ECO (test1&2)
According to Adam Smith, individual self interest: a. is a powerful force for economic progress when it is directed by competitive markets b. is a powerful force for economic progress when individuals are wisely directed by a strong central government c. is a major factor in retarding the economic progress of humankind d. could be either a positive or negative force for economic progress, depending on the moral influences of political leaders.
a
Assumes, for the U.S., that the domestic price of beef without international trade is lower than the world price of beed. This suggests that with trade, a. the U.S. has a comparative advantage in the production of beed over other countries and the U.S. will export beef b. the U.S. has a comparative advantage in the production of beed over other countries and the U.S. will import beef c. other countries have a comparative advantage over the U.S. in the production of beef and the U.S. will export beef d. other countries have a comparative advantage over the U.S. in the production of beef and the U.S. will import beef
a
The law of demand refers to the a. inverse relationship between the price of a good and the willingness of consumers to buy it b. price increase that results from an increase in demand for a good of limited supply c. inverse relationship between the price of a good and the quantity offered for sale d. increase in the quantity of a good available when its price increases
a
The primary value of real GDP is its ability to measure year to year changes in a. real output b. income inequality c. real social welfare d. the general level of prices
a
The theory of comparative advantage suggests that nations should produce a good if they a. have the lowest opportunity cost b. have the lowest wages c. have the most resources d. can produce more of a good than any other nation
a
The type of unemployment caused by changes in the business cycle is a. cyclical unemployment b. natural unemployment c. frictional unemployment d. structural unemployment
a
The value of a good a. depends on many factors, including who uses it and under what circumstances b. is determined by the cost of producing it c. depends on the labor necessary to supply the good d. can be measured objectively by a survey of manufacturers of the good
a
The vertical long-run aggregate supply curve reflects the fact that in the long run, an increase in the price level a. will not alter the economy's maximum sustainable rate of output b. will increase the economy's maximum sustainable rate of output c. will reduce the quantity of goods and services purchasers will demand d. will improve the overall efficiency of resource use
a
In an economy with persistent inflation a. real GDP will grow faster than the nominal rate b. nominal GDP will grow faster than real GDP c. nominal and real GDP will grow at the same rate d. nominal and real GDP will both fall
b
Investment in both physical and human capital tends to enhance economic growth because it generally a. increases consumption during the current period b. makes it possible for individuals to produce more goods and services per hour worked c. encourages firms to expand output by employing more low productivity workers d. encourages workers to unionize and thereby fight for higher wages
b
Other things constant, which of the following would you expect to increase the output growth rate of a country? a. an increase in the rate of taxation on personal income b. an increase in the rate of investment as a share of total output c. passage of regulations restricting international trade d. passage of regulations restricting domestic trade
b
Over the last 60 years, the average annual growth of real GDP in the United States has been approximately a. 1 percent b. 3 percent c. 5 percent d. 9 percent
b
The annual rate of inflation is a. a change in real income of workers from one year to the next b. the percentage change in the general level of prices from one year to the next c. the increase in the purchasing power of the dollar from one year to the next. d. the percentage increase in the total value of the goods and services produced from one year to the next
b
The opportunity cost of building a park in your hometown would be the a. money cost of constructing the park b. highest valued bundle of other goods and services that must be forgone because of the park construction c. necessary increase in tax revenue to finance the construction d. amount of time spent in leisure activities in the park once it is constructed
b
In the AD/AS model, the aggregate demand for goods and services is composed of the purchases made by a. households and foreigners b. businesses, bondholders, and foreigners c. businesses and governments d. consumers, investors, governments, and foreigners
d
Jamal buys a new jacket for $50. If his willingness to pay is __, he receives consumer surplus of $15 on his purchase. a. $15 b. $35 c. $50 d. $65
d
Private property rights involve a. the right to exclusive use of the property b. lega protection against those who would seek too use or abuse the property without the owner's permission c. the right to transfer, sell, exchange, or mortgage the property d. all of the above
d
