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The functions of money are to serve as a:
A. resource allocator, method for accounting, and means of income distribution.
B. unit of account, store of value, and medium of exchange.
C. determinant of consumption, investment, and government spending.
D. factor of production, exchange, and aggregate supply.
The long-run supply curve would be downsloping in:
A. an increasing-cost industry.
B. a decreasing-cost industry.
C. a constant-cost industry.
D. a variable-cost industry.
Within the financial services industry, which of the following is an example of a
financial institution?
A. Thrifts
B. Insurance companies
C. Pension funds
D. All of these
Refer to the above graph. Assume that in long-run equilibrium a purely competitive
firm has the same cost curves as that of the monopolistically competitive firm shown. It
can be concluded that the:
A. purely competitive firm would have lower profits.
B. purely competitive firm would have higher profits.
C. purely competitive producer would produce less at a higher ATC.
D. monopolistically competitive producer would produce less at a higher ATC.
A firm would be likely to lay off workers following:
A. an increase in the demand for labor.
B. an increase in the marginal revenue product of labor.
C. the imposition of a new minimum wage below the current equilibrium wage.
D. a successful attempt by an industrial union to push wages above the marginal
revenue product of labor.
The money income of households consists of the sum of:
A. wages plus salaries plus benefits.
B. consumption expenditures plus profits.
C. wages plus rents plus interest plus profits.
D. consumption expenditures plus costs of resources.
Economic models do not reflect the full complexity of reality and instead are based on:
A. trade-offs.
B. purposeful simplifications.
C. value judgments.
D. the fallacy of composition.
By free enterprise, we mean that:
A. products are provided free to those who cannot afford to buy them.
B. individual producers determine how to produce, but government agencies determine
what will be produced.
C. individuals may obtain resources, organize production, and sell the resulting output
in any legal way they choose.
D. individuals are free to produce those products that government agencies determine
can be produced profitably.
Consider the above parallel demand curves. Which curve is relatively more elastic at
P1?
A. AA
B. BB
C. Cannot be determined
D. Both have the same slope; therefore, both have the same elasticity.
Refer to the above diagrams that show identical marginal utility from income curves for
Singer and Catalano. The marginal utility from income curves are drawn on the
assumption that:
A. Singer buys more inferior goods than does Catalano.
B. Singer and Catalano have identical capacities to enjoy income.
C. Catalano has a greater capacity to enjoy income than does Singer.
D. Singer has a greater capacity to enjoy income than does Catalano.
Implicit costs are:
A. regarded as costs by accountants but not by economists.
B. payments that a firm makes to other firms or individuals who supply resources to it.
C. nonexpenditure costs.
D. costs that vary proportionately with output.
Which one of the following would increase income inequality as measured by official
Census data and the quintile distribution?
A. A doubling of Social Security retirement benefits
B. The elimination of the food stamp (SNAP) program
C. The elimination of the TANF program
D. Reduced divorce rates
The reason that the supply curve for labor in a purely competitive market rises is
because:
A. the wage rate paid to workers falls as more are hired.
B. the marginal product of labor falls as output increases.
C. marginal resource cost rises as productivity increases.
D. higher wages must be paid to bid workers away from other opportunities.
The Federal Reserve Banks are owned by the:
A. federal government.
B. Board of Governors.
C. U.S. Treasury.
D. member banks.
Which is an example of a change in the price of another resource that increases labor
demand?
A. Software sales rise, thus increasing the demand for software developers.
B. Snowboarding increases in popularity, thus increasing the demand for the workers
who make snowboards.
C. A decrease in the price of wood decreases the cost of furniture, thus increasing the
demand for furniture workers.
D. A technological change increases output per worker in the computer industry, thus
increasing the demand for computer workers.
With allocative efficiency:
A.the state of technologyor methods used to produce outputdoes not change.
B.the available supplies of factors of production are fixed in both quantity and quality.
C.production of any particular mix of goods and services occurs in the least costly way.
D.production of any particular mix of goods and services is that mix most wanted by
society.
Suppose that lenders want to receive a real rate of interest of 5 percent and that they
expect inflation to remain steady at 2 percent in the coming years. Based on this,
lenders should charge a nominal interest rate of:
A. 2 percent.
B. 3 percent.
C. 5 percent.
D. 7 percent.
Refer to the above diagram. Rent controls are best illustrated by:
A. price A.
B. quantity E.
C. price C.
D. price B.
Items
1) Money market mutual funds held by individuals
2) Savings deposits, including money market deposit accounts
3) Money market mutual funds held by businesses
4) Currency held by the public
5) Small time deposits
6) Checkable deposits
Refer to the above table. Which items are included in the M2 money supply but not the
M1 money supply?
