Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download Question - nimitz25
Document related concepts
Business cycle wikipedia , lookup
Monetary policy wikipedia , lookup
Economic democracy wikipedia , lookup
Exchange rate wikipedia , lookup
Ragnar Nurkse's balanced growth theory wikipedia , lookup
Money supply wikipedia , lookup
Nominal rigidity wikipedia , lookup
Transcript
Question 1. As the US economy enters a recession, government outlays will automatically _____ and government revenue will automatically _____. a. Increase, decrease b. Decrease, increase c. Increase, increase d. Decrease, decrease e. Remain constant, remain constant 2. Which of the following is TRUE of financial intermediaries? a. they were illegalized by the Clayton Act b. they reduce aggregate investment c. they are essential to the formation of cartels d. they borrow at the prime rate e. they receive interest as profit 3. Barter is ineffective because it requires a(n) a. physical marketplace b. medium of exchange c. financial intermediary d. double coincidence of wants e. loss for at least one party 4. Which of the following requires a coincidence of wants? a. speculation b. demand c. picketing d. barter e. supply 5. An economy is in a recession when its GDP has dropped for a. 2 successive quarters b. 4 successive quarters c. 6 successive quarters d. 8 successive quarters e. 10 successive quarters 6. The correct sequence of the business cycle is a. expansion, contraction, trough b. expansion, peak, trough, depression c. contraction, peak, expansion, trough d. expansion, peak, contraction, trough e. recession, depression, boom, bust 7. The regular fluctuation of economic activity is known as a. the circular flow model b. the business cycle c. stabilization d. discretionary spending e. cyclical unemployment 8. An economy enters a recession if it experiences a decline in real output for a. one consecutive quarter b. two consecutive quarters c. three consecutive quarters reference automatic stabilizers banks barter barter business cycle business cycle business cycle business cycle d. four consecutive quarters e. eight consecutive quarters 9. Ceteris paribus MOST CLOSELY means a. "assume nothing" b. "with change" c. "let do" d. "other things being equal" e. "in the long run" 10. In the circular flow model, money moves directly from households to the a. product markets b. factor markets c. firms d. foreign factor markets e. domestic market 11. In the circular flow model, productive resources are held by a. firms b. the government c. product markets d. households e. factor markets 12. Which of the following is regarded as an injection in the circular flow model? a. income b. savings c. taxation d. exports e. consumption ceteris paribus circular flow circular flow circular flow 13. Which of the following correctly follows the flow of goods and services through the circular flow? a. factor, market, product market, firms, households b. firms, government, investment, households circular flow c. foreign factor markets, domestic markets, households, firms d. product markets, households, factor markets, firms e. households, government, factor market, product market 14. A factor market is where a. firms receive revenue b. households sell income c. households sell resources d. firms sell goods e. households sell goods 15. Who is the primary supplier of productive resources in the US? a. foreign countries b. households c. the government d. businesses e. the Federal Reserve circular flow circular flow model 16. If country B has a lower relative cost than country A in producing a good, then comparative country B has a(n) advantage a. international advantage b. c. d. e. absolute advantage direct advantage comparative advantage opportunity advantage 17. Which of the following concepts best explains why division of labor is beneficial for society? a. Imperfect competition b. Positive externalities comparative c. Comparative advantage advantage d. The indifference curve e. Absolute advantage 18. David Ricardo, who supported free trade and minimal government intervention, was a proponent of a. command economies b. market economies david ricardo c. utopian economies d. Marxist economies e. traditional economies 19. Approximately how large is the US national debt? a. $200 billion b. $300 billion c. $2 trillion d. $3 trillion e. $11 trillion debt 20. The willingness of consumers to purchase goods and services over a range of prices is known as a. demand b. quantity demanded demand c. aggregate demand d. quantity supplied e. supply 21. Demand for electricity results from demand for air conditioning. This is an example of a. derived demand b. secondary demand c. utility d. relative demand e. factor substitution 22. Which industry is characteristic of less-developed countries? a. craft b. agriculture c. manufacturing d. service e. communications 23. Economic rent is a. an entrepreneur's salary b. the opportunity cost of maintenance and depreciation c. economic profit earned from fixed inputs d. the opportunity cost of owning land derived demand developing countries economic rent e. earned only in perfectly competitive markets 24. At equilibrium, quantity demanded equals a. zero b. quantity supplied c. demand d. supply e. price 25. At which of the following exchange rates would the US import the MOST goods from France? a. 1 euro = 2 dollars b. 1 dollar = 2 euros c. 1 euro = 1.5 dollars d. 1 dollar = 1.5 euros e. The exchange rate will not affect the level of imports 26. Appreciation of the US dollar would result in an increase in a. gold reserves b. imports c. exports d. tariffs e. domestic investment equilibrium exchange rage exchange rates 27. If ten dollars is worth fifteen pesos, then which of the following exchange rates is CORRECT? a. 1 peso = 0.66 dollars b. 1 dollar = 1.33 pesos exchange c. 1 peso = 1.33 dollars rates d. 1 peso = 1.50 dollars e. 1 dollar = 15.00 pesos 28. The US dollar and the euro are exchanged on a(n) a. Tied exchange rate system b. Fixed exchange rate system c. Tiered exchange rate system d. Pegged exchange rate system e. Floating exchange rate system 29. If the US trades with France, then a decrease in the price of the dollar will result in a(n) a. increase in French exports b. increase in the price of the euro c. decrease in US exports d. decrease in the supply of euros e. increase in the supply of dollars 30. Depreciation of a currency is BEST identified by a decrease in a. nominal interest rates b. the rate of inflation c. real interest rates d. real GDP per capita e. its exchange rate 31. How many districts are in the Federal Reserve System? a. 14 exchange rates exchange rates exchange rates fed b. c. d. e. 12 10 8 6 32. The Federal Reserve System consists of how many districts? a. 4 b. 6 c. 8 d. 10 e. 12 33. How many banks are in the Federal Reserve System? a. 6 b. 12 c. 17 d. 25 e. 37 34. Which of the following is a contractionary fiscal policy? a. increasing the required reserve ratio b. increasing federal spending c. decreasing the prime rate d. increasing personal income tax e. decreasing the CPI 35. Which of the following actions can the government NOT pursue to combat inflation? a. reducing welfare benefits b. raising sales tax c. buying bonds d. reducing public spending e. raising personal income tax fed fed fiscal policy fiscal policy 36. Which of the following was founded primarily to provide financial assistance to developing countries? a. the GATT b. the WTO gobal c. the World Bank d. the IMF e. the European Community 37. Bad money is MOST LIKELY to a. have few fluctuations in value b. dominate the money supply c. be illegal d. experience few debasements e. have no intrinsic value 38. Gresham's law states that a. bad money forces good money out of circulation b. good money forces bad money out of circulation c. inflation varies inversely with unemployment d. inflation varies directly with unemployment e. supply creates its own demand gresham's law gresham's law 39. Which of the following is a microeconomic decision? a. How much cereal Xavier should eat b. How much money to print c. How to reduce unemployment d. Whether to trade with France e. How to analyze consumer spending 40. Improved treatment for disease leads to a decrease in prevention. This is an example of a. internal consequences b. unintended consequences c. intended consequences d. normative consequences e. unpredictable consequences how much? I.??? 41. The decision to make a tax system more progressive is an example of society answering what basic economic question? a. what to produce? b. how to produce? I.??? c. how much to produce? d. what to tax? e. who receives the benefits? 42. The United States is BEST classified as a a. mixed economic system b. pure market economic system c. planned economic system d. command economic system e. traditional economic system 43. A point on the production possibilities curve must be BOTH a. attainable and efficient b. attainable and inefficient c. unattainable and efficient d. unattainable and inefficient e. unattainable and inflationary I.??? I.??? 44. Which of the following incentives is NOT a non-monetary incentive to buy gum for $1 instead of $0.90? a. personal values b. larger quantity I.??? a. better quality a. convenience a. uncertainty 45. Which of the following issues involves microeconomics? a. the overall price level b. industrial organization c. the business cycle d. national economic growth e. the money supply 46. Which of the following items is a natural resource used to make ketchup? a. a factory b. an employee c. the firms founder I.??? I.??? d. a tomato e. packaging 47. A country has a comparative advantage in a good compared to its trade partner if a. it produces the good at a higher opportunity cost b. it produces the good at a lower opportunity cost c. it produces more of the good d. it consumes less of the good e. it consumes more of the good 48. Normal profit is a component of a. economic profit b. economic rent c. supernormal profit d. external cost e. total cost 49. All of the following are true regarding traditional economies EXCEPT: a. They are more prevalent in less-developed countries b. They can result because of cultural forces c. They can result from ignorance of alternatives d. They are usually governed by a democratic government e. Aspects of such economies can be found in some developed countries 50. A society’s experiences and education is its a. standard of living b. human capital c. store of value d. economic profit e. comparative advantage I.??? I.??? I.??? I.??? 51. Both Country A and Country B produce with constant opportunity costs. Along its production possibilities curve Country A must give up 3 units of steel for 1 unit of oil. Country B must give up 1 unit of steel for 1 unit of oil. Which statement correctl a. Country A has the comparative advantage in steel and oil. b. Country B has the comparative advantage in steel and oil. c. Country A has the comparative advantage in steel and Country B has the I.??? comparative advantage in oil. d. Country A has the comparative advantage in oil and Country B has the comparative advantage in steel. e. Country A has the absolute advantage in oil and Country B has the absolute advantage in steel. 52. Trading and specializing often lead to a a. deflationary spiral b. strengthening of family bonds c. growth in government power d. financial marketplace e. web of interdependence I.??? 53. Decision-making tends to be more difficult in all of the following circumstances EXCEPT a. when there is a big difference in benefits and costs I.??? b. when there is a state of imperfect information c. when benefits and costs are difficult to measure d. when there are many differing perspectives e. when there are too many choices to choose from 54. A graph of which of the following relationships does NOT show a curve whose slope increases at a decreasing rate at most points? a. laborer’s wages and his age b. profits and units of output I.??? c. degree of specialization and time d. total utility and units of a good e. total costs and units of input 55. Which of the following BEST describes a response to a positive non-monetary incentive? a. Rick works overtime to make more money b. Anita doesn’t speed to avoid paying a fine I.??? c. David gets detention for skipping class d. Julia shops at a discount store e. Adam buys a product because it is made in America 56. A system of exchange done through bartering suffers from which of the following problems? a. its transactions costs are far too low b. a double coincidence of wants must exist c. it cannot be regulated by the government d. people are hesitant to trade with strangers e. the value of goods is too easy to calculate 57. Entrepreneurs are usually motivated by a a. positive monetary incentive b. positive non-monetary incentive c. negative monetary incentive d. negative non-monetary incentive e. negative moral incentive 58. Education is considered to be a(n) a. penalty b. investment c. luxury d. free good e. fixed cost 59. Which of the following is TRUE about capital resources? a. they help increase productivity b. they cannot be consumed c. they include paper assets d. they cannot be produced e. they are unaffected by derived demand 60. The term laissez-faire refers to a: a. Market economy b. Planned economy c. Command economy d. Traditional economy e. Mixed economy I.??? I.??? I.??? I.??? I.??? 61. A technological discovery that improves the efficiency of automotive production would cause the production possibilities curve to a. shift outward b. shift leftward I.??? c. shift inward d. flatten e. remain constant 62. If a country can produce two goods and trades with another country to obtain the other good, how will the two countries decide what to produce? a. they will produce the good with the greatest positive externality b. they will produce the good with the lowest marginal benefit relative to the other good c. they will produce the good in which they have the absolute advantage d. they will produce the good with the lower opportunity cost relative to the other good e. they will produce the good with the higher fixed cost relative to the other good I.??? 63. The theory of comparative advantage was first put forth by which economist? a. Jean-Baptiste Say b. Jean-Baptiste Colbert c. Thomas Malthus I.??? d. Adam Smith e. David Ricardo 64. If a good is not desirable, then the good is a. not scarce b. not rare c. a public good d. a club good e. a private good 65. Which of the following concepts can the production possibilities frontier illustrate? a. technological advances b. consumer confidence c. rnargnai benefits d. marg;nal costs e. market equilibrium 66. If country A can produce every good more efficiently than country B, then country A a. Has a comparative advantage in producing every good b. Has a dominant trading strategy c. Should enforce a tariff on country B's goods d. Has more factor inputs than country B e. Will benefit from trade with country B 67. A benefit-to-cost ratio that equals one means a. there are no benefits b. the costs exceed the benefits c. the benefits equal the costs d. the benefits exceed the costs e. there are no costs I.??? I.??? I.??? I.??? 68. In order for markets to function, which of the following activities must occur? a. mass production b. specialization c. elastic price fluctuation d. voluntary exchange e. government control 69. Which of the following is NOT characteristic of an ideal command economy? a. frivolous production b. limits on private property c. government intervention d. planned allocation e. economic egalitarianism 70. A country with an absolute advantage in a good: a. Produces that good most efficiently b. Produces that good at the lowest opportunity cost c. Produces that good at the highest opportunity cost d. Should always export that good e. Should always import that good I.??? I.??? I.??? 71. Given the following data about the output of Country A and Country B with alternative uses of one year of labor inputs, what generalization can be made about Country B? Country A can produce 50 units of computers or 50 units of televisions. Country B can produce 40 units of televisions or 10 units of computers. a. Country B has an absolute advantage in producing televisions. I.??? b. Country B has a comparative advantage in producing computers. c. Country B should not produce either televisions or computers. d. Country B has a higher cost of production for computers. e. Country B has a comparative advantage in producing televisions. 72. The US has a a. market economy b. planned economy c. mixed economy d. traditional economy e. utopian economy 73. What is the name given to the slope of an economys production possibilities frontier? a. rate of diminishing return b. price elasticity c. marginal rate of transformation d. marginal sociai cost e. aggrecate product of labor 74. A profit-maximizing boat company sells identical boats at different prices in different markets. This allows it to do all of the following EXCEPT a. increase total revenue b. increase the quantity of boats supplied c. increase demand for boats d. decrease consumer surplus e. increase marginal revenue I.??? I.??? I.??? 75. Payments for resources are called a. value payments b. market payments c. factor payments d. commodity payments e. currency payments 76. Which of the following is NOT an opportunity cost of having a job? a. attending summer school b. international tourism c. learning statistics d. the time spent at work e. watching movies 77. Which of the following issues involves normative analysis? a. the unemployment rate b. the price of coffee beans c. the proper tax policy d. the level of real GDP e. the use of one’s time 78. In a market economy, the question of what to produce is decided by: a. Resource owners b. A central planning agency c. An authoritarian government d. The interaction of buyers and sellers e. The voting populace 79. All of the following are true of countries with socialist economic structures EXCEPT a. some northern European nations have socialist economies b. socialist nations do not always have one-party structures c. socialist nations are always communist d. socialist nations aim to share resources for the common good e. this economic structure was prevalent in the U.S.S.R. 80. When a tax is levied on yacht purchases, all of the following changes occur EXCEPT a. fewer yacht sales b. a higher standard of living a. higher unemployment a. increased car sales a. a more inefficient yacht market 81. If a society tries to grow beyond its production possibilities curve by demanding more goods and services than can be produced, what is the result? a. Resource shortages and decreased productivity b. An increase in supply c. A surplus of goods and resources d. Increase in unemployment e. Prices and costs increase in the economy I.??? I.??? I.??? I.??? I.??? I.??? I.??? 82. Which of the following is the BEST example of someone responding to a nonmonetary negative incentive? I.??? a. Chuck ditches class because all of his friends were doing it b. Dirk steals more cars because laws have become less stringent c. Barry gets detention for cheating on his quiz d. Jordan drives slower to avoid getting a speeding ticket e. Greg pays the bill because he does not want to look cheap 83. Which of the following would NOT result in economic growth? a. an increase in capital goods b. higher aggregate demand c. inefficient use of resources d. use of innovative technologies e. an improved labor force 84. Which factor of production receives profit? a. money b. land c. entrepreneurship d. capital e. labor I.??? I.??? 85. In a free market economy, which of the following people decide how much of a good to produce? a. the advertiser b. the consumer I.??? c. the regulator d. the entrepreneur e. the government 86. An example of an unintended consequence of running a factory is a. wage expenses b. air pollution c. employment d. goods production e. revenue I.??? 87. All of the following are reasons why governments erect trade barriers EXCEPT a. to protect infant industries from competition b. to discourage domestic investment in foreign industries c. to retaliate against trade barriers erected against them I.??? d. to protect industries vital to national security e. to protest a foreign governments policy 88. If a country can produce more of a good using the same number of inputs than its trade partners, then the country a. should always specialize in the production of that good b. should never specialize in the production of that good I.??? c. has a comparative advantage in that good d. has an absolute advantage in that good e. does not have a comparative advantage in that good 89. There is a crowded intersection, but no one is standing there selling newspapers. The MOST likely reason is a. no one has discovered the profit-making potential b. newspaper sales at that intersection are prohibited c. selling newspapers at intersections is not proper d. there are not enough workers to cover that intersection e. the profit potential does not justify the undertaking I.??? 90. Payments for entrepreneurial resources are called a. rent b. wages c. interest d. profit e. benefits 91. Which of the following would be the BEST example of a fixed cost? a. Overtime wages for hourly workers b. The electricity used to run a machine c. Advertising costs d. The lease on a factory e. The time spent on production 92. Payments for labor are referred to as a. interest b. wages c. Economic rent is d. derived costs e. factor inputs 93. Which of the following does NOT usually have a comparative advantage? a. a country b. an individual c. a market d. a region e. a firm I.??? I.??? I.??? I.??? 94. The decision to allow free international trade is a trade-off between _____ and _____ a. equity, absolute advantage b. absolute advantage, comparative advantage I.??? c. self-sufficiency, economic efficiency d. domestic industries, foreign industries e. weak industries, infant industries 95. Which of the following is NOT a factor of production? a. human resources b. capital resources c. entrepreneurial resources d. natural resources e. financial resources 96. A public service announcement on TV about the dangers of smoking is a: a. Positive monetary incentive b. Positive non-monetary incentive c. Negative monetary incentive d. Negative non-monetary incentive e. Negative values incentive I.??? I.??? 97. Jack has three dogs and twenty cats while Sam has fifteen dogs and two cats. If Jack and Sam, who like both animals, trade, Sam might end up with a. 18 dogs and zero cats I.??? b. 8 dogs and 22 cats c. zero dogs and 10 cats d. 9dogsand 11 cats e. 16 dogs and 21 cats 98. Which of the following provides an argument for free trade? a. protectionism b. the principle of absolute advantage c. the principle of comparative advantage d. the law of diminishing returns e. rational expectations theory 99. Which of the following is possible through trade? a. neither party will be forced to specialize b. scarcity no longer becomes an economic problem c. both parties can move beyond their resource constraints d. currency prices will stabilize completely e. both parties will be able to survive with fewer goods 100. Ceteris paribus is a Latin phrase meaning: a. “one from many” b. “from the absurd” c. “vicious circle” d. “all else being equal” e. “assuming nothing” 101. If an action is rational, then a. Its benefits must be minimal b. Its costs must be minimal c. Its benefits must equal or exceed its costs d. Its benefits must be maximal e. Its costs must exceed its benefits 102. The production possibilities curve involves which basic economic question? a. What to produce? b. How to produce? c. When to produce? d. Who directs production? e. Who receives the benefits of production? 103. Marginal analysis is concerned with: a. Net gains b. Cost-to-benefit ratios c. Incremental changes d. External costs e. Unintended consequences 104. Which of the following is NOT considered a type of economic system? a. traditional b. command c. market d. mixed e. competitive 105. What is the primary allocation concern of MOST planned economies? a. efficiency b. productivity c. private property d. equity I.??? I.??? I.??? I.??? I.??? I.??? I.??? I.??? e. monopoly 106. What is an unintended consequence of building a private runway? a. noise pollution b. increased air traffic c. job creation d. less open space e. increased profits 107. In a pure market economy, the government is always responsible for a. export subsidies b. industrial regulation c. preventing market failure d. environmental protection e. income redistribution 108. As a country's labor force becomes increasingly specialized, which of the following is MOST LIKELY to occur? a. the production possibilities curve will shift inward b. resources will be used less efficiently c. economic interdependence will increase d. prices will increase e. labor productivity will decrease 109. When the opportunity cost of producing o good is constant, the production possibilities frontier forms a. a concave line b. a convex line c. a straight line d. a parabola e. a squiggly line I.??? I.??? I.??? I.??? 110. In which economic system does custom decide who receives the benefits of production? a. a command economy b. a Marxist economy I.??? c. a mixed economy d. a traditional economy e. a market economy 111. Which of the following could cause a production possibility curve to shift to the right? a. a natural disaster b. a decrease in unemployment c. an increase in inflation d. an increase in population e. a reallocation of resources I.??? 112. All of the following could potentially make a point beyond the PPF obtainable EXCEPT: a. Increased investment in education b. Improvements in technology I.??? c. Increases in the supply of natural resources d. Increases in international trade e. Decreases in unemployment 113. Human capital is developed through a. education b. entertainment c. technology d. consumption e. competition 114. What should Mike do if his cost to benefit ratio is 1.2 if he purchases an ice cream cone, lithe purchases a candy bar, and .08 if he purchases a slice of cheesecake? a. purchase an ice cream cone b. purchase two ice cream cones c. purchase a candy bar d. purchase an ice cream cone and a candy bar e. purchase a slice of cheesecake 115. A country that has an absolute advantage in making CDs a. often has a larger work force than another country b. uses more resources to make CDs than another country c. can produce more CDs than another country d. has more musicians than another country e. cannot make anything better than CDs 116. If long-run average costs in an industry are decreasing as output increases, then a. there are economies of scale b. there are constant returns to scale c. there are diseconomies of scale d. there is price discrimination e. there is collusion 117. The U.S. economy is a a. market economy b. command economy c. mixed market economy d. centrally-planned economy e. traditional economy 118. Rent control results in a. a higher price for housing b. a housing surplus c. diminished supply of housing d. a Pareto inefficient market e. limited production possibilities 119. Rent is payment for: a. Land b. Labor c. Financial capital d. Physical capital e. Human capital 120. Interest is payment for which factor of production? a. Natural resources b. Labor resources c. Capital resources I.??? I.??? I.??? I.??? I.??? I.??? I.??? I.??? d. Entrepreneurial resources e. Financial resources 121. Diminishing marginal returns cause production possibility curves to be: a. Sloped downward b. Sloped upward c. Concave to the origin d. Convex to the origin e. Straight line 122. The payments received by an entrepreneur are known as a. economic rent b. economic profit c. profit d. rent e. wages 123. A trade deficit exists when a. there is a favorable balance of trade b. government expenditures exceed revenues c. imports are greater than exports d. consumption spending exceeds investment e. a country’s current account is positive 124. A country's balance of trade is considered favorable if its a. Exports exceed its imports b. Imports exceed its exports c. Current account balance exceeds its capital account balance d. Capital account balance exceeds its current account balance e. Current account balance equals its capital account balance 125. The largest percentage of income earned by households is comprised of a. interest b. rent c. profit d. tuition e. wages 126. Which of the following is NOT an aspect of free trade? a. more movement of capital b. less reliance on foreign nations c. free exchange of ideas d. greater movement of labor e. free exchange of goods 127. In a market economy, the question of what to produce is decided by a. resource owners b. a central planning agency c. an authoritarian government d. the interaction of buyers and sellers e. the voting populace I.??? I.??? I.??? I.??? I.??? I.??? I.??? 128. A pure command economy is LEAST likely to feature which of the following? a. An authoritarian government I.??? b. Government ownership of industry c. No economic freedom d. Economic planning e. Equal distribution of wealth 129. All of the following are characteristics of a command economy EXCEPT a. government control of production b. government-owned property c. a fixed wage system d. price controls e. labor unions I.??? 130. A company that forgoes the benefits of spending $100 on new equipment to invest the money in a subsidiary faces which of the following? a. a fixed cost b. a sunk cost I.??? c. a variable cost d. an opportunity cost e. a production cost 131. In a command economy, resource allocation questions would MOST likely be answered by: a. A central planning agency b. Democratically elected politicians I.??? c. An authoritarian government d. The interaction of buyers and sellers e. Traditions and customs 132. Through comparative advantage, countries will facilitate specialization by a. indoctrinating the entire population with propaganda b. having workers elect leaders drectly c. implementing a system of division of labor d. erecting tariffs on goods that they specialize in producing e. lowering income taxes while increasing benefits 133. Canada can produce guns or butter. A new invention doubles butter output per input. What BEST describes the effect on the production possibilities curve, assuming butter is on the X-axis? a. It will expand. b. It will contract. c. It will not change. d. It will stretch horizontally. e. It will stretch vertically. 134. Positive economics is BEST defined as a. monetarism b. marginalism c. the study of economic growth d. the study of how things are e. the study of how things should be 135. Which of the following economic systems would be MOST likely to feature aspects of both command economies and democratic political systems? a. Communism b. Socialism c. Capitalism d. Traditionalism I.??? I.??? I.??? I.??? e. Mercantilism 136. Which of the following is MOST likely to be state-owned in a mixed economy? a. Labor b. The means of production other than labor c. Basic infrastructure I.??? d. The press e. Commercial and residential buildings 137. Market economies still require some degree of government control due to all of the following problems EXCEPT a. inflation b. unemployment I.??? c. inefficient use of resources d. lack of consumer sovereignty e. unequal income distribution 138. Consumers regularly buy brand-name cereals instead of cheaper cereals because a. brand-name cereals are more expensive b. they are overly sensitive to advertising c. they act according to the law of supply d. their purchases are value-based decisions e. they are responding to a monetary incentive 139. The fact that scarcity exists suggests that optimization is ALWAYS a. constrained b. unattainable c. productive d. uncommon e. unbounded 140. Which of the following is an assumption made about human nature in economics? a. people are not controlled by the government b. people do not take scarcity into account c. people use unlimited resources d. people have unlimited wants e. people have plenty of free time 141. Expenditures in investment will result in a(n) a. increase in capital goods b. increase in business profits c. creation of economies of scale d. increase in government regulation e. decrease in aggregate demand 142. Which of the following is BEST seen as an example of the United States having some aspects of a traditional economy? a. Progressive income taxes b. Sunday closing laws c. Environmental regulations d. Private property e. Free trade I.??? I.??? I.??? I.??? I.??? 143. Which of the following BEST describes why production possibility curves are usually bowed outward? a. Economies of scale b. Imperfect substitution I.??? c. The income effect d. The wealth effect e. The substitution effect 144. What is a tax on an imported good? a. a quota b. a tariff c. a sanction d. an excise tax e. an automatic stabilizer 145. Knowledge increases the value of which of the following resources? a. natural resources b. human resources c. fixed resources d. deferred resources e. prorated resources 146. Identify the normative economic statement. a. inflation is steady at six percent b. the budget deficit has increased this year c. the rate of economic growth is unprecedented d. the rate of unemployment should be decreased e. inflation is currently above average 147. What are tariffs? a. Taxes on exported goods b. Taxes on imported goods c. Limits on the quantity of a good that can be exported d. Limits on the quantity of a good that can be imported e. Limits on the quantity of a good that can be both exported and imported 148. A market economy answers the “for whom to produce’ question using a. distribution by need b. distribution to the highest bidder c. distribution based on political favors d. distribution based on productivity e. unlimited distribution I.??? I.??? I.??? I.??? I.??? 149. What is the graphical representation of the trade-off between the production of two different goods? a. the indifference curve b. the production possibilities curve I.??? c. the consumption possibility frontier d. the supply curve e. the Edgeworth box 150. Which of the following can be considered a variable cost? a. interest b. rent c. natural resources d. insurance I.??? e. depreciation 151. Which of the following BEST displays the combination of military goods and domestic goods a nation can produce? a. a supply and demand graph b. a production possibilities curve c. a Phillips curve d. an aggregate supply and demand graph e. a Laffer curve 152. A person who combines land, labor, and capital to produce goods and services, usually at some risk, is called a(n) a. actuary b. broker c. capitalist d. debtor e. entrepreneur 153. A tax on alcohol is an example of a: a. Positive monetary incentive b. Positive non-monetary incentive c. Negative monetary incentive d. Negative non-monetary incentive e. Negative values incentive I.??? I.??? I.??? 154. A monopoly currently produces 100 frisbees per month and sells them at the market price of $10 each. If the monopoly instead sold 101 frisbees per month at the market price of $9 each, then the marginal revenue of the 101st frisbee would be a. -$101 I.??? b. -$100 c. -$91 d. $9 e. $909 155. Which of the following statements is FALSE? a. In a two-good market, one can have an absolute advantage in both goods b. In a two-good market, one can have a comparative advantage in both goods c. Interdependence is a result of specialization I.??? d. Comparative advantage should be considered in deciding what to specialize in e. Absolute advantage considers the amount of a good one can produce 156. A tariff is a. a limit on imports b. a limit on exports c. a tax on imports d. both a limit and a tax on imports e. both a limit and a tax on exports 157. Demand is different from want in that: a. Demand considers opportunity costs b. Demand considers external costs c. Demand considers fixed costs d. Demand does not consider price I.??? I.??? e. Demand does not consider income 158. In which economic system does the "invisible hand" determine prices? a. A Marxist economy b. A command economy c. A utopian economy d. A market economy e. A traditional economy 159. An increase in the efficiency of resource allocation would be represented graphically by a. a shift outwards of the production possibilities curve b. a shift inwards of the production possibilities curve c. movement along the production possibilities curve d. movement towards the production possibilities curve e. movement away from the production possibilities curve 160. The government decides to tax corporate profits and redistribute the tax revenue to the poorest fifth of the population. In this example, the government is answering which of the basic economic questions? a. who receives the benefits of production b. what to produce c. how much to produce d. how to produce e. what are the benefits of production 161. Why would a person buy the large meal for $5 when the medium meal is available for $4.50? a. his reservation price for the large meal is below $5 b. his utility for the medium meal is not at least $4.50 c. he gets at least $50 more utility out of the large d. he is not being a utility-maximizing consumer in this case e. he prefers the food at this restaurant to that of any other 162. All of the following are normative economic statements EXCEPT: a. The minimum wage is too high because it causes unemployment b. Income taxes should be increased for the rich c. Increasing the minimum wage will increase unemployment d. Corporate profits ought to be distributed more equitably e. The government should not lower tariffs 163. Comparative advantage occurs when one party has an advantage in a. The amount of time in which a good can be produced b. The amount of resources with which a good can be produced c. The relative cost of producing a good d. The total amount of a good that can be produced e. The domestic price of a good 164. What is the result of a negative incentive? a. A decrease in costs and benefits b. An increase in costs and benefits c. A decrease in costs or an increase in benefits d. An increase in costs or a decrease in benefits e. No change in costs or benefits I.??? I.??? I.??? I.??? I.??? I.??? I.??? 165. Engaging in international trade does NOT result in which of the following improvements? a. uniform prices b. better products c. more independence d. greater efficiency e. more variety 166. What is the MOST accurate explanation of why diamonds cost more than water? a. diamonds are rarer than water b. marginal utility for diamonds is higher c. diamonds provide more utility than water d. diamonds cost more to produce than water e. demand for diamonds is higher 167. Which of the following is a normative economic statement? a. unemployment is at its lowest in ten years b. the cost of living has increased since last year c. education costs are too high d. individuals with advanced degrees earn more money e. high gas prices are causing inflation 168. Traditional economies use which of the following criteria to decide what to produce? a. markets b. prices c. customs d. quality of life e. relative wealth 169. A positive economic statement is: a. Testable b. TRUE FALSE Value-based e. Open-ended 170. Which of the following does NOT increase labor productivity? a. division of labor b. specialization c. technology d. education e. derived demand 171. Total cost is equal to a. marginal cost times quantity b. total variable cost plus total marginal cost c. average cost times price d. total fixed cost plus total variable cost e. total fixed cost plus total marginal cost 172. When making a rational decision, one should choose the option with the: a. Highest total benefits b. Lowest total costs c. Highest marginal benefits I.??? I.??? I.??? I.??? I.??? I.??? I.??? I.??? d. Highest cost-to-benefit ratio e. Lowest cost-to-benefit ratio 173. Which force MOST accurately answers the “what to produce” question in a market economy? a. supply and demand b. a planning committee a. unions a. producers a. tradition 174. Manufactured goods used in the production of other goods are known as: a. Land b. Labor c. Financial capital d. Physical capital e. Human capital 175. Which of the following is necessary for a market to exist? a. a location b. a good c. an exchange d. many buyers e. many sellers 176. An increase in a country’s natural resources will: a. Shrink the production possibilities curve b. Expand the production possibilities curve c. Move the economy closer to the production possibilities curve d. Move the economy away from the production possibilities curve e. Have no effect whatsoever regarding the production possibilities curve 177. A positive economic statement is a(n): a. Suggestion on how to improve the economy b. Suggestion on how to make the economy more equitable c. Observation of how the economy is doing d. Recommendation on fiscal policy e. Recommendation on monetary policy 178. What is the opportunity cost of a decision? a. the money spent because of the choice b. the time spent making a decision c. the average value of the alternative possibilities d. the value of the next best alternative e. the money that would have been spent on an alternative 179. The production possibilities curve illustrates the a. law of supply b. benefits of economies of scale c. law of diminishing marginal utility d. principle of opportunity costs e. income effect 180. All of the following are typical complaints against command economic systems EXCEPT a. highly bureaucratic institutions are largely inefficient I.??? I.??? I.??? I.??? I.??? I.??? I.??? I.??? b. c. d. e. education and healthcare are unaffordable due to price controls lack of competition leads to a limited variety of goods shortages lead to long waits in line for goods adequate incentives for innovation do not exist 181. All of the following are productive resources EXCEPT a. Land b. Labor c. Capital d. Money e. Entrepreneurship 182. In a command economy, producers may be motivated by all of the following incentives EXCEPT a. special privileges b. political advancement c. increased profits d. social distinction e. acquisition of contracts 183. Which of the following is important to a market economy? a. central planning b. price discrimination c. tradition d. free goods e. innovation 184. The demand for the factors of production is called a(n) a. Elastic demand b. Inelastic demand c. Cost-driven demand d. Derived demand e. Marginal Demand 185. All of the following ideas are consistent with Marxist theory EXCEPT a. competition breaks down into monopoly b. value is determined solely by labor c. wages do not rise above subsistence d. capital should be owned collectively e. the proletariat will be overthrown 186. Payments for capital are called a. wages b. interest c. rent d. profit e. taxes 187. Which of the following would not cause an increase in productivity? a. the acquisition of Canada b. the immigration of 50,000 people c. an increase in the quality of public education d. technological advances in car-producing machinery e. an increase in the amount of car-producing machinery I.??? I.??? I.??? I.??? I.??? I.??? I.??? 188. Which consideration is LEAST likely to factor into a profit-maximizing firm’s decision to build a factory? a. demand for its product b. the price of land c. the surrounding wildlife d. transportation costs e. tax policies 189. In order to maximize world output each country should specialize in the production of goods and services in which it has the: a. Highest domestic absolute costs b. Lowest domestic absolute costs c. Lowest domestic nominal costs d. Lowest domestic opportunity costs e. Highest domestic opportunity costs 190. In which type of economy do religion and ritual often play a dominant role? a. a market economy b. a command economy c. a mixed market economy d. a planned economy e. a traditional economy I.??? I.??? I.??? 191. It has been suggested that, without international trade, a country would benefit by keeping its own products and money. This statement is flawed because it discredits which consideration? a. absolute advantage b. exchange rates I.??? c. opportunity costs d. political prowess e. transaction costs 192. When a manufacturer decides between hiring extra workers or replacing existing workers, which fundamental question is involved? a. what to produce b. when to produce c. how to produce d. for whom to produce e. how much to produce 193. Which of the following is NOT a likely aspect of a planned economy? a. more affordable staple goods b. a ban on individual wealth c. fewer luxury goods d. more surpluses and shortages e. a ban on profits 194. In a market economy, the basic economic question of “what to produce” is answered by which of the following? a. Supply and demand b. The government c. Traditional values d. A central planning authority e. Private producers I.??? I.??? I.??? 195. All of the following features are necessary for an exchange to occur EXCEPT a. an endowment b. self-interest c. specialization I.??? d. money e. interdependence 196. An explanation of why Sierra Leone is able to contribute to the global economy involves an understanding of a. absolute advantage b. comparative advantage c. the World Bank d. natural resources e. foreign currency 197. A country should specialize in producing the good for which it has: a. A comparative advantage b. An absolute advantage c. A comparative disadvantage d. An absolute disadvantage e. Both an absolute disadvantage and a comparative disadvantage I.??? I.??? 198. What do economists call the thing that people routinely accept as payment for a good or service? a. barter b. checks I.??? c. currency d. money e. labor 199. A point outside of a production possibilities curve indicates a. a need to increase international trade b. a need to decrease international trade c. real economic growth d. an impossible level of production e. maximum economies of scale 200. All of the following would generally be considered natural factors of production EXCEPT a. petroleum b. soil c. air d. soy e. water 201. If the United States can produce more oil than Equatorial Guinea a. the United States should provide Equatorial Guinea with oil b. Equatorial Guinea should provide the United States with oil c. the United States has an absolute advantage in producing oil d. Equatorial Guinea should provide the United States with cocoa beans e. the United States should provide Equatorial Guinea with cocoa beans 202. All of the following are capital resources EXCEPT a. education b. machinery c. roads I.??? I.??? I.??? I.??? d. buildings e. bridges 203. Which of the following entities exists because of tradition? a. subsidies for sugar planters b. the New York Stock Exchange c. blue laws d. private property e. baseball card sales 204. When deciding whether to produce another pencil, a company compares which quantities? a. total benefits and total costs b. total benefits and sunk costs c. marginal benefits and total costs d. marginal benefits and marginal costs e. marginal benefits and sunk costs I.??? I.??? 205. What is the name given to the assumption in which one variable is examined while all else is held constant? a. in media res b. modus operandi I.??? c. amicus curiae d. nolo contendere e. cetens paribus 206. Which of the following examples represents a rational response to a positive non-monetary incentive? a. Alex hides his report card in hopes of avoiding punishment b. Betty helps wash dishes in hopes of being praised I.??? c. Caroline pays her friend $5 for a ride to work d. Dean is awarded an ice cream cone for good behavior e. Edward skips school when he become sick 207. Competition is MOST important to which of the following? a. Socialism b. Capitalism c. Mercantilism d. Feudalism e. Traditionalism 208. Computers, copiers, and conference rooms are examples of a. natural resources b. human resources c. capital resources d. financial resources e. entrepreneurial resources 209. Generally, one should perform an activity a. when the economic profits of performing are zero b. when the marginal cost is greater than the opportunity cost c. when the activity has high fixed costs and low variable costs d. when the transaction cost is greater than the marginal benefit e. when the marginal benefit is greater than the marginal cost I.??? I.??? I.??? 210. A firm has achieved optimization when it: a. Produces goods with optimal utility b. Minimizes profits and maximizes costs c. Experiences economies of scale d. Produces goods at full efficiency e. Is the dominant firm in an industry I.??? 211. Which of the following is necessary in order for voluntary exchange between two parties to occur? a. A double coincidence of wants needs to exist b. Both parties need to expect gain I.??? c. The gains of one party need to exceed the losses of the other d. The social benefits from the exchange must exceed the social costs e. The exchange must lead to a Pareto optimal situation 212. Farmer John decides to plant corn on his fields since the price of corn is increasing. John is answering which basic economic question? a. what to produce b. for whom to produce c. how to produce d. where to produce e. when to produce 213. A main feature of a pure market economy is: a. Cooperation b. Regulation c. Competition d. Collusion e. Monopolization 214. A tax levied on imported goods is known as a(n) a. tariff b. excise tax c. quota d. ad valorem tax e. picket 215. Comparative advantage is always determined using a. dollar costs b. unit costs c. opportunity costs d. comparative costs e. competitive costs 216. A nation producing at maximum efficiency is operating a. outside its production possibilities curve b. along its production possibilities curve c. inside its production possibilities curve d. at the origin of its production possibilities curve e. along the vertical axis of the production possibilities curve I.??? I.??? I.??? I.??? I.??? 217. What MUST be true if Pamela buys ice cream for herself and Thomas waits for her in the car? a. the cost to benefit ratio of ice cream is negative for Thomas I.??? b. the cost to benefit ratio of ice cream is lower for Pamela c. the cost to benefit ratio of waiting for Thomas is lower than that of ice cream d. Thomas must have disutility for ice cream e. Pamela must derive more utility from ice cream than Thomas does 218. What are two goods called when an increase in the price of one leads to a decrease in the demand for the other? a. customary b. substitutes c. complements d. inferior e. normal 219. What, is the fundamental problem afflicting all economic agents? a. scarcity b. poverty c. shortage d. recession e. leakage 220. Normative economics is BEST defined as a. Marginalism b. The study of how things should be c. The study of equilibrium d. Monetarism e. The study of how things are 221. As a result of workers specializing, all of the following changes occur EXCEPT a. increased productivity b. increased costs c. increased interdependence d. increased division of labor e. increased income 222. An economic system that is described as laissez-faire exhibits which of the following characteristics? a. government regulation of natural monopolies b. permits requiring workers to unionize c. minimum wage laws to help the poor d. no impediments to buyer-seller interactions e. environmental laws that restrict production 223. Which of the following is included in short-run marginal cost? a. sunk cost b. implicit cost c. deadweight loss d. marginal revenue e. fixed cost 224. Payments for natural resources are called a. wages b. profit c. interest d. domains e. rent I.??? I.??? I.??? I.??? I.??? I.??? I.??? 225. If there are extreme economies of scale in an industry, then efficient production would BEST be achieved through a. a large number of small-scale firms b. a small number of small-scale firms c. a large number of large-scale firms d. a small number of large-scale firms e. a medium number of medium-scale firms I.??? 226. Adam Smiths idea that economic harmony would come from conflicting selfinterests is called the a. multiplier effect b. invisible hand I.??? c. smooth microcosm d. optimal trade system e. propensity to consume 227. Which two resources are MOST commonly mistaken for one another? a. labor and physical capital b. labor and land c. physical capital and land d. labor and entrepreneurship e. physical capital and entrepreneurship 228. The opportunity cost for 1 DVD is 3 CDs for Cuba and 4 CDs for Japan. Which of the following should happen? a. Japan should produce both DVDs and CDs b. Cuba should produce both DVDs and CDs c. Japan should specialize in DVDs while Cuba specializes in CDs d. Cuba should specialize in DVDs while Japan specializes in CDs e. Both Cuba and Japan should produce CDs 229. For economic decision makers, what is the defined difference between the long run and the short run? a. in the short run all costs are increasing b. in the short run all costs are fixed c. in the short run all costs are variable d. in the long run all costs are variable e. in the long run all costs are fixed 230. A machine is an example of: a. Land b. Labor c. Financial capital d. Physical capital e. Human capital 231. A choice that results in an optimal outcome is always a. free from transactions costs b. Pareto efficient c. disagreeable to society d. at a Nash equilibrium e. determined through bargaining 232. In a pure market economy, the basic economic question “who receives the benefits of production” is answered by: a. The producers I.??? I.??? I.??? I.??? I.??? I.??? b. c. d. e. The consumers Supply and demand The government A central planning agency 233. The production possibilities frontier is bowed outward due to a. increasing opportunity costs b. diminishing marginal utility c. Pareto improvements d. theincomeeffect e. government regulation 234. Which of the following is a basic economic question? a. Who decides what to produce? b. Who receives the benefits of production? c. How much to charge? d. How to transfer goods and services? e. When to produce? 235. Movement along the production possibilities curve represents a change in: a. Unemployment levels b. Available technology c. Resource allocation d. The supply of productive inputs e. Available resources I.??? I.??? I.??? 236. What non-price aspects of a product or service do firms generally NOT use to compete for consumers? a. quality b. rebates I.??? c. brand name d. intrinsic benefits e. product design 237. All of the following changes result in an outward shift of the production possibilities frontier EXCEPT a. an increase in technology b. an increase in population c. investment in new manufacturing plants d. a new way to divide labor e. an increase in automobile output I.??? 238. Sparta can produce 10 swords or 20 shields. Athens can produce 2 swords or 6 shields. At which relative price would BOTH cities benefit from trade? a. 1 shield per sword b. 1.5 shields per sword I.??? c. 2 shields per sword d. 2.5 shields per sword e. 3 shields per sword 239. Which of the following is an example of a normative economic statement? a. Increases in the money supply tend to increase inflation b. The government should invest more in environmental protection c. The current Director-General of the WTO is Pascal Lamy d. The relative price of gasoline has increased in the past decade I.??? e. The standard of living is lower in less-developed countries 240. An action is beneficial if its benefit-to-cost ratio is a. less than -1 b. greaterthan-1 c. equal to 0 d. less than 1 e. greater than 1 241. If imports exceed exports, then a country has a: a. Budget deficit b. Budget surplus c. Trade deficit d. Trade surplus e. Trade shortage 242. All of the following would be considered fixed costs EXCEPT: a. electricity b. rent c. salaries d. depreciation e. interest I.??? I.??? I.??? 243. Karl Marx’s concept where historical changes were due to conflicts between economic classes is called a. a peasant revolt b. a Luddite transformation I.??? c. dialectical materialism d. the proletarian revolution e. communal anarchy 244. Goods that are not subject to scarcity are called a. natural goocs b. common goods c. free goods d. unlimited goods e. commodities 245. Which of the following is a positive economic statement? a. central banks should control the money supply to prevent inflation b. free trade increases unemployment in the manufacturing sector c. it is socially important that income taxes be progressive d. the government should refrain from regulating industry e. patents and copyrights are essential for encouraging innovation 246. A firm maximizes its profits by producing at the point where a. average revenue is maximized b. average cost equals average revenue c. marginal revenue is maximized d. marginal revenue equals zero e. marginal cost equals marginal revenue 247. All of the following attributes are indicative of a high degree of competition EXCEPT a. advertising b. quality improvement I.??? I.??? I.??? I.??? c. price fixing d. market prices e. multiple firms 248. If an airplane-producing firm decides to instead produce potatoes and keeps its original factors of production, then its a. implicit costs will increase b. implicit costs will decrease I.??? c. explicit costs will increase d. explicit costs will decrease e. costs will not change 249. An entrepreneur PRIMARILY: a. unifies the factors of production. b. supplies raw materials to producers. c. supplies capital to producers. d. demands finished products. e. demands services. I.??? 250. Tyler spends extra hours at work in order to get a raise. This BEST illustrates someone responding predictably to a. positive non-monetary incentives b. negative non-monetary incentives I.??? c. positive monetary incentives d. negative monetary incentives e. selfishness 251. A country’s balance of trade is determined by a. adding imports to the money multiplier b. dividing imports by interest rates c. subtracting imports from exports d. adding investment to consumption e. multiplying savings by exports 252. In which of the following enterprises does one expect to find the MOST heavily divided labor? a. a lawn-mowing service in a small town b. a nationally operated car manufacturer c. a universitys student-run newspaper d. a multinational toy manufacturer e. a New York City ferry service 253. The concept of diminishing marginal utility suggests that a. productive inputs are not perfectly substitutable b. increases in price lead to decreases in purchasing power c. marginal utility is increasing in the quantity of a good consumed d. successive units of a good provide less additional satisfaction e. there is a disutility to consuming additional units of a good I.??? I.??? I.??? 254. France and Belgium freely trade wine and chocolate. France has an absolute advantage in producing wine when a. Belgium produces chocolate less efficiently I.??? b. France has larger stockpiles of both goods c. Belgium has an absolute advantage in producing chocolate d. the opportunity cost of producing wine is lower in France e. Belgium can produce less wine per hour than France 255. The infant-industry argument is an argument for: a. Nationalism b. Free trade c. Protectionism d. Mercantilism e. Capitalism 256. All of the following tools are commonly employed to limit the volume of imported goods EXCEPT a. quotas b. tariffs c. currency devaluation d. sanctions e. excise taxes I.??? I.??? 257. Economies closest to the market economic system model are said to practice a. authoritarianism b. democracy c. capitalism I.??? d. communism e. socialism 258. Firms will enter a perfectly competitive market if price exceeds the a. sunk costs b. marginal benefit c. average variable cost d. average fixed cost e. average total cost 259. Which of the following BEST describes the basic economic question “who receives the benefits of production” being answered in a command economy? a. The government blocks the implementation of a new machine. b. Anatoly is recognized for his hard work with credits to state services. c. Igor is punished for his laziness by being sent to a forced labor camp. d. Vladimir is caught smuggling goods for the black market. e. Josef begins stealing jewelry to make ends meet. 260. All of the following are reasons why Joe lacks the incentive to let his friend copy his homework EXCEPT a. Joe is afraid of the penalty if they both got caught b. Joe does not believe his friend would return the favor c. Joe’s friend promises to give Joe free movie tickets d. Joe gains little material benefit from helping his friend e. Joe does not want to have his friend rely on him all the time 261. All of the following are normative economic statements EXCEPT: a. Taxes should be lowered. b. Interest rates are too high. c. Corporate taxes should be raised. d. Pollution ought to be taxed. e. The income tax rate has doubled. 