Which of the following would be considered to be the most liquid?
A. Checkable deposits.
B. Small time deposits.
C. Money market mutual funds.
D. Savings deposits.
Refer to the above diagram. When output increases from Q1 and the price level
decreases from P1, this change will:
A. be caused by a shift in the aggregate supply curve from AS1 to AS2.
B. be caused by a shift in the aggregate supply curve from AS1 to AS3.
C. result in a movement along the aggregate demand curve from e1 to e2.
D. result in a movement along the aggregate demand curve from e3 to e1.
Which statement is correct?
A. The operation of a market system eventually results in an equal distribution of
income.
B. Producers are “kings” in a market economy because they determine what is
produced.
C. The market system is efficient at allocation of resources but not in getting consumer
goods to their most valued uses.
D. Freedom of choice and enterprise are essential elements of the market system.
Refer to the above graph. What combination would most likely cause a shift from AD1
to AD2?
A. An increase in taxes and an increase in government spending
B. A decrease in taxes and an increase in government spending
C. An increase in taxes and a decrease in government spending
D. A decrease in taxes and a decrease in government spending
The marginal cost of a productive resource is equal to the price of the resource if a firm
is:
A. a price taker in the output market.
B. a price taker in the resource market.
C. able to influence the price of the product by producing more or less of it.
D. able to influence the price of the factor by buying more or less of it.
In 1997, McDonald’s introduced the “55-cent special.” It turned out to be an
unsuccessful product. In the marketplace for fast-food products, this lack of success is
an example of:
A. normal profit.
B. economic costs.
C. consumer sovereignty.
D. medium of exchange.
Graphically, the market demand curve is:
A. steeper than any individual demand curve that is part of it.
B. greater than the sum of the individual demand curves.
C. the horizontal sum of individual demand curves.
D. the vertical sum of individual demand curves.
In long-run equilibrium a purely competitive firm will operate where price is:
A. greater than MR but equal to MC and minimum ATC.
B. greater than MR and MC but equal to minimum ATC.
C. greater than MC and minimum ATC but equal to MR.
D. equal to MR, MC, and minimum ATC.
The multiplier can be calculated by dividing:
A. the initial change in spending by the change in real GDP.
B. the change in real GDP by the initial change in spending.
C. one by one minus the marginal propensity to save.
D. one by one minus the marginal propensity to invest.
You are given the following information about the economy: (1) nominal interest = 8
percent; (2) real rate of interest = 6 percent. The inflation premium is:
A. 2 percent.
B. 6 percent.
C. 8 percent.
D. 14 percent.
Command systems in the Soviet Union and pre-reform China failed primarily because
of:
A. coordination and incentive problems.
B. greater resource scarcity than in market systems.
C. the failure to accumulate and use capital.
D. the failure to specialize in production.
If the cyclically adjusted budget deficit increases from $200 billion to $250 billion and
GDP remains constant over the two years:
A. fiscal policy is expansionary.
B. fiscal policy is contractionary.
C. fiscal policy is neutral.
D. the tax system is progressive.
If price declines from $450 to $350 and, as a result, quantity demanded rises from 1200
to 1500, price elasticity of demand is:
A. 1.78.
B. 0.89.
C. 1.12.
D. 3.42.
Members of the Federal Reserve Board of Governors are:
A. appointed by Congress to staggered 14-year terms.
B. selected by the Federal Open Market Committee for 4-year terms.
C. appointed by the president to staggered 14-year terms.
D. selected by each of the Federal Reserve Banks for 4-year terms.
An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:
A. demand curve for cigarettes rightward.
B. demand curve for cigarettes leftward.
C. supply curve for cigarettes rightward.
D. supply curve for cigarettes leftward.
If we say that a price is too high to clear the market, we mean that:
A. quantity demanded exceeds quantity supplied.
B. the equilibrium price is above the current price.
C. quantity supplied exceeds quantity demanded.
D. the price of the good is likely to rise.
The Sunshine Corporation finds its costs are $40 when it produces no output. Its total
variable costs (TVC) change with output as shown in the accompanying table. Use this
information to answer the following question.
Refer to the above information. The marginal cost of the third unit of output is:
A. $105.
B. $25.
C. $15.
D. $20.
Changes in government spending and tax revenues for the purpose of achieving a
full-employment and noninflationary level of domestic output is called:
A. industrial policy.
B. monetary policy.
C. fiscal policy.
D. trade policy.
Waybelow Normal University has found it necessary to institute a crime-control
program on its campus to deal with the high costs of theft and vandalism. The
university is now considering several alternative levels of crime control. This table
shows the expected annual costs and benefits of these alternatives.
