In a fractional reserve banking system:
A. bank panics cannot occur.
B. the monetary system must be backed by gold.
C. banks can create money through the lending process.
D. the Federal Reserve has no control over the amount of money in circulation.
A firm is observed using 15 units of input X when the price of X is $2, and 10 units of X
when its price increases to $4. What is the elasticity of demand for input X in this price
range?
A. 0.5.
B. 0.6.
C. 1.67.
D. 2.0.
About what percentage of the population in the United States lived in poverty in 2009?
A. 14 percent
B. 24 percent
C. 34 percent
D. 44 percent
The political business cycle refers to the possibility that:
A. incumbent politicians will be reelected regardless of the state of the economy.
B. politicians will manipulate the economy to enhance their chances of being reelected.
C. there is more inflation during Democratic administrations than during Republican
administrations.
D. recessions coincide with election years.
The following is budget information for a hypothetical economy. All data are in billions
of dollars.
Refer to the above data. In which year is there a balanced budget?
A. Year 1
B. Year 2
C. Year 3
D. Year 4
If X is a normal good, a rise in money income will shift the:
A. supply curve for X to the left.
B. supply curve for X to the right.
C. demand curve for X to the left.
D. demand curve for X to the right.
Refer to the above diagram. Negative economic growth can be shown by a shift of:
A. EF to AB.
B. EF to CD.
C. AB to CD.
D. CD to AB.
In year 1, the actual budget deficit was $200 billion and the cyclically adjusted deficit
was $150 billion. In year 2, the actual budget deficit was $225 billion and the cyclically
adjusted deficit was $175 billion. GDP was $1000 billion in year 1 and $1005 billion in
year 2. It can be concluded that fiscal policy from year 1 to year 2 was:
A. proportional.
B. inflationary.
C. contractionary.
D. expansionary.
Refer to the above graphs. Pizza and beer are the only two goods Jon consumes. The
price of beer is $2.00 per pitcher and pizza is $1.25 per slice. If Jon has only $10 to
spend for the evening, which graph represents the set of possible combinations of beer
and pizza he can consume?
A. Graph A
B. Graph B
C. Graph C
D. Graph D
Which is not commonly offered as a reason to support protectionism and abandon free
trade?
A. Maintaining military self-sufficiency
B. Increasing domestic employment
C. Allowing infant industries to mature and become competitive
D. Promoting specialization and increasing worldwide production levels
A major difficulty with the argument that trade barriers are necessary because foreign
workers are paid low wages is that:
A. labor costs and product prices are not related.
B. there is no discernible relationship between wage rates and labor productivity.
C. wage rates and labor productivity are directly related.
D. wage rates and labor productivity are inversely related.
Refer to the above graph. A budget surplus would be associated with GDP level:
A. H.
B. J.
C. K.
D. L.
If the cross-price-elasticity of goods X and Y is positive, then the sales of X move:
A. in the same direction as the price of Y, and X and Y are complementary goods.
B. in the opposite direction as the price of Y, and X and Y are complementary goods.
C. in the opposite direction as the price of Y, and X and Y are substitute goods.
D. in the same direction as the price of Y, and X and Y are substitute goods.
When a check is cleared against a bank, the bank will lose:
A. cash and securities.
B. checkable deposits and reserves.
C. reserves and capital stock.
D. loans and demand deposits.
A positive cross-price-elasticity of demand for two products indicates that they are:
A. substitutes.
B. complements.
C. independent goods.
D. normal goods.
Data from the registrar’s office at Gigantic State University indicate that over the past
20 years tuition and enrollment have both increased. From this information we can
conclude that:
A. higher education is an exception to the law of demand.
B. the supply of education provided by GSU has also increased over the 20-year period.
C. school-age population, incomes, and preferences for education have changed over
the 20-year period.
D. GSU’s supply curve of education is downsloping.
If the economy is to have automatic stabilizers, when real GDP rises:
A. tax revenues should fall.
B. tax revenues should rise.
C. government spending should rise.
D. government spending should not change.
The economy of North Korea would best be classified as:
A. a laissez-faire economy.
B. a command system.
C. a capitalist economy.
D. a market system.
A durable consumer good is expected to last for at least how long?
