.
Chp. 7 An aggregate supply curve represents the relationship between the: A) real domestic output bought and the real domestic output sold. B) price level that producers are willing to accept and the price level buyers are willing to pay. C) price level and the buying of real domestic output. D) price level and the production of real domestic output.
D) price level and the production of real domestic output.
Chp 1. The distinction between microeconomics and macroeconomics is: A) that microeconomics examines the beach, while macroeconomics looks at the sand, individual rocks, and shells, so to speak. B) that microeconomics studies the behavior of individual consumers, workers, and firms, while macroeconomics studies the economy as a whole. C) that microeconomics seeks to obtain an overview, while macroeconomics observes the details of individual components. D) so clear-cut that every topic can be readily labeled as either macro or micro.
D) so clear-cut that every topic can be readily labeled as either macro or micro.
Chp 1. A movement from one point to another along the production possibilities curve would imply that: A) productivity has increased over time. B) productivity has declined over time. C) the labor force available to society has grown. D) society is producing a different combination of outputs.
D) society is producing a different combination of outputs.
Chp 1. A country can achieve some combination of goods outside its production possibilities curve by: A) producing more capital goods and fewer consumer goods. B) buying the debt (bonds and stocks) of foreign nations. C) idling some of its resources. D) specializing and engaging in international trade.
D) specializing and engaging in international trade.
Chp. 7 The multiplier can be calculated by dividing: A) one by one minus the marginal propensity to save. B) one by one minus the marginal propensity to invest. C) the initial change in spending by the change in real GDP. D) the change in real GDP by the initial change in spending
D) the change in real GDP by the initial change in spending
Chp 1. The production possibilities curve is a graph of A) the maximum amount of capital and labor that the economy can employ. B) the maximum amounts of labor and capital resources available for production. C) various combinations of goods and services among which consumers are indifferent in terms of preference. D) the maximum combinations of products that can be produced with the available resources.
D) the maximum combinations of products that can be produced with the available resources.
Chp 1. In moving along a given budget line, A) the prices of both products are assumed to vary, but money income is constant. B) each point on the line will be equally satisfactory to consumers. C) money income varies, but the prices of the two goods are constant. D) the prices of both products and money income are assumed to be constant.
D) the prices of both products and money income are assumed to be constant.CH
Chp 3. Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect: A) consumer demand for wheat to fall. B) the supply to fall as farmers plant more of other crops. C) the supply of ethanol, a corn-based product, to increase. D) the supply to increase as farmers plant more corn
D) the supply to increase as farmers plant more corn
Chp 1. If the equation y = -10 + 2.5x was plotted, A) it would graph as a down-sloping line. B) the slope would be -7.5. C) the slope would be -10. D) the vertical intercept would be -10.
D) the vertical intercept would be -10.
Chp. 7 Wage contracts, menu costs, and the minimum wage are explanations for why: A) there is little support for the existence of a real-balances effect. B) competition results in price wars. C) the aggregate demand curve slopes downward. D) wages tend to be inflexible downward.
D) wages tend to be inflexible downward.
Chp. 7 The intersection of the aggregate demand and aggregate supply curves determines the: A) equilibrium level of real domestic output and prices. B)shape of the aggregate supply curve. C) per-unit cost of production in the economy. D) shape of the aggregate demand curve.
A) equilibrium level of real domestic output and prices
Chp. 5 The value of corporate stocks and bonds traded in a given year is: A) excluded from the calculation of GDP because they make no contribution to current production of goods and services. B) included in the calculation of gross private domestic investment. C) included in the calculation of net private domestic investment. D) included in the calculation of GDP because they make a contribution to the current production of goods and services.
A) excluded from the calculation of GDP because they make no contribution to current production of goods and services.
Chp 2. The main characteristics of a modern market system include all of the following except A) government is restricted to national defense and does not intervene at all in various markets. B) economic power is diffused by competition among economic units. C) entrepreneurs are free to obtain and use resources to produce goods and services. D) consumers are free to buy goods and services that their budgets allow.
A) government is restricted to national defense and does not intervene at all in various markets.
Chp. 5 One of the basic defenses of economic growth rests on the conclusion that: A) growth makes the gap between unlimited wants and scarce resources less acute. B) growth reduces the cost to society of "common property" resources. C) a growth-oriented society confers a "work and look to the future" attitude on the members of society. D) growth makes workers less obsolete and more secure in employment.
A) growth makes the gap between unlimited wants and scarce resources less acute.