262. If a profit-maximizing firm's marginal social cost exceeds its marginal social benefit, then which of the following is true? I.??? I.??? I.??? I.??? I.??? a. b. c. d. e. the government should subsidize the firm it is producing too much it is producing too little its average cost is overstated the firm should shut down 263. In economic terms, an individual is said to want a good if: a. The benefit from consumption is greater than the cost b. The individual is willing and able to purchase it c. The good would be consumed if there were no opportunity costs d. The total social benefits outweigh the total social costs e. There is no cost to consuming the good I.??? 264. Which of the following is the BEST example of the question “how to produce” being answered in a pure market economy? a. An increase in technological skills leads to labor replacing capital b. A labor union blocks the introduction of a new machine I.??? c. Increased profits lead to increased production of a good d. Decreased demand leads to a decrease in the consumption of a good e. The government decides to reallocate productive inputs 265. What is a nation’s merchandise trade balance? a. its foreign sales record b. its net exports of goods a. its holdings of foreign goods a. its black-market sales a. its national income 266. When analyzing changes in supply and demand, outside factors are usually held constant. This assumption is known as a. Say’s law b. ceteris paribus c. equilibrium d. Okun’s law e. linear analysis 267. All of the following represent non-monetary incentives EXCEPT a. quality control b. advertising c. sale prices d. ethical production e. renewable energy 268. A firm that tries to optimize its production processes will always try to a. decrease output b. produce efficiently c. spend less on production d. close factories e. decrease inflation 269. Comparative advantage considers: a. costs b. benefits c. externalities d. trade barriers I.??? I.??? I.??? I.??? I.??? e. opportunity costs 270. An unintended consequence that affects others is called a(n) a. aggregate b. benefit c. marginal cost d. trade-off e. externality 271. Normative economics differs from positive economics in all of the following ways EXCEPT a. it makes value judgments b. it looks at how things should be c. it makes general observations d. it tries to determine possible outcomes e. it tries to prescribe a course of action I.??? I.??? 272. John can build four houses or ten toolsheds in an hour. If he builds only three houses in an hour, his level of production is a. unattainable b. attainable and efficient I.??? c. attainable but inefficient d. on his production possibilities curve e. outside his production possibilities curve 273. When New Zealand produces one pen, it loses the production of two pencils. When Australia produces one pen, it loses the production of three pencils. Based on this information, we know that a. New Zealand has a comparative advantage in pens b. New Zealand has a comparative advantage in pencils I.??? c. New Zealand has an absolute advantage in pens d. New Zealand has an absolute advantage in pencils e. New Zealand has no comparative or absolute advantages 274. Human capital is defined as: a. Physical labor used to create goods used for consumption b. Physical labor used to create goods for production c. The stock of human knowledge used for production d. The portion of wages converted to financial capital e. Human-made goods used in the production of other goods 275. Scarcity assumes the existence of what? a. Unlimited demand b. Unlimited resources c. Limited wants d. Limited resources e. Limited demand 276. Assume that the US can produce more computers per hour than Madagascar. The US has a(n) _____ in producing computers. a. unilateral advantage b. opportunity advantage c. comparative advantage d. bilateral advantage e. absolute advantage I.??? I.??? I.??? 277. A market economist approves of which of the following policies? a. free healthcare b. union activity c. cartel formation d. laissez-faire policies e. economic sanctions 278. The site of a farm is BEST classified as a. financial capital b. physical capital c. land d. human capital e. entrepreneurship 279. Ideally, the goods and services that a region will specialize in will be determined by a. cost-push pricing b. the resource distribution c. the number of firms d. the equilibrium price level e. the business cycle 280. Production possibilities curves are usually concave because of a. Diminishing marginal returns b. Absolute advantage c. Constant opportunity costs d. Unit elasticity e. Comparative advantage 281. Hugo Chavez of Venezuela has NOT instituted which of the following programs? a. social welfare b. nationalization c. privatization d. collusion, via OPEC e. road construction 282. Demand for resources is determined by the a. government b. availability of labor c. cost of obtaining those resources d. supply of resources available e. demand for goods made from those resources 283. All of the following are positive economic statements EXCEPT a. there is a short-run trade-off between inflation and unemployment b. increasing the tax rate will not increase government revenue c. quantity demanded increases with price d. the unemployment rate is currently eight percent e. capitalism is preferable to socialism due to higher efficiency 284. Government intervention in the economy is beneficial a. when market failures exist b. when companies go out of business c. when CEOs are laid off d. when the market is perfectly competitive I.??? I.??? I.??? I.??? I.??? I.??? I.??? I.??? e. when there is a surplus of goods 285. A country uses only nuts and bolts to produce various goods. If nuts and bolts are perfect substitutes, then a. the country's aggregate demand curve is horizontal b. the country's goods are interchangeable c. the country will always operate at full efficiency d. the country should produce only nuts and bolts e. the country's PPC is downward sloping 286. A market requires a(n): a. exchange b. double coincidence of wants c. location d. currency e. intermediary 287. The decision to use land either for a factory or for agriculture addresses which basic question? a. how much to pay for the good b. how many goods to produce c. what good to produce d. where to produce the good e. when to produce the good 288. Which productive resource usually remains fixed in the long run? a. physical capital b. labor c. land d. money e. human capital 289. Which item would NOT be included in your opportunity cost of attending college? a. textbooks and school supplies b. tuition c. fees d. forgone earnings e. room and meals 290. Suppose that Mary earns $100 as an economics tutor. Instead of tutoring students in economics, she could have earned $80 working at a grocery store. Mary’s opportunity cost of tutoring students in economics is a. $100/hr b. $20/hr c. $80/hr d. $180/hr e. $200/hr 291. All of the following represent trade-offs EXCEPT a. a Laffer curve b. a supply curve c. a production possibilities curve d. a long-run Phillips curve e. a demand curve I.??? I.??? I.??? I.??? I.A.1 I.A.1 I.A.1 292. Suppose that it takes 100 hours of labor to produce one car and 25 hours of labor to produce 1,000 bushels of wheat in Japan, while in the USA it takes 150 hours of labor to produce one car and 15 hours of labor to produce 1,000 bushels of wheat. We can a. $4 I.A.1 b. $39817 c. $10 d. $39823 e. $25 293. The value of the next best alternative is known as the: a. Opportunity cost b. Marginal cost c. Sunk cost d. Average cost e. Unintended cost 294. The cost of a trade-off is called a. opportunity cost b. trade-off cost c. explicit price d. real value e. future cost 295. What is the economic term for the result of combination of limited resources and unlimited wants? a. Economics b. Wars c. Greed d. Scarcity e. Shortages 296. Which of the following examples best captures the idea of trade-offs? a. Howard was too sick to go to the movies. b. Lakshmi prefers apples to oranges. c. Josh does not have time to study because of the party. d. Laura goes to every concert that comes to her town. e. Benny moves to Arizona because of his new job. I.A.1 I.A.1 I.A.1 I.A.1 297. What occurs when one must give something up in order to obtain something else? a. a decrease in scarcity b. a trade-off I.A.1 c. an increase in demand d. barter e. an increase in opportunity costs 298. What is the basic economic problem? a. Scarcity b. Shortages c. Surpluses d. Inefficiencies e. Limited wants I.A.1 299. Amy studies for the Academic Decathlon all evening. The opportunity cost of I.A.1 this event could be all of the following EXCEPT a. b. c. d. e. free time with her friends money earned from a job the price of her study materials a healthy level of sleep better grades in her other classes 300. After school, Bill can study or watch television. Which statement BEST explains why Bill faces scarcity in this situation? a. One activity is better than the other. b. Bill has nothing else to do. c. Both activities have no cost. d. Bill’s time has alternative uses. e. Bill can not make a decision. 301. The fundamental problem faced by all economic systems is a. limited resources versus unlimited wants b. unlimited resources versus unlimited wants c. limited resources versus limited wants d. unlimited resources versus limited wants e. how to maximize tax revenues 302. Scarcity results when a. wants are unlimited b. there is a small amount of a good c. wants exceed needs d. there is not enough of a good to satisfy everyone e. needs are unlimited I.A.1 I.A.1 I.A.1 303. The value of the next best alternative that is given up to obtain the preferred item is called: a. Economics b. A trade-off I.A.1 c. Opportunity cost d. Production decision e. Efficiency 304. The payment to any resource (land, labor, capital) that exceeds its opportunity cost is called: a. A comparative advantage b. An absolute advantage c. A capital gain d. Economic cost e. Economic rent 305. Which of the following is equivalent to the opportunity cost? a. economic cost b. external cost c. implicit cost d. unintended cost e. accounting cost 306. Economists insist that there is no "free lunch" because a. the implicit cost of food exceeds its explicit cost b. all actions have an opportunity cost c. consumers fund free meals with other purchases d. it is irrational to offer a good for free I.A.1 I.A.1 I.A.1 e. the restaurant industry resembles perfect competition 307. What do economists call the best alternative sacrificed for a chosen alternative? a. sacrifice cost b. marginal cost c. explicit cost d. implicit cost e. opportunity cost 308. Which of the following is FALSE about scarcity? a. It is different from rarity b. It forces societies to make trade-offs c. It can be solved through increases in productivity d. It is caused by unlimited wants and limited resources e. A society’s way for dealing with it determines its economic system 309. Which of the following is FALSE about opportunity costs? a. They are also known as economic costs b. They include implicit costs c. They are the value of the next best alternative d. They are not included in social costs e. They do not include external costs I.A.1 I.A.1 I.A.1 310. The Jones family decided not to purchase holiday presents for each other this year to save for a big summer vacation. What was the opportunity cost of their vacation? a. the value of the vacation and holiday presents b. the value of exchanging the holiday presents I.A.1 c. the cost of the big summer vacation d. the cost of the holiday presents e. celebrating the holidays with the family 311. The Nguyen family spends $50 at an Italian restaurant instead of $45 at a Mexican restaurant. What is the opportunity cost of this decision? a. 5 45 50 The value of the Mexican food e. The value of the Mexican food + $5 312. The opportunity cost of an action is the a. value of the next best alternative b. actual cost of engaging in the activity c. profit minus any costs of taking the action d. cost associated with being the first to take an action e. estimated value of undertaking the action 313. The implicit costs of running a firm do NOT include investment forgone from payments for a. startup costs b. an entrepreneur's salary c. wages d. rent e. natural resources I.A.1 I.A.1 I.A.1 314. The basic economic problem facing all economies comes from the existence of: a. Government budget deficits and trade deficits b. Excessive growth rates of the money supply and population I.A.1 c. Flexible exchange rates and the end of the gold standard d. High interest rates and high unemployment rates e. Scarce resources and unlimited wants 315. The cost of forgone alternatives is known as a. marginal cost b. secondary cost c. explicit cost d. opportunity cost e. variable cost 316. What do economists call the situation in which one good is sacrificed for another good? a. Economic sacrifice b. Production c. Scarcity d. Trade-off e. Opportunity cost 317. Which of the following is an economic concept? a. politics b. money c. wealth d. income e. scarcity 318. Trade-offs are required because of a. limited wants and unlimited resources b. unlimited wants and limited resources c. unlimited supply and unlimited demand d. unlimited supply and limited demand e. limited supply and unlimited demand 319. The field of economics exists because of a. scarcity b. variety c. rarity d. charity e. parity 320. The basic economic problem is a. inequity b. scarcity c. limited wants d. rarity e. limited money 321. In economic analysis, what term describes resources at all times? a. expensive b. useful c. limited d. marginal I.A.1 I.A.1 I.A.1 I.A.1 I.A.1 I.A.1 I.A.1 e. forgone 322. When economic decisions are made, choices result in a. increasing scarcity b. forgone alternatives c. decreasing costs d. limited resources e. unlimited wants 323. Economics is the study of how society manages which type of resources? a. total b. scarce c. marginal d. natural e. economic 324. If a country can produce either 10 guns or 50 units of butter, then the opportunity cost of producing a unit of butter a. Is 0.2 guns b. Is 5 guns c. Is 40 guns d. Is 50 guns e. Changes 325. The combination of which two features results in scarcity? a. Limited resources and too many people b. Gravity and time c. Productivity and unemployment d. Unlimited wants and limited resources e. Unemployment and inflation 326. When one good is sacrificed for another, the sacrifice is called a(n) a. explicit cost b. trade-off c. marginal benefit d. marginal cost e. implicit cost 327. Scarcity results in: a. Demand b. Want c. Trade-offs d. Diminishing marginal returns e. Unintended consequences 328. Which of the following is TRUE about scarcity? a. It is caused by opportunity costs. b. It is caused by unlimited resources. c. It can be eliminated if an economy achieves full efficiency d. It is only present in command economies e. It is present in all economies 329. Not going to college is a rational economic decision if one’s a. forgone wages exceed the cost of tuition b. cost of tuition exceeds forgone wages c. top-choice school is inaccessible I.A.1 I.A.1 I.A.1 I.A.1 I.A.1 I.A.1 I.A.1 I.A.1 d. employment is guaranteed out of high school e. forgone wages exceed the value of additional future wages 330. People are forced to make choices because they a. work hard b. manage to get by with less c. find ways to economize d. must deal with scarcity e. are required to do so by government I.A.1 331. The fact that some resources are better suited than others for the production of certain goods is the cause of: a. Scarcity b. Increasing opportunity costs I.A.1 c. Natural unemployment levels d. Shortages e. Decreasing marginal utility 332. When you give up something you want in order to get something else, you are a. maximizing marginal cost b. making a trade-off c. ignoring opportunity cost d. behaving perfectly elastically e. clearing the market 333. What do economists call the condition in which human wants are forever greater than the available supply of time, goods, and resources? a. want b. greed c. satisfaction d. scarcity e. competition 334. Which of the following is considered a payment for one of the factors of production? a. opportunity cost b. capital c. interest d. labor e. land 335. What do economists call the payments made for the use of land? a. rent b. profit c. value d. price e. interest 336. The factor of production that bears the risk of productive activity is: a. Labor b. Physical capital c. Human capital d. Land e. Entrepreneurship I.A.1 I.A.1 I.A.2 I.A.2 I.A.2 337. Which is NOT considered one of the factors of production? a. labor b. money c. capital d. land e. entrepreneurship 338. As a factor of production, capital resources include a. money in banks b. stocks and bonds c. land d. buildings e. workers 339. What is the economic term for any resource used to produce products? a. Firms b. Productive resources c. Factor of production d. Raw materials e. Commercial resources 340. Which of the following is NOT a factor of production? a. labor b. entrepreneurship c. interest d. capital e. natural resources 341. Capital deepening occurs when the a. amount of capital increases b. capital-to-labor ratio increases c. technological capacity capital increases d. tonnage of capital increases e. dollar value of capital increases 342. Land would fit into which category of the factors of production? a. human resources b. natural resources c. entrepreneurship d. capital resources e. real estate resources I.A.2 I.A.2 I.A.2 I.A.2 I.A.2 I.A.2 343. What name do economists give to resources used in the production of goods and services? a. factors of production b. scarcity I.A.2 c. production possibilities frontier d. demand e. supply 344. Increases in human capital are increases in the: a. Knowledge and skills of labor b. Interest rate paid on student loans c. Funds available for supporting higher education d. Quantity of worker-operated machines I.A.2 e. Quality of worker-operated machines 345. Which of the following is NOT a major category of productive resources? a. capital resources b. technology resources c. labor resources d. natural resources e. entrepreneurship resources 346. Which item is NOT considered to be a factor of production? a. land b. machinery c. money d. workers e. entrepreneurship 347. Entrepreneurial resources consist primarily of a. services b. money c. intermediate goods d. regulations e. decisions 348. Blending together resources to create something of value is called: a. Management b. Entrepreneurship c. Government d. Firms e. Executives I.A.2 I.A.2 I.A.2 I.A.2 349. The factor of production that bears the risk of possibly gaining or losing large sums of wealth by engaging in new ventures is: a. Land b. Labor I.A.2 c. Human capital d. Physical capital e. Entrepreneurship 350. What term describes investments in people, such as education or on-the-job training? a. labor market b. compensating differential I.A.2 c. human capital d. wage inflation e. signaling 351. Small, medium, and large sodas cost $0.89, $1.19, and $1.39, respectively. The marginal cost of purchasing a large soda is: a. $0.20 b. $0.30 c. $0.50 d. $1.19 e. $1.39 352. What causes marginal costs to increase as production increases? a. Decreasing opportunity costs I.A.3 I.A.3 b. c. d. e. Unintended consequences Decreasing variable costs Economies of scale Diminishing returns 353. A tailor can produce 10 shirts for $100 or 11 shirts for $121. What is the marginal cost of increasing production from 10 to 11 shirts? a. $10 b. $11 c. $21 d. $100 e. $121 354. The idea that greater demand for a product will result in greater demand for the resources to produce that product is based on the principle of a. marginal cost b. derived demand c. specialization d. scarcity e. elasticity 355. The demand for labor is sometimes called ________ demand. a. labor b. derived c. workers d. job e. employment 356. What model illustrates the various combinations of output an economy can produce with available resources? a. Phillips curve b. circular flow model c. production possibilities frontier d. aggregate supply curve e. normative model 357. Why do production possibility frontiers bow outward? a. limited resources b. unlimited wants c. increasing opportunity costs d. decreasing opportunity costs e. economic efficiency 358. A marginal cost is: a. A cost which can be safely ignored b. The cost of producing one more unit of a good c. The cost of buying one more unit of a good d. The implicit cost of consuming a good e. The explicit cost of consuming a good 359. What is average variable cost? a. total cost divided by total output b. the change in total costs when one additional unit of output is produced c. total variable costs divided by total output d. the sum of fixed and variable costs I.A.3 I.A.3 I.A.3 I.A.3 I.A.3 I.A.3 I.A.3 e. fixed costs divided by total output 360. What are fixed costs? a. costs that do not vary with output b. costs that are zero when output is zero and increase as output increases c. the total costs of producing a fixed output d. total costs divided by total output e. the change in total costs with the addition of a fixed asset 361. As an economy invests in its human resources and new capital, a. output cannot increase without more natural resources b. production will increase only if there is no inflation c. the price level will increase if supply does not increase d. its production possibilities curve will move outward e. the marginal cost of production will continue to increase 362. Which will cause a nation’s production possibilities curve to shift outward? a. an increase in the general price level b. an increase in the size of a nation’s capital stock c. a decrease in the general price level d. an increase in the nation’s dependence on energy e. an increase in government regulation of business 363. For a dentist, the cost of renting office space is a(n) a. variable cost b. marginal cost c. fixed cost d. average cost e. opportunity cost 364. Total cost is the sum of a. fixed costs and marginal costs b. marginal costs and supply costs c. supply costs and fixed costs d. marginal costs and variable costs e. fixed costs and variable costs 365. For a delivery service, the cost of gasoline is a(n) a. variable cost b. fixed cost c. marginal cost d. average cost e. opportunity cost I.A.3 I.A.3 I.A.3 I.A.3 I.A.3 I.A.3 366. A production possibilities frontier is bowed outward because a. production costs are increasing b. the opportunity cost of a good is constant as the production of that good changes c. the opportunity cost of a good is not constant as the production of that good I.A.3 changes d. the opportunity cost of all goods are constant e. of the interdependency of trade guarantees it 367. The various maximum amounts of two products that can be produced using the available resources is illustrated by a a. production function I.A.3 b. c. d. e. Phillips curve demand curve Lorenz curve production possibilities 368. Under conditions of perfect competition in both the product and input markets, the demand for labor by a firm is derived demand that depends on the: a. Earnings of workers relative to the firm’s profits b. Demand for the final product produced by the firm’s labor c. Age, sex, and ethnic background of workers hired by the firm d. Firm’s preference to hire domestic rather than foreign workers e. Level of the nominal interest rate relative to the nominal wage 369. A firm increases production. Which of the following CANNOT happen? a. Marginal cost increases b. Variable cost increases c. Average fixed cost increases d. Total cost increases e. Average total cost increases I.A.3 I.A.3 370. What is marginal cost? a. total costs divided by total output b. total costs divided by marginal output c. the change in total costs due to the production of one additional unit of output I.A.3 d. total variable costs divided by marginal output e. total fixed costs divided by total output 371. The production function is the relationship between the quantity of inputs used to make a good and what other measurement? a. quantity of output b. price level c. average cost d. market price e. input costs I.A.3 372. It costs a publisher $500 to print 100 books and $600 to print 200 books. The marginal cost to increase production from 100 books to 200 books is a. $3 b. $5 I.A.3 c. $50 d. $100 e. $400 373. Which term refers to the additional cost incurred by a company to produce one more unit of a good? a. product cost b. average cost c. finance cost d. consumption cost e. marginal cost 374. Which of these might cause a nation’s production possibilities curve to shift inward? a. Demand for bananas is greater than supply. b. Other nations export more bananas. c. The size of the labor force decreases. I.A.3 I.A.3 d. The price level increases dramatically. e. Investment in technology reduces costs. 375. Increased investment in human resources and new capital causes a(n) a. Outward shift of the production possibilities curve b. Period of stagflation due to lack of natural resources c. Increase in production only in cases of no inflation d. Increase in the price level e. Increase in the marginal costs of production I.A.3 376. All other factors held constant, a supply curve shows a. the amount of a product supplied at various prices b. the price at which a product sells given the quantity produced c. the relationship between the supply of a product and the price of the product I.A.3 d. that as price increases, quantity supplied decreases e. that as price increases, supply increases 377. A production possibilities frontier is the collection of points that represent a. unattainable production outcomes b. inefficient and unattainable production outcomes c. attainable and efficient outcomes d. attainable production outcomes e. efficient and unattainable production outcomes 378. Rational decision makers take an action if and only if: a. The total benefits exceed the total costs of the action b. The action will not harm them c. The action is legal and ethical d. The marginal benefits exceed the marginal costs of the action e. They are required or forced to take the action 379. As long as the marginal social benefit of education exceeds its marginal social cost and education increases, what will be the result? a. marginal social benefits b. social welfare increases c. demand for education increase d. social costs decrease e. private education costs decrease 380. When faced with a trade-off, what two factors must an economic decision maker compare? a. supply and demand b. marginal benefits and costs c. goods and services d. utility and value e. marginal costs and fixed costs 381. Which factor of production includes manufactured materials used to create products? a. Raw resources b. Labor c. Entrepreneurship d. Land e. Capital I.A.3 I.B.2 I.B.2 I.B.2 I.B.2 382. People and firms think at the margin when they a. maximize marginal benefits b. minimize marginal costs c. ignore non-marginal benefits d. ignore non-marginal costs e. compare marginal benefits to marginal costs 383. Which of the following is a normative statement? a. Everyone should study economics. b. Only very intelligent people understand economics. c. Just about anyone can understand economics, if he or she tries. d. Many U.S. presidents were economists. e. Economists seem to never agree about anything. 384. Which of the following is a positive statement? a. The Fed should increase the money supply no faster than the rate of increase in the money supply to keep inflation low. b. More states ought to increase the minimum wage. c. Government should place a price ceiling on gasoline. d. All demand curves slope upward to the right. e. Free trade is important I.B.2 I.B.3 I.B.3 385. “If the Federal Reserve lowers interest rates, then real output will increase” in an example of a: a. Normative statement about monetary policy b. Positive statement about monetary policy I.B.3 c. Normative statement about fiscal policy d. Positive statement about fiscal policy e. Normative statement about fiscal policy 386. Which of the following is a normative statement? a. The FED should hold the rate of growth in the money supply constant. b. Professor Friedman said, “The FED should hold the rate of growth in the money supply constant.” c. The rate of growth in the money supply is constant. d. The rate of growth in the money supply is never constant. e. It is impossible to control the rate of growth in the money supply. 387. An objective, value-free inquiry into an economic problem is an example of a. comparative economics b. positive economics c. marginal economics d. normative economics e. real economics I.B.3 I.B.3 388. Which of these is an example of a normative economic statement? a. Increasing the money supply will reduce the interest rate in the short run b. Increasing the interest rate will reduce investment spending c. Increasing interest rates will harm low-income households more than highincome households I.B.3 d. The Federal Reserve should increase interest rates to lower inflation e. When the Federal Reserve increases interest rates, the growth of the money supply is slowed 389. Which statement is a positive economic statement? a. Governments should not interfere with private economic decisions. I.B.3 b. c. d. e. The unemployment rate is higher this year than last year. An income tax is more equitable than a sales tax. Lower interest rates are better for the economy. Incomes in the United States should be more equal. 390. What is an example of a common-pool problem of an open-access good? a. Overfishing seriously depletes the fish population in an uncontrolled fishing area. b. Because of reduced ticket prices at a concert, people arrive very early and stand in long lines for hours. c. Milk prices increase dramatically because of the lack of available grazing lands. d. Air pollution increases when utilities do not meet government-imposed emission standards. e. Consumers tend to waste electricity when the price of electricity is fixed by regulation. 391. Which of the following is a positive statement? a. The FED should increase interest rates to prevent inflation. b. The FED is not concerned with interest rates. c. Interest rates should not be of concern to the FED. d. Interest rates should be of concern to the FED. e. The FED ought to be concerned about the money supply. I.B.3 I.B.3 392. Which of the following represents one of the basic economic decisions we are forced to make due to scarcity? a. How to distribute goods b. When to produce I.C.1 c. Where to produce d. Where to attend college e. When to attend college 393. “For Whom to Produce?” is the basic economic question about a. allocation of goods and services b. production of goods and services c. the role of government in the economy d. fiscal policy e. economic growth 394. Which of these is considered one of the three basic questions that any economic system must address? a. What price to charge for education? b. Who should do the production? c. How to produce? d. Where to produce? e. When to produce? 395. The Aborigines of Australia, Mbuti of central Africa, and Inuit of Canada are often cited as examples of what type of economic system? a. Traditional b. Command c. Market d. Mixed e. Capitalistic I.C.1 I.C.1 I.C.2 396. The driving force in a market economy is a. government b. production c. competition d. inflation e. supply I.C.2 397. How are the questions of what to produce, how to produce, and for whom to produce answered in a market economy? a. through interactions of buyers and sellers b. by government decisions I.C.2 c. by profit incentives d. through group consensus e. by resource owners 398. The United States' economy is commonly referred to as a mixed economic system because it has characteristics of a. democratic socialism and pure capitalism b. private markets and income redistribution c. public markets and private markets d. unregulated markets and regulated markets e. competitive markets and government involvement 399. In a pure market economic system, who makes decisions about what to produce? a. government b. tradition c. households d. churches e. individuals 400. Adam Smith’s “invisible hand” refers to: a. Governments b. Protectionism c. Self-interest d. Democracy e. Greed 401. The predominant type of economic system in existence among the world’s nations today is a. market b. command c. mixed d. traditional e. regulated I.C.2 I.C.2 I.C.2 I.C.2 402. What term do economists give to the organizations and methods used to determine what goods and services are produced, how they are produced, and for whom they are produced within an economy? a. economic system b. model of demand and supply I.C.2 c. model of aggregate demand and supply d. elasticity e. market efficiency 403. Who developed the idea of the invisible hand? a. Adam Smith b. Karl Marx c. Thomas Malthus d. Milton Friedman e. John Maynard Keynes 404. In a free market economy, people exercise property rights over all of the following EXCEPT a. commodities b. themselves c. ideas d. private land e. public parks I.C.2 I.C.2 405. The belief that a nation’s economic strength is best measured by the amount of its holdings of precious metals is known as _____. a. mercantilism b. capitalism I.C.2 c. communism d. traditionalism e. a democracy 406. What was the primary strategy to achieve mercantilist policy goals? a. comparative advantages in trade b. accumulation of gold and silver reserves c. establishment of new market for goods d. reducing their domestic labor costs e. using domestic resources most efficiently 407. Capitalism is an example of what type of economy? a. Traditional b. Command c. Free d. Market e. Democratic socialism 408. The output mix in a market system is determined by: a. The government b. The pursuit of profits c. The needs of society d. Technology e. The cost of labor 409. Long lines, empty shelves, and black markets are generally associated with which type of economy? a. traditional b. market c. capitalistic d. historical e. command 410. Command economies are sometimes called a. planned economies b. capitalistic c. opportunistic I.C.2 I.C.2 I.C.2 I.C.2 I.C.2 d. corrupt e. organized economies 411. The two largest groups of economic decision makers are: a. Men and women b. Bureaucracies and elected representatives c. Children and adults d. Urban and city dwellers e. Consumers and producers 412. What was Adam Smith describing when he referred to the “invisible hand”? a. price b. comparative advantage c. money d. collusion e. specialization 413. In laissez-faire capitalism: a. The government owns the factors of production b. Barter is used instead of monetary exchange c. The government does not interfere with economic activity d. There is no international trade e. Monetary policy is more powerful than fiscal policy 414. Which describes a characteristic unique to a mixed market system? a. some public ownership and some private ownership of resources b. a few large companies and many small companies c. many ways to produce goods using different types of technology d. government regulation of production, but not of consumption e. the use of various forms of payment and money for exchanges 415. In the United States, the basic economic question, “What to produce?”, is decided by a. political conditions at the time the decisions are made b. different governmental units c. majority of producers d. majority of consumers e. consumers, producers, and governments I.C.2 I.C.2 I.C.2 I.C.2 I.C.2 416. The central role of incentives in determining behavior is especially important for a. students b. policy makers I.D.1 c. teachers d. psychologists e. football coaches 417. A negative incentive will a. increase both costs and benefits b. decrease both costs and benefits c. increase benefits or decrease costs d. increase costs or decrease benefits e. not change costs or benefits 418. In a market economy, according to Adam Smith, economic activity is regulated by I.D.1 I.D.2 a. b. c. d. e. government buyers sellers self-interest exporters 419. A necessary and sufficient condition for barter to occur is a. demand and purchasing power b. free trade c. perfect competition d. a democracy e. the coincidence of wants 420. The function of money that makes it unnecessary to have a double coincidence of wants is called a. portable b. durable c. medium of exchange d. store of value e. standard of value 421. What is representative money? a. Money that has intrinsic value b. Another term for fiat money c. The same thing as commodity money d. There is no such thing as representative money e. Money that is redeemable for a commodity, such as gold or silver 422. Barter is difficult because it a. is illegal b. requires a coincidence of wants c. is plagued by externalities d. never works e. uses too much money 423. Which of the following is a problem with barter? a. Lack of clearly defined property rights b. Lack of a standard of value c. Lack of a clearly defined marketplace d. Lack of competition e. Lack of cooperation 424. Without any type of money, trade must be conducted using a. barter b. haggle c. bargaining d. checks e. money orders 425. A double coincidence of wants a. usually occurs in every transaction b. is common place in capitalistic societies c. is always required for barter to occur d. is never required for barter to occur e. happens when two people want the same good I.E.3 I.E.3 I.E.3 I.E.3 I.E.3 I.E.3 I.E.3 426. Exchanging one good for another is known as a. scarcity b. trade c. barter d. economics e. finance 427. The direct exchange of goods and services without the use of money is called: a. Consumer sovereignty b. Oligopoly c. Privatization d. Barter e. Specialization 428. Barter is: a. The exchange of economic services for currency b. The exchange of goods now for future repayment c. The exchange of payment now for goods in the future d. Trade that does not use a medium of exchange e. Trade that occurs between countries I.E.3 I.E.3 I.E.3 429. John trades three of his best marbles for Ted’s red apple. This is an example of a. barter b. international trade I.E.3 c. a pecuniary transaction d. a monetary trade e. an illegal trade 430. Barter requires the a. use of some money b. presence of superior information c. double coincidence of wants d. use of relative prices e. absence of money 431. What are deposits held in accounts that are invested in a broad range of financial assets, such as stocks and bonds called? a. Money market funds b. Federal funds c. Financial funds d. Savings deposits e. Demand deposits 432. A coincidence of wants is necessary for a. trade b. investment c. consumption d. competition e. barter 433. Which of the following is TRUE regarding barter? a. It can result in an inefficient allocation of resources b. It uses money c. It is not a market I.E.3 I.E.3 I.E.3 I.E.3 d. Neither party has to expect a gain e. It does not require a double coincidence of wants 434. What are the three forms of economic exchange? a. Foreign, student, product b. Barter, foreign, credit c. Credit, monetary, barter d. Goods, services, information e. Land, labor, capital 435. Specialization increases a. flexibility b. interdependence c. costs d. resourcefulness e. scarcity 436. _____ and economic interdependence serve as the basis for international trade. a. Import duties b. Import quotas c. Import/export banks d. The specialization of labor e. A favorable exchange rate I.E.3 I.F.1 I.F.1 437. Specialization is expected to lead to increases in all of the following EXCEPT a. productivity b. consumption c. interdependence I.F.1 d. trade e. price levels 438. Specialization and interdependence: a. Can be beneficial to everyone involved b. Promote economies of scale c. Eliminate externalities d. Eliminate comparative advantages e. Discourage free trade 439. Both Mike and Tim work in a factory that produces automobiles. Mike only welds while Tim only installs seats. This is an example of a. comparative advantage b. collective bargaining c. planned allocation d. division of labor e. production possibilities 440. Comparative advantage is determined by a. absolute advantage b. opportunity cost c. trade d. specialization e. effort I.F.1 I.F.1 I.F.3 441. It takes James two hours to read ten pages of economics, but only one hour I.F.3 to read ten pages of history. It takes Ted three hours to read ten pages of economics and two hours to read ten pages of history. Then we can say that a. Ted has an absolute advantage in reading both economics and history b. James has an absolute advantage in reading both economics and history c. Ted has a comparative advantage in reading both economics and history d. James has a comparative advantage in reading both economics and history e. James has an absolute and comparative advantage in reading both economics and history 442. The ability to produce a good or service at a relatively lower opportunity cost than someone else is a(n) a. nominal advantage b. absolute disadvantage I.F.3 c. absolute advantage d. comparative disadvantage e. comparative advantage 443. Jim can produce 20 tomatoes or 50 carrots. Tom can produce 15 tomatoes or 60 carrots. Which of the following trade rates would benefit both Jim and Tom? a. 1 carrot per tomato b. 2 carrots per tomato I.F.3 c. 3 carrots per tomato d. 4 carrots per tomato e. 5 carrots per tomato 444. What advantage is held by a producer that requires fewer inputs to produce a good? a. opportunity cost b. comparative I.F.3 c. absolute d. complete e. competitive 445. Absolute advantage is determined by a. productivity b. opportunity costs c. comparative advantage d. trade e. specialization I.F.3 446. The term economists use when making a comparison among producers of a good according to their productivity is known as a. a trade-off b. opportunity cost I.F.3 c. productivity comparison d. absolute advantage e. comparative advantage 447. A nation has a comparative advantage in the production of a product if it can produce that product at a(n): a. lower absolute cost than most other nations b. lower relative cost than most other nations I.F.3 c. slightly lower cost than any other nation d. advantage to all other nations e. lower opportunity cost than another nation 448. Economists determine which producer has an absolute advantage in the production of a good using a. the price of the inputs used to make the good b. the value of the inputs used to make the good c. the opportunity cost of making the good d. the quantity of the inputs used to make the good e. the relative price of the good 449. Trade restrictions, such as tariffs and quotas, are intended to impose additional costs on a. the government imposing the trade restrictions b. foreign producers of other goods c. foreign consumers of the exported goods d. domestic consumers of the imported goods e. domestic producers of the same type of goods I.F.3 I.F.4 450. A limitation on the amount of a specific product that can be imported during a given time period is called a(n) a. export incentive b. import incentive I.F.4 c. tariff d. import quota e. export quota 451. The highest protective tariff rates in U.S. history were established by the a. Smoot-Hawley-Tariff Act b. Tariff of Abominations c. Civil War Tariffs d. GATT e. NAFTA 452. Which of the following is NOT an argument for tariffs in the U.S.? a. Protecting infant industries b. Protecting high U.S. wages c. Improving efficiency of world markets d. Developing the defense industry e. Diversifying industry 453. A voluntary export restraint has the same effect as a(n) a. import quota b. export quota c. import tariff d. export tariff e. trade embargo 454. A nation’s trade balance is primarily determined by its a. production and consumption b. income and output c. imports and exports d. output and currency e. tariffs and quotas 455. If a country imports more than it exports, the country has a: a. Budget deficit b. Budget surplus c. Net financial overflow I.F.4 I.F.4 I.F.4 I.F.5 I.F.5 d. Trade surplus e. Trade deficit 456. In the 1990s, the U.S. had a large trade deficit with Japan. As a result of this trade deficit, a. U.S. inflation increased b. Japan exported capital into the U.S. I.F.5 c. U.S. unemployment increased d. Japan extracted capital from the U.S. e. the U.S. balance of payments did not balance 457. The primary difference between the trade balance and merchandise trade balance consists of the a. balance on current account b. balance of payments c. import and export of services d. export of capital e. import of capital I.F.5 458. The value of the export of goods from the U.S. minus the value of the imports of goods into the U.S. is called the a. balance of payments b. balance on current account I.F.5 c. trade balance d. merchandise trade balance e. net exports of the U.S. 459. A technological monopoly is one in which the monopoly is created by a. geography b. government edict c. the elasticity of supply for the product d. a copyright e. a patent 460. Which of the following industries is a good example of perfect competition? a. wheat producers b. pharmaceutical companies c. car manufacturers d. television manufacturers e. cell phone providers 461. By advertising firms hope to a. become price takers b. decrease production costs c. participate in non-price competition d. develop a monopoly e. increase marginal costs but decrease total costs 462. Which of the following is an example of a derived demand? a. the demand for cars b. the demand for houses c. the demand for clothes d. the demand for apple pickers e. the demand for counseling II.??? II.??? II.??? II.??? 463. A decrease in the price of salt would MOST likely: a. decrease demand. b. increase demand. c. decrease quantity demanded. d. decrease revenue. e. increase revenue. 464. Issuing a patent creates a temporary a. cartel b. monopoly c. market d. monopsony e. firm II.??? II.??? 465. What happens when the government imposes a price ceiling that is below the equilibrium point? a. companies enter the market b. the demand curve becomes kinked II.??? c. a natural monopoly is formed d. goods are excessively supplied e. goods are excessively demanded 466. The goal of which of the following is to develop a new combination of land, labor, and capital in order to create something of value? a. enterprise b. capitalists c. manufacturers d. business e. entrepreneurship 467. Money serves as a unit of account by a. transferring the value from the present to the future b. comparing the value of different goods and services c. being transferable for goods and services d. earning interest over time e. holding intrinsic value 468. The demand for a good is perfectly elastic if its graph a. is completely vertical b. is positive sloping c. has a slope greater than 1 d. is relatively flat e. is completely flat 469. Which of the following occurs when household income increases? a. the value of net worth declines b. the demand for inferior goods falls c. the supply of inferior goods increases d. the supply of normal goods increases e. the demand for normal goods falls 470. Why is there no long-term economic profit in the pure competition market structure? a. the goods being sold are not very expensive b. the firms profit maximize c. firms can easily enter and exit the market II.??? II.??? II.??? II.??? II.??? d. production costs are high e. there is a low opportunity cost 471. Which of the following incentives does NOT induce an entrepreneur to take risks? a. issuing a patent b. issuing a copyright a. increasing taxation a. the prospect of larger profits a. issuing full insurance 472. A union that units a certain group of skilled artisans is known as a. a company union b. an industrial union c. a general union d. a closed shop union e. a craft union 473. Which statement about a monopolistically competitive firm is NOT true? a. It can earn positive economic profits in the long-run. b. It can earn positive economic profits in the short-run. c. Its average revenue curve is downward sloping. d. It practices product differentiation. e. Its output is less than that of a perfectly competitive firm. II.??? II.??? II.??? 474. In which of the following market structures is a firm MOST likely to cooperate with its competitors? a. monopolies b. oligopolies II.??? c. monopolistic competition d. perfect competition e. monopsonies 475. The M1 definition of the money supply does NOT include a. currency held by the public b. non-bank travelers checks c. checkable deposits d. currency held by banks e. demand deposits 476. The cost of borrowing money is a. interest b. inflation c. consumption d. taxation e. investment 477. The process by which union members cooperatively negotiate with the employers for benefits like wages and better health care is called a. communal meeting b. group contracting c. emphatic discourse d. Nash bargaining e. collective bargaining II.??? II.??? II.??? 478. What is the difference between currency and money? a. currency does not function as a medium of exchange b. currency is equivalent to money a. currency can be used to purchase more items than money a. currency only refers to the physical units of money a. money is a subset of currency II.??? 479. Which of the following is NOT true of the pure competition market structure? a. there is no product differentiation b. there is perfect knowledge of the market c. there are no barriers to entry II.??? d. there is a price taking atmosphere e. there is heavy government regulation 480. In a perfectly competitive market, what would cause firms to exit the market? a. implicit costs in excess of normal profits b. marginal revenue equaling marginal cost c. an increase in the demand for their good II.??? d. a decrease in each firm’s production costs e. internal costs in excess of external costs 481. Which of the following factors affects the productivity of labor? a. immigration laws b. education and skill level of the labor force c. fertility rates d. capital to labor ratio e. household size II.??? 482. Demand for money is downward-sloping because of the relationship between the _____ relationship between the _____ and the quantity of money demanded. a. direct, interest rate b. inverse, supply of money II.??? c. direct, rate of inflation d. inverse, interest rate e. direct, supply of money 483. The demand curve for an oligopoly is a. flat b. upward-sloping c. kinked d. broken e. vertical II.??? 484. Which of the following changes does NOT cause the price paid by consumers at each quantity to change? a. shifting preferences b. population growth II.??? c. a rise in incomes d. an increase in supply e. the invention of a new substitute 485. If supply increases, then a. the quantity demanded and the quantity supplied increase b. demand and equilibrium price decrease c. the quantity demanded and the quantity supplied decrease d. equilibrium price and quantity supplied increase II.??? e. equilibrium price and quantity demanded increase 486. The market for fast food can be BEST characterized as which type of market? a. competitive b. monopolistic c. monopolistic competitive d. oligopolistic e. perfectly competitive 487. Which of the following is NOT true of a labor union? a. they negotiate for better wages b. they negotiate for work hours and job safety c. they decide the demand for labor d. they heavily influence the labor supply e. they can influence inflation 488. An increase in the price of grain will lead to a. a decrease in demand for grain b. a decrease in the quantity of grain demanded c. an increase in the quantity of bread demanded d. an increase in the supply of bread e. a decrease in the supply of grain 489. The number of hours of labor offered to employers at various wage rates is the a. income effect of labor b. supply of labor c. labor force participation rate d. contingent labor force e. marginal output of labor 490. Patents encourage: a. risks. b. competition. c. saving. d. strikes. e. innovation. 491. Why does the market demand for sports cars NOT cover everyone who wants to own one? a. demand only exists when a bid is made b. demand only covers actual purchases c. one must be both willing and able to purchase the car d. the quantity sold is much less than the quantity desired e. a black market for sports cars must exist 492. All of the following tend to increase productivity EXCEPT a. education b. specialization c. technological improvements d. lower nominal but higher real wages e. investments in capital resources II.??? II.??? II.??? II.??? II.??? II.??? II.??? 493. Which mechanism transmits the effects of a change in one market to another II.??? related market? a. b. c. d. e. quantity price demand supply equilibrium 494. Which item does NOT affect the demand for a product? a. number of buyers of the product b. price of inputs used to make the product c. income of buyers of the product d. tastes of buyers e. price of goods related to the product 495. The market-clearing price clears _____ from the market. a. efficiency b. equity c. shortages and surpluses d. equilibrium e. demand and supply II.??? II.??? 496. Which of the following is NOT an action a union would take as part of a labor dispute? a. a strike b. a boycott II.??? c. a lockout d. a picket e. a petition 497. Education has all of the following effects upon an economy EXCEPT a. increasing the minimum wage b. increasing the value of human capital c. increasing productivity levels d. bringing out new technologies e. increasing the level of labor specialization 498. If Hannah gets a raise of $400 a month, what will that do to her demand curve for a normal good? a. there will be a movement to the right along the demand curve b. the demand curve will shift to the right c. there will be a movement to the left along the demand curve d. the demand curve will shift to the left e. the demand curve will not change in any way 499. Which of the following goals is the LEAST likely reason why a labor union creates qualification procedures? a. to entice people to enter its field and increase labor supply b. to maintain a high level of professionalism within its field c. to limit the employer’s ability to hire nonunion labor d. to increase demand for its product, which increases labor demand e. to decrease labor supply and increase wages for its members 500. Money should have all of the following characteristics if it is to be effective EXCEPT a. be abundant b. be easily portable c. have good purchasing power II.??? II.??? II.??? II.??? d. be accepted by merchants e. have stable values 501. If at $10, 20 CDs are sold and at $5, 50 CDs are sold; from the $5-$10 range CDs are a. unit elastic b. completely inelastic II.??? c. inelastic d. completely elastic e. elastic 502. Which of the following statements is TRUE regarding all inferior goods? a. They have an upward-sloping demand curve. b. They have a positive income elasticity c. Demand for them increases as income decrease d. They have few substitutes e. They have a cross-price elasticity of zero with complements. II.??? 503. An increase in productivity levels can often be attributed to which two factors? a. investment and interest rates b. inflation and technology c. technology and competition II.??? d. competition and consumption e. consumption and investment 504. Can the quantity demanded change without demand changing? a. No. b. Yes, if the quantity supplied does not change. c. Only if supply does not change. d. Yes, if supply changes. e. Only if price controls are imposed on the market. 505. Demand curves are never a. straight lines b. vertical c. nonlinear d. upward sloping e. horizontal 506. All of the following actions will raise a nation’s standard of living EXCEPT a. diverting resources to an inefficient industry b. investing in capital c. employing more doctors d. investing in education e. making industry more competitive II.??? II.??? II.??? 507. Which of the following events, everything else held constant, would cause the demand for computer software to increase? a. a decrease in the costs of computer chips b. a decrease in income II.??? c. an increase in the price of computers d. an increase in computer sales e. a decrease in the wages of computer software engineers 508. The market concentration of a firm in perfect competition is a. low II.??? b. c. d. e. medium high absolute competitive 509. If demand for a good decreases while its supply remains constant, then the equilibrium a. price and quantity decrease b. price increases and quantity decreases c. price decreases and quantity increases d. price and quantity increase e. price and quantity are indeterminate 510. The nominal money supply is the total dollar value of a. stocks and bonds b. purchasing power c. GDP d. aggregate income e. paper money and coins II.??? II.??? 511. The law of demand states that, for a normal good, the quantity demanded will fall when its price rises. The fact that this statement may NOT hold for inferior goods is attributed to which effect? a. the substitution effect b. the wealth effect II.??? c. the income effect d. the Pigou effect e. the crowding-out effect 512. A supply curve is a basic representation of a. the quantity supplied at a given price b. the amount of time it takes to supply the good c. the amount of labor that goes into supplying the good d. the quantity supplied given each unit of input e. the quantity supplied given consumer preferences 513. Which of the following is considered a public good? a. fish in the ocean b. cable TV c. national defense d. congested toll roads e. congested non-toll roads 514. Which of the following pairs of goods is likely to have the HIGHEST cross elasticity of demand? a. salt and sports cars b. salt and pepper c. gasoline and sports cars d. coffee and tea e. record players and records 515. Which of the following is FALSE of a monopoly market structure? a. economic profit is possible b. one firm and many buyers exist c. there is a high incentive for invention d. there are many barriers to entry II.??? II.??? II.??? II.??? e. there exist few substitute products 516. All of the following changes will end up resulting in a decrease in the price of desktop computers EXCEPT: a. A decrease in the price of laptops b. An increase in desktop producers II.??? c. A decrease in the price of printers d. A decrease in the population e. An expectation that the price of desktops will decrease 517. If the price of a good decreases: a. The supply of a complementary good will decrease b. The demand for a substitute good will decrease c. The supply of a substitute good will increase d. The demand of a complementary good will decrease e. The demand for a substitute good will increase 518. Money is useful in any society, because it a. eliminates the need to fulfill a double coincidence of wants b. helps eliminate hunger c. makes a good store of value d. is used as a unit of account e. is highly portable 519. If Josh spends $10 to go see a movie when the next best alternative is studying for tomorrow’s economics test, what is the implicit cost of his decision? a. There is no implicit cost. b. $10 c. The value of his studying d. $10 + the value of his studying e. The value of the movie 520. What happens when there is a decrease in the price of a substitute for apples, assuming everything else is constant? a. the equilibrium quantity of apples rises b. the equilibrium price of apples falls c. the supply curve for apples shifts to the right d. the demand curve for apples shifts to the right e. there are no changes to the price or quantity of apples 521. Firms can make a long-term economic profit in a(n) a. monopoly and a monopolistically competitive market b. perfectly competitive market and a monopolistically competitive market c. monopoly and oligopoly d. oligopoly and a monopolistically competitive market e. oligopoly and a perfectly competitive market II.??? II.??? II.??? II.??? II.??? 522. Why do individuals spread their income over a variety of goods and services rather than on one item? a. individuals experience diminishing product of labor b. individuals experience diminishing marginal utility II.??? c. individuals experience decreases in marginal advantage d. individuals experience market saturation of goods e. individuals experience high search costs for the good 523. Which of the following products has the MOST elastic demand? a. aspirin in the short run b. soda in the long run c. lime soda in the short run d. lime soda in the long run e. aspirin in the long run 524. The term “derived demand” can be used to describe the demand for a. goods b. services c. labor d. final goods and services e. any finished product 525. An industry with only one competitor is called a(n) a. pure competition b. impure competition c. monopolistic competition d. oligopoly e. monopoly 526. By establishing a price ceiling when market prices are increasing, which of the following is likely to result? a. A shift in the equilibrium b. A shortage c. An increase in demand d. A surplus e. An increase in supply 527. All of the following affect the demand for labor EXCEPT a. the price of output b. the supply of alternative inputs c. the price of complementary inputs d. the productivity of workers e. the rate of immigration II.??? II.??? II.??? II.??? II.??? 528. If the price of a good rises from $5 to $10, causing the quantity demanded to fall from 200 to 150, the producer could maximize revenue by a. raising the price b. decreasing the price II.??? c. supplying more products d. firing some employees e. buying better technology 529. An increase in the price of hamburgers will MOST likely result in a(n): a. increase in the supply of fries. b. decrease in the demand for hamburgers. c. increase in the demand for hamburgers. d. decrease in the price of hot dogs. e. increase in the price of hot dogs 530. Which of the following is NOT characteristic of a perfectly competitive market? a. independent buyers and sellers b. free access to the market c. many buyers and sellers II.??? II.??? d. product differentiation e. the market determines price 531. A firm’s capital stock includes all of the following EXCEPT a. plants b. liabilities c. equipment d. inventories e. intangible assets 532. Which statement is NOT true for monopolists? a. They can earn positive, short-run profits. b. They can earn positive, long-run profits. c. They will produce at a level that is less than a perfectly competitive firm. d. Their average revenue curve is downward sloping. e. They produce at their minimum average total costs. 533. The marginal product of labor is a. the market price of one unit of output b. the cost in wages of an additional unit of labor c. the average output of workers in a market d. the additional output gained from an additional unit of labor e. the output produced by the initial worker hired 534. Supply curves are never a. downward sloping b. upward sloping c. vertical d. horizontal e. nonlinear 535. Which of the following is FALSE about oligopolies? a. There are large barriers to entry. b. There are few sellers. c. Each firm’s demand curve is kinked. d. Each firm has some control over the market. e. Oligopolists are price takers. 536. Non-price competition is MOST important to: a. a monopoly. b. an oligopoly. c. monopolistic competition. d. perfect competition. e. a monopsony. 