The table below shows the cyclically adjusted budget deficit as a percentage of GDP
over a five-year period.
Refer to the above information. In which year was fiscal policy expansionary?
A. Year 2
B. Year 3
C. Year 4
D. Year 5
If the dollar depreciates in value relative to foreign currencies, aggregate:
A. demand decreases.
B. demand increases.
C. supply and aggregate demand increase.
D. supply and aggregate demand decrease.
Other things being equal, which would tend to increase the mobility of labor?
A. A reduction in job information services.
B. Fewer opportunities for job training.
C. A reduction in discrimination at work.
D. Increased licensing requirements by occupational groups.
“The nation needs to prevent foreign nations from selling their excess goods in our
nation at a price below cost so we can save American firms.” This quotation would be
most closely associated with which protectionist argument?
A. Increase in domestic employment
B. Protection against dumping
C. Strategic trade policy
D. Cheap foreign labor
The market system is characterized by:
A. extensive government constraints on individual behavior.
B. private ownership of the means of production.
C. government control of all production decisions.
D. government rationing of all goods and services.
The main reason for the high price of antiques is that:
A. supply is relatively elastic and demand increases over time.
B. supply is relatively inelastic and demand increases over time.
C. demand is relatively elastic and supply increases over time.
D. demand is relatively inelastic and supply increases over time.
Refer to the above diagram. A binding government-set price ceiling is best illustrated
by:
A. price A.
B. quantity E.
C. price C.
D. price B.
The more progressive the tax system, the:
A. less is the built-in stability for the economy.
B. greater is the built-in stability for the economy.
C. less is the effect of crowding out on the economy.
D. greater is the severity of business fluctuations on the economy.
The interest rate that banks charge one another on overnight loans is called the:
A. discount rate.
B. prime lending rate.
C. overnight lending rate.
D. Federal funds rate.
Refer to the above payoff matrix. Assume that firm B adopts a low-price strategy while
firm A maintains a high-price strategy. Compared to the results from a high-price
strategy for both firms, firm B will now:
A. lose $75 million in profit and firm A will gain $50 million in profit.
B. gain $50 million in profit and firm A will lose $50 million in profit.
C. gain $75 million in profit and firm A will lose $50 million in profit.
D. gain $50 million in profit and firm A will lose $75 million in profit.
One timing problem with fiscal policy to counter a recession is a “recognition lag” that
occurs between the:
A. start of the recession and the time it takes to recognize that the recession has started.
B. end of the recession and the time it takes to recognize that the recession has ended.
C. time fiscal action is taken and the time that the action has its effect on the economy.
D. time the need for the fiscal action is recognized and the time that the action is taken.
After the First World War, Germany experienced an economic condition that can be best
described as:
A. hyperinflation.
B. cost-push inflation.
C. unanticipated inflation.
D. anticipated inflation.
The optimal level of pollution in society occurs whenever:
A.there is no pollution.
B.the marginal benefit of pollution control equals the marginal cost.
C.the total benefit of pollution control equals the total cost of pollution.
D.the average cost of cleaning up the pollution is greater than the marginal cost of
cleanup.
The “war on terror” waged by the United States:
A. shifted the production possibilities curve to the right.
B. shifted the production possibilities curve inward.
C. caused the United States to shift from “defense goods” to “civilian goods.”
D. caused the perceived marginal benefit curve for “defense goods” to shift out.
If the secular trend of labor productivity is 3 percent per year, the number of years that
it will take for the standard of living to double will be about:
A. 15 years.
B. 17 years.
C. 20 years.
D. 23 years.
Which would decrease the demand for a particular type of labor?
A. An increase in the demand for the products produced by that type of labor.
B. An increase in the prices of the resources that are complements to that type of labor.
C. A decrease in the prices of those resources that are complements for that type of
labor.
D. An increase in the wages of that type of labor.
Which question is an illustration of a microeconomic question?
A. Is the quantity of wine purchased in one year dependent upon the price of wine?
B. Does government spending influence the total level of employment in the economy?
C. Is the purchasing power of the dollar higher or lower today than it was in 2005?
D. Is capitalism superior to socialism?
As a student of economics, when you speak of scarcity, you are referring to the ability
of society to:
A. employ all of its resources.
B. consume all that is produced.
C. satisfy economic wants given limited resources.
D. continually make technological breakthroughs and increase production.
Which would be considered a real burden of the public debt on the domestic output of
the United States? Public debt that is held by:
A. U.S. citizens.
B. domestic corporations.
C. foreign corporations.
D. the Federal Reserve System.
Which one is considered a limitation of monetary policy?
A. The cause-effect chain.
B. Its cyclical asymmetry.
C. Its isolation from political pressure.
D. The speed with which it can be implemented.
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. The M2 money supply is composed of items:
A. 1, 2, 3, 4, 5, and 6.
B. 1, 2, 4, 5, and 6.
C. 1, 2, 4, and 6.
D. 2, 4, 5, and 6.
Refer to the above table. The equilibrium price of the product is:
A. $40.
B. $80.
C. $120.
D. $160.
The economy of Australia would best be classified as:
A. a command system.
B. socialism.
C. pure capitalism.
D. a market system.
Collective bargaining agreements that prohibit wage cuts for the duration of the contract
contribute to:
A. a wealth effect.
B. a multiplier effect.
C. an increase in aggregate supply.
D. a price level that is inflexible downward.
A firm will earn economic profits whenever:
A. marginal revenue exceeds marginal costs.
B. marginal revenue exceeds variable costs.
C. average revenue exceeds average total costs.
D. average revenue exceeds average variable costs.
Assume that you pay $10,000 of tax on a taxable income of $50,000. If your taxable
income were $150,000, your tax payment would be $25,000. This tax structure is:
A. progressive.
B. proportional.
C. regressive.
D. discriminatory.
Suppose capital is readily substitutable for labor and that the price of capital falls. We
can conclude that the:
A. substitution effect will tend to reduce the demand for labor.
B. output effect will tend to reduce the demand for labor.
C. demand for labor will necessarily decline.
D. demand for labor will necessarily increase.
If there is a surplus within the Social Security trust fund in a given year, then this Social
Security surplus will:
A. increase a federal budget deficit that year.
B. decrease a federal budget surplus that year.
C. offset federal government spending that year.
D. increase federal government spending that year.
Which is the correct way to calculate the unemployment rate?
A. [(Unemployed)/(Population)] 100
B. [(Unemployed)/(Labor force)] 100
C. [(Labor force)/(Population)] 100
D. [(Labor force)/(Unemployed)] 100
Refer to the above diagram. If the production possibilities curve for an economy is at
AB but the economy is operating at point 4, the reasons are most likely to be because of:
A. supply and environmental factors.
B. demand and efficiency factors.
C. labor inputs and labor productivity.
D. technological progress.
Refer to the above graph. It shows the cost curves for a competitive firm. If the market
price falls to $0.55, the optimal output rate is:
A. 0.
B. 15.
C. 20.
D. more than 20, but less than 35.
The supply curve for cars will be more elastic the:
A. greater the quantity demanded.
B. longer the time interval considered.
C. greater the decline in input prices.
D. less able producers are to make other goods.
One major feature of the economic perspective is:
A. that scarcity is more important than choice.
B. that costs are more important than benefits.
C. the assumption of purposeful behavior by individuals.
D. the idea that the economy has unproductive resources.