Chp. 6 Unlike demand-pull inflation, cost-push inflation: A) is self-limiting. B) drives up the price level. C) increases real income. D) increases nominal income.
A) is self-limiting.
Chp. 7 An aggregate supply curve shows the: A) level of real domestic output that will be produced at each possible price level. B) price level at which real domestic output will be purchased. C) level of real domestic output that will be purchased at each possible price level. D) price level at which real domestic output will be in equilibrium.
A) level of real domestic output that will be produced at each possible price level.
Chp. 6 The level of total spending is the immediate determinant of the: A) level of real output and employment. B) inflation rate. C) ratio of private to public goods production. D) size of the labor force.
A) level of real output and employment.
Chp 1. Which of the following is not a factor of production? A) money B) entrepreneur C) labor D) capital
A) money
Chp. 7 The vertical slope of the long-run aggregate supply curve is based on the assumption that: A) nominal wages and other resource costs do respond to price level changes. B) nominal wages are less than real wages. C) nominal wages and other resource costs do not respond to price level changes. D) nominal wages are greater than real wages.
A) nominal wages and other resource costs do respond to price level changes.
Chp. 5 The sale of a used automobile would not be included in the GDP for the current year because it is a: A) nonproduction transaction. B) noninvestment transaction. C) public transfer payment. D) nonmarket transaction.
A) nonproduction transaction.
Chp 1. The notion of "purposeful behavior" in the economic perspective suggests that: A) one person's choice may differ from another's if their circumstances and information differ. B) economic analysis will provide people with a single "right" way to behave. C) people will tend to stick with a particular choice for a long period of time. D) economists do not believe that people can sometimes behave impulsively.
A) one person's choice may differ from another's if their circumstances and information differ.
Chp. 5 "Show me a pastoral society with an untouched environment, an abundance of leisure, and nonsecular values, and I will show you an underdeveloped, poverty-ridden country." This statement is most likely to be made by a(n): A) proponent of economic growth. B) advocate of learning by doing. C) critic of economic growth. D) advocate of network effects.
A) proponent of economic growth.
Chp. 7 When aggregate demand decreases, product prices, wage rates, and per-unit production costs are inflexible downward because of a: A) ratchet effect. B) foreign-purchases effect. C) interest-rate effect. D) real-balances effect.
A) ratchet effect.
Chp 2. According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center, then A) she has served society's interests by providing a desired good or service. B) government should regulate the business to ensure quality. C) the profit Susie earns indicates that she is overcharging for her services. D) this demonstrates that consumer sovereignty is not present in this market.
A) she has served society's interests by providing a desired good or service.
Chp. 6 When the economy is at its potential output: A) the labor force is fully employed. B) there is no unemployment. C) there is no structural unemployment. D) there is no frictional unemployment.
A) the labor force is fully employed
Chp. 1 (Consider This) An exception to the advice "go to college, stay in college, and earn a degree" occurs when: A) the opportunity cost of attending college is extraordinarily high. B) the economy is growing rapidly and jobs are plentiful. C) the price of textbooks is high and rising. D) tuition expenses are high and rising.
A) the opportunity cost of attending college is extraordinarily high.
Chp. 5 The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320), imports ($35), exports ($22), personal consumption expenditures ($2460), and government purchases ($470). What is GDP in this economy? A) $3237 billion. B) $3250 billion. C) $3263 billion. D) $3290 billion.
A) $3237 billion.
Chp 2. Innovation lagged in the centrally planned economies because: A) enterprises resisted innovation in fear that their production targets would be raised. B) there was too much competition from foreign firms. C) exports had to equal imports for the plan to work. D) there was too much domestic business competition.
A) enterprises resisted innovation in fear that their production targets would be raised.
Chp. 7 If a $100 billion increase in government spending results in a $500 billion increase in real GDP, then the value of the multiplier: A) equals 5. B) equals $400 billion. C) equals 0.2. D) cannot be determined.
A) equals 5.
Chp. 7 A decrease in aggregate demand will have no effect on the real equilibrium GDP of the economy and will lower its price level in the short run. A) True B) False
B) False
Chp. 7 Aggregate demand is a schedule that shows the various amounts of goods and services that only consumers and businesses desire to purchase at each possible price level. A) True B) False
B) False
Chp. 7 Below the full-employment level of output, per-unit production costs rise and firms must receive higher product prices for them to be profitable. A) True B) False
B) False
Chp 2. Which of the following is not a reason why specialization and trade are beneficial to society? A) The total output of economic goods may be increased even without any increase in resources. B) Firms and workers become less dependent on others for producing goods and services. C) Specialization fosters learning by doing, thus lowering the unit-costs of products. D) Scarce resources are utilized more efficiently by exploiting differences among them.
