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If there is no comparative advantage between two countries:
A. one country must be more productive in producing all goods than the other.
B. the benefits resulting from trade are increased.
C. there are no gains from specialization and trade.
D. each country should specialize in the production of a particular commodity.
The demand for most products varies directly with changes in consumer incomes. Such
products are known as:
A. complementary goods.
B. competitive goods.
C. inferior goods.
D. normal goods.
Given the following production possibilities schedules, it can be seen that:
A. Brazil has a comparative advantage in producing wine.
B. Poland can produce more machines than Brazil.
C. Brazil has a comparative advantage in producing machines.
D. Poland can produce more of both goods than Brazil.
The massive increase in government spending during World War II moved the economy
in the span of a few short years from mass unemployment and price stability to
"overfull" employment and severe demand-pull inflation. This situation can be best
characterized by:
A. a decrease in aggregate supply.
B. an increase in aggregate supply.
C. an increase in aggregate demand.
D. a decrease in aggregate demand.
The federal income tax is consistent with the __________ principle of taxation, whereas
an excise tax on sporting event tickets is consistent with the ___________ principle of
taxation.
A. benefits-received; ability-to-pay
B. benefits-received; pay-as-you go
C. ability-to-pay; benefits-received
D. ability-to-pay; pay-as-you-go
A market system is best characterized by:
A. extensive government intervention in economic activity.
B. the private production of most capital goods.
C. government regulation of all private markets.
D. central planning and control.
Refer to the above diagram. If this is a competitive market, price and quantity will
move toward:
A. $60 and 100, respectively.
B. $60 and 200, respectively.
C. $40 and 150, respectively.
D. $20 and 150, respectively.
The U.S. demand for British pounds is:
A. downsloping because a higher dollar price of pounds means British goods are
cheaper to Americans.
B. downsloping because a lower dollar price of pounds means British goods are more
expensive to Americans.
C. upsloping because a lower dollar price of pounds means British goods are cheaper to
Americans.
D. downsloping because a lower dollar price of pounds means British goods are
cheaper to Americans.
The descriptions give the responses of four individuals to a Bureau of Labor Statistics
(BLS) survey of employment.
1)Mollie just graduated from college and is now looking for work. She has had three
job interviews in the past month.
2) George works in an automotive assembly plant. He was laid off six months ago as
the economy weakened. He expects to return to work in several months when national
economic conditions improve.
3) Jeanette worked as an aircraft design engineer for a company that produces military
aircraft until she lost her job last year when the federal government cut defense
spending. She has been looking for similar work for a year, but no company seems
interested in her aircraft design skills.
4) Ricardo lost his job last year when his company downsized and laid off middle-level
managers. He tried to find another job for a year but was unsuccessful and quit looking
for work.
Refer to the above information. Which individual is frictionally unemployed?
A. 1
B. 2
C. 3
D. 4
If the dollar appreciates in value relative to foreign currencies:
A. aggregate demand decreases.
B. aggregate demand increases.
C. the quantity of real domestic output demanded increases.
D. the quantity of real domestic output demanded decreases.
Refer to the above figure. If box A represents businesses and flow (7) represents goods
and services, then:
A. box D is the product market and box B is the resource market.
B. box D is the product market and box B is households.
C. box B is the product market and box C is households.
D. box C is the product market and box B is the resource market.
A conglomerate is a(n):
A. firm with monopoly power.
B. industry in which there is only one firm.
C. firm that owns plants in different markets and industries.
D. firm that owns plants at various stages of the production process.
Assume an economy is producing only one product. Year 2 is the base year. Output and
price data for a five-year period are given.
Refer to the above data. If year 2 is the base year, then real GDP for year 5 is:
A. $41.
B. $50.
C. $56.
D. $100.
If the reserve ratio is 15 percent and commercial bankers decide to hold additional
excess reserves equal to 5 percent of any newly acquired checkable deposits, then the
relevant monetary multiplier for the banking system will be:
A. 3.
B. 4.
C. 5.
D. 10.
Refer to the above diagram. The vertical distance between ATC and AVC reflects:
A. the law of diminishing returns.
B. the average fixed cost at each level of output.
C. marginal cost at each level of output.
D. the presence of economies of scale.
In an oligopoly game, each player tries to:
A. maximize its own profits.
B. minimize the market shares of its opponents.
C. minimize the profits of its opponents.
D. maximize its own market share.
Cathy Rogers deposits $200 in currency in her checking account at a bank. This deposit
is treated as:
A. a subtraction of $200 from the money supply because the $200 in currency is no
longer in circulation.