A. 1 and 7
B. 3 and 5
C. 1 and 2
D. 1, 2, and 5
Firms are prohibited from entering into contracts, combinations, and conspiracies that
restrain trade by:
A. Section 2 of the Sherman Act.
B. Section 8 of the Clayton Act.
C. Section 1 of the Sherman Act.
D. the Wheeler-Lea Act.
The labels for the axes of an aggregate supply curve should be:
A. real domestic output for the vertical axis and price level for the horizontal axis.
B. real domestic output for the horizontal axis and price level for the vertical axis.
C. real employment for the vertical axis and price level for the horizontal axis.
D. aggregate demand for the vertical axis and real national output for the horizontal
axis.
If a product is in surplus supply, its price:
A. is below the equilibrium level.
B. is above the equilibrium level.
C. will rise in the near future.
D. is in equilibrium.
Which is a primary use for national income accounting?
A. To analyze the environmental cost of economic growth.
B. To assess the economic efficiency of specific industries in the economy.
C. To measure changes in the value of goods and services produced in the economy.
D. To determine whether there is a fair and equitable distribution of income in the
economy.
A market is in equilibrium:
A. provided there is no surplus of the product.
B. at all prices above that shown by the intersection of the supply and demand curves.
C. if the amount producers want to sell is equal to the amount consumers want to buy.
D. whenever the demand curve is downsloping and the supply curve is upsloping.
Which is a payment or wage subsidy made by the federal government to offset Social
Security taxes for low-income workers?
A. Food stamp program
B. Supplement Security Income
C. Earned-income tax credit
D. Temporary Assistance to Needy Families
Refer to the above diagrams, in which the numbers in parentheses near the AD1, AD2,
and AD3 labels indicate the level of investment spending associated with each curve.
All figures are in billions. The economy is at point Z on the investment demand curve.
Given these conditions, what policy should the monetary authorities pursue to achieve a
noninflationary full-employment level of real GDP (Qf)?
A. Decrease the reserve ratio.
B. Decrease the discount rate.
C. Sell government securities in the open market.
D. Make no change in monetary policy.
Cost-push inflation arises from:
A. a decrease in aggregate demand.
B. a decrease in aggregate supply.
C. an increase in aggregate demand.
D. an increase in aggregate supply.
The Federal Open Market Committee (FOMC) of the Federal Reserve System is
primarily for:
A. maintaining cash reserves that can be used to settle international transactions.
B. supervising banks to make sure markets are open to all and remain competitive.
C. issuing currency and acting as the fiscal agent for the federal government.
D. setting the Fed's monetary policy and directing the purchase and sale of government
securities.
The multiple by which the commercial banking system can increase the supply of
money on the basis of each dollar of excess reserves is equal to:
A. the reciprocal of the legal reserve ratio.
B. 1 minus the legal reserve ratio.
C. the reciprocal of the income velocity of money.
D. 1/MPS.
Refer to the figures above. Suppose the graphs represent the demand for use of a local
golf course for which there is no significant competition (it has a local monopoly). P
denotes the price of a round of golf and Q is the quantity of rounds sold each day. If the
left graph represents the demand during weekdays and the right graph the weekend
demand, this profit-maximizing golf course should:
A. charge $9 for each round, regardless of the day of the week.
B. charge $7 for each round, regardless of the day of the week.
C. charge $7 for each round on weekdays, and $10 during the weekend.
D. charge $9 for each round on weekdays, and $10 during the weekend.
Refer to the above diagram. Discretionary fiscal policy designed to expand GDP is
illustrated by:
A. the shift of curve T1 to T2.
B. the shift of curve T2 to T1.
C. a movement from a to c along curve T2.
D. a movement from d to b along curve T1.
According to the principle of comparative advantage, worldwide output and
consumption levels will be highest when goods are produced in nations where:
A. domestic opportunity costs are lowest.
B. inflation rates are low.
C. the balance of trade is in a surplus position.
D. the exchange rate is falling.
How are the following items treated in the calculation of M1?
A. Small time deposits and currency are both included.
B. Small time deposits and money market mutual funds of individuals are both
included.
C. Checkable deposits are excluded and currency is included.
D. Checkable deposits and currency are both included.
To practice long-run price discrimination, a monopolist must:
A. be a natural monopoly.
B. charge one price to all buyers.
C. permit the resale of the product by the original buyers.
D. be able to separate buyers into different markets with different price elasticities.
