If the rate of exchange for a pound is $4, the rate of exchange for the dollar is:
A. pound.
B. 4 pounds.
C. $.25.
D. $1.00.
Refer to the above graphs. Which pairs of budget constraints represent only an increase
in income but no change in the prices of goods A and B?
A. Graph A
B. Graph B
C. Graph C
D. Graph D
A firm’s total variable cost will depend on:
A. the prices of variable resources.
B. the production techniques that are used.
C. the level of output.
D. all of these.
The combination of fiscal policies that would reinforce each other and be most
expansionary would be a(n):
A. increase in government spending and taxes.
B. decrease in government spending and taxes.
C. decrease in government spending and an increase in taxes.
D. increase in government spending and a decrease in taxes.
Answer the next question on the basis of the following consolidated balance sheet for
the commercial banking system. Assume the required reserve ratio is 30 percent. All
figures are in billions.
Refer to the above data. The commercial banking system has excess reserves of:
A. $9 billion.
B. $7 billion.
C. $6.1 billion.
D. $5 billion.
What is one major measure of economic growth?
A. The rise in the price level.
B. The fall in the rate of unemployment.
C. Changes in interest rates.
D. Changes in real GDP per capita.
Other things being the same, if the demand for labor is inelastic:
A. decreases in wage rates will result in greater payrolls.
B. increases in wage rates will result in greater payrolls.
C. increases in wage rates will result in smaller payrolls.
D. decreases in wage rates will increase both employment and worker incomes.
According to the Gates, Winfrey, and Rodriguez illustration:
A. Gates, Winfrey, and Rodriguez made a mistake by not attending college.
B. Gates, Winfrey, and Rodriguez did not weigh marginal benefits against marginal
costs when making decisions.
C. Opportunity costs vary greatly between individuals and matter in decision making.
D. Attending college has little effect on lifetime earnings.
Refer to the above diagram. Assume that G and T1 are the relevant curves, the economy
is currently at A, and the full-employment GDP is B. This economy has a(n):
A. cyclically adjusted budget deficit.
B. actual budget deficit.
C. actual budget surplus.
D. neither a surplus nor deficit in the actual budget.
The overallocation of resources by society to a product means that the:
A. marginal benefit is greater than the marginal cost.
B. marginal cost is greater than the marginal benefit.
C. entrepreneurs are making too much profit in the economy.
D. workers are not being paid adequate wages and salaries.
Which is an example of a privately owned monopoly?
A. The De Beers diamond syndicate
B. State of Utah Liquor Commission Stores
C. U.S. Postal Service
D. New Jersey State Lottery
A wealthy executive is holding money for a good time to invest in the stock market.
This action would be an example of the:
A. transactions demand for money.
B. asset demand for money.
C. creation of fiat money.
D. use of money as a medium of exchange.
Which of the above diagrams illustrate(s) the effect of a decrease in incomes on the
market for secondhand clothing?
A. A and C
B. A only
C. B only
D. C only
To economists, the main differences between “the short run” and “the long run” are that:
A. the law of diminishing returns applies in the long run, but not in the short run.
B. in the short run all resources are fixed, while in the long run all resources are
variable.
C. in the long run all resources are variable, while in the short run at least one resource
is fixed.
D. fixed costs are less important to decision making in the long run than they are in the
short run.
If there is a decrease in the demand for union electrical workers and at the same time
there is a drastic cutback in the numbers of electricians trained by the union, then the:
A. wages of electricians are likely to increase and the quantity employed will decrease.
B. wages of electricians are likely to increase and the quantity employed will increase.
C. quantity employed will increase, but the effect on wages is indeterminate.
D. quantity employed will decrease, but the effect on wages is indeterminate.
In an oligopolistic market there is likely to be:
A. little consideration of the actions of rival firms.
B. price-taking behavior on the part of firms.
C. homogeneous but not differentiated products.
D. neither allocative nor productive efficiency.
Refer to the above graph. At price level P2:
A. the quantity of output is constant.
B. the quantity of output is equal to the quantity of output demanded.
C. the quantity of output is greater than the quantity of output demanded.
D. the quantity of output is less than the quantity of output demanded.
Which would best be considered part of income?
