ECON 1010 FINAL
A decline in real GDP for at least two consecutive quarters is referred to as: A) A recession. B) A depression. C) Deflation. D) Inflation.
A
All of the following are used to measure a country's economic welfare except: A) A change in relative prices. B) The unemployment rate. C) The output produced. D) A change in production capacity.
A
An emission charge can be used to: A) Reduce the difference between social and private costs. B) Encourage firms to externalize pollution costs. C) Encourage the equitable distribution of goods. D) Reduce the abuses of market power.
A
An externality is: A) A cost or benefit of a market activity that impacts a third party. B) The private costs that are borne by an individual. C) The cost of clean up paid for by the polluter. D) A situation in which the government solution makes the outcome worse.
A
Ceteris paribus, if the average price level falls, then the _____ effect will result in _____ in the purchases of goods and services. A) Real balances; an increase B) Foreign trade; a decrease C) Interest rate; a decrease D) Cost; an increase
A
GDP can be found by: A) Adding the monetary value of all final goods and services produced during a given period of time. B) Adding the physical amount of all final goods and services produced during a given period of time. C) Taking the difference between exports and imports during a given period of time. D) Adding the value of all final output produced and measuring it in constant prices during a given period of time.
A
If an increase in the price of some goods outweighs other prices that remain constant or decrease then there is: A) Inflation. B) Deflation. C) Stagflation. D) Reflation.
A
In the model where we assume that all parcels of land are the same, the relationship between food and timber produced when all land is in use is: A) Linear and inverse. B) Direct and linear. C) Inverse and nonlinear. D) Direct and nonlinear.
A
Keynes viewed the economy as inherently unstable and suggested that during a recession policy makers should: A) Cut taxes and/or increase government spending. B) Cut taxes and/or reduce government spending. C) Raise taxes and/or increase government spending. D) Raise taxes and/or reduce government spending.
A
One reason our full employment goal is not zero percent is because: A) Frictional unemployment will always exist. B) Cyclical unemployment will always exist. C) Population growth makes such a goal impossible. D) Discouraged workers make such a goal impossible.
A
Opportunity cost may be defined as the: A) The value of goods or services that are forgone in order to obtain something else. B) Dollar price paid for a final good or service. C) Dollar cost of producing a particular product. D) Dollar cost of the next best alternative resources for producing a good.
A
Say's Law implies that: A) The economy will not experience a long-term decrease in output. B) Economic instability requires government intervention. C) Flexible wages and prices require government intervention. D) The economy is unlikely to attain full employment.
A
Social costs are: A) The full resource costs of an economic activity. B) Usually less than private costs. C) The costs of an economic activity borne by the producer. D) Always less than private costs.
A
The federal government's role in providing aid to the poor and the aged is justified because of concerns about: A) Inequity. B) Externalities. C) Market power. D) Macro failure.
A
The first antitrust act to prohibit "conspiracies in restraint of trade" was: A) The Sherman Act. B) The Clayton Act. C) The Federal Trade Commission Act. D) Case decisions such as those for AT&T and Microsoft.
A
The output of cell phones can be added to the output of refrigerators in order to compute GDP by: A) Multiplying the output of each by the corresponding prices and adding these dollar values. B) Dividing the output of each by price and adding these dollar values. C) Adding up the physical number of cell phones and refrigerators produced. D) Dividing dollar values of output for each by price and adding the results.
A
When there is a surplus in a market, prices are likely to fall because: A) Buyers do not wish to buy as much as sellers want to sell. B) Some buyers will offer to pay a higher price, initiating a move up the supply curve. C) Sellers are likely to increase their production. D) Buyers will wait for the government to establish a price floor.
A
Whenever external costs exist: A) Social demand is less than market demand. B) Market demand is less than social demand. C) Market demand and social demand are equal. D) Market demand understates the social benefits.
A
Which of the following best describes the "invisible hand?" A) Price signals drive the market mechanism. B) Government regulations influence the allocation of society's scarce resources. C) The Internal Revenue Service enforces the nation's tax laws. D) Lobbyists influence which laws are passed by Congress.
A
Which of the following explains why economic choices must be made? A) The factors of production are scarce. B) The factors of production are expensive. C) The factors of production are used inefficiently. D) The factors of production are of inferior quality.
