Because of unseasonably cold weather, the supply of oranges has substantially
decreased. This statement indicates that:
A. the demand for oranges will necessarily rise.
B. the equilibrium quantity of oranges will rise.
C. the amount of oranges that will be available at various prices has declined.
D. the price of oranges will fall.
Refer to the above graph. When the quantity of product X increases from 14,000 to
16,000, the price elasticity of demand for product X is:
A. elastic.
B. inelastic.
C. unit-elastic.
D. perfectly inelastic.
Which one of the following is a tool of monetary policy for altering the reserves of
commercial banks?
A. Reserve ratio.
B. Treasury deposits.
C. Federal Reserve Notes.
D. Budget surplus or budget deficit.
Due to automatic stabilizers, when income rises, government transfer spending:
A. increases and tax revenues decrease.
B. decreases and tax revenues increase.
C. and tax revenues decrease.
D. and tax revenues increase.
How many members can serve on the Board of Governors of the Federal Reserve
System?
A. 7
B. 9
C. 12
D. 14
A Federal funds rate reduction that is caused by monetary policy will:
A. increase the prime interest rate.
B. decrease the size of the monetary multiplier.
C. increase the Fed’s discount rate.
D. decrease the prime interest rate.
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.
An increase in the price of a product that is a complement to X will:
A. decrease S, decrease P, and decrease Q.
B. decrease D, decrease P, and decrease Q.
C. increase D, increase P, and increase Q.
D. increase D, increase P, and decrease Q.
If an economy is being “allocatively efficient,” then that means the economy is:
A.using the least costly production techniques.
B.producing the goods and services most wanted by society.
C.fully employing all economic resources.
D.maximizing the returns to factors of production.
An “aggregate”:
A. treats a collection of specific units as one unit.
B. treats a single unit as if it were a collection of specific units
C. is the primary unit of analysis in microeconomics.
D. is too large to analyze using standard macroeconomic theories.
Which best describes the backing for money in the United States?
A. The gold stored in the Federal Reserve Bank of New York.
B. The acceptability of it as a medium of exchange.
C. The willingness of foreign government to hold U.S. dollars.
D. The size of the budget surplus in the U.S. government.
The following list contains items that are related to aggregate demand and/or aggregate
supply.
Refer to the above list. Changes in which of the above two factors would most likely
cause a change in aggregate supply?
A. 1 and 5
B. 3 and 10
C. 5 and 7
D. 8 and 9
The private ownership of property resources and use of prices to direct and coordinate
economic activity is characteristic of:
A. a command system.
B. a market system.
C. communism.
D. socialism.
There is no control over price by firms in:
A. oligopoly.
B. pure monopoly.
C. pure competition.
D. monopolistic competition.
If the production of a product or service involves external or spillover benefits, then the
government can improve efficiency in the market by:
A.providing a subsidy to correct for an overallocation of resources.
B.providing a subsidy to correct for an underallocation of resources.
C.imposing a corrective tax to correct for an overallocation of resources.
D.imposing a corrective tax to correct for an underallocation of resources.
In a purely competitive market for economic resources, a firm’s marginal revenue
product for a factor could decrease as a result of a(n):
A. increase in the resource’s marginal product.
B. decrease in the demand for the firm’s product.
C. increase in the prices of all other resource inputs.
D. decrease in the supply for the economic resource.
In some markets consumers may buy many different brands of a product. Which of the
statements below best represents a situation where demand for a particular brand would
be very elastic?
A. “The different brands are almost identical so I always buy the cheapest.”
B. “I use so little of that product that when I do buy it, I don’t pay much attention to the
price.”
C. “The brand I buy is so superior to other available brands that I hardly consider the
others.”
D. “I pinch pennies in buying other products, but like most people I feel I owe it to
myself to get the best brand of this product.”
If firms are losing money in a purely competitive industry, then in the long run this
situation will shift the industry:
A. demand curve to the right, and the market price will increase.
B. supply curve to the left, and the market price will increase.
C. supply curve to the right, and the market price will decrease.
D. demand curve to the left, and the market price will decrease.
The gross domestic product provides an estimate of society’s evaluation of the relative
worth of goods and services because it:
A. takes into account the value of security transactions.
B. excludes public and private transfer payments.
C. includes indirect business taxes.
D. is a monetary measure.
Which is a correct statement?
A. It is relatively easy to distinguish between cost-push and demand-pull inflation even
if you don’t know the source of the inflation.
B. A supply shock will cause a variation of demand-pull inflation that can lead to
hyperinflation.
C. Demand-pull inflation will continue so long as there is excess total spending in the
economy.
D. Cost-push inflation will continue because increased per-unit cost will lead to a
reduced supply.
One of the main arguments against further growth for industrialized nations focuses on
the issue of:
A. technological knowledge.
B. environmental quality.
C. feedback mechanisms.
D. infrastructure development.
The following diagram is a flexible exchange market for foreign currency:
At the price $.80 for one euro:
A. the quantity of euros demanded equals the quantity supplied.
B. the dollar-euro exchange rate is unstable.
C. the dollar price of one euro equals the euro price of one dollar.
D. there will be a surplus of euros in the foreign exchange market.
The institution of private property encourages:
A. lack of maintenance because people are not forced by law to do it.
B. lack of easy exchange because ownership is sometimes hard to prove.
C. easy exchange of some property because a formal title or deed exists.
D. lack of incentives because the owner is responsible for maintenance costs.
In 2010, the trade deficit in goods for the United States was about:
A. $55 billion.
B. $107 billion.
C. $455 billion.
D. $646 billion.
What is the main body assisting the Board of Governors of the Federal Reserve System
in determining monetary policy?
A. U.S. Treasury.
B. U.S. Congress.
C. Federal Advisory Council.
D. Federal Open Market Committee.
A person states that “a large public debt will bankrupt the U.S. government.” An
economist is likely to respond:
A. yes because a large public debt means that the U.S. government will not be able to
meet its financial obligations.
B. yes because this public debt will reduce our ability to borrow the necessary funds
from foreign nations.
C. no because the government can refinance the public debt by selling new bonds.
D. no because most of the public debt is held by foreign nations.
A progressive income tax would cause the after-tax Lorenz curve, compared with the
before-tax Lorenz curve, to be:
A. more bowed toward the southeast.
B. less bowed to the southeast.
C. a vertical line.
D. a horizontal line.
Refer to the above diagrams. Assume that prior to specialization and trade Italy and
Greece preferred points I and G on their production possibilities curves. As a result of
complete specialization according to comparative advantage, the resulting gains in
output will be:
A. 5X and 15Y.
B. 10Y.
C. 15X and 5Y.
D. 25X.
The cyclically adjusted deficit as a percentage of GDP is 1 percent in year 1. This
deficit becomes a surplus of 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.
Which products are most likely to be most price elastic?
A. Sugar and eggs
B. Clothing and auto repair
C. China and glassware
D. Electricity and housing
One timing problem with fiscal policy to counter a recession is an “operational lag” that
occurs between the:
A. start of the recession and the time it takes to recognize that the recession has started.
B. end of the recession and the time it takes to recognize that the recession has ended.
C. time fiscal action is taken and the time that the action has its effect on the economy.
D. time the need for the fiscal action is recognized and the time that the action is taken.