537. Which economist coined the phrase “creative destruction”? a. Karl Marx b. Joseph Schumpeter c. John Maynard Keynes d. Milton Friedman e. Garrett Hardin 538. If an increase in price does not affect quantity demanded, then demand for the good is considered a. perfectly inelastic b. inelastic II.??? II.??? II.??? II.??? II.??? II.??? II.??? II.??? c. unit elastic d. elastic e. perfectly elastic 539. In a perfectly competitive market for oranges, a frost wipes out much of the crop. What would happen to an orange producer’s price and economic profit if that firm remained unaffected by the frost? a. price rises, and economic profit drops b. price is indeterminate, and economic profit rises II.??? c. price rises, and economic profit rises d. price drops, and economic profit is indeterminate e. price drops, and economic profit drops 540. A tax of five cents on each unit purchased is MOST harmful to the consumer if demand is a. perfectly inelastic b. perfectly elastic II.??? c. unit elastic d. relatively elastic e. relatively inelastic 541. At the equilibrium price: a. the Pareto optimal is reached b. There is no surplus or shortage c. The Gini coefficient is zero d. Supply must be unit elastic e. Demand must be unit elastic 542. In a perfectly competitive market, what is the demand curve for a firm? a. Vertical b. Constantly shifting c. Positively sloped d. Horizontal e. Negatively sloped 543. A supply schedule shows: a. quantity supplied at each price b. quantity supplied at each quantity demanded c. supply at each price d. supply at each quantity demanded e. supply at each quantity supplied 544. The minimum amount of profit an entrepreneur needs to continue operating his business is called a. economic profit b. normal profit c. opportunistic profit d. stable profit e. net profit 545. All of the following are features of a perfectly competitive market EXCEPT a. free entry and exit of firms b. perfect information c. a large number of buyers and sellers d. heterogeneous products II.??? II.??? II.??? II.??? II.??? e. no constraint on prices 546. If good A and good B have a positive cross-price elasticity of demand, and good A and good C have a negative cross-price elasticity of demand, all of the following could possibly decrease demand for good A EXCEPT a. an increase in the price of good B and a decrease in the supply of good C b. an increase in the supply of good B and an increase in the price of good C II.??? c. a decrease in the price of good B and an increase in the supply of good C d. a decrease in the supply of good B and a decrease in the price of good C e. an increase in the supply of good B and a decrease in the supply of good C 547. The “Tragedy of the Commons” illustrates that people a. will not voluntarily contribute to a public project if asked to donate b. will behave recklessly if they think they have the protection of the law c. have a tendency to rely on insurance and not take care of themselves d. take better care of their personal property than communal property e. should not vote in elections because it is irrational 548. Which of the following measures the price elasticity of demand? a. (% change in quantity demanded) x (% change in price) b. (% change in price) x (% change in quantity supplied) c. (% change in quantity supplied) / (% change in price) d. (% change in quantity demanded) / (% change in price) e. (% change in price) / (% change in quantity demanded) 549. What does price elasticity of demand measure? a. the absolute shift of the demand curve b. the percent change in supply c. buyer’s response to a change in price d. cost-push inflation e. suppliers’ response to resource costs 550. In order for markets to be totally efficient, all of the following cases must be true EXCEPT a. firms must determine the efficient level of household consumption b. there must be an efficient allocation of resources among firms c. there must be an efficient allocation of output among households d. firms must produce an efficient mix of goods and services e. firms must decide on an optimal amount of labor to produce the good 551. The number of orange juice producers rises, and then the price of oranges rises. What is the overall movement of the supply curve? a. to the left b. to the right c. upwards d. downwards e. indeterminate 552. Instead of buying new machinery, the owner of a dairy decides to hire more local workers to help reduce local unemployment. This is an example of a(n) a. open market operation b. negative externality c. coincidence of wants d. negative incentive e. value-based decision II.??? II.??? II.??? II.??? II.??? II.??? 553. If the price of gasoline rose around the world, which of the following would MOST likely happen? a. company employees would carpool less b. farmers would use their tractors more often c. cab drivers would drive around looking for fares d. manufacturing plants would add extra shifts e. airlines would cut low-profit routes 554. If the demand for a particular good declines when incomes rise, the good is referred to as a(n) a. inferior good b. complementary good c. substitute good d. normal good e. Phillip’s good 555. The difference between a demand schedule and a demand curve is equivalent to the difference between a(n) a. explanation and a graph b. increasing and decreasing graph c. t-chart and a graph d. picture and a chart e. line and a curve 556. The calculation of wealth differs from the calculation of income in all of the following ways EXCEPT a. wealth is what the household owns minus its debts b. income is measured in a given period c. wealth includes non-cash assets d. income takes dissaving into account e. income includes cash dividends 557. Which piece of legislation guaranteed unions the right to collective bargaining? a. the Wagner Act b. the Landrum-Griffin Act c. the Taft-Hartley Act d. the Smoot-Hawley Act e. the Norris-La Guardia Act 558. The “Tragedy of the Commons” illustrates the sometimes ruinous nature of a. self-interest b. non-monetary incentives c. monetary incentives d. social thinking e. explicit costs 559. The ability to sell the same product at different prices is known as a. price leadership b. price discrimination c. product differentiation d. price squeezing e. price fixing II.??? II.??? II.??? II.??? II.??? II.??? II.??? 560. If one wanted to see the quantity demanded of a good at specific points, one II.??? would look at a a. b. c. d. e. supply curve supply schedule indifference curve demand schedule production possibilities curve 561. In negotiations between management and labor unions, which of the following issues is typically NOT discussed? a. wages and fringe benefits b. tax withholding c. working conditions d. job security e. grievance procedures 562. Where do most standard of living measurements fail? a. they fail to measure inflation b. they fail to measure non-monetary differences c. they fail to measure how many people are within a household d. they fail to measure the intrinsic value of money e. they fail to measure opportunity cost 563. How is the short run defined in microeconomics? a. the period in which demand does not change b. any time changes in supply only affect the price a. the period in which a company can not shut down a. the period in which some factor costs are fixed a. the period in which the prices can not change 564. The money supply can be controlled by all of the following EXCEPT a. the Fed lowering the discount rate b. the Fed buying securities from the public c. the Fed selling securities to the public d. a change in the reserve requirement e. people buying or selling corporate stocks or bonds 565. In an increase in the supply of a good causes a decrease in revenue, then the good has _______ price elasticity of demand, making it ________. a. an inelastic; a necessity b. an inelastic; an inferior good c. a unit elastic; a normal good d. an elastic; a luxury e. an elastic; an economic good 566. All of the following are true of markets EXCEPT a. they consist of a buyer and a seller b. they often adjust for social goals c. they seek to reach equilibrium d. the market clearing price occurs where supply meets demand e. they can determine how scarce resources are allocated 567. The wage rate can also be seen as a. the cost of living b. the measure of wealth c. the aggregate price of goods d. the price of survival II.??? II.??? II.??? II.??? II.??? II.??? II.??? e. the price of leisure 568. Suppose the price of a good fell from $4 to $2 and quantity demanded rose from 5 units to 10 units. What is the product’s elasticity of demand? a. -2 b. -1/2 c. 1/2 d. 2 e. 8 569. Which of the following is a function of money? a. durable b. portable c. medium of exchange d. scarce or rare e. uniform 570. Supply is represented by “Qs = 2 x price,” while demand is represented by “Qd = 15 - (3 x price).” What is equilibrium for this market? a. Quantity = 3; price = 6 b. Quantity = 6; price = 3 c. Quantity = 9; price = 4.5 d. Quantity = 15; price = 15 e. Quantity = 30; price = 15 571. The reward an entrepreneur receives for being innovative is a. rent b. interest c. profit d. a wage e. revenue II.??? II.??? II.??? II.??? 572. If supply increases and demand decreases, then what is the change to price and quantity demanded? a. price increases, quantity demanded is indeterminate b. price decreases, quantity demanded decreases II.??? c. price decreases, quantity demanded is indeterminate d. price is indeterminate, quantity demanded decreases e. price is indeterminate, quantity demanded is indeterminate 573. Which of the following is not a characteristic of monopolistic competition? a. the marginal cost of a good equals the price b. products are differentiated c. each firm has a downward-sloping demand curve d. long-run economic profits are driven to zero e. firms easily enter of exit the market 574. Which of the following market structures operates with the smallest deadweight loss? a. fixed-price monopolies b. oligopolies c. regulated markets d. monopolistic competition e. discriminating monopolies II.??? II.??? 575. Which of the following is MOST important for money to be an effective store of value? a. it should be durable b. it should be fungible II.??? c. it should be divisible d. it should be intrinsically valuable e. it should be perishable 576. When price is 15, quantity demanded is 150. When price increases to 25, quantity demanded drops to 50. Using the midpoint formula, the price elasticity of demand is: a. 39818 b. 39815 II.??? c. 1 d. 2 e. 5 577. For an industry facing diseconomies of scale, production would be more efficient if a. firms increased the scale of their operations b. there were less competing firms in the market c. firms increased the level of specialization of labor d. firms decreased the number of inputs used in production e. firms colluded to increase market power 578. Which of the following is TRUE? a. A financial intermediary allows savers to directly supply funds to investors. b. Banks are not financial intermediaries. c. The stock market is a financial intermediary. d. The bond market is a financial intermediary. e. Mutual funds are financial intermediaries. 579. The labor theory of value suggests that a. It is impossible to exploit workers b. Human capital and physical capital are not distinct c. Wages are always equal to the value of workers' output d. Value-added taxes are ideal e. Value originates from human exertion 580. Standard of living is generally measured in a. nominal GDP b. real GDP c. real per capita GDP d. nominal GNP e. per capita GNP II.??? II.??? II.??? II.??? 581. If a firm doubles its labor and production triples, the firm experiences which of the following? a. economies of scale b. constant returns to scale II.??? c. decreasing returns to scale d. marginal decrease in labor e. diseconomies of scale 582. The type of market MOST beneficial to producers is: a. a monopoly. II.??? b. c. d. e. an oligopoly. monopolistic competition. perfect competition. a monopsony. 583. Which of the following goals is unequivocally held by labor unions? a. higher wages b. more employment c. increased labor supply d. more inelastic labor demand e. more right-to-work laws 584. The consumer price index and the producer price index are determined by the: a. Council of Economic Advisors b. Department of Labor and Commerce c. Bureau of Economic Analysis d. Federal Reserve Board e. Bureau of Labor Statistics 585. All of the following can help raise a nation’s standard of living EXCEPT a. investments in healthcare b. increased job training and placement programs c. investments in capital resources d. investments in education e. raising the minimum wage 586. A market structure with many sellers and only one buyer is known as a(n) a. monopoly b. monopsony c. oligopoly d. oligopsony e. tight market 587. If new technology allows all firms to produce computer chips more cheaply a. computer prices will rise b. computer prices will fall c. demand for computers will rise d. demand for computers will fall e. there will be a surplus of computers 588. In which market are both buyers and sellers price takers? a. a monopoly b. an oligopoly c. monopolistic competition d. perfect competition e. a monopsony 589. Which of the following does not have a very inelastic demand curve? a. salt b. insulin c. cars d. limited food stuffs e. paper clips II.??? II.??? II.??? II.??? II.??? II.??? II.??? 590. Utility is BEST defined as the a. usefulness of a technological innovation b. satisfaction derived from consuming a good or service c. efficiency of a certain resource allocation d. economic profit made by competitive firms e. income distribution of an economy 591. When two goods are substitutes, an increase in the price of one good will result in a(n) a. Decrease in supply for the other good b. Decrease in demand for the other good c. Increase in price for the other good d. Increase in demand for the other good e. Increase in supply for the other good 592. All of the following are examples of fixed costs EXCEPT a. rent b. raw materials c. CEOs salary d. consulting fees e. advertising costs 593. Firms must decide to allocate a combination of which factors in order to produce a certain quantity of a good? a. labor and capital b. capital and cost c. cost and maintenance d. maintenance and time e. time and labor 594. Which of the following tools is NOT used to minimize an employer’s hiring and training costs? a. noncompeting groups b. signaling c. screening d. an internal labor market e. reviewing credentials 595. Why does the demand curve intersect the price axis? a. there is a price where profits for the firm is zero b. consumers choose to price discriminate c. the market cannot support the good d. households have limited income e. firms supply limited amounts of the good 596. An increase in supply will lead to a. a decrease in price and an increase in quantity b. a decrease in price and a decrease in quantity c. an increase in price and a decrease in quantity d. an increase in price and an increase in quantity e. an increase in price an indeterminate change in quantity II.??? II.??? II.??? II.??? II.??? II.??? II.??? 597. A fatal infectious disease leads to a decrease in both buyers and sellers in a market. This would be expected to cause II.??? a. an increase in price and an indeterminate change in quantity b. a decrease in price and an indeterminate change in quantity c. an indeterminate change in price and an increase in quantity d. an indeterminate change in price and a decrease in quantity e. an increase in price and an increase in quantity 598. All of the following are true of Coke and Pepsi EXCEPT a. a decrease in the price of Pepsi will lead to a decrease in the demand for Coke b. an increase in the demand for Coke will lead to a decrease in demand for Pepsi c. Coke and Pepsi are substitutes II.??? d. an increase in the price of Coke will lead to an increase in the demand for Pepsi e. a decrease in the supply of Pepsi will lead to an increase in the demand for Coke 599. Which of the following would increase the equilibrium quantity for a good? a. a decrease in the price of a substitute b. improvements in the technology used to produce the good c. an increase in the cost of producing the good d. an increase in the price of a complement e. the exiting of industries which produce the good 600. Prices in a market are determined by: a. The interaction of buyers and sellers b. Traditions and customs c. The government d. Democratic decision-making e. Collusion 601. Ham and eggs are to Coke and Pepsi as a. normal goods are to inferior goods b. substitutes are to complements c. complements are to substitutes d. inputs are to outputs e. generic are to brand names 602. How is the price elasticity of demand for a good calculated? a. % change in demand divided by % change in supply b. % change in demand divided by % change in price c. % change in quantity demanded divided by % change in price d. % change in price is divided by % change in quantity demanded e. % change in price is divided by % change in quantity supplied 603. A monopsonistic market exhibits which of the following properties? a. it is dominated by a cartel b. it has few barriers to entry c. firms compete solely on price d. goods are generally unit elastic e. the firms are the price takers 604. In a competitive labor market, a firm should employ more labor than capital until which point? a. the marginal product of labor is higher than that of capital b. the marginal product of labor equals that of capital c. the marginal products per factor cost are equal d. the total product of labor is less than that of capital II.??? II.??? II.??? II.??? II.??? II.??? e. the average product of labor is equal to that of capital 605. We can predict that the demand for computer software will increase as a result of which of the following events, other things the same? a. an increase in the price of computer memory chips b. a decrease in income c. a decrease in the price of computers d. an increase in the wages of software programmers e. an improvement in the technology for producing computer software 606. The public can force the interest rate upward by a. directly raising the interest rate b. decreasing demand for loanable funds c. decreasing the level of investment d. decreasing the supply of loanable funds e. becoming less productive as a society 607. What is the BEST description for the demand curve faced by an oligopoly a. Positive b. Inverse c. Vertical d. Kinked e. Horizontal 608. The tragedy of the commons is about goods that are a. excludable and rival b. not excludable but rival c. not excludable and not rival d. excludable and not rival e. sometimes excludable but usually rival 609. In supply and demand schedules, quantity is typically given relative to a. equilibrium price b. opportunity cost c. utility d. supply e. time II.??? II.??? II.??? II.??? II.??? 610. Which of the following is an objection to the use of the standard of living as a measure of economic welfare? a. It is difficult to measure output. b. It is difficult to measure the size of the population. II.??? c. Economic welfare defies measurement. d. Varying income distributions is not addressed by the standard of living. e. There are too many definitions of the standard of living. 611. All of the following are sales techniques used to create the image of product differentiation EXCEPT a. billboards b. sales II.??? c. design altering d. TV commercials e. new brands 612. What do economists call two goods for which an increase in the price of one II.??? leads to an increase in the demand for the other? a. b. c. d. e. complements inferior substitutes normal customary 613. If the price elasticity of demand for a good is greater than one, then a decrease in price would MOST likely: a. increase demand. b. decrease demand. c. decrease quantity demanded. d. increase revenue. e. decrease revenue. 614. Good A is an inferior good, with good B as a complement. Which of the following would increase demand for good A? a. income rise, demand for good B shifts to the right b. income rise, supply of good B shifts to the right c. incomes rise, prices of good B rises d. incomes fall, price of good B rises e. incomes fall, price of good B falls II.??? II.??? 615. If an increase in income leads to a decrease in demand for a good, then the good is a(n) a. normal good b. inferior good II.??? c. superior good d. luxury e. necessity 616. If the demand for one good increases because the price of another good declines, the goods are said to be _____ goods. a. normal b. inferior c. substitute d. complementary e. derivative 617. What is the impact in the market for computer software, if the price of computer chips falls? a. Equilibrium price and quantity fall. b. Equilibrium price falls but quantity rises. c. Equilibrium price rises but quantity falls. d. Equilibrium price falls but quantity is ambiguous. e. Equilibrium price and quantity rise. II.??? II.??? 618. Demand for good A is elastic, while good B is used to produce good Which of the following would result in an increase in revenue from good A? a. Consumer preferences shift toward good A while the price of good B rises. b. The price of a substitute for good A decreases while the price of good B falls. c. The price of a complement for good A increases while the price of good B II.??? rises. d. The utility of good A increases while the supply of good B shifts to the right. e. Demand for good A shifts to the right while the supply of good B shifts to the left. 619. One of the functions of money includes a. store of value b. portability c. durability d. uniformity e. finely divisible II.??? 620. Suppose that the price of a product increases. In the market for the workers who make the product, a. supply and wages increase b. demand and wages increase II.??? c. supply and demand increase, while the change in wages is ambiguous d. supply decreases, demand increases, and wages stay the same e. employment decreases, but wages increase 621. If the price of an elastic good increases, what is the effect on the amount of total revenue the company receives from selling the good? a. total revenue increases b. total revenue decreases c. total revenue stays the same d. total revenue peaks and troughs e. total revenue falls to zero 622. Which of the following terms is LEAST associated with oligopolies? a. price leadership b. collusion c. price discrimination d. market sharing e. price wars 623. Which of the following is a likely result from a change in income? a. An increase or decrease in supply b. An increase or decrease in demand c. An increase in both supply and demand d. A decrease in both supply and demand e. No change in either supply or demand 624. Utility, as used in economics, refers to the measurement of a. ability to pay for a good b. an entity’s value to the state c. the degree of specialization d. opportunity cost of production e. the satisfaction derived from a good 625. Which of the following has to do with the overuse of a common good? a. caveat emptor b. “The Tragedy of the Commons” c. caveat venditor d. A shortage e. A lockout 626. The utility of a good is the: a. satisfaction gained from consuming it. b. social benefit it has. c. cost of maintaining its consumption. d. cost of its externalities. II.??? II.??? II.??? II.??? II.??? II.??? e. cost of producing the good. 627. In a monopolistically competitive market a. Few firms produce identical products b. Few firms produce similar products c. Many firms produce dissimilar products d. Many firms produce identical products e. Many firms produce similar products 628. What is necessary for a market to exist? a. a location b. a good c. a service d. an exact time e. an exchange 629. Which of the following is a financial intermediary? a. a life insurance company b. a land bank c. a mutual fund d. a commercial bank e. an investment bank 630. All of the following lead to the formations of monopolies EXCEPT a. a price-taking atmosphere b. economies of scale c. patents and copyrights d. government licensing e. large corporate mergers and buyouts 631. Which of the following would cause an increase in the price of cars? a. a decrease in the price of bicycles b. advancements in car-producing technology c. an increase in the price of gasoline d. a decrease in the number of car producers e. expectations that the price will decrease 632. A firm is forced to shut down in the long run if, at the profit-maximizing quantity a. average total cost is below average revenue b. average revenue is below total costs c. marginal revenue is below average total cost d. average revenue is below average total cost e. average revenue is below marginal cost 633. If the price of CDs decreases and the price of mp3 players decreases, the effect on the equilibrium price and quantity demanded of CD players is a. price increases and quantity demanded increases b. price increases and quantity demanded decreases c. price decreases and quantity demanded is indeterminate d. price is indeterminate and quantity demanded is indeterminate e. price is indeterminate and quantity demanded decreases 634. What is the income elasticity of demand of an inferior good? a. Less than zero b. Zero II.??? II.??? II.??? II.??? II.??? II.??? II.??? II.??? c. Between zero and one d. One e. Greater than one 635. What is fiat money? a. money that is intrinsically valuable b. money that is not accepted in an economy c. money that is not represented by any currency d. money that is valuable because the government says it is e. money that is backed by a commodity such as gold or silver II.??? 636. If the cross-price elasticity of two goods is negative, then the two goods are: a. unrelated b. complements c. substitutes II.??? d. factors of production e. inferior goods 637. Which of the following was seen as the most important piece of legislation enacted to prevent employers from interfering with the organization of labor unions? a. Webster Act b. McKinley Act c. Taft-Hartley Act d. Norris-LaGuardia Act e. Wagner Act 638. Cartels and price leadership are often found in which market structure? a. perfect competition b. monopolistic competition c. oligopoly d. monopoly e. regulated monopoly 639. Economic profit is: a. revenue. b. revenue minus implicit costs. c. revenue minus explicit costs. d. revenue minus implicit and explicit costs. e. revenue minus implicit costs, explicit costs, and external costs. 640. When price increases from $20 to $30, quantity demanded goes from 50 to 40. Demand for the good over this range can be classified as: a. Perfectly inelastic b. Inelastic c. Unit elastic d. Elastic e. Perfectly inelastic II.??? II.??? II.??? II.??? 641. If consumer preference shifts towards Nike shoes while a new tariff makes transporting the shoes more expensive, what is the likely effect on the equilibrium price and quantity demanded of Nike shoes? a. price increases and quantity demanded increases II.??? b. price increases and quantity demanded decreases c. price decreases and quantity demanded is indeterminate d. price increases and quantity demanded is indeterminate e. price is indeterminate and quantity demanded decreases 642. The name brand shoe industry is an example of which market structure? a. perfect competition b. monopolistic competition c. oligopoly d. monopoly e. regulated monopoly 643. A country’s standard of living is often measured by looking at a nation’s a. per capita GDP b. production possibilities curve c. aggregate demand curve d. aggregate income e. population growth rate 644. A reduction in the price of steel would cause the a. supply of automobiles to decrease b. supply of automobiles to increase c. demand for steel to increase d. demand for steel to fall e. demand for automobiles to fall 645. What do economists call the amount of a good that buyers are willing and able to purchase at a given price? a. demand b. supply c. quantity demanded d. quantity supplied e. equilibrium II.??? II.??? II.??? II.??? 646. Costs that should not be considered in rational decision making are known as a. opportunity costs b. marginal costs c. variable costs II.??? d. sunk costs e. average costs 647. How do economists calculate the market demand curve? a. by summing individual demand curves horizontally b. by summing individual demand curves vertically c. by multiplying the demand curve by its elasticity d. by multiplying the CPI with individual demand curves e. by looking up the Laspeyres index 648. The demand curve for Giffen goods is a. horizontal b. very elastic c. very inelastic d. vertical e. upward sloping 649. In a perfectly competitive market, each firm faces a demand curve that is: a. horizontal. b. downward sloping. c. vertical. II.??? II.??? II.??? d. upward sloping. e. parabolic. 650. If a pizzeria has unsold pizza at the end of the day, which action should it take next time? a. lower prices b. raise prices c. sell its flour d. buy a new oven e. shut down II.??? 651. When a person decides to use his salary to save for a computer, upon which function of money does he rely? a. unit of account b. medium of exchange II.??? c. store of value d. standard of value e. financial investment 652. Under normal circumstances, the supply of a currency in an international market is a. fixed b. perfectly elastic c. perfectly inelastic d. upward-sloping e. downward-sloping 653. What do economists call the demand curve faced by an oligopolist that assumes rivals will match a price decrease, but ignore a price increase? a. derived demand curve b. kinked demand curve c. game theory demand curve d. nonprice competition demand curve e. oligopolist demand curve 654. A shift to the right of a demand curve for a good shows that a. people are willing to purchase less of that good at all prices b. people are willing to purchase more of that good at all prices c. the cost of the good is taking up a larger percent of income d. the cost of the good is taking up a smaller percent of income e. people are not able to purchase as much the good as before II.??? II.??? II.??? 655. A vendor charges one dollar for his cookies because that is what he pays for materials. Which of the following is NOT a miscalculation made by the vendor? a. he does not account for his labor b. he does not account for discarded cookies II.??? c. he does not account for his opportunity cost d. he does not account for transportation costs e. he does not account for his profit 656. In which economic system is long-run economic profit most likely? a. perfect competition b. monopolistic competition c. oligopoly d. monopoly II.??? e. monopsony 657. Which of the following pairs of goods would BEST be seen as complementary goods? a. butter and margarine b. cars and motorcycles II.??? c. baseballs and bats d. computers and televisions e. tea and coffee 658. Which of the following is FALSE? a. a union is a collective of workers b. a union is a type of cartel c. union members typically have lower wages than non-union members d. during a strike, union members withhold their labor e. during a lockout, employers keep employees from the workplace 659. If the average disposable income of citizens increases, what is the likely result on the demand for goods? a. an increase for all goods b. a decrease for all goods c. an increase for normal goods d. a decrease for luxury goods e. an increase for inferior goods 660. If a decrease in income leads to an increase in demand, then the good is known as a(n): a. Normal good b. Inferior good c. Giffen good d. Elastic good e. Substitute good 661. A union is an institution which: a. assists employers by engaging in lockouts. b. assists the government by petitioning. c. assists employees by engaging in collective bargaining. d. assists consumers by driving down costs. e. assists investors by creating closed shops II.??? II.??? II.??? II.??? 662. If good A and good B are unrelated goods, then an increase in the price of good A will have what effect on good B, assuming the income effect outweighs the substitution effect? a. Demand will decrease. b. Demand will increase. II.??? c. Supply will decrease. d. Supply will increase. e. Neither supply nor demand will change. 663. What do economists call the amount of a particular product that sellers are willing and able to sell at a given price? a. quantity supplied b. supply c. aggregate supply d. production II.??? e. output 664. Monopolistic competition features: a. many sellers. b. few buyers. c. a horizontal demand curve. d. high barriers to entry. e. identical products. 665. Resurgence in the popularity of pogs causes the number of pogs sold to increase dramatically and at higher prices. This describes a. a movement along the demand curve b. a shift of the demand curve to the left c. a shift of the demand curve to the right d. a shift of the supply curve to the left e. a shift of the supply curve to the right 666. Which of the following is NOT a non-price determinant of supply? a. Price of resources b. Seasonal variations c. Level of income d. Technological advances e. Taxes and subsidies 667. In a standard graph of supply and demand, a. an increase in demand is shown by an upward shift in the demand curve b. an increase in supply is shown by an upward shift in the supply curve c. a decrease in supply is shown by shifting the supply curve to the left d. a decrease in demand is shown by shifting the demand curve to the right e. a decrease in demand is shown by a downward shift of the demand curve 668. Technological changes generally have what sort of an effect upon production? a. productivity decreases b. the quantity of goods supplied increases c. more labor-hours are required d. costs of production increase e. firms will be unwilling to invest II.??? II.??? II.??? II.??? II.??? 669. Which industry is a good example of a monopolistically competitive market? a. long distance telephone service b. automobiles c. wheat II.??? d. residential electric power e. heating oil 670. What type of a good does a natural monopoly usually produce? a. a free good b. a public good c. a common good d. a private good e. a club good 671. Which of the following events would cause the supply of bread to increase? a. The price of butter falls. b. The price of rice rises. II.??? II.??? c. The price of flour declines. d. The price of yeast increases. e. Income levels decrease. 672. The law of supply states that an increase in market price generally leads to a. a higher amount of consumer surplus b. an increase in quantity supplied c. lower producer surplus d. higher costs of production e. greater marginal utility 673. Cross elasticity of demand measures the responsiveness of demand to changes in: a. The price of the good b. Income c. The price of related goods d. Future expectations e. The supply of the good 674. The market concentration of a pure monopoly is a. low b. medium c. high d. absolute e. comparative 675. Which of the following grants due process? a. the Commerce Clause b. Plessy v. Ferguson c. the Sherman Act d. the Wagner Act e. the Fifth Amendment 676. Money that has some form of intrinsic value like gold and silver is known as a. accrual money b. metallic money c. commodity money d. deferred money e. hedged money 677. The “Tragedy of the Commons” refers to the problem of a. private goods being over-produced b. public goods being under-produced c. common goods being over-consumed d. public goods being under-consumed e. common goods being under-consumed 678. Which of the following is added to M1 to get M2? a. travelers’ checks b. money market and mutual fund deposits c. demand deposits d. stock margin deposits e. credit union share draft deposits 679. Demand curves are usually downward-sloping because of the substitution effect and the II.??? II.??? II.??? II.??? II.??? II.??? II.??? II.??? a. b. c. d. e. income effect interest rate effect net exports effect wealth effect balance effect 680. Labor productivity is a measure of a. how hard workers work b. how much the average worker produces in a given period of time c. the size of the labor force d. the unemployment rate e. the contributions of labor to production II.??? 681. Which of the following events would cause the supply of oranges to decline? a. Incomes decline. b. The price of apples decline. c. The price of orange juice declines. II.??? d. The wages of orange grove workers declines. e. An unexpected hard winter freeze in Florida. 682. An increase in demand will result in a(n) a. increase in supply b. decrease in supply c. increase in quantity supplied d. decrease in quantity supplied e. decrease in price 683. Much of the money being used around the world is in what form? a. fiat money b. bullion c. stock money d. rotating money e. floating money 684. An industry in which there are many sellers producing slightly different products is a. monopolistically competitive b. competitive c. perfectly competitive d. monopolistically non-competitive e. an oligopoly II.??? II.??? II.??? 685. The market for the delivery of electricity to the end user is usually structured as a(n) a. monopoly b. competitive market II.??? c. perfectly competitive market d. oligopoly e. entrepreneurship 686. It is said that in the labor market wages tend to be a. shifting, as people constantly move from job to job b. preset; nominal wage rates do not rise in the long term c. sticky, they resist any upward or downward movement d. indifferent, uninfluenced by inflation II.??? e. erratic; different in different geographic locals 687. Firms in a monopolistically competitive industry control prices through a. price competition b. perfect information c. a small number of firms d. barriers to entry e. product differentiation 688. Supply is a. the amount of a good offered at every price b. the amount of a good produced at a particular price c. the amount of a good producers are capable of producing d. the total amount of goods and services produced in an economy e. the amount of a good that consumers are willing and able to buy 689. Market-clearing price is also known as a. equilibrium price b. aggregate price c. opportunity cost d. relative price e. marginal price 690. The minimum amount that an entrepreneur must make in order to stay in business is called a(n) a. economic profit b. entrepreneurial incentive c. economic risk d. wage rate e. normal profit 691. Which of the following indicators does NOT represent a high standard of living? a. a low infant mortality rate b. a high per capita GDP c. a high literacy rate d. a low prevalence of AIDS e. a high rate of population growth 692. The market-clearing price is the price where a. marginal benefit is less than marginal cost b. marginal benefit exceeds marginal cost c. quantity supplied is less than quantity demanded d. quantity supplied equals quantity demanded e. quantity supplied is greater than quantity demanded 693. Which market system is INCORRECTLY matched with its characteristic? a. perfect competition - many buyers and sellers b. monopolistic competition - heavy reliance on non-price competition c. oligopoly - high barriers to entry d. monopoly - perfectly elastic demand curve e. regulated monopoly - heavy government participation 694. The result of “too many dollars chasing too few goods” is known as a. cost-push inflation b. cost-push deflation II.??? II.??? II.??? II.??? II.??? II.??? II.??? II.??? c. cost-pull inflation d. demand-pull deflation e. demand-pull inflation 695. What is often the most important opportunity cost businesses must consider when they make decisions? a. cost of equipment b. cost of maintenance II.??? c. cost of capital d. cost of inventory e. cost of depreciation 696. The demand for workers is typically referred to as a. total employment b. derived demand c. the demand for labor d. wage earners’ demand e. worker demand II.??? 697. To continue producing in the short run, a firm's total revenue should equal or exceed its a. Average fixed cost b. average variable cost II.??? c. average cost d. total variable cost e. total cost 698. Which of the following is TRUE of an economy of scale? a. the marginal cost of additional production remains the same with more production b. the marginal cost of additional production decreases with more production c. its marginal costs increase greatly when production increases d. its total costs greatly outweigh its total revenue e. its marginal revenue rapidly declines with extra production 699. The rights of the owner of an item to use and exchange the item are known as _____ rights. a. economic b. exchange c. property d. private e. ownership II.??? II.??? 700. Which of the following goods is MOST susceptible to the fate described in the “Tragedy of the Commons”? a. a bridge b. national defense II.??? c. a computer d. a lighthouse e. a forest 701. Money that has intrinsic value is called _____ money. a. natural b. commodity c. fiat d. fundamental II.??? e. core 702. In a market economy, how output will be distributed is determined by: a. Consumer income and product prices b. Firm profits and product prices c. Consumer needs and resource supplies d. International competition and government regulations e. Consumer preferences and firm profits II.??? 703. The market-clearing price can be reached if which of the following conditions are TRUE? a. oligopolies are in control b. a recession is taking place II.??? c. government does not intervene d. interest rates are low e. inflation is spiraling out of control 704. All of the following will cause an increase in the demand for a normal good EXCEPT a. an increase in the number of buyers b. a decrease in price c. an increase in income d. an increase in the price of substitutes e. an expectation of inflation 705. A firm in perfect competition faces a demand curve that is a. perfectly inelastic b. inelastic c. unit elastic d. elastic e. perfectly elastic 706. The incentives that could entice gas stations to offer consumer-friendly service do NOT include a. regulated gas prices b. monopolistic competition c. federal mandate d. price competition e. advertising 707. Which of the following is LEAST likely to result in a monopoly for a good? a. a patent b. a copyright c. ownership of a key resource d. large economies of scale e. the existence of substitutes 708. The quantity supplied is the amount of a good or service that a. sellers are willing to provide at a given price b. sellers are willing to provide at various prices c. consumers are willing to purchase at a given price d. consumers are willing to purchase at various prices e. is always available in a free market 709. What will happen if grape pickers strike and a new report extols the grapes medicinal properties? II.??? II.??? II.??? II.??? II.??? II.??? a. b. a. a. a. the change in quantity sold is indeterminate, but grape prices will rise grape sales will fall, and prices will rise grape sales will rise, and prices will drop grape sales will drop, but the price change is indeterminate the changes in both quantity sold and grape prices are indeterminate 710. The MOST immediate economic goal involved in educating oneself is to a. decrease the marginal factor cost b. increase ones marginal physical product c. decrease ones marginal propensity to consume d. increase demand for goods and services e. give oneself a better social conscience 711. If the law of diminishing returns is obeyed, which of the following will ALWAYS be true for a firm? a. average fixed cost will equal marginal cost b. average fixed cost will exceed average variable cost c. variable cost will equal marginal cost d. marginal cost will exceed average total cost e. marginal cost will exceed average variable cost 712. Which of the following events would cause the demand for hot dogs to increase? a. a decrease in the price of hot dog buns b. an increase in the price of hot dog buns c. a decrease in the wages of hot dog workers d. a decrease in the price of pork and beef e. an improvement in the technology of hot dog production II.??? II.??? II.??? 713. After Phillip receives a raise, he buys more records and less CDs. For Phillip, records and CDs are a. both inferior b. both normal II.??? c. inferior and normal, respectively d. normal and inferior, respectively e. complements with each other 714. The fact that the cross-price elasticity of demand for ketchup and mustard is positive suggests that a. ketchup and mustard are priced similarly b. ketchup and mustard are priced differently II.??? c. ketchup is preferred to mustard d. ketchup and mustard are complements e. ketchup and mustard are substitutes 715. Which method of destroying a building does NOT use capital-intensive technologies? a. using a wreckig ball to smash it apart b. using a crane to remove the blocks c. using workers with sledgehammers to destroy it d. using dynamite to destroy it e. using a bulldozer to knock it down 716. A decrease in demand and an increase in supply causes a. an increase in quantity and an increase in price b. a decrease in quantity and an indeterminate change in price II.??? II.??? c. an indeterminate change in quantity and a decrease in price d. an indeterminate change in quantity and an increase in price e. a decrease in quantity and a decrease in price 717. Financial intermediaries are generally responsible for linking up which two groups? a. employers and employees b. borrowers and lenders c. consumers and notaries d. traders and merchants e. corporations and accountants 718. All of the following would be considered macroeconomic topics EXCEPT a. national income taxes b. unemployment c. inflation rates d. economic growth e. market shortages 719. A monopoly faces a demand curve that is a. horizontal b. sloped downward c. vertical d. sloped upward e. kinked II.??? II.??? II.??? 720. If the marginal cost curve is horizontal, which of the following happens in the short run as production increases? a. total cost remains constant b. total fixed cost increases linearly II.??? c. total cost increases linearly d. average cost remains constant e. average cost increases 721. What is a lower limit for an individuals wage rate? a. the level of union control b. his subsistence level c. his marginal revenue product d. his marginal factor cost e. his opportunity cost 722. Demand for a normal good will increase if a. price increases b. supply increases c. supply decreases d. incomes decline e. incomes increase II.??? II.??? 723. If a firm’s production decisions have no effect on the price of a good, then the firm is referred to as a. a price maker b. a price discriminator II.??? c. a price accepter d. a price taker e. a price negotiator 724. The amount of a good that consumers are willing and able to buy at a certain price is known as the a. quantity demanded b. quantity supplied II.??? c. supply schedule d. demand curve e. aggregate demand 725. Who are responsible for linking lenders and borrowers? a. investors b. unions c. households d. corporations e. financial intermediaries II.??? 726. All of the following are differences between demand deposits, cash on hand, and savings accounts EXCEPT a. average amount b. liquidity II.??? c. the extrinsic value of the dollars stored in them d. interest collected e. opportunity cost 727. A single firm operating under pure competition faces which of the following situations? a. decreasing marginal revenue b. perfectly inelastic demand c. perfectly elastic demand d. constant total revenue e. increasing marginal revenue 728. How many firms are in a monopoly? a. 5 or less b. 4 or less c. 3 or less d. no more than 2 e. only 1 II.??? II.??? 729. A good with an income elasticity greater than one can BEST be classified as a(n): a. superior good. b. substitute good. II.??? c. inferior good. d. luxury. e. necessity. 730. No barriers to entry is a feature of: a. a monopoly. b. an oligopoly. c. monopolistic competition. d. perfect competition. e. a monopsony. 731. Demand for which of the following would be the MOST elastic? a. Bread b. Textbooks II.??? II.??? c. Diabetes medication d. Stamps e. Vanilla ice cream 732. In the short run, companies will continue to operate as long as their total revenue covers a. total fixed cost b. average fixed cost c. total variable cost d. average variable cost e. opportunity cost II.??? 733. In a standard graph of supply and demand, a. supply slopes upward, demand slopes downward, and price is on the vertical axis b. supply slopes upward, demand slopes downward, and price is on the horizontal axis c. supply slopes downward, demand slopes upward, and quantity is on the II.??? horizontal axis d. supply slopes upward, demand slopes downward, and quantity is on the vertical axis e. supply slopes upward, demand slopes upward, and price is on the vertical axis 734. Which of the following is an example of price discrimination? a. luxury goods b. sales tax c. rent ceilings d. royalty payments e. student discounts 735. In the short run, the supply of oranges is: a. perfectly inelastic. b. inelastic. c. unit elastic. d. elastic. e. perfectly elastic. 736. The quantity demanded for labor in a labor market a. has a negative correlation with wages b. has a positive correlation with wages c. has a positive correlation with price d. has a negative correlation with price e. is mutually exclusive of price and wage 737. The consumers set of choices is limited by which of the following? a. budget constraints b. utility functions c. marginal costs d. shortage of goods e. marginal benefits 738. What type of collusion occurs when all firms mark up the price of their products by a set amount? a. price taking b. cost-plus pricing II.??? II.??? II.??? II.??? II.??? c. economies of scale d. price leadership e. demand-pull pricing 739. Product differentiation can have all of the following positive effects EXCEPT a. it satisfies consumer tastes b. it keeps product quality high c. it provides incentives to produce efficiently II.??? d. it uses advertising to disperse information e. it prevents firms from going out of business 740. Demand for which of the following would be MOST inelastic? a. Orange soda b. Stamps c. Yachts d. Houses e. Strawberry ice cream II.??? 741. As the wage rate increases, the labor supply curve is thought to eventually be backward-sloping because of the trade-off between a. hours worked and productivity b. hours worked and marginal revenue II.??? c. earnings and productivity d. earnings and marginal revenue e. earnings and leisure 742. What do economists call the market structure with many firms that sell a differentiated product in a market with easy entry and exit? a. monopsony b. monopolistic competition c. perfectly competitive d. monopoly e. oligopoly II.??? 743. Which of the following is often used by employers to break the striking power of the labor union? a. ignoring the strike b. calling for a boycott II.??? c. withholding Social Security d. hiring scabs e. signing yellow dog contracts 744. Which of the following is NOT a feature of monopolistic competition? a. non-price competition b. profit maximization c. free entry and exit d. many buyers e. few sellers II.??? 745. Which of the following would cause a decrease in equilibrium price and an indeterminate change to equilibrium quantity for hot dogs? a. expectations that the price of hot dogs will increase and a decrease in the price of hamburgers II.??? b. expectations that the price of hamburgers and a decrease in the price of hot dog buns c. a decrease in the number of hot dog bun producers and advancements in hot-dog-producing technology d. an increase in the price of hamburgers and an increase in the number of hot dog bun producers e. a decrease in the number of hot dog producers and a decrease in the number of hamburger producers 746. Which of the following will ALWAYS lead to an increase in price? a. A decrease in supply and an increase in demand b. An increase in supply and a decrease in demand c. A decrease in supply and a decrease in demand d. An increase in supply and an increase in demand e. An increase in the price elasticity of demand 747. Because of the diminishing marginal product of labor, an additional unit of labor will a. decrease total output b. not affect total output c. increase total output by less than the previous unit of labor d. increase total output the same as the previous unit of labor e. increase total output by more than the previous unit of labor II.??? II.??? 748. If a new hairbrush maker enters the market for hairbrushes, what will happen in the market for combs? a. demand for combs will decrease b. demand for combs will increase II.??? c. nothing will change d. supply of combs will increase e. supply of combs will decrease 749. Which of the following is a good that is very strongly inferior? a. A luxury good b. An inelastic good c. A Giffen good d. An unwanted good e. A public good 750. All of the following are true regarding monopolies EXCEPT: a. There are large barriers to entry. b. The firm’s demand curve is the market’s demand curve. c. Long-term economic profits are not possible. d. The demand curve slopes downward. e. The monopolist is a price setter. 751. The Taft-Hartley Act outlawed: a. unions. b. collective bargaining. c. closed shops. d. lockouts. e. strikes. 752. Which of the following does NOT change supply? a. price of complements b. price of the product c. technology d. price of inputs II.??? II.??? II.??? II.??? e. number of suppliers 753. Which of the following is FALSE of highly elastic goods? a. they have many substitutes b. they take up a high percentage of income c. they are not necessities d. price decreases decrease their total revenue e. they are very sensitive to changes in price 754. Assuming increasing marginal costs, the supply price of a good at a given quantity is equal to the a. average cost of production b. cost of producing the last unit c. marginal cost of the first unit d. average marginal cost e. total cost of production 755. Which of the following markets is MOST beneficial to consumers? a. a monopoly b. an oligopoly c. monopolistic competition d. perfect competition e. a monopsony 756. Which law, passed in 1932, outlawed yellow-dog contracts? a. Taft-Hartley Act b. Sherman Act c. Wagner Act d. Clayton Act e. Norris-LaGuardia Act 757. What is supply? a. the specific amount of a good or service offered at a certain price b. the specific amount of a good or service demanded at a certain price c. the maximum amount a producer can produce of a good or service d. the quantity of a good or service a producer is willing to supply at different price levels e. the amount of a good or service demanded at various times II.??? II.??? II.??? II.??? II.??? 758. For normal goods, an increase in the price of a substitute good has the same effect as a. a decrease in income b. a decrease in the price of a complement II.??? c. an increase in the price of a complement d. an increase in the price of the good e. a decrease in the price of the good 759. An increase in the supply of butter will lead to a(n) a. increase in demand for butter b. decrease in the price of butter c. decrease in the quantity of butter demanded d. increase in the price of margarine e. increase in the quantity of margarine demanded 760. Which of the following features does NOT exist in monopolistically competitive markets in the long run? II.??? II.??? a. b. c. d. e. few barriers to entry and exit many firms price searching economic profits non-price competition 761. Suppose the demand for good X increases as the result of an increase in the price of good Y. What can we say about these two goods? a. They are substitutes. b. They are complements. II.??? c. X is a normal good. d. Y is a normal good. e. Nothing can be said without more information. 762. The interest rate on a small sized savings account is essentially a. the cost of purchasing goods b. the quantity demanded of money c. the burden of the lender d. the supply of money e. the opportunity cost of spending money 763. If one person’s consumption of a good does not affect the ability of other people to consume it, then the good is a. excludable b. non-excludable c. rival d. non-rival e. non-scarce II.??? II.??? 764. If a price maker’s goal is to maximize revenue, then it will choose to produce where a. the demand curve intersects the x-axis b. the marginal cost curve intersects the marginal revenue curve II.??? c. the marginal cost curve intersects the demand curve d. the demand curve is unit elastic e. the demand curve is kinked 765. Which of the following would lead to an increase in the supply of a good? a. an increase in the price of the good b. a reduction in wages c. a decrease in the price of the good d. an increase in wages e. an increase in income 766. The body of scientific knowledge used to improve goods or production processes is referred to as a. capital b. technology c. investment d. entrepreneurship e. competition 767. What is the cause of creative destruction? a. economies of scale b. imperfect competition c. innovation II.??? II.??? II.??? d. the substitution effect e. inflation 768. When the price of a good increases, people demand less of that good because their ability to purchase it has decreased. This is known as the a. wealth effect b. interest rate effect c. exchange rate effect d. income effect e. substitution effect 769. Cathy buys less gasoline when its price increases. Cathy is a. responding to a negative monetary incentive b. expecting an increase in future prices c. acting irrationally d. trying to reduce emissions e. expecting a decrease in future prices 770. Why does the labor supply curve slope backward? a. As wages increase, people choose leisure over work b. There is an absolute limit for the demand for labor c. As wages increase, employers search for substitutes for labor d. Wage rates do not increase beyond equilibrium e. There are government limits to the number of hours worked by a person 771. If the number of companies providing a good increases the a. Equilibrium price moves down the supply curve b. Supply curve for the good shifts to the left c. Supply curve for the good shifts to the right d. Equilibrium price moves up long the supply curve e. Supply curve experiences no change 772. Copyrights last how many years after the creators death? a. 25 years b. 50 years c. 70 years d. 100 years e. 150 years 773. Good A and good B are substitutes. An increase in the price of good A will lead to: a. A decrease in the demand for good A b. An increase in the supply of good B c. A decrease in the demand for good B d. An increase in the supply of good A e. An increase in the demand for good B 774. A car originally sold for $5,000 and a plane sold for $100,000. If both prices double, what has happened? a. the relative price of the car has risen b. the relative price of the plane has risen c. the relative prices have remained unchanged d. the market prices have remained unchanged e. the market price of the car has risen more quickly II.??? II.??? II.??? II.??? II.??? II.??? II.??? 775. All of the following are true regarding normal goods EXCEPT: a. They are also known as superior goods. b. They have an income elasticity greater than zero. c. They have a downward-sloping demand curve. d. Necessities are not normal-goods. e. They have an upward-sloping supply curve. 776. The law of supply says that: a. Supply creates its own demand b. Quantity demanded and price are inversely related c. Quantity supplied and quantity demanded are directly related d. Quantity supplied and price are directly related e. Total output and price level are inversely related 777. If the price of a good is currently greater than the market-clearing price then there will be: a. No consumer surplus b. An economic shortage c. Downward pressure on the price d. Upward pressure on the price e. No pressure on prices to change 778. At the equilibrium price all of the following are necessarily true EXCEPT a. there is no upward pressure on prices b. there is no downward pressure on prices c. no surpluses or shortages exist d. the demand curve intersects the supply curve e. the demand curve is unit elastic 779. All of the following are ways the Constitution protects individual property rights EXCEPT a. making the government compensate the owner for any property taken b. allowing for patents on intellectual ideas c. allowing the government to use taxes only for public purposes d. allowing for government regulation of industry e. allowing property to only be taken for public purposes 780. Producing goods beyond the point of diminishing returns results in a. decreasing variable costs b. increasing marginal costs c. decreasing total costs d. increasing fixed costs e. decreasing average costs 781. If the price for Product A increases, resulting in an increase in demand for product B, then the two goods are a. luxury goods b. inferior goods c. substitute goods d. complementary goods e. elastic goods 782. The different combinations of two goods producing the same utility can be viewed using a(n) a. production possibilities curve b. demand curve II.??? II.??? II.??? II.??? II.??? II.??? II.??? II.??? c. indifference curve d. Phillips curve e. Laffer curve 783. Which of the following is responsible for the underproduction of public goods? a. the “Tragedy of the Commons” b. the free-rider problem c. the substitution effect II.??? d. the Fisher effect e. the prisoner’s dilemma 784. All of the following attributes are necessary for money to be useful EXCEPT a. acceptability b. relative scarcity c. divisibility II.??? d. stability e. intrinsic value 785. Which of the following is NOT a financial intermediary? a. a commercial bank b. a savings and loan c. a life insurance company d. a savings bank e. a credit union 786. Nash equilibrium is a term usually associated with: a. a monopoly. b. an oligopoly. c. monopolistic competition. d. perfect competition. e. a monopsony. 