Voluntary recycling is available in many parts of the country. If citizens of these areas
have collected recyclable material at home, they can bring it to a recycling center. These
materials reduce landfill space, reduce the need for virgin material extraction, and
provide an inexpensive input in many production processes. The information in this
question suggests what about areas without voluntary recycling?
a. Externalities exist.
b. There is mandatory recycling.
c. Raw materials are less expensive.
d. The cost of production is higher.
e. Nothing.
Total government spending (federal, state, and local) sums to approximately:
a. 10 percent of the U.S. economy.
b. 20 percent of the U.S. economy.
c. 40 percent of the U.S. economy.
d. one-half of the U.S. economy.
Exhibit 11-1 Disposable income and consumption data Income (Y)Change in
Disposable Income
Consumption (C)
0 500
1,000 1,000 1,400
2,000 1,000 2,200
3,000 1,000 2,900
4,000 1,000 3,500
5,000 1,000 4,000 In Exhibit 11-1, when disposable income (Y) is increased from $0 to
$1,000 to $2,000, the marginal propensity to consume:
a. is 1.
b. decreases from 0.9 to 0.8.
c. decreases from 0.8 to 0.7.
d. increases from 0.8 to 0.9.
e. is negative.
Using the AD-AS model, if consumers and business become more optimistic about the
future direction of the economy and increase spending, then:
a. aggregate demand will decrease.
b. aggregate demand will increase.
c. long-run aggregate supply will increase.
d. long-run aggregate supply will decrease.
Foreachstatementprovided,choosetheletteroftheappropriatetermfromthelistthateachstate
mentbestdescribes.Sometermsmaybeusedmorethanonce,whileothersarenotusedatall.
a. Capital stock
b. Asset
c. Owners’ equity
d. Time period
e. Dividends
f. Economic entity concept
g. Expense
h. Retained earnings
i. Cost principle
j. Creditor
k. Liability
l. Revenue
m. Going concern
n. Monetary unit
o. Corporation
The cost of doing business that results from the process of generating revenues.
A person who voluntarily quits his/her job in New York and expects to get a similar job
in Los Angeles is an example of:
a. structural unemployment.
b. cyclical unemployment.
c. durational unemployment.
d. frictional unemployment.
Demand-pull inflation is associated with a(n):
a. decrease in the aggregate supply curve.
b. increase in the aggregate supply curve.
c. increase in the aggregate demand curve.
d. decrease in the aggregate demand curve.
e. decline in the availability of a productive resource
Economists use ____ economic analysis to understand an individual market. They then
use ____ economic analysis to guide future national economic policy.
a. b and d
b. macro; micro
c. positive; normative
d. normative; positive
The aggregate demand curve is downward sloping because:
a. an increase in the price level will cause an increase in spending.
b. at lower price levels, real wealth decreases, causing a decrease in the quantities of
goods and services demanded.
c. at lower price levels, interest rates decrease, causing a decrease in the quantities of
goods and services demanded.
d. at lower price levels, exports increase, causing an increase in real GDP.
e. increases in the price level do not affect people’s real wealth.
Policies to lower the price level of goods in the nation are a concern of:
a. macroeconomics.
b. microeconomics.
c. both microeconomics and macroeconomics.
d. political science.
There is news that the price of Tucker’s Root Beer will increase significantly next week.
If the demand for Tucker’s Root Beer reacts only to this factor and shifts to the right, the
position of this demand curve has reacted to a change in:
a. tastes.
b. income levels.
c. the price of other goods.
d. the number of buyers.
e. expectations.
Exhibit 1A-6 Straight line
In Exhibit 1A-6, the slope of straight line A-D is:
a. greater than 1.
b. equal to 1.
c. less than 1.
d. zero.
In Keynes’s view, an excess quantity of money demanded causes people to:
a. sell bonds and the interest rate rises.
b. buy bonds and the interest rate falls.
c. buy bonds and the interest rate rises.
d. increase speculative balances.
In the aggregate demand and supply model, the:
a. aggregate supply curve is horizontal at full-employment real GDP.
b. vertical axis measures real GDP.
c. vertical axis measures the average price level.
d. All of the above.
e. None of the above.
All assets are tangible in nature.
a. True
b. False
An increase in the price of plastic raises the cost of manufacturing DVDs. As a result,
the market changes to a new equilibrium because of a(n):
a. surplus of DVDs.
b. increase in the demand for DVDs.
c. leftward shift in the demand curve for DVDs.
d. leftward shift in the supply curve for DVDs.
If the equilibrium price of good X is $4 and a price ceiling is imposed at $5, the result
will be a(n):
a. depletion of inventories.
b. shortage.
c. surplus.
d. equilibrium.
Exhibit 8-3 Disposable income and consumption data Disposable
income
Consumption
SavingMarginal propensity to consume (MPC)Marginal propensity to save (MPS)
0 $100
100 175
200 250
300 325
400 400
500 475
600 550 Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-3,
if disposable income is $100 billion, the marginal propensity to consume (MPC) is:
a. 0.00.
b. 0.25.
c. 0.75.
d. 1.00.
The highest valued alternative that must be given up in order to choose an option is
called the:
a. opportunity cost.
b. utility cost. c. scarcity expense.
d. disutility option.
Exhibit 4-10 Supply and demand data for apricots Bushels demanded
per monthPrice per
bushelBushels supplied
per month
50 $5 80
55 4 75
60 3 70
65 2 65
70 1 55 In Exhibit 4-10, the equilibrium price is:
a. $1.
b. $2.
c. $3.
d. $4.
One of the strengths of a socialist economy, according to those who advocate such a
system, is that government intervention will enable a more equitable distribution of
income and therefore goods and services produced.
Surpluses cause prices to rise while shortages cause prices to fall.
Economic efficiency and economic freedom are commonly cited as two major benefits
of socialism.
Opening trade between nations enables each nation’s consumption possibilities to go
beyond the confines of its own production possibilities curve.
Discuss how a market reaches equilibrium. How is it expressed graphically?
If the demand curve increases while the supply curve remains unchanged, the
equilibrium price would decrease.
If the economy is not operating at full-employment real GDP, classical economists
prescribe a government policy of nonintervention.