Archives: Quiz

Unemployment caused by a business cycle recession is called cyclical unemployment. Examining the conditions that could lead to economic growth is an example of macroeconomic topic. Answer: TRUE The government purchases multiplier will be larger if the marginal income tax […]

Consider a country that produces only two goods: bird feeders and binoculars. Suppose it is possible for this country to increase its production of bird feeders without producing fewer binoculars. In this case, its current output combination is inefficient. In […]

Increasing a fixed exchange rate is called a revaluation. There will be no deadweight loss if the marginal benefit to consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized. […]

If speculators believe a currency is soon going to be revalued, they will increase their demand for that currency. The division of the burden of a tax between buyers and sellers in a market is called tax incidence. Answer: TRUE […]

Adverse selection refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off. One problem with deflation is that it can raise the real value of debt. Answer: […]

If two countries adhere to a gold standard, the exchange rate for their currencies is fixed. An increase in the inflation rate increases employment only if the increase in inflation is unexpected. Answer: FALSE Aggregate expenditure includes consumption spending, unplanned […]

A voluntary export restraint is an agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other country. Compared to the previous 20 years, productivity […]

If the federal budget has an actual budget surplus of $75 billion, but a cyclically adjusted budget surplus of $50 billion, then the economy must be above potential real GDP. One of the main sources of comparative advantage is natural […]

Direct finance includes the sale by a corporation of stocks or bonds, but does not include borrowing money from a bank. If the CPI falls from 142 to 140 between two consecutive years, this implies that prices fell by 2% […]

The substitution effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded. If additional units of a good could be produced at a constant opportunity cost, the production possibility […]

The government makes all economic decisions in a centrally planned economy. When voluntary exchange takes place, only one party gains from the exchange. Answer: FALSE Using “chain-weighted” prices to calculate real GDP remedies the distortions causes by changes in relative […]

The income effect explains why there is a direct relationship between the price of a product and the quantity of the product demanded. The United States would gain from the elimination of tariffs and quotas even if other countries do […]

A real appreciation of the dollar is caused by either a nominal appreciation of the dollar, a rise in the foreign price level, or a fall in the U.S. price level. An increase in the purchasing power of money need […]

With the Troubled Asset Relief Program (TARP), the Treasury provided funds to banks in exchange for stock. The natural rate of unemployment is the rate that exists when the economy is producing at potential GDP. Answer: TRUE Under current U.S. […]

Contractionary fiscal policy is used to decrease aggregate demand in an attempt to fight rising inflation. As a percentage of GDP, health care spending on Medicare and Medicaid is expected to double over the next 40 years unless health care […]

The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss. Most U.S. currency held outside the U.S. banking system is held by foreigners. Answer: TRUE Examining the conditions that could lead to inflation […]

The only type of business that faces limited liability is a corporation. For most goods and services, the burden of a tax is on the sellers. Answer: FALSE One consequence of adverse selection in the market for used cars is […]

An increase in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point inside the frontier. An increase in government spending lowers interest rates and increases the rate of investment […]

The overall mortality rate in the United States has declined for the past 30 years. Most economists believe that labor unions significantly increase the overall unemployment rate in the United States. Answer: FALSE The Fed has complete control over the […]

By the 2000s, investment banks had become significant participants in the secondary market for mortgages. The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises. Answer: TRUE The income effect of […]

If a country has an absolute advantage in producing a product, it may not have a comparative advantage in producing that product. The Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association were established by Congress in order […]

New Keynesian macroeconomic theory emphasizes the role of ‘sticky” prices in the economy. On a diagram of a production possibility frontier, opportunity cost is represented by the slope of the production possibility frontier. Answer: TRUE The aggregate demand curve shows […]

If it costs Hobie $900 to produce 5 lamps and $1,200 to produce 6 lamps, then the difference of $300 is the marginal cost of producing the 5th lamp. Over the last three decades in the United States, services have […]

If a firm in Thailand borrows dollars from a U.S. bank, its interest payments on the loan in bahts will decrease if the baht appreciates against the dollar. The circular flow of income shows that GDP can be measured as […]

Maintaining a strong dollar in international currency markets is not one of the four monetary policy goals of the Fed listed in the textbook. If inflation is higher than expected, this helps borrowers (by reducing the real interest rate they […]

Producer surplus is the difference between the highest price someone is willing to pay and the price he actually pays. Ceteris paribus, an increase in the government’s budget deficit will increase the current account deficit. Answer: TRUE Foreign portfolio investment […]

The ratio at which a country can trade its exports for imports from other countries is called comparative advantage. In a market with positive externalities, the market equilibrium price will be greater than the efficient equilibrium price. Answer: FALSE “Cost […]

