Refer to the table above. Starting at a $5 price, at what price range does demand
become inelastic?
A. $1-2
B. $2-3
C. $3-4
D. $4-5
The lag between the time the need for fiscal action is recognized and the time action is
taken is referred to as the:
A. crowding-out lag.
B. recognition lag.
C. operational lag.
D. administrative lag.
The relationship between a consumer’s monthly income and monthly consumption of
four products, A-D, is shown below.
Which product listed is an example of an inferior good?
A. A
B. B
C. C
D. D
Answer the next question based on the following balance sheet for the First National
Bank. Assume the reserve ratio is 15 percent.
Refer to the above data. If the original balance sheet was for the commercial banking
system, rather than a single bank, loans and deposits could have been expanded by a
maximum of approximately:
A. $120,000.
B. $213,333.
C. $333,500.
D. $415,373.
Refer to the above diagram. When AD1 shifts to AD2, then at P1Q3 output demanded
will:
A. equal output supplied.
B. exceed output supplied.
C. be less than output supplied.
D. be at stable full-employment GDP.
Which assumption is part of the model of monopolistic competition?
A. Firms make identical products.
B. There is no collusion among firms.
C. There are significant barriers to entry into the market.
D. There are few buyers and sellers.
If excess reserves in the banking system are $4000, checkable deposits are $40,000, and
the legal reserve ratio is 10 percent, then actual reserves are:
A. $4000.
B. $6000.
C. $8000.
D. $5000.
Nonmonetary considerations tend to be most important in the allocation of:
A. land.
B. capital.
C. labor.
D. natural resources.
In the following question you are asked to determine, other things equal, the effects of a
given change in a determinant of demand or supply for product X upon (1) the demand
(D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium
quantity (Q) of X.
Consumer expectations that the price of X will rise sharply in the future will:
A. increase S, increase P, and increase Q.
B. increase D, increase P, and increase Q.
C. decrease S, increase P, and increase Q.
D. increase D, decrease P, and increase Q.
When a purely competitive firm is in long-run equilibrium, price is equal to:
A. marginal cost, but may be greater or less than average cost.
B. minimum average cost and also to marginal cost.
C. minimum average cost but may be greater or less than marginal cost.
D. marginal revenue but may be greater or less than both average and marginal cost.
Which one of the following do economists consider to be a stock?
A. Income
B. Money
C. Wages
D. Salaries
In year 1, inventories rose by $25 billion. In year 2, inventories fell by $20 billion. In
calculating total investment, national income accountants would have:
A. decreased it by $25 billion in year 1 and increased it by $20 billion in year 2.
B. decreased it by $25 billion in year 1 and increased it by $5 billion in year 2.
C. increased it by $25 billion in year 1 and decreased it by $5 billion in year 2.
D. increased it by $25 billion in year 1 and decreased it by $20 billion in year 2.
When the competitive market system does not allocate resources to economically
desirable goods, economists say what has occurred?
A.Market failure
B.Government failure
C.Externalities
D.Productive inefficiency
Refer to the above diagram. Assume that G and T1 are the relevant curves, the economy
is currently at A, and the full-employment GDP is B. This economy has a(n):
A. cyclically adjusted budget surplus.
B. cyclically adjusted budget deficit.
C. actual budget deficit.
D. actual budget surplus.
Equilibrium price differentials for productive resources:
A. tend to be self-eliminating.
B. may be caused by differences in the quality of those resources.
C. are eliminated when the allocation of resources is in a state of equilibrium.
D. are unrelated to differences in nonmonetary benefits.
A stock reflecting, at a given time, the financial and real assets an individual has
accumulated is:
A. income.
B. wealth.
C. preferences.
D. noncash transfers.
If an economy that produces capital and consumer goods is operating at a point on its
production possibilities curve:
A. it is achieving full employment but not full production.
B. it is achieving full production but not full employment.
C. more capital goods can be produced only at the cost of some consumer goods.
D. the economy is incapable of achieving significant economic growth.
Medicaid:
A. helps finance medical expenses for those participating in the TANF and
Supplemental Security Income programs.