B. an addition of $200 to the money supply because of the creation of a checkable
deposit of $200.
C. an addition of $200 to the money supply because the bank holds $200 in currency
and the checking account has been increased by $200.
D. no change in the money supply because the $200 in currency has been converted to a
$200 increase in checkable deposits.
The price of season tickets to a performing arts theater decreases by 3 percent. As a
result, the quantity demanded increases by 6 percent. The price elasticity of demand for
season tickets is:
A. 0.
B. 1.
C. 2.
D. 3.
A trade surplus implies that:
A. exports of goods exceed imports of goods.
B. imports of goods exceed exports of goods.
C. exports of services exceed imports of services.
D. imports of services exceed exports of services.
Assume the commercial banking system has checkable deposits of $20 billion and
excess reserves of $2 billion at a time when the reserve ratio is 25 percent. If the reserve
ratio is lowered to 20 percent, we can conclude that the:
A. bank now has excess reserves of $3.2 billion.
B. bank now has neither an excess nor a deficiency of reserves.
C. maximum money-creating potential of the banking system has been increased by $7
billion.
D. Board of Governors has decided that the economy is experiencing a high rate of
inflation.
The demand for labor will decrease in response to:
A. increased productivity.
B. better training of all laborers.
C. a decrease in the supply of labor.
D. decreased demand in markets for consumer goods and services.
Holding the money deposits of businesses and households and making loans to the
public are the basic functions of:
A. district banks of the Federal Reserve System.
B. commercial banks and thrift institutions.
C. the Open Market Committee and the Board of Governors.
D. the Federal Deposit Insurance Corporation and the Federal Savings and Loan
Insurance Corporation.
Depreciation of the dollar will:
A. decrease the prices of both U.S. imports and exports.
B. increase the prices of both U.S. imports and exports.
C. decrease the prices of U.S. imports but increase the prices to foreigners of U.S.
exports.
D. increase the prices of U.S. imports but decrease the prices to foreigners of U.S.
exports.
A monopsonist is the only seller of a good or service in a market area.
Refer to the above graph, which shows the supply and demand for unionized
manufacturing workers. The initial equilibrium point is point 1. The wages paid in
comparable nonunion occupations increase significantly, while at the same time the
price of manufactured goods increases. Which point would represent the new
equilibrium?
A. 2
B. 3
C. 4
D. 5
What function is money serving when you buy a ticket to a movie?
A. A store of value.
B. A unit of account.
C. A transaction demand.
D. A medium of exchange.
Refer to the above diagram. When output decreases from Q1 and the price level
increases from P1, then this change will:
A. be caused by a shift in the aggregate supply curve from AS1 to AS3.
B. be caused by a shift in the aggregate supply curve from AS2 to AS1.
C. result in a movement along the aggregate demand curve from e2 to e1.
D. result in a movement along the aggregate demand curve from e1 to e2.
The labels for the axes of the aggregate demand graph should be:
A. quantity of a product on the vertical axis and the price of a product on the horizontal
axis.
B. price of a product on the vertical axis and quantity of a product on the horizontal
axis.
C. real domestic output on the vertical axis and the price level on the horizontal axis.
D. real domestic output on the horizontal axis and the price level on the vertical axis.
Refer to the above diagram. When AD1 shifts to AD2, real output:
A. increases from Q1 to Q2, while the price level stays the same.
B. increases from Q1 to Q3, while the price level declines.
C. increases from Q1 to Q2, while the price level rises.
D. stays the same, while the price level rises.
Decreases in product prices causes the consumer's:
A. production possibilities curves to shift outward from the origin.
B. production possibilities curves to shift inward to the origin.
C. budget line to shift outward from the origin.
D. budget line to shift inward to the origin.
Under which market model are the conditions of entry into the market easiest?
A. Pure competition
B. Pure monopoly
C. Monopolistic competition
D. Oligopoly