B) Firms and workers become less dependent on others for producing goods and services.
Chp. 6 What is the main problem with mild inflation, according to some economists? A) It reduces the size of the GDP gap. B) It diverts productive time towards activities to hedge against inflation. C) It increases frictional and structural unemployment in the economy. D) It leads to unanticipated deflation.
B) It diverts productive time towards activities to hedge against inflation.
Chp. 5 Which would be considered an investment according to economists? A) The buying of shares of Janus mutual funds. B) The purchase of a new machine by Ford. C) The selling of IBM corporate bonds. D) The purchase of stock in MacDonald's
B) The purchase of a new machine by Ford.
Chp 3. In which of the following statements are the terms "demand" and "quantity demanded" used correctly? A) When the price of ice cream rose, the demand for ice cream fell and the quantity demanded of ice cream toppings fell. B) When the price of ice cream rose, the quantity demanded of ice cream fell and the demand for ice cream toppings fell. C) When the price of ice cream rose, the demand for both ice cream and ice cream toppings fell. D) None of these statements uses the terms correctly.
B) When the price of ice cream rose, the quantity demanded of ice cream fell and the demand for ice cream toppings fell.
Chp. 6 A recession is defined as: A) a fall in real GDP that lasts six months or longer. B) a fall in the natural rate of unemployment. C) the minimum point in the business cycle before the recovery phase. D) a rise in the natural rate of unemployment.
B) a fall in the natural rate of unemployment.
Chp 1. Money is not considered to be an economic resource because: A) money is not a free gift of nature. B) as such it is not productive. C) idle money balances do not earn interest income. D) money is made by humans.
B) as such it is not productive.
Chp. 7 The long run in macroeconomics is a period in which nominal wages: A) do not respond as the price level stays constant. B) change as the price level changes. C) do not respond as the price level changes. D) change as the price level stays constant.
B) change as the price level changes.
Chp 3. DVD players and DVDs are: A) inferior goods. B) complementary goods. C) substitute goods. D) independent goods.
B) complementary goods.
Chp 3. When an economist says that the demand for a product has increased, this means that: A) the product has become particularly scarce for some reason. B) consumers are now willing to purchase more of this product at each possible price. C) product price has fallen and as a consequence consumers are buying a larger quantity of the product. D) the demand curve has shifted to the left.
B) consumers are now willing to purchase more of this product at each possible price.
Chp 3. If products A and B are complements and the price of B decreases, the: A) demand for A will decline and the demand for B will increase. B) demand for A will increase and the amount of B demanded will increase. C) demand curves for both A and B will shift to the left. D) amount of B purchased will increase, but the demand curve for A will not shift.
B) demand for A will increase and the amount of B demanded will increase.
Chp. 6 Deflation during a recession is of concern to economists because: A) the government is powerless to stop it. B) falling prices lead consumers to delay purchases and further reduce spending. C) workers will demand wage increases to offset the effects of deflation. D) it is generally followed by periods of hyperinflation
B) falling prices lead consumers to delay purchases and further reduce spending.
Chp. 6 If unemployment is above the unemployment rate consistent with full employment, then potential GDP is: A) equal to actual GDP. B) greater than actual GDP. C) less than actual GDP. D) equal to the GDP gap.
B) greater than actual GDP.
Chp. 6 From November 1993 to December 1994, the Democratic Republic of the Congo experienced an inflation rate of 69,502 percent. This economic condition would best be described as: A) cost-push inflation. B) hyperinflation. C) anticipated inflation. D) a cost-of-living adjustment.
B) hyperinflation.
Chp. 5 The movement of workers from lower productivity jobs to higher productivity jobs would be an example of: A) network effects. B) improved resource allocation. C) simultaneous consumption. D) technological advance.
B) improved resource allocation.
Chp. 5 In year 1, inventories rose by $25 billion. In year 2, inventories fell by $20 billion. In calculating total investment, national income accountants would have: A) increased it by $25 billion in year 1 and decreased it by $5 billion in year 2. B) increased it by $25 billion in year 1 and decreased it by $20 billion in year 2. C) decreased it by $25 billion in year 1 and increased it by $20 billion in year 2. D) decreased it by $25 billion in year 1 and increased it by $5 billion in year 2.
