The school of engineering at a modern university would be a supporter of the new
a. consumption theory.
b. growth theory.
c. monetary theory.
d. construction theory.
Which of the following would be the most likely candidate for direct application of the
benefits principle of taxation?
a. education
b. fire protection
c. police protection
d. use of roads
If aggregate demand grows faster than aggregate supply, the equilibrium price level will
rise.
a. True
b. False
An optimal purchase is one that maximizes total utility.
a. True
b. False
If the price of the dollar changes from 100 Japanese yen to 120 Japanese yen, the dollar
has depreciated.
a. True
b. False
The diminished employment prospects for the graduates of 2002 is most likely due to
the existence of a(n)
a. inflationary gap.
b. significant increase in real GDP.
c. shift of the aggregate demand curve outward.
d. recessionary gap.
If the economy is near full employment and Congress cuts taxes, the proper monetary
policy should be
a. expansionary to keep the economy fully employed.
b. expansionary to counteract the increased deficit.
c. contractionary to shift the aggregate demand curve outward.
d. contractionary to counteract the effects of fiscal policy.
If the aggregate supply curve is flat,
a. expansionary fiscal or monetary policy will cause a good deal of inflation with little
increase in real output.
b. expansionary fiscal or monetary policy will buy large gains in real output at low cost
in terms of inflation.
c. a contractionary stabilization policy is an effective way to reduce inflation.
d. decreasing the income tax will not shift aggregate demand.
Which of the following would be most likely to shift the consumption function
downward?
a. a stock market crash
b. a price level decrease
c. increased corporate profits
d. a stock market boom
Cartels usually succumb to divisive forces caused by
a. limited information.
b. members cheating by giving secret discounts.
c. entry by new rivals seeking profits.
d. insufficient profits compared to independent operations.
In which of the following ways is a monopolist different from a perfect competitor?
a. Average cost will continually drop as output expands.
b. Price is above marginal revenue.
c. Average total cost equals average fixed costs plus average variable costs.
d. The demand curve for the industry has a negative slope.
It is not true in the long run of monopolies that
a. other firms seeking positive economic profit enter the market.
b. they earn positive economic profit.
c. they sell their output at a price greater than marginal cost.
d. they benefit from barriers to entry.
Trade adjustment assistance in the United States began in 1962. The program
a. was designed to provide assistance to firms or workers who suffer idle facilities,
unprofitability, and unemployment because of sharp increases in imports.
b. provided little assistance to victims of free trade before the 1970s.
c. was enlarged and worker benefits were extended in 1981 by the Reagan
administration.
d. All of the above are correct.
Laissez faire is a policy that espouses central planning.
a. True
b. False
National defense made up the largest portion of federal expenditures in 2009.
a. True
b. False
The gold standard established fixed exchange rates among all countries.
a. True
b. False
An investor will diversify his portfolio to reduce risk.
a. True
b. False
Movements along the consumption function are called
a. autonomous consumption.
b. leakage consumption.
c. induced consumption.
d. injected consumption.
If policy makers do nothing in response to an inflationary gap, what will happen?
a. a rapid movement toward lower unemployment and higher inflation
b. a rapid movement toward lower unemployment and lower inflation
c. a slow movement toward higher unemployment and higher inflation
d. a slow movement toward lower unemployment and lower inflation
Fixed prices in a free-market economy can increase efficiency.
a. True
b. False
In contrast to poorer countries, most residents of middle-income countries will have
a. universal primary education.
b. universal secondary education.
c. universal higher education.
d. lower levels of productivity.
According to Keynes, a pessimistic outlook causes consumers and businesspersons to
____, and a recession could occur.
a. increase planned investment
b. decrease planned spending
c. increase exports
d. decrease imports
e. decrease saving
Recessions
a. almost never occur in the American economy.
b. follow a regular and predictable cycle.
c. are common features of the American economy.
d. have been abolished by wise macroeconomic policy.
Consumer income changes can shift market demand.
a. True
b. False
Sales maximization and profit maximization are essentially equivalent.
a. True
b. False
If the government increases defense spending by $1 billion and the MPC is 0.8, how
much additional spending will occur in the third “round” of spending?
a. $640 million
b. $800 million
c. $1 billion
d. $1.8 billion
A contraction of the money supply would have no effect on a recession.
a. True
b. False
Bargain airline fares in which airlines charge varying rates to passengers for the same
flight and service is an example of
a. market penetration
b. transaction pricing.
c. collusion.
d. price discrimination.
The national poverty rate in the United States reached a low in the
a. early 1960s.
b. early 1970s.
c. late 1970s.
d. early 1980s.
What mechanism assures that producers use inputs efficiently?
a. governmental regulations on use of resources
b. altruism
c. the desire for profit
d. an innate desire to be efficient
e. All of the above are correct.
The average cost curve shows the total cost divided by quantity produced for various
levels of output.
a. True
b. False
A recent decline in interest rates made home construction more affordable for many
families. The consequent increase in construction produced a rightward shift in the
demand curves for construction materials. Economists would say that the change in
demand for materials is due to
a. the principle of marginal productivity.
b. rent seeking.
c. diminishing marginal returns.
d. derived demand.
Which of the following observations is true of the principle of comparative advantage?
a. It arises from the absolute cost advantage.
b. It helps determine most efficient patterns of production.
c. It was advanced by Adam Smith.
d. It means producing a good using smaller quantities of resources than others.