A. 6 months.
B. 1 year.
C. 3 years.
D. 10 years.
Which is considered to be an economic resource by economists?
A. Rent
B. Money
C. Labor
D. Wages
Legal and social rules that affect the ownership of property are:
A. property rights.
B. the coincidence of wants.
C. the division of labor.
D. the freedom of enterprise.
“A more equal distribution of income in the United States would result in greater total
consumer satisfaction.” This statement is based on the concept that:
A. income inequality is unfair.
B. income inequality is undemocratic.
C. income equality stimulates efficiency.
D. incomes are subject to diminishing marginal utility.
Which statement is correct?
A. During a recession spending on capital goods increases.
B. Real output and employment usually show little variance over the business cycle.
C. The production of nondurable consumer goods is more stable than the production of
durable consumer goods over the business cycle.
D. Recessions have not been severe because economists and statisticians have been able
to predict their occurrence and intensity with high accuracy.
Refer to the above table. If demand is represented by columns (3) and (2) and supply is
represented by columns (3) and (5), equilibrium price and quantity will be:
A. $10 and 60 units.
B. $9 and 50 units.
C. $8 and 60 units.
D. $7 and 50 units.
Whether crowding out occurs is most likely to depend on:
A. whether there is full employment in the economy.
B. whether the actions of state governments are procyclical.
C. the political business cycle.
D. the timing of fiscal policy.
An improvement in production technology will:
A. increase equilibrium price.
B. shift the supply curve to the left.
C. shift the supply curve to the right.
D. shift the demand curve to the left.
Which is a correct statement?
A. Frictional unemployment is the result of frictions between labor and management
over how best to perform work.
B. Structural unemployment results from changes in the structure of consumer demand
or technology.
C. Cyclical unemployment is also called wait unemployment because this
unemployment depends on the timing of the business cycle.
D. Search unemployment is the broadest unemployment category because it covers all
other types of unemployment.
Block’s sells 500 bottles of perfume a month when the price is $7. A huge increase in
resource costs causes price to rise to $9 and Block’s only manages to sell 460 bottles of
perfume. The price elasticity of demand is:
A. 0.33 and elastic.
B. 3.0 and elastic.
C. 0.33 and inelastic.
D. 3.0 and inelastic.
Aggregate demand decreases and real output falls, but the price level remains the same.
Which factor most likely contributes to downward price inflexibility?
A. The multiplier effect.
B. The wealth effect.
C. Fear of price wars.
D. Business taxes.
The pure monopolist who is nondiscriminating must decrease price on all units of a
product sold in order to sell additional units. This explains why:
A. there are barriers to entry in pure monopoly.
B. a monopoly has a perfectly elastic demand curve.
C. marginal revenue is less than average revenue at all levels of output.
D. total revenues are greater than total costs at the profit-maximizing level of output.
Under which of the following circumstances would we observe the greatest increase in
real income?
A. Nominal income falls by 2 percent, and the price level falls by 10 percent.
B. Nominal income rises by 8 percent, and the price level rises by 4 percent.
C. Nominal income rises by 12 percent, and the price level rises by 15 percent.
D. Nominal income falls by 4 percent, and the price level rises by 6 percent.
What economic concept would be most closely associated with a situation where an
aluminum plant uses extensive computerization on the production line to reduce
per-unit costs of production?
A. Infrastructure.
B. Human capital.
C. Network effects.
D. Economies of scale.
Which of the following would move the Lorenz curve closer to the diagonal?
A. A 20 percent boost in Social Security retirement benefits
B. An increase in payroll taxes
C. A reduction in the progressiveness of the federal personal income tax
D. The elimination of the TANF program
Lowering the discount rate has the effect of:
A. changing required into excess reserves.
B. changing excess into required reserves.
C. making it less expensive for commercial banks to borrow from the central banks.
D. forcing commercial banks to call in outstanding loans from their best customers.