A
Which of the following individuals is typically associated with a laissez faire economic policy? A) Adam Smith. B) Karl Marx. C) The Chairman of the Federal Reserve. D) John Maynard Keynes.
A
Which of the following is true about the factors of production? A) The factors of production as well as technology determine the physical limits to production. B) Rich countries have an unlimited quantity of factors. C) The factors include natural resources but not skilled labor. D) Some factors are scarce but other factors are not.
A
Which of the following types of unemployment would best characterize a tax accountant's unemployment after tax returns are due? A) Seasonal unemployment B) Frictional unemployment C) Underemployment D) Cyclical unemployment
A
One HEADLINE article in the text, "Hurricane Sandy to Raise Prices on Used Cars" describes the impact of thousands of cars being destroyed by the storm. What will happen to the equilibrium quantity of used cars if the supply decreases? A) Increase. B) Decrease. C) Remain unchanged. D) Either increase or decrease based on the slope of the supply curve.
B
Pollution is an example of: A) Inefficiency by the polluting firm. B) Market failure. C) Government transfers. D) Economic instability.
B
The Consumer Price Index is used specifically to measure the: A) Unemployment rate. B) Inflation rate. C) Growth rate of the economy. D) Business cycle.
B
The central problem of economics is the: A) Distribution of goods and services to those in need. B) Scarcity of resources relative to human wants. C) Inefficiency of government operations. D) Unemployment of certain factors of production.
B
The essential signal of the market mechanism is: A) Income. B)Price. C) Property. D) Government directive.
B
Which of the following economic theories focus on aggregate demand to explain changes in unemployment and inflation? A) Classical and supply-side B) Keynesian and monetarist C) Classical and Keynesian D) Classical but not monetarist
B
Which of the following is NOT an assumption under which the production possibilities curve is drawn? A) The economy's resources are fully employed. B) The price level is stable. C) Technology is being held constant. D) The supplies of factors of production are fixed. E) The trade-off of one good for another is always constant.
B
Which of the following is an example of the price effect during a period of inflation? A) Your income increases, but not as rapidly as the price level does. B) You buy a lot of gasoline, and the price of gasoline rises more rapidly than the price level does. C) You own a house, and its value rises more rapidly than the price level does. D) You own municipal bonds that pay a low interest rate while the price level is rising.
B
Which of the following is an example of the wealth effect during a period of inflation? A) A firm receives a fixed price for the services it sells while the price level is rising B) You hold money in a savings account that earns 5 percent interest while the price level doubles C) Your income stays constant while the price level doubles D) You pay for utilities that are becoming more expensive as the price level is rising
B
Which of the following prohibits price discrimination? A) The Sherman Act B) The Clayton Act C) The Federal Trade Commission Act D) The Full Employment and Balanced Growth Act
B
Which of the following does not explain why the market sometimes fails to produce the optimal mix of output? A) Some producers have market power. B) Public goods can have free-riders. C) Private goods cannot be consumed jointly. D) There are externalities associated with production.
C
Which of the following is a determinant of supply? A) Consumer tastes or preferences. B) Consumer income. C) Prices of the factors of production. D) Number of buyers.
C
Which of the following is an example of supply-side policy? A) The government response to the Great Depression B) The hyperinflation during the 1970s C) The tax cuts in 1981 D) Government policy before 1930
C
Which of the following is not a basic measure of macroeconomic performance? A) Output growth B) Unemployment C) Public goods D) Inflation
C
Which of the following is not an income transfer? A) Unemployment benefits B) Social Security payments C) Food stamps D) Welfare
C
Which of the following would not cause the market supply of cell phones to change? A) Telecommunications are deregulated, and anyone can produce and sell cell phones. B) A cheaper technology for producing cell phones is developed. C) A reduction in the demand for cell phones causes the price to fall. D) Taxes levied on cell phone production are reduced.
C
A tax cut can best be characterized as: A) Monetary policy only. B) Fiscal policy only. C) Both monetary and supply-side policy. D) Both fiscal and supply-side policy.
