The excess of government spending over tax collections is:
A. national income.
B. national saving.
C. national wealth.
D. the government budget deficit.
The opportunity cost of an activity is the value of:
A. an alternative forgone.
B. the next-best alternative forgone.
C. the least-best alternative forgone.
D. the difference between the chosen activity and the next-best alternative forgone.
In the short-run Keynesian model, to close a recessionary gap of $1 billion dollars
government purchases must be:
A. increased by $1 billion.
B. decreased by $1 billion.
C. increased by more than $1 billion.
D. increased by less than $1 billion.
If firms maintain preset prices in the short run, then the primary cause of outputs gaps is
changes in:
A. potential output.
B. prices.
C. capital and technology.
D. economywide spending.
Refer to the figure above. What might cause Demand to shift from the Original Demand
to the New Demand?
A. An expectation that coffee prices will fall in the future.
B. An increase in the price of coffee creamer.
C. A decrease in the price of tea.
D. An increase in incomes.
Refer to the figure above. Suppose all firms in this industry have identical costs to this
firm and are producing 15 units of output. One can predict that
A. new firms will enter the industry.
B. old firms will exit the industry.
C. firms will attempt to lower their implicit costs.
D. price must rise.
The shoe leather costs of inflation include all of the following EXCEPT:
A. the lost purchasing power of cash.
B. the extra costs incurred to avoid holding cash.
C. the cost of more frequent trips to the bank.
D. the installation of a new cash management system.
For two goods, A and B, MUA/PA = 25 and MUB/PB = 25. The consumer should
A. leave their choices as they are.
B. purchase less of A and more of B.
C. purchase more of A and B.
D. purchase less of A and B.
The beginning of a recession is called the:
A. depression.
B. expansion.
C. peak.
D. trough.
A welfare payment that is reduced when the recipient earns more income is a(n)
A. fair benefit.
B. inducement for the poor to find employment.
C. unconditional benefit.
D. means-tested benefit.
Refer to the table above. Corey’s opportunity cost of the production of an extra pizza is
the delivery of ______ pizza(s).
A. 2
B. 3/2
C. 2/3
D. 1/2
Taylor’s marginal utility from watching movies and marginal utility from eating out
each month in utils are represented in the following table. Taylor spends exactly $100
every month on these two forms of entertainment, and the price per movie is $10 and
price per dinner is $20.
If Taylor eats out 3 times a month, Taylor will watch _____ movies, and have marginal
utility per dollar of _____ from eating out and _______ from going to the movies.
A. 4; 6; 2
B. 3; 2; 6
C. 4; 6; 1/2
D. 3; 4; 4
Refer to the figure above. Based on the figure, which point or points indicate peaks of
the business cycle?
A. A and C and E
B. B and D
C. only A
D. only B
Quick Buck and Pushy Sales produce and sell identical products and face zero marginal
and average cost. Below is the market demand and marginal revenue curves for the
product.
Refer to the figure above. Quick Buck and Pushy Sales have agreed to each produce
half the profit-maximizing monopolist quantity, set the monopoly price and split the
profits evenly. Suppose Quick Buck cheats on Pushy Sales and reduces its price to
$1.00 each while Pushy Sales continues to comply with the collusive agreement. What
will be the economic profit for Quick Buck?
A. $6,000
B. $1,500
C. $2,000
D. $3,000
According to Okun’s Law, when cyclical unemployment increases from 1 to 2 percent,
the recessionary gap increases from ______ percent.
A. -2 to -4
B. -1 to -2
C. 2 to 4
D. 1 to 2
Higher real income ______ the demand for money and a higher price level ______ the
demand for money.
A. increases; increases
B. increases; decreases
C. decreases; increases
D. decreases; decreases
Jenny sells lemonade by the street during the summer time. Several other kids also sell
lemonade in Jenny’s neighborhood.
