ECO2013 170652 MIDTERM EXAM STUDY GUIDE MULTIPLE CHOICE
An advantage of using GDP per capita to measure the standard of living in a country is that it declines if economic growth results in deterioration of the environment. A) False B) True
A) False
Consumption expenditures play a minor role in the U.S. economy. A) False B) True
A) False
If the United States has absolute advantages in producing wheat and automobiles, it should never trade with other countries that produce wheat and automobiles. A) False B) True
A) False
Market failure occurs only when a market completely stops conducting business. A) False B) True
A) False
Mathematically, the law of demand refers to the positive relationship between price and quantity demanded. A) False B) True
A) False
Total surplus is maximized at a price of $0. A) False B) True
A) False
Which of the following statements is CORRECT? A) Households supply both labor and nonlabor resources. B) In the circular flow model, incomes and resources flow in the same direction. C) The four main factors of production are water, land, entrepreneurial ability, and energy. D) Owners of factors of production pay income to firms.
A) Households supply both labor and nonlabor resources.
When the foreign sector, government spending, and taxes are added to the simple Keynesian model, at equilibrium all injections must equal all withdrawals, as stated by the equation I + G + X = S + T + M. A) True B) False
A) True
If the price of a good is higher than the equilibrium price: A) consumer surplus is decreased and deadweight loss is increased. B) consumer surplus is increased and deadweight loss is decreased. C) producer surplus is decreased and deadweight loss is increased. D) producer surplus is decreased and deadweight loss is decreased.
A) consumer surplus is decreased and deadweight loss is increased.
People use _____ to determine how many hours to work, and businesses use _____ to determine how much of their product they are willing to supply to the market. A) marginal analysis; marginal analysis B) allocative efficiency; production efficiency C) production efficiency; marginal analysis D) marginal analysis; allocative efficiency
A) marginal analysis; marginal analysis
If disposable income is $3,000 and saving is $1,200, how much is consumption? A) −$1,200 B) $1,800 C) $2,100 D) $4,200
B) $1,800
Macroeconomics studies economic activity from the level of one individual or firm. A) True B) False
B) False
Much of the economic growth we have seen over the past century has been due to population growth. A) True B) False
B) False
Natural resources such as water are included in capital resources. A) True B) False
B) False
Which of the following does NOT deal with microeconomics? A) Profits for some manufacturing firms fell in 2009. B) In 2009, the unemployment rate in the United States rose to nearly 10%. C) Salaries of some top executives fell in 2009. D) Competitive markets promote efficiency.
B) In 2009, the unemployment rate in the United States rose to nearly 10%.
Which of the following is NOT an example of a market? A) neighborhood lemonade stand B) Painting one's house C) ticket scalping D) New York Stock Exchange
B) Painting one's house
If a business increases its inventories, the change is treated as an investment. A) False B) True
B) True
If a price ceiling is set above the market price, it is ineffective. A) False B) True
B) True
If the marginal propensity to consume is 0.5, then $50 of every additional $100 of income will be spent. A) False B) True
B) True
Patents and copyright laws are needed to promote invention and innovation. A) False B) True
B) True
Total factor productivity is influenced in part by a country's institutions. A) False B) True
B) True
Infrastructure is: A) not important in a market-based economy. B) a country's public capital. C) typically better when provided by private companies. D) unimportant for economic growth because the government provides it.
B) a country's public capital.
What is considered a labor resource? A) a sewing machine B) an apprentice C) mineral deposits D) a copier
B) an apprentice
In 2012, the group with the LOWEST unemployment rate in the United States was: A) high school graduates. B) college graduates and higher. C) people with less than a bachelor's degree. D) people with less than a high school diploma.
B) college graduates and higher.
Suppose the government raises income taxes, so consumers have less take-home pay. This policy action will cause a(n): A) increase in aggregate demand. B) decrease in aggregate demand. C) increase in short-run aggregate supply. D) decrease in short-run aggregate supply.
