How many Federal Reserve Banks are there?
A. 1
B. 6
C. 12
D. 24
Refer to the above supply and demand graph. In the graph, point A is the current
equilibrium level of output of this product and point B is the optimal level of output
from society’s perspective. S is the supply curve without a tax and St is the supply curve
with a tax. One solution to this externality problem is to:
A.give consumers a subsidy of the amount FG.
B.give producers a subsidy of the amount AB.
C.tax producers by the amount DE.
D.tax consumers by the amount EF.
The economy is experiencing high unemployment and a low rate of economic growth
and the Fed decides to pursue an expansionary money policy. Which action by the Fed
would be most consistent with this policy?
A. Buying government securities.
B. Selling government securities.
C. Raising the reserve ratio.
D. Raising the discount rate
A computer manufacturer’s elasticity of demand for labor is not likely to be affected by
the:
A. supply of computers.
B. price elasticity of demand for computers.
C. ratio of labor cost to other resource costs in the firm.
D. ease of substituting capital for labor in producing computers.
Refer to the above diagram. If aggregate supply shifts from AS1 to AS3, then real
domestic output will:
A. increase and the price level will increase.
B. increase and the price level will decrease.
C. decrease and the price level will increase.
D. decrease and the price level will decrease.
From society’s point of view, the economic function of profits is to:
A. equalize incomes.
B. ensure that the rich get richer.
C. provide revenues to pay high wages.
D. direct resources in response to changes in the economy.
The individual who brings together economic resources and assumes the risk in a
capitalist economy is called the:
A. manager.
B. entrepreneur.
C. stockbroker.
D. banker.
Which is true of a price discriminating pure monopolist?
A. P > MR for the last unit sold.
B. Profit will be lower than in the nondiscriminating case.
C. The average price will be higher than in the nondiscriminating case.
D. Allocative inefficiency will be greater than in the nondiscriminating case.
Refer to the table above. Starting at a $1 price, at what price range does demand
become elastic?
A. $1-2
B. $2-3
C. $3-4
D. $4-5
Effective price ceilings and price floors:
A. cause surpluses and shortages, respectively.
B. make the rationing function of free markets more efficient.
C. interfere with the rationing function of prices.
D. shift demand and supply curves and therefore have no effect on the rationing
function of prices.
Which is the single most important source of U.S. economic growth?
A. Stability of the sociocultural-political environment.
B. Improvement in the legal and human environment.
C. Increases in the quantity of labor.
D. Increases in labor productivity.
A sharp rise in the real value of stock prices, which is independent of a change in the
price level, would affect aggregate demand due to:
A. the interest-rate effect.
B. the real-balances effect.
C. a change in the degree of excess capacity.
D. a change in real value of consumer wealth.
The federal budget deficit is calculated each year by:
A. subtracting government spending from government revenues.
B. subtracting consumption and investment from government spending.
C. adding up consumption, investment, government purchases, and net exports.
D. adding up the difference between government revenues and spending over the years
of the nation’s existence.
Working as an elevator operator used to be a common job in the workforce four decades
ago, but today few jobs remain. The unemployment created by the introduction of
automatic elevators would be considered:
A. wait.
B. cyclical.
C. frictional.
D. structural.
A pure monopoly firm will never charge a price in the inelastic range of its demand
curve because lowering price to get into this region will:
A. increase total revenue, increase total cost, and decrease profit.
B. decrease total revenue, increase total cost, and decrease profit.
C. increase total revenue, decrease total cost, and decrease profit.
D. decrease total revenue, total cost, and profit.
Refer to the above graph. The pure monopolist firm will charge a price of:
A. P1.
B. P2.
C. P3.
D. P4.
Which statement applies to the Social Security system?
A. Benefits are paid on the basis of need.
B. It provides cash assistance and services to families with dependent children.
C. It is financed by payroll taxes on employees and employers.
D. Benefit levels vary throughout the nation because the system is administered by the
individual states.
If a monopolist produces 100 units of output at a market price of $5 per unit with
marginal revenue per unit equaling $4, we would expect that if the monopolist’s good
were provided under pure competition, quantity would be:
A. higher than 100 units, price would be lower than $5, and MR = price.
B. lower than 100 units, price would be greater than $5, and MR = price.
C. higher than 100 units, price would be greater than $5, and MR = price.
D. lower than 100 units, price would be lower than $5, and MR = price.
To say money is socially defined means that:
A. money has been defined in a constitutional amendment.
B. whatever performs the functions of money extremely well is considered to be money.
C. the money supply includes all public and private securities purchased by society.
D. society, acting through Congress, specifies what shall be included in the money
supply.
