Which of the following will be most likely to contribute to the growth of a
less-developed country?
a. price controls that keep the cost of agricultural products low
b. rapid population growth
c. exchange rate controls and export restrictions
d. secure property rights and low marginal tax rates
Fiscal policy designed to increase aggregate demand during economic downturns and
decrease aggregate demand during economic booms is called
a. business cycle fiscal policy.
b. new classical fiscal policy.
c. supply-side fiscal policy.
d. countercyclical fiscal policy.
The optimal time for the implementation of restrictive fiscal policy would be
a. before inflation accelerated.
b. after inflation accelerated.
c. during a recession.
d. after the price level had risen significantly.
In a market economy, which of the following would most likely cause a prolonged grain
surplus?
a. a decrease in the demand for grain
b. an increase in the supply of grain
c. imposition of a price floor above the equilibrium price of grain
d. imposition of a price ceiling below the equilibrium price of grain
Unemployment caused by people voluntarily quitting work in order to seek more
attractive employment is called
a. the natural rate of unemployment.
b. full employment.
c. cyclical unemployment.
d. frictional unemployment.
e. structural unemployment.
Which of the following states had the highest incidence of union membership as a
percent of all wage and salary workers in 2012?
a. New York, Hawaii, and Alaska
b. South Carolina, North Carolina, and Mississippi
c. Arkansas, North Carolina, and Texas
d. California, Florida, and Georgia
Use the figure to answer the following question(s).
Figure 12-2
The demand D1 and short-run supply SSR of accountants is indicated in Figure 12-2.
Which of the following would most likely shift the demand for accountants from D1 to
D2?
a. an increase in the number of accounting majors in college
b. enacting legislation that increases the complexity of personal and business tax returns
c. high wages for accountants
d. a reduction in the wages of bookkeepers, a substitute resource for accountants
Economic theory suggests that the standard of living of American workers would rise if
a. technological change increased output per worker.
b. the minimum wage were doubled.
c. automation were outlawed.
d. a larger proportion of the labor force was unionized.
Suppose that the consumer price index at year-end 2010 was 180 and by year-end 2011
had risen to 189. What was the inflation rate during 2011?
a. 4.8 percent
b. 5 percent
c. 6 percent
d. 9 percent
Which one of the following events will reduce GDP?
a. Mrs. Lee hires a housekeeper.
b. You buy the ingredients to bake a loaf of bread, but you burn the bread and throw it
away.
c. You decide to work five more hours per week at your bookkeeper job, even though
you need more time to study.
d. An automobile manufacturer lays off 200 workers as the result of a fire in the paint
shop.
If the money rate of interest is 12 percent and the real rate of interest 7 percent, the
inflationary premium is
a. 5 percent.
b. 7 percent.
c. 12 percent.
d. 19 percent.
Why do economists use the concept of elasticity in addition to measurement of the
slope of the demand curve?
a. Mathematical equations are favored over graphical analysis.
b. Elasticities are independent of the units of measure.
c. The concept of elasticity can be used in other areas of economics, whereas the slope
of the demand curve is only useful in demand analysis.
d. These terms are interchangeable, but elasticity has the more professional sound.
What does gross private domestic investment include?
a. Business purchases of capital goods, all new construction, and purchases of consumer
durable goods.
b. Business purchases of capital goods, all new construction, and inventory investment.
c. Business purchases of capital goods, all new commercial construction, and inventory
investment.
d. Business purchases of capital goods, all new residential construction, and inventory
investment.
e. Business purchases of all types of durable goods, all new construction, and inventory
investment.
Keynesian analysis implies that potential output and price stability can be achieved if
a. the federal budget is balanced annually.
b. marginal tax rates are kept low so the incentive to produce will be strong.
c. aggregate demand is equal to the economy’s full-employment rate of output.
d. current saving exceeds the level of investment.
“He [the producer] intends only his gain, and he is in this, as in many other cases, led
by an invisible hand to promote an end which was no part of his intention.” What
famous economist made this statement?
a. Alfred Marshall
b. Friedrich Hayek
c. Adam Smith
d. David Ricardo
The exit of existing firms from a competitive market will
a. increase market supply and increase market prices.
b. increase market supply and decrease market prices.
c. decrease market supply and increase market prices.
d. decrease market supply and decrease market prices.