The "loanable funds market" is a term used by economists to describe the a. demand for goods and services by households b. market that includes resources such as labor and capital c. supply of goods and services by firms d. market that coordinates the borrowing and lending of individuals and firms
d
The aggregate demand curve indicates the relationship between a. the real wage rate and the quality of resources demanded by producers of goods and services b. the interest rate and the amount of loanable funds demanded by borrowers c. the natural rate of unemployment and the demand for goods and services when the economy is in long-run equilibrium d. the general price level and the aggregate quantity of goods and services demanded
d
The primary benefits derived from tariffs usually accrue to the a. domestic consumers of goods protected by tariffs b. foreign producers of goods protected by tariffs c. domestic producers of export goods d. domestic producers of goods protected by tariffs
d
Which of the following is a driving force underlying economic growth? a. trade restrictions that protect domestic businesses from competition within foreign producers b. regulations that require businesses to obtain permission from the government before starting a new business c. tax increases that expand the revenues of the government d. entrepreneurial discovery and production of imported products
d
Which of the following is a positive economic statement? a. too much government spending is the biggest problem facing the U.S. economy b. creating jobs is the most serious problem facing the U.S. economy c. raising taxes provides additional revenue that should be used to finance health care d. if taxes are over 50 percent of national income, job creation falls
d
A recent study suggested that moderate wine drinking may actually benefit one's health. If this information leads to an increased demand for wine, we would expect a. both the price and quantity of wine sold to increase b. both the price and quantity of wine sold to decrease c. the price to decrease and the quantity of wine sold to increase d. the price to increase and the quantity of wine sold to decrease
a
Because information is costly to acquire, a. people will rationally choose not to become fully informed when making decisions b. people will generally choose to become as fully informed as possible when making decisions c. people will generally choose to acquire no information that would be relevant to their decisions d. none of the above are true
a
GDP is not a perfect measure of welfare because it a. treats a dollar spent on candy bars the same as a dollar spent on education b. treats a dollar spent on exports the same as a dollar spent on imports c. counts illegal activities in the underground economy d. double counts depreciation
a
If a market economy has a self-correcting mechanism, when output is lower than potential or full-employment output, a. changes will occur that will automatically guide the economy back to full employment b. resource prices will increase c. prolonged unemployment such as was experience during the Great Depression will occur d. the economy will fall into a more severe recession
a
If price falls, what happens to the quantity demanded for a product? a. it increases b. it decreases c. it does not change d. uncertain-- economic theory has no answer to this question
a
If the actual price level exceeds the expected price level reflected in long-term contracts, a. many firms will find production more profitable than they had expected and will increase the quantity of output supplied b. many firms will find production less profitable than they had expected and will decrease the quantity of output supplied c. many firms will find production more profitable than they had expected and will decrease the quantity of output supplied d. many firms will find production less profitable than they had expected and will increase the quantity of output supplied
a
In economics, the term marginal refers to a. the change or difference between two alternatives b. man-made resources as opposed to natural resources c. the satisfaction a consumer receives from a good d. holding everything else constant in the analysis
a
In economics, transaction cost refers to the a. time, effort, and other resources needed to search out and negotiate an exchange b. dollar cost or price of the item traded c. cost an economy suffers when it allows specialization according to comparative advantage d. amount by which the price of an item increases due to the presence of a middleman
a
Isabella is on a temporary layoff from her factory job. If Isabella participates in the BLS survey, she will be classified as a. unemployed and in the labor force b. unemployed and out of the labor force c. employed and in the labor force d. employed and out of the labor force
a
Obstacles that restrict trade, either domestic or international, will a. reduce output, income, and the general living standard of the populace b. help people achieve higher income levels c. help promote high rates of economic growth d. encourage domestic business firms to expand output so they can achieve larger gains from the adoption of mass production techniques
a