B. has been abandoned in favor of privately provided medical insurance.
C. is a program of medical insurance for the aged and retired.
D. is a compulsory national health insurance program that covers all adult Americans.
Built-in stabilizers:
A. intensify the business cycle.
B. reduce the size of the multiplier.
C. increase the government’s deficit during a recession.
D. are a part of discretionary fiscal policy.
The eligibility basis for food stamps (SNAP) is:
A. age.
B. illness.
C. income.
D. disability.
Refer to the graph above and assume that the areas of the boxes are the same. Consider
a situation where price increases from P3 to P4. In this price range, demand is
relatively:
A. inelastic because the loss in total revenue (areas E + F + G) is greater than the gain
in total revenue (area A).
B. elastic because the loss in total revenue (areas E + F + G) is greater than the gain in
total revenue (area A).
C. elastic because the loss in total revenue (area A) is greater than the gain in total
revenue (areas E + F + G).
D. inelastic because the loss in total revenue (area A) is greater than the gain in total
revenue (areas E + F + G).
Refer to the above information. Total cost is:
A. the change in marginal cost.
B. .
C. .
D. .
Assume, in a competitive market, price is initially below the equilibrium level. We
predict that price will:
A. decrease, quantity demanded will decrease, and quantity supplied will increase.
B. decrease and quantity demanded and quantity supplied will both decrease.
C. increase, quantity demanded will increase, and quantity supplied will decrease.
D. increase, quantity demanded will decrease, and quantity supplied will increase.
Which is an important problem associated with the public debt?
A. Payments of interest on the debt lead to greater income equality.
B. Interest payments on the debt tend to improve economic incentives to work and
produce more unemployment.
C. Government borrowing to finance the debt may increase the level of private
investment.
D. Payment of interest on the debt held by foreigners transfers real resources abroad.
A major difference between pure competition and monopolistic competition is that
under pure competition:
A. individual firms have more elastic demand curves.
B. the market demand curve is less elastic.
C. there are a smaller number of producers.
D. there are barriers to entry.
Which contributes more to the reduction of income inequality?
A. Taxes
B. Wealth
C. Transfer payments
D. Earned income tax credits
Refer to the above graph. If a curve shifted from (b) to (d), then the Gini ratio would:
A. increase.
B. decrease.
C. remain constant.
D. become negative.
What will the elasticity of resource demand be if unit wages rise by 5 percent and the
number of employed workers falls by 12 percent?
A. 0.42.
B. 1.60.
C. 2.40.
D. 6.00.
If a purely competitive firm is in short-run equilibrium and its marginal cost exceeds its
average total cost, we can conclude that:
A. this is a decreasing-cost industry.
B. this is an increasing-cost industry.
C. firms will exit the industry in the long run.
D. firms will enter the industry in the long run.
A shift to the right in the demand curve for product A can be most reasonably explained
by saying that:
A. consumer incomes have declined and they now want to buy less of A at each
possible price.
B. the price of A has increased and, as a result, consumers want to purchase less of it.
C. consumer preferences have changed in favor of A so that they now want to buy more
at each possible price.
D. the price of A has decreased and, as a result, consumers want to purchase more of it.
Which phase of the business cycle would be most closely associated with an economic
contraction?
A. Peak
B. Recession
C. Trough
D. Recovery
Tammie makes $150 a day as a bank clerk. She takes off two days of work without pay
to fly to another city to attend the concert of her favorite music group. The cost of
transportation for the trip is $250. The cost of the concert ticket is $50. The opportunity
cost of Tammie’s trip to the concert is:
A. $300.
B. $450.
C. $500.
D. $600.
The term “quantity demanded”:
A. refers to the entire series of prices and quantities that comprise the demand schedule.
B. refers to a situation in which the income and substitution effects do not apply.
C. refers to the amount of a product that will be purchased at some specific price.
D. means the same thing as demand.