B) increased it by $25 billion in year 1 and decreased it by $20 billion in year 2.
Chp 3. A demand curve: A) shows the relationship between income and spending. B) indicates the quantity demanded at each price in a series of prices. C) graphs as an upsloping line. D) shows the relationship between price and quantity supplied.
B) indicates the quantity demanded at each price in a series of prices.
Chp. 6 The descriptions give the responses of four individuals to a Bureau of Labor Statistics (BLS) survey of employment.1. Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month.2. George works in an automotive assembly plant. He was laid off six months ago as the economy weakened. He expects to return to work in several months when national economic conditions improve.3. Jeanette worked as an aircraft design engineer for a company that produces military aircraft until she lost her job last year when the federal government cut defense spending. She has been looking for similar work for a year, but no company seems interested in her aircraft design skills.4. Ricardo lost his job last year when his company downsized and laid off middle-level managers. He tried to find another job for a year but was unsuccessful and quit looking for work.Refer to the above information. Which individual is frictionally unemployed? A) 1 B) 2 C) 3 D) 4
A) 1
Chp. 6 In an economy, the price level has doubled in about 70 years. The approximate annual percentage rate of increase in the price level over this period has been: A) 1 percent. B) 2 percent. C) 3 percent. D) 4 percent.
A) 1 percent.
Chp 1. If you knew that the vertical intercept for a straight line was 15, that the slope was -.5, and that the independent variable had a value of 8, the value of the dependent variable would be: A) 11. B) 9. C) 8. D) 10.
A) 11.
Chp. 7 Suppose that real domestic output in an economy is 2400 units, the quantity of inputs is 60, and the price of each input is $30. The level of productivity in this economy is: A) 40. B) 50. C) 30. D) 20.
A) 40
Chp. 6 If Fred's annual real income rises by 8 percent each year, his annual real income will double in about: A) 8-9 years. B) 5-6 years. C) 19-20 years. D) 10-11 years.
A) 8-9 years.
Chp. 6 Which measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers? A) The Consumer Price Index B) The Retail Trade survey C) The Survey of Manufactures D) The GDP price index
A) The Consumer Price Index
Chp 2. A market system is characterized by the private ownership of resources and the use of prices to coordinate economic activity. A) True B) False
A) True
Chp 3. An increase in demand accompanied by an increase in supply will increase the equilibrium quantity, but the effect on equilibrium price will be indeterminate. A) True B) False
A) True
Chp. 5 Government purchases include expenditures for publicly owned capital such as schools and highways that have long lifetimes. A) True B) False
A) True
Chp. 5 In an economy, the value of inventories rose from $275 billion in 2009 to $300 billion in 2010. In calculating total investment for 2010, national income accountants would increase it by $25 billion. A) True B) False
A) True
Chp. 5 Net exports are positive when exports are greater than imports. A) True B) False
A) True
Chp. 5 Supply factors that shift the economy's production possibilities curve outward also cause a rightward shift in its long-run aggregate supply curve. A) True B) False
A) True
Chp. 5 To adjust nominal GDP for a given year to obtain real GDP, it is necessary to divide nominal GDP by the price index (expressed in hundredths) for that year. A) True B) False
A) True
Chp. 6 Deflation is a decline in the price level. A) True B) False
A) True
Chp. 6 The economy is considered to be at its potential output when the only unemployment is structural or frictional. A) True B) False
A) True
Chp. 7 Depreciation of the dollar relative to foreign currencies will tend to increase net exports and aggregate demand. A) True B) False
A) True
Chp. 7 The equilibrium price level and equilibrium level of real GDP occur at the intersection of the aggregate demand curve and the aggregate supply curve. A) True B) False
A) True
Chp 3. In the past few years the demand for donuts has greatly increased. This increase in demand might best be explained by: A) a change in buyer tastes. B) an increase in the price of coffee. C) consumers expecting donut prices to fall. D) an increase in the cost of making donuts.
A) a change in buyer tastes.
Chp. 5 Net exports is a positive number when: A) a nation's exports of goods and services exceed its imports. B) depreciation is greater than gross private domestic investment. C) a nation's imports of goods and services exceed its exports. D) gross private domestic investment is greater than depreciation.
A) a nation's exports of goods and services exceed its imports.
Chp. 6 A college graduate using the summer following graduation to search for a job would best be classified as: A) a part of frictional unemployment. B) a part of cyclical unemployment. C) not officially a member of the labor force. D) a part of structural unemployment.