D
All of the following are macro failures that justify government intervention except for: A) High unemployment. B) A rising price level. C) A decline in the production capacity. D) Inequitable distribution of output.
D
An extremely deep and long period of negative economic growth is most accurately called: A) Inflation. B) Deflation. C) A recession. D) A depression.
D
An office worker who loses her job because she does not have the necessary computer skills is, ceteris paribus: A) Frictionally unemployed. B) Seasonally unemployed. C) Cyclically unemployed. D) Structurally unemployed.
D
Both Keynesian and monetarist theories believe that _______ aggregate _______ causes inflation. A) An increase in; supply B) Excessive; supply C) Too little; demand D) Excessive; demand
D
Ceteris paribus, a leftward shift of the aggregate demand curve will cause the equilibrium price level to _______ and equilibrium real output to _______. A) Increase; increase B) Increase; decrease C) Decrease; increase D) Decrease; decrease
D
Ceteris paribus, based on the aggregate demand curve, if the price level _______ the quantity of real output _______ increases. A) Increases; produced B) Decreases; produced C) Increases; demanded D) Decreases; demanded
D
Ceteris paribus, if North Korea increases the size of its military, then: A) Its production possibilities curve will shift outward. B) Its production possibilities curve will shift inward. C) Its production of consumer goods will increase. D) Its production of consumer goods will decrease.
D
During a period of inflation: A) Specific prices are rising, and relative prices are falling. B) Both relative prices and average prices are rising. C) Relative prices are rising, but it is not certain what is happening to average prices. D) Average prices are rising, but it is not certain what is happening to relative prices.
D
External costs are partly caused by: A) the law of diminishing returns. B) economic incentives which prompt firms to use recycled inputs. C) increase government regulation. D) the growth of a modern economy.
D
If the CPI is 137 in Year Y, then it costs _______ in Year Y to buy the same market basket that cost _______ in the base period. A) $37; $100 B) $137; $37 C) $100; $137 D) $137; $100
D
If the inflation rate is zero, changes in relative prices signal a change in the _____ for the economy. A) Production possibilities B) Unemployment rate C) Level of GDP D) Desirable mix of output
D
In order to maximize society's welfare, a firm should produce where: A) Price equals social marginal revenue. B) All pollution is entirely eliminated. C) Marginal revenue equals price. D) Social marginal cost equals marginal revenue.
D
Social demand exceeds market demand whenever: A) Private costs exist. B) External costs exist. C) Private benefits exist. D) External benefits exist.
D
The Full Employment and Balanced Growth Act of 1978 established a goal for inflation of _______ percent. A) Zero B) One C) Four to six D) Under three
D
The short-run aggregate supply curve is: A) Vertical at all levels of output. B) Horizontal at all levels of output. C) Downward sloping to the right. D) Upward sloping to the right.
D
To construct the Consumer Price Index, the Bureau of Labor Statistics must: A) Convert nominal incomes into real GDP and then compute the percentage increase on an annual basis. B) Interview people to determine their willingness and ability to work and their average income. C) Construct an index of the growth rate of real income to measure the growth of the economy. D) Find out what people buy and then survey how the prices of these items change.
D
Too much government regulation might do all of the following EXCEPT: A) Inhibit production. B) Raise product prices. C) Limit consumer choices. D) Cause market failure.
D
Which of the following components of consumer spending is the most cyclical? A) Services. B) Agricultural goods. C) Nondurable goods. D) Durable goods.
D
Which of the following is NOT true about U.S. corporations? A) The owners have limited liability for the actions of the company. B) They account for the majority of business sales. C) The typical asset size is in excess of $4 million. D) They are the most common type of business firm.
D
Which of the following is an example of the interest-rate effect, assuming the U.S. price level decreases? A) The purchasing power of money decreases and people buy more goods B) U.S. goods are more expensive for foreigners to buy and exports decrease C) U.S. production costs increase and producers charge higher prices D) The demand for loans decreases so interest rates decline and loan-financed purchases increase
D
Which of the following is not included in the study of macroeconomics? A) Business cycles B) The unemployment rate C) Inflation D) Market structures
D
Which of the following is the best example of the "WHAT" economic question? A) Is the production process using an efficient amount of labor and capital machinery? B) Who gets the goods once they are produced? C) What is the most efficient method for producing goods? D) What is the optimal mix of output?
