Archives: Quiz

Which of the following helps explain low growth rates of many less developed countries? a. Good law enforcement b. Political stability c. Low population growth rates d. Excellent legal systems e. Near-subsistence levels of per capita output The feature of […]

Wealth in the hands of Americans has been a. rising because of the trade deficit b. rising in spite of the trade deficit c. falling because of the trade deficit d. falling in spite of the trade deficit e. falling […]

Which of the following is a characteristic of perfect competition? The formula for labor productivity is given by a. employment / output. b. output / population. c. output / employment. d. population / output. e. output / number of firms. […]

Equilibrium GDP is reached when a. aggregate expenditure exceeds GDP b. aggregate expenditure is less than GDP c. aggregate expenditure equals the level of output d. the level of output is greater than aggregate expenditure e. the level of output […]

Who owns a commercial bank? a. Its depositors b. Its stockholders c. Lenders d. Savers e. The Federal Reserve The long-run Phillips curve is downward-sloping. Answer: B Households make their savings available to borrowers through a. resource markets b. the […]

The total cost to a firm of producing zero units of output is Human capital is defined as a. the skills and knowledge possessed by workers b. the tools used by labor c. equipment and machinery used to train workers […]

A monopoly’s Which of the following is a distinguishing characteristic of oligopolies? Answer: C Cyclical unemployment a. is short-term joblessness experienced by those who are between jobs b. is joblessness created by a mismatch between available jobs and workers’ skills […]

Fun Time Toys produced $60 million worth of toys in 2008. Because of a slow Christmas shopping season, only $50 million worth was sold to consumers, and the remaining $10 million worth went into inventories. Based on this information, how […]

Which of the following would not be included in the consumption component of GDP? a. Movie ticket sales b. Purchase of a new home c. Medical bills d. Clothing purchases e. Home electricity bills Which of the following statements about […]

If nominal GDP increased, which of the following could also have occurred? a. Both prices and real GDP decreased. b. Prices remained the same and real GDP decreased. c. Prices decreased and real GDP remained the same. d. Prices increased […]

Which of the following mechanisms helps output to return to potential after a demand shock? a. Change in business mentality b. Change in nominal wage rate c. Large changes in the capital stock d. Inability of the price level to […]

The law of demand says that In the classical model, when an open economy has balanced trade, Say’s law holds. Answer: A Suppose that when the price of aspirin rises from $2 to $3 per bottle, the quantity demanded falls […]

Given the balance sheet below and assuming a required reserve ratio of 20 percent, how much (in dollar terms) is this bank holding in excess reserves? a. $3.5 million b. $8 million c. $15 million d. $19 million e. $35 […]

Diseconomies of scale tend to occur in large firms because A monopoly is a Answer: E When opportunity costs rise as more of a good is consumed, the production possibilities frontier will be concave (bowed out) with respect to the […]

The term laissez faire can be translated a. “leave it alone” b. “make it equitable (fair)” c. “take an active role” d. “markets work” e. “free of problems” Net exports are a. total exports minus total imports b. what foreigners […]

In the short-run macro model, adjustment toward equilibrium is facilitated by price changes. Price-fixing agreements among competing firms are a violation of the Sherman Antitrust Act. Answer: A The order of Soviet dictator Joseph Stalin to farmers in the 1930s […]

Gold, silver and furs, when used as money, are referred to as a. fiat money b. precious money c. paper currency d. commodity money e. exchange money An excise tax on cigarettes Answer: C Deleveraging is the process of reducing […]

As China switches from catch-up growth to discovery-based growth, the pace of worldwide discoveries will increase and this will raise living standards a. in the countries that China trades with. b. in China and its neighboring countries. c. in the […]

Refer to Figure 7-1. Based on the figure, a. the price level has fallen since 1965 b. the price level in 1985 was lower than in 1980 c. the price level fell from 1980 to 1990 d. the price level […]

Wage rates may vary among labor markets for each of the following reasons, except one. Which is the exception? A firm that sells its output and hires its labor in perfectly competitive markets Answer: D Even though households do not […]

Which of the following would shift the aggregate demand curve to the left? a. increases in government purchases, investment spending, autonomous consumption, taxes or the money supply b. decreases in government purchases, investment spending, autonomous consumption, or the money supply […]

Which of the following factors may lead to an underestimation of the significance of unemployment when evaluating the overall unemployment rate? a. Involuntary full-time employment b. An increase in the number of military personnel c. Discouraged workers d. An increase […]

If the Fed wants to lower the interest rate, it will a. increase the money supply b. decrease the money supply c. increase money demand d. decrease money demand e. simply set a lower market interest rate Claire was trying […]

Nominal federal spending is a a. good indicator of how responsibility the federal government is b. good indicator of the overall economy’s performance c. measure of the public’s concern for the educational needs of the country d. warning sign that […]