787. What is the graphical representation of a demand schedule? a. An indifference curve b. A demand curve c. A supply curve d. A production possibilities curve e. An aggregate demand curve II.??? II.??? II.??? 788. If the price of hot dog buns increases, what happens to the equilibrium price and quantity demanded of hot dogs? a. price decreases and quantity demanded increases b. price increases and quantity demanded decreases II.??? c. price decreases and quantity demanded decreases d. price increases and quantity demanded increases e. price remains unchanged and quantity demanded decreases 789. When the price of a Nintendo system is $100, 1,000 units are bought, and 1,500 are bought at $50. What is the price elasticity of demand for Nintendo systems according to the midpoint formula? a. 0.4 b. 0.6 c. 0.8 d. 1 e. 1.7 II.??? 790. Diminishing marginal utility predicts that the consumption of an additional unit of a good will: a. Decrease utility less than the previous unit did b. Decrease utility less than the next unit will II.??? c. Increase utility less than the previous unit did d. Increase utility the same amount that the previous unit did e. Increase utility more than the previous unit did 791. Both equilibrium price and quantity will decline if a. demand falls b. supply falls c. demand increases d. supply increases e. demand and supply increases 792. If Philip spends ten dollars on hot dogs every day, the price elasticity of his demand for hot dogs is a. inelastic b. elastic c. unit elastic d. zero e. indeterminate 793. The standard of living in a country is measured by its per capita a. natural resources b. wealth c. income d. investment e. consumption 794. An increase in the supply of good Y would be modeled on a graph by a a. shift to the left b. shift to the right c. shift downward d. shift upward e. flattening of the curve 795. Price elasticity of demand measures the responsiveness of: a. quantity demanded to changes in supply b. quantity demanded to changes in price c. demand to changes in supply d. demand to changes in price e. demand to changes in quantity demanded 796. When does the labor supply curve begin to slope downwards? a. when diminishing product of labor sets in b. when the substitution effect dominates c. when the income effect dominates d. when the consumer effect dominates e. when the market price fluctuates 797. Money is being used as a unit of account when John a. spends money to fix his lawnmower b. mows lawns over the summer c. collects coins d. saves his summer earnings to buy a car II.??? II.??? II.??? II.??? II.??? II.??? II.??? e. determines that one $2 ice cream cone is worth two $1 cones 798. The profit of financial intermediaries equals a. the interest rate b. what is paid for deposits c. what is charged for loans d. the sum of what is charged for loans and what is paid for deposits e. the difference between what is charged for loans and what is paid for deposits II.??? 799. When calculated, the price elasticity of demand for good X is 0. This means the good is a. unit elastic b. perfectly inelastic II.??? c. inelastic d. perfectly elastic e. elastic 800. A firm’s demand for labor is also known as its a. minimum average cost wage rate b. minimum marginal cost wage rate c. kinked demand curve d. average revenue product curve e. marginal revenue product curve II.??? 801. Price can serve as which of the following? a. a profitability signal to producers deciding whether or not to produce a good b. a communications tool to explain why wholesalers should stock the product c. a determinant as to the amount of labor and the amount of capital employed II.??? d. a means to motivate employees through benefits e. a filter to stop lower-quality products from entering the market 802. Which of the following will be the MOST LIKELY result from an increase in supply? a. A decrease in quantity and an undetermined change in price b. An increase in quantity and an undetermined change in price c. An increase in quantity and an increase in price d. An increase in quantity and a decrease in price e. An undetermined change in quantity and a decrease in price 803. What provides the incentive for producers to risk resources? a. deadweight loss b. profit c. consumer surplus d. goodwill e. regulation 804. All of the following are true of a monopoly EXCEPT a. there exist barriers to entry b. there is a single firm in the industry c. the firm can raise prices indefinitely and not lose any demand d. the firm produces a good that has no close substitutes e. the firms consumers are usually the price takers II.??? II.??? II.??? 805. Labor productivity can be increased by all of the following methods EXCEPT II.??? a. attending institutions of higher learning b. c. d. e. employing more efficient technology increasing the wage rate for union members finding new ways to divide labor finding new sources of a natural resource 806. A firm with a copyright or a patent generally acts as though it were a. a monopoly b. a competitive firm c. a monopsony d. an oligopoly e. a cartel 807. If the price of good X goes from $5 to $6, what happens to the demand for good X? a. it shifts left b. it shifts right c. it shifts up d. it shifts down e. nothing II.??? II.??? 808. Which of the following changes leads to an increase in the demand for labor? a. a higher wage rate b. the creation of a minimum wage c. a drop in world population II.??? d. alowerwage rate e. a rise in demand for the product 809. What do economists call the market structure with a few firms and difficult market entry? a. monopsony b. monopolistic competition c. perfectly competitive d. monopoly e. oligopoly 810. The interest rate is the cost of a. allocating expenses b. depreciating equipment c. issuing debt d. investing in stocks e. regulating businesses 811. How do changes in technology affect supply? a. New technologies increase the costs of production b. New technologies usually increase output per unit of input c. New technologies decrease productivity d. New technologies remove the need for labor resources e. New technologies do not increase fixed costs II.??? II.??? II.??? 812. Consumers who would be willing to pay above the market price of a product experience a. consumer surplus II.??? b. economic profit c. derived demand d. misallocation of resources e. deadweight losses 813. John purchases a lawnmower. In this instance John is using money for which function? a. medium of exchange b. standard of value c. unit of account d. store of value e. deferred payment 814. When producing 10 units, a firm’s average fixed cost is $10 per unit and its average variable cost is $2 per unit. If the firm increases production to 20 units, which of the following MUST be true? a. average total cost is $12 per unit b. average fixed cost is $10 per unit c. average variable cost is $2 per unit d. average fixed cost is $5 per unit e. average variable cost is $1 per unit II.??? II.??? 815. If sugar and coffee are complements, what happens to the market for coffee when the supply of sugar falls? a. only quantity demanded of coffee rises b. only quantity demanded of coffee falls II.??? a. the demand for coffee rises a. the demand for coffee falls a. nothing changes 816. Which of the following statements is true for an individual firms profitmaximizing production under ALL market structures? a. marginal cost equals marginal revenue b. marginal cost is above average total cost c. marginal cost is above marginal revenue d. marginal revenue is decreasing e. price equals average total cost 817. Much of the capital income received by households comes in the form of a. wages b. transfer payments c. Social Security checks d. interest payments e. stock certificates 818. The ease with which an asset can be converted into a medium of exchange for other goods is its a. liquidity b. fungibility c. durability d. intrinsic value e. stability 819. According to the law of supply, what is the relationship between quantity supplied and price? a. direct b. inverse c. quadratic d. cyclical II.??? II.??? II.??? II.??? e. non-existent 820. ATC and AVC converge because of diminishing a. Marginal costs b. Marginal physical product c. Average fixed costs d. Average revenue product e. Economies of scale 821. Which of the following is NOT a function of money? a. medium of exchange b. unit of account c. portability d. store of value e. standard of value 822. Demand for a good is perfectly elastic if the demand curve is a. sloped upwards b. sloped downwards c. horizontal d. vertical e. kinked 823. From which source does the supply of loanable funds arise? a. money supply b. federal reserves c. private savings d. government surplus e. borrowers 824. If at five dollars, ten toys are supplied, then at three dollars, which of the following is possible? a. five toys are supplied b. eleven toys are supplied c. fifteen toys are supplied d. twenty toys are supplied e. fifty toys are supplied 825. The law of supply says that, other things being equal, the _____ of a good rises when the price of the good _____. a. quantity supplied; falls b. supply; falls c. supply; rises d. quantity supplied; is held constant e. quantity supplied; rises II.??? II.??? II.??? II.??? II.??? II.??? 826. The tragedy of the commons refers to a. the inefficient use of resources when these resources are owned collectively by people b. the failure of private incentives to efficiently allocate reserves in capitalist economies II.??? c. the need for control planning by government in command economies d. more active government participation in the economy to stabilize the business cycle e. how the theory of comparative advantage encourages specialization 827. Money deposited into a savings account at the bank demonstrates which function of money? a. medium of exchange b. standardization of accounts c. standard of value d. decision-making medium e. store of value 828. Quantity demanded is a function of a. demand b. price c. supply d. quantity supplied e. time 829. Property rights are essential to which principle of decision-making? a. ecological thinking b. self-interest c. social justice d. external costs e. marginal costs 830. Which of the following is NOT characteristic of monopolistic competition? a. few barriers to entry b. firms that profit maximize c. long-run economic profit d. product differentiation e. many firms and many buyers 831. The MOST important type of human capital is a. strength b. speed c. education d. on-the-job training e. experience 832. If the government establishes effective rent control, which of the following results will occur? a. a leftward shift of the supply of houses b. a lefiward shift of the demand for houses c. a surplus of housing d. a shortage of housing e. an increase in consumer surplus 833. Which item does NOT affect the supply of a product? a. the price of the product b. number of firms selling the product c. technology in producing the product d. price of inputs used in making the product e. expectations of those who sell the product II.??? II.??? II.??? II.??? II.??? II.??? II.??? 834. Oligopolies possess kinked demand curves because a. as price increases demand decreases b. competitors match price decreases, but not price increases II.??? c. they follow a set price pattern d. at a certain point consumers rapidly choose to forgo purchasing their goods e. they sell goods that are not necessities 835. The demand for productive resources is known as a. derived demand b. indirect demand c. implicit demand d. intermediate demand e. supply-side demand II.??? 836. What effect would an increase in the price of peanut butter, other things held constant, have in the market for jelly? a. the demand for jelly would decrease b. the demand for jelly would increase II.??? c. the supply of jelly would decrease d. the supply of jelly would increase e. there is no effect 837. In a two-good world, what is the relative price of Good A? a. Income / (price of good A) b. (Price of good A) / income c. (Price of good B) / (price of good A) d. (Price of good A) / (price of good B) e. (Price of good A) / (price of good B x income) II.A.1 838. The market price of apples triples while the market price of oranges doubles. The relative price of apples has _____ and the relative price of oranges has _____/ a. increased; increased b. increased; decreased II.A.1 c. decreased; decreased d. decreased; increased e. decreased; not changed 839. Last year a CD cost $10 and a DVD cost $20. This year a CD costs $15 and a DVD costs $22. The money price of a DVD has _____ and the relative price of a DVD has _____. a. Increased; increased b. Decreased; increased II.A.1 c. Increased; remains unchanged d. Increased; decreased e. Decreased; decreased 840. If an apple is $1 and an orange is $3, then what is the relative price of apples to oranges? a. 4 to 1 b. 3 to 1 II.A.1 c. 1 to 1 d. 1 to 3 e. 1 to 4 841. The price in a competitive market where quantity demanded equals quantity supplied is known as the a. relative price II.A.2 b. socially optimal price c. equilibrium price d. marginal price e. opportunity cost 842. What other name do economists give to equilibrium price? a. balance price b. correct price c. relative price d. market clearing price e. payment price II.A.2 843. Holding other factors constant, if the cost of digital cameras that use memory cards decreases, then the equilibrium price of memory cards will _____ and the equilibrium quantity of memory cards sold will _____. a. Increase; increase b. Increase; decrease II.A.2 c. Increase; remain constant d. Decrease; increase e. Decrease; decrease 844. The price at which the quantity demanded equals the quantity supplied is known as the a. equilibrium price b. market price c. equality price d. best price e. equity price 845. In equilibrium, a. demand equals supply b. the quantity demanded exceeds the quantity supplied c. demand is greater than supply d. the quantity supplied equals demand e. the quantity supplied equals the quantity demanded 846. In the real world, equilibrium is brought about through changes in a. quantity demanded b. quantity supplied c. prices d. government regulations e. technology and consumer tastes II.A.2 II.A.2 II.A.2 847. Holding other factors constant, if the number of firms producing digital picture frames increases, then the equilibrium price of digital picture frames will _____ and the equilibrium quantity of digital picture frames will _____. a. Increase; increase b. Increase; remain constant II.A.2 c. Increase; remain constant d. Decrease; increase e. Decrease; decrease 848. According to the law of supply, if all other factors are constant, what behavior will result? a. Producers will lower their prices. II.A.3 b. Producers will reduce the quantity of what they produce at every price. c. Consumers will purchase more of the product. d. Workers will want to work fewer hours. e. The quality of outputs will increase. 849. What do economists call the amount of a product that buyers are willing and able to purchase at a given price? a. Demand b. Supply II.A.3 c. Quantity supplied d. Equilibrium price e. Quantity demanded 850. A supply curve represents how the quantity supplied of a good will change when what other variable changes? a. price b. demand c. equilibrium d. output e. income II.A.3 851. The quantity supplied can change without any change in supply under which conditions? a. if quantity demanded does not change b. if demand changes II.A.3 c. if demand does not change d. if price controls are imposed on the market e. This is not possible. 852. The sum of demands of all of the individual buyers in a market for a specific product is the: a. Market demand b. Total demand c. Aggregate demand d. Aggregate supply e. Total sales 853. The relationship between the amounts of a good that people are willing to purchase at various prices is known as a. demand b. quantity demanded c. supply d. quantity supplied e. economics 854. How is demand different from want? a. demand exists for all prices while want does not b. demand indicates a willingness to pay for a good or service c. demand has quantities demanded associated with it d. demand is determined by supply while want is not e. demand is unaffected by substitution effects 855. Holding other factors constant, when the price of computers increases the: a. Demand for computers decreases b. Demand for computers increases c. Quantity of computers demanded decreases d. Quantity of computers demanded increases e. Quantity demanded of computers does not change II.A.4 II.A.4 II.A.4 II.A.4 856. According to the law of supply, as price increases a. demand increases b. demand decreases c. supply increases d. the quantity supplied increases e. the quantity supplied decreases 857. The law of supply states that as the price of a good increases, the a. supply of the good increases b. demand for the good increases c. quantity supplied of the good increases d. quantity demanded increases e. quantity supplied decreases 858. Which of the following does NOT involve the relationship between quantity demanded and price? a. the law of demand b. diminishing marginal utility c. the substitution effect d. the income effect e. the wealth effect 859. Two principles explain the law of demand, and they are a. scarcity and opportunity cost b. the substitution and income effects c. price and quantity demanded d. trade-off and scarcity e. trade-off and opportunity cost 860. Which theory explains the slope of the supply curve? a. the law of supply b. the law of comparative advantage c. the law of demand d. Gresham’s law e. Say’s law 861. What do economists call the claim that, other things equal, the amount of a product that buyers are willing and able to buy is inversely related to the price of the good? a. law of equilibrium b. law of demand c. law of supply d. law of diminishing returns e. law of marginal utility 862. According to the law of demand, what is the relationship between price and quantity demanded in a normal demand curve? a. The two variables are not related. b. Their relationship is direct. c. It is an inverse relationship. d. Their relationship is positive. e. It is a marginal relationship. 863. The law of demand states that: a. demand and price are inversely related b. supply and demand are inversely related II.B.1 II.B.1 II.B.1 II.B.1 II.B.1 II.B.1 II.B.1 II.B.1 c. quantity demanded and quantity supplied are inversely related d. quantity demanded and price are inversely related e. supply and quantity demanded are inversely related 864. What do economists call the principle that sees there is a direct relationship between the price of a particular product and the quantity of sellers are willing and able to sell at that price? a. law of supply b. quantity supplied II.B.1 c. supply d. law of demand e. demand 865. An increase in the price of the good decreases consumers’ purchasing power, decreasing quantity demanded. This is known as: a. The substitution effect b. The income effect c. The wealth effect d. The Gresham effect e. The interest-rate effect II.B.1 866. A snowboard company starts producing more snowboards when the price of snowboards increases. This example illustrates the a. equilibrium effect b. income effect II.B.1 c. substitution effect d. law of demand e. law of supply 867. The law of demand predicts that demand curves should be a. kinked b. sloped upwards c. sloped downwards d. vertical e. horizontal 868. Market equilibrium occurs when a. the quantity demanded equals the quantity supplied b. demand equals supply c. the equilibrium price equals the equilibrium quantity d. demand equals the quantity supplied e. supply equals the quantity demanded 869. The law of demand states that consumers purchase a. as much of a good as is supplied b. only goods that they need c. less of a good as the quantity supplied increases d. more of a good as price decreases e. equal amounts of a good and a complementary good 870. The law of demand states that as price increases a. demand increases b. demand decreases c. quantity demanded increases d. quantity demanded decreases II.B.1 II.B.1 II.B.1 II.B.1 e. supply increases 871. Demand curves always a. slope downward to the left b. slope upward to the right c. slope upward to the left d. are flat e. are vertical 872. The law of demand states that the price elasticity of demand is always a. negative b. positive c. elastic d. inelastic e. unitary 873. The inverse relationship between the price of a good and the quantity of the good demanded is known as the a. hypothesis of demand b. theory of demand c. conjecture of demand d. law of demand e. premise of demand II.B.1 II.B.1 II.B.1 874. What economic law explains how the amount of a product people are willing and able to buy varies with the price of the product, other things held constant? a. Law of demand b. Law of supply II.B.1 c. Law of quantity demanded d. Grisham's law e. Say's law 875. According to the law of demand, the typical demand curve must be a. upward sloping to the right b. first upward then downward sloping to the right c. downward sloping to the right d. bowed outward e. first downward then upward sloping to the right 876. According to the law of demand, what results when any relevant variable, other than price of the good or service, changes? a. an increase in demand b. a shift in the demand curve c. an increase in the equilibrium price d. a decrease in quantity supplied e. a movement along the demand curve II.B.1 II.B.1 877. Which of the following is the first step in analyzing the changes in equilibrium price and quantity when demand and/or supply change? a. Decide in which direction the curve(s) shift b. Draw the new curve(s) on the graph II.B.1 c. Draw a graph of the market in equilibrium d. Observe the change in equilibrium price e. Note the change in equilibrium quantity 878. Which of the following statements concerning the labor force is TRUE? a. it includes individuals under the age of 16 b. it does not include individuals who are employed c. it includes individuals not seeking work d. it does not include individuals seeking work e. it includes individuals employed part time 879. The statement that, “Other things being equal, the quantity demanded of a good falls when the price of the good rises,” is known as the a. economics hypothesis b. law of supply c. law of demand d. law of quantity demanded e. law of quantity supplied 880. Which pair of terms has essentially the same meaning? a. real price, market clearing price b. equilibrium price, price floor c. nominal price, price level d. market clearing price, equilibrium price e. equilibrium price, real price II.B.1 II.B.1 II.B.1 881. What law does the following statement illustrate: Only at a higher price will it be profitable for sellers to incur the higher opportunity cost associated with producing and supplying a larger quantity? a. law of demand b. law of supply II.B.1 c. law of diminishing marginal utility d. Say’s law e. law of diminishing returns 882. Demand curves reflect the behavior of: a. Firms b. Buyers c. Government d. Suppliers e. Prices 883. The price of a product is positively related to the quantity supplied of the product according to the: a. law of supply b. theory of supply c. hypothesis of supply d. conjecture of supply e. premise of supply II.B.2 II.B.2 884. The amount of a product that people are willing and able to buy at a specific price is called: a. Demand b. Quantity wanted II.B.2 c. Quantity demanded d. Quantity sold e. Quantity purchased 885. As price increases, the a. quantity demanded decreases II.B.2 b. c. d. e. quantity supplied decreases demand curve shifts up supply curve shifts up equilibrium price decreases 886. Which of the following statements about a demand curve is incorrect? a. Demand curves are usually downward sloping to the right b. Sometimes a demand curve can be vertical c. Demand curves are never upward sloping d. Sometimes a demand curve can be horizontal e. Sometimes a demand curve can double back on itself 887. Which of the following events would increase the demand for gasoline? a. a strike among oil refinery workers b. a decrease in income c. a decrease in the price of automobiles d. an increase in steel prices e. the discovery of a new, major underground reservoir of oil in Texas 888. A market demand curve is the ___________ sum of all individual demand curves. a. Total b. Vertical c. Horizontal d. Circular e. Algebraic 889. The law of supply requires a. some quantity to be supplied at all prices b. producers to sell a good or service at cost c. that a supply curve be linear d. supply to be equal to demand e. the slope of a supply curve to be positive II.B.2 II.B.2 II.B.2 II.B.2 890. A movement along a demand curve is associated with what type of behavior or change in a market? a. a change in price b. a change in demand II.B.2 c. a decision to purchase d. an increase in income e. a drop in income 891. Which of these represents one of the typical ways in which the concept of demand can be expressed? a. Dollars b. Tabular c. Amount d. Time e. Words 892. Supply curves reflect the behavior of: a. Sellers b. Government c. Prices d. Buyers II.B.2 II.B.2 e. Investors 893. An increase in quantity supplied a. causes the supply curve to shift up b. causes the supply curve to shift down c. causes the supply curve to shift right d. causes the supply curve to shift left e. does not alter the supply curve 894. A decrease in quantity demanded a. causes the demand curve to shift up b. causes the demand curve to shift down c. causes the demand curve to shift right d. causes the demand curve to shift left e. does not alter the demand curve 895. The relationship between quantity demanded and price is called a. scarcity b. interest c. utility d. equilibrium e. demand 896. The income effect states that a decrease in price gives consumers a. more real income b. less purchasing power c. more nominal income d. less utility e. more market influence 897. A graph of demand is a line that a. slopes downward to the right b. slopes upward to the right c. zig-zags up and down, from left to right d. first slopes upward, then downward to the right e. first slopes downward, then upward to the right 898. If both the supply and demand for a good increases, then the a. equilibrium price increases b. equilibrium price decreases c. equilibrium price is indeterminate d. equilibrium quantity decreases e. equilibrium quantity is indeterminate 899. What can we say about the market for a product, if demand increases while supply decreases, other things the same? a. Quantity increases but the change in price is ambiguous. b. Quantity decreases but the change in price is ambiguous. c. Price increases but the change in quantity is ambiguous. d. Price decreases but the change in quantity is ambiguous. e. Price and quantity increase. 900. If the supply of a good increases while its demand decreases, then the a. equilibrium price does not change b. equilibrium price rises c. equilibrium price is indeterminate II.B.2 II.B.2 II.B.2 II.B.2 II.B.2 II.B.3 II.B.3 II.B.3 d. equilibrium quantity rises e. equilibrium quantity is indeterminate 901. Which of the following would guarantee an increase in equilibrium price? a. an increase in supply and demand b. an increase in supply with constant demand c. an increase in demand with falling supply d. a decrease in demand with constant supply e. a decrease in supply and demand 902. A shift in supply a. changes income b. changes consumer tastes c. changes the price of related goods d. never changes demand e. always changes demand 903. What happens to equilibrium price and quantity if demand increases and supply decreases? a. Quantity increases, but the change in price is ambiguous b. Quantity decreases, but the change in price is ambiguous c. Price increases, but the change in quantity is ambiguous d. Both increase e. Both decrease 904. What happens to equilibrium price and quantity if demand and supply both increase at the same time? a. Both increase b. Both decrease c. Price increases, but the change in quantity is ambiguous d. Quantity increases, but the change in price is ambiguous e. The change in price and quantity are both ambiguous 905. A shift in the demand curve occurs when there is a change in a. price b. demand c. supply d. quantity demanded e. quantity supplied 906. If the supply of a good decreases while its demand increases, then the a. equilibrium quantity is indeterminate b. equilibrium quantity rises c. equilibrium price is indeterminate d. equilibrium price falls e. equilibrium price does not change 907. An increase in supply in a perfectly competitive market will a. Not affect quantity demanded b. Not affect price c. Decrease price d. Decrease quantity demanded e. Increase demand II.B.3 II.B.3 II.B.3 II.B.3 II.B.3 II.B.3 II.B.3 908. What can we say about the market for a product, if demand decreases while II.B.3 supply increases? a. b. c. d. e. Quantity increases but the change in price is ambiguous. Quantity decreases but the change in price is ambiguous. Price increases but the change in quantity is ambiguous. Price decreases but the change in quantity is ambiguous. Price and quantity increase. 909. A supply curve shifts when there is a change in a. quantity demanded b. quantity supplied c. price d. demand e. supply 910. If demand and supply increase simultaneously, then a. equilibrium price and quantity increase b. equilibrium price decreases, but equilibrium quantity increases c. equilibrium price and quantity decrease d. equilibrium quantity increases, but the change in equilibrium price is ambiguous e. equilibrium price decreases, but the change in equilibrium quantity is ambiguous 911. In a normal market, an increase in price will a. shift the demand curve leftward b. Shift the demand curve rightward c. Not shift the demand curve d. Shift the demand curve upward e. Shift the demand curve downward 912. An increase in supply will create a. an increase in demand b. a decrease in demand c. no change in demand d. an increase in price e. a decrease in quantity supplied and demanded 913. An increase in supply is shown graphically by: a. Rotating the supply curve clockwise b. Shifting the supply curve vertically upward c. Rotating the supply curve counterclockwise d. Shifting the supply curve horizontally to the right e. Shifting the supply curve horizontally to the left 914. If demand and supply both increase, then the new equilibrium quantity is a. higher, while price is unknown b. higher and price is lower c. higher and price is also higher d. ambiguous and price is lower e. ambiguous and price is higher II.B.3 II.B.3 II.B.3 II.B.3 II.B.3 II.B.3 915. If demand increases but supply decreases at the same time, then equilibrium a. price and quantity increase b. price increases but quantity is unknown II.B.3 c. price increases and quantity decreases d. price and quantity decreases e. quantity increases but price is unknown 916. An increase in demand a. causes the demand curve to shift up b. causes the demand curve to shift down c. causes the demand curve to shift right d. causes the demand curve to shift left e. does not alter the demand curve 917. Which of the following would cause the supply of steel to increase? a. the development of a more efficient smelting process b. an increase in the price of iron ore c. steel mills in the Midwest going out of business d. a government tax on steel e. lack of qualified steel workers 918. An increase in the number of publishing companies would a. increase the supply of books b. increase the price of books c. decrease the demand for books d. decrease the cost to produce books e. decrease the quantity of books produced II.B.3 II.B.4 II.B.4 919. What happens in the market for sweatshirts as a consequence of an increase in the price of cotton, other things held constant? a. demand increases b. supply decreases II.B.4 c. demand decreases d. supply increases e. nothing 920. In a normal market, an increase in price will be caused by a. An increase in quantity supplied b. A decrease in supply c. A decrease in quantity supplied d. A decrease in demand e. An increase in quantity demanded 921. An example of a change that can cause supply to increase is a(n) a. higher price b. lower input price c. lower price d. higher income e. lower income 922. All of the following will shift the supply curve to the right EXCEPT a. An improvement in technology b. An increase in product prices c. A decrease in input prices d. An increase in labor productivity e. An increase in workers' education 923. If producers expect a decrease in future SUV prices, which of the following will MOST LIKELY happen in the short run? a. a decrease in demand for SUVs b. an increase in demand for SUVs II.B.4 II.B.4 II.B.4 II.B.4 c. a decrease in the quantity of SUVs demanded d. a decrease in the price of SUVs e. a decrease in the supply of SUVs 924. If technology in the production of computer chips improves, which of the following will transmit ripple effects into many other markets such as the markets for computers, computer software, typewriters, etc? a. telephone b. internet c. computer industry d. increase in quantities of chips sold e. price mechanism 925. If the price of grapes falls, then the a. demand for wine increases b. supply of wine increases c. cost of producing wine increases d. demand for grapes decreases e. production of wine decreases 926. The supply of labor is determined by all of the following EXCEPT a. Labor unions b. Right-to-work laws c. Labor productivity d. The quantity of workers e. The mobility of labor 927. Which of the following would NOT shift a supply curve? a. an increase in an input price b. a decrease in income c. an improvement in technology d. a decrease in the number of sellers e. a change in suppliers’ expectations 928. Higher corn yields due to genetic engineering will a. lead to a shortage of corn b. lead to a surplus of corn c. shift demand to the right d. shift supply to the right e. lower exports of corn II.B.4 II.B.4 II.B.4 II.B.4 II.B.4 929. What happens in the markets for cotton and sweatshirts as the result of a series of hurricanes in the cotton growing south, other things the same? a. The supply of cotton decreases, increasing the price of cotton and decreasing the demand for sweatshirts. b. The supply of cotton decreases, increasing the price of cotton and decreasing the supply of sweatshirts. c. The supply of cotton increases, decreasing the price of cotton and increasing II.B.4 the supply of sweatshirts. d. The demand for cotton decreases, increasing the price of cotton and decreasing the supply of sweatshirts. e. The demand for cotton increases, increasing the price of cotton and decreasing the supply of sweatshirts. 930. Which event would increase quantity supplied but not change supply? a. a decrease in the price of a factor of production II.B.4 b. c. d. e. an improvement in technology a decrease in the price of a complementary good a decrease in the price of a substitute good no event can produce this change 931. Which of these would cause the supply curve of a good to shift to the right? a. An increase in income, if the good is a normal good b. A decrease in income, if the good is a normal good c. A decrease in the number of firms d. An increase in the price of an input e. A decrease in the price of an input II.B.4 932. Which of the following would increase the supply of a good, ceteris paribus? a. an increase in the price of the good b. a decrease in income c. a decrease in the price of a factor of production II.B.4 d. a decrease in the number of firms that produce the good e. a decrease in the number of buyers of the good 933. What happens to the demand for wheat if a widespread drought devastates wheat growers? a. It increases b. Nothing, there is a movement along the demand curve as supply decreases II.B.4 c. Nothing, there is a movement along the demand curve as supply increases d. It decreases e. First it decreases, then it increases 934. An increase in the price of corn would cause the a. supply of corn tortillas to increase b. demand for corn to increase c. production of corn to decrease d. price of corn syrup to decrease e. supply of wheat to decrease 935. All else held constant, a decrease in the price of computer chips used to produce global positioning system (GPS) devices will: a. Increase the price and quantity of GPS devices sold b. Decrease the price and quantity of GPS devices sold c. Increase the price and decrease the quantity of GPS devices sold d. Decrease the price and increase the quantity of GPS devices sold e. Decrease the price, but the quantity of GPS devices sold may increase, decrease, or remain the same 936. Which of the following is an elastic good? a. gasoline b. water c. cigarettes d. football tickets e. car insurance 937. Which of the following does NOT affect the demand for a product? a. Income b. Number of buyers c. Tastes or preferences d. Price of related goods II.B.4 II.B.4 II.B.5 II.B.5 e. Price of the product 938. Which of the following would cause the demand for milk to increase? a. a decrease in the price of milk b. a decrease in consumer income c. a government subsidy for the production of milk d. an increase in the price of cow feed e. a marketing campaign that makes drinking milk seem trendy 939. The price of pencils increases from $0.50 to $0.75 and the quantity sold per month decreases from 100 to 75. What is the price elasticity of demand for pencils? a. 0.50 b. 0.75 c. 1.00 d. 1.25 e. 1.75 II.B.5 II.B.5 940. Which of the following is NOT a factor that can affect the demand for a good? a. subsidies to produce the good b. consumer preferences c. utility of the good II.B.5 d. availability of substitutes e. the season 941. Demand for coal miners is influenced by all of the following EXCEPT a. the price of coal b. demand for coal c. the productivity of coal miners d. the supply of mining equipment e. the supply of coal miners 942. Suppose you work in a ski rental shop and your boss wants your advice about how to increase ski rentals (your job depends on your answer!). What information would you want to know in order to give you boss the correct answer (and keep your job)? a. the rental rates of nearby ski rental shops b. the expected amount of snow for the upcoming ski season c. the price elasticity of demand for the shop’s equipment d. the price elasticity of supply for the shop’s equipment e. the cost of the rental equipment II.B.5 II.B.5 943. What term describes the additional satisfaction a consumer receives with the consumption of one additional unit of a good? a. quantity demanded b. preference II.B.5 c. consumer surplus d. marginal utility e. demand schedule 944. Suppose that the price elasticity of supply is 1.5 and that an increase in demand creates a 10% increase in the price of the product. The quantity supplied of the product will II.B.5 a. decrease 15% b. increase 1.5% c. increase 15% d. decrease 150% e. increase 150% 945. The BEST word below that is similar to the term elasticity is a. responsiveness b. bounce c. recoil d. spring e. jump 946. What happens in the market for minivans as a consequence of people deciding to have more children? a. nothing b. demand increases c. demand decreases d. supply increases e. supply decreases 947. What word or phrase below BEST describes the concept of elasticity in economics? a. responsiveness b. rate of change c. interest rate d. unemployment e. demand and supply 948. Which of the following factors is a shift determinant of demand? a. income b. prices c. technology d. interest rates e. wage rates II.B.5 II.B.5 II.B.5 II.B.5 949. The field of microeconomics would include the study of which of the following topics? a. the rate of inflation b. the level of aggregate demand II.B.5 c. the level of aggregate supply d. the determinants of demand e. the determinants of GDP 950. Consumers expect the price of bottled water to fall in the future. Which of the following is MOST LIKELY to happen in the short run? a. a decrease in tap water consumption b. an increase in price of bottled water II.B.5 c. a decrease in demand for bottled water d. an increase in demand for bottled water e. a shortage of bottled water 951. What happens as a result of people changing the amount they want to work at a given wage rate? a. Personal incomes decrease. b. The demand for labor changes. c. Labor force participation changes. d. The labor supply curve shifts. II.B.5 e. The unemployment rate changes. 952. The substitution effect states that as the price of a good increases, the a. demand for complementary goods increases b. demand for substitute goods increases c. supply for the good increases d. supply for substitute goods decreases e. supply for complementary goods decreases 953. A unit elastic demand curve is a. vertical b. horizontal c. upward-sloping d. concave e. convex 954. A good whose price elasticity of demand is greater than one has a. elastic demand b. stabilizing demand c. upward-sloping demand d. inferior demand e. inelastic demand 955. Which of the following pairs of goods are complements? a. mustard and ice cream b. ketchup and hotdogs c. labor and machines d. cars and bicycles e. computers and typewriters 956. All else constant, an increase in the productivity of labor will: a. Increase the supply of labor b. Decrease the supply of labor c. Not change either the supply or demand for labor d. Increase the demand for labor e. Decrease the demand for labor II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 957. If, as the result of an increase in demand, the equilibrium quantity increased by 20% while the equilibrium price increased by 25%, the price elasticity of supply would be a. 1.25 b. 0.0125 II.B.5 c. 0.8 d. 0.008 e. There is insufficient information to calculate the price elasticity of supply 958. In the market for orange juice, what is the effect of an increase in the price of tomato juice? a. Demand and supply both increase b. Demand increases and supply does not change II.B.5 c. Demand decreases and supply does not change d. Demand and supply both decrease e. Demand increases and supply decreases 959. What effect will an increase in workers' productivity have on labor supply and II.B.5 demand? a. b. c. d. e. Both supply and demand will increase Supply will increase and demand will decrease Supply will decrease and demand will increase Only demand will increase Only supply will increase 960. Suppose that the price elasticity of demand for computers is 1.25. If the price of computers falls $100 to $900 per unit, the number of units of computers bought and sold will increase by a. 0.0125 b. 0.1 II.B.5 c. 0.125 d. 1.25 e. 125 units 961. Economic rent arises because a. Renting is more economically efficient than buying b. Demand for land is relatively elastic c. Some firms cannot afford to purchase capital goods d. The supply of land is perfectly inelastic e. The market cannot effectively allocate land II.B.5 962. The price of widgets falls from $5 to $4 and the quantity demanded rises from 80 widgets to 100 widgets. At the same time, the price and quantity demanded of gizmos is unchanged. Which of the following statements is TRUE? a. total revenue has increased b. widgets and gizmos are substitute goods II.B.5 c. the demand for widgets is unit elastic d. consumers spend more income on widgets than gizmos e. the price elasticity of supply for widgets is negative 963. Which of these examples illustrates the law of diminishing marginal utility? a. Mary wants to purchase 10 new pillows for her house. She thinks that because she is buying a large number of pillows, she should not have to pay as much per pillow. b. The Acme Company has been producing widgets for over fifty years. Over the past few years, it seems like people are willing to buy fewer widgets. c. The Smith Company is willing to sell you one toaster for $30, but will also sell II.B.5 you two toasters for $25 each. d. After Fred consumes several additional $1.00 candy bars, he becomes less likely to pay $1.00 for an additional candy bar. e. When the six members of the Brown family go to the movies, they do not buy popcorn because the cost of their tickets takes their whole budget. 964. If the price of a good does not change when the quantity bought and sold declines 10%, then we can say that the price elasticity of demand for the good is a. perfectly inelastic b. perfectly elastic c. not possible to calculate d. -10 e. 10 II.B.5 965. Which of the following events would cause the equilibrium price and quantity of apples to increase, other things held constant? II.B.5 a. A decrease in the price of oranges b. A decrease in income c. A decrease in the wages of apple pickers d. An increase in the price of oranges e. An increase in the number of apple orchards 966. Which of the following events would increase the demand for ice cream? a. a decrease in income b. a decrease in the price of milk and cream c. a decrease in outdoor temperatures d. a decrease in the price of frozen yogurt e. a decrease in the price of ice cream toppings 967. An increase in the total number of consumers would a. increase the demand for a good or service b. increase the supply of a good or service c. decrease the quantity supplied of a good or service d. decrease the price of a good or service e. decrease the demand for complementary goods or services 968. Which of the following is one of the determinants of the price elasticity of demand? a. income b. the price of inputs c. technology d. the availability of close substitutes e. the number of suppliers 969. If the cross-price elasticity of demand for two goods is negative, then they must be a. substitutes b. complements c. luxury goods d. inferior goods e. unrelated 970. Which of the following occurs as the productivity of labor increases? a. the supply of labor increases b. employers pay higher wages c. employers pay lower wages d. demand for labor decreases e. the supply of labor decreases II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 971. The price elasticity of demand is defined as: a. the total change in quantity demanded is divided by the percentage change in price b. the percentage change in price is divided by the percentage change in quantity demanded c. the marginal change in price is divided by the marginal change in quantity II.B.5 demanded d. the percentage change in quantity demanded is divided by the percentage change in price e. the marginal change in quantity demanded is divided by the marginal change in price 972. What happens in the market for Pepsi Cola as the result of an increase in the price of Coca-Cola, other things the same? II.B.5 a. Demand increases, and price and quantity decrease. b. c. d. e. Supply increases, and price and quantity increase. Demand increases, and price and quantity increase. Supply increases, price increases, and quantity decreases. Demand increases, and price increases, and quantity decreases. 973. If the price of a good is expected to rise, then a. short-term supply of the good will remain unchanged b. consumer preferences will not affect demand c. prices of substitute goods are expected to rise d. the income effect on demand is reduced e. short-term demand for the good will increase 974. What can we say about demand and supply in a market where a price increase causes a decrease in total revenues? a. Demand must be elastic. b. Demand must be inelastic. c. Demand is unit elastic. d. Supply is elastic. e. Supply is inelastic. 975. Holding other factors constant, if the price of digital cameras falls, what will happen to the price and quantity of film cameras sold? a. Price and quantity will decrease b. Price and quantity will increase c. Price will increase and quantity will decrease d. Price will decrease and quantity will increase e. Price will decrease, but the change in quantity is uncertain 976. The total revenue test is used to determine the a. elasticity of demand for a good b. relationship between two goods c. perceived quality of a good d. ability of suppliers to shift resource usage e. appreciation of the good over time 977. Which of the following is a determinant of the price elasticity of demand? a. income b. tastes c. the price of related goods d. the availability of substitutes e. the cost of factors of production 978. If total revenue increases when the price of the product decreases, then demand is: a. inelastic b. elastic c. unit-elastic d. perfectly elastic e. perfectly in-elastic II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 979. There is an unexpected surplus of nectarines, which are a close substitute for oranges. How ill the equilibrium price and quantity of oranges be affected? a. price and quantity will both decrease II.B.5 b. price and quantity will both increase c. price will decrease and quantity will increase d. price will increase and quantity will decrease e. price will change indeterminately and quantity will increase 980. Which is NOT a variable that can shift the demand curve for a product? a. prices of related goods b. tastes and preferences c. number of buyers d. future expectations e. a change in the price of the product II.B.5 981. According to the total revenue test, if a firm increases the price of a priceinelastic good, it can expect a(n) _____ in revenue and a(n) _____ in quantity sold. a. Increase, increase b. Decrease, decrease II.B.5 c. Indeterminate change, decrease d. Decrease, increase e. Increase, decrease 982. What happens in the market for orange juice as a consequence of an increase in the price of tomato juice, other things held constant? a. nothing b. supply increases c. demand increases d. supply decreases e. demand decreases 983. If the demand for milk increases, then the a. cost of milk will decrease b. demand for dairy workers will increase c. productivity of dairies will decrease d. supply of milk will increase e. normal profit of dairies will decrease 984. A perfectly inelastic demand curve is a. convex b. horizontal a. upward-sloping a. vertical a. downward-sloping 985. Suppose that the wage rate rises for automobile workers. In the market for gasoline, ceteris paribus, a. supply would decrease b. demand would decrease c. supply would increase d. demand would increase e. demand and supply would decrease 986. Which pair of goods are typically complements? a. bananas and radios b. automobiles and motorcycles c. baseballs and softballs d. nails and screwdrivers e. milk and cookies 987. An example of a change that can cause demand to increase is a(n) a. lower price II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 b. c. d. e. higher price increase in income decrease in income increase in supply 988. Salt is considered to be a(n) a. elastic good since it has few close substitutes b. elastic good since it is considered to be a necessity c. unit elastic good since consumers have ample time to buy it d. inelastic good since it has a horizontal demand curve e. inelastic good since it is a small fraction of income 989. Which of the following goods would predictably have the LEAST elastic demand? a. diamonds b. automobiles c. gasoline d. houses e. sugar II.B.5 II.B.5 990. Although taxes on gasoline are highly effective in creating revenue, they are unlikely to significantly reduce its consumption because of gasoline's a. establishment as a "sin" good b. price-inelastic supply II.B.5 c. income-elastic demand d. price-inelastic demand e. price-elastic demand 991. As the result of a 5% increase in the demand for computers, the price and quantity of computers demanded increased by 10% and 15%, respectively. What is the price elasticity of supply? a. 0.5 b. 1 II.B.5 c. 1.5 d. 2 e. 2.5 992. Which of the following typically faces the most elastic demand curve? a. A monopoly b. A firm in an oligopoly c. A perfectly competitive market d. A monopsony e. A monopolistic competitor II.B.5 993. Which of the following will MOST LIKELY cause an increase in demand for a good? a. an improvement in production technology b. an increase in the number of buyers II.B.5 c. an increase in the number of firms d. a decrease in the price of a substitute e. an expectation of lower future incomes 994. If demand for a good is inelastic, then a. the demand curve for the good has a gentle slope b. a large change in price has little effect on quantity demanded c. the good is viewed as a luxury good II.B.5 d. a decrease in price would increase total revenue e. its price elasticity of supply is also inelastic 995. Which of the following is NOT characteristic of an elastic good? a. it has a relatively flat demand curve b. it is considered to be a luxury good c. a decrease in its price will increase total revenue d. it has few close substitutes e. it takes up a large fraction of income 996. What will typically result when consumer incomes increase? a. The prices of all goods and services will increase. b. The market price will move up the demand curve. c. The demand curve for normal goods will shift to the right. d. There will be an increase in supply. e. Producers will be willing to increase output if prices decrease. 997. What happens in the market for computer software as a consequence of a decrease in the price of computer memory chips? a. nothing b. supply decreases c. supply increases d. demand increases e. demand decreases 998. Total revenues increase when price increases if the a. good is a necessity b. good is an inferior good c. good is a normal good d. demand for the good is elastic e. demand for the good is inelastic II.B.5 II.B.5 II.B.5 II.B.5 999. If the price elasticity of demand is .25, and the price of the good doubles, then a. supply increases by 25% b. supply decreases by 25% c. the quantity supplied decreases by 25% II.B.5 d. the quantity demanded increases by 25% e. demand for the good is elastic 1000. The high cost of college textbooks is caused primarily by a. The limited supply of textbooks b. The income-elastic supply of textbooks c. The limited supply of students d. The price-inelastic demand for textbooks e. The high cost of revision 1001. Suppose that the price elasticity of demand for a particular product is 1.5. Then we can say that the demand for this product is a. relatively elastic b. relatively inelastic c. perfectly elastic d. perfectly inelastic e. neither elastic nor inelastic 1002. If the price of orange juice increases, which of the following is MOST likely to happen? II.B.5 II.B.5 II.B.5 a. b. c. d. e. Demand for orange juice will fall Supply for orange juice will rise Demand for apple juice will fall Demand for oranges will fall Demand for oranges will rise 1003. Which of the following is NOT a cause for a change in demand? a. a change in consumer income b. a change in the price of the good c. a change in the price of the good’s substitute d. a change in the price of the good’s complement e. a change in consumer tastes II.B.5 1004. The price elasticity of demand is calculated by dividing the percent change in a. quantity demanded by the percent change in inflation b. quantity demanded by the percent change in income II.B.5 c. quantity demanded by the percent change in price d. quantity supplied by the percent change in income e. quantity supplied by the percent change in price 1005. If an increase in price does not affect quantity demanded, then demand for the good is considered: a. Perfectly inelastic b. Inelastic II.B.5 c. Unit elastic d. Elastic e. Perfectly elastic 1006. If prices and real incomes are increasing at the same rate, then a. purchasing power is increasing b. nominal income remains constant c. the rate of inflation is increasing d. government revenue is decreasing e. the rate of inflation is decreasing 1007. Economic rent is the: a. Opportunity cost of an apartment b. Price paid for the use of money c. Difference between total revenue and total costs d. Price paid for the use of a perfectly inelastic resource e. Marginal benefit minus the marginal cost of land 1008. Which event would cause quantity demanded to decrease but not change demand? a. a decrease in income b. a decrease in the number of buyers c. an increase in the price of a factor of production d. an increase in productivity e. no event can produce this change 1009. An increase in the price of Coke shifts the demand for Pepsi to the right. This is an example of which effect? a. complement b. income c. disequilibrium II.B.5 II.B.5 II.B.5 II.B.5 d. substitution e. market 1010. Which of the following would NOT cause a shift in demand? a. an increase in income b. a decrease in the number of households c. an increase in the price of a substitute good d. a change in consumer tastes for the good e. a technological improvement in the production of the good 1011. An increase in both the productivity and quantity of laser tag workers will lead to a(n) a. decrease in workers demanded and an increase in wages b. increase in workers demanded and a decrease in wages c. decrease in both workers demanded and wages d. increase in both workers demanded and wages e. increase in workers demanded and an indeterminate change in wages 1012. If a supply curve is horizontal, a. supply is perfectly elastic b. supply is perfectly inelastic c. demand is perfectly elastic d. demand is perfectly inelastic e. equilibrium can never be achieved 1013. If the price of PlayStation 3 video games drops, then a. demand for Xbox 360 game consoles would increase b. demand for PlayStation 3 game consoles would increase c. the utility obtained by playing a PlayStation 3 game would decrease d. PlayStation 3 game consoles would become less affordable e. the cost of publishing an Xbox 360 game would decrease 1014. An excise tax on cigarettes will have little effect on their consumption because of cigarettes' a. price-elastic supply b. price-inelastic supply c. high level of availability d. price-elastic demand e. price-inelastic demand 1015. A firm's total revenue is maximized at the point where its a. total variable cost is minimized b. total cost is minimized c. elasticity of demand equals zero d. elasticity of demand equals one e. elasticity of demand equals infinity II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 1016. Assume that pancakes and syrup are complements. If the cost of producing pancakes increases, then the quantity of syrup demanded will _____ and the price of syrup will _____. a. increase, increase b. decrease, increase II.B.5 c. increase, decrease d. decrease, decrease e. decrease, change indeterminately 1017. Which of the following would NOT increase the demand of a normal good, ceteris paribus? a. an increase in income b. an increase in the number of buyers c. a shift in preferences in favor of the good d. an increase in the price of a substitute good e. an increase in the price of a complementary good 1018. If the quantity of light bulbs demanded doubles when price is decreased from $2.00 to $1.00, then the price elasticity of demand for light bulbs is a. 1/4 b. 1/2 c. 1 d. 2 e. 4 1019. For a good with an inelastic demand curve, total revenue and price are a. inversely related b. directly related c. constant d. equal to zero e. not related 1020. Which of these would shift the demand curve for a good to the right, other things held constant? a. A decrease in the price of a substitute good b. An increase in the price of a complementary good c. A decrease in income, if the good is an inferior good d. An increase in income, if the good is an inferior good e. A decrease in the number of buyers 1021. All of the following will increase demand for writers EXCEPT a. an increase in writers' level of education b. an increase in demand for books c. a decrease in the price of paper d. a decrease in writers' wages e. an increase in writers' productivity 1022. Which of the following is NOT a determinant of the price elasticity of demand? a. the availability of substitutes b. the geographical scope of the market c. the length of the time frame d. whether or not the good is a luxury or a necessity e. consumer tastes 1023. An increase in the price of gasoline would cause the demand curve for inefficient, gasoline-burning sport utility vehicles (SUVs) to a. shift left b. shift right c. shift down d. shift up e. remain unchanged 1024. A perfectly elastic demand curve has an elasticity of a. Zero II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 II.B.5 b. c. d. e. One Ten One hundred Infinity 1025. If the demand for one good rises when the price of another good falls, the goods are a. complements b. substitutes c. normal goods d. inferior goods e. Giffen goods 1026. Which of the following occurs when the price of a good increases? a. the demand for the good decreases b. the demand for substitutes increases c. the demand for complements decreases d. B and C e. A, B, and C II.B.5 II.B.5 1027. In some markets, the decisions of individual firms have no influence on the market price. What term BEST describes the firms in this situation? a. profit maximizers b. price takers II.C.2 c. monopolistic d. marginalized e. revenue maximizers 1028. Which situation serves as an incentive for existing firms to expand production and for new firms to enter that sector? a. A decline in the government’s budget deficit b. An appreciation in the international value of the domestic currency c. An increase in the market interest rate d. A decline in the number of existing firms e. Above-normal economic profits earned by existing firms 1029. The market structure with the LEAST amount of competition is a. pure monopoly b. monopolistic competition c. pure competition d. perfect competition e. oligopoly II.C.3 II.C.3 1030. In the long run, the demand curve of a perfectly competitive firm that earns economic profit will a. shift up b. shift down II.C.3 c. shift left d. not shift e. shift right 1031. The market for aircraft carriers is a(n) a. monopoly b. monopsony c. oligopoly d. oligopsony II.C.3 e. duopoly 1032. The Organization of Petroleum Exporting Countries (OPEC) is an example of a a. financial intermediary b. cartel II.C.3 c. monopsony d. labor union e. monopoly 1033. Which market structure achieves the greatest economies of scale? a. Oligopoly b. Perfect competition c. Monopolistic competition d. Natural monopoly e. Monopsony 1034. Which of the following is NOT a characteristic of a perfectly competitive market? a. Many buyers b. Many sellers c. Sellers offer identical products d. Buyers are well informed about the market e. Buyers cannot enter or exit the market easily 1035. Compared to a competitive market, a monopoly firm will produce: a. A greater quantity at a higher price b. The same quantity at a lower price c. A greater quantity at a lower price d. A smaller quantity at a higher price e. A smaller quantity at a lower price 1036. An industry in which a large number of firms compete in the production of products that differ slightly, such as the computer software industry, is called: a. Perfect competition b. Monopolistic competition c. Oligopoly d. Monopsony e. Monopoly 1037. What rule do all firms use to maximize their profits? a. produce where price equals marginal cost b. produce where marginal cost equals minimum average costs c. produce where marginal costs equal marginal revenues d. produce as much as possible e. produce until total revenues decline 1038. Oligopolies are characterized by all of the following EXCEPT a. large barriers to entry b. interdependence c. no control over price d. a kinked demand curve e. non-price competition 1039. How are monoposonies differentiated from other firms? a. They have an advantage in buying labor II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 b. c. d. e. They rely less on non-price differentiation They rely more on non-price differentiation They face only one buyer They face more buyers 1040. A monopsony is a a. financial intermediary b. market with only one buyer c. nationalized corporation d. firm with favorable economies of scale e. market with only one seller II.C.3 1041. What characteristic differentiates a monopolistic competitive market from a perfectly competitive market? a. In a monopolistic competitive market, there are just a few producers. b. In a monopolistic competitive market, market information is controlled. II.C.3 c. In a monopolistic competitive market, the products are homogeneous. d. In a monopolistic competitive market, the products are heterogeneous. e. In a monopolistic competitive market, there are barriers to entry. 