Other things equal, if a full-employment economy reallocated a substantial quantity of
its resources to capital goods, we would expect:
A. present consumption to rise.
B. future consumption to fall.
C. a lower rate of growth of real GDP.
D. labor productivity to rise.
Surpluses from Social Security:
A. reduce the size of the actual budget deficit.
B. increase the size of the actual budget deficit.
C. have no effect on the size of the actual budget deficit.
D. are projected to rise substantially in the next few decades.
A purely competitive firm is in short-run equilibrium and its MC exceeds its ATC. It
can be concluded that:
A. firms will leave the industry in the long run.
B. the firm is realizing an economic profit.
C. the firm is realizing a loss.
D. this is an increasing-cost industry.
The principle of comparative advantage indicates that mutually beneficial international
trade can take place only when:
A. tariffs are eliminated.
B. transportation costs are almost zero.
C. relative costs of production differ between nations.
D. a country can produce more of some product than other nations can.
(GDP figures are in billions of dollars.)
Refer to the above table. What is the GDP price index in year 1?
A. 113.2.
B. 108.3.
C. 109.6.
D. 111.5.
If personal income taxes and business taxes decrease, then this will:
A. increase aggregate demand and aggregate supply.
B. decrease aggregate demand and aggregate supply.
C. decrease aggregate demand and increase aggregate supply.
D. increase aggregate demand and decrease aggregate supply.
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 would be included in the calculation
of the full-employment unemployment rate?
A. 1 only
B. 2 only
C. 1 and 3
D. 2 and 4
In which case below will the elasticity of demand for laborers who produce yo-yos be
most inelastic? The price elasticity of demand for yo-yos is:
A. 5, and labor’s share of total costs is 20 percent.
B. 5, and labor’s share of total costs is 75 percent.
C. 0.1, and labor’s share of total costs is 20 percent.
D. 0.1, and labor’s share of total costs is 75 percent.
The Economic Stimulus Act of 2008:
A. provided about $152B in economic stimulus, primarily through checks sent to
households.
B. provided about $152B in economic stimulus, primarily through tax cuts to
businesses.
C. provided about $600B in economic stimulus, primarily through checks sent to
households.
D. provided about $152B in economic stimulus, primarily through checks sent to banks
that had made mortgage loans.
Refer to the above graph. Which line shows the full-employment output for the
economy?
A. 1
B. 2
C. 3
D. 4
Suppose that corn prices rise significantly. If farmers expect the price of corn to
continue rising relative to other crops, then we would expect:
A. the supply of ethanol, a corn-based product, to increase.
B. consumer demand for wheat to fall.
C. the supply to increase as farmers plant more corn.
D. the supply to fall as farmers plant more of other crops.
Another term for the full-employment budget is the:
A. actual budget.
B. cyclical budget.
C. cyclically adjusted budget.
D. administrative budget.
Most economists believe that:
A.all spillover costs should be eliminated.
B.the control of spillovers is costless.
C.spillover costs do not cause a misallocation of resources.
D.spillover costs should be considered in determining optimal output.
The graph depicts a monopolistically competitive firm.
Refer to the above graph. This monopolistically competitive firm is:
A. making economic profit in the long run.
B. making economic profit in the short run
C. making a loss in the long run.
D. making a loss in the short run.
An economic system in which money is not used is a:
A. planned economy.
B. market economy.
C. mixed economy.
D. barter economy.
Which industry or sector of the economy would least likely be affected by the business
cycle?
A. Automobiles
B. Consumer durables
C. Capital goods
D. Services
If the demand for money and the supply of money both increase, then the new
equilibrium:
A. quantity of money and the interest rate will both increase.
B. quantity of money and the interest rate will both decrease.
C. quantity of money will increase, but the change in the interest rate cannot be
predicted.
D. interest rate will increase, but the change in the interest rate cannot be predicted.
The ABC Corporation decreases all of its inputs by 12 percent and finds that its output
falls by only 8 percent. This means that initially it was producing:
A. in the range of diseconomies of scale.
B. in the range of economies of scale.
C. where AP is less than MP.
D. at the point of minimum efficient scale.
Which represents an expenditure in the circular flow of domestic output and national
income?