Refer to the above information. Based on cost-benefit analysis, Waybelow should
undertake:
A.Level Two.
B.Level Three.
C.Level Four.
D.Level Five.
To say that the Federal Reserve Banks are quasi-public banks means that:
A. they are privately owned but managed in the public interest.
B. they deal only with banks of foreign nations and do not have direct business contact
with U.S. banks.
C. they deal only with commercial banks, and not the public.
D. they are publicly owned but privately managed.
From the economist’s perspective, “market failures” basically arise when:
A.the quantity demanded for a good or service is greater than the quantity supplied of
the good or service.
B.the quantity supplied of a good or service is greater than the quantity demanded for a
good or service.
C.demand and supply do not accurately reflect all the benefits and all the costs of
production.
D.the market system is unable to adapt to or to accommodate change.
In monopolistic competition there is an underallocation of resources at the
profit-maximizing level of output, which means that:
A. minimum ATC is less than MC.
B. minimum ATC is less than MR.
C. price is greater than minimum ATC.
D. price is greater than MC.
If a pure monopolist can engage in price discrimination:
A. the marginal revenue curve and the total revenue curve will then coincide.
B. the marginal revenue curve will now shift to a position above the demand curve.
C. the firm will face multiple marginal revenue curves.
D. marginal revenue will become less at each level of output than it would be without
price discrimination.
Refer to the above diagram, in which S1 and D1 represent the original supply and
demand curves and S2 and D2 the new curves. In this market the indicated shift in
supply may have been caused by:
A. an increase in the wages paid to workers producing this good.
B. the development of more efficient machinery for producing this good.
C. this product becoming less fashionable.
D. an increase in consumer incomes.
When government tax revenues change automatically and in a countercyclical direction
over the course of the business cycle, this is an example of:
A. impounding.
B. built-in stability.
C. money creation.
D. the standardized budget.
Which would be evidence of price discrimination at a local bar called Heaters?
A. Charging higher prices than under perfect competition
B. Charging higher prices for imported than for domestic beer
C. Charging lower prices to customers wearing Heaters t-shirts
D. Charging lower prices during Happy Hour from 5 to 6 p.m.
The law of increasing opportunity costs indicates that:
A. resources are perfectly mobile except for transportation costs.
B. the sum of all costs cannot rise above the market price of a product.
C. to produce more of one good, society must sacrifice larger and larger amounts of
alternative goods.
D. if the prices of all the resources involved in the production of goods increase, the
cost of producing those goods will increase at the same rate.
Which line in the above graph would best reflect the slope of the transactions demand
for money curve?
A. Line 1.
B. Line 2.
C. Line 3.
D. Line 4.
The process by which new products and technologies drive out existing products and
techniques is known as:
A. Destructive creation.
B. Creative destruction.
C. Consumer sovereignty.
D. Capital accumulation.
Assuming that the Federal Reserve Banks sell $40 million in government securities to
commercial banks and the reserve ratio is 20 percent, then the effect will be to reduce:
A. excess reserves by $8 million.
B. excess reserves by $200 million.
C. the potential money supply by $200 million.
D. the potential money supply by $400 million.
If you write a check on a bank to purchase a used Honda Civic, you are using money
primarily as:
A. a medium of exchange.
B. a store of value.
C. a unit of account.
D. an economic investment.
Proponents of economic growth make all of the following arguments except:
A. growth is the basic means of improving living standards.
B. it is easier to reduce poverty when the economy is growing than when it is not.
C. there is a direct relationship between a growing real GDP and rising pollution.
D. growth provides an economic environment favorable to education and
self-fulfillment.
Pa and Pb represent the prices that citizens (a) and (b), the only two people in this
nation, are willing to pay for additional units of a quantity (Qc) of the public good. Qs
represents the quantity of the public good supplied by government at each of the
collective prices.
Refer to the above information. The collective willingness of this nation to pay for the
fourth unit of the public good is:
A.$7.
B.$6.
C.$5.
D.$3.
What is one of the advantages of monetary policy over fiscal policy?
A. Its control over the size of federal budget deficits.
B. The quickness with which it can be used.
C. The opportunity for broad political influence.
D. Its domination of major sectors of the economy.