D
Which of the following types of unemployment is most directly related to real GDP growth? A) Structural unemployment B) Seasonal unemployment C) Frictional unemployment D) Cyclical unemployment
D
On average, U.S. real GDP has grown roughly _____ percent per year. A) Two B) Three C) Four D) Five
B
A HEADLINE article in the text indicates that North Korea is running out of food. If North Korea is on its production possibilities curve and reduces its production of food so that it can increase the size of its military, this is most consistent with: A) Market failure. B) A movement along the production possibilities curve. C) An inward shift of the production possibilities curve. D) An expansion beyond the production possibilities curve.
B
A market shortage is: A) Equal to the quantity supplied. B) Caused by a price ceiling. C) Caused by scarce resources. D) Caused by a price floor.
B
A movement along the supply curve is the same as a: A) Shift in the supply curve. B) Change in the quantity supplied. C) Change in supply. D) Change in the number of producers.
B
After quitting one job, some people with marketable skills find that it takes several months to find a new job. This is an example of which type of unemployment? A) Structural unemployment B) Frictional unemployment C) Cyclical unemployment D) Seasonal unemployment
B
Based on the News Wire article titled "Inflation and the Weimar Republic," which of the following is the best illustration of the price effect of inflation? A) "Profits fell as employees demanded frequent wage adjustments" B) "... businessmen traveling around the country found themselves borrowing funds from their customers each stage of the way. The cash they'd allocated for the entire trip barely sufficed to pay the way to the next stop" C) "Those thrifty Germans who had placed their savings in corporate or government bonds saw their lifetime efforts come to naught" D) "Debtors sought out creditors to pay them in valueless currency"
B
Ceteris paribus, a leftward shift of the aggregate supply curve will cause the equilibrium price level to _______ and equilibrium real output to _______. A) Increase; increase B) Increase; decrease C) Decrease; increase D) Decrease; decrease
B
Economic models: A) Focus on details about the economy. B) Focus on basic relationships. C) Cannot be constructed because of the complexity of the economy. D) Can be used to predict market behavior but not consumer behavior.
B
Externalities are the: A) Domestic economic impact of foreign events. B) Difference between social and private costs or benefits. C) Outside costs that producers absorb. D) Effects of government actions on the private sector.
B
If a good generates an external cost, the market will produce: A) Some of the good but not enough. B) Too much of the good. C) An optimal amount of the good. D) None of the good.
B
If the economy relies entirely on markets to answer the WHAT question, it tends to: A) Overproduce private goods and overproduce public goods. B) Overproduce private goods and under produce public goods. C) Under produce private goods and overproduce public goods. D) Under produce private goods and under produce public goods.
B
Immediately following the years 1929-1933, the U.S. economy: A) Resumed growing at the long-term trend for real GDP of 6 percent. B) Suffered sporadic decreases in the growth rate of GDP, which led to lower GDP per capita. C) Grew dramatically and steadily over a 20-year period with a record long growth period. D) Experienced World War II, which resulted in rapid growth and rapid deflation.
B
In economics, which of the following is the best example of capital? A) Money held in a checking account. B) A computer used by a lawyer to prepare legal documents. C) Investment in training for employees in an accounting firm. D) The executive producer of a new adventure movie.
B
Inflation acts like a tax because: A) The government tends to benefit during periods of inflation. B) It takes income and wealth from some people and gives it to others. C) Inflation pushes everyone into higher tax brackets. D) Everyone loses purchasing power during periods of inflation just like everyone must pay taxes.
B
Keynesian policy levers include: A) Deregulation. B) Fiscal policy. C) Supply-side policy. D) Laissez-faire policy.
B
Keynesian theory is referred to as a: A) Supply-side theory. B) Demand-side theory. C) Full-employment theory. D) GDP gap theory.
B
Market failure means: A) Government solutions fail to improve economic outcomes. B) The market mechanism does not produce the best mix of output. C) The market allocates goods more efficiently than does the government. D) The market is responsive to consumer demand.
B
Nominal income must have fallen if real income: A) Falls and there is inflation. B) Falls and there is deflation. C) Rises and there is inflation. D) Rises and there is deflation.