A. The buying of corporate stock by an investor
B. The buying of a used car by a consumer
C. The payment of military salaries by the government
D. The distribution of corporate profits to stockholders
The factor accounting for the largest increase in the productivity of labor in the United
States has been:
A. the education and training of workers.
B. improved resource allocation.
C. the quantity of capital.
D. technological advance.
“Show me a pastoral society with an untouched environment, an abundance of leisure,
and nonsecular values, and I will show you an underdeveloped, poverty-ridden
country.” This statement is most likely to be made by a(n):
A. advocate of learning by doing.
B. advocate of network effects.
C. proponent of economic growth.
D. critic of economic growth.
The primary responsibility of the Federal Open Market Committee (FOMC) is:
A. issuing currency and acting as the fiscal agent for the federal government.
B. handling the Fed’s collection of checks and adjusting legal reserves among banks.
C. setting the Fed’s monetary policy and directing the buying and selling of government
securities.
D. supervising bank operations to make sure they follow regulations and monitoring
banks for fraud.
The table below shows cost data for a firm that is selling in a purely competitive
market.
Refer to the above table. If the market price for the firm’s product is $50, the
competitive firm will:
A. produce one unit.
B. produce two units.
C. produce three units.
D. shut down.
The short run is characterized by:
A. plenty of time for firms to either enter or leave the industry.
B. increasing, but not diminishing, returns.
C. at least one fixed resource.
D. zero fixed costs.
Which of the following will cause the demand curve for product A to shift to the left?
A. Population growth that causes an expansion in the number of persons consuming A
B. An increase in money income if A is a normal good
C. A decrease in the price of complementary product C
D. An increase in money income if A is an inferior good
At the point where the demand and supply curves intersect:
A. the buying and selling decisions of consumers and producers are inconsistent with
one another.
B. the market is in disequilibrium.
C. there is neither a surplus nor a shortage of the product.
D. quantity demanded exceeds quantity supplied.
Net exports is a negative number when:
A. a nation’s imports of goods and services fall.
B. a nation’s imports of goods and services rise.
C. a nation’s exports of goods and services are greater than its imports.
D. a nation’s imports of goods and services are greater than its exports.
The public debt is the amount of money that:
A. state and local governments owe to the federal government.
B. Americans owe to foreigners.
C. the federal government owes to holders of U.S. securities.
D. the federal government owes to taxpayers.
The value of U.S. imports is:
A. added to exports when calculating GDP because imports reflect spending by
Americans.
B. subtracted from exports when calculating GDP because imports do not constitute
spending by Americans.
C. subtracted from exports when calculating GDP because imports do not constitute
production in the United States.
D. added when calculating GDP because imports do not constitute production in the
United States.
Economic efficiency would be primarily discussed with respect to which of the
fundamental questions about a competitive market economy?
A. What goods and services will be produced?
B. How will the goods and services be produced?
C. How will the system promote progress?
D. Who will get the goods and services?
If the Fed buys government securities from the public in the open market:
A. the Fed gives the securities to the public; the public pays for the securities by writing
checks that when cleared will increase commercial bank reserves at the Fed.
B. the Fed gives the securities to the public; the public pays for them by writing checks
that when cleared will decrease commercial bank reserves at the Fed.
C. the public gives the securities to the Fed; the Fed pays for the securities by check,
which when deposited at commercial banks will increase their reserves at the Fed.
D. the public gives the securities to the Fed; the Fed pays for the securities by check,
which when deposited at commercial banks will decrease their reserves at the Fed.
Refer to the above graph, which shows an aggregate demand curve for a hypothetical
economy. If the price level is 150, the quantity of real GDP demanded is:
A. $500 billion.
B. $600 billion.
C. $700 billion.
D. $800 billion.
Other things being equal, a reorganization of the OPEC cartel to permit it to increase
world oil prices by 70 percent would most likely have which effect?
A. It would shift the aggregate demand curve right.
B. It would shift the aggregate supply curve right.
C. It would shift the aggregate supply curve left.
D. It would shift the aggregate demand curve right and the aggregate supply curve left.
GDP is the market value of:
A. economic resources used in the production of annual output in an economy.
B. all final goods and services produced in an economy in a given year.
C. consumption and investment spending in an economy in a given year.
D. national income distributed to producers, consumers, and investors in an economy.
Laws and government actions designed to prevent monopoly and promote competition
are the focus of:
A. social regulation.
B. industrial regulation.
C. antitrust policy.
D. incomes policy.