B) decrease in aggregate demand.
A production function of the sort that says output per worker equals A * f(L / L, K / L, H / L, N / L) tells us all of the following EXCEPT that ____________ will lead to a better standard of living. A) increases in capital B) more people C) more human capital D) more natural resources
B) more people
If the U.S. aggregate price level falls: A) the purchasing power of wealth declines. B) net exports rise. C) interest rates go up. D) the aggregate demand curve shifts to the right.
B) net exports rise.
If society produces a pie at the lowest possible cost and then distributes the pie evenly among its population, then: A) production and allocative efficiency are achieved. B) only production efficiency is achieved. C) neither production efficiency nor allocative efficiency is achieved. D) only allocative efficiency is achieved.
B) only production efficiency is achieved.
Which of the following factors will cause the aggregate demand curve to shift to the right? A) reduction in the aggregate price level B) reduction in personal income taxes C) increase in interest rates D) drop in foreign income
B) reduction in personal income taxes
If sellers expect the price of their product to rise in the future, they are likely to: A) increase their supply in the near term. B) restrict their supply in the near term. C) increase their demand in the near term. D) restrict their demand in the near term.
B) restrict their supply in the near term.
Robert lost his job and now takes care of the children while his wife works. Robert has decided he likes his daddy duties. Robert would take a job similar to the one he lost if it was offered, but he is not actively seeking work. How is Robert categorized in the unemployment figures? A) Robert is unemployed. B) Robert is employed because he is providing a useful product. C) Robert is not part of the labor force. D) Robert is underemployed.
C) Robert is not part of the labor force.
The collapse of home values that began in 2008 led to ____ in Americans' saving rates, shifting aggregate demand to the ____. A) a decrease; left B) a decrease; right C) an increase; left D) an increase; right
C) an increase; left
If the marginal propensity to consume is 0.8 and the government reduces taxes by $5 billion, equilibrium income will: A) fall by $25 billion. B) rise by $25 billion. C) rise by $20 billion. D) fall by $20 billion.
C) rise by $20 billion.
In a market based economy, scarce resources are allocated by: A) political power. B) first come, first served. C) the price system. D) Cooperative efforts to determine relative need.
C) the price system.
In 2009, a market basket of goods and services cost $100 in Merryland; the same basket cost $200 in Berryland. In 2010, the cost in Merryland was $150 and in Berryland it was $225. Based on that information, which of the following statements is true? A) Neither of the countries underwent inflation. B) Berryland has more inflation than Merryland. C) The countries had the same rate of inflation. D) The rate of inflation is four times as large in Merryland as in Berryland.
D) The rate of inflation is four times as large in Merryland as in Berryland.
The ability to use physical resources in creative ways to produce goods and services is known as: A) labor. B) natural resources. C) physical capital. D) entrepreneurial ability, technology, and ideas.
D) entrepreneurial ability, technology, and ideas.
Frictional unemployment occurs when job openings: A) exist and people are willing to take them, but the applicants do not have the necessary skill set. B) do not exist, although people are willing to work, so it makes no sense to try to bring the two together. C) exist, but people are not willing to take them, so it makes no sense to bring the two together. D) exist, and people are willing to take them, but it takes some time to bring the two together.
D) exist, and people are willing to take them, but it takes some time to bring the two together.
If one person consumes a public good: A)others are excluded from enjoying it. B) the amounts available to others are diminished. C) he or she must pay for it. D) others cannot be excluded from enjoying it.
D) others cannot be excluded from enjoying it.
In a pure market economy, the government's primary roles do NOT include: A) protecting property rights. B) enforcing contracts between private parties. C) providing public goods such as national defense. D) reallocating resources across the economy.
D) reallocating resources across the economy.
The household survey provides a detailed demographic picture of ________________, and the payroll survey provides detailed information __________________________. A) consumer spending; about business spending B) consumer spending; by industry and region C) the labor market; about business spending D) the labor market; by industry and region
D) the labor market; by industry and region