1042. A natural monopoly must a. Be nationalized b. Practice price discrimination c. Have favorable economies of scale d. Have minimal producer surplus e. Not earn any economic profit 1043. Brands and other forms of non-price competition are MOST COMMON in a. monopolistic competition and monopoly b. perfect competition and monopolistic competition c. perfect competition and monopsony d. oligopoly and monopolistic competition e. oligopoly and monopoly 1044. Economies of scale over the relevant range of output will result in a. monopoly b. oligopoly c. monopolistically competitive firm d. unnatural monopoly e. natural monopoly 1045. A cartel is a a. collusive group of firms b. group of items used to calculate CPI c. powerful group of labor unions d. firm operating in the black market e. tax-evading firm 1046. A cartel is a. a collective bargaining until used by organized labor b. a governmental practice to disrupt unfair competition c. a group of rival firms in monopolistic competition d. an extreme form of collusion involving a formal agreement e. a form of non-price competition involving false advertising II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 1047. A market in which a few large sellers control most of the output is known as a(n) a. monopoly b. perfect competition II.C.3 c. monopolistic competition d. oligopoly e. competitive market 1048. For a perfectly competitive firm, all of the following will be equal in the long run EXCEPT a. average variable cost b. marginal revenue c. marginal cost d. average revenue e. average fixed cost 1049. A monopolist is a(n) a. price maker b. ideal producer c. government franchise d. imperfect consumer e. price taker 1050. According to game theory, which of the following is TRUE? a. Oligopolies will not form cartels b. Collusion reduces any incentive to cheat c. Firms will always try to undercut their competitors d. A Nash equilibrium may not result in the best payoff e. A game can only have a single Nash equilibrium 1051. A monopoly's economic profit can be eliminated by forcing it to produce where a. Price equals average cost b. Average cost equals marginal cost c. Price equals marginal cost d. Marginal revenue equals marginal cost e. Price equals marginal revenue 1052. Under perfect competition, a firm can a. differentiate its product from competitors b. reduce production to influence the price of a product c. make an economic profit in the long term d. maximize profits by selling above marginal cost e. sell as much as it wants at the market price 1053. Which of these factors is NOT a characteristic of a perfectly competitive market? a. product differentiation b. a homogeneous product c. no obstacles to entry or exit d. a large numbers of sellers e. a large number of buyers II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 1054. Which of the following types of market structures can earn economic profits in the long run? II.C.3 a. Monopoly b. c. d. e. Competition Perfect competition Monopolistic competition Capitalistic 1055. Which of the following is true of a perfectly competitive market? a. the number of firms must remain constant b. there may be slight barriers to entry c. heterogeneous products are produced d. sellers can earn a profit in the long run e. buyers and sellers have perfect knowledge II.C.3 1056. A market in which there are only two or three producers would be called a(n) a. monopoly b. competitive market c. perfectly competitive market II.C.3 d. oligopoly e. imperfect monopoly 1057. In what type of market does the individual firm have a negligible impact on the market price? a. oligopoly b. competitive c. mixed market d. free market e. monopoly 1058. What type of firm always tries to maximize profits? a. Monopoly b. Oligopoly c. Monopolistic competition d. Competitive e. All firms try to maximize profits 1059. Which organization is an example of a natural monopoly? a. mobile telephone service b. a public utility company c. Alcoa in the late nineteenth century d. Exxon-Mobile e. OPEC 1060. For a perfectly competitive firm, which of the following will be minimized in the long run? a. average cost b. marginal revenue c. total variable cost d. total cost e. marginal cost 1061. In pure competition, provided that price exceeds average variable cost, a profit-maximizing firm produces a level of output so that: a. Product price equals marginal cost b. Marginal revenue equals average fixed costs c. Average revenue equals average cost d. Product price equals the average total cost II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 e. Average revenue equals the minimum marginal cost 1062. In which market structure can a firm sell any amount of a good at a constant price? a. monopsony b. monopolistic competition II.C.3 c. perfect competition d. monopoly e. oligopoly 1063. All of the following are aspects of monopolistic competition EXCEPT a. heterogeneous products b. deadweight loss c. long-run economic profits d. small barriers to entry e. a large number of firms II.C.3 1064. Which market structure is characterized by a large number of buyers and a limited number of sellers? a. perfect competition b. monopoly II.C.3 c. monopolistic competition d. oligopoly e. monopsony 1065. The kinked demand curve is theoretically supported by a. Okun’s law b. game theory c. Fishers law d. Marshall’s law e. the Lorenz curve 1066. If there are many firms in the market for a particular good, then the market structure is called a. pure competition b. monopolistically competitive c. either monopolistically competitive or pure competition d. either competitive or an oligopoly e. both pure competition and monopolistically competitive 1067. Which of the statements regarding monopolies is TRUE? a. they are price takers b. they only sell to one buyer c. they can make an economic profit d. they do not maximize profits e. they lower prices for consumers 1068. Oligopoly is distinguished from monopolistic competition by a. a greater number of firms b. greater barriers to entry c. less interdependence d. less product differentiation e. less long-run economic profit 1069. All of the following are potential barriers to entry EXCEPT a. economies of scale II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 b. c. d. e. patents unfair pricing antitrust laws property rights 1070. If the market share of each firm in an industry is high but not absolute, then the market structure is called a. competitive b. pure competition II.C.3 c. a monopoly d. monopolistically competitive e. an oligopoly 1071. Barriers to entry can include all of the following EXCEPT a. Non-price competition b. High sunk costs c. Low market concentration d. High economies of scale e. Patents 1072. The use of brand names is an example of a. perfect competition b. specialization c. price leadership d. comparative advantage e. non-price competition 1073. The field of macroeconomics includes the study of all of the following EXCEPT: a. inflation b. interest rates c. aggregate demand d. aggregate supply e. monopolies 1074. Extreme economies of scale are MOST likely to lead to which of the following? a. the “Tragedy of the Commons” b. negative externalities c. shortages d. natural monopolies e. income inequality 1075. In monopolistic competition a. there is only one seller b. it is difficult to enter and leave the market c. it is possible to make a long-term economic profit d. products are differentiated e. firms face an inelastic supply curve 1076. Firms will enter a perfectly competitive market if price exceeds the: a. Sunk costs b. Marginal benefit c. Average variable cost d. Average fixed cost II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 e. Average total cost 1077. A monopoly's marginal revenue curve is a. below its demand curve b. the inverse of its marginal cost curve c. vertical d. horizontal e. upward-sloping 1078. The market structure characterized by one seller and barriers to entry is a. a monopoly b. an oligopoly c. perfect competition d. monopolistic competition e. a monopsony 1079. Which market structure features interdependent firms? a. oligopoly b. perfect competition c. monopolistic competition d. monopsony e. monopoly 1080. The long-run deterioration of any economic profits in perfect competition is caused by a. economies of scale b. diminishing marginal returns c. the entrance of new firms d. increasing market demand e. depreciation of capital 1081. Which of the following is NOT a type of market structure studied by economists? a. Perfect competition b. Capitalistic c. Monopoly d. Oligopoly e. Monopolistic competition 1082. How do economists classify the various market structures they study? a. By degree of competition b. By market size of firms c. Alphabetically d. From oldest to newest e. As either microeconomics or macroeconomics 1083. It is NOT possible for monopolistic competitors to effectively collude because a. they have no control over market price b. a single firm will always become the price leader c. their products are too heterogeneous d. there are too many firms e. their incentive to cheat is too great 1084. A firm’s demand curve in a pure competition market structure is a. vertical II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 b. c. d. e. positive sloping flat negatively sloping cyclical 1085. A cartel is an example of what type of market structure? a. pure competition b. monopoly c. oligopoly d. monopolistic competition e. monopsony 1086. Perfect competition is BEST represented by the market for a. pumpkins b. telephone service c. flutes d. military helicopters e. crude oil 1087. Which of the following is NOT a barrier to entry? a. one buyer b. high sunk costs c. high risk d. product patents e. economies of scale 1088. The kinked demand curve is a feature of a. duopoly b. monopoly c. oligopoly d. monopolistic competition e. perfect competition 1089. A monopoly's level of production is socially optimal when a. Price equals average cost b. Price equals marginal cost c. Marginal revenue equals marginal cost d. Price equals marginal revenue e. Average cost equals marginal revenue 1090. Natural monopolies develop because of a. collusion b. economies of scale c. patents and licenses d. profit maximization e. scarcity 1091. Natural monopolies exist when a. there is monopolistic competition b. a product has a kinked demand curve c. it is inefficient to have more than one producer d. the market only has one buyer e. there are no barriers to entry II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 II.C.3 1092. For a perfectly competitive firm, which of the following can NEVER change? II.C.3 a. economic profit b. c. d. e. total variable cost total cost elasticity of demand price 1093. What tool do economists often use to explain oligopolies? a. game theory b. model of demand and supply c. oligopoly theory d. law of diminishing marginal returns e. model of aggregate demand and aggregate supply 1094. A profit-seeking monopoly will produce until a. price reaches its maximum b. demand is inelastic c. total costs are minimized d. marginal revenue equals marginal cost e. the marginal cost curve intersects the demand curve 1095. Which of the following conditions produces the welfare-maximizing level of output? a. Price equals zero b. Price is greater than marginal cost c. Price is equal to average cost d. Price is equal to marginal cost e. Marginal cost is less than marginal revenue 1096. In a perfectly competitive market economy, a consumer will always buy a product until a. total cost exceeds total benefit b. the benefit-to-cost ratio is less than one c. net benefits are negative d. the opportunity cost is zero e. its marginal benefit equals its marginal cost 1097. Banks are an example of a a. financial intermediary b. collective bargainer c. price leader d. demand manager e. savings scheduler II.C.3 II.C.4 II.C.4 II.C.4 II.D.1 1098. The economic motivation for a strike by a labor union is to: a. Force the business to permanently cease production and declare bankruptcy b. Allow competing firms to work together to maximize profits in the long run c. Impose costs on management sufficient to force acceptance of the union demands II.D.2 d. Keep workers out of jobs long enough to qualify for unemployment insurance e. Remove the current management team and replace with a management team of union representatives 1099. Collective bargaining agreements negotiated by labor unions in the United States typically specify all of these EXCEPT: a. Wages paid to labor b. Hours worked by labor c. Grievance procedures II.D.2 d. Types of equipment used in production e. Criteria for layoffs and employee recall 1100. What problem is illustrated by the tragedy of the commons? a. monopolies b. labor unions c. rush hour traffic congestion d. minimum wage e. oligopolies II.D.3 1101. What is the term that describes the action in which a nation's government takes control of a foreign-owned firm or industry without compensating the owner? a. Exploitation b. Expatriation II.D.3 c. Eminent domain d. Expropriation e. Condemnation 1102. Songs, books, and other artistic works are protected from unauthorized reproduction by a. copyrights b. patents c. trademarks d. cartels e. tariffs 1103. How long do copyrights last in the United States? a. 20 years after the date they are approved b. 50 years after the date they are approved c. 20 years after the death of the owner d. 70 years after the death of the owner e. indefinitely 1104. How long do copyrights last in the United States? a. 20 years after the date they were approved b. 50 years after the date they were approved c. 20 years after the death of the owner d. 70 years after the death of the owner e. Indefinitely II.D.3 II.D.3 II.D.3 1105. Why do markets sometimes fail to allocate resources efficiently? a. because sometimes households and firms are too greedy b. because households and/or firms sometimes violate the laws of demand and supply II.D.3 c. because government can always do it better d. because markets are inherently inefficient e. because property rights are not well established 1106. Which of the following is an example of fiat money? a. gold b. a check c. bill of credit d. wampum e. a penny II.E.1 1107. Which of the following is a desirable characteristic of money? a. durability b. a store of value c. a unit of account d. a medium of exchange e. perishability 1108. Trade in a large, complex society is made easier with a. perfect competition b. barter c. money d. double coincidence of wants e. an authoritarian government 1109. Money is: a. The same as income b. Measured as the sum of coin and currency in circulation c. The market value of goods and services produced in an economy d. Anything commonly accepted as a means of payment e. A factor of production II.E.1 II.E.1 II.E.1 1110. The ease with which an asset can be converted into a medium of exchange is called: a. Functionality b. Durability II.E.1 c. Safety d. Portability e. Liquidity 1111. The savings rate in the U.S. is around _____ to _____ percent of after-tax personal income. a. 18, 20 b. 12, 15 c. 8, 9 d. 4, 5 e. 2, 3 1112. Minimum wage laws are good examples of a. price ceilings b. how government makes the labor market more efficient c. protectionism d. price minimums e. price floors 1113. Which factor does NOT have a significant impact on productivity growth? a. Level of available technology b. Amount of experts c. Capital-to-labor ratio d. Education level of the labor force e. Skill level of the labor force 1114. The term productivity refers to the a. rate of inflation b. percentage change in the GDP deflator c. amount of goods and services produced per capita d. output produced per worker hour II.E.4 II.F.1 II.G.3 II.G.3 e. ratio real to nominal GDP 1115. What is capital deepening? a. An increase in capital b. A reduction in the depreciation rate of capital c. When more capital is imported than exported d. An increase in the capital-to-labor ratio e. Any improvement in technology 1116. Human capital is the: a. Knowledge and skills that make a worker productive b. Plant and equipment produced by human workers c. Amount of financial wealth accumulated by labor d. Marginal revenue product of labor e. The sum of earnings of all workers in an economy 1117. Which of the following measurements would BEST represent the average well-being of a country? a. Real GDP b. Nominal GDP c. Per capita GDP d. The GDP deflator e. The consumer price index II.H.1 II.H.1 II.H.2 1118. Which of these is a common measure of the distribution of income within a country? a. Laffer curve b. Real GDP per capita II.H.2 c. Real disposable income per capita d. Lorenz curve e. Says' curve 1119. Economists usually measure growth in terms of what units? a. Nominal GDP b. Real GDP c. Percentage change in the GDP deflator d. Percentage change in real GDP e. Percentage change in real GDP per capita 1120. Which of the following items best measures a nation’s standard of living from year to year? a. GDP b. real GDP c. real GDP per capita d. real disposable income per capita e. real national income per capita 1121. An entrepreneur does all of the following EXCEPT: a. Provides managerial skills b. Organizes the other factors of production c. Aims to earn profit d. Assumes the risk of failure e. Produces raw materials II.H.2 II.H.2 II.I.1 1122. In a market system in which the economic unit is motivated by self-interest, II.I.2 the goal of entrepreneurs is to maximize: a. b. c. d. e. The quantity of goods produced The quality of goods produced The number of workers employed Profits or minimize losses Revenue and sales 1123. According to Gresham’s Law, what type of money will people prefer to use for trade? a. fiat money b. inferior money c. commodity money d. intrinsic money e. token money III 1124. How is the GDP affected by the construction of a new automobile assembly plant? a. Net exports increase. b. Net exports decrease III.??? c. Government spending increases. d. Investment spending decreases. e. Investment spending decreases. 1125. In the US, the largest component of aggregate expenditure is a. investment b. consumption c. government spending d. net exports e. black market activity 1126. When a good is taxed, the affected producer surplus not transferred to government becomes a. Economic profit b. Consumer surplus c. A sunk cost d. Deadweight loss e. Excess inventory 1127. The interest rate that banks charge their best customers is called the a. prime rate b. nominal rate c. consumer rate d. federal funds rate e. adjusted rate III.??? III.??? III.??? 1128. Which component(s) of GDP are affected and in what direction will it (they) move if Ford sells an Explorer SUV out of inventory? a. consumption increases and exports increase b. investment and consumption decrease III.??? c. consumption increases and investment declines d. consumption increases and imports decline e. investment and exports decline 1129. The nominal interest rate minus the inflation rate equals the: a. GDP inflator. b. real interest rate. c. exchange rate. III.??? d. disinflation rate. e. deflation rate. 1130. Which of the following duties is NOT the responsibility of the Federal Reserve System? a. conducting the nation's monetary policy b. providing banking services for member banks c. clearing checks for commercial banks d. providing loans for individuals e. supervising the practices of banking institutions III.??? 1131. If the Federal Reserve System wants to increase the money supply by $1 billion, with a reserve requirement of five percent, by how much should it augment reserves? a. $20 billion b. $500 million III.??? c. $100 milllion d. $50 million e. $5 million 1132. The MAIN goal of unions is to a. decrease the efficiency and profits of corporations b. connect potential borrowers with potential leaders c. prevent the government from abusing its authority d. negotiate improved wages and working conditions for members e. guarantee the right of due process to citizens III.??? 1133. Into what category of unemployment would Jane be classified, if she were to voluntarily leave her job as a receptionist to search for a job as a data processor? a. none, because she left her job voluntarily b. structural III.??? c. frictional d. seasonal e. cyclical 1134. If the CPI market basket cost $3,542 in 2005 and the same market basket cost $2,000 in the base year (1982-84), what was the CPI in 2005? a. 154.2 b. 177.1 c. 193.6 d. 254.2 e. 354.2 1135. All of the following are generally considered regressive EXCEPT a. property taxes b. sales taxes c. the lottery d. income taxes e. payroll taxes 1136. Gross national product does NOT include a. exports b. purchases of staple goods c. purchases of final goods d. defense spending III.??? III.??? III.??? e. income transferred abroad 1137. Definitions of the money supply differ with respect to asset a. value b. marketability c. volume d. liquidity e. number 1138. Which of the following benefits is NOT covered by Social Security? a. old age insurance b. disability insurance c. welfare d. healthcare e. life insurance 1139. Which of the following transactions is not a part of a country’s GDP? a. buying a music CD from Tower Records b. buying a computer from Dell c. buying a new dishwasher d. buying a used guitar e. buying a Big Mac III.??? III.??? III.??? 1140. If the Federal Reserve increases the reserve requirement, the discount rate, and sells bonds it is participating in a. inflation creation b. open money practices III.??? c. expansionary fiscal policy d. contractionary fiscal policy e. a tight money policy 1141. An increase in the level of real GDP would a. shift the aggregate demand curve up b. shift the aggregate demand curve down c. shift the aggregate demand curve left d. shift the aggregate demand curve right e. not affect the aggregate demand curve 1142. What were Federal government taxes as a percent of GDP in the year 2000? a. between 10 and 15 percent b. between 16 and 20 percent c. between 21 and 30 percent d. between 31 and 40 percent e. More than 40 percent 1143. A sin tax should equal the a. implicit cost of the activity it is taxing b. explicit cost of the activity it is taxing c. marginal cost of the activity it is taxing d. external cost of the activity it is taxing e. opportunity cost of the activity it is taxing 1144. The tax multiplier is equal to a. the required reserve ratio / -MPS b. the required reserve ratio / -MPC III.??? III.??? III.??? III.??? c. -MPC / MPS d. -MPC / the required reserve ratio e. -1 / the required reserve ratio 1145. The short-run aggregate supply curve is: a. downward sloping. b. horizontal. c. upward sloping. d. vertical. e. parabolic. 1146. Which of the following statements is true for an economy in the long run? a. the aggregate supply curve is upward sloping b. the aggregate demand curve is vertical c. the price level is determined by aggregate supply d. the price level is determined by aggregate demand e. every member of the labor force is employed 1147. If you purchase an asset for $1,000 and sell it for $1,500, the profit you made on this transaction is called: a. A capital gain and will be subject to the federal income tax b. A capital gain and will not be subject to the federal income tax c. An inflation premium and will be subject to the federal income tax d. An inflation premium and will not be subject to the federal income tax e. A marginal benefit and will not be subject to the federal income tax 1148. Which explains movement along a short-run aggregate supply curve? a. a fall in the natural rate of unemployment b. wealth effect c. interest-rate effect d. an improvement in technology e. sticky-wage theory 1149. Intensive economic growth results from a. increases in output per unit of factor input b. the expansion of factor inputs c. increases in exports d. decreases in imports e. increases in investment spending 1150. What occurs when the government borrows on a scale that negatively affects interest rates? a. the balance effect b. the interest rate effect c. the crowding-out effect d. the income effect e. the wealth effect III.??? III.??? III.??? III.??? III.??? III.??? 1151. When a US excise tax is levied on a good with price-inelastic demand, most of the tax's burden is borne by a. domestic consumers b. domestic producers III.??? c. foreign consumers d. the US government e. foreign governments 1152. If the CPI in New York City is 115, while the CPI in Des Moines, Iowa is 107, what salary in New York City would be required to just equal the purchasing power of a salary of $22,000 in Des Moines? a. $22000 b. $23645 III.??? c. $23540 d. $25300 e. $20470 1153. What happens in the model of aggregate demand and aggregate supply, if households and firms become more pessimistic about the future? a. Short-run aggregate supply decreases. b. Aggregate demand increases. III.??? c. Short-run aggregate supply increases. d. Aggregate demand decreases. e. Long-run aggregate supply decreases. 1154. In which component of GDP will your aunt Matilda’s purchase of a new home be recorded? a. investment spending b. consumption spending c. government spending d. imports e. exports 1155. What bank provides financial services for other banks and controls the available and the cost of credit? a. central bank b. banking center c. reserve bank d. bank center e. headquarters bank 1156. Corporate income is a. considered to be investment b. not subject to taxes c. usually not reported d. taxed twice e. subject to an antitrust tax III.??? III.??? III.??? 1157. An increase in aggregate demand while aggregate supply remains constant a. increases unemployment b. results in inflation c. reduces productivity III.??? d. decreases interest rates e. does not affect equilibrium GDP 1158. Which of the following characterizes inflation in the U.S.? a. It is caused by aggregate supply exceeding aggregate demand. b. It can be of cost-push or demand-pull types. c. It fell into deflation during most of the 1990s. d. It has exceeded 10% most years since the early 1980s. e. It increases purchasing power as measured by the Consumer Price Index. 1159. The federal government receives the largest portion of its income from a. transfer payments III.??? III.??? b. c. d. e. income taxes customs corporate taxes fines 1160. Real GDP is calculated by a. converting GNP to GDP b. multiplying per capita GDP by the unemployment rate c. adding national income to personal income d. subtracting depreciation from GNP e. dividing nominal GDP by a GDP deflator 1161. Coins and paper currency make up about what percent of the M1 money supply? a. 15% b. 25% c. 35% d. 45% e. 60% 1162. What is the total supply of goods and services in an economy at different price levels? a. the standard of living b. the quantity supplied c. the unit of account d. the aggregate supply e. the money supply 1163. By purchasing securities though open market operations, the Federal Reserve is: a. Increasing the money supply b. Decreasing the money supply c. Leaving less money to be loaned by banks d. Decreasing the reserve requirement e. Increasing interest rates 1164. What function of money is illustrated by a purchase by check? a. liquidity b. store of value c. Portability d. unit of account e. medium of exchange 1165. One of the problems with the definition of “unemployed” is that it does not take which of the following into account? a. total size of the labor force b. differences in geographic regions c. total number of available jobs d. discouraged workers e. people doing volunteer work 1166. Government regulations are used to offset the shortcomings of market economies in a. laissez-faire economies b. planned economies c. command economies III.??? III.??? III.??? III.??? III.??? III.??? III.??? d. mixed economies e. traditional economies 1167. The expenditure multiplier is equal to a. 1 / (1-MPS) b. 1 / (MPC) c. 1 / (MPC + MPS) d. 1 / (1 - MPC) e. MPC / MPS 1168. The MOST flexible tool available to the Fed to control the money supply is called its (the) a. reserve ratio b. discount rate c. Fed rate d. open market operations e. prime rate 1169. Which of the following is included in GDP? a. tips that are not reported by a bartender b. winnings from gambling with friends c. the income a receptionist receives at her night job as a waitress d. services exchanged between a plumber and a dentist e. money earned from the sale of a used car 1170. The government faces a trade-off between efficiency and: a. competition. b. equity. c. inflation. d. unemployment. e. demand. 1171. The Keynesian region of the aggregate supply curve is a. largely positively sloped b. largely negatively sloped c. vertical d. relatively flat e. cyclical 1172. The crowding out effect is MOST CLOSELY associated with reduced a. net exports b. exports c. price levels d. interest rates e. private investment 1173. Social insurance programs like unemployment compensation are often funded by a. property taxes b. use taxes c. excise taxes d. sales taxes e. payroll taxes III.??? III.??? III.??? III.??? III.??? III.??? III.??? 1174. In 1999, the base year, the market basket of goods cost $250. In 2004, the III.??? same market basket cost $500. What was the CPI in 1999? a. b. c. d. e. 0.5 1 2 100 200 1175. Which of the following is considered a leakage in the circular flow model? a. public goods b. government spending c. exports d. savings e. consumer spending 1176. Which of the following indicators is a leading economic indicator? a. average duration of unemployment b. the level of unemployment c. average personal income d. mean prime interest rate e. stock market prices III.??? III.??? 1177. What spurred the creation of the social security, welfare, and unemployment compensation programs? a. the assassination of McKinley b. the dropping of the atom bomb III.??? c. the Great Depression d. World War II e. the inflationary spiral of the 70's 1178. Which of the following statements is TRUE? a. trusts are corporations that do not have to pay taxes b. a tax can have positive and negative externalities c. the U.S. government does not tax corporate income d. dividends paid to shareholders are not taxed e. a sales tax is a progressive tax 1179. A national sales tax designed to replace the current income tax system is regressive because a. the tax costs more to administer than it retains in revenue b. the tax is based on traditional economic policies c. the tax would not raise as much revenue as the income tax d. the tax takes a larger percentage of income from poorer individuals e. the tax is more easily evaded than the current system of income tax 1180. Discouraged workers a. cause the level of unemployment to be understated b. are individuals actively seeking employment c. work part time instead of full time d. are white-collar workers in blue-collar jobs e. do not enjoy working at their jobs 1181. Tax policies that favor higher incomes are known as a. regressive tax policies b. progressive tax policies c. negative tax policies d. distributive tax policies III.??? III.??? III.??? III.??? e. inverse tax policies 1182. If a tax system is progressive: a. the real tax rate is higher than the charged tax rate b. The effective tax rate is higher than the levied tax rate c. The marginal tax rate will always be higher than the average tax rate d. Tax payments will decrease as income increases e. The average tax rate is always higher than the marginal tax rate III.??? 1183. One of the reasons why an aggregate demand curve is downward sloping is the a. substitution effect b. income effect III.??? c. wealth effect d. consumption effect e. investment effect 1184. Which of the following is an example of an easy money policy used by the Federal Reserve? a. printing more money b. increasing the discount rate c. selling government bonds d. increasing government expenditures e. reducing the reserve ratio 1185. A decrease in aggregate demand will: a. decrease output and the price level in the long run. b. decrease output and increase the price level in the long run. c. not affect output and decrease the price level in the long run. d. not affect output and the price level in the long run. e. increase output and the price level in the long run. 1186. The largest portion of federal tax receipts are in the form of a. corporate income tax b. estate and gift taxes c. personal income tax d. capital gains taxes e. excise taxes 1187. All of the following were tactics used by management to prevent the development of unions EXCEPT a. court injunctions b. blacklisting c. strikebreakers d. closed shops e. company unions 1188. After his study of the Great Depression, Keynes concluded that in order to get out of a recession, government should a. do nothing b. deregulate overregulated markets c. decrease the money supply d. increase the money supply e. increase spending III.??? III.??? III.??? III.??? III.??? 1189. Real GDP differs from nominal GDP in that real GDP a. does not look at international trade b. uses dollar values from a base year c. uses the money supply as a conversion tool d. also takes amortization into account e. uses the Gini coefficient to determine final prices 1190. An easy money policy a. results in budget deficits b. reduces the money supply c. stimulates economic growth d. increases the reserve ratio e. preserves price stability 1191. What function of money is illustrated by an ATM withdrawal? a. unit of account b. portability c. scarcity d. store of value e. medium of exchange 1192. Which of the following would cause an aggregate demand curve to shift to the right? a. depreciation of the exchange rate of the dollar b. a decrease in government spending c. a decrease in the money supply d. an increase in taxes e. a stock market crash III.??? III.??? III.??? III.??? 1193. Suppose that Betty leaves her job as a secretary to look for a job as a data processor. Betty would be classified in which unemployment category? a. structural b. frictional III.??? c. seasonal d. cyclical e. temporary 1194. The difference between GNP and NNP is a. national income b. personal income c. business transfer payments d. domestic and foreign income e. depreciation III.??? 1195. Per capita real GDP is not a perfect indicator of the well being of a country’s citizens MAINLY because: a. it does not show the money multiplier. b. it does not show the level of income inequality. III.??? c. it does not consider taxes. d. it does not consider transfer payments. e. it does not consider services. 1196. Which component(s) of GDP would be affected and in what direction if the Social Security Administration pays your grandmother $2,500 in social security benefits? a. government spending would increase III.??? b. c. d. e. consumption would decrease investment spending would increase net exports would decline none of the components of GDP are affected by this transaction 1197. Which of the following will increase the money supply? I. cutting taxes II. decreasing the discount rate III. decreasing the reserve ratio IV. buying government securities a. I and II only b. II and III only c. I, II, and III only d. II, III, and IV only e. I, II, III, and IV 1198. Which of the following actions is MOST unlikely to meet the goals of the Employment Act of 1946? a. selling government securities b. engaging in deficit spending c. engaging in interest group politics d. decresaing the reserve ratio e. lowering the capital gains tax 1199. The Phillips curve suggests that an increase in unemployment leads to a. a decrease in inflation b. an increase in inflation c. stagflation d. greater income inequality e. greater income equality 1200. Which of the following is NOT a function of the Federal Reserve? a. providing financial services to the government b. stabilizing the financial system c. regulating banking institutions d. establishing monetary policy e. approving annual budgets III.??? III.??? III.??? III.??? 1201. Which of the following components of the federal budget is the LARGEST in amount? a. net interest on the debt b. national defense III.??? c. social security d. medicare e. transportation 1202. The revenue that a government raises by creating money is called a(n) a. nontax transfer b. inflation tax c. money tax d. revenue neutral tax e. revenue enhancement 1203. What monetary policy tool does the Federal Reserve use most often to achieve its target for the federal funds rate? a. the discount rate III.??? III.??? b. c. d. e. reserve requirements the money multiplier the price level open-market operations 1204. The drawback of nominal GDP compared to real GDP is that it a. excludes unemployment b. overstates actual growth c. undervalues net exports d. is more difficult to measure e. includes production overseas 1205. Inflation and unemployment are BEST described as being: a. directly related. b. inversely related. c. unrelated. d. directly related in the short run, but unrelated in the long run. e. inversely related in the short run, but unrelated in the long run. 1206. What is substitution bias? a. a type of preference or taste for a good or service b. one of the reasons that explains the shape of a supply curve c. one of the problems with using the CPI to measure inflation d. one of the reasons that explains the shape of a demand curve e. a factor of production 1207. A negative income tax is an example of a. A contractionary policy b. Income redistribution c. A price ceiling d. A flat tax e. A regressive tax III.??? III.??? III.??? III.??? 1208. If Rick is trying to determine the worth of a slice of pizza relative to the worth of a can of soda, then he is using money as a a. store of value b. standard of value III.??? c. medium of exchange d. mean of production e. means of trade 1209. If a country exports more than it imports, it has a(n) a. trade deficit b. trade surplus c. balance of payments problem d. absolute advantage over its trading partners e. exchange rate higher than its trading partners 1210. Which of the following is an example of expansionary monetary policy? a. The capital gains tax is doubled. b. $50 million is spent for a telescope in Hawaii. c. The income tax is slashed. d. The reserve requirement is raised 2%. e. The FOMC buys securities. III.??? III.??? 1211. Using the expenditure approach, which of the following equations equals GDP? a. C + I + G b. C + I + G + X c. R + I + P d. R + I + P + W e. C + R + X + W III.??? 1212. What is the difference between nominal gross domestic product (nominal GDP) and real gross domestic product (real GDP)? a. Nominal GDP includes all spending in one year. Real GDP does not include depreciation. b. Nominal GDP is expressed in current dollars. Real GDP is expressed in constant dollars. c. Nominal GDP is measured in current year dollars. Real GDP does not III.??? include the change in the level of output. d. Real GDP is measured in current dollars. Nominal GDP is measured in constant dollars. e. Real GDP includes all production in one year. Nominal GDP is real GDP plus financial transactions. 1213. How many regional Federal Reserve banks are there in the United States? a. 1. b. 5. c. 7. III.??? d. 12. e. 50. 1214. Which macroeconomic indicator reveals the fiscal discipline of a country? a. GDP b. GINI coefficient c. income shares by percentile d. national poverty rates e. public debt 1215. Which of the following would be a contractionary fiscal policy? a. increasing taxes b. increasing government spending c. increasing the reserve ratio d. decreasing the reserve ratio e. decreasing taxes III.??? III.??? 1216. Keynesian economists believe that, as a control on spending and loans, the interest rate is largely a. effective in promoting spending but not loans b. effective in promoting savings and loans III.??? c. ineffective in promoting savings but able to generate loans d. ineffective in promoting savings and loans e. ineffective in promoting spending but able to generate loans 1217. A decline in real GDP for two consecutive quarters is defined as a. a depression b. a recession c. stagflation d. hyperinflation III.??? e. an expansion 1218. The GDP deflator is found by dividing _____ by _____. a. the CPI, the nominal interest rate b. nominal GDP, the real interest rate c. real GDP, the real interest rate d. nominal GDP, real GDP e. real GDP, the nominal interest rate III.??? 1219. Because consumers change consumption patterns in response to changes in relative prices, economists believe that a. the CPI overstates the inflation rate b. the CPI understates the inflation rate III.??? c. the GDP deflator overstates the inflation rate d. the GDP deflator understates the inflation rate e. the CPI overstates the growth of real GDP 1220. If the required reserve ratio is twenty percent and the Federal Reserve sells one million dollars of bonds, the money supply will a. Decrease by $5 million b. Decrease by $4 million III.??? c. Increase by $1 million d. Increase by $5 million e. Increase by $250 million 1221. A nation’s debt is the a. amount by which real GDP decreases between consecutive years b. amount by which expenditures exceed revenues in a given year c. difference between a nation’s total exports and total imports d. amount of money a country owes foreign lenders over time e. accumulation of all the federal government’s deficits and surpluses 1222. The US Social Security tax is a(n) a. indirect tax b. excise tax c. state tax d. regressive tax e. progressive tax 1223. Token money is money that a. has a face value exceeding its intrinsic value b. is valuable based on the government’s authority c. can be consumed as well as exchanged d. holds no real economic value e. lacks any physical representation 1224. Suppose that on January 1, 2001 the CPI was 121, and that on January 1, 2002, the CPI was 131. Based on the CPI, the rate of inflation during 2001 was a. 13.1% b. 12.1% c. 10% d. 9.31% e. 8.26% 1225. The crowding-out effect occurs when a. consumption by the wealthy drives out consumption by the poor III.??? III.??? III.??? III.??? III.??? b. c. d. e. the process of economic growth causes unskilled workers to suffer people abuse a common resource to the point of depletion increased government spending results in less private investment potential employees become discouraged and leave the labor force 1226. Increasing and decreasing the amount of reserves is the responsibility of a. the Secretary of the Treasury b. the Securities and Exchange Commission c. the Federal Reserve Board d. the U.S. Treasury e. the Federal Open Market Committee III.??? 1227. What will happen if the government passes a law that increases consumers’ marginal propensity to consume? a. interest rates will rise, decreasing investment b. interest rates will rise, increasing investment III.??? c. interest rates will fall, decreasing investment d. interest rates will fall, increasing investment e. interest rates will fall, not affecting investment 1228. When the state of the economy changes, revenues and expenses that change accordingly to keep GDP steady are called a. automatic stabilizers b. financial controls c. fiscal oversights d. monetary stewards e. federal expense variations 1229. After expansionary fiscal policy causes a shift in aggregate demand, what does the multiplier effect cause? a. additional shifts to aggregate demand in the opposite direction b. additional shifts to aggregate demand in the same direction c. a shift in aggregate supply in the opposite direction d. a shift in aggregate supply in the same direction e. an initial shift in aggregate supply which eventually cancels out 1230. If the crowding-out effect outweighs the multiplier effect, then a $1 billion increase in government expenditures will a. increase aggregate demand by more than $1 billion b. increase aggregate demand by less than $1 billion c. decrease aggregate demand by more than $1 billion d. decrease aggregate demand by exactly $1 billion e. decrease aggregate demand by less than $1 billion 1231. Unexpected inflation redistributes income from a. borrowers to lenders b. lenders to borrowers c. consumers to producers d. producers to consumers e. the government to households 1232. The federal income tax is an example of what kind of tax? a. a flat tax b. a fair tax c. a progressive tax d. a proportional tax III.??? III.??? III.??? III.??? III.??? e. a regressive tax 1233. A tax cut will MOST likely: a. shift aggregate demand to the left. b. shift aggregate demand to the right. c. increase unemployment. d. shift aggregate supply to the left. e. decrease inflation. 1234. The largest portion of the U.S. gross domestic product (GDP) is a. government spending b. investment c. consumption d. net exports e. savings 1235. Inflation can be thought of as a tax on a. holding money b. income c. investments d. consumption e. exports III.??? III.??? III.??? 1236. How many hours must a person have worked as a paid employee during the previous week to be counted as employed by the Bureau of Labor Statistics? a. 30 b. 25 III.??? c. 20 d. 10 e. 1 1237. What interest rate does the Federal Reserve target as a tool of monetary policy? a. the prime rate b. the discount rate c. the federal funds rate d. mortgage interest rate e. the real interest rate 1238. What is included in the measurement of nominal gross domestic product? a. the market value of people’s leisure time activities b. the value of environmental degradation or improvement c. purchase of a new computer to replace one that no longer works d. the value of intermediate goods that are used in production e. transfer payments, such as social security 1239. The sticky wage theory is the theory that: a. real wages are slow to adjust to a changing economy. b. nominal wages are slow to adjust to a changing economy. c. real wages quickly adjust to a changing economy. d. nominal wages quickly adjust to a changing economy. e. nominal wages do not adjust to a changing economy. 1240. What characteristic determines the money supply component of a given type of money? a. popularity III.??? III.??? III.??? III.??? b. c. d. e. liquidity durability age intrinsic value 1241. Which of the following persons is NOT counted among the unemployed? a. a person who is laid off due to an economic downturn in his industry b. a person who sells Christmas trees, but can't find a job the rest of the year c. a person who has stopped searching for work, after being discouraged III.??? d. a person whose skills have recently been rendered useless by a new device e. a person who has recently quit his job due to a disagreement with his boss 1242. The short-run aggregate supply curve differs from the long-run aggregate supply curve because there is a lag between a. changes in product price and changes in input price b. changes in input price and changes in productivity c. changes in productivity and changes in economic profit d. changes in input price and changes in economic profit e. changes in product price and changes in productivity III.??? 1243. What is gross domestic product? a. the quantity of final goods and services produced within a country's borders in a given year b. the demand for all goods and services at different price levels c. the amount of consumer spending at different price levels III.??? d. the quantity of final goods and services produced globally by a nation in a given year e. the supply for all final goods and services at different price levels 1244. What do economists call the total quantity of goods and services that firms produce and sell at each price level? a. production b. gross domestic product c. supply d. aggregate supply e. aggregate demand 1245. What is arguably the MOST significant deterrent to supplying Americans with universal healthcare? a. unequal demand for healthcare b. poor efforts by lobbyists c. inefficient allocation of healthcare d. fear of free riders e. limited need for healthcare 1246. The Fisher effect explains the relationship between inflation and a. GDP b. National Income Accounts c. real and nominal interest rates d. monetary neutrality e. the liquidity trap 1247. The circular flow model contains which two types of flow? a. households and firms b. monetary and real c. inflationary and deflationary III.??? III.??? III.??? III.??? d. domestic and international e. private and public 1248. What is Gresham's law? a. bad money drives out good money b. supply creates its own demand c. there ain't no such thing as a free lunch d. demand runs the economy e. an invisible hand moves everyone towards the common good III.??? 1249. Which of the following circumstances BEST characterizes the free-rider problem? a. instead of paying admission, John sits outside the concert walls and listens to the music b. a community ends up overfishing its lake because everyone catches the limit c. the populace suffers when a politician amends a bill to cater to his support III.??? base d. inflation occurs because the government decides to finance its debt by printing money e. a factory ends up causing global warming because it does not consider the environment 1250. For individuals born after 1938, the minimum age for receiving social security benefits is a. 49. b. 55. c. 61. d. 67. e. 72. 1251. The policy that utilizes government spending and taxes is: a. monetary policy b. democratic policy c. Republican policy d. supply-side policy e. fiscal policy 1252. One of the services that the Fed provides to banks is a. printing money b. deposit insurance c. armed guards d. check clearing e. hunting down money counterfeiters III.??? III.??? III.??? 1253. The large drop in U.S. GDP in the early 1930s and the large increase in the early 1940s are attributable to a. events that took place in the U.S. stock market b. changes in the U.S. money supply III.??? c. war and peace d. shifts in short-run aggregate supply e. shifts in short-run aggregate demand 1254. The equation for GDP includes all of the following EXCEPT a. income b. consumption c. investment III.??? d. exports e. imports 1255. Aggregate demand is the relationship between average price of aggregate output and what other factor? a. real growth of gross domestic product b. labor productivity output c. nominal gross domestic product d. average quantity demanded e. quantity of aggregate output demanded 1256. In the United States, the CPI is calculated by the a. Bureau of Labor Statistics b. Consumer Price Index Agency c. Department of Commerce d. Office of Budget and Management e. Treasury Department III.??? III.??? 1257. Which of the following statements is FALSE? a. in the short run, inflation and unemployment are inversely related b. the long-run Phillips curve is vertical c. in the long run, an increase in aggregate demand will not affect the inflation rate III.??? d. in the short run, a decrease in aggregate demand will raise the unemployment rate e. in the short run, a decrease in aggregate supply will raise both inflation and unemployment 1258. Which action below would increase aggregate demand in the short run and also increase aggregate supply in the long run? a. an increase in the income tax rate for the wealthiest 1% b. a decrease in the income tax rate for the wealthiest 1% III.??? c. an investment tax credit d. an increase in government spending e. a decrease in income tax rates and an increase in government spending 1259. An economic depression is when a. a recession is accompanied by a high rate of inflation b. inflation increases at an accelerated rate c. real GDP declines for two consecutive quarters d. there is a prolonged and severe recession e. the growth rate of an economy slows 1260. Any expenditure on domestic goods and services originating from outside the household sector is a(n) a. injection b. leakage c. withdrawal d. input e. output 1261. A financial intermediary is a(n) a. institution responsible for producing currency b. organization that connects savers with investors c. firm that consults corporations on improving their efficiency d. governmental agency that sets the interest rate III.??? III.??? III.??? e. an individual that invests in the stock market 1262. One of the problems with using GDP is that it does not take which of the following into account? a. services rendered b. scarce resources c. negative externalities d. fixed weights e. fluctuating prices 1263. The Federal Reserve has how many regional banks? a. 1 b. 5 c. 12 d. 14 e. 25 1264. Which term represents a measure of the overall cost of the goods and services bought by a typical consumer? a. consumer price index b. comparative price index c. inflation d. absolute price index e. GDP deflator 1265. Which of the following is a service that the FED provides to commercial banks? a. holds Treasury Department cash deposits b. conducts purchases and sales of government securities c. regulates the nation’s money supply d. supervises banks e. provides check clearing services III.??? III.??? III.??? III.??? 1266. A corporation’s dividend payout is special in that it is subject to which of the following? a. inflationary spirals b. double taxation III.??? c. stockholder opinion d. bond calls e. stock shorting 1267. An increase in aggregate demand is represented on the aggregate demand curve by a. A rightward shift b. A leftward shift III.??? c. An upward shift d. A downward shift e. An indeterminate change 1268. Inflation combined with recession (stagflation) will result in a shift to a. the left of the short-run aggregate supply curve b. the right of the aggregate demand curve III.??? c. the right of the long-run aggregate supply curve d. the left of the aggregate demand curve e. the right of the aggregate demand curve and the short-run aggregate supply curve 1269. All of the following are components that contribute positively to GDP EXCEPT a. goods exported b. goods imported c. consumption d. investment e. government expense III.??? 1270. The classical dichotomy suggests that all economic variables be divided into which two groups? a. macroeconomic and microeconomic b. demand and supply III.??? c. aggregate demand and supply d. real and nominal e. fiscal and monetary 1271. In the circular flow model, national income is represented by a. payments made in the factor market b. transfers made by the government c. expenditures in the product market d. purchases made by the foreign market e. activities in the black market 1272. What do economists call the type of unemployment that results from workers moving from one job to another? a. structural unemployment b. frictional unemployment c. seasonal unemployment d. cyclical unemployment e. frictional unemployment 1273. What is the most basic implication of the Phillips Curve? a. there is only one revenue-maximizing tax rate b. there is a trade-off between unemployment and inflation c. economic growth results in more inequality to a point d. as the price level rises, less production is demanded e. the unemployment rate drops as the job vacancy rate rises 1274. Which of the following is NOT used to determine economic progress? a. The prime interest rate b. The GDP c. The standard of living d. The unemployment rate e. Labor productivity III.??? III.??? III.??? III.??? 1275. The fact that a higher price for good A causes people to replace good A with a substitute shows that the CPI a. understates the level of inflation b. uses an outdated basket of goods III.??? c. does not take quality into account d. is less accurate than the PPI e. overstates the level of inflation 1276. Which reason explains the shape of an aggregate demand curve? a. sticky price theory b. sticky wage theory c. misperceptions theory d. consumption effect e. interest-rate effect 1277. The system of national income accounts was established in the 1930s by a. John Maynard Keynes b. Simon Kuznets c. Jean Baptiste Say d. David Hume e. Paul Samuleson 1278. All of the following are not part of the labor force EXCEPT: a. a 25-year-old who has given up looking for work b. a 60-year-old retired lawyer c. a 17-year-old searching for a job d. a 35-year-old stay at home mom e. a 30-year-old who goes to college full-time 1279. The Laffer curve supports a. monetarism b. Keynesian economics c. protectionism d. supply-side economics e. socialism 1280. What event would shift a short-run aggregate supply curve to the right? a. a tax cut b. an increase in the money supply c. a boom overseas d. optimism about the future e. a decrease in government purchases 1281. The Commerce Clause of the US Constitution a. bans the Congress from printing money b. bans the government from regulating international trade c. allows states to impose duties on trade d. allows the government to put limitations on commerce e. allows states to print money 1282. The guarantee that the government will not seize private property without justification and compensation is known as a. The commerce clause b. The property clause c. The Sherman Act d. Due process e. The Smoot-Hawley Act 1283. What is demand-pull inflation? a. too few dollars chasing too many goods b. when costs of production rise, producers increase their prices c. when supply shocks happen, producers increase their prices d. another term for disinflation III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? e. when aggregate demand exceeds supply potential, prices go up 1284. What effect does an increase in output have on the money demand curve? a. there is no movement in or along the demand curve b. there is a movement along the curve to the right c. there is a movement along the curve to the left III.??? d. the money demand curve shifts to the right e. the money demand curve shifts to the left 1285. The LARGEST component in the CPI basket of goods and services is a. food and beverages b. transportation c. medical care d. entertainment e. housing 1286. Who is responsible for taking action against businesses engaging in unfair monopolistic trade practices? a. the Federal Open Market Committee b. the Franchise Tax Board c. the Federal Reserve d. the Bureau of Labor Statistics e. the Federal Trade Commission III.??? III.??? 1287. If the government wants to use fiscal policy to alleviate high unemployment, it should a. raise income taxes b. decrease the money supply III.??? c. increase spending d. increase the money supply e. reduce spending 1288. Which of the following purchases would be included in GDP? a. a used computer b. cotton used for shoemaking c. a corporate bond d. a government bond e. a final good 1289. Real GDP is the production of goods and services a. valued at current prices b. valued at constant prices c. measured in tons d. measured in worker hours e. in a given base year 1290. What is the structure of a regressive tax? a. everyone pays an equal percentage of their income b. the richest pay the largest aggregate total c. the richest pay the largest percentage of their income d. the poorest pay the smallest aggregate total e. the poorest pay the largest percentage of their income 1291. The LARGEST component of M1 is a. coins b. Federal Reserve Notes III.??? III.??? III.??? III.??? c. checkable (demand) deposits d. nonblank traveler’s checks e. time deposits 1292. Special-interest groups often use which of the following tactics the MOST to present their viewpoint to legislators? a. lobbying b. donating to political committees III.??? c. forming think tanks d. sponsoring civic events e. calling voters 1293. When an increase in government spending causes higher interest rates which lead to a decrease in private investment, this is referred to as a. the automatic-stabilizer effect b. the multiplier effect c. the crowding-out effect d. the wealth effect e. the income effect 1294. When graphing aggregate demand, the vertical axis represents the a. marginal cost b. quantity demanded c. real GDP d. inflation rate e. price level 1295. Which is NOT a function of the Federal Reserve Bank? a. clearing checks b. supervising and regulating banks c. printing money d. protecting consumers e. maintaining Federal government checking accounts 1296. Which of the following would NOT cause the aggregate demand curve to shift? a. a change in consumer spending habits b. a change in tax policy c. a change in the money supply d. a change in government spending e. a change in the price level 1297. U.S. monetary policy is controlled by a. the President b. Congress c. the Office of Management and Budget d. the Federal Reserve System e. the U.S. Supreme Court III.??? III.??? III.??? III.??? III.??? 1298. A persistent upward movement in price level with a decrease in purchasing power is known as a. inflation III.??? b. deflation c. interest d. discount e. rent 1299. If the reserve ratio is 0.25 and the Fed buys a $40,000 bond from the public, then the money supply will increase by a. $0 b. $10000 III.??? c. $40000 d. $120000 e. $160000 1300. Which of the following items is NOT included in the calculation of M1? a. currency in bank vaults b. currency in the hands of the nonbank public c. checking account balances d. travelers' checks e. coins in circulation 1301. What is the difference between the calculation of real GDP and the calculation of nominal GDP? a. Real GDP does not take unemployment into account. b. Real GDP does not take income inequality into account. c. Real GDP takes inflation into account. d. Real GDP takes taxes into account. e. Real GDP takes the money multiplier into account. 1302. A person or a group of people who are paid to influence the thinking of a legislative official are known as a. muckrakers b. lobbyists c. protesters d. allies e. lawyers III.??? III.??? III.??? 1303. What macroeconomic variable is biased by the introduction of new goods? a. GDP b. GNP c. unemployment III.??? d. cost of living e. interest rates 1304. Since 2001 the country with the HIGHEST Human Development Index has been a. Canada b. the United States III.??? c. the United Kingdom d. Luxemburg e. Norway 1305. A capital gains tax applied when a. improvements to a property increase its value b. goods with positive externalities are purchased c. an individual sells stock for profit d. corporations reinvest their profits in capital e. the income of an individual exceeds $200,000 III.??? 1306. Which of the following fiscal policies would a government use to combat unemployment and a recession? a. expand the money supply b. contract the money supply c. increase taxes d. decrease taxes e. decrease government spending 1307. The slope of the aggregate demand curve is a product of which of the following effects? a. income effect b. substitution effect c. wealth effect d. added buyer effect e. multiplier effect III.??? III.??? 1308. All of the following are examples of fiscal policies used to solve an economic crisis EXCEPT a. lowering interest rates b. lowering taxes III.??? c. increasing welfare checks d. setting up make-work programs e. subsidizing certain industries 1309. Supply-side economists argue that the BEST way to accentuate economic growth is to a. engage in deficit spending b. purchase government securities c. decrease tax rates d. decrease interest rates e. decrease the reserve ratio 1310. Which of the following is included in M1? a. ATS accounts b. credit cards c. small time deposits d. large time deposits e. bankers’ acceptances 1311. An increase in the general price levels diminishes the purchasing power of the public’s financial assets leading to a decrease in aggregate spending. This describes a. the income effect b. the wealth effect c. the substitution effect d. the interest-rate effect e. the exchange-rate effect III.??? III.??? III.??? 1312. If an economy is in a severe depression, then the aggregate supply curve is in its: a. Keynesian range b. Intermediate range III.??? c. Classical range d. Neoclassical range e. Malthusian range 1313. Which of the following is NOT included in aggregate demand? a. consumption b. savings c. government expenditures d. investment e. net exports III.??? 1314. In 1936, John Maynard Keynes argued that the government should bring the economy out of the depression by establishing programs to a. increase aggregate demand b. deregulate key industries III.??? c. control the uses of productive resources d. reduce controls on wages e. increase business profits 1315. How many members are in the Federal Open Market Committee? a. 1 b. 5 c. 7 d. 12 e. 50 1316. The long-run aggregate supply curve is: a. horizontal, because output has no effect on prices. b. horizontal, because prices are fixed. c. vertical, because prices have no effect on output. d. upward sloping, because quantity supplied increases as the price level increases. e. upward sloping, because quantity demanded decreases as the price level increases. 1317. The consumer price index tries to calculate the cost of living by using what measurement tool? a. the prime rate b. distribution of income c. a market basket of goods d. agricultural prices e. the unemployment rate 1318. An increase in aggregate demand would do all of the following EXCEPT a. increase in the level of output in the long run b. increase the level of output in the short run c. increase the price level in the long run d. increase the inflation rate in the short run e. decrease the unemployment rate in the short run III.??? III.??? III.??? III.??? 1319. The producer price index has an advantage over the consumer price index in that it a. gives an earlier indication of inflation b. avoids the problem of double-counting III.??? c. is more accurate when measuring wages d. predicts the economy’s future better e. is a better indicator of a recessionary period 1320. According to the circular flow diagram, all of the following flow from firms to III.??? households EXCEPT a. b. c. d. e. taxes wages interest dividends rent 1321. Minimum wage laws are an example of a. a price floor b. a price ceiling c. union influence d. free market activities e. abusive monopoly powers III.??? 1322. What does it mean for a public good to be nonrivaled? a. no other goods compete with the public good for consumers in the market b. a person who consumes the good does not interfere with another’s consumption of it c. once the good is produced, those who do not pay are excluded from enjoying III.??? the benefits d. there are few regulatory procedures and little regulatory oversight over the good e. few people will want to invest money to pay for the public good 1323. Which of the following is an example of a regressive tax? a. sales tax b. income tax c. corporate tax d. contingency tax e. inheritance tax 1324. The total resource cost of the goods and services produced by the U.S. economy is known as a. gross domestic product b. net national product c. national income d. personal income e. disposable personal income 1325. What will the Federal Reserve MOST LIKELY do under a tight monetary policy? a. Sell government bonds b. Increase taxes c. Decrease the discount rate d. Increase the required reserve ratio e. Decrease government spending III.??? III.??? III.??? 1326. What do economists call government’s intervention into markets to prevent equilibrium price from being established, because government thinks that the equilibrium price is either too high or too low? a. price ceilings b. price controls III.??? c. price floors d. minimum wage laws e. rent controls 1327. The Commerce Clause of the United States Constitution gives Congress the right to a. regulate interstate and international commerce b. overrule states on issues of intrastate commerce III.??? c. allow one state to charge higher tariff duties than others d. charge tariffs for goods that cross state borders e. establish national entities to compete with private companies 1328. According to the Phillips Curve, inflation is inversely proportional to a. the unemployment rate b. the GDP c. the CPI d. the stock market e. the business cycle III.??? 1329. Which is NOT one of the principles or features of a tax system considered by those interested in the fairness of the tax system? a. ability-to-pay principle b. benefits-received principle III.??? c. progressiveness d. regressiveness e. equity principle 1330. Unemployment compensation was created by the a. Federal Insurance Contributions Act b. Social Security Act c. National Welfare Act d. Social Protection Act e. Universal Healthcare Act 1331. Tax policies that attempt to distribute income more equitably are a. Progressive b. Regressive c. Flat d. Proportional e. Inverse 1332. What is the purpose of the CPI? a. to estimate the GDP b. to calculate the unemployment rate c. to determine economic growth d. to determine the exchange rate e. to calculate inflation 1333. The Lorenz curve measures which of the following? a. income distribution b. unemployment c. utility possibilities d. budget constraints e. consumer indifference 1334. Cost-push inflation is created by a decrease in a. interest rates b. aggregate supply c. GNP d. resource costs III.??? III.??? III.??? III.??? III.??? e. market prices 1335. What is the capital gains tax? a. a sales tax on buyers of capital b. a tax on profit made by selling assets c. a property tax on corporations d. an additional income tax on corporations e. a tax on inheritances 1336. Which of the following is the MOST liquid classification of money? a. M1 b. M2 c. M3 d. L e. All are equally liquid. 1337. The measurement of GDP is based upon which model? a. aggregate demand - aggregate supply b. circular flow c. consumption - investment - government - net exports model d. IS - LM model e. Laffer III.??? III.??? III.??? 1338. Which of the following is an example of structural unemployment? a. Your uncle Joe quits his job as a bartender to search for a job as a liquor salesman. b. Your brother loses his job as a sales clerk on December 30th. c. Dell lays off several hundred telephone sales people due to a drop in sales. III.??? d. A textile factory fires all of its workers because it moves its operations to China. e. A friend of yours quits her summer job to return to college. 1339. Which component of GDP would be affected and in what direction would it change if your Aunt Jane buys a new house? a. investment would increase b. consumption would increase c. government spending would decline d. investment would decline e. imports would decline 1340. Which of the following measures the value of a country’s output using market prices from a selected base year? a. per capita GDP b. real GDP c. nominal GDP d. the GDP deflator e. adjusted GDP 1341. Which of the following activities is NOT outlawed by the Clayton Act? a. restraint of trade b. price discrimination c. tying contracts d. exclusive dealing e. interlocking directorates III.??? III.??? III.??? 1342. Which of the following is a source of bias in the CPI? a. sampling errors b. changes in productivity c. federal deficit spending d. changes in the money supply e. substitution bias 1343. A decrease in the level of real GDP would a. shift the aggregate demand curve down b. shift the aggregate demand curve up c. shift the aggregate demand curve left d. shift the aggregate demand curve right e. not affect the aggregate demand curve 1344. The tax burden of a tax on luxury cruises would MOST likely be borne: a. completely by the producers. b. mostly by the producers. c. equally by both consumers and producers. d. mostly by the consumers. e. completely by the consumers. 