Which of the following is not an example of a factor of production?
a. A forest.
b. A computer program.
c. A labor leader.
d. Dollars.
Exhibit 10-4 Aggregate supply and demand curves
The increase in the price level as
the economy moves from E1 to E2 in Exhibit 10-4 represents:
a. cost-push inflation.
b. demand-shock inflation.
c. wage push inflation.
d. demand-pull inflation.
On January 1, 2015, Flaggler Company’s balance in retained earnings was $70,000.
During 2015, the company earned net income of $43,000 and paid $15,000 in
dividends. Calculate the retained earnings balance at December 31, 2015.
a. $42,000
b. $90,000
c. $98,000
d. $113,000
Which of the following is used to illustrate an independent relationship between two
variables?
a. An upward-sloping curve
b. A downward-sloping curve c. A hill-shaped curve
d. A horizontal or vertical line
Which of the following policies would be most likely to reduce the rate of inflation?
a. sale of government bonds by the Federal Reserve
b. a reduction in the discount rate
c. an increase in the size of the federal budget deficit
d. a reduction in the required reserves imposed on the banking system
The market shown in Exhibit 4-2 is initially in equilibrium at E1. Changes in market
conditions result in a new equilibrium at E2. This change is stated as a(n):
a. increase in supply and an increase in quantity demanded.
b. increase in supply and a decrease in demand.
c. decrease in supply and a decrease in quantity demanded.
d. increase in demand and an increase in supply.
Exhibit 6-2 Unemployment categories Category# of
Individuals
Frictional unemployment 20
Structural unemployment 35
Cyclical unemployment 60
Discouraged workers 5
Underemployed workers 10
Fully employed workers 410
Population 900 The unemployment rate for the economy in Exhibit 6-2 is:
a. 28 percent.
b. 30.5 percent.
c. 31.7 percent.
d. 12.8 percent.
e. 21.5 percent.
The marginal propensity to save (MPS) is computed as the change in:
a. savings divided by the change in saving.
b. savings divided by the change in income.
c. saving divided by the change in GDP.
d. None of these.
Exhibit 4-3 Supply and demand curves
In Exhibit 4-3, an increase in quantity supplied would cause a movement from which
equilibrium point to another, other things being equal?
a. E1 to E2.
b. E1 to E4.
c. E4 to E1.
d. E3 to E4.
The reason individual homeowners usually do not hire a private contractor to fill the
potholes on their street is because:
a. it costs too much.
b. the value to the neighborhood exceeds the cost of repair.
c. others who use the street will be free riders.
d. they do not trust the government.
e. there are negative externalities associated with the repair.
Automatic stabilizers “lean against the prevailing wind” of the business cycle because:
a. wages are controlled by the minimum wage law.
b. federal expenditures and tax revenues change as the level of real GDP changes.
c. the spending and tax multipliers are constant.
d. they include the power of special interests.
The equation of exchange states that:
a. money supply multiplied by real output equals velocity.
b. velocity multiplied by money supply equals the selling price times the quantity of
actual output.
c. money supply divided by velocity equals nominal GDP.
d. money supply divided by velocity equals real GDP.
The production possibilities curve depicts the various combinations of two goods that
can be:
a. interchanged among two countries.
b. produced with a given technology.
c. consumed with a given quantity of resources.
d. produced with increments in resources and changes in technology.
e. consumed as the resources increase.
Classical economists traditionally believed that:
a. there are three motives for demanding money.
b. a change in the money supply can affect real GDP.
c. the transactions demand for money influences the velocity of money.
d. the velocity of money is constant.
e. the economy does not always operate at full employment.
An economist has conducted extensive research and has found that Jones Cola is a
substitute for Tucker Cola. Ceteris paribus, the price of Jones Cola increases. The
impact on the demand curve for Tucker Cola is a(n):
a. increase in demand.
b. decrease in demand.
c. increase in quantity demanded.
d. decrease in quantity demanded.
Economic growth and development in LDCs are low because many of them lack:
a. saving.
b. infrastructure.
c. a political environment favorable to growth.
d. All of these.
Economics is the study of how people:
a. vote for political leaders who decide what is to be produced.
b. make choices to produce and consume goods and services.
c. establish social institutions that maximize well-being.
d. develop value systems that affect their consumption choices.