B
A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed. A) Frictionally B) Structurally C) Cyclically D) Chronically
C
Frictional unemployment goes up when: A) Students quit work to return to school at the end of the summer. B) A corporation transfers a worker to another city. C) A worker quits one job in order to search for another. D) There is inadequate demand for labor.
C
Given that resources are scarce: A) A "free lunch" is possible, but only for a limited number of people. B) Poor countries must make choices, but rich countries do not have to make choices. C) Opportunity costs are experienced whenever choices are made. D) Some choices involve opportunity costs while other choices do not.
C
If resources are limited: A) People will rush to buy more goods than they would otherwise. B) Businesses will sell more products than they would otherwise. C) Choices that involve tradeoffs must be made. D) All individuals are deprived of basic necessities.
C
If the economy relies entirely on markets to answer the WHAT question, it tends to _____ goods with external benefits and _____ goods with external costs. A) Overproduce; overproduce B) Overproduce; under produce C) Under produce; overproduce D) Under produce; under produce
C
In the model where we assume that all five parcels of land are NOT the same, the relationship between food and timber produced when all land is in use is: A) Linear and inverse. B) Direct and linear. C) Inverse and nonlinear. D) Direct and nonlinear.
C
Monetary theory is referred to as: A) A factor-market theory. B) The business-cycle theory. C) A demand-side theory. D) A supply-side theory.
C
Over the last century in the United States there has been an increase in _______ as a percentage of total output. A) Manufacturing, government, and services B) Farming, international trade, and manufacturing C) Services, government, and international trade D) Services, farming, and construction
C
Per capita GDP is the most practical way to: A) Measure how much income households receive. B) Measure how much output can be consumed on a sustainable basis. C) Measure how much output is potentially available to the average person. D) Analyze the growth rate of the economy over time.
C
Private costs are identified as: A) Costs borne by a third party as a result of polluting activities by producers. B) The difference between the social and public costs of a market activity. C) The costs of an economic activity borne directly by the immediate producer or consumer. D) Being greater, in general, than social costs.
C
Short-run economic growth comes from: A) Expanding the production possibilities curve. B) A rightward shift of aggregate supply. C) Increased or more efficient use of existing resources. D) A population decrease which increases output per person.
C
The market demand for a particular good indicates: A) That consumers will purchase more of the good at higher prices, ceteris paribus. B) That sellers will offer more of the good only at higher prices, ceteris paribus. C) The total quantities buyers are willing and able to purchase at alternative prices, ceteris paribus. D) How much of the good is actually purchased in a given period of time.
C
The most important motivation for producers is the desire to: A) Minimize external costs. B) Minimize social costs above private costs. C) Maximize economic profits. D) Maximize social benefits and private revenues at the same time.
C
The opportunity cost of playing tennis with your friend is: A) Negative since its good exercise. B) Zero since you already own the tennis racket and play on a public court. C) The next-best alternative use of your time that is forgone. D) The cost of the tennis lessons you took last year.
C
The primary concern of economics is the study of: A) Why human wants exist and what motivates them. B) How to distribute goods and services according to human needs. C) How best to allocate scarce resources among competing uses. D) Who holds the most political power in a particular country.
C
The quantity of a good demanded in a given time period increases as the price falls, which is known as: A) Say's Law. B) The law of ceteris paribus. C) The law of demand. D) The opportunity cost.
C
The value of an original painting, held as an asset, increased in value by 100 percent from 1970 to 2012. Suppose during the same period average prices in the economy rose by 150 percent. The owner of the painting, relative to those who do not own paintings, experienced a: A) Higher real income as a result of the wealth effect. B) Higher real income as a result of the price effect. C) Lower real wealth as a result of the wealth effect. D) Lower real income as a result of the income effect.
C
Unemployment that occurs when there are not enough jobs for the number of people in the labor force is referred to as: A) Frictional unemployment. B) Structural unemployment. C) Cyclical unemployment. D) Seasonal unemployment.
C
Which of the following created an agency to identify anticompetitive practices? A) The Sherman Act B) The Clayton Act C) The Federal Trade Commission Act D) The Federal Reserve Act
C