1345. Changes in a nation's level of output can be overstated if given in terms of a. Real GNP b. Nominal GDP per capita c. Real GDP d. Real GDP per capita e. Real GNP per capita 1346. One problem that occurs if the government spends too much is a. a decrease in the deficit b. a decrease in the level of consumption c. a decrease in private investment d. a decrease in the level of imports e. a decrease in the level of exports 1347. The Federal Unemployment Tax Act taxed which group in order to finance unemployment compensation? a. empoyers b. employees c. consumers d. wealthy individuals e. white-collar workers 1348. What economic term describes the overall welfare of a society? a. purchasing power b. economic rent c. human capital d. consumer expectations e. standard of living 1349. Price controls a. do not include price ceilings b. often hurt those they are intended to help c. do not include price floors d. are created by firms III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? e. never alter market outcomes 1350. The "full employment" level of unemployment, although an issue of contention, always involves a. every citizen of a country having a job b. every member of the labor force having a job c. an absence of frictional unemployment d. an absence of unemployment due to recession e. no person settling for part-time employment 1351. An increase in the minimum wage would cause an increase in a. frictional unemployment b. structural unemployment c. cyclical unemployment d. seasonal unemployment e. abnormal unemployment III.??? III.??? 1352. When the government attempts to spur GDP growth by increasing spending it can inadvertently decrease investment in a process known as a. shadow filling b. crowding out III.??? c. inflationary spiral d. saving promoting e. interest rate spiking 1353. In 2003, which U.S. government expenditure category was the LARGEST? a. income security b. national defense c. education and health III.??? d. net interest on federal debt e. transportation 1354. In what year did the percent of non-farm workers who are members of a labor union peak in the U.S.? a. 1945 b. 1955 c. 1965 d. 1975 e. 1985 1355. According to the Boskin Commission, the CPI overstates the true rate of inflation by a. 0.5% b. 1% c. 3% d. 5% e. 7% 1356. For the economy as a whole, income equals: a. debt. b. expenditure. c. investment. d. consumption. e. taxes. III.??? III.??? III.??? 1357. During the 1990s, which demographic group suffered the highest level of unemployment? a. black males, 20 and over b. black females, 20 and over c. white females, 16 - 19 d. black females, 16 - 19 e. black males, 16 - 19 III.??? 1358. Changes in the level of consumption lead to greater changes in the level of output due to which effect? a. investment effect b. substitution effect III.??? c. income effect d. debtor effect e. multiplier effect 1359. According to the expenditures approach, GDP is calculated by adding a. consumption, investment, exports, and imports b. investment, stocks and bond purchases, consumer spending, and imports c. government expenditures, investment, consumer spending, and net exports III.??? d. wages, salaried, gross profits, net interests, and rent e. value of all production in agriculture and industry 1360. Which of the following will affect the short-run aggregate supply curve but NOT the long-run aggregate supply curve? a. an increase in the expected price level b. an increase in capital c. a decrease in natural resources d. a decrease in technological knowledge e. an increase in immigration 1361. How is the GDP affected when an auto manufacturer sells a vehicle out of inventory? a. Consumption spending increases and net exports decrease. b. Consumption spending decreases and net exports increase. c. Consumption and investment spending increase. d. Consumption spending increases and investment spending decreases. e. Consumption and investment spending decrease. 1362. The interest rate effect affects which component of aggregate demand? a. consumption b. investment c. government spending d. net imports e. net exports 1363. What is the name of the curve that illustrates the level of income inequality in a country? a. Laffer curve b. Lorenz curve c. Phillips curve d. Beveridge curve e. Fisher curve 1364. What can the Fed do if it wants to increase the money supply? a. Increase the discount rate. III.??? III.??? III.??? III.??? III.??? b. c. d. e. Increase the required reserve ratio. Print more money. Buy federal securities. Nothing, the Fed does not have any control over the money supply. 1365. The largest welfare program provides assistance to a. needy families with children under 18 b. veterans of the armed forces c. individuals disabled on the job d. dependents of deceased individuals e. unskilled workers training for a new industry 1366. The Federal Reserve System was founded in a. 1912 b. 1913 c. 1914 d. 1916 e. 1917 1367. Which of the following items is counted in the United States' GDP? a. a social security payment b. a black-market cigarette c. a homemade apple pie d. a German-made car e. a share of common stock III.??? III.??? III.??? 1368. Which of the following policy tools is an example of an automatic stabilizer? a. the discount rate b. sales tax c. capital gains tax III.??? d. estate and gift tax e. corporate income tax 1369. The reduction in the need for television repair specialists due to the use of transistors in televisions is an example of what sort of unemployment? a. frictional b. seasonal c. structural d. cyclical e. reallocated 1370. If output produced by domestic citizens in foreign countries is greater than the output produced by foreigners domestically, then a. NNP will exceed GNP b. per capita GDP will exceed GDP c. real GDP will exceed nominal GDP d. GDP will exceed GNP e. GNP will exceed GDP 1371. Which of the following is a component of expansionary fiscal policy? a. decreasing the reserve ratio b. decreasing interest rates c. increasing taxation d. increasing government spending e. increasing the money supply III.??? III.??? III.??? 1372. Keeping money under a mattress BEST serves as an example of what function of money? a. a medium of exchange b. a standard of value c. a measure of liquidity d. a store of value e. a means of income 1373. In the United States, the labor force consists of a. everyone in a population b. everyone 16 and older in a population c. everyone 16 and older who is employed d. everyone 16 and older who wants to be employed e. everyone 16 and older who is employed or seeking employment III.??? III.??? 1374. According to the business cycle model, economic expansion involves all of the following changes EXCEPT a. rising GDP b. falling unemployment III.??? c. higher inflation rates d. lower inflation rates e. rising stock prices 1375. Which of the following is included in GDP? a. used goods b. purely financial transactions c. defense spending d. intermediate goods e. illegal activities 1376. Which of the following is NOT a goal of monetary or fiscal policies? a. full employment b. a balanced budget c. stable prices d. steady growth in real GDP e. low interest rates III.??? III.??? 1377. The minimum amount of cash a federally chartered bank must keep on hand is determined by the amount of its liabilities and a. its assets b. the reserve ratio III.??? c. its geographical location d. interest rates e. the needs of its customers 1378. Which of the following interest rates is fixed by the Federal Reserve System? a. prime rate b. mortgage rate c. federal funds rate d. Treasury bill rate e. discount rate 1379. What is the federal funds rate? a. the interest rate the Federal Reserve sets directly b. the interest rate banks charge each other III.??? III.??? c. the interest rate charged to the average consumer d. the interest rate set on long term government bonds e. the interest rate charged on all large bank deposits 1380. What is the MOST frequently used mechanism of monetary policy? a. the discount rate b. printing money c. the reserve ratio d. open market operations e. the tax rate 1381. Which of the following would be included in the investment category of the expenditures model of GDP? a. a waiter's unreported tips b. black market sales c. the sale of a used car d. the purchase of a house e. the purchase of a personal computer 1382. Monetary policy is the setting of the a. foreign exchange rate of the U.S. dollar b. money supply by policymakers in the central bank c. federal debt limits set by congress d. rate of inflation relative to the tax rate e. functions of money in the economy 1383. The civilian labor force consists of all persons in the total labor force EXCEPT a. federal government workers b. state government workers c. local government workers d. members of the resident armed forces e. all government workers 1384. If the Fed wants to increase the money supply, it should a. buy government securities b. sell government securities c. increase reserve requirements d. increase the discount rate e. lower the prime rate 1385. Which of the following is FALSE of a nominal interest rate? a. it accounts for inflation b. it can be higher or lower than the real interest rate c. it can lead to unwanted consequences for both the borrower and lender d. it is calculated by adding the real interest rate to the rate of inflation e. it is the price of borrowing money 1386. Which of the following describes someone who is frictionally unemployed? a. Carl voluntarily quit his job to look for something higher paying b. Lenny was fired because his skill set is no longer valid c. Nelson is unable to find a job because of an economic recession d. Cletus only works during the summer when his services are valued e. Patty has given up looking for work altogether III.??? III.??? III.??? III.??? III.??? III.??? III.??? 1387. Unemployment associated with a general downturn in the economy is called _____ unemployment. a. cyclical b. counter-cyclical III.??? c. structural d. frictional e. seasonal 1388. What does a GDP deflator do? a. It measures the cost of living. b. It represents the real interest rate. c. It is an indicator of unemployment. d. It measures a nation’s output in current dollars. e. It measures a nation’s output in constant dollars. 1389. How is the GDP affected by new home purchases? a. net exports increase b. consumption spending increases c. net exports decrease d. investment spending decreases e. investment spending increases 1390. A nation’s GDP per capita is found by dividing its GDP by its a. total population b. labor force c. employed portion of the labor force d. unemployed portion of the labor force e. employment rate 1391. What function of money is illustrated by a retail outlet listing the price of products on a sign? a. store of value b. liquidity c. information d. unit of account e. medium of exchange 1392. Welfare programs a. have no externalities b. increase equity c. destabilize the economy d. increase efficiency e. decrease the quality of life 1393. The CPI measures changes in the prices of: a. basic resources needed for production. b. goods which are commonly consumed. c. goods only available to the rich. d. inferior goods. e. rare resources used in production. 1394. Inflation is usually measured as the percentage change in a. interest rates b. the producer price index c. the purchasing power index d. the real wage index III.??? III.??? III.??? III.??? III.??? III.??? III.??? e. the consumer price index 1395. Welfare is a government program designed to provide assistance to a. the poor b. those of retirement age c. small businesses d. illegal immigrants e. local governments 1396. Oftentimes, the money supply curve is drawn as a. a hyperbola b. a line sloping downwards c. a line sloping upwards d. a horizontal line e. a vertical line III.??? III.??? 1397. If an economy is in a severe depression, then the aggregate supply curve is in its a. Keynesian range b. intermediate range III.??? c. classical range d. neoclassical range e. Malthusian range 1398. U.S. income tax rates were indexed for inflation in a. 1945 b. 1955 c. 1965 d. 1975 e. 1986 1399. Real GDP is the a. production of goods and services valued at constant prices b. total weight of all goods and services produced c. value of all goods and services produced d. value of the base year’s production valued at today’s prices e. total volume of all goods and services produced 1400. Which of the following measures the market value of all final goods and services produced in a country in a given year? a. Consumer Price Index b. Gross National Product c. Gross Domestic Product d. Net National Income e. Net National Product 1401. The investment tax credit is an example of a(n) a. tool of fiscal policy b. tool of monetary policy c. investment tax policy d. expansionary monetary policy e. favor to big businesses 1402. One of the ideas being debated in Congress regarding the reduction of air pollution involves a. levying higher taxes on polluters III.??? III.??? III.??? III.??? III.??? b. c. d. e. setting up uniform regulations using tradable pollution rights boycotting all polluters fining all polluters 1403. If the nominal GDP in 1995 is $8 trillion and the GDP deflator for that year is 105, what is the real GDP? a. $7.2 trillion b. $7.5 trillion III.??? c. $7.6 trillion d. $8 trillion e. $8.4 trillion 1404. Income inequality is BEST measured using a(n) a. Phillips curve b. Lorenz curve c. indifference curve d. Laffer curve e. CPI curve 1405. An interest rate that is adjusted for inflation is called a. deflated interest rate b. nominal interest rate c. prime interest rate d. real interest rate e. normative interest rate 1406. Which of the following statements is FALSE? a. The real interest rate adjusts for inflation. b. The Fed Funds rate is the rate banks charge each other. c. The discount rate is the rate the Reserve charges banks. d. The Reserve functions as the primary lender in the economy. e. The Reserve does not determine the prime rate. 1407. Arguably one of the biggest failures of the Clinton Administration was a. an inability to create a national health care system b. a poor environmental record c. a long period of high inflation d. a low budget surplus stemming from military forays e. an expansion of the United States debt III.??? III.??? III.??? III.??? 1408. Hyperinflation refers to an inflation rate that is at least an annual increase of a. 60% b. 70% c. 80% III.??? d. 90% e. 100% 1409. What type of production is included in GDP? a. used goods b. transfer payments c. future production d. all products consumed domestically e. new domestic production III.??? 1410. The most volatile component of GDP is a. Government spending b. Investment c. Demand d. Net exports e. Consumption III.??? 1411. If government receipts exceed outlays in a given year, then the government has a(n) a. Budget surplus b. Budget deficit III.??? c. National surplus d. National deficit e. Budget debt 1412. A legal minimum on the price at which a good can be sold is called a(n) a. price ceiling b. equilibrium price c. price floor d. equitable price e. efficient price 1413. Currency owned by the Treasury is considered a. not a part of the money supply b. a part of M1 c. a part of M2 d. a part of M3 e. a part of L 1414. What were the macroeconomic consequences of the sharp increases in OPEC oil prices during the 1970s? a. high gasoline prices b. a severe economic depression c. an economic expansion d. a pair of economic recessions e. high rates of inflation III.??? III.??? III.??? 1415. Which of the following accounts for the largest share of federal tax receipts? a. social insurance and contributions b. individual income taxes c. corporate income taxes III.??? d. excise taxes e. customs duties and fees 1416. All of the following are reasons that the unemployment rate inaccurately represents the current production capacity EXCEPT a. a lack of adjustment for part-time employment b. not considering a discouraged worker unemployed a. incorrectly reporting oneself as employed a. not considering home production a type of employment a. the existence of those who report a lack of desire to work 1417. Which category accounts for the largest share of Federal tax receipts in 2003? a. social insurance taxes b. corporate income taxes III.??? III.??? c. individual income taxes d. excise taxes e. estate taxes 1418. Which action below would represent a fiscal policy to reduce inflation? a. decrease tax rates b. increase government spending c. reduce the money supply d. reduce government spending e. increase imports III.??? 1419. Which of the transactions below would be included in GDP? a. You buy lunch at McDonald’s b. A lumber yard sells lumber to a home builder. c. Your younger brother mows the yard every week for his allowance. III.??? d. A waitress pockets her tips without reporting them to the IRS. e. An investor earns $100,000 in dividends on an investment in stock traded on the Toronto Stock Exchange. 1420. Government spending or taxation actions that take place without any deliberate government control or policy decision are called a. entitlement programs b. discretionary fiscal policies c. expansionary fiscal policies d. contractionary fiscal policies e. automatic stabilizers 1421. The central bank of the United States is a. the U.S. Treasury b. the Federal Reserve c. the U.S. Central Bank d. the Department of Finance e. the Securities and Exchange Commission 1422. Macroeconomics is the study of a. how consumers and firms interact in a market b. how an economy works as a whole c. what the economy ought to be like d. economic relationships that can be verified e. economic decisions made at the margin 1423. A legally established maximum price that a good can be sold at is referred to as a a. price ceiling b. price floor c. quota d. subsidy e. market clearing price 1424. The social security system provides all of the following EXCEPT a. a small monthly income for qualifying retirees b. health insurance for qualifying individuals c. bankruptcy relief for failed small businesses d. disability insurance for workers e. financial support for dependents of deceased individuals III.??? III.??? III.??? III.??? III.??? 1425. Raising taxes would fall under the realm of a. public policy b. foreign policy c. fiscal policy d. corporate policy e. monetary policy 1426. An increase in the per capita number of college degrees in the U.S. would cause a. aggregate supply to shift to the right b. aggregate demand to shift to the right c. aggregate supply and aggregate demand to shift to the right d. aggregate demand to shift to the left e. aggregate supply to shift to the right III.??? III.??? 1427. During the Great Depression, John Maynard Keynes suggested increasing government spending to stimulate the economy. What was the reasoning for this strategy? a. Government spending is more efficiently used in the economy and is a stronger stimulus than private spending. b. The government can spend money in ways that more directly stimulates demand than private investment. III.??? c. Government spending has less inflationary effect than private investment or consumption. d. Government spending would replace the lack of consumption and increase aggregate demand. e. Government spending would more directly increase the supply of goods and services in the economy. 1428. The quantity of goods and services that households, firms, and the government wish to buy at each price level is represented by the a. aggregate demand curve b. aggregate supply curve c. market demand curve d. market supply curve e. individual demand curve 1429. The aggregate demand curve: a. slopes downward. b. slopes upward. c. is horizontal. d. is vertical. e. is parabolic. 1430. Which of these can be illustrated by a Lorenz Curve? a. marginal production costs b. income tax revenues c. distribution of income d. price elasticity of demand e. production possibilities 1431. Public or national debt includes a. the borrowing of all federal government departments and agencies b. only the borrowing of the U.S. Treasury c. the borrowing of all federal and state governments d. the borrowing of all federal, state, and local governments III.??? III.??? III.??? III.??? e. the borrowing f the public in the nation 1432. If the Federal Reserve sets the reserve requirement at 20%, a $100,000 deposit can lead to the creation of a. $150,000 b. $200,000 c. $250,000 d. $500,000 e. $1,000,000 III.??? 1433. Which of the following is FALSE about the long-run aggregate supply curve? a. it is perfectly vertical b. output will be at full employment c. changes in aggregate demand will not affect the price level III.??? d. economic growth will shift the curve to the right e. the economy is at its natural rate of unemployment 1434. A tight money policy a. encourages consumption b. raises taxes c. promotes inflation d. reduces unemployment e. increases interest rates III.??? 1435. The short-term ups and downs in an economy are often known as which of the following? a. circular correction b. economic flow III.??? c. business cycle d. inflationary period e. deflationary period 1436. The main reason Keynesians advocate aggressive fiscal policy is that they beliee a. politicians are more knowledgeable than private citizens are b. the private sector takes too long to correct itself III.??? c. full employment does not exist in the long run d. the government should be more concerned about equity than efficiency e. economic expansion should be accentuated by government spending 1437. The quantity of goods and services that households, firms, and governments are willing to purchase at each price level is the a. aggregate demand b. market demand c. equilibrium output d. aggregate supply e. production possibilities curve 1438. According to the equation of exchange, an increase in the money supply would likely cuase a. output to decrease b. the price level to increase c. the velocity of money to increase d. appreciation of the currency e. the price level to decrease III.??? III.??? 1439. Inflation in the U.S. is measured a. by the Fed b. as the percentage change in the GDP deflator c. by the Bureau of Labor Statistics d. as the percentage increase in the money supply e. by the Bureau of Price Management 1440. The phrase “too many dollars chasing too few goods” refers to a. nominal inflation b. cost-push inflation c. demand-pull inflation d. market-clearing inflation e. hard inflation 1441. What role does the Federal Reserve take when it provides funds to banks that cannot find a source of funds? a. chief financier b. fund bailout director c. opportunity holder d. insurance provider e. lender of last resort 1442. The use of taxation or government spending as a means to influence the level of economic activity in a country is referred to as a. budgetary policy b. monetary policy c. congressional policy d. fiscal policy e. progressive policy 1443. All of the following are public goods EXCEPT a. fire protection b. national defense c. police protection d. internet service e. neighborhood parks 1444. Sales taxes are generally considered a. regressive b. proportional c. progressive d. lump-sum e. equitable 1445. The store-of-value function of money a. allows people to transfer purchasing power from the present into the future b. gives people a yardstick for recording debts c. facilitates trade d. means that money is always more valuable if stored for a period of time e. means that money is always less valuable if stored for a period of time 1446. According to Okun's law, in terms of real GDP per capita, a one percent increase in which of the following would MOST BENEFIT the economy? a. the CPI b. nominal GDP per capita c. the rate of employment III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? d. disposable income e. real GDP per capita 1447. A tax on cigarettes to cover the negative externalities associated with smoking is an example of a(n) a. sales tax b. excise tax c. corporate tax d. capital gains tax e. value-added tax 1448. All of the following can be supported by the benefits-received principle EXCEPT a. a healthcare initiative funded by an increase in the tobacco tax b. revenue for a national park raised by entrance fees to the park c. gasoline taxes being used to pave roads d. property taxes going towards local schools and law enforcement e. government efforts to redistribute income to poorer families 1449. Which of the following would most directly affect the stability of money? a. stocks b. interest c. inflation d. taxes e. wages 1450. Which term(s) below would NOT be used to describe or define GDP? a. market value b. within a country c. produced d. goods and services e. intermediate 1451. Changes in a company’s inventory falls under which of the following categories? a. government expenses b. exports c. imports d. investment e. consumption 1452. The idea that people with similar abilities to pay taxes should pay similar amounts is known as a. the progressive-scale principle b. the ability to pay principle c. the benefits received principle d. horizontal equity e. vertical equity 1453. Which of the following events would cause the aggregate supply curve to shift to the right? a. a decrease in U.S. oil prices b. a decrease in world oil prices c. an increase in world oil prices d. low rates of unemployment III.??? III.??? III.??? III.??? III.??? III.??? III.??? e. high interest rates 1454. All of the following are subject to taxes EXCEPT a. capital gains b. inheritances c. property holdings d. municipal bonds e. income 1455. In which section of the aggregate supply curve was the US economy operating during the Great Depression? a. the Keynesian range b. the classical range c. the vertical range d. the unit range e. the normal range 1456. Which of the following is NOT the headquarters of a regional Federal Reserve District? a. New York City b. Dallas c. Los Angeles d. Chicago e. Atlanta 1457. Which category represents the largest expenditure item of state and local governments in 2000? a. public welfare b. health and hospitals c. highways d. civilian safety e. education 1458. Net National Product equals Gross National Product less a. subsidies b. personal taxes c. business taxes d. capital depreciation e. interest and dividend income 1459. What do economists call unemployment that results from recessions? a. traditional b. frictional c. cyclical d. seasonal e. structural 1460. The Gini coefficient is in a range between: a. negative infinity and positive infinity. b. negative infinity and zero. c. zero and positive infinity. d. negative one and zero. e. zero and one. 1461. Which of the following is NOT part of the circular flow model? a. firms III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? b. c. d. e. labor unions households markets for factors of production markets for goods and services 1462. Which of the following is NOT true of the aggregate demand curve? a. it flattens out at lower price levels b. it is bowed inward c. it shows an inverse relationship between price level and aggregate demand III.??? d. Keynesians believe that it is the main curve to shift in order to alter output e. in the long run the curve is vertical 1463. If the average price level rises due to increased demand, the economy experiences a. consumptive inflation b. demand-pull inflation c. deferred inflation d. cost-push inflation e. supply-side inflation 1464. Stagflation refers to a period of a. falling output and falling prices b. rising output and falling prices c. falling output and rising prices d. falling output and rising interest rates e. falling output and falling interest rates 1465. Which of the following is the LARGEST source of federal tax receipts? a. estate and gift taxes b. corporate income taxes c. excise taxes d. social insurance taxes and contributions e. personal income taxes 1466. A major trade-off experienced by any economy is that of equity and a. growth b. efficiency c. inflation d. crime e. employment 1467. A work stoppage caused by employers excluding workers from working as part of a labor dispute is known as a(n) a. strike b. lockout c. boycott d. picket e. injunction 1468. What do economists call a curve that shows the quantity of goods and services that households, firms, and the government want to buy at each price level? a. demand b. quantity demanded c. production d. aggregate production III.??? III.??? III.??? III.??? III.??? III.??? e. aggregate demand 1469. Increasing government spending is one example of a. expansionary fiscal policy b. contractionary fiscal policy c. expansionary monetary policy d. contractionary monetary policy e. neutral monetary policy 1470. Charlie is a wealthy real estate agent who deposits much but withdraws little. His bank likely charges him the a. prime rate b. discount rate c. fed funds rate d. common nominal interest rate e. promissory rate 1471. What do economists call the market value of all final goods and services produced within a country in a given period of time? a. gross domestic product b. total output c. production d. aggregate demand e. aggregate supply 1472. The interest rate that the Fed charges member banks who wish to borrow reserves is called which type of rate? a. prime b. discount c. federal funds d. bank e. reserve 1473. A change in government spending or tax rates made for the purpose of achieving macroeconomic goals is called a. politics b. fiscal policy c. monetary policy d. policy activism e. Keynesian politics 1474. Which would be used to explain a movement along an aggregate demand curve? a. wealth effect b. sticky-price theory c. sticky-wage theory d. a stock market boom e. an increase in the money supply 1475. What is the rate of interest before adjustment for inflation called? a. the real interest rate b. the normative interest rate c. the positive interest rate d. the deflated interest rate e. the nominal interest rate III.??? III.??? III.??? III.??? III.??? III.??? III.??? 1476. During an economic downturn, output falls and a. interest rates fall b. interest rates rise c. unemployment rises d. unemployment falls e. prices rise 1477. Fiscal discipline is a general term that describes how well a government a. maintains the value of its currency b. manages its income and expenditures c. controls the amount of money in circulation d. distributes wealth to all segments of the population e. encourages economic growth 1478. Supply-siders would NOT want a. a less progressive income tax b. lower business taxes c. less government regulation of businesses d. lower tax rates for everyone e. a higher minimum wage 1479. People tend to believe the inflation fallacy because they tend to disbelieve the principle of a. monetary neutrality b. aggregate demand c. aggregate supply d. the Fisher effect e. real interest rates 1480. In 1936, John Maynard Keynes published a theory to explain a. long-run interest rates b. wars c. long-run unemployment d. the economic behavior of politicians e. short-run economic fluctuations 1481. Which of the following does N"OT measure price level? a. the CPI b. the GDP deflator c. the money multiplier d. the producer price index e. the quantity theory of money 1482. The sales tax is a a. progressive tax b. proportional tax c. regressive tax d. flat tax e. sin tax III.??? III.??? III.??? III.??? III.??? III.??? III.??? 1483. Suppose that Bill Bailey loses his job in an RCA television production plant when the plant closes down because RCA has moved its TV production to another country. Bill would be included in which category of unemployment? III.??? a. natural b. frictional c. seasonal d. cyclical e. structural 1484. Business cycles can result from changes in a. aggregate demand only b. aggregate supply only c. aggregate demand and/or aggregate supply d. neither aggregate demand nor aggregate supply e. employment 1485. What best establishes long-run interest rates? a. the fed funds rate b. government 10-year treasury bonds c. discount rates d. prime rates e. the real prime interest rate 1486. A low interest rate a. encourages saving b. encourages unemployment c. encourages investment d. discourages inflation e. discourages borrowing 1487. The long-run aggregate supply curve is a. horizontal b. vertical c. upward-sloping d. downward-sloping e. kinked 1488. In the expenditures model all of the following are factors of GDP EXCEPT a. consumption b. taxes and social security c. government spending d. investment e. net exports 1489. The largest source of revenue for the federal government is the: a. income tax. b. property tax. c. excise tax. d. sales tax. e. capital gains tax. 1490. As interest rates fall, the amount of planned investment a. spirals uncontrollably b. decreases c. increases d. fluctuates wildly e. stays the same 1491. Which of the following changes would shift aggregate demand to the left? a. Consumer confidence improves. b. Consumer confidence deteriorates. c. Government spending increases. III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? d. Exports increase. e. Imports decline. 1492. Which of the following helps explain why the aggregate demand curve has its slope? a. the income effect b. the substitution effect c. the wealth effect d. the inflation effect e. the price effect 1493. State sales taxes are a. progressive, because wealthy people spend more than poor people b. progressive, because they exclude necessities, such as food and prescription drugs c. regressive, because they take a larger percentage out of higher incomes d. neutral, because they are levied at a flat rate e. regressive, because lower income individuals pay a larger portion of their incomes 1494. The quantity theory of money is strongly associated with a. John Maynard Keynes b. William Jennings Bryant c. Jean Baptiste Say d. Adam Smith e. Milton Friedman 1495. The prime rate is: a. the interest rate the Federal Reserve charges to member banks. b. the interest rate banks charge other member banks. c. the interest rate banks charge non-member banks. d. the interest rate banks charge their best customers. e. the interest rate banks charge all customers. 1496. The percentage increase in the price level from one year to the next is called a. COLA b. inflation c. the GDP deflator d. the CPI e. expansion 1497. The table below reports the quantities and prices of all products produced and sold in a nation. Given this information, the nominal GDP in 2001 is 2001 2002 Item Qty Sold Price Qty Sold Price Cars 1000 25,000 1250 25,750 Wheat 5000 27 5250 26 Houses 500 100,000 450 125,000 Jeans 10,000 25 11,000 30 a. $16500 b. $17950 c. $75385000 d. $88904000 e. none of the above are correct III.??? III.??? III.??? III.??? III.??? III.??? 1498. The Federal Reserve System can BEST be described as a(n) a. commercial banking system b. investment banking system c. central bank d. national guard for U.S. banks e. depository for the reserves in U.S. banks 1499. Because the consumer price index (CPI) does not take into consideration improvements in the quality of goods and services, it a. underestimates unemployment b. lowers interest rates c. overstates inflation d. changes spending patterns e. increases aggregate demand 1500. Credit cards FIRST appear in which category of money? a. M1 b. M2 c. M3 d. L e. No category 1501. Farm workers who lose their jobs during the winter months are included in the _____ unemployment category. a. frictional b. seasonal c. structural d. cyclical e. agricultural 1502. In national income accounts, personal savings plus personal consumption expenditures equals a. personal income b. national income c. corporate savings d. disposable income e. transfer payments 1503. Where is the long-run aggregate supply curve located? a. where aggreagte demand and aggregate supply cross b. where the country's level of full employment GDP is located c. where inflation is replaced by deflation d. where the country's current level of unemployment is located e. where the country's aggregate demand curve begins to flatten 1504. Which index is used by government agencies to make cost-of-living adjustments for Social Security? a. the consumer price index b. the producer price index c. the GDP deflator d. the Paasche index e. the Fisher index 1505. Price controls are a. used to make markets more efficient b. established by firms with monopoly power III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? c. enacted when government thinks that the price of a product is unfair to buyers and sellers d. usually effective in eliminating inequities e. aimed at controlling the adverse effects of monopolies 1506. What happens when the Federal Reserve sells bonds on the open market? a. exchange rates increase b. the deficit increases c. the money supply decreases III.??? d. government expenditures decrease e. tax rates decrease 1507. The total amount of money owed by the federal government is the a. national deficit b. national debt c. budget shortfall d. fiscal shortage e. annual depletion 1508. If the required reserve ratio is .25 and the Fed buys $1 million of federal securities, the money supply will a. increase by $4 million b. decrease by $4 million c. increase by $250,000 d. decrease by $250,000 e. remain unchanged 1509. All of the following will lead to a shift in the aggregate demand curve EXCEPT a. a change in the money supply b. a change in investor’s expectations c. a change in the price level d. a change in consumer saving habits e. a change in government expenditures 1510. Which type of inflation is caused by increased union activity across all sectors of the economy? a. demand-pull inflation b. cost-push inflation c. pricing power inflation d. sectoral inflation e. oligopolistic inflation 1511. Which of the following transactions would be directly included in the determination of GDP? a. your aunt buys an imported bottle of fine French wine b. you wash your dad’s car so that you can use it that evening c. your uncle buys a ton of paper to use in his printing business d. you pocket the tips you made waiting tables and do not report them as income e. Microsoft sells $100 million of software to Wal-Mart 1512. A tax rate is progressive if a. the marginal tax rate is increasing b. the marginal tax rate is decreasing c. the marginal tax rate is constant III.??? III.??? III.??? III.??? III.??? III.??? d. its revenues are spent on lower-income households e. its revenues are spent on higher-income households 1513. Unlike GDP, GNP includes a. citizens' income earned abroad b. unintentional inventories c. transfer payments d. black market activity e. currency held by the Treasury 1514. How would increases in energy costs affect the aggregate supply curve? a. the curve would shift downwards b. there would be a leftward movement along the curve c. the curve would shift to the right d. the curve would shift to the left e. tnere would be a rightward movement along the curve 1515. Which of the following represents a reason why the unemployment rate does not measure all aspects of unemployment? a. marginally attached workers b. structural changes in the economy c. seasonal employment trends d. frictional unemployment e. cyclical trends 1516. A legal maximum on the price at which a good can be sold is called a(n) a. price floor b. equilibrium price c. price ceiling d. government price e. rationing price 1517. Inflation tends to increase the tax burden on income earned from a. wages b. savings c. social security d. gambling e. international trade III.??? III.??? III.??? III.??? III.??? 1518. Which of the phenomena below would cause an aggregate demand curve to shift to the right? a. an increase in the marginal propensity to consume b. a decrease in the marginal propensity to consume III.??? c. a fall in government expenditures d. a major recession in Europe e. appreciation in the exchange rate of the U.S. dollar 1519. Cyclical unemployment is caused by: a. changes in the seasons. b. movement between jobs. c. a mismatch of skills. d. discouragement. e. short-run economic changes. 1520. Which asset is NOT included in the M1 definition of the money supply? a. demand deposits III.??? III.??? b. c. d. e. travelers’ checks checkable deposits currency not held by banks currency held by banks 1521. The LONGEST uninterrupted period of prosperity in the U.S. was a. 1945-1951 b. 1955-1967 c. 1962-1975 d. 1990-1999 e. 1995-2001 1522. Which of the following combinations of fiscal and monetary policy would result in the MOST EFFECTIVE expansionary policy? a. an increase in the money supply and a decrease in spending b. a decrease in the money supply and an increase in spending c. an increase in the money supply and a decrease in taxes d. a decrease in the money supply and an increase in taxes e. an increase in the money supply and an increase in taxes 1523. Under the expenditure approach, aggregate demand is equal to a. C + N + G + X b. C + I + N + G c. D + N + I + E d. C + I + G + X e. D + I + N + G 1524. NOW accounts first appear in a. M1 b. M2 c. M3 d. L e. K 1525. The Lorenz curve is usually used to graphically represent: a. the percentage of total income earned for each percentage of households. b. the level of unemployment for each rate of inflation. c. the rate of inflation for each percentage of income taxed. d. the level of unemployment for each value of the reserve ratio. e. the percentage of tax burden for each percentage of households. 1526. The equilibrium price level for an economy is determined by where a. the market supply curve intersects the market demand curve b. the aggregate demand curve intersects the horizontal axis c. the aggregate demand curve intersects the vertical axis d. the aggregate supply curve intersects the horizontal axis e. the aggregate supply curve intersects the aggregate demand curve III.??? III.??? III.??? III.??? III.??? III.??? 1527. What is the MOST common method used to finance deficit spending by the government? a. selling government securities b. buying government securities III.??? a. raising the federal funds rate a. lowering tax rates a. buying foreign currency 1528. In terms of the circular flow diagram, exports are: a. a surplus. b. a deficit. c. not a factor. d. a leakage. e. an injection. III.??? 1529. Which of the following statements does NOT descrive an inefficiency of the corporate income tax? a. the tax is charged twice b. consumers must pay more for goods III.??? c. corporate profits decrease d. the tax is collected with or without profits e. the tax causes investment to decrease 1530. Which of the following policies was NOT included in the theory of "Reaganomics"? a. reduction of business regulation b. expansive money supply growth c. manipulation of exchange rates d. reduction of income tax rates e. federal spending cuts 1531. Growth of the economy would shift the long-run aggregate supply curve a. left b. right c. up d. down e. away from the origin 1532. Which of the following are transfer payments? a. Social security payments b. Interest payments c. Rent payments d. Payments for services e. Payments for foreign goods 1533. People in which category are NOT included in the definition of the labor force in the United States? a. must be age 16 or over b. must not be living at home with his or her parents c. must not be in jail, hospital, or some other form of institutional care d. can be employed e. can be unemployed 1534. The misery index is a. another name for the unemployment rate b. the sum of the unemployment rate and the rate of inflation c. another name for the rate of inflation d. the cyclical unemployment rate e. the structural unemployment rate 1535. Which of the following taxes is considered regressive? a. social security tax b. Medicare tax c. federal income tax III.??? III.??? III.??? III.??? III.??? III.??? d. estate tax e. capital gains tax 1536. During the first half of the 1800s, there were at least how many varieties of bank notes issued by state chartered banks? a. 2500 b. 5000 III.??? c. 10000 d. 20000 e. 30000 1537. Which of the following would be an example of appropriate counter-cyclical fiscal policy during a recession? a. the reserve requirement is increased by 2% b. $5 billion worth of securities is bought III.??? c. $3 billion is spent for a new government building d. the corporate income tax is doubled e. welfare programs are cut back 5% 1538. A person’s income after taxes is his or her a. nominal income b. net savings c. personal savings d. gross income e. disposable income 1539. What is the difference between real GDP and nominal GDP? a. real GDP takes into account inflation b. nominal GDP takes into account deflation c. nominal GDP takes into account purchasing power d. nominal GDP takes into account goods produced abroad e. real GDP takes into account non-market transactions 1540. Shifts in aggregate demand cause shifts in a. output and prices in the long run b. output and prices in the short run c. prices, but not output in the long run d. output, but not prices in the short run e. long-run aggregate supply III.??? III.??? III.??? 1541. Which reason explains the shape of the short-run aggregate supply curve? a. exchange-rate effect b. interest-rate effect c. sticky-price theory III.??? d. money illusion e. wealth effect 1542. The interest rate banks pay when they borrow from the Federal Reserve is called the a. discount rate b. preferred rate III.??? c. common rate d. federal funds rate e. designation rate 1543. A discouraged worker is someone who a. is actively searching for work unsuccessfully b. has never been considered part of the labor force c. is officially considered unemployed d. has given up actively seeking employment e. is too young to be a part of the labor force III.??? 1544. Which of the following was the largest expenditure category in U.S. GDP in 2002? a. services b. durable goods III.??? c. nondurable goods d. producers’ durable equipment e. residential structures 1545. What is the exchange rate effect? a. As the price level decreases, real income increases. b. As the price level decreases, relative prices decrease. c. As the price level decreases, interest rates decrease. d. As the price level decreases, net exports increase. e. As the price level decreases, inflation decreases. 1546. Which is NOT a characteristic of money? a. durable b. uniform c. scarce d. official e. divisible 1547. For a market in equilibrium, the introduction of a sales tax will a. increase only producer surplus b. decrease only consumer surplus c. decrease both consumer and producer surplus d. increase both consumer and producer surplus e. have an indeterminate effect on surplus 1548. An “easy money” policy is one in which a. the Fed expands the money supply b. Congress increases its spending on domestic programs c. Congress increases its spending on capital improvement projects d. state governments increase their spending e. banks lower their lending rates 1549. Consumption is a portion of GDP under the a. income approach b. federal approach c. expenditure approach d. value-added approach e. aggregate approach 1550. Net domestic product minus indirect business taxes equals a. personal income b. corporate savings c. national income d. disposable income III.??? III.??? III.??? III.??? III.??? III.??? e. corporate income 1551. Which tax do state and local governments NOT collect? a. property taxes b. sales taxes c. individual corporate taxes d. corporate income taxes e. social insurance taxes 1552. An increase in aggregate demand will result in a. an increase in real output at each price level up to a point b. a decrease in real output at each price level up to a point a. a lower price level at each level of real output up to a point a. only a higher price level up to a point a. only a higher level of real output up to a point 1553. Which of the following represents the LARGEST hyperinflation in history? a. Germany, 1919-1923 b. Bolivia, 1985 c. Hungary, 1946 d. United States, 1979 e. Russia, early 1990s 1554. Which of the following is an automatic stabilizer? a. unemployment benefits b. discretionary spending c. a tax cut d. the federal funds rate e. the discount rate 1555. How are interest rates related to total money demanded? a. inversely b. proportionally c. hyperbolically d. cyclically e. not at all 1556. Which of the following is an explicit goal of monetary policy? a. to eliminate inflation b. to increase the supply of money c. to decrease interest rates d. to achieve full employment e. to improve the balance of trade 1557. All of the following are true of the Federal Reserve EXCEPT: a. It aims to induce deflation. b. Its board of governors consist of seven people. c. It is responsible for regulating banks. d. It sets the reserve requirement. e. It controls the discount rate. 1558. Which of the following is an example of a price floor? a. minimum wage b. rent ceilings c. sales tax d. bulk discounts III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? e. coupons 1559. An increase in the general price level is called a. Appreciation b. Depreciation c. Inflation d. Expansion e. Interest III.??? 1560. Which of the following types of tax is likely to have the SMALLEST effect on behavior? a. excise tax b. lump-sum tax III.??? c. estate tax d. sales tax e. capital gains tax 1561. If a tax is regressive, then: a. those with a higher income pay more. b. those with a higher income pay less. c. everyone pays the same rate. d. those with a higher income pay a higher percentage of their income. e. those with a higher income pay a lower percentage of their income. III.??? 1562. In the base year, 1990, the market basket of goods cost $275. If the CPI in 2004 is 200, how much does the market basket cost? a. $00.1375 b. $13.75 III.??? c. $137.50 d. $550 e. $55,000 1563. An inflation tax is a hidden tax on a. the government b. borrowers c. people who hold money d. people with variable incomes e. foreign consumers III.??? 1564. If real GDP is $420 billion and the GDP deflator is 1.2, then nominal GDP is a. $35 billion b. $336 billion c. $350 billion III.??? d. $420 billion e. $504 billion 1565. Which of the following is NOT one of the tools of fiscal policy? a. marginal tax rates b. tax incentives c. government spending d. transfer payments e. bank reserve requirements III.??? 1566. Which of the following is NOT considered one of the major characteristics of money? III.??? a. durability b. c. d. e. portability divisibility acceptability medium of exchange 1567. If the inflation rate exceeds the nominal interest rate, then: a. the real interest rate is positive. b. the GDP deflator is negative. c. households will invest less and instead consume more. d. real income will be redistributed from lenders to borrowers. e. the Gini coefficient is negative. 1568. The worst part of a business cycle is known as the a. recession b. bottom c. trough d. gutter e. depression III.??? III.??? 1569. The reserve requirement is the a. amount of deposits upon which a commercial bank is not allowed to make loans b. number of times the money supply can expand if all excess reserves are lent c. percentage of a commercial bank’s deposits it must keep as required III.??? reserves d. rate of interest the FED charges member banks that borrow reserves from it e. rate of interest paid by one commercial bank to another commercial bank 1570. Which of the following is a component of contractionary fiscal policy? a. increasing interest rates b. increasing taxation c. increasing government spending d. decreasing the money supply e. decreasing the reserve ratio III.??? 1571. Most of the unemployment in the United States during the Great Depression was of the _________ type. a. cyclical b. seasonal III.??? c. frictional d. recessionary e. structural 1572. Who is directly responsible for setting the government’s policy regarding the purchase and sale of government bonds? a. the Federal Open Market Committee b. the U.S. Treasury III.??? c. the Federal Advisory Council d. the House of Representatives e. the President 1573. If the marginal propensity to save is 0.9, then the marginal propensity to consume is a. 0.1 b. 0.9 c. 1.0 III.??? d. 1.1 e. 9.1 1574. The intersection of the aggregate demand and aggregate supply curves determines the a. balance of trade b. interest rate c. money supply d. inflation rate e. equilibrium price level III.??? 1575. What is the MOST effective move the Federal Reserve can take to combat recession? a. decreasing the federal funds rate b. decreasing the reserve requirement III.??? c. decreasing the discount rate d. ending supervision of member banks e. purchasing government securities 1576. Which of the following describes how demand for money can impact aggregate demand? a. the balance effect b. the wealth effect c. the interest rate effect d. the net exports effect e. the substitution effect III.??? 1577. The slope of the household consumption function at a given point is known as a. the consumption substitution function b. the consumption differentiation function III.??? c. the rate of inflationary consumption d. the aggregate consumption rate e. the marginal propensity to consume 1578. Which of the following will lead to an inward shift of the short-run aggregate supply curve? a. a decrease in inflation b. an increase in inflation III.??? c. a decrease in corporate taxes d. a decrease in government spending e. an increase in inflationary expectations 1579. The phase of the business cycle that occurs after a peak is a. inflation b. a trough c. expansion d. a crest e. contraction 1580. The sticky-wage theory helps to explain a. cost-push inflation b. price-pull inflation c. frictional unemployment d. short-run aggregate supply III.??? III.??? e. long-run aggregate supply 1581. What is the total output of goods and services at current prices? a. Real GDP b. Nominal NDP c. Nominal GDP d. Real GNP e. Base GDP 1582. Which of the following is MOST often used for cost-of-living adjustments? a. the CPI b. the PPI c. the GDP deflator d. the GNP deflator e. the GDP inflator 1583. The federal government uses _____ to meet the goals of the Employment Act of 1946. a. unemployment insurance b. monetary policy c. fiscal policy d. a floating exchange rate e. the Department of Labor 1584. Who appoints the governors of the Federal Reserve? a. the House of Representatives b. the Senate c. the President d. the Secretary of the Treasury e. the Secretary of State 1585. Open market operations refer to the sales and purchases of a. economic goods in a market economy b. used products in a “flea” market c. fresh produce in a “farmers” market d. securities by the FED e. government goods and services 1586. The federal income tax is _____, while the federal payroll (Social Security) tax is _____. a. neutral, regressive b. regressive, progressive c. progressive, regressive d. progressive, neutral e. regressive, neutral 1587. One of the arguments that critics made regarding welfare programs in the United States was that a. it was going to the wrong people b. t reduced incentives to work c. it had no effect on the economy d. no one benefited from the program e. supermarkets did not accept food stamps 1588. GDP adjusted for inflation is a. nominal GDP III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? b. c. d. e. GNP current GDP real GDP NDP 1589. The federal funds rate is the rate a. at which the money supply is growing b. banks charge one another when loaning reserves c. that salaries should be adjusted to offset inflation d. at which the budget deficit is growing e. that is used to calculate federal income tax 1590. The Phillips curve shows a trade-off between: a. aggregate demand and the Gini coefficient b. inflation and aggregate demand c. inflation and unemployment d. the Gini coefficient and unemployment e. the Gini coefficient and inflation 1591. Economists use all of the following to measure the standard of living in a country EXCEPT the a. literacy rate b. infant mortality rate c. life expectancy d. GDP per capita e. exchange rate 1592. Unemployment MOST disproportionately affects a. skilled workers compared to unskilled workers b. teenagers compared to adults c. white adults compared to African-American adults d. women compared to men e. men compared to women 1593. A price ceiling may NOT result in a shortage when applied to a monopolist because it forces the monopolist to produce at or closer to the point at which a. marginal cost equals total cost b. price equals marginal revenue c. price equals marginal cost d. marginal cost equals average cost e. price equals total cost 1594. A situation is Pareto optimal if: a. Marginal benefits equal marginal costs b. No one can be made better off without making someone else worse off c. The difference between total benefits and total costs is maximized d. The allocation of resources is perfectly equitable e. Fixed costs are minimized 1595. An economy at full employment has eliminated: a. frictional unemployment b. cyclical unemployment c. structural unemployment d. frictional and cyclical unemployment e. frictional, structural, and cyclical unemployment III.??? III.??? III.??? III.??? III.??? III.??? III.??? 1596. The part of the business cycle in which macroeconomic conditions have begun to improve but before prosperity has been reached is called a(n) a. trough b. peak c. contraction d. expansion e. recession III.??? 1597. What is subtracted from the United States' Gross Domestic Product to yield its Net Domestic Product? a. the effect of inflation b. goods exported to Mexico III.??? c. transfer payments d. the net value of exports e. capital consumption allowance 1598. Local governments receive most of their income from a. corporate taxes b. income taxes c. property taxes d. excise taxes e. sales taxes 1599. If the Gini coefficient is one, then its corresponding Lorenz curve will be a a. straight line with a slope of one b. straight line with a slope of negative one c. parabola d. right angle e. vertical line 1600. Which of the following is often referred to by its opponents as “the death tax”? a. the gift tax b. the capital gains tax c. the estate tax d. the corporate income tax e. the excise tax 1601. Which of the following is an example of a public good? a. whales b. digital music c. salt water d. national defense e. environmental pollution 1602. The investment component of GDP does NOT include spending on a. capital equipment b. stocks and bonds c. inventories d. new single-family houses e. factories and warehouses 1603. Setting up a living wage ordinance involves setting a. a wage price floor b. a wage price ceiling c. a glass ceiling III.??? III.??? III.??? III.??? III.??? III.??? d. a wage below the inflation rate e. interest rates below zero 1604. According to the circular flow model a. households buy goods from businesses in the factor market b. households provide goods for businesses in the product market c. households buy goods from businesses in the product market d. households provide goods for foreign firms in the domestic product market e. the government only functions by collecting taxes from households 1605. Before Keynes’s time, most classical economists believed that recessions a. were unusually frequent b. were self-correcting c. were due to poor investments d. resulted from high prices e. were needed in a healthy economy 1606. What rate of interest is charged for short-term loans to a bank’s most creditworthy customers? a. the subprime rate b. the prime rate c. the discount rate d. the Fed Funds rate e. the premium rate 1607. What is the condition called in which the price level increases, generally over an extended period of time? a. recession b. depression c. deflation d. inflation e. full-employment 1608. One example of something that produces a negative externality is a. the prison system b. unemployment c. abandoned housing d. inflation e. witness protection 1609. GDP that has not been corrected for inflation is known as a. GNP b. NGDP c. nominal GDP d. real GDP e. NDP 1610. Supply-side economics was popularized by a. Milton Friedman b. John Maynard Keynes c. Kenneth Galbraith d. Arthur Laffer e. Paul Samuleson 1611. Cost-of-living adjustments (COLAs) are calculated from the a. GDP growth rate III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? b. c. d. e. prime interest rate unemployment rate inflation rate tax rate 1612. Which of the following is a characteristic during a contraction of the business cycle? a. GDP, employment, and industrial production decrease, and prices increase b. Prices and output increase, and employment and industrial production decrease c. GDP, industrial production, business investments, and employment all III.??? decrease d. GDP, unemployment, and industrial production decrease, and interest rates increase e. Prices and employment decrease, while output and industrial production increase 1613. Unexpected inflation could cause all of the following EXCEPT a. a decrease in the short-run rate of output b. no change to the long-run rate of output c. a decrease in the real value of wages d. a decrease in the real value of prices e. a decrease in the real value of interest payments 1614. The assertion in macroeconomics that supply creates its own demand is also known as a. Gresham’s law b. classical theory c. neoclassical theory d. Say’s law e. Fisher’s rule 1615. If the nominal interest rate is five percent and the inflation rate is three percent, what is the real interest rate? a. two percent b. three percent a. eight percent a. fifteen percent a. sixty percent 1616. A money multiplier of 10 indicates that a. the marginal propensity to save is 1/10 b. the marginal propensity to consume is 10/11 c. the marginal propensity to consume is 1/10 d. the reserve ratio is 1/10 e. the reserve ratio is 9/10 1617. What problem often affects public goods because of their characteristics? a. public goods do not benefit society b. public goods often emit a great deal of pollution c. people with higher wages do not want public goods d. tax revenue is not sufficient to fund public goods e. people will try to get a free ride without paying for public goods 1618. Which of the following is NOT one of the chief tools of fiscal policy? a. tax incentives III.??? III.??? III.??? III.??? III.??? III.??? b. c. d. e. stock market regulation government spending public transfer payment progressive income tax rates 1619. The lender of last resort for US financial intermediaries is a. the WTO b. the EU c. the IMF d. the World Bank e. the Federal Reserve III.??? 1620. The total value of all final goods and services produced in a nation in a year is called the a. gross domestic product b. gross national product III.??? c. net domestic product d. net national product e. national income 1621. All of the following are public goods EXCEPT: a. education b. Medicare c. subsidized housing d. law enforcement e. cable television 1622. Paper money in the U.S. economy is an example of a. representative money b. commodity money c. fiat money d. inferior money e. credit money 1623. Which of the following results in an indeterminate change in equilibrium quantity? a. an increase in supply and a decrease in demand b. a decrease in both supply and demand c. an increase in both supply and demand d. an increase in supply e. an increase in demand 1624. National income includes a. payments to only individuals b. wages, salaries, bonuses, and commission c. wages, rents, interest, and profits d. profits, losses, and deductions e. land, labor, capital, and entrepreneurship 1625. What do economists call unemployment that occurs as a result of major shifts in technology? a. frictional unemployment b. seasonal unemployment c. cyclical unemployment d. occasional unemployment III.??? III.??? III.??? III.??? III.??? e. structural unemployment 1626. The Federal Reserve is MOST LIKELY to manipulate the money supply by a. changing the rate of taxation b. changing the federal funds rate c. changing the prime rate III.??? d. changing the discount rate e. buying and selling bonds 1627. A change in which of the following can shift the short-run, but not the longrun, aggregate supply curve? a. labor b. capital c. technology d. natural resources e. price expectations 1628. All of the following are true of inflation EXCEPT a. it is a sign of a shrinking economy b. it reduces the purchasing power of currency c. it is counteracted by the actions of the Federal Reserve d. it has occurred repeatedly in America's history e. it is greatest on the classical portion of the aggregate supply curve 1629. An economic change that results in people spending more money at any price level will cause a shift of what curve in which direction? a. The supply curve to the right b. The demand curve to the left c. The aggregate supply curve to the left d. The aggregate demand curve to the right e. It will not shift any curve 1630. Which of the following would reduce the money supply? a. reducing the reserve ratio b. decreasing the discount rate c. increasing government spending d. raising taxes e. selling government securities 1631. What type of organization was formed because workers recognized that acting together gave them more bargaining power with their employers? a. monopsony b. class action law suits c. social clubs d. unions e. fraternal 1632. An effective minimum wage a. is below the market wage rate b. increases producer surplus c. is a market failure d. is a price ceiling e. reduces deadweight loss 1633. One of the implications of the Employment Act of 1946 is that the government should III.??? III.??? III.??? III.??? III.??? III.??? III.??? a. b. c. d. e. force employ the unemployed in order to keep unemployment rates low allow federal government employees to unionize attempt to stabilize aggregate demand attempt to stimulate aggregate supply fix the number of government employees at no more than 15% of the labor 1634. The consumer price index (CPI) measures a. unemployment b. production c. inflation d. income e. growth 1635. Local governments receive MOST of their income from a. sales taxes b. personal income taxes c. capital gains taxes d. property taxes e. estate taxes 1636. The bankers’ bank is the a. Securities and Exchange Commission b. Federal Reserve c. U.S. Treasury d. Bureau of Finance e. World Bank 1637. All of the following are true EXCEPT a. barter is the direct exchange of goods and services b. money functions as a medium of exchange c. an increase in the money supply leads to an increase in productivity d. demand deposits are a form of money e. credit cards are not a form of money 1638. The equilibrium price level for an economy is determined by where: a. The market supply curve intersects the market demand curve b. The aggregate demand curve intersects the horizontal axis c. The aggregate demand curve intersects the vertical axis d. The aggregate supply curve intersects the horizontal axis e. The aggregate supply curve intersects the aggregate demand curve 1639. Which of the following is a good approximation of the real interest rate? a. the coupon rate minus the par value b. the listed interest rate minus the yield to maturity c. the listed interest rate minus the inflation rate d. the bond yield rate minus the inflation rate e. the par value minus the yield to maturity 1640. Which method of calculating GDP adds wages, salaries, gross profits, net interests, rents, and indirect taxes minus subsidies? a. the aggregate approach b. the expenditures approach c. the income approach d. the value-added approach III.??? III.??? III.??? III.??? III.??? III.??? III.??? e. the money supply approach 1641. Currently, U.S. national debt is approximately a. $9 million b. $90 million c. $9 billion d. $90 billion e. $9 trillion 1642. The short-run aggregate supply curve a. slopes upwards b. slopes downwards c. is horizontal d. is vertical e. does not shift 1643. During a recession, output declines for how many consecutive months or more? a. six b. seven c. eight d. nine e. twelve 1644. In the Keynesian model, government expenditures are intended to shift a. short-run aggregate supply b. aggregate demand c. the supply of money d. demand for money e. long-run aggregate supply 1645. Which type of tax is typically levied in order to discourage a particular behavior? a. personal income tax b. sales tax c. capital gains tax d. ad valorem tax e. excise tax 1646. The total amount of expenditure on goods and services in an economy at different price levels is called a. aggregate demand b. quantity demanded c. consumption d. derived demand e. net national profit 1647. A tax that is levied on purchased goods is a(n) a. sales tax b. income tax c. corporate tax d. property tax e. capital gains tax 1648. The Laffer curve is parabolic because: a. as the tax rate rises, the incentive to work increases. III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? b. c. d. e. as the tax rate rises, the incentive to work decreases. as inflation rises, the incentive to work increases. as inflation rises, the incentive to work decreases. as the trade deficit rises, the incentive to work decreases. 