The aggregate demand curve slopes downward indicating that a. an increase in the general price level will reduce the aggregate quantity of goods and services demanded b. an increase in the general price level will increase the aggregate quantity of goods and services demanded c. a change in the interest rate will alter the aggregate quantity of goods and services demanded d. consumers substitute between domestic-made and foreign-made goods as their relative prices change
a
What impact would a severe drought that destroys the wheat crop in several areas of the United States have on the market for wheat? a. the supply of wheat would fall b. the supply of wheat would rise c. the demand for wheat would fall d. the demand for wheat would rise
a
When the actual GDP equals the full-employment level of GDP, the a. economy is in long-run equilibrium b. price level must be rising c. expected inflation must be zero d. aggregate supply curve is not constrained by scarcity of resources
a
Which of the following about demand is true? a. the height of the demand curve for a product at a given quantity represents the marginal value derived by consumption of that unit b. the height of the demand curve for a product at a given quantity reflects the total value consumers derive from all units of the good consumed c. the total area above the demand curve for a product is equal to consumer surplus d. at every quantity, the height of the demand curve for a product represents the cost of pro ducting that unit
a
Which of the following events will leave GDP unchanged? a. you purchase 100 shares of Wal-Mart stock b. you pay $500 to repair the damage done to your car by an uninsured motorist c. you decide to work five more hours per week at your job to pay for the repairs performed on your car d. you purchase a new car at an auction
a
Which of the following will decrease the demand for coffee? a. the discovery that caffeine can cause heart problems b. an increase in the price of coffee c. an increase in the price of tea, a substitute for coffee d. a decrease in the prices of coffee makers and coffee cups, complements to coffee
a
Which of the following will most likely occur in the United States as the result of an unexpected rapid growth in real income in Canada and Mexico? a. an increase in aggregate demand and output in the short run b. a reduction in aggregate demand and output in the short run c. a reduction in the price level d. a decrease in the natural rate of unemployment in the United States
a
Because GDP does not fully account for improvements in the quality of goods, the GDP calculation a. tends to overstate the true value of output in the United States b. tends to understate the true value of output in the United States c. provides an accurate value of output in the United States d. measures the value correctly because price changes always capture the value of quality changes
b
Economic growth will a. reduce the future real GDP of an economy b. expand the production possibilities of an economy c. increase an economy's nominal income, but not its real income d. increase real output, but the real income level of the country will decline
b
Economists use the term ceteris paribus to indicate that a. supply and demand are in balance b. other things are assumed to be constant c. the analysis is true for the individual but not for the economy as a whole d. their conclusions are based on normative economics rather than positive economic analysis
b
For a college student who wishes to calculate the true costs of going to college, the costs of room and board a. should be counted in full, regardless of the costs of eating and sleeping elsewhere b. should be counted only to the extent that they are more expensive at college than elsewhere c. usually exceed the opportunity cost of going to college d. plus the cost of tuition, equals the opportunity cost of going to college
b
If a good is scarce, a. there will be shortages of it if the good is rationed by markets b. the good will have a price in a market setting c. there will be enough go the good freely available from nature to satisfy the human desire for it d. all of the above are true
b
If nominal GDP increased 2 percent during a year, while real GDP increased 4 percent, the a. price level must have increased approximately 2 percent compared to the prior year b. price level must have decreased approximately 2 percent compared to the prior year c. price level must have decreased approximately 50 percent compared to the prior year d. unemployment rate must have increased during the year
b
If resource prices are fixed and the product selling price rises, then a. profits will decrease b. profits will increase c. profits will remain constant d. both profits and output will decrease
b
If the U.S. imposed an import quota on sugar, then in the U.S. a. exports and imports would rise b. exports and imports would fall c. exports would rise and imports would fall d. exports would fall and imports would rise
b
If the exchange rate value of the dollar depreciates relative to other currencies, we would expect a. U.S. exports to decrease b. U.S. exports to increase c. U.S. imports to increase d. aggregate demand in the United States to decrease
b
If the labor force grows as a faster rate than the number employed, the a. unemployment rate will fall b. unemployment rate will rise c. labor force participation rate will fall d. employment rate will rise
b