Refer to the above graph. What will shift D1 to D2?
A. An increase in the price of a substitute input (if the output effect is greater than the
substitution effect).
B. An increase in the price of a substitute input (if the substitution effect is greater than
the output effect).
C. A decrease in the price of a substitute input (if the substitution effect is greater than
the output effect).
D. An increase in the price of a complementary resource.
Refer to the above graph, which shows the supply and demand for money where Dm1,
Dm2, and Dm3 represent different demands for money and Sm1, Sm2, and Sm3 represent
different levels of the money supply. The initial equilibrium point is A. What will be the
new equilibrium point following an increase in the asset demand for money?
A. C.
B. D.
C. G.
D. I.
Actions by the federal government that decrease the progressivity of the tax system:
A. decrease the amount of government spending.
B. increase the effects of automatic stabilizers.
C. decrease the effects of automatic stabilizers.
D. increase the amount of taxation.
If a firm is a price taker, then the demand curve for the firm’s product is:
A. equal to the total revenue curve.
B. perfectly inelastic.
C. perfectly elastic.
D. unit elastic.
In an oligopolistic market there are:
A. many buyers.
B. few buyers.
C. few sellers.
D. many sellers.
Refer to the above production possibilities curves. Curve (a) is the current curve for the
economy. The movement from curve (a) to curve (b) suggests:
A. a movement from unemployment to full employment.
B. an improvement in capital goods technology but not in consumer goods technology.
C. an improvement in consumer goods technology but not in capital goods technology.
D. a decline in the total output of this society.
Which would be considered an investment according to economists?
A. The purchase of newly issued shares of stock in Microsoft.
B. The construction of a new computer chip factory by Intel.
C. The purchase of shares of stock by Fidelity, a mutual fund company.
D. The sale of government bonds by the nation’s central bank.
Which statement is correct?
A. The Social Security Act requires all employers to insure their workers against
industrial accidents and diseases.
B. The poor have gotten richer and the rich have gotten poorer in the United States; that
is, the degree of income inequality has decreased.
C. over 90 percent of the workers in the United States are currently covered by Social
Security.
D. about one-fifth of our population is now classified as living in poverty.
Which of the following statements is correct?
A. If demand increases and supply decreases, equilibrium price will fall.
B. If supply increases and demand decreases, equilibrium price will fall.
C. If demand decreases and supply increases, equilibrium price will rise.
D. If supply decreases and demand remains constant, equilibrium price will fall.
In the long-run average total cost curve below, the:
A. movement from A to B reflects diseconomies of scale.
B. movement from B to C reflects diseconomies of scale.
C. realization of economies of scale would shift the entire curve downward.
D. movement from B to C reflects the law of diminishing returns.
Refer to the graph above. If the price is P3, then total revenue is represented by areas:
A. B + C + D.
B. E + F + G.
C. B + C + D + E + F + G.
D. A + B + C + D + E + F + G.
Refer to the above graphs, in which the numbers in parentheses near the AD1, AD2, and
AD3 labels indicate the level of investment spending associated with each curve,
respectively. All numbers are in billions of dollars. The interest rate and the level of
investment spending in the economy are at point B on the investment demand curve. To
achieve the long-run goal of a noninflationary full-employment output Qfin the
economy, the Fed should:
A. decrease the interest rate from 10 to 8 percent.
B. decrease the interest rate from 8 to 6 percent.
C. decrease the interest rate from 6 to 4 percent.
D. increase investment spending from $30 to $60 billion.
The demand curve faced by a monopolistically competitive firm is:
A. vertical.
B. horizontal.
C. highly elastic.
D. highly inelastic.
When production creates external costs greater than external benefits, a market is:
A.not producing the product without government intervention.
B.producing a socially optimal quantity of the product.
C.allocating too few resources to production of the product.
D.allocating too many resources to production of the product.
Refer to the above graph of the representative firm in monopolistic competition.
Demand is tangent to average total cost at point:
A. a.
B. b.
C. c.
D. d.