1649. Holders of which of the following assets are likely to benefit MOST from inflation? a. insurance policies b. pensions c. common stock d. currency e. bonds 1650. Which of the following is not included in measurements of economic growth? a. leisure time b. sports events c. health services d. education e. automobiles 1651. The U.S. government debt as a percentage of GDP peaked during a. the Revolutionary War b. the Civil War c. World War I d. World War II e. the Vietnam War 1652. The Clayton Act of 1914 did all of the following EXCEPT a. prohibited the formation of interlocking directorates b. outlawed the usage of yellow-dog contracts c. prohibited the acquisition of stocks of competing corporations d. forbade tying contracts e. outlawed price discrimination III.??? III.??? III.??? III.??? 1653. The introduction of a new technology leads to downsizing at a factory. This would contribute to a. frictional unemployment b. structural unemployment III.??? c. cyclical unemployment d. seasonal unemployment e. capital unemployment 1654. Which of the following people is frictionally unemployed? a. Alan, who quit his job for another job b. Angelica, who was fired because of a recession c. Lionel, whose skills were replaced with a machine d. Denise, who is a stay-at-home mom e. Jack, who has a part-time job 1655. Approximately what percentage of people in US families were below the poverty line in 2008? a. 6% b. 8% c. 11% d. 13% III.??? III.??? e. 16% 1656. An example of substitution bias in the CPI is a. measurable changes in the quality of goods b. consumers buy more goods whose relative prices have fallen c. introduction of new products d. unmeasured changes in quality e. increased interest rates 1657. The amount by which government expenditures exceed government revenues in a particular year is a. the trade deficit b. the public debt c. the budget deficit d. the exchange rate e. consumer surplus 1658. Supply side adherents believe that by lowering taxes to a certain level, the government can increase a. revenue b. interest rates c. dividend yields d. price to earnings ratios e. price levels 1659. A person who enjoys the benefits of a good without paying its costs is referred to as a. a parasitic consumer b. a utility thief c. a scam artist d. a public consumer e. a free rider 1660. If the reserve requirement is 5%, then the money multiplier is: a. 1 b. 5 c. 10 d. 20 e. 50 1661. Members of the Federal Reserve Board of Governors are a. appointed for life b. appointed for fourteen year terms c. presidents of regional banks d. elected by popular vote e. elected by congress 1662. Which of the following entities represents the BEST example of a public good? a. a chicken b. a bridge c. a lake d. a school e. national defense III.??? III.??? III.??? III.??? III.??? III.??? III.??? 1663. Which of the following is an aspect of the CPI that leads to a problem known as substitution bias? a. It does not measure income inequality. b. It does not measure changes in unemployment. III.??? c. It measures a fixed basket of goods. d. It only measures changes in the cost of individual goods. e. It does not measure changes in production. 1664. The believe that the relative burden of a tax should be based on one’s wealth is known as a. the benefits-received principle b. the horizontal-equity principle c. the regressive-taxation principle d. the ability-to-pay principle e. the inverse-burden principle 1665. Which of the following would definitely be excluded from GDP? a. Benito sells strawberries. b. Zachary mows Joan’s lawn for $20. c. Laura sees a therapist. d. James buys a used car. e. Patricia buys some cigarettes. 1666. At what point is there an equilibrium output level? a. when aggregate supply equals the price level b. when aggregate demand equals aggregate output c. when aggregate output equals aggregate expenditure d. when aggregate money supply equals aggregate output e. when aggregate expenditure equals the price level 1667. Unemployment caused by an imbalance between the skills possessed by workers and the skills demanded in the labor markets is called _____ unemployment. a. cyclical b. frictional c. technological d. structural e. skilled 1668. Which of the following is NOT a leading economic indicator? a. stock market prices b. changes in the CPI c. the money supply d. the index of consumer expectations e. the average work week 1669. GDP measures the value of: a. all final goods and services produced by a country’s citizens. b. all final goods and services produced within a country. c. all final goods and services produced both within a country and by its citizens. d. all intermediate goods produced in a country. e. all intermediate goods produced by a country’s citizens. 1670. Which of the following people are in the labor force? a. someone who is not available for work III.??? III.??? III.??? III.??? III.??? III.??? III.??? b. c. d. e. someone who does not want a job someone who has given up looking for work someone who is 15 years of age someone who is unemployed 1671. How is the labor-force participation rate calculated? a. (the number of employed adults / the total number of adults) X 100 b. (the number of employed adults / the number of adults in the labor force) X 100 c. (the number of adults in the labor force / the number of employed adults) X 100 d. (the number of adults in the labor force / the total number of adults) X 100 e. (the total number of adults / the number of adults in the labor force) X 100 1672. Housing sales are counted in which portion of GDP? a. consumption b. investment c. government expenditures d. savings e. net exports 1673. A tax which charges the same total amount for everyone is a a. marginal tax b. lump-sum tax c. progressive tax d. proportional tax e. hidden tax 1674. The increase in unemployment resulting from a recession is called a. cyclical unemployment b. structural unemployment c. frictional unemployment d. recessional unemployment e. economic unemployment 1675. Rent control is an example of a(n) a. positive externality b. price ceiling c. wage control d. open market operation e. transfer payment 1676. A spike in the price of oil such as that in 2008 will MOST LIKELY result in a(n) a. decrease in aggregate supply b. increase in aggregate supply c. increase in net investment d. increase in aggregate demand e. decrease in aggregate demand 1677. All of the following are examples of fiscal policy EXCEPT: a. The government implements a tariff on imported goods. b. The government spends $20 million on defense research. c. The government raises the discount rate. d. The government lowers the income tax. III.??? III.??? III.??? III.??? III.??? III.??? III.??? e. The government pays for a new highway. 1678. The MOST probable cause of persistent or accelerating inflation is a. a large, one-shot increase in aggregate demand b. a large, one-shot decrease in aggregate supply c. persistent increases in aggregate demand d. persistent decreases in aggregate supply e. persistent declines in the money supply 1679. The first U.S. antitrust law was the a. Rudman Act b. Sherman Act c. Gramm Act d. Sarbanes-Oxley Act e. Clayton Act 1680. A negative externality associated with capital gains taxes is a. decreased consumption b. increased unemployment c. decreased wages d. increased prices e. decreased investment 1681. The seven members of the Board of Governors of the Federal Reserve system are a. elected by the general populace b. appointed by the President and approved by the Senate c. nominated by the House of Representatives d. the presidents of the Federal Reserve Banks e. prominent commercial bankers selected by the Federal Reserve Banks 1682. The Gini coefficient measures a. productivity b. quality of life c. income inequality d. competitiveness e. consumption 1683. Property taxes are often used to fund a. education b. welfare c. Social Security d. Medicare e. the military 1684. When the Federal Reserve alters the interest rate, they directly alter the a. prime rate b. discount rate c. fed funds rate d. real prime interest rate e. promissory rate 1685. Which of the following is NOT included in the M1 definition of the money supply? a. deposits in checking accounts b. nonbank traveler’s checks III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? c. coins in the hands of the nonbank public d. deposits in savings accounts e. currency in the hands of the nonbank public 1686. Credit card holders are MOSt wise to keep track of which type of interest rate? a. real interest rate b. federal funds rate c. prime rate d. consumer rate e. nominal interest rate III.??? 1687. What is the real interest rate if the inflation rate is 6 percent and the nominal interest rate is 12 percent? a. 0 percent b. 2 percent III.??? c. 6 percent d. 12 percent e. 18 percent 1688. Which of the following is a lagging economic indicator? a. stock market prices b. new building permits for houses c. the ratio of inventories to sales d. average personal income e. the index of consumer expectations 1689. Monetarists believe increasing the interest rate has all of the following effects EXCEPT a. controlling inflation b. increasing the loanable supply of money c. decreasing the demand for loans d. increasing the marginal propensity to save e. increasing home purchases 1690. Which president used many of the ideas of supply-side economics when formulating his economic policies? a. Reagan b. Nixon c. Kennedy d. Carter e. Clinton 1691. The aggregate supply curve becomes virtually vertical at the point when it approaches the a. aggregate money supply limit b. consumption limit c. investment limit d. capacity constraint e. aggregate budget constraint 1692. The short-run trade off between inflation and unemployment is called the a. Fisher effect b. Keynes multiplier c. Say’s theory d. Phillips curve III.??? III.??? III.??? III.??? III.??? e. Hume hypothesis 1693. The objective of counter-cyclical fiscal policy is to a. keep inflation at a minimum b. increase the short-run rate of output c. decrease unemployment d. increase aggregate supply e. minimize short-run economic changes 1694. Which category of GDP is the largest in the U.S. economy? a. consumption spending b. investment spending c. government spending d. net exports e. depreciation 1695. What is the Fed Funds rate? a. the rate banks charge their most preferred customers b. the rate on loans banks receive directly from the Federal Reserve c. the rate banks charge each other on overnight loans d. the rate on U.S. Treasury bonds with maturities of 10 years or more e. the rate banks charge customers with a history of credit problems 1696. Many developing countries thwart economic growth because they spend money on which of the following rather than economic development? a. consumption b. national defense c. transfer payments d. export industries e. services 1697. Goods that result in positive externalities have the problem in that they are often a. unreliable b. underfinanced c. undersupplied d. neglected e. underused 1698. If the long-run aggregate supply curve shifts to the right, then a. inflation and output will increase b. inflation will increase while output stays the same c. inflation will not change while output decreases d. inflation and output will decrease e. inflation will decrease while output increases 1699. Small changes in the reserve requirement cause large changes in the money supply due to the a. money multiplier b. GDP deflator c. interest rate effect d. elasticity of supply e. benefit-to-cost ratio 1700. Economists argue that, as long as the costs are fully internalized, the optimal level of pollution for a society would be III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? a. b. c. d. e. the point at which there is absolutely no pollution the point at which marginal social benefits equal marginal social costs the point at which the fewest people die of pollution the point at which economic growth is highest the level which existed before the Industrial Revolution 1701. Which of the following would be characterized as M1? a. a savings account holding over $1,000,000 b. a debit card account c. a government bond d. a CD e. a home's equity 1702. The measurement of money supply that includes everything that is directly and immediately usable as a medium of exchange is a. M1 b. M2 c. M3 d. M4 e. L 1703. Monetary policy tools consist of a. open-market operations and the discount rate b. open-market operations and the reserve requirement c. open-market operations, the discount rate, and the reserve requirement d. open-market operations, the Federal Funds rate, and the reserve requirement e. open-market operations, the discount rate, the Federal Funds rate, and the reserve requirement 1704. If nominal GDP has increased by 10% and the inflation rate for the time period was -6%, then real GDP has a. decreased by 16% b. decreased by 4% c. not changed d. increased by 4% e. increased by 16% 1705. Substitution bias leads to a. an overstatement of the CPI b. an understatement of the CPI c. inflated GDP calculations d. higher rates of inflation e. lower unemployment rates 1706. Substitutes for Ml such as savings accounts are called a. mutual funds b. transactions money c. near money d. bond money e. federal deposits 1707. If Ashley's job is replaced by machinery, under what category of unemployment does she fall? a. frictional unemployment b. seasonal unemployment III.??? III.??? III.??? III.??? III.??? III.??? III.??? c. structural unemployment d. cyclical unemployment e. hidden unemployment 1708. GDP that has been adjusted for inflation is called a. nominal GDP b. per capita GDP c. positive GDP d. devalued GDP e. real GDP 1709. An increase in interest rates will a. Decrease demand for money b. Increase demand for money c. Increase the rate of inflation d. Decrease the quantity of money demanded e. Increase the supply of money 1710. Which transaction is NOT included in the calculation of GDP? a. you buy lunch for a friend b. your parents buy a new house c. your older brother buys a used car d. Honda expands its factory in Marysville, Ohio e. Texas builds a new government office building 1711. The LARGEST component of U.S. GDP is what type of spending? a. investment b. consumption c. government d. import e. export 1712. Macroeconomic equilibrium occurs where a. demand equals supply b. the unemployment rate equals the rate of interest c. the rate of growth in the money supply equals the rate of growth in productivity d. fiscal policy equals monetary policy e. aggregate demand equals aggregate supply 1713. GDP does NOT include a. Extra inventories b. Essential goods c. Welfare payments d. Imports e. Final goods 1714. When is an economy at full employment? a. when the unemployment rate is zero b. when the labor-force participation rate is 100 c. when there is no frictional unemployment d. when there is no cyclical unemployment e. when government policies cannot affect unemployment 1715. If the interest rate is 10% and the required reserve ratio is 0.2, what is the money multiplier? III.??? III.??? III.??? III.??? III.??? III.??? III.??? III.??? a. b. c. d. e. -10 0 0.02 2 5 1716. Which of the following causes the crowding out effect? a. government borrowing b. market saturation c. unexpected inventories d. supply shortages e. excess reserves 1717. Which of the following types of money is included in the M1 definition? a. eurodollars b. savings bonds c. savings accounts d. traveler's checks e. money market accounts 1718. Which of the following tracks changes in a market basket of goods and services? a. the Dow Jones Industrial Average (DJIA) b. the consumer price index (CPI) c. the gross domestic product (GDP) d. the production possibilities curve (PPC) e. the Federal Open Market Committee (OMC) 1719. MOST economic fluctuations, called the business cycle, are a. regular, but unpredictable b. irregular and unpredictable c. irregular, but predictable d. regular and predictable e. following a predictable pattern 1720. A country’s GDP minus the depreciation of its capital goods is its a. net domestic product b. gross national product c. net national product d. national income e. per capita GDP 1721. Fiscal drag is a. the slowing effect on the economy that results from inflation b. a discretionary fiscal policy c. an expansionary fiscal policy d. a non-discretionary fiscal policy e. the activating effect on the economy that results from a budget deficit 1722. Which is an example of a price floor? a. food stamps b. minimum wage laws c. school vouchers d. quotas e. tariffs III.??? III.??? III.??? III.??? III.??? III.??? III.??? 1723. Suppose that there are 8.7 million people unemployed. In addition, there are 70.1 million people not in the labor force with a working-age population of 213.8 million people. How many people are employed? a. 78.8 million b. 200.1 million III.??? c. 213.8 million d. 70.1 million e. 135.0 million 1724. A tax on a particular good or service is known as a(n) a. excise tax b. direct tax c. sales tax d. tariff e. marginal tax 1725. The length of a business cycle is typically measured as the number of months from a. beginning to end of an expansion b. beginning to end of a decline c. peak to peak d. trough to peak e. peak to trough III.??? III.??? 1726. Which of the following transactions would NOT be included in the calculation of GDP? a. Your father buys a bottle of imported wine. b. Your uncle buys a new Honda Accord. III.??? c. Microsoft buys a new super computer. d. Texas builds a new prison. e. Your brother buys a used Ford F-100 truck 1727. Which of the following is found on the y-axis of a graph containing the aggregate supply and demand curves? a. price of goods sold b. interest rate c. overall price level d. consumption level e. investment level III.??? 1728. The Clayton Act amended the Sherman Antitrust Act by regulating all of the following practices EXCEPT a. price discrimination b. exlusive contracts III.??? c. monopolistic competition d. interlocking directorates e. corporate mergers 1729. US Social Security is funded by a. a payroll tax b. independent lobbies c. an excise tax d. sales tax e. capital gains tax III.??? 1730. According to the quantity theory of money, an increase in the supply of money in circulation will lead to a. a decrease in total output b. an increase in total output c. a decrease in the price level d. an increase in the price level e. a decrease in the velocity of money 1731. Which of the following is NOT one of the measures of the money supply? a. M b. M1 c. M2 d. M3 e. L III.??? III.??? 1732. Long lines at gasoline stations in the U.S. in the early 1970s were the result of a. an OPEC oil embargo b. gasoline price controls III.??? c. high oil prices charged by OPEC d. gas guzzling U.S. automobiles e. price gouging by U.S. oil refineries 1733. The table below reports the quantities and prices of all products produced and sold in a nation. Given this information and using 2001 as the base year, the real GDP in 2002 is 2001 2002 Item Qty Sold Price Qty Sold Price Cars 1000 25,000 1250 25,750 Wheat 5000 27 5250 26 Houses 500 100,000 450 125,000 Jeans 10,000 25 11,000 30 a. $75385000 b. $76666750 c. $88904000 d. $88680000 e. none of the above are correct III.??? 1734. The Commerce Clause in the U.S. Constitution empowers which branch of the government to regulate trade? a. the executive branch b. the legislative branch III.??? c. the judicial branch d. the IRS e. the EPA 1735. An aggregate demand curve is the graphical representation of: a. The national output that would be produced at every price level b. The national output that would be purchased at every price level c. The quantity supplied of a good at every price d. The quantity demanded of a good at every price e. The amount the government would spend at every income level 1736. Which event would shift the aggregate demand curve of a nation to the right? a. A tax increase III.A.1 III.A.1 b. c. d. e. A stock market crash A decrease in the money supply A recession in a foreign country that was localized A reduction in household propensity to save 1737. Which of the following is one of the reasons why the aggregate demand curve slopes downward to the right? a. The exchange-rate effect b. Sticky-wage theory c. Sticky-price theory d. Misperceptions theory e. Savings-rate effect 1738. At full employment, an increase in aggregate demand will cause: a. An increase in the price level and an increase in real output b. An increase in the price level and a decrease in real output c. A decrease in the price level and a decrease in real output d. Only an increase in price level e. Only an increase in real output III.A.1 III.A.1 1739. What model do economists use to explain short-run economic fluctuations in an economy? a. Circular flow model b. Aggregate demand and aggregate supply III.A.1 c. Quantity equation d. Demand and supply e. Say's law 1740. The interest-rate effect helps explain why: a. The aggregate demand curve is downward sloping b. The individual demand curve is downward sloping c. The aggregate demand curve is upward sloping d. The market demand curve is downward sloping e. The aggregate supply curve is upward sloping 1741. An increase in government spending can be represented graphically as: a. A movement along the aggregate demand curve b. A shift of the aggregate demand curve to the right c. A shift of the aggregate demand curve to the left d. A shift of the aggregate supply curve to the right e. A shift of the aggregate supply curve to the left III.A.1 III.A.1 1742. What is aggregate demand? a. The vertical sum of all individual demand curves b. The demand for aggregates, such as cement, in the economy c. The amount of goods and services that households, firms and the government want to buy at each price level III.A.1 d. The amount of goods and services that households want to buy at each price level e. The quantity of products produced and sold in the economy 1743. What curve represents the quantity of goods and services that households, firms, and governments are willing to purchase at each price level? a. aggregate demand curve III.A.1 b. Phillips curve c. consumption possibilities curve d. price elasticity curve e. production possibilities function 1744. An increase in aggregate demand would be shown graphically as a a. movement along the aggregate demand curve b. shift to the right of the aggregate supply curve c. shift to the left of the aggregate supply curve d. shift to the left of the aggregate demand curve e. shift to the right of the aggregate demand curve 1745. Macroeconomics is a part of the discipline of economics that studies a. individual consumer behavior b. individual business behavior c. economic decisions by consumers d. aggregate economic behaviors e. economic decisions by individual consumers and individual producers III.A.1 III.A.1 1746. Which event would give rise to a shift in the aggregate demand curve due to a change in investment spending? a. A change in the marginal propensity to spend b. A stock market boom III.A.1 c. A tax cut d. An increase in the money supply e. An increase in spending on national defense 1747. Aggregate demand is defined as the a. demand for a product at various prices in a twelve month period of time b. quantity demanded at various prices in a twelve month period of time c. quantities of total output households, firms, and governments want to buy at different price levels III.A.1 d. quantity of all goods and services demanded at any given point in time at the market prices e. sum of the prices times the quantities of all production in a nation in one year 1748. Which of the following is considered a reason an aggregate demand curve is downward sloping? a. misperceptions effect b. sticky-wage effect c. interest rate effect d. sticky-price effect e. substitution effect 1749. Which agents in an economy does an aggregate supply curve reflect? a. Households b. Government c. Households, government, and firms d. Firms and households e. Firms 1750. When drawn with the price level on the vertical axis and real domestic output on the horizontal axis, the long-run aggregate supply curve is: a. Downward sloping from left to right b. Upward sloping from left to right c. Horizontal at the full fixed price level d. Vertical at the full-employment level of output III.A.1 III.A.2 III.A.2 e. Increasing at a decreasing rate 1751. Which of the following explains why the shape of the long-run, aggregate supply curve is vertical? a. Monetary neutrality b. Sticky wages c. Wealth effect d. Interest rate effect e. Say's law 1752. The sticky-price theory explains why a. prices move in sudden jumps b. the aggregate supply curve slopes upward c. the aggregate demand curve slopes downward d. the velocity of money fluctuates e. expected inflation is always less than actual inflation 1753. Which of the following is one explanation for the shape of the short-run, aggregate supply curves? a. Interest rate effect b. Say's law c. Misperceptions theory d. Wealth effect e. Aggregate supply effect III.A.2 III.A.2 III.A.2 1754. The model that economists use to explain short-run fluctuations in economic activity around its long-run trend is called the a. circular flow model b. investment-savings model III.A.2 c. quantity theory of money model d. model of aggregate demand and aggregate supply e. Keynesian model 1755. A worldwide drought that results in very poor harvests of food would cause aggregate a. supply to shift to the right b. supply to shift to the left III.A.2 c. demand to shift to the right d. demand to shift to the left e. supply and demand to shift to the left 1756. In the Keynesian range, the aggregate supply curve is: a. Downward sloping b. Horizontal c. Upward sloping d. Vertical e. Parabolic 1757. In the classical quantity theory, the aggregate supply curve has a _____ shape, while in the Keynesian theory, the aggregate supply curve has a _____ shape. a. L, vertical b. vertical, L c. backward L, vertical d. vertical, backward L III.A.2 III.A.2 e. vertical, horizontal 1758. Which of the following is not a component of calculating GDP using the expenditures approach? a. Investment b. Indirect business taxes c. Net exports d. Government spending e. Consumption 1759. Gross domestic product is a measure of a nation’s: a. Wealth b. Output c. Money d. Capital e. Resources 1760. The expenditure approach to measuring GDP adds up total spending on: a. Consumption, profits, wages, and net exports b. Net exports, government, investment, and consumption c. Interest, rent, net exports, and consumption d. Government, consumption, interest, and net exports e. Land, labor, capital, and entrepreneurial ability 1761. What type of prices are used in the calculation of real gross domestic product? a. normal dollars b. constant dollars c. inflated dollars d. nominal dollars e. real dollars III.A.3 III.A.3 III.A.3 III.A.3 1762. Which, if any, GDP components are affected and in what direction if General Motors sells a new Corvette out of inventory? a. consumption spending increases and investment spending decreases b. consumption spending increases III.A.3 c. investment spending increases d. investment spending decreases e. consumption spending increases and savings decrease 1763. All of the following would be excluded from GDP calculations EXCEPT: a. Social security payments b. Illegal drug purchases c. Used car sales d. Non-market household activity e. The purchase of consulting services 1764. The market value of all final goods and services produced in a country during a year is the: a. Total corporate profits b. Gross domestic product c. Net national income d. Gross industrial production e. Total consumption expenditures III.A.3 III.A.3 1765. The term potential GDP is MOST closely related to which term? a. nominal GDP b. real GDP c. actual GDP d. full employment e. GDP per capita 1766. GDP in 2007 expressed in terms of 2000 purchasing power is called: a. Per capita GDP b. Current dollar GDP c. Money GDP d. Nominal GDP e. Real GDP 1767. Real GDP can be calculated by: a. Dividing nominal GDP by the GDP deflator b. Multiplying nominal GDP by the GDP deflator c. Dividing nominal GDP by the size of the population d. Multiplying nominal GDP by the money multiplier e. Subtracting depreciation from nominal GDP 1768. The field of microeconomics includes the study of all of the following EXCEPT a. GDP b. market structure c. demand d. supply e. price controls 1769. GNP measures the value of a. All final goods and services produced by a country's citizens b. All final goods and services produced within a country c. The change in prices of all goods and services a country produces d. All intermediate goods produced by a country in a given year e. The income of a nation's residents minus depreciation III.A.3 III.A.3 III.A.3 III.A.3 III.A.3 1770. In which component of GDP, if any, is the interest the U.S. government pays on its debt to U.S. citizens included? a. consumer spending b. government spending III.A.3 c. investment spending d. net exports e. it is not included in GDP 1771. The GDP is adjusted for price changes using the a. rate of inflation b. GDP deflator c. CPI deflator d. Fisher equation e. change in interest rates 1772. Which component(s) of GDP would be affected in which direction if your aunt Jane buys a new house? a. consumption spending would increase b. consumption spending would decrease c. investment spending would increase III.A.3 III.A.3 d. investment spending would decrease e. net exports would decrease 1773. Which of the following transactions would be included in the measurement of GDP? a. Hondas sold in the U.S., but produced in Japan b. steel sold to a Ford Motor Company production plant c. home grown and consumed vegetables d. work that people do for themselves (i.e., painting the house) e. refrigerators Maytag sells to Home Depot 1774. GDP is the sum of net exports, plus a. transfer payments, consumer, investment, and government spending b. consumer, investment, and government spending c. savings, investment, taxes, and government spending d. consumer and investment spending, savings, and taxes e. consumer, government, and investment spending and taxes 1775. Which of the transactions below would NOT be included in GDP? a. you purchase a new automobile with a five-year loan b. your school buys new textbooks for the science classes c. Kohl’s builds a new store in a depressed area of the city d. the Social Security Administration sends your grandmother her monthly check e. Japan buys 100 tons of wheat from the United States 1776. The LARGEST component of GDP is a. net exports b. investment c. government spending d. consumer spending e. interest spending 1777. The profits sent to Honda of Japan from the sale of Hondas in the U.S. would show up as an adjustment in the calculation of a. consumer spending b. investment spending c. government spending d. net exports e. gross national product 1778. Real GDP is calculated using a. last year’s prices b. the current year’s prices c. the base year’s output d. last year’s output e. the base year’s prices 1779. Which of the following items would be added to GDP to get GNP? a. the amount of currency in the nonbanking public b. the amount of the U.S. balance of payments c. the income earned by U.S. citizens in other countries d. the income earned by foreigners in the U.S. e. the amount of the U.S. balance of trade III.A.3 III.A.3 III.A.3 III.A.3 III.A.3 III.A.3 III.A.3 1780. Which of the following is a source of injections into the circular flow model? a. imports b. taxes c. saving III.A.4 d. exports e. consumption spending 1781. In the circular flow diagram, which of the following does NOT flow in the direction of households? a. payments for finished products b. payments for factors of production c. foreign goods d. government services e. government transfer payments 1782. In the circular flow model, foreigners sell a. factors of production to businesses in the factor market b. factors of production to households in the factor market c. goods to the government in the factor market d. goods to businesses in the domestic product market e. goods to households in the domestic product market 1783. In a circular flow model, a. taxes always equal government spending b. expenditures always equal income c. imports always equal exports d. private savings always equal investment spending e. households control factor markets while firms control goods markets 1784. Which of the following is considered a source of leakage in a circular flow model? a. imports b. exports c. investment d. government spending e. resources payments 1785. In the circular flow model, the resource market: a. Converts savings into borrowing b. Converts investment spending to profit c. Exchanges consumption spending for goods and services d. Exchanges factors of production for income e. Converts taxes to government spending III.A.4 III.A.4 III.A.4 III.A.4 III.A.4 1786. A circular flow model of an economy illustrates which two types of markets? a. product and government b. international trade and domestic production c. product and resource III.A.4 d. monetary and pecuniary e. capital and labor 1787. In the circular flow of income and outputs _____ flow(s) in one direction and _____flow(s) in the other direction. a. Real goods and services; money payments III.A.4 b. Domestic assets; domestic liabilities c. Investment spending; consumption spending d. Physical capital; financial capital e. Intermediate goods and services; final goods and services 1788. The amount of money earned by a household is its a. profit b. savings c. demand d. supply e. income 1789. A depression is characterized by high a. taxes b. productivity c. investment d. prices e. unemployment III.A.4 III.A.5 1790. Historically, how long must a downturn in total output last to be identified as a recession by the National Bureau of Economic Research? a. three months b. six months III.A.5 c. nine months d. twelve months e. twenty-four months 1791. The point in time when a recession starts and ends is determined by the a. length of the business cycle b. Federal Reserve Board of Governors c. time it takes for unemployment to reach 6 percent d. consensus of economists in the Department of Commerce e. National Bureau of Economic Research 1792. In a typical business cycle, what phase immediately follows the trough? a. A recession b. A peak c. A recovery d. A depression e. Another trough 1793. What “rule of thumb” does the business cycle dating committee use when determining if a recession has occurred? a. GDP must have declined by at least three percent. b. All regions must have experienced the same decline. c. Real GDP must decline for at least two consecutive quarters. d. Both the price level and GDP must have declined. e. The growth rate must have decreased for at least nine months. 1794. Which of the topics below is studied within the scope of macroeconomics? a. demand b. recessions c. supply d. prices e. elasticity 1795. Which of the following states is NOT considered a right-to-work state? a. Texas III.A.5 III.A.5 III.A.5 III.A.5 III.B.1 b. c. d. e. Mississippi Nebraska Nevada Wisconsin 1796. Individuals classified as unemployed could include all of the following EXCEPT: a. Workers whose employment was involuntarily terminated b. Workers who voluntarily left a job c. New entrants to the labor market d. Reentrants to the labor market e. Discouraged workers 1797. The labor force in the United States equals: a. The population aged 16 years and older b. The population aged 18 years and older c. The population between the ages of 16 and 65 d. The number of people employed e. The number of people employed and unemployed III.B.1 III.B.1 1798. The number of people employed plus the number of people unemployed is called the: a. Population b. Demand for labor III.B.1 c. Labor force d. Natural rate of employment e. Participation sector 1799. In recent years, the labor force participation rate in the United States is approximately what percentage of the labor force? a. 54 percent b. 60 percent c. 67 percent d. 74 percent e. 80 percent 1800. Using the U.S. Census definition of employment, which of the following individuals would be classified as employed during a particular survey week? a. a man who worked for pay for only one hour b. a 15-year old student who worked at McDonald’s for 20 hours c. a 17-year old student who worked on the family farm without pay for 10 hours d. an out-of-work woman who collected unemployment compensation e. a new college graduate searching for a job 1801. The entire adult population is divided into three groups for calculating unemployment statistics. These groups include which of the following? a. unemployed, employed, in military service b. employed, unemployed, not in the labor force c. structurally unemployed, seasonally unemployed, employed d. unemployed, employed, under the age of 18 e. men employed, women employed, unemployed 1802. Who of the following would be considered a part of the labor force? a. A stay-at-home mom who does not earn income b. A fifteen-year-old working at a fast food restaurant III.B.1 III.B.1 III.B.1 III.B.1 c. An inmate doing prison labor d. A recent graduate looking for her first job e. A retired school teacher 1803. Why is Michael NOT counted as part of the labor force? a. He has never had a job. b. He is still in school. c. He is not a citizen. d. He is fifteen years old. e. He can not find a job. III.B.1 1804. Which of the following employment categories provides jobs for the largest percentage of workers? a. Agriculture b. Service and manufacturing III.B.1 c. Public administration d. Teachers and professors e. Unemployed 1805. One of the problems with measuring employment is that it does NOT include which type of worker? a. frictional b. structural III.B.1 c. seasonal d. discouraged e. cyclical 1806. The lowest rate of unemployment is for those in which age group? a. 16-19 b. 20-24 c. 25-44 d. 45-64 e. 65-older III.B.2 1807. At the Great Depression’s worst point in 1933, approximately what percent of the American work force was unemployed? a. 15% b. 20% III.B.2 c. 25% d. 30% e. 35% 1808. The unemployment rate is measured as: a. The number of unemployed people as a percentage of employed workers b. The labor force as a percentage of the adult population c. The number of unemployed people as a percentage of the population d. The number of employed workers as a percentage of the labor force e. The number of unemployed people as a percentage of the labor force 1809. Suppose that your cousin Henry is working part time as a computer programmer. He would like to work full time, but cannot find a full-time job as a computer programmer. Henry is considered to be a. a marginally attached worker b. a discouraged worker c. cyclically unemployed d. underemployed III.B.2 III.B.3 e. unemployed 1810. Your older sister is unemployed because she is unaware of the jobs for which she is qualified. She is included in the unemployment category called a. cyclical b. structural c. frictional d. seasonal e. uninformed 1811. Frank lost his job as a baggage handler for an airline when air travel fell during a recession. This is an example of _____. a. The natural rate of unemployment b. Frictional unemployment c. Seasonal unemployment d. Cyclical unemployment e. Structural unemployment III.B.3 III.B.3 1812. Which of the following persons would be classified as unemployed by the U.S. Census Bureau during any survey week? a. Bob works for only one hour during the week b. George works without pay for fifteen hours in his family owned business c. Mary did not work at all because she was on sick leave from her job III.B.3 d. Jane did not work at all because she was on vacation leave from her job e. Tammy did not work at all because she was spending all of her time looking for a job 1813. What type of unemployment is associated with the changing of jobs and the entering and leaving of workers in the labor force? a. cyclical b. structural III.B.3 c. natural d. frictional e. seasonal 1814. Which type of unemployment is considered a normal part of a healthy and growing economy? a. structural b. frictional c. seasonal d. cyclical e. marginal 1815. If the supply for a good increases while its demand remains constant, then the equilibrium a. price and quantity increase b. price increases and quantity decreases c. price decreases and quantity increases d. price and quantity decrease e. price and quantity are indeterminate 1816. Which of the following is NOT a type of unemployment? a. frictional b. marginal c. seasonal d. structural III.B.3 III.B.3 III.B.3 e. cyclical 1817. What type of unemployment exists when the number of jobs in some labor markets is not enough to provide jobs for all of those who want one? a. frictional unemployment b. cyclical unemployment c. natural unemployment d. sectoral unemployment e. structural unemployment 1818. Which of the following is NOT one of the reasons why the U.S. economy always has some unemployment? a. minimum-wage laws b. market power of unions c. efficiency wages d. market power of firms e. job searches 1819. The type of unemployment that occurs when a worker loses his/her job during an economic recession is called: a. Frictional b. Aggregate c. Structural d. Cyclical e. Natural III.B.3 III.B.3 III.B.3 1820. In which category of unemployment is Tim, who is unemployed because he is moving from one job to another? a. Frictional b. Structural III.B.3 c. Seasonal d. Cyclical e. None; he is technically employed 1821. The difference between real and nominal GDP in any given year is a. unemployment b. inflation c. net income d. depreciation e. personal disposable income III.B.3 1822. If you lose your job at a nearby ski lodge in the spring, your unemployment is included in which category? a. frictional b. structural III.B.3 c. seasonal d. cyclical e. marginal 1823. What type of unemployment results from the long-run decline of certain industries? a. frictional b. cyclical c. natural d. structural III.B.3 e. industrial 1824. If your older brother loses his job at a Ford factory due to an economic downturn, he is included in which category of unemployment? a. seasonal b. frictional c. cyclical d. structural e. natural 1825. Someone who voluntarily leaves one job to look for another is included in which category of unemployment? a. marginal b. frictional c. structural d. seasonal e. cyclical III.B.3 III.B.3 1826. Suppose that Heather Jones leaves her job as a receptionist to find a job as a data processor. During her job search, she would be considered part of which unemployment category? a. frictional b. natural III.B.3 c. structural d. seasonal e. cyclical 1827. Which type of unemployment typically affects agricultural laborers? a. frictional b. natural c. cyclical d. structural e. seasonal 1828. A labor union is a type of: a. cooperative b. financial intermediary c. corporation d. oligopoly e. cartel 1829. What is the trend in labor union membership in the United States between the years 1950 and 2000? a. A gradual increase of about percent over the entire period. b. Periods of increase and decrease, with a small decrease over the period. c. There has been no significant change over the period of time. d. A gradual decrease of about forty percent over the entire period. e. Periods of increase and decrease, with a small increase over the period. III.B.3 III.B.4 III.B.4 1830. A union is successful in obtaining higher wages for its members. The higher wages would MOST LIKELY result in a. structural unemployment III.B.4 b. cost-push inflation c. decreased productivity d. high interest rate e. lower aggregate demand 1831. Labor unions seek to a. protect the rights of their members b. help a firm maximize their profits c. trade shares of corporations d. make zero economic profits e. promote cost-plus pricing 1832. All of the following are typically true of labor unions EXCEPT a. They can organize strikes and pickets b. They are subject to the free rider problem c. Their members earn higher wages d. They include only skilled workers e. They engage in collective bargaining 1833. Labor unions typically a. Decrease wages b. Increase product prices c. Decrease input prices d. Increase working hours e. Decrease inflation 1834. Which of the following issues is NOT one that labor unions bargain with employers? a. Wages and fringe benefits b. Working conditions c. Quality of the product produced d. Job security e. Grievance procedures 1835. All of the following are incentives for union membership EXCEPT a. Increased bargaining ability b. Increased wages c. Improved working conditions d. Yellow-dog contracts e. Union shops 1836. The rate at which money circulates is known as: a. The liquidity of money b. The transportability of money c. The transfer rate of money d. The neutrality of money e. The velocity of money 1837. Which of the following topics would be studied in the field of macroeconomics? a. the money supply b. the structure of markets c. the price elasticity of demand d. the price elasticity of supply e. the effect of price controls 1838. The velocity of circulation of money equals a. real GDP divided by the monetary base b. nominal GDP divided by the money supply III.B.4 III.B.4 III.B.4 III.B.4 III.B.4 III.C.1 III.C.1 III.C.1 c. the money supply divided by nominal GDP d. the monetary base divided by nominal GDP e. nominal GDP divided by the monetary base 1839. The definition of the U.S. money supply that puts the greatest emphasis on the transaction approach is: a. M1 b. M2 III.C.1 c. MMMF d. MMDA e. The monetary base 1840. Which form of money is NOT included in the measurement of M2? a. large denomination time deposits b. currency and coins not held by banks c. savings account deposits d. money market mutual funds e. travelers checks 1841. Which of these is a source of bias in measuring the cost of living using the CPI? a. Substitution effect b. Complementary effect c. Income effect d. Price effect e. Output effect III.C.1 III.C.2 1842. What government agency determines the level of the consumer price index? a. Federal Reserve Board of Governors b. Bureau of Labor Statistics c. General Accounting Office III.C.2 d. Comptroller of the Currency e. Federal Trade Commission 1843. Which federal department houses the agency that collects the data used to calculate the consumer price index? a. Department of Commerce b. Council of Economic Advisors III.C.2 c. Department of Interior d. Department of Labor e. Department of Consumer Prices 1844. What is the largest component in the CPI basket? a. Education and communications b. Housing c. Apparel d. Medical care e. Food and beverages 1845. Approximately how many items are included in the basket of goods and services used in calculating the U.S. CPI? a. 800 8000 80000 800000 III.C.2 III.C.2 8000000 1846. Which government agency calculates the U.S. Consumer Price Index? a. Department of Commerce b. Bureau of Consumer Prices c. Department of the Interior d. Federal Reserve System e. Bureau of Labor Statistics 1847. Which of the following is NOT one of the main sources of bias in the CPI? a. New goods bias b. Calculation error bias c. Quality change bias d. Commodity substitution bias e. Outlet substitution bias 1848. What does the federal government use as its measure of inflation? a. The current CPI b. The current CPI minus the previous CPI c. The sum of the CPIs during the year d. The current CPI times the previous CPI e. The percentage change in the CPI III.C.2 III.C.2 III.C.2 1849. The consumer price index is a measure of the cost of a basket of goods and services bought by: a. Government b. Firms III.C.2 c. Households d. Exporters e. Importers 1850. A one-day hospital stay in an intensive care unit cost $35 in 1947 and $2,300 in 1997. The 1947 cost adjusted for the rate of inflation from 1947 to 1997 is only $258. What explains this large difference? a. the market power of hospitals b. the increase in employer-sponsored health insurance III.C.2 c. higher inflation than what was measured d. an improvement in the quality of care e. the high incomes expected by doctors 1851. Recent studies conclude that the consumer price index overstates inflation by about what percentage point(s) per year? a. 0.25 0.5 III.C.2 0.75 1 e. 1.25 1852. The LARGEST category of spending included in the measurement of the CPI is a. transportation b. medical care c. apparel and upkeep d. food and beverage e. housing III.C.2 1853. If nominal GDP in 2007 equals $13.5 trillion and the GDP deflator equals 110 (GDP deflator = 100 in 2002), then real GDP in 2007 in terms of 2002 prices equals: a. $12.15 trillion b. $12.27 trillion c. $13.5 trillion d. $14.5 trillion e. $14.85 trillion 1854. A sustained increase in the average price level of prices is called a period of: a. Inflation b. Deflation c. Recession d. Expansion e. Competition 1855. A Phillips curve shows the trade-off between a. aggregate demand and aggregate supply b. monetary and fiscal policy c. unemployment and inflation d. unemployment and growth e. inflation and growth 1856. If the Fed decreases the money supply, what phenomenon results? a. a shift of the aggregate supply curve to the left b. an increase in both personal savings and investment c. a shift of the aggregate demand curve to the left d. a shift of the aggregate supply curve to the right e. a decrease in the equilibrium price level and increasing output 1857. An increase in the price level will lead to all of the following EXCEPT: a. A decrease in the public's purchasing power b. An increase in the interest rate c. A decrease in investment d. A decrease in consumption e. A decrease in the relative price of domestic goods 1858. Which of the following is MOST likely to lead to stagflation? a. An increase in aggregate supply b. A decrease in aggregate supply c. An increase in aggregate demand d. A decrease in aggregate demand e. An increase in both aggregate supply and aggregate demand 1859. Unanticipated deflation a. increases real output b. reduces real output c. increases profits d. employment increases e. wages increase III.C.3 III.C.3 III.C.3 III.C.3 III.C.3 III.C.3 III.C.3 1860. The residents of Fishtopia eat nothing but fish. In 2003, they spent $200 on 25 pounds of salmon, $225 on 50 pounds of cod, and $175 on 100 pounds of cat III.C.3 fish. In 2004, they spent $225 on 20 pounds of salmon, $275 on 60 pounds of cod, and $200 on 125 po a. b. c. d. e. 11.28% 14.29% 16.67% 22.32% 27.33% 1861. A monopoly's marginal revenue curve will equal its demand curve in the event of a. perfect price discrimination b. an excise tax c. normal conditions d. perfectly inelastic demand e. maximum producer surplus 1862. Cost-push inflation could be caused by: a. An increase in the price of a basic resource b. An increase in the number of consumers c. A decrease in the production of money d. An increase in specialization e. A decrease in government spending 1863. Unanticipated inflation hurts all of the following EXCEPT a. creditors b. savers c. workers d. debtors e. consumers 1864. The highest rates of inflation in the U.S. were experienced in the a. early 1950s b. early 1960s c. late 1960s d. late 1970s e. late 1980s 1865. Inflation equals: a. The Consumer Price Index b. The general price level c. The increase in the general price level d. The real value of money e. The growth in output minus the change in prices 1866. Based on the loanable funds theory, the quantity of funds savers lend and quantity of funds firms borrow to fund investment spending in brought into equilibrium by the _____ rate. a. Exchange b. Interest c. Inflation d. Unemployment e. Discount 1867. The interest rate that banks charge to their MOST reliable business customers is called the a. discount rate b. prime rate c. commercial rate III.C.3 III.C.3 III.C.3 III.C.3 III.C.3 III.C.4 III.C.4 d. M1 rate e. M2 rate 1868. Which interest rate do banks make available to individuals and firms with the best collateral and credit ratings? a. exchange b. discount III.C.4 c. prime d. principle e. concession 1869. If the nominal interest rate equals 8% and the expected rate of inflation equals 3%, then the real interest rate equals: a. 3% b. 5% c. 8% d. 11% e. 24% 1870. The real interest rate is determined a. in the market for loanable funds b. by Congress c. by aggregate demand and aggregate supply d. by net exports e. in the market for interest rates 1871. What type of interest rate is expressed in a loan contract? a. current rate b. nominal rate c. real rate d. prime rate e. discount rate 1872. The nominal interest rate equals the real interest rate: a. Minus the expected rate of inflation b. Plus the expected rate of inflation c. Plus the consumer price index d. Minus the consumer price index e. Minus the GDP deflator 1873. In Country A, high income and low income taxpayers pay the same percentage of their income in taxes. This is referred to as what type of tax? a. regressive tax b. flat tax c. proportional tax d. earned income tax e. progressive tax 1874. Which is an example of a payroll tax? a. social security tax b. corporate income tax c. personal income tax d. marginal taxes e. regressive taxes III.C.4 III.C.4 III.C.4 III.C.4 III.D.2 III.D.2 1875. Taxes that affect private decision making as little as possible are referred to as a. progressive b. regressive III.D.2 c. proportional d. neutral e. nonmarginal 1876. Which tax is an example of a proportional tax? a. income tax b. sales tax c. property tax d. excise tax e. flat tax III.D.2 1877. What federal government agency was established to enforce antitrust laws? a. Federal Trade Commission b. Securities and Exchange Commission c. Federal Reserve System III.D.3 d. Federal Price and Wage Commission e. National Labor Relations Board 1878. All of the following are economic roles for the government to play in a market economy EXCEPT a. decrease the competitiveness of markets through antitrust laws b. diminish negative externalities such as environmental pollution c. protect institutions such as clearly-defined property rights d. provide public goods such as law enforcement e. subsidize goods with positive externalities such as public health 1879. Laws designed to regulate monopolies are called a. antitrust laws b. franchise laws c. copyright laws d. price laws e. excise laws III.D.3 III.D.3 1880. The two major methods used by the U.S. government to prevent monopolies and promote competition are: a. Monetary policy and fiscal policy b. Taxes and regulations III.D.3 c. International free trade agreements and income security programs d. Antitrust laws and regulatory agencies e. Subsidies and export credits 1881. What was the first federal antitrust act? a. the Robinson-Patman Act b. the Clayton Act c. the Sherman Act d. the Celler-Kefauver Act e. the Federal Trade Commission Act III.D.3 1882. Social costs which are not necessarily considered in production are known as III.D.4 a. Explicit costs b. Deadweight losses c. Sunk costs d. Externalities e. Implicit costs 1883. Which of these federal programs is NOT a means-tested program? a. Medicaid b. Social Security c. Food Stamps d. Supplemental security income e. Earned-income tax credit III.D.5 1884. Governments may intervene in the economy to redistribute income from the rich to the poor by means of: a. A proportional income tax and import quotas b. Wage and price controls and exchange rate controls III.D.5 c. A progressive income tax and transfer payments d. Minimum wage laws and tariffs e. Sales taxes and a military draft 1885. What term refers to a tax levied on the difference between a commodity’s price before taxes and its cost of production? a. excise tax b. specific tax c. value added tax d. trade adjustment e. ad valorem tariff 1886. The policy debate surrounding income equality versus inequality must recognize that redistribution of income to achieve greater equality comes at the cost of reduced: a. Efficiency b. Unionization c. Externalities d. Leisure e. Total utility 1887. Which of the following is NOT considered a characteristic of money? a. portable b. store of value c. durable d. uniform e. finely divisible 1888. What are the three functions of money? a. medium of exchange, standard of value, durability b. store of value, standard of value, portability c. standard of value, store of value, finely divisible d. store of value, standard of value, medium of exchange e. portable, durable, and finely divisible III.E.1 III.E.1 III.E.2 III.E.2 1889. Mary decided to save her allowance for a month so that she could use it later to purchase holiday presents for her family. What function of money does this illustrate? III.E.2 a. store of value b. standard of value c. medium of exchange d. commodity money e. unit of account 1890. When functioning as a medium of exchange, money serves as a(n): a. Means of settling debts maturing in the future b. Asset accepted as a payment in transactions c. Measure of prices d. Store of value over time e. Common denominator of the economy III.E.2 1891. When the quantity demanded exceeds the quantity supplied, there exists a: a. Negative externality b. Positive externality c. Shortage III.E.3 d. Surplus e. Trade deficit 1892. Because the establishment of a minimum wage creates a price floor, what is the predictable result? a. a labor surplus at wages above the minimum level b. an increase in the total demand for labor III.E.3 c. a labor shortage at the minimum wage level d. a decrease in the supply for labor at the minimum wage level e. a shortage of labor at levels above the minimum wage 1893. What happens when the current price is above the equilibrium price of a product? a. Demand changes until equilibrium is established. b. Supply changes until equilibrium is established. c. Both demand and supply change until equilibrium is established. d. There is a surplus of the product which drives down the price. e. There is a shortage of the product which drives up the price. III.E.3 1894. What happens when the price in the market for a product is artificially above the equilibrium price? a. There is a shortage of the product and price will increase. b. There is a surplus of the product and price will increase. c. There is a surplus of the product and price will decrease. III.E.3 d. There is a shortage of the product and price will decrease. e. The price of the product will fall, but the quantity demanded/supplied will not change. 