Net exports a. are the second largest component of total spending b. are already included in measures on consumption, investment, and government spending c. are a source of total spending on U.S. output d. are always positive; i.e., total exports […]

Statistical discrimination In the Full Employment and Balanced Growth Act of 1978, Congress set a target rate of unemployment. The nation achieves this target rate a. in most years b. at least once a year c. only rarely d. in […]

How are the prices of various goods and services determined for the Consumer Price Index (CPI)? a. By an extensive annual household survey b. By an extensive monthly survey of stores, apartments, and owner-occupied homes c. By an extensive annual […]

When a positive externality exists, the marginal social demand curve Automatic stabilizers do not include a. taxes b. interest rates c. transfer payments d. forward-looking behavior e. enhancing the multiplier effect Answer: E Both tariffs and quotas a. benefit domestic […]

Why does increasing employment not necessarily increase living standards? a. Productivity always increases as employment increases. b. Living standards and employment are always positively related. c. Increasing employment may not be accompanied by higher real wages d. There is no […]

Wages often respond slowly to changes in output. The demand curve that a monopolist faces Answer: E The money demand curve indicates the total quantity of money demanded in the economy at each a. price level b. level of GDP […]

The budget line is useful for illustrating the notion of opportunity cost. The marginal revenue product of labor Answer: E Which of the following is not among the factors that lead to economic growth? a. Increases in employment b. Increases […]

What is the difference between actual investment (as defined in GDP) and planned investment? a. Planned investment does not include unplanned inventory changes; actual investment does. b. There is no difference; they are the same. c. Planned investment does not […]

The Fed’s goal is a. moderate and stable inflation b. zero inflation c. a low price level d. an inflation rate that diminishes over time e. low and stable inflation Rent control is an example of a price ceiling. Which […]

The largest component of private investment expenditure is a. inventories b. the capital stock c. new home construction d. purchases of newly-produced plant and equipment e. government investment in private industries Suppose that in 2009, private investment spending was $500 […]

If there is an excess demand for money, there is an excess a. supply of bonds and the price of bonds will increase. b. supply of bonds and the price of bonds will decrease. c. demand for bonds and the […]

Consider Figure 11-10 above. If the full employment level of output is $9 trillion, which of the following is true? a. The economy is currently operating at the full employment level b. The economy is currently operating below than the […]

Which of the following would be counted in U.S. GDP? a. the purchase of an old house b. the purchase of a new textbook c. the purchase of a $1,000 government savings bond d. washing your car in the driveway […]

Figure 7-8 shows three different cost curves, labeled A, B, and C. Which of these curves is most likely to represent marginal cost? Production is productively efficient when Answer: B What can be said about the firm shown in Figure […]

When there are implicit costs of production, If the required reserve ratio is 0.2, the demand deposit multiplier is a. 0.2 b. 0.8 c. 1.25 d. 5.0 e. 8.0 Answer: D If U.S. GDP drops and South Korean GDP remains […]

Henry decides to quit his job, take his $60,000 in savings, and open a dry cleaning store. Figure 8-1 shows the revenues and expenditures for his first year of operation. Which of the following items would be included in the […]

Your aunt gives you a PepsiCo bond with face value of $5,000. It will mature in two years. Currently, the interest rate is 10 percent (0.10) per year. How will the value of the bond change if the interest rate […]

The inflation rate a. explains how prices are reacting to economic policies b. indicates the level of prices charged by all firms in the economy c. measures the annual percent increase in the average level of prices d. measures how […]

In order to build a table, a furniture company buys $50 worth of wood from a lumber company and $20 worth of hardware from a metal products firm. If the value added by the furniture company is $200, what price […]

Which of the following is an example of a positive externality? Figure 2-5 shows five different points along the production possibilities frontier for a country that produces rockets and cruise ships. If the country is currently operating at point C […]

If the marginal propensity to consume is 0.75 and investment spending decreases by $20 billion, what will be the overall effect on GDP? a. GDP will decrease by $20 billion b. GDP will increase by $15 billion c. GDP will […]

Some of the inaccuracies in measuring GDP are attributable to a. monopolization b. ignoring production by U.S.-owned plants abroad c. the underground economy and quality changes d. tax evasion and inflation e. short-term changes in spending If output is below […]

To be effective, countercyclical fiscal policy must be temporary. One way to increase labor force participation is to cut income tax rates. Which of the following is true given such a scenario? a. Cutting income tax rates increases labor force […]

Economists consider the minimum wage to be a Economic growth policies always involve a. trade-offs b. lower taxes c. higher government spending d. more investment e. more transfer payments Answer: A The phenomenon of wages in many industries changing very […]

A person has an absolute advantage in producing a good if he can The economic behavior of government is constrained by Answer: A If the demand for good A is more elastic than the demand for good B, a small […]

The effect of a change in the price of tea on the quantity of coffee demanded is measured by the Which of the following is a reason why the labor demand curve would shift rightward? a. A decrease in the […]