In a country that is experiencing economic growth at 7 percent per year, per capita income will double in approximately a. seven years b. ten years c. fourteen years d. twenty-one years
b
The short-run aggregate supply curve shows the relationship between a. the general level of prices and the quantity of goods and services purchased by all consumers in the economy b. the general level of prices and the quantity of and services that domestic firms will supply c. the interest rate and the quantity of goods and services that domestic firms will supply d. the money supply and the quantity of goods and services that domestic firms will supply
b
When economists say a good is scarce, they mean a. there are only a limited number of consumers who would be interested in purchasing the good b. the human desire for the good exceeds the amount freely available from nature c. most people in poorer countries do not have enough of the good d. the production of the good has no opportunity cost for society
b
When property rights are clearly defined and enforced, private owners will a. use their property for selfish ends because they have little or no incentive to consider the desires of others b. develop and direct their property toward uses that others value highly because the market will generally reward them for doing so c. have little or no incentive to take care of their property or conserve it for the future d. be unable to derive personal gain if they are sensitive to the desires of others when deciding how to use their property
b
When there is excess demand for a product in a market, a. price will tend to fall b. prices must be below the equilibrium price c. price must be above equilibrium price d. producers will reduce output and sales will fall
b
Which of the following about unemployment is true? a. when a dynamic labor market is operating efficiently, mostly cyclical unemployment will be present b. some unemployment will be present even when a dynamic labor market is operating efficiently c. when full employment is present, the rate of unemployment will be zero d. when full employment is present, there will not be any frictional unemployment
b
Which of the following is most important if the living standards of people residing in a country are going to improve? a. growth of population b. growth of per capita GDP c. growth of the money supply d. growth of government expenditures as a share of GDP
b
Which of the following is true regarding private ownership? a. relative to common ownership, private ownership generally leads to less conservation of resources b. with private ownership, owners are held accountable for using their resources in a manner that harms the resources of others c. private ownership generally gives the owner little incentive to find ways to use the resources wisely d. with private ownership, resource owners have little incentive to consider the preferences of others when deciding how to employ a resource
b
Which of the following is true with regard to value and exchange? a. exchange generally moves a good from a person who values it more to a person who values it less b. transaction costs reduce our ability to gain from potentially advantageous trade c. middlemen increase transaction costs and, thereby, reduce the potential gains derived from trade d. physical goods have an objective value that is unrelated to time and the person of ownership
b
Which of the following is true? a. marginal tax rates that take a large share of income will enhance the incentive of individuals to invest and engage in productive activities b. high tax rates will tend to drive investment funds and highly productive citizens to other countries where tax rates are lower c. as marginal tax rates increase, individuals get to keep a larger share of their earnings d. countries can gain by imposing higher tariffs and other barriers that will restrain international trade
b
Which of the following would increase U.S. GDP? a. Ford Motor Company begins to produce and sell cars in China b. Mercedes-Benz begins to produce and sell cars in Mississippi c. An American investor buys 100 shares of Ford stock d. An American investor purchases 100 shares of Mercedes-Benz stock
b
Which of the following would increase the GDP of the United States? a. a resident of California buys a case of wine from a winery in France b. a resident of Germany buys a software program from a company in Washington c. a resident of Florida spends $3,000 on a vacation in Mexico d. a Japanese investor purchases 100 shares of a computer company located in Illinois
b
Which of the following would likely increase the supply of laptop computers? a. higher wage rates for the wooers that produce laptop computers b. a technological improvement that lowers the cost of producing laptop computers c. an increase in the price of computer chips used to produce laptop computers d. all of the above
b
Within the AD/AS model, if consumers and investors become more optimistic about the future direction of the economy, a. aggregate demand will decrease b. aggregate demand will increase c. long-run supply will increase d. long-run supply will decrease
b
A large grain crop resulting from favorable weather conditions would shift which of the following curves? a. only aggregate demand b. aggregate demand and short-run aggregate supply c. only short-run aggregate supply d. only long-run aggregate supply