If an economy operates at a point within its production possibilities curve,
a. it lacks the resources necessary to reach the curve.
b. it is utilizing all of its resources efficiently.
c. it does not confront the problem of scarce goods relative to unlimited wants.
d. it is not efficiently using all of its resources.
People are likely to want to hold more money if the interest rate
a. increases making the opportunity cost of holding money rise.
b. increases making the opportunity cost of holding money fall.
c. decreases making the opportunity cost of holding money rise.
d. decreases making the opportunity cost of holding money fall.
Which of the following is a private owner prohibited from doing?
a. selling the property to another person
b. erecting a fence designed to keep others from using the property
c. painting the property a color that others do not like
d. using the property in a manner that invades or infringes on the property of another
Which of the following events could increase the demand for labor?
a. a decrease in output price.
b. a decrease in the amount of capital available for workers to use.
c. an increase in the marginal productivity of workers.
d. All of the above are correct.
When a resource price is below equilibrium,
a. excess supply will be present.
b. excess demand will be present.
c. the supply of the resource will be inelastic.
d. the demand for the resource will be inelastic.
Adjustable rate mortgages became increasingly attractive and grew as a percentage of
total outstanding mortgages during 2002 to 2004 because
a. interest rates were kept artificially low during this period.
b. interest rates rose sharply during this period.
c. lending standards were tightened during this period.
d. housing prices declined during this period.
According to the Keynesian view, the proper response to a severe recession would be
a. an increase in taxes in order to reduce the budget deficit.
b. an increase in government spending financed by borrowing.
c. a shift toward a restrictive monetary policy to reduce aggregate demand.
d. reliance on automatic stabilizers to direct the economy toward full employment.
Which of the following is true?
a. Automated production processes are generally adopted regardless of whether they
reduce costs.
b. Automated production processes eliminate jobs and, thereby, endanger our future
living standards.
c. Cost-reducing automated production techniques will expand output directly and/or
release scarce resources for the expansion of output in other areas.
d. Use of the most advanced technology will always minimize the cost of a productive
activity.
A good is considered to be a public good if it
a. is a good produced by the government sector.
b. is both nonrival-in-consumption and nonexcludable.
c. benefits only a small group of consumers but is very costly to produce.
d. is a good whose production is financed by tax revenue.
A tariff differs from a quota in that a tariff is
a. levied on imports, whereas a quota is imposed on exports.
b. levied on exports, whereas a quota is imposed on imports.
c. a tax levied on exports, whereas a quota is a limit on the number of units of a good
that can be exported.
d. a tax imposed on imports, whereas a quota is an absolute limit to the number of units
of a good that can be imported.
Babe Ruth’s 1931 salary was $80,000. Government statistics show a consumer price
index of 15.2 for 1931 and 215 for 2008. Ruth’s 1931 salary was equivalent to a 2008
salary of about
a. $536,000.
b. $828,000.
c. $1,131,000.
d. $1,216,000.
You purchased an automobile two years ago for $10,000. Its current market price is
$5,000, and the expected market value one year from now is $4,500. If the interest rate
is 10 percent, how much will it cost you to keep the car for an additional year (over and
above operation and maintenance costs)?
a. $500
b. $1,000
c. $1,500
d. $5,000
Which of the following would encourage consumers to economize on health-care
expenditures and producers to supply health-care services more efficiently?
a. an increase in out-of-pocket expenditures by health-care consumers
b. decreased reliance on personal Medical Savings Accounts and health-care
expenditures from the accounts
c. decreased reliance on the purchase of catastrophic health insurance coverage and less
reliance on insurance with first-dollar coverage and small co-payments
d. the establishment of a national health-care system that would provide coverage to all
people
Two goods are considered substitutes only if
a. a decrease in the demand for one leads to a decrease in the supply of the other
b. an increase in the demand for one leads to a decrease in the supply of the other
c. an increase in the price of one leads to an increase in the demand for the other
d. a decrease in the price of one leads to an increase in the demand for the other
e. a decrease in the supply of one leads producers to switch to production of the other