The Federal Open Market Committee (FOMC):
A. provides advice on banking policy to the Fed.
B. monitors regulatory banking laws for member banks.
C. sets policy on the sale and purchase of government bonds by the Fed.
D. follows the actions and operations of financial markets to keep them open and
competitive.
In the kinked-demand model, there will be a vertical break in the firm’s:
A. demand curve.
B. marginal cost curve.
C. marginal revenue curve.
D. average total cost curve.
Which is not a supply factor in economic growth?
A. An efficient allocation of resources.
B. Natural resources.
C. The quantity and quality of labor.
D. Technological knowledge.
When the interest rate falls, the:
A. asset demand for money decreases.
B. transactions demand for money increases.
C. total amount of money demanded increases.
D. total amount of money demanded decreases.
If the government adopts an expansionary fiscal policy that requires more government
borrowing in the money market, then interest rates are likely to:
A. fall and partially reinforce the effects of the fiscal policy.
B. rise and partially offset the effects of the fiscal policy.
C. fall and partially offset the effects of the fiscal policy.
D. rise and partially reinforce the effects of the fiscal policy.
One main complaint about the official income thresholds for defining poverty is that
they:
A. are too variable for guiding government policy.
B. depend too much on payments for rent and in-kind benefits.
C. understate the standard of living by not considering consumption.
D. are inadequate to meet basic needs in major metropolitan areas.
Which of the following will cause the aggregate demand curve to shift to the left?
A. A decrease in the price level.
B. An increase in the price level.
C. An increase in national incomes abroad.
D. An appreciation in the value of the U.S. dollar.
If a 2 percent increase in the price of product X causes the demand for product Y to
increase by 6 percent, then:
A. X and Y are substitutes.
B. X and Y are complements.
C. X and Y are independent goods.
D. the demand for X is elastic.
If oligopolistic firms facing similar cost and demand conditions successfully collude,
price and output results in this industry will be most accurately predicted by which of
the following models?
A. Kinked-demand curve model of oligopoly.
B. Price-leadership model of oligopoly.
C. Pure monopoly model.
D. Monopolistic competition model.
The long run in macroeconomics is a period in which nominal wages:
A. do not respond as the price level stays constant.
B. change as the price level stays constant.
C. do not respond as the price level changes.
D. change as the price level changes.
Raising the reserve ratio:
A. decreases the discount rate.
B. increases the discount rate.
C. decreases the amount of excess reserves banks must keep.
D. changes excess reserves to required reserves.
Craft unions typically attempt to increase wage rates for their members by:
A. organizing all of the employees in a factory or industry.
B. opposing increases in the minimum wage that benefit nonunion workers.
C. supporting regulations and policies that increase the price of complementary
resources.
D. restricting the supply of skilled workers through worker licensing and training
requirements.
If the U.S. dollar appreciates in value relative to foreign currencies, then this will:
A. increase aggregate demand.
B. decrease aggregate demand.
C. cause a movement downward along the aggregate demand curve.
D. cause a movement upward along the aggregate demand curve.
Refer to the above graph. At what level of output will the firm shut down?
A. 0A
B. 0B
C. 0C
D. 0K
Which of the following is correct?
A. A person who purchases a corporate bond is borrowing money from a corporation.
B. A person who purchases a corporate stock is buying ownership in the corporation.
C. A person who purchases a corporate bond is guaranteed to earn dividends from the
stock.
D. A person who purchases a corporate stock gets the option to buy other shares at
lower prices.
The cyclically adjusted deficit as a percentage of GDP is 2 percent in year 1. This
deficit becomes 1 percent of GDP in year 2. It can be concluded from year 1 to year 2
that:
A. fiscal policy was expansionary.
B. fiscal policy was contractionary.
C. the federal government is decreasing taxes.
D. the federal government is increasing spending.
If there were a market for pollution rights established by a public agency that
determined the amount of pollution that the atmosphere or a body of water can safely
absorb, and the agency sold these rights to polluters, we could expect that:
A.the price of these pollution rights would increase over time as the economy grows.
B.there would be a surplus of pollution rights.
C.there would be a shortage of pollution rights.
D.there would be a black market for pollution rights.
A business organization that owns and operates one or more plants is:
A. a firm.
B. an industry.
C. a partnership.
D. an S corporation.
Which would most likely increase aggregate supply?
A. An increase in the degree of excess capacity.
B. A decrease in the prices of resources.
C. A decrease in subsidies for businesses.
D. A decrease in net exports.
If a production possibilities boundary is a curve concave to the origin and not a straight
line, then:
A. resources are equally suited to producing alternative products.
B. resources are not equally suited to producing alternative products.
C. resources are perfectly interchangeable to alternative uses.
D. there are unemployed resources.
One prediction about monopolistic competition is that firms:
A. operate at minimum average total cost in the long run.
B. will not engage in brand advertising.
C. will be inefficient in the long run.
D. must make economic profits in the short run.
When the federal government cuts taxes and increases spending to stimulate the
economy during a period of recession, such actions are designed to be:
A. passive.
B. automatic.
C. countercyclical.
D. nondiscretionary.
One reason that “near-monies” are important is because:
A. they simplify the definition of money and therefore the formulation of monetary
policy.
B. they can be easily converted into money or vice versa, and thereby can influence the
stability of the economy.
C. they do not reflect the level of consumer spending, but they have a critical impact on
saving and investment in the economy.
D. credit cards synchronize one’s expenditures and income, thereby reducing the cash
and checkable deposits one must hold.
If there are external or spillover benefits associated with consumption and production of
a product, it can be said that the:
A.government should consider placing a special tax on producers.
B.government should consider prohibiting the production of the commodity.
C.supply curve for the product lies too far to the right to provide an efficient allocation
of resources.
D.demand curve understates the total benefit from the product and resources are
underallocated to its production.
One important consequence of the public debt in the United States is that:
A. income inequality is reduced.
B. incentives to work are increased.
C. it transfers a portion of real output to foreign nations.
D. there is greater saving at every level of disposable income.
A checkable deposit at a commercial bank is a(n):
A. asset to the bank.
B. liability to the bank.
C. liability to the depositor.
D. asset to the Federal Reserve.
Which of the following statements is true?
A.A competitive market can achieve allocative efficiency without achieving productive
efficiency.
B.A competitive market can achieve productive efficiency without achieving allocative
efficiency.
C.A competitive market economy cannot achieve both productive efficiency and
allocative efficiency simultaneously.
D.A competitive market cannot achieve productive efficiency without also achieving
allocative efficiency.
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 classified as a discouraged
worker?
A. 1
B. 2
C. 3
D. 4
Refer to the above data. The marginal product of the sixth worker is:
A. 180 units of output.
B. 30 units of output.
C. 15 units of output.
D. negative.
A nation buys three products, A, B, and C. Over two years, the prices of these products
change as follows:
Over the period referred to, the nation’s nominal income increased by 2 percent. The
nation’s real income changed by approximately:
A. 2 percent.
B. 3 percent.
C. -3 percent.
D. -2 percent.