A. Wages and salaries
B. The value of one’s home
C. Corporate stock holdings
D. Money in a bank account
Refer to the above diagrams, in which the numbers in parentheses near the AD1, AD2,
and AD3 labels indicate the level of investment spending associated with each curve.
All figures are in billions. The economy is at point Y on the investment demand curve.
Given these conditions, what policy should the Fed pursue to achieve a noninflationary
full-employment level of real GDP (Qf)?
A. Increase aggregate demand from AD3 to AD2.
B. Decrease the money supply from $225 to $150 billion.
C. Increase interest rates from 4 to 8 percent.
D. Make no change in monetary policy.
A major reason that firms form a cartel is to:
A. reduce the elasticity of demand for the product.
B. enlarge the market share for each producer.
C. minimize the costs of production.
D. maximize joint profits.
Microeconomics focuses on:
A. the workings of the whole economy or large sectors of it.
B. the individual units that make up the whole of the economy.
C. issues such as unemployment and inflation.
D. total output and the general level of prices.
Economies of scale refer to:
A. the idea that proprietorships are less bureaucratic and therefore more efficient than
corporations.
B. public investments in highways, schools, utilities, and such.
C. the fact that large producers may be able to use more efficient technologies than
smaller producers.
D. the reallocation of labor from less-productive to more-productive uses.
In the treatment of U.S. exports and imports, national income accountants:
A. subtract exports, but add imports, in calculating GDP.
B. subtract both exports and imports in calculating GDP.
C. add both exports and imports in calculating GDP.
D. add exports, but subtract imports, in calculating GDP.
Refer to the above graph. The shift of the budget line from CD to AB is consistent with:
A. a decrease in money income.
B. an increase in money income.
C. an increase in the price of Good 1 and no change in the price of Good 2.
D. a decrease in the price of Good 2 and no change in the price of Good 1.
When universities announce a large tuition increase and follow it with an announcement
that more financial aid will be available, they are assuming that students who pay full
tuition:
A. have elastic demand and students who use financial aid have inelastic demand.
B. have inelastic demand and students who use financial aid have elastic demand.
C. view a college education as an inferior good and students who use financial aid view
it as a normal good.
D. view a college education as a normal good and students who use financial aid view it
as an inferior good.
What are the primary effects of cost-push inflation?
A. It raises real output and redistributes an increased level of real income.
B. It reduces real output and redistributes a decreased level of real income.
C. It raises real output but redistributes a decreased level of real income.
D. It reduces real output but redistributes an increased level of real income.
Other things equal, in which of the following cases would economic profit be the
greatest?
A. An unregulated monopolist who is able to engage in price discrimination
B. An unregulated, nondiscriminating monopolist
C. A regulated monopolist charging a price equal to average total cost
D. A regulated monopolist charging a price equal to marginal cost
Answer the question based on the following price and output data over a five-year
period for an economy that produces only one good. Assume that year 2 is the base
year.
In year 4, nominal GDP would be:
A. $60.
B. $90.
C. $120.
D. $316.
The purely competitive firm’s supply curve:
A. is perfectly inelastic in the short run.
B. is horizontal in the long run.
C. is upward sloping when some inputs are fixed.
D. becomes less elastic in the long run.
Suppose an excise tax is imposed on product X. We would expect this tax to:
A. increase the demand for complementary good Y and decrease the demand for
substitute product Z.
B. decrease the demand for complementary good Y and increase the demand for
substitute product Z.
C. increase the demands for both complementary good Y and substitute product Z.
D. decrease the demands for both complementary good Y and substitute product Z.
Which is a valid counterargument to the call for higher tariffs to save U.S. jobs?
A. They are needed to protect U.S. workers from the dumping of foreign products.
B. Strategic trade policy calls for equal treatment of all trading nations so that they will
have the same competitive conditions.
C. U.S. firms and workers must be protected from the ruinous competition of nations
where wages for workers are low.
D. Imports may eliminate some U.S. jobs, but they create others, so they may have little
or no effect on employment.
As a consequence of the condition of scarcity:
A. there is never enough of anything.
B. production has to be centrally planned.
C. things that are plentiful have relatively high prices.
D. individuals and communities have to make choices from among alternatives.