If a country produces only two goods, it is possible to have an absolute advantage in the production of both those goods. On average, people in the United States spend a smaller percentage of their income on health care than […]

In a fixed exchange rate system, speculation regarding an expected revaluation or devaluation of a currency makes it more difficult to maintain the existing exchange rate. If the Fed wishes to decrease the supply of money and credit, it may […]

The principal-agent problem that exists between shareholders and managers also exists between managers and workers. When Javier’s income increases by $5,000, he spends an additional $3,750 dollars. This implies that his marginal propensity to consume is 0.75. Answer: TRUE An […]

Inflation rates during the years 1979-1981 were the highest the United States has ever experienced during peacetime. Exchange rates under the Bretton Woods system were determined by relative supplies of gold held by countries within the system. Answer: FALSE[/cpmembership] When […]

An economy that grows too slowly fails to raise living standards. In the United States, the typical person who has lost his or her job finds another one in a few months except during severe recessions. Answer: TRUE The developing […]

The long-run aggregate supply curve is vertical. Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling price to remain competitive. Answer: FALSE For the purchasing power of money to increase, the price level […]

The term “market” refers only to trading arrangements that have been approved by the government. Contractionary fiscal policy involves decreasing government purchases or increasing taxes. Answer: TRUE Economies cannot function without money. Answer: FALSE There are no costs to inflation […]

Raising taxes on interest and dividend income will increase the level of investment and economic growth. The rising cost of uninsured patients receiving treatment at hospital emergency rooms is one of the leading causes of the increase in health care […]

Inflation targeting, typically, has been accompanied by lower inflation. The question of whether economic growth is desirable is a positive question, easily settled by economic analysis. Answer: FALSE[/cpmembership] Ceteris paribus, an increase in the money supply will lower short-term interest […]

The budget deficit increases during wars and recessions. In a market with positive externalities, the market equilibrium quantity will be less than the efficient equilibrium quantity. Answer: TRUE Increasing the federal budget deficit will contribute to increasing the federal government […]

A price discount where the discount is based on the total quantity purchased over a given period, regardless of the number of lots purchased over that period, is A) customer based. B) lot size based. C) supplier based. D) volume […]

Personnel can utilize forecasts to make decisions concerning A) scheduling. B) promotions. C) plant/equipment investment. D) purchasing. Which of the following uses transportation to minimize the total cost (transportation, inventory, information, and facility) while providing an appropriate level of responsiveness […]

The rising popularity of bubble and squeak as a breakfast item on the menu has resulted in a steady demand for peas. Over the course of the past week, 457 patrons have ordered the hearty breakfast and each serving contains […]

Gang Aft Agley, a manufacturing company, faces the aggregate planning problem shown in the table below. Cost of regular production is $5 per unit, the cost of producing the same unit on overtime is $7.50, the cost of subcontracting is […]

The primary role of cycle inventory is to allow different stages in the supply chain to A) purchase product in lot sizes that maximize the sum of the material, ordering, and holding cost. B) purchase product in lot sizes that […]

The tailored strategy “Focus on low-cost, decentralized capacity for predictable demand” follows which risk mitigation strategy? A) Get redundant suppliers. B) Increase capacity. C) Increase responsiveness. D) Increase inventory. The phenomenon where each actor is incentivized to maximize his gain […]

A high fashion retailer should rely on A) historical data to forecast next season’s demand. B) interpretation of industry trends and customer tastes to forecast next season’s demand. C) store-level POS data to forecast next season’s demand. D) distribution center […]

The goal of procurement is A) to analyze spending across various suppliers and component categories to identify opportunities for decreasing the total cost. B) to analyze spending across various suppliers and component categories to identify opportunities for increasing the total […]

The drive for strategic fit should come from A) the supply chain manager. B) the strategic planning department. C) the highest levels of the organization, such as the CEO. D) middle management. The opportunities from globalization are often accompanied by […]

The sales typically measured by a manufacturer are A) the quantity sold to final customers (sell–through). B) the quantity sold to distributors or retailers (sell-in). C) the quantity reported by the salesperson. D) based on the quantity of supplies purchased […]

The goal of trade promotions is to A) influence retailers to act in a way that helps the retailer achieve its objectives. B) influence retailers to act in a way that helps the manufacturer achieve its objectives. C) influence retailers […]

Seasonal demand can be met by A) maintaining enough manufacturing capacity to meet demand in any period. B) building up inventory during the off season to meet demand during peak seasons. C) offering a price promotion during periods of low […]

________ is used to determine customer service levels. A) Inventory held B) Backlog/stockout quantity C) Workforce hired/laid off D) Machine capacity increase/decrease A high level of product availability requires A) large inventories and tends to raise costs for the supply […]