A) a part of frictional unemployment.
Chp. 7 The amount of real domestic output that will be purchased at each possible price level is best shown by the: A) aggregate demand curve. B) difference between real and nominal GDP. C) aggregate supply curve. D) aggregate expenditures model.
A) aggregate demand curve.
Chp. 7 If the U.S. dollar appreciates in value relative to foreign currencies, then this will: A) decrease aggregate demand and increase aggregate supply. B) increase aggregate demand and aggregate supply. C) increase aggregate demand and decrease aggregate supply. D) decrease aggregate demand and aggregate supply.
A) decrease aggregate demand and increase aggregate supply.
Chp 1. The "other things equal" assumption is employed when: A) economists draw a two-dimensional (or two-axes) graph. B) the relationship is direct, but not when it is inverse. C) the relationship is inverse, but not when it is direct. D) the graph of a given relationship is shifting up or down.
A) economists draw a two-dimensional (or two-axes) graph.
Chp. 6 A peak in the business cycle: A) occurs when the unemployment rate is its greatest. B) is a temporary maximum point. C)occurs when the inflation rate is its lowest. D) is a temporary minimum point.
B) is a temporary maximum point.
Chp. 7 The following list contains factors that are related to the aggregate demand curve.1) Household expectations2) Profit expectations3) Degree of excess capacity4) Personal income tax rates5) Exchange rates6) National income abroad7) Government spending8) Household wealth Refer to the above information. A change in net export spending would most likely be caused by changes in: A) 2 and 3. B) 5 and 6. C) 4 and 7. D) 1 and 8.
B) 5 and 6.
Chp. 6 A nation has a population of 260 million people. Of these, 60 million are retired, in the military, in institutions, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate? A) 27 percent B) 6 percent C) 4 percent D) 9 percent
B) 6 percent
Chp 1. A reduction in the unemployment rate will cause the nation's production possibilities curve to shift outward. A) True B) False
B) False
Chp 1. An economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy: A) True B) False
B) False
Chp 1. An economy will always operate at some point on its production possibilities curve. A) True B) False
B) False
Chp 1. Positive statements are expressions of value judgments. A) True B) False
B) False
Chp 1. The study of economics is not useful for consumers, because economic analysis focuses only on businesses and the economy. A) True B) False
B) False
Chp 2. In a command economy, the head of each household makes the fundamental economic choices such as what to produce and how to produce output. A) True B) False
B) False
Chp 2. In a market system, the income earned by owners of natural resources is called interest income. A) True B) False
B) False
Chp 2. One of the most important economic resources is money. A) True B) False
B) False
Chp 2. Property rights give the government the right to own, use, and dispose of resources in an economy. A) True B) False
B) False
Chp 2. Property rights give to some people the right to coerce others into giving up their property. A) True B) False
B) False
Chp 2. Quantitative measures of managerial success, such as production targets or quotas, are highly foolproof and are thus ideal to use in raising economic efficiency. A) True B) False
B) False
Chp 2. Selfishness and self-interest are identical concepts in economics. A) True B) False
B) False
Chp 3. A price floor in a competitive market will result in persistent shortages of a product. A) True B) False
B) False
Chp 3. An increase in quantity supplied might be caused by an increase in production costs. A) True B) False
B) False
Chp 3. If effective, a government-set price ceiling will lower equilibrium price and quantity in a market. A) True B) False
B) False
Chp 3. Toothpaste and toothbrushes are substitute goods. A) True B) False
B) False
Chp. 5 Economies of scale are increases in per-unit cost that result in a decrease in the size of markets and firms. A) True B) False
B) False
Chp. 5 In an economy, the value of inventories fell by $50 billion from year 1 to year 2. In calculating total investment for year 2, national income accountants would increase it by $50 billion. A) True B) False
B) False
Chp. 5 The gross domestic product (GDP) is the market value of all goods and services produced by the economy in one year. A) True B) False
B) False
Chp. 6 An annual rate of inflation of 7 percent will double the price level in about 15 years. A) True B) False
B) False
Chp. 6 Cost-push inflation increases real output and employment. A) True B) False
B) False
Chp. 6 If the nominal interest rate is 8 percent and the real interest rate is 5 percent, then the inflation premium is 13 percent. A) True B) False
B) False
Chp. 6 The economy's GDP gap is negative when actual GDP is greater than potential GDP. A) True B) False
B) False
Chp. 6 The unemployment rate for managerial and professional workers tends to be high. A) True B) False
B) False