c
How would the Bureau of Labor Statistics classify a college graduate who is not currently working but recently turned down an offer for employment at $10 an hour in order to keep looking for a better job? a. not in the labor force b. employed c. unemployed d. on temporary absence from school
c
If Honda (a Japan based firm) produces a car in Ohio and exports it to Japan, in which country's GDP will the car be counted? a. Japan's, because Honda is a Japanese company b. Japan's because that is where that car is purchased c. the GDP of the United States because that is where it was built d. both Japan and the United States
c
If Terrell can produce more bagels in one day than Zori can produce in one day, then a. Terrell has a comparative advantage in the production of bagels b. Zori has a comparative advantage in the production of bagels c. Terrell has an absolute advantage in the production of bagels d. Zori has an absolute advantage in the production of bagels
c
If the United States unilaterally removed all of its trade restrictions and moved toward a policy of free trade, international trade theory indicates that a. U.S. residents would gain, but the people in other countries would be worse off b. people in other countries would gain, but U.S. residents would be worse off c. both U.S. residents and people in other countries would be able to achieve higher income levels d. the average income level would be lower in both the United States and other countries
c
If we observe a decrease in the price of a good and a decrease in the amount of the good bought and sold, this could be explained by a. an increase in the supply of the good b. an increase in the demand for the good c. a decrease in the demand for the good d. a decrease in the supply of the good
c
In recent years, wireless cellular telephones have been replacing land-line phone service. This is an example of a. economies of scale b. division of labor c. creative destruction d. entry barriers into a market
c
One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00. Taking these three transactions into account, what it the effect on GDP? a. GDP increases by $1.50 b. GDP increases by $3.50 c. GDP increases by $6.00 d. GDP increases by $7.50
c
Other things constant, an increase in resource prices will a. increase aggregate demand b. decrease aggregate demand c. decrease short-run aggregate supply d. increase short-run aggregate supply
c
Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause a. an increase in the supply of piercings and a lower price for piercings b. an increase in the supply of piercings and a higher price for piercings c. a decrease in the supply of piercings and a higher price for piercings d. a decrease in the supply of piercings and a lower rice of piercings
c
The economic boom between 2002 and 2006 was primarily a result of a. a reduction in stock prices along with rising oil prices b. a sharp reduction in the real price of resources and wages c. an increase in both housing and stock prices d. an increase in both resource prices and interest rates
c
The opportunity cost of an action is a. the monetary payment the action required b. the total time spent by all parties in carrying out the action c. the value of the best opportunity that must be sacrificed in order to take the action d. the cost of all alternative actions that could have been taken, added together
c
Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a. an inward shirt of the curve b. a movement from one point to another point along the curve c. an outward shift of the curve d. a movement from a point on the curve to a point inside the curve
c
When competition is present and property rights secure, people will be encouraged to a. plunder the resources of others b. pay the lowest possible wages c. provide others with things that they value in exchange for income d. invest in other countries where markets are less competitive and property rights less secure
c
Which of the following is most indicative of a recession? a. a decline in unemployment b. a rise in inflation c. a decline in real GDP d. an increase in the interest rate
c
Which of the following is the best example of a supply shock? a. an increase in the availability of capital machinery due to normal changes in business investment b. a decrease in the productivity of the labor force due to a decline in the average educational level of workers c. a decline in agricultural output due to a summer drought d. an increase in output as a result of an expansion in employment
c
Which of the following statements is correct? a. if the buyer of a good gains, the seller must lose an equal amount b. the value of goods is objective; it is equal to the cost of supplying the good c. opportunity costs will always be incurred when scarce resources are used to produce a good d. changes in incentives generally have no effect on human behavior
c
Which of the following will most likely cause an increase in the long-run aggregate supply curve? a. a reduction in the general level of prices b. an increase in the general level of prices c. an improvement in technology that substantially reduces the cost of generating energy d. an increase in taxes that makes it more expensive for Americans to import crude oil
c
