The cyclically adjusted deficit is the difference between annual government
expenditures and tax revenues that would have occurred if the economy was:
A. in a recession.
B. at full employment.
C. at the peak of a business cycle.
D. at the trough of the business cycle.
Refer to the above graph. The profit-maximizing monopolist shown sets its price at:
A. 0J.
B. 0G.
C. 0K.
D. 0H.
Refer to the above diagram, in which Qf is the full-employment output. If the
economy’s current aggregate demand curve is AD0, it would be appropriate for the
government to:
A. reduce government expenditures and taxes by equal-size amounts.
B. reduce government expenditures or increase taxes.
C. increase government expenditures or reduce taxes.
D. reduce unemployment compensation benefits.
The principal concept behind comparative advantage is that a nation should:
A. compare its volume of trade with other nations.
B. use tariffs and quotas to protect the production of vital products for the nation.
C. concentrate production on those products for which it has the lowest domestic
opportunity cost.
D. make the nation self-sufficient in the production of essential goods and services.
Refer to the above graph. If the interest rate was 1 percent and the money supply
decreased by $100 billion, the new interest rate would be:
A. 2 percent.
B. 3 percent.
C. 4 percent.
D. 5 percent.
The long-run supply curve would be upsloping in:
A. an increasing-cost industry.
B. a decreasing-cost industry.
C. a constant-cost industry.
D. a variable-cost industry.
If the Board of Governors of the Federal Reserve System decreases the legal reserve
ratio, this change will:
A. increase the excess reserves of member banks and thus increase the money supply.
B. increase the excess reserves of member banks and thus decrease the money supply.
C. decrease the excess reserves of member banks and thus decrease the money supply.
D. decrease the excess reserves of member banks and thus increase the money supply.
The long-run supply curve in a constant-cost industry would be:
A. vertical.
B. horizontal.
C. upsloping.
D. downsloping.
A profit-maximizing monopolist facing the situation shown in the graph above should:
A. shut down immediately.
B. continue producing to minimize losses.
C. continue producing to make economic profits.
D. continue producing as long as price is greater than marginal cost.
The monopolistically competitive seller’s demand curve will become more elastic the:
A. larger the number of competitors.
B. greater the degree of product differentiation.
C. more significant the barriers to entry.
D. smaller the number of competitors.
Which is true with respect to the demand data confronting a monopolist?
A. Demand is perfectly price inelastic.
B. Price increases as the output of the firm increases.
C. Marginal revenue increases as price decreases.
D. Marginal revenue is less than price.
Which question is an example of a microeconomic question?
A. What should the federal government do to reduce the trade deficit with Japan?
B. Will the merger of two airlines likely result in higher airline ticket prices?
C. What factors are contributing to the rise of unemployment in the economy?
D. Will the inflation rate remain relatively stable this year?
A single buyer is called a(n):
A. monopolist.
B. monopsonist.
C. oligopolist.
D. labor union.
Assume a nation’s current production possibilities are represented by the curve AB in
the above diagram. Positive economic growth would best be indicated by a:
A. shift in the curve from AB to CD.
B. shift in the curve from AB to EF.
C. movement from point 1 to point 2.
D. movement from point 3 to point 4.
The debate over income distribution focuses on the trade-off between:
A. unemployment and economic freedom.
B. equality and economic growth.
C. economic efficiency and equality.
D. unemployment and economic growth.
Refer to the above graph. A monopolistically competitive firm was initially successful,
but then its rivals started an advertising campaign that undercut its market position. This
situation would cause the demand curve for the monopolistically competitive firm to
shift from:
A. A to B and become more elastic.
B. A to B and become less elastic.
C. B to A and become more elastic.
D. B to A and become less elastic.
Which of the above diagrams illustrate(s) the effect of an increase in automobile worker
wages on the market for automobiles?
A. A only.
B. B only.
C. C only.
D. D only.
If the exchange rate between the U.S. dollar and the Japanese yen is $1 = 200 yen, then
the dollar price of the yen is:
A. $.005.
B. $.05.
C. $.50.
D. $5.
In the long run an oligopoly:
A. will always produce less than a monopoly.
B. may be able to earn positive economic profits.
C. will always produce in the range of decreasing returns to scale.
D. will produce on the portion of the demand curve where demand is price-inelastic.
From an economic perspective, when a student decides to attend another year of
college, the student has concluded that the marginal:
A. costs of attending college have increased that year.
B. benefits of attending college have decreased that year.
C. benefits of attending college are greater than the marginal costs.
D. costs of attending college will be subsidized by someone else such as parents or the
government.
Answer the next question based on the following consolidated balance sheet for the
commercial banking system. Assume the required reserve ratio is 30 percent. All figures
are in millions of dollars.
Refer to the above data. The excess reserves in this commercial banking system are:
A. $10 million.
B. $20 million.
C. $30 million.
D. $180 million.
A firm operating in a purely competitive labor market has the following marginal
revenue product schedule.
If the wage rate decreases from $17 to $13, by how much will the firm expand
employment?
A. 5 workers.
B. 4 workers.
C. 3 workers.
D. 2 workers.
Consumer sovereignty and “dollar votes” are most related to which fundamental
question about a competitive market system?
A. What goods and services will be produced?
B. How will the goods and services be produced?
C. How will the system promote progress?
D. Who will get the goods and services?
If the interest rate is above equilibrium, the:
A. quantity of money demanded would be greater than the quantity of money supplied.
B. quantity of money demanded would be less than the quantity of money supplied.
C. supply of money would increase and the demand for money would decrease.
D. demand for money would increase and the supply of money would decrease.
The number of countries belonging to the World Trade Organization (WTO), as of
2011, is about:
A. 153.
B. 25.
C. 80.
D. 202.
A firm has a single wage rate. At present 10 workers are employed at $50 per day.
Wages are raised to $55 per day to attract an extra worker. The marginal labor cost per
day is:
A. $5.
B. $10.
C. $55.
D. $105.
The Federal Reserve can increase aggregate demand by:
A. increasing taxes.
B. raising the discount rate.
C. raising the reserve requirement.
D. buying government securities in the open market.
Which would tend to reduce the crowding-out effect that occurs when the federal
government increases its borrowing to finance a deficit?
A. The economy is operating at full employment.
B. The economy is operating at less than full employment.
C. The expenditures fail to contribute to the development of human capital.
D. The deficit financing reduces the profit expectations of business firms.
Other things equal, in which of the following instances would the increase in labor
productivity be greatest?
A. The stock of real capital and inputs of labor increase proportionately.
B. The increase in the stock of real capital exceeds the increase in inputs of labor.
C. The increase in inputs of labor exceeds the increase in the stock of real capital.
D. Inputs of labor increase and the stock of real capital remains constant.
The basic requirement of money is that it be:
A. backed by precious metalsgold or silver.
B. authorized as legal tender by the central government.
C. generally accepted as a medium of exchange.
D. some form of debt or credit.
Refer to the above diagram, in which Qf is the full-employment output. If the
economy’s current aggregate demand curve is AD3, it is experiencing:
A. a positive GDP gap.
B. a negative GDP gap.
C. a recession.
D. cost-push inflation.