Refer to the information above. If the lemonade market is perfectly competitive and
price is already at the equilibrium level, Jenny can increase her revenue if she:
A. decreases the price of lemonade and increases the output.
B. increases the price of lemonade and decreases the output.
C. increases both the price and output of lemonade.
D. keeps the price the same and increases the output.
A demand curve is ________ sloping because __________________.
A. downward; of increasing opportunity costs
B. upward; people prefer to purchase high-quality consumer goods
C. downward; reservation prices tend to fall over time
D. downward; fewer people are willing to buy an item at higher prices
The Boy Scouts have so far sold 100 tickets for their upcoming raffle, but they sell an
additional 12 tickets every day. The ______ is a stock variable, and the ______ is a flow
variable.
A. number of tickets sold each day; number of tickets sold so far
B. number of tickets sold so far; total number of tickets sold by the time of the raffle
C. number of tickets sold each day; total number of tickets available
D. total number of tickets sold by the time of the raffle; number of tickets sold each day
In the Keynesian model, a $1 billion increase in autonomous consumption leads to
______ in short-run equilibrium output.
A. a $1billion increase
B. a greater than $1 billion increase
C. no change
D. a $1 billion decrease
Curly and Moe are considering living alone or being roommates and splitting the rent
for the next twelve months. If they live alone, they each rent a one bedroom, one bath
apartment for $500 per month, while if they are roommates, they can split a two
bedroom, one bath apartment for $800 per month. The one difficulty they have is that
Moe snores very loudly. Curly estimates the cost of poor sleep due to Moe’s snoring at
$150 per month. Moe could obtain a snore-eliminating device for $50 per month.
Refer to the information given above. The actual monthly gain in surplus to Curly and
Moe from living together after addressing the snoring problems in the least costly way
is:
A. $200.
B. $150.
C. $100.
D. $50.
The relationship between labor usage and output at the local coffee shop is summarized
in the table below. The price of a cup of espresso is $1.25 and no other inputs are
required.
The most the coffee shop would pay the third worker is _______.
A. $75
B. $60
C. $18.75
D. $15
Real GDP measures the ______ of production; nominal GDP measures the ______ of
production.
A. current dollar value; physical volume
B. current dollar value; current dollar value
C. current dollar value; market value
D. physical volume; current dollar value
When the central bank sells $1,000,000 worth of government bonds to the public, the
money supply:
A. decreases by more than $1,000,000.
B. decreases by $1,000,000.
C. decreases by less than $1,000,000.
D. increases by $1,000,000.
If the rate of inflation equals zero then the nominal rate of interest:
A. equals zero.
B. equals the real rate of interest.
C. can be negative.
D. equals the target real interest rate.
Starting from potential output, if consumer confidence increases and consumers decide
to spend more, then this will generate a(n) _____ gap and inflation will _____.
A. recessionary; increase
B. recessionary; decrease
C. expansionary; decrease
D. expansionary; increase
Gino’s Pizza shop hires cooks in a competitive market. The raw material required to
make each pizza costs $5. Daily output at Gino’s Pizza varies with the number of
workers hired, as shown in the table below:
If the pizzas sell for $10/pie, and the competitive market wage is $80 per day, Gino will
hire ____ workers and produce ____ pizzas per day.
A. 5; 84
B. 2; 36
C. 3; 54
D. 4; 70
Who from among the following would be classified as employed?
A. Brenda Smith, an 18 year old full-time college student.
B. Mario Faubert, a NHL hockey player at home sick with the flu.
C. Jack Little, a 21 year old new college graduate actively looking for his first job.
D. Sarah Lopez, a retired public school teacher.
The price of output to a firm is $9 and the marginal cost of the last unit produced is
$8.50. This means the
A. extra benefit of the last unit produced is less than the extra cost.
B. firm should lower its output to increase profits.
C. firm is earning an average profit of $0.50.
D. extra benefit of the last unit produced is greater than the extra cost.
The greater the flow of investment spending, the greater the increase in the stock of:
A. saving.
B. money.
C. income.
D. capital.