Which of the following will most likely occur during the contractionary phase of a business cycle? a. real GDP rises, and the unemployment rate falls b. real GDP declines, and the rate of inflation rises c. the sales of most businesses decline, and the unemployment rate rises d. inflation rises, and employment/population ratio falls
c
Which of the following would increase GDP? a. you buy 100 shares of Wal-Mart stock b. your car is destroyed by a fire, and you purchase a two-year-old car to replace it c. your car is destroyed by a fire, and you hire a mechanic to repair it d. your car is destroyed by a fire, and you reduce the number of hours you work to repair the car yourself
c
Who among the following is most likely to favor an appreciation of the U.S. dollar? a. a German professor visiting Chicago b. an American farmer who depends on exports c. an American professor on a tour of Austrian universities d. Disney World, in Orlando, Florida, a popular destination for foreign tourists
c
Within the AD/AS model, how does an economy adjust to an output beyond its long-run capacity as a result of an unanticipated increase in aggregate demand? a. wage rates and resource prices will fall, causing a decrease in aggregate demand and the restoration of equilibrium, at a higher price level b. long-run aggregate supply will increase, leading to a new equilibrium, at a lower price level c. resource prices and real interest rates will rise causing output to fall back to its long-run sustainable rate d. lower real interest rates will stimulate demand and restore equilibrium at the initial price level
c
A tax levied on imported goods is called a. an excise tax b. a quota c. a foreign profits tax d. a tariff
d
Actual GDP will be below potential GDP a. when the economy is at full employment b. during an economic boom c. when resources are fully utilized d. during a recession
d
An increase in per capita income will generally lead to a. more material goods, but a decline in the quality of the environment b. a reduction in life expectancy because working conditions are less desirable c. an increase in the number of hours worked by residents d. an increase in the living standards of most people
d
Andrea would be considered unemployed if she is a. working at a part-time job but is looking for a full time job b. absent from her regular job as the result of illness c. working as a full-time job but is looking for a part-time job d. not working and is looking for a part-time job
d
During the early 1990s, many workers in military-related industries lost their jobs as defense budget was reduced. Unemployment of this type is called a. cyclical b. the nature rate of unemployment c. frictional d. structural
d
If an economy operates at a point within its production possibilities curve, a. it lacks its resources necessary to reach the curve b. it is utilizing all of its resources efficiently c. it does not confront the problem of scarce goods relative to unlimited wants d. it is not efficiently using all of its resources
d
If the quantity of a good supplied is not very sensitive to the price of the good, this is illustrated by a a. demand curve that is relatively flat (more horizontal) b. demand curve that is relatively steep (more vertical) c. supply curve that is relatively flat (more horizontal) d. supply curve that is relatively steep (more vertical)
d
The law of comparative advantage suggests that a. curtailing U.S. trade with other countries would make U.S consumers better off b. everyone would be better off if they were self-sufficient c. countries will tend to import commodities that they can produce at a relatively low opportunity cost d. countries will tend to import commodities that they can produce at a relatively high opportunity cost
d
When economists say the quantity supplied of a product has decreased, they mean the a. supply curve has shifted to the left b. supply curve has shifted to the right c. price of the product has risen, and consequently, suppliers are producing more of it d. price of the product has fallen, and consequently, suppliers are producing less of it
d
Which of the following is an example of a rational decision? a. DeShawn enjoys the feeling of wind in his hair enough to ride his motorcycle without a helmet, even though he fully realizes the potential for injury it creates by not wearing one in unlikely event he is in an accident b. Jayla, a burglar who breaks into houses, decides to break into the house at 265 Elm Street, rather than the house next door because the house next door has a sign in the yard that says "home protected by a security system" c. Nicolas, a drug user, chooses to buy his cocaine from Samuel, because Samuel's cocaine is as good as the cocaine from other dealers, but Samuel has lower prices d. all of the above are examples of rational choices
d
Which of the following is correct? a. an increase in the tariff on foreign-produced automobiles will benefit U.S. consumers of domestic cars b. an ongoing result of the North American Free Trade Agreement is that producers in both countries will benefit at the expense of consumers c. The wages of U.S. workers would sharply decline if we traded freely with low-wage countries like India and China d. exports provide a nation with its primary source of purchasing power used to buy imported goods
d