1895. The largest source of Federal government revenue in the United States is the: a. Corporate income tax b. Property tax c. Social Security payroll tax d. Personal income tax e. Capital gains tax 1896. An example of a fiscal policy action used to expand economic output is: a. A tax cut b. A decrease in government spending c. A decrease in the money supply d. An increase in the minimum wage III.F.1 III.F.1 e. An increase in the interest rates 1897. Which of the following taxes is indexed in the United States? a. federal income tax b. state sales taxes c. federal sales taxes d. property taxes e. excise taxes 1898. Which of these government programs accounts for the most government expenditures? a. Low-income housing assistance b. Head Start c. Food stamps d. Low-income energy assistance e. Training for disadvantaged adults and youth 1899. Approximately what percent of all federal government spending is for relatively uncontrollable outlays - expenditures that are locked in by statutes, contracts, and other obligations? a. 55 65 75 85 95 1900. The Keynesian approach to macroeconomics is also known as the: a. Circular flow model b. Quantity equation c. Income-expenditure approach d. Classical theory of macroeconomics e. Permanent income hypothesis 1901. An example of a fiscal action that takes place automatically and with no policy decision is a. a budget deficit b. a budget surplus c. an increase in the money supply d. a decrease in the money supply e. unemployment compensation 1902. Which of the following is the largest source of federal tax receipts? a. Social insurance taxes b. Corporate income taxes c. Excise taxes d. Estate and gift taxes e. Individual income tax 1903. Which of the following taxes is NOT collected by the federal government? a. individual income taxes b. capital gains taxes c. property taxes d. social security taxes e. corporate income taxes III.F.1 III.F.1 III.F.1 III.F.1 III.F.1 III.F.1 III.F.1 1904. The appropriate fiscal policy action to close a recessionary gap would be to: a. Increase government spending b. Decrease government spending c. Increase taxes III.F.1 d. Increase the money supply e. Decrease the money supply 1905. When the economy goes into a recession, changes in fiscal policy that stimulate aggregate demand without policymakers having to take any deliberate action are called a. automatic stabilizers b. automatic stimulants c. invisible stabilizers d. invisible stimulants e. autonomous stabilizers 1906. The assertion that falling prices, wages, and interest rates provide an automatic escape from recession is known as a. Gresham’s law b. classical theory c. neoclassical theory d. Say’s law e. Fisher’s rule 1907. Discretionary fiscal policy works through a. automatic stabilizers b. autonomous changes in taxes and government spending c. unemployment compensation and welfare payments d. entitlement programs e. cooperative monetary policy III.F.1 III.F.1 III.F.1 1908. The Federal debt equals the: a. Annual amount by which Federal government expenditures exceed Federal government receipts b. Annual amount by which Federal government receipts exceed Federal government expenditures c. Accumulation of past Federal government budget deficits minus Federal III.F.2 budget surpluses d. Size of the Federal budget deficit in any given fiscal year e. Expenditures of the Federal Reserve System less the amount of money created by the Federal Reserve System 1909. The balance of payments for the U.S. in any given year is equal to a. aggregate demand minus aggregate supply b. aggregate supply minus aggregate demand c. total monetary flows into the U.S. minus total monetary flows out of the U.S. III.F.2 d. total monetary flows out of the U.S. minus total monetary flows into the U.S. e. exports minus imports 1910. In the United States, monetary policy is determined and carried out by the a. Treasury Department b. Comptroller of the Currency c. Commerce Department d. Federal Reserve System e. U.S. Congress III.F.3 1911. What is the highest decision making body of the Federal Reserve System? a. Federal Open Market Committee b. Chairman of the Federal Reserve System c. President of the United States III.F.3 d. Secretary of the Treasury e. Board of Governors of the Fed 1912. Which of the following cities does NOT house a regional Federal Reserve Bank? a. Dallas b. Chicago c. Denver d. Richmond e. Boston 1913. What is the length of the term of appointment of Governors to the Board of Governors of the Federal Reserve System? a. 14 years b. 12 years c. 8 years d. 6 years e. 4 years 1914. Who owns the Federal Reserve District banks? a. Federal government b. Federal Reserve Bank of Washington, D.C. c. Member banks in each district d. Board of Governors of the Fed e. U.S. Citizen investors 1915. If the Federal Reserve wants to increase the money supply, it will: a. Raise the federal funds rate b. Raise the discount rate c. Increase reserve requirements d. Conduct an open market purchase e. Conduct an open market sale III.F.3 III.F.3 III.F.3 III.F.3 1916. How many people serve on the Fed’s Open-Market Committee that have the right to vote? a. 7 b. 9 III.F.3 c. 12 d. 15 e. 18 1917. Where is the seat of the Board of Governors of the Federal Reserve System located? a. New York City b. Washington, D.C. III.F.3 c. Philadelphia d. Boston e. Chicago 1918. The Federal Reserve System was created in response to the panic of: a. 1791 b. 1891 III.F.3 c. 1907 d. 1933 e. 1987 1919. Which of the following is an example of “moral suasion”? a. The president scolds Congress for passing a budget that is too big. b. The president scolds Congress for passing a budget that is too small. c. Congress holds hearings regarding the war on drugs. III.F.3 d. The attorneys-general of the states warn banks to cease predatory lending. e. The chairman of the Fed testifies before Congress regarding exuberant expectation in the stock market. 1920. Banks borrow from the Federal Reserve at the a. Final rate b. Prime rate c. Federal funds rate d. Discount rate e. Reserve rate 1921. What is the system called when banks keep on hand and available for withdrawal by depositors less than the full amount of their total deposits? a. arbitrage banking b. bank balance sheet c. deposit insurance d. prime interest rate e. fractional reserve banking 1922. How many district banks make up the Federal Reserve System? a. 12 b. 10 c. 8 d. 6 e. 2 1923. One of the three primary macroeconomic goals is a. low crime rates b. price stability c. a balanced budget d. a positive balance of trade e. a positive balance of payments 1924. The Employment Act of 1946 was established to promote maximum a. growth b. labor wages c. consumer demand d. purchasing power e. prices 1925. The macroeconomic goals of the U.S. government were established by a. Congress b. the President’s Council of Economic Advisors c. the Employment Act of 1946 d. the Fed e. the Office of Budget Management III.F.3 III.F.3 III.F.3 III.F.4 III.F.4 III.F.4 1926. Monetary policy actions to increase the money supply include open market _____ by the Federal Reserve and _____ in the Federal Reserve discount rate. a. Purchases; increases b. Purchases; decreases III.F.5 c. Sales; increases d. Sales; decreases e. Sales; either increases or decreases 1927. The monetary base equals a. reserves on deposit at the Fed b. reserves on deposit at the Fed plus cash in bank vaults c. reserves on deposit at the Fed plus cash in bank vaults plus currency in circulation d. reserves on deposit at the Fed plus cash in bank vaults plus currency in circulation plus checking account balances e. reserves on deposit at the Fed plus cash in bank vaults plus currency in circulation plus checking account balances plus travelers' checks 1928. Financial institutions are so important in the study of economics because: a. They hold all the money b. They have so many employees c. They are the source of most capital d. Their owners/managers have considerable political influence e. Those that offer checkable deposits are involved in the creation of money 1929. An expansionary monetary policy is often referred to as an “easy money” policy, because a. credit is cheaper and plentiful b. money is easier to spend c. money earns more interest d. credit is less painful e. government spends more money 1930. The FED buys and sells government securities a. through all of its member banks b. through its regional reserve banks c. directly with the public d. through the Federal Reserve Bank of New York e. through the U.S. Treasury III.F.5 III.F.5 III.F.5 III.F.5 1931. According to monetarists, recessions and inflation can be avoided with a. a fixed money supply b. the proper blend of fiscal and monetary policies c. a constant moderate expansion of the money supply III.F.5 d. an increase in the money supply equal to the rate of increase in total output e. no intervention by government, because any intervention will be fully anticipated by the private sector 1932. The interest rate that the FED charges on loans to member banks is known as which rate? a. reserve requirement b. federal funds III.F.5 c. discount d. prime e. sub-prime 1933. The buying and selling of U.S. government securities for monetary policy purposes is directed by the: a. Board of Governors of the Federal Reserve System b. Federal Reserve Banks c. Federal Open Market Committee d. Securities and Exchange Commission e. Federal Deposit Insurance Corporation 1934. The MOST commonly used monetary policy tool of the Federal Reserve System is a. open market operations b. the discount rate c. the prime rate d. reserve requirements e. the tax rate 1935. A fractional reserve banking system is one in which a. reserves are fractionated among various banks b. fractions of society deposit the reserves with banks c. banks are owned by a fraction of its depositors d. bank reserves are less than bank deposit liabilities e. bank reserves are less than bank deposit assets 1936. What do demand-side and supply-side economics have in common? a. They share the same goals. b. They share the same assumptions. c. They share the same fiscal policy implications. d. Both call for the same remedy to a recession. e. Both call for the same remedy to high unemployment. 1937. The theory widely held prior to the Great Depression which claims that supply creates its own demand is called: a. Keynes' law b. Say's law c. Friedman's permanent income hypothesis d. Mercantilism e. Austrian school of economics III.F.5 III.F.5 III.F.5 III.F.6 III.F.6 1938. In an effort to improve profits, a firm offers bonuses that are proportional to its performance. This is an example of a(n) a. unintended consequence b. currency initiative incentives c. positive monetary incentive d. progressive incentive e. negative monetary incentive 1939. Commissions and bonuses are examples of a. positive incentives b. negative incentives c. positive values d. negative values e. normative values 1940. Which of the following is regularly used to measure income inequality? a. the CPI b. the GDP deflator incentives income inequality c. The indifference curve d. the Gini coefficient e. GNP per capita 1941. Complete income inequality would be indicated by a Gini coefficient of a. -1.0 b. -0.5 c. 0.0 d. 0.5 e. 1.0 1942. Inflation is BEST defined as a(n) a. decrease in the availability of credit b. decrease in purchasing power c. increase in nominal interest rates d. increase in a currencys value e. increase in the general price level 1943. A decrease in the rate of inflation is known as a. Demand-pull inflation b. Stagflation c. Disinflation d. Creeping inflation e. Bearish inflation inequality inflation inflation 1944. If the nominal interest rate is 9% and the rate of inflation is 3%, then the real interest rate is a. 3% b. 6% inflation c. 9% d. 12% e. 27% 1945. Assuming all interest rates are fixed, which of the following groups will benefit from unexpected inflation? a. borrowers b. creditors c. savers d. people on fixed incomes e. currency holders 1946. Which of the following can increase aggregate demand? a. production quotas b. producer subsidies c. price ceilings d. price floors e. innovation 1947. Interdependence is caused by: a. Specialization b. Barter c. Inflation d. Absolute advantages e. Governments inflation innovation interdepende nce 1948. When individuals or firms borrow money, financial institutions doing the lending charge a. margin b. principal c. interest d. rent e. credit 1949. Interest payments are NOT a component of a. short-run average cost b. long-run average cost c. short-run marginal cost d. long-run marginal cost e. short-run total cost 1950. What is a measure of the cost of borrowing money? a. the exchange rate b. the savings rate c. the interest rate d. the GDP growth rate e. the deposit rate 1951. The interest rate at which banks lend to each other overnight is known as the a. emergency rate b. discount rate c. federal funds rate d. reserve rate e. prime rate 1952. There is an incentive to borrow when a. economic growth is slow b. the discount rate is increasing c. the money supply is contracting d. interest rates are high e. interest rates are low 1953. US interest rates are determined MOST DIRECTLY by a. supply and demand for loanable funds b. the Federal Open Market Committee c. the Board of Governors of the Federal Reserve d. the Chairman of the Federal Reserve e. supply and demand for dollars interest interest interest rate interest rate interest rates interest rates 1954. In terms of the total value of exports and imports, the biggest trading partner of the United States is: a. Canada b. China International c. India Trade d. Japan e. Mexico 1955. Both Large Country and Small Country produce with constant costs. If in one week workers in Large Country can produce 4,000 cases of wine or 1,000 International cases of olive oil, while workers in Small Country can produce 900 cases of wine or Trade 300 cases of olive oil, a. The absolute and comparative advantage in producing olive oil b. The absolute and comparative advantage in producing wine c. The comparative advantage, but not the absolute advantage, in producing wine d. The comparative advantage, but not the absolute advantage, in producing olive oil e. Neither the absolute nor the comparative advantage in producing wine 1956. The use of extensive licensing requirements to limit imports is called a(n): a. Tariff b. Quota c. Nontariff barrier d. Export subsidy e. Foreign exchange control International trade 1957. In the initial years of the twenty-first century, total U.S. international trade in goods and services has been: a. In balance b. Persistently in deficit International c. Persistently in surplus Trade d. Shifting between years in surplus and years in deficit e. Mostly in deficit with a few years in surplus 1958. A protective tariff imposed on each foreign automobile imported into the United States will have all of the following effects EXCEPT: a. U.S. automobile prices will decrease b. U.S. automobile workers will lose some jobs c. Foreign automobile producers will sell fewer cars in the U.S. d. The U.S. government will receive revenue from the tariff e. U.S. consumers will purchase fewer automobiles International Trade 1959. In a flexible exchange rate system, a nation’s exchange rate is determined by: a. The sale or purchase of foreign currencies by the central bank b. Government intervention to control the flow of trade and finance c. The supply and demand for the national currency in the foreign exchange International market Trade d. The establishment of exchange controls limiting the purchase or sale of the national currency e. The use of domestic stabilization policy to eliminate shortages or surpluses of foreign currency 1960. Investment in an industry typically comes from a. labor unions b. entrepreneurs c. researchers d. accountants e. educators 1961. In most developing countries, what sector typically employs the majority of workers? a. mining b. handicrafts c. agriculture d. manufacturing investment IV.??? e. government 1962. An additional unit of capital tends to increase growth more in developing countries than in developed countries because of a. the brain-drain effect b. capital flight c. the catch-up effect d. the wealth effect e. economies of scale 1963. Many developing nations lack infrastructure which includes all of the following EXCEPT a. roads b. power grids c. land d. sewage systems e. irrigation 1964. The United States has a trade deficit with a. the Netherlands b. Switzerland c. Australia d. Mexico e. Belgium 1965. What are the International Bank for Reconstruction and Development and the International Development Association? a. branches of the United Nations b. departments within the International monetary Fund c. divisions of the Import-Export Bank d. components of the World Bank e. European Union aid organizations 1966. Where are the headquarters of the World Trade Organization? a. Geneva b. Washington, D.C. c. Seattle d. Doha e. Paris 1967. The World Bank: a. is a depository for nations. b. manages international exchange rates. c. gives loans and advice to less-developed countries. d. is a depository for firms with multinational holdings. e. settles disputes between nations regarding debts. 1968. The foreign-exchange rate expresses a. the value of tradable goods in relation to non-tradable goods b. the price of a currency in relation to the price of gold c. the value of consumption goods in relation to productive resources d. the inflation rate of one country in relation to the inflation rate of another e. the price of one currency in relation to another country’s currency IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? 1969. If the exchange rate between the U.S. dollar and the Japanese yen is 1 IV.??? dollar to 100 yen and the exchange rate between the U.S. dollar and the euro is 1 dollar to 0.5 euros, then a. 1 euro will buy more yen than 1 dollar b. 1 yen will buy more euros than 1 dollar c. the yen and euro are worth the same d. the dollar is worth more than the euro e. the yen is worth more than the dollar 1970. Which of the following would increase the US capital account balance? a. a US consulting firm being hired in France b. a US purchase of French capital c. French tourists buying airline tickets to the US d. a French purchase of US land e. French investors withdrawing US securities 1971. Which of the following is a common barrier to development found in lessdeveloped countries? a. little endowment of natural resources b. a low birth rate c. an unstable political structure d. a small land mass e. low inflation 1972. A trade quota is a: a. Minimum quantity that can be imported b. Minimum quantity that can be exported c. Maximum quantity that can be imported d. Tax on imported goods e. Tax on exported goods 1973. A positive value for net exports signifies a: a. budget deficit. b. budget surplus. c. budget depression. d. trade deficit. e. trade surplus. 1974. In the long run, a country's participation in international trade is generally believed to a. increase national self-sufficiency b. decrease interest rates c. increase domestic prices d. provide more domestic jobs e. increase international prices 1975. What international organization makes loans to countries faced with shortterm balance of payments problems? a. World Bank b. United Nations c. International Monetary Fund d. International Development Association e. International Bank for Reconstruction and Development 1976. Over how many years does NAFTA phase out tariffs among the parties to the treaty? a. 20 b. 15 IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? c. 10 d. 5 e. 3 1977. To what single country does the U.S. export the LARGEST dollar value of goods? a. Japan b. Germany c. Mexico d. Canada e. China 1978. A floating exchange rate system: a. determines the exchange rate solely through market forces. b. has a minimum exchange rate which the exchange rate cannot go below. c. has a maximum exchange rate which the exchange rate cannot go above. d. sets the exchange rate based on the advice of economic advisors e. is controlled by the legislative branch of a government 1979. If the U.S. dollar falls relative to the Japanese yen, which of the following statements is TRUE? a. Japanese goods will be less expensive for American consumers b. American goods will be more expensive for American consumers c. American goods will be more expensive for Japanese consumers d. American goods will be less expensive for Japanese consumers e. Japanese goods will be less expensive for Japanese consumers 1980. The European Economic Community was created in 1958 by the a. Treaty of Rome b. the Maastricht Treaty c. Bretton Woods Conference d. Treaty of Nice e. Amsterdam Treaty 1981. What is the difference between the public sector budget balance and the public sector primary balance? a. the budget balance omits indirect taxes b. the budget balance includes the current account balance c. the budget balance omits government spending d. the primary balance includes the trade balance e. the primary balance omits interest payments 1982. The last round of GATT was a. the Seattle Round b. the Argentina Round c. the Uruguay Round d. the Bretton Round e. the Kennedy Round 1983. To what single country does the U.S. export the LARGEST dollar value of goods? a. Mexico b. Japan c. Germany d. Great Britain IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? e. Canada 1984. The balance of trade is used to calculate a country’s a. capital account balance b. comparative account balance c. current account balance d. comparative account balance e. central account balance IV.??? 1985. The three main categories of work undertaken by the International Monetary Fund (IMF) are a. technical assistance, financial assistance, and economic research b. surveillance, financial assistance, and technical assistance IV.??? c. technical assistance, sanctions, and financial assistance d. surveillance, financial assistance, and economic research e. technical assistance, sanctions, and economic research 1986. What international organization was established in 1945 and has been a rather large contributor to foreign aid around the world? a. Import-Export Bank b. International Monetary Fund c. World Trade Organization d. World Bank e. European Common Market 1987. Between 2006 and 2007, the annual U.S. a. trade surplus decreased for the first time in over fifteen years b. balance of trade was a deficit for the first time in ten years c. volume of trade decreased for the first time in over five years d. balance of trade was a surplus for the first time in ten years e. trade deficit decreased for the first time in over fifteen years IV.??? IV.??? 1988. If a government imposes a tariff on an imported good that moves the market closer to the equilibrium that would exist without trade, what group predictably suffers a net loss? a. the domestic government b. domestic consumers IV.??? c. domestic producers d. foreign consumers e. foreign governments 1989. Which region had the lowest GDP per capita (in 2003)? a. Latin America and Caribbean b. Europe and Central Asia c. Middle East and north Africa d. East Asia and Pacific e. South Asia 1990. A country’s HDI is BEST described as a measure of its a. financial maturity b. total development c. sustainability d. political stability e. total wealth IV.??? IV.??? 1991. One concern that many Americans had regarding NAFTA was that a. the U.S. trade deficit would grow b. Canada would not participate in the agreement c. Mexico would renege on the agreement d. Mexico had a lax environmental policy e. Mexico would send fewer immigrants to the U.S. 1992. The exchange rate best determines which of the following? a. terms of trade b. bargaining positions c. production capabilities d. growth of wealth e. capital gains 1993. What do economists say should be done when one person is the best producer of any good that another person could make? a. the worst producer should make all the goods b. the best producer should make alt the goods c. each person should specialize and trade d. each person should make goods to satisfy themselves e. the government should decide who makes what good 1994. Critics of free trade question if it is for all of the following reasons EXCEPT a. the loss of jobs in the domestic economy b. its inefficiency in allocating resources c. possible human rights violations d. the adverse effect on unprepared foreign markets e. poor environmental standards of trading partners 1995. An administered reduction in the value of a currency against other currencies under a fixed exchange rate system is referred to as a. currency depreciation b. currency appreciation c. currency devaluation d. currency revaluation e. currency depression IV.??? IV.??? IV.??? IV.??? IV.??? 1996. How is the real exchange rate calculated? a. The rate of inflation is subtracted from the nominal exchange rate. b. The nominal exchange rate is multiplied by the foreign price level divided by the domestic price level. c. The nominal exchange rate is multiplied by the foreign price level plus the IV.??? domestic price level. d. The nominal exchange rate is multiplied by the domestic price level divided by the foreign price level. e. The domestic price level is subtracted from the nominal exchange rate. 1997. All of the following are part of the European Union EXCEPT: a. the United Kingdom b. Ireland c. Greece d. Italy e. Switzerland IV.??? 1998. The organization that oversees the international monetary system is known IV.??? as the a. b. c. d. e. International Monetary Fund World Bank United Nations Global Monetary Enterprise Organization of National Banks 1999. In which year did the U.S. have a merchandise trade surplus? a. 1975. b. 1980. c. 1985. d. 1990. e. 1995. 2000. Members of the North American Free Trade Agreement (NAFTA) include a. the United States and Canada b. the United States, Canada, and Mexico c. the United States, Canada, Mexico, and Chile d. the United States, Canada, Mexico, and Panama e. the United States, Canada, Mexico, and Guatemala 2001. Much of the demand for subsidies has come from which sector of the economy? a. services b. finance c. healthcare d. agriculture e. technology 2002. What typically happens when the U.S. dollar depreciates? a. aggregate supply increases b. aggregate supply decreases c. unemployment increases d. interest rates decrease e. net exports increase IV.??? IV.??? IV.??? IV.??? 2003. Foreign direct investment in the United States in 1993 was the GREATEST for a. Japan b. Canada IV.??? c. United Kingdom d. Germany e. Netherlands 2004. A decline in GDP for two consecutive quarters is a(n) a. expansion b. depression c. deficit d. recession e. externality 2005. Which of the following states that is it better for people or countries to specialize in those activities in which their advantage over other people or countries is greatest or in which their disadvantages compared to others are the smallest? a. Adam Smith b. the law of supply and demand IV.??? IV.??? c. the theory of international trade d. the rule of absolute advantage e. the law of comparative advantage 2006. From 1800 to 2000, developing countries accounted for about _____ percent of the world’s population and about _____ percent of the world’s GDP a. 80, 20 b. 20, 80 c. 75, 25 d. 90, 10 e. 60, 40 IV.??? 2007. Over the last 30 years, what has been characteristic of United States trade? a. the U.S. has become more isolationist b. the U.S. has become less competitive c. the U.S. has become less specialized IV.??? d. the U.S. has run a trade deficit e. the U.S. has run a trade surplus 2008. The difference between exports and imports of goods is referred to as the a. balance of trade b. merchandise trade balance c. balance on current account d. balance of payments e. net exports 2009. The US signed the GATT in a. 1934 b. 1947 c. 1948 d. 1957 e. 1960 IV.??? IV.??? 2010. The “price” of one nation’s currency in terms of another nation’s currency is referred to as the a. currency price b. exchange rate IV.??? c. currency swap rate d. natural price e. parity price 2011. An import is a good or service that is a. domestically produced and consumed b. domestically produced and sold in a foreign country c. produced and consumed in a foreign country d. produced in a foreign country and consumed domestically e. a positive contributor to a country’s balance of payments 2012. Which of the following is NOT a form of international reserve money? a. gold b. the U.S. dollar c. Special Drawing Rights (SDRs) d. silver e. convertible currencies IV.??? IV.??? 2013. Who benefits the MOST from international trade in the short run? a. All participants benefit equally b. developed countries c. developing countries d. Infant industries e. Less-developed countries IV.??? 2014. Which of these measures of international transactions between the U.S. and other nations has been the largest amount in recent years? a. merchandise exports b. merchandise imports IV.??? c. service exports d. service imports e. outflow of U.S. capital 2015. Revaluation is when a. the market increases the price of a currency b. the market decreases the price of a currency c. the government increases the value of its currency d. the government decreases the value of its currency e. the price level decreases the purchasing power of a currency 2016. An embargo is a(n) a. tax levied on imports b. restriction on trade with a country c. type of fixed exchange rate d. market structure where one firm dominates e. increase in the general level of prices 2017. If a nation has a trade deficit, then a. it is importing too much b. it needs to increase public spending c. it must also have a capital account deficit d. it must be in a recession e. its net exports must be negative IV.??? IV.??? IV.??? 2018. The relative levels of a country’s imports and exports is called that country’s a. balance of payment b. import/export ratio c. import/export difference IV.??? d. balance of exchange e. balance of trade 2019. What United Nations-affiliated organization is responsible for providing finance and advice to developing countries with the goal of increasing economic development and eliminating poverty? a. the World Bank b. the WTO c. NAFTA d. the European Union e. GATT 2020. Who is currently the president of the International Monetary Fund? a. Paul Wolfowitz b. Robert Zoellick c. Alan Greenspan IV.??? IV.??? d. Condoleezza Rice e. Rodrigo Rato 2021. The United States’ largest receiver of exports is: a. Mexico. b. Canada. c. China. d. Japan. e. Germany. IV.??? 2022. Which of the following is a reason a country might choose a fixed exchange rate system? a. the improve the effectiveness of monetary policy b. to decrease the country’s interdependence with other countries IV.??? c. to decrease expectations of inflation d. to increase reserves of foreign currencies e. to restrict imports more effectively 2023. Which of the following organizations is NOT a part of the World Bank Group? a. Bank for International Settlements (BIS) b. International Centre for Settlement of Investment Disputes (ICSID) c. International Development Association (IDA) d. International Finance Corporation (IFC) e. Multilateral Investment Guarantee Agency (MIGA) IV.??? 2024. Suppose that it takes 100 hours of labor to produce one car and 25 hours of labor to produce 1000 bushels of wheat in Japan, while in the USA it takes 150 hours of labor to produce one car and 15 hours of labor to produce 1000 bushels of wheat. We can sa a. Japan has the absolute advantage in the production of wheat IV.??? b. the USA has an absolute advantage in the production of cars c. Japan has a comparative advantage in the production of cars d. Japan has a comparative advantage in the production of wheat e. the USA has a comparative advantage in the production of cars 2025. If a U.S. company sells some goods to the Chinese and uses the proceeds to buy stock in a Chinese company, then a. U.S. net exports and net capital outflow will increase b. U.S. net exports will increase while net capital outflow decreases IV.??? c. U.S. net exports will decrease while net capital outflow increases d. U.S. net exports and net capital outflow will decrease e. U.S. net exports and net capital outflow will not change 2026. The European Union countries have adopted a common currency known as the a. European Dollar b. euro IV.??? c. sterling franc d. EU dollar e. Continental 2027. The current U.S. balance of trade in goods and services is approximately a. +$500 billion b. +$100 billion c. -$30 billion IV.??? d. -$250 billion e. -$700 billion 2028. A company purchasing a factory in a foreign country is an example of a. merchandise exports b. merchandise imports c. foreign direct investment d. foreign portfolio investment e. capital inflows for the domestic country 2029. Which of the following countries was NOT a founding member of the European Community? a. Belgium b. France c. the United Kingdom d. Germany e. Italy 2030. The World Bank and the International Monetary Fund both a. provide funds to promote economic development b. control the size of the global money supply c. set international exchange rates d. help financial institutions collect on loan defaults e. oversee international stock markets 2031. The law of diminishing returns makes which of the following possible? a. brain drain b. capital flight c. the catch-up effect d. the wealth effect e. the exchange rate effect 2032. What do economists call those countries with the lowest GDP per capita? a. poor b. not yet developed countries c. less developed countries d. industrially advanced countries e. industrially retarded countries 2033. Which country was the largest trading partner with the U.S. in 2003? a. Mexico b. China c. Canada d. Japan e. Australia 2034. If the U.S. dollar depreciates relative to the euro, then: a. a euro is worth less dollars than before. b. a euro is worth more dollars than before. c. European exporters and American importers benefit. d. European importers and American exporters are harmed. e. both European and American exporters are harmed. 2035. Which of the following treaties led to the creation of the World Trade Organization? a. Maastricht Treaty IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? b. c. d. e. NATO GATT Treaty of Versailles Bretton Woods 2036. NAFTA would have the most significant negative impact on a. unskilled Mexican workers b. unskilled American workers c. skilled American workers d. American multinational corporations e. Mexican multinational corporations 2037. Specialization and economic interdependence are the basis for a. recessions b. booms c. unemployment d. international trade e. inflation 2038. One of the goals of the International Monetary Fund is to a. control interest rates b. pay down government surpluses c. promote world health d. stabilize exchange rates e. promote international peace 2039. What is the main goal of organizations such as NAFTA, the WTF, and the GATT? a. to create a common world currency b. the creation of a free trade zone in Europe c. the creation of a single global marketplace d. the reorganization of global business structure e. the negotiation and enforcement of trading policies IV.??? IV.??? IV.??? IV.??? 2040. In 1998, which of the following was the LARGEST category of both imports and exports for the United States? a. agricultural b. industrial supplies IV.??? c. capital goods d. automotive e. consumer goods 2041. Which of the following organizations and agreements were established during the Bretton Woods Conference? I. the IMF II. the IBRD III. the WTO IV. NAFTA a. I, II b. I, III c. I, III, IV d. II, III, IV e. III, IV 2042. Which of the following are barriers to free trade? I. environmental and safety regulations IV.??? IV.??? II. taxes levied on imports III. limiting the volume of imports IV. government payments to domestic producers a. I and IV only b. II and III only c. I, II, and III only d. II, III, and IV only e. I, II, III, and IV 2043. When a government chooses dollarization, it sacrifices its ability to use a. international trade b. fiscal policy c. monetary policy d. transfer payments e. foreign investment IV.??? 2044. If country M can produce 10 clocks and 5 watches in one hour, and country S can produce 5 clocks and 10 watches in one hour, which of the following is NOT true? a. country M has an absolute advantage in clocks b. country S has an absolute advantage in watches IV.??? c. country M should produce watches d. country S should produce watches e. country M should produce clocks 2045. World Bank is to Robert Zoellick as International Monetary Fund is to a. Ben Bernanke b. Dominique Strauss-Kahn c. Ban Ki-moon d. Paul Wolfowitz e. Pascal Lamy 2046. Which three countries participate in NAFTA? a. the United States, Japan, and Germany b. Mexico, Guatemala, and Honduras c. Canada, Mexico, and the United States d. France, Italy, and Germany e. Austria, Belgium, and Denmark IV.??? IV.??? 2047. What is a limit on the quantity of a good that may be imported into a country during a given time period called? a. tariff b. embargo IV.??? c. quota d. anti-protectionism e. free trade 2048. In the market for cars and bicycles, country Z has constant opportunity costs. Which of the following is TRUE regarding country Z? a. it cannot benefit from specialization b. it cannot benefit from interdependence c. its production possibilities curve for cars and bicycles is straight d. it still faces imperfect substitutions e. it does not face the problem of scarcity IV.??? 2049. In 1995, GATT was superseded by a. NAFTA b. Regional Trade Organizations c. the European Union d. the World Trade Organization e. the European Economic Community 2050. The Gold Standard is an example of a(n) a. fiscal policy tool b. capital account balance c. optimal growth policy d. fixed exchange rate system e. flexible exchange rate system 2051. When was GATT founded? a. shortly before World War I b. shortly after World War I c. during the Great Depression d. shortly after World War I e. shortly after the Vietnam War 2052. Which agency is NOT part of the World Bank? a. International Finance Corporation b. Multilateral Investment Guarantee Agency c. Bank for International Settlements d. International Council for Settlement of Investment Disputes e. International Development Association 2053. Which of the following was established first? a. the European Union b. the World Trade Organization c. the International Monetary Fund d. the North Atlantic Free Trade Agreement e. the Organization for Economic Cooperation and Development 2054. Compared to a developing country, a developed country is more likely to have a. more self-sustaining communities b. fewer established property rights c. fewer specialized workers d. a lower per-capita GNP e. higher levels of interdependence 2055. The largest U.S. trade deficit is with a. China b. Mexico c. Canada d. Saudi Arabia e. Japan IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? 2056. Which country is classified as an industrially advanced country by the IMF in 2003? a. China IV.??? b. Chile c. Taiwan d. Ukraine e. Egypt 2057. What is the name of the financial instrument used by the IMF to provide temporarily relief to member nations that have a shortage of a particular type of foreign currency? a. repurchase agreements b. currency drawing rights c. special drawing rights d. exchange bowering agreements e. currency bowering agreements 2058. MOST of the world’s poorest countries are located in a. Africa b. Asia c. Europe d. South America e. Central America 2059. What is the rate of price of one national currency expressed in terms of another national currency called? a. balance of trade b. current account balance c. exchange rate d. exchange price e. foreign currency price 2060. Subsistence farming is MOST COMMON in a. utopian economies b. market economies c. traditional economies d. command economies e. mixed economies 2061. What agency makes long-term, low-interest loans and provides technical assistance to less-developed countries? a. Bretton Woods b. United Nations c. World Bank d. Agency of International Development Aid e. World Council of Churches 2062. All of the following are steps a developing country can take to improve its standard of living EXCEPT a. increasing investment in education b. reducing protectionist tariffs c. restricting foreign direct investment d. increasing education about birth control e. creating incentives to increase savings 2063. If the US begins importing more Japanese goods, then a. the supply of dollars will decrease b. the quantity of dollars supplied will decrease c. the yen will depreciate d. demand for dollars will decrease e. demand for yen will increase IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? 2064. One of the major problems with developing nations is a lack of human resources brought about by a. unemployment b. poor management c. low shareholder return d. brain drain e. urban flight 2065. Which of the following countries is NOT a member of the World Trade Organization? a. Brazil b. Greece c. China d. Russia e. India 2066. Which of the following is NOT an argument against free trade? a. It raises prices. b. It takes jobs from domestic workers. c. It threatens national security. d. It damages domestic business. e. It gives an unfair advantage to less regulated countries. 2067. Since the 1960s, trade as a percentage of GNP in the US has a. remained relatively constant b. decreased c. not shown any trend d. increased e. become more export-oriented 2068. The General Agreement on Tariffs and Trade was created during the: a. Geneva Conference b. Bretton Woods Conference c. Uruguay Round d. Yalta Conference e. Paris Conference 2069. A government that actively uses tariffs and quotas to prevent foreign companies from legitimately competing with domestic companies is a. inflationist b. monopsonist c. capitalist d. protectionist e. monetarist 2070. Which of the following is NOT characteristic of a developing country? a. high unemployment b. political volatility c. lack of infrastructure d. an industrial economy e. rapid population growth 2071. In 2003, the U.S. used trade sanctions to protect which industry? a. textile b. wheat c. steel IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? d. oil e. automobile 2072. The European Union was set up to achieve all of the following EXCEPT a. setting up a common currency b. stabilizing foreign economies c. ending all border controls between its members d. ending tariffs between its members e. coordinating monetary affairs 2073. Less-developed countries have a per-capita GDP of less than a. $400 b. $700 c. $1000 d. $1500 e. $3000 2074. What is the current primary activity of the International Monetary Fund (IMF)? a. settling exchange rate disputes b. enforcing international antitrust laws c. loans to nations with financial difficulties d. enforcing trade agreements e. establishing relative prices among nations 2075. Flexible exchange rates were established under the a. GAH b. Bretton Woods Agreement c. Smithsonian Agreement d. Treaty of Rome e. Wagner Act IV.??? IV.??? IV.??? IV.??? 2076. Canada can produce 30,000 snowshoes or 70,000 snow cones and trades with Russia at a rate of 2 snow cones per snowshoe. Assuming both countries are rational, which of the following MUST be true? a. Canada has an absolute advantage in both goods b. Canada has an absolute advantage in snow cones IV.??? c. Russia has an absolute advantage in snow cones d. Canada has a comparative advantage in snowshoes e. Russia has a comparative advantage in snowshoes 2077. Countries are charged with dumping their products when they are trying to a. get rid of their low quality goods b. sell goods on the black market c. increase the price of a good to monopolistic levels d. sell a good below its cost of production e. get rid of all surplus goods 2078. Which of the following is NOT an argument for protectionism? a. infant industries need protection while they grow b. foreign firms could use dumping to drive out domestic competitors c. some trading partners have unfair human rights practices d. increasing opportunity costs provide unfair competition e. dependence on some countries could compromise national security IV.??? IV.??? 2079. Which three countries participate in NAFTA? a. Mexico, United States, Japan b. Germany, Japan, United States c. Spain, Mexico, Brazil d. United States, Mexico, Canada e. Canada, United States, Russia 2080. Which of the following will lead to an increase in the real exchange rate? a. a decrease in the nominal exchange rate b. an increase in foreign price levels c. an increase in domestic price levels d. an increase in domestic government spending e. an increase foreign unemployment IV.??? IV.??? 2081. Which of the following would be considered a less-developed country, with a per capita GDP under $3,000? a. Haiti b. Japan IV.??? c. Chile d. Mexico e. Argentina 2082. The World Trade Organization (WTO) replaced the a. General Agreement on Tariffs and Trade (GATT) b. International Bank for Reconstruction and Development (IBRD) c. Organization for Economic Cooperation and Development (OECD) d. International Monetary Fund (IMF) e. United Nations Industrial Development Organization (UNIDO) IV.??? 2083. Less developed countries will face lower levels of real GDP per capita when population increases unless the increase in population is accompanied by: a. A higher labor force participation rate b. A lower labor force participation rate IV.??? c. A decrease in average labor productivity d. An increase in income taxes e. A decrease in income taxes 2084. Which of the following is NOT a developed country? a. New Zealand b. Canada c. Japan d. Ireland e. Russia 2085. Which of the following international organizations is a group of countries, each committed to a market economy and a democracy? a. the World Bank b. the International Monetary Fund c. the Organization for Economic Cooperation and Development d. the United Nations e. the World Trade Organization 2086. Which of the following countries is NOT one of the top trading partners of the United States? a. Mexico b. Canada IV.??? IV.??? IV.??? c. Japan d. China e. India 2087. Which nation is NOT a member of the European monetary union? a. Germany b. Italy c. Luxembourg d. United Kingdom e. Spain 2088. An exchange rate that is determined by supply and demand is a. fixed b. negotiated c. inflated d. deflated e. floating 2089. The euro depreciating with respect to the yen will hurt a. Japanese exporters and European importers b. Japanese importers and European importers c. Japanese importers and European exporters d. Japanese exporters and Japanese importers e. European exporters and European importers IV.??? IV.??? IV.??? 2090. Which of the following countries is NOT one of the least developed countries in the world? a. Afghanistan b. Turkey IV.??? c. Bangladesh d. Rwanda e. Haiti 2091. Which of the factors would contribute to a trade deficit in the U.S.? a. a weak dollar relative to the currencies of other nations b. increased productivity in the U.S. c. a U.S. absolute advantage in the production of most goods d. a floating exchange rate e. a strong dollar relative to the currencies of other nations 2092. Much of the World Banks funding comes from which of the following sources? a. private investors b. sales of stocks and bonds c. donations from political parties d. subscriptions from member states e. retained earnings and investments IV.??? IV.??? 2093. According to the theory of purchasing power parity, which of the following is TRUE in the long run? a. the nominal exchange rate is driven to one unit of currency per unit of foreign currency IV.??? b. the real exchange rate is driven to one unit of a good per unit of the same foreign good c. a country with a comparative advantage in a good will sell that good for more than its opportunity cost d. a country with an absolute advantage in a good will sell that good for more than its opportunity cost e. a country with an absolute advantage in a good will sell that good for less than its opportunity cost 2094. If the US experiences a trade surplus, then a. US exports exceed US imports b. US imports exceed US exports c. the US current account balance is negative d. interstate trade exceeds international trade e. the US capital account balance is positive 2095. Less-developed countries tend to have all of the following EXCEPT a. political barriers to development b. low literacy rates c. low birth rates d. low life expectancies e. high infant mortality rates 2096. Which of the following countries is part of the European Union but does NOT use the euro? a. Greece b. France c. Denmark d. Switzerland e. Finland 2097. An increase in the dollar price of yen could lead to which of the following? a. an increase in vacations to Japan b. a decrease in exports from the United States c. a decrease in imports from the United States d. a decrease in unemployment in the United States e. an improvement in Japan’s balance of trade 2098. Which economist predicted that growth in the world’s population would outpace the growth of the world’s food supply, leading to widespread famine and starvation? a. Karl Marx b. Joseph Schumpeter c. Garrett Hardin d. Thomas Malthus e. John Maynard Keynes 2099. The members of NAFTA are a. Russia and the European Union b. The US, Mexico, and Canada c. Belgium, France, and Germany d. The UK, France, and Italy e. The UK, Denmark, and Turkey 2100. All of the following countries have adopted the euro as their currency EXCEPT? a. Slovenia b. Austria c. Finland d. Greece IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? e. Sweden 2101. A limit on the number of imports is a(n) a. Excise b. Lockout c. Quota d. Tariff e. Embargo 2102. The world’s largest importer is a. Mexico b. the United States c. China d. Canada e. the United Kingdom IV.??? IV.??? 2103. The theory of purchasing power parity states that: a. trade between two countries will naturally equalize. b. the strength of a country’s currency depends on the purchasing power of a country’s citizens c. the nominal interest rate never equals the real interest rate IV.??? d. in the long run, currencies will gravitate toward the same value e. a unit of currency should be able to buy the same amount of a good in every nation 2104. If exports exceed imports, then a country has a: a. Budget deficit b. Budget surplus c. Trade deficit d. Trade surplus e. Trade shortage 2105. Developing countries typically have a per-capita GDP of between a. $300 and $3000 b. $500 and $3000 c. $3000 and $10000 d. $5000 and $10000 e. $6000 and $12000 2106. Which of the following is a term used to describe a floating exchange rate system with government intervention to stabilize currencies? a. devaluation b. revaluation c. adjustable float d. stabilized float e. dirty float 2107. Which of the following was NOT one of the GATT negotiating rounds? a. Tokyo b. Uruguay c. Geneva d. Helsinki e. Kennedy 2108. Which of the following is FALSE regarding the World Trade Organization? a. It was founded in 1995. IV.??? IV.??? IV.??? IV.??? IV.??? b. c. d. e. It is an example of a unilateral approach to free trade. It establishes trade agreements. It provides a place for negotiations. It arbitrates disputes between member nations. 2109. Countries will have a comparative advantage in a good if which of the following conditions is true? a. if the good can be assigned to a different production process b. if the good can be produced in larger quantities than other goods c. if the good can be purchased more easily by consumers d. if the good can be sold for a higher profit margin than other goods e. if the good can be produced at a lower cost relative to other goods IV.??? 2110. Which rate measures the trade of goods and services of one country for the goods and services of another? a. exchange b. trade IV.??? c. barter d. substitute e. real exchange 2111. A tax levied on imports is called a(n) a. quota b. value-added tax c. embargo d. tariff e. excise tax 2112. One of the major benefits of trading is that it allows both countries to a. be more diverse producers b. set up trade barriers c. be completely independent d. move beyond their production possibilities frontier e. improve international relations 2113. Much of the debate over the theory of comparative advantage began with the set of tariffs and subsidies enacted by Britain called the a. Stamp Acts b. Coercive Acts c. Enclosure Acts d. Poor Laws e. Corn Laws 2114. What currency has the aspiration of becoming an international reserve currency that will rival the U.S. dollar? a. Pound b. Canadian Dollar c. Euro d. France e. Krone 2115. If the exchange rate between the U.S. dollar and the Japanese yen is 1 dollar to 100 yen in January and 1 dollar to 105 yen in April, then the a. dollar has depreciated with respect to the yen b. dollar has appreciated with respect to the yen c. value of the dollar has remained the same IV.??? IV.??? IV.??? IV.??? IV.??? d. dollar is overvalued e. dollar is undervalued 2116. The United States has a trade _____ in goods and a trade _____ services. a. Surplus; surplus in b. Surplus; deficit in c. Surplus; sanction on IV.??? d. Deficit; surplus in e. Deficit; deficit in 2117. About one half of the total dollar value of U.S. imports and exports is trade between the U.S. and: a. The OPEC members b. Mexico c. Other industrialized countries d. China e. Canada 2118. All of the following countries uses the euro as currency EXCEPT: a. Sweden b. France c. Germany d. Spain e. Finland 2119. Economists demonstrate that voluntary trade makes both trading partners better off using the concepts of a. absolute and comparative advantage b. absolute advantage and specialization c. comparative advantage and specialization d. opportunity cost and comparative advantage e. absolute advantage and opportunity cost 2120. What was formed during the Uruguay Round of the GATT? a. the WTO b. NAFTA c. the European Union d. the European Community e. the IMF 2121. Which of the following is NOT an argument for limiting foreign trade? a. the low wage argument b. the infant-industry argument c. the cost-benefit argument d. the strategic-industry argument e. the unfair-competition argument 2122. What is arbitrage? a. inexplicable increases in inflation b. setting exchange rates based on political rather than economic factors c. taking advantage of different prices for the same good in different markets d. an exchange rate based on the market demand for a currency e. the method by which trade disputes between countries are usually solved 2123. What do economists call the comparison among producers of a good according to their productivity? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? a. b. c. d. e. productive advantage absolute advantage comparative advantage production advantage efficiency 2124. Mexico can produce either 1,000 umbrellas or 5,000 galoshes. Canada can produce either 10,000 umbrellas or 15,000 galoshes. Mexico has a. a comparative advantage in umbrellas b. a comparative advantage in galoshes IV.??? c. an absolute advantage in umbrellas d. an absolute advantage in galoshes e. an absolute advantage in both umbrellas and galoshes 2125. Which of the following is a credit towards a country’s balance of payments? a. merchandise imports b. imports of services c. net transfers IV.??? d. capital outflows e. net investment income 2126. What has the United States done in order to protest Fidel Castro’s communist government in Cuba? a. erected an embargo on Cuban goods b. sent Cuban refugees abroad c. raised tariffs on Cuban goods d. assigned a quota on Cuban goods e. allowed all corporations to enter Cuba 2127. Which of the following provides an argument for free trade? a. Protectionism b. The principle of absolute advantage c. The principle of comparative advantage d. The law of diminishing returns e. Rational expectations theory 2128. About how much percent of the world’s population lives in developing countries? a. 35 45 55 65 75 2129. Who benefits from the euro appreciating relative to the dollar? a. U.S. consumers of imports and European customers of imports b. U.S. consumers of imports and European producers of exports c. U.S. consumers of imports and U.S. producers of exports d. European consumers of imports and U.S. producers of exports e. European consumers of imports and European producers of exports 2130. Countries wishing to join the European Union must do which of the following? I. have a democracy II. have a market economy III. accept European Union law IV.??? IV.??? IV.??? IV.??? IV.??? IV. adopt the euro a. I and III only b. II and IV only c. I, II, and III only d. II, III, and IV only e. I, II, III, and IV 2131. Which doesn’t exasperate the difficulties of less developed countries? a. limited natural resources b. too few people c. low level of human capital d. shortage of physical capital e. low technological progress 2132. If Japan has an absolute advantage in manufacturing automobiles and semiconductors when compared to the United States, then the United States a. should import automobiles from Japan b. should import semiconductors from Japan c. should import both automobiles and semiconductors from Japan d. can still have a comparative advantage in automobile production e. can still have an absolute advantage in semiconductor production IV.??? IV.??? 2133. In one day a farmer can produce either 32 oz of potatoes or 8 oz of meat. During the same day, a rancher can produce either 48 oz of potatoes or 24 oz of meat. Who has the comparative advantage in the production of potatoes and what is the person’s oppo a. the farmer; 1/2 oz of meat IV.??? b. the rancher; 1/4 oz of meat c. the farmer; 4 oz of meat d. the rancher; 2 oz of meat e. the farmer; 1/4 oz of meat 2134. International trade always a. makes one of the trading partners worse off b. leads to a loss of jobs in both countries c. makes both trading partners better off d. leads to inflation in one of the countries e. induces inflation in both countries 2135. A country can improve its balance of trade by a. subsidizing exports b. increasing its capital account balance c. decreasing its current account balance d. decreasing exports e. decreasing import tariffs 2136. Which of the following is NOT one of the World Bank’s Millennium Development Goals? a. eradicate poverty b. achieve universal primary education c. promote gender equality d. combat HIV/AIDS, malaria, and other diseases e. eliminate corruption 2137. What do the Kennedy Round, Tokyo Round, and Uruguay Round have in common? IV.??? IV.??? IV.??? IV.??? a. b. c. d. e. types of ammunition made illegal by international law negotiation sessions to reduce tariffs peace treaties types of international laws United Nations’ meeting places 2138. Which of the following created a free-trade bloc between the United States, Canada, and Mexico in 1994? a. FTAA b. NAFTA IV.??? c. the WTO d. GATT e. MERCOSUR 2139. The most recent round of World Trade Organization (WTO) negotiations is the a. Doha Round b. Kennedy Round c. Uruguay Round d. Geneva Round e. Tokyo Round IV.??? 2140. Less-developed countries with valuable resources, such as oil, are hindered from developing by all of the following EXCEPT a. high infant mortality rates b. foreign competition IV.??? c. a lack of investment from foreigners d. a lack of an educated labor force e. undiversified economies 2141. Most developed countries have a per capita GDP exceeding: a. $1000 b. $3000 c. $10000 d. $20000 e. $30000 IV.??? 2142. As of 2009, which of the following eligible members of the European Union have BOTH NOT adopted the euro? a. Slovakia and Luxembourg b. Germany and Italy IV.??? c. The UK and Denmark d. Spain and France e. Austria and Finland 2143. GATT was succeeded by the: a. North American Free Trade Agreement. b. European Union. c. United Nations. d. World Bank. e. World Trade Organization. 2144. The GATT was superseded by the a. WTO b. NAFTA c. IMF IV.??? IV.??? d. EU e. EMU 2145. The United States economy is referred to as a mixed economy because it has the characteristics of which two systems? a. Unregulated markets and regulated markets b. Monopolistically competitive markets and public markets c. Pure capitalism and democratic socialism d. Public markets and private markets e. Competitive markets and government involvement 2146. If exports equal $100 billion and imports equal $150 billion, then there is: a. A budget surplus b. A budget deficit c. Balanced trade d. A trade surplus e. A trade deficit 2147. Educated workers emigrating from less-developed countries is known as: a. brain drain. b. capital flight. c. the catch-up effect. d. the income effect. e. labor flight. 2148. Prior to 1933, foreign exchange rates were established by the a. market b. International Monetary Fund c. Bretton Woods System d. gold standard e. Hoover accords 2149. The weakest argument in favor of a tariff on foreign steel imported into the United States is to a. protect U.S. jobs b. level the playing field between the U.S. and other steel producing countries c. raise revenue for the U.S. government d. protect a vital U.S. industry e. diversify the industrial structure of the U.S. 2150. The GATT is also known as the a. General Agreement on Taxes and Tariffs b. Global Agreement on Taxes and Tariffs c. Global Agreement on Taxes and Trade d. General Agreement on Tariffs and Trade e. Global Agreement on Tariffs and Trade 2151. Prior to 1994, the European Union was known as the a. Economic and Monetary Union b. European Economic Union c. European Community d. European Coalition e. European Free Trade Association 2152. The interaction of supply and demand for currencies determines the exchange rate under IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? a. b. c. d. e. a fixed exchange rate system dollarization a floating exchange rate system a pegged exchange rate system a managed exchange rate system 2153. Which of the following is NOT characteristic of stagflation? a. reduced productivity b. slow growth c. inflation d. privatization e. unemployment 2154. The official currency of the European Union is called the a. emu b. euro c. pound d. dollar e. ecu 2155. Which of the following countries is INCORRECTLY matched with its currency? a. the United States - dollar b. the United Kingdom - euro c. Mexico - peso d. Japan - yen e. Canada - dollar 2156. Which is NOT an argument for protectionism? a. infant industry argument b. national security argument c. employment argument d. free trade argument e. cheap foreign labor argument 2157. What do economists call the comparison among producers of a good according to their opportunity cost? a. absolute advantage b. comparative advantage c. competitive advantage d. compensating advantage e. complete advantage 2158. Which of the following is a protectionist measure? a. a balanced budget policy b. deficit spending c. currency devaluation d. tax cuts e. a decrease in the money supply 2159. The Maastricht Agreement established the a. European Community b. Common Market c. Economic Community d. European Union IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? IV.??? e. Monetary System 2160. Immediately after the fall of the Soviet Union, most post-communist states had to deal with a. high output levels b. low inflation c. a shrinking debt level d. a growing middle class e. a shrinking economy 2161. If the exchange rate between dollars and yen is 105 yen per dollar, the value of one yen is a. $1.05 b. $0.95 c. $0.8 d. $0.75 e. $0.5 IV.??? IV.??? 2162. Since 1960, the United States has had economic sanctions in place against a. Iran b. Venezuela c. Cuba IV.??? d. North Korea e. South Africa 2163. Which of the following is NOT a developing country? a. Norway b. Egypt c. China d. Hungary e. Mexico 2164. Which phrase describes the current international exchange rate system? a. rigidly fixed exchange rates b. freely floating exchange rates c. a blend of fixed and floating exchange rates d. exchange rates pegged to the U.S. dollar e. a single currency system 2165. In 2000, the LARGEST category of imports into the United States was a. industrial supplies and materials b. capital goods except automotive c. automotive goods d. petroleum and related products e. agricultural and related products 2166. Assume that the US trades with Japan. If the supply of dollars increases, then a. demand for yen will increase b. the price of yen will decrease c. the supply of yen will decrease d. the quantity of dollars demanded will decrease e. the price of dollars will decrease 2167. Which of the following is NOT a characteristic shared by most developing nations? IV.??? IV.??? IV.??? IV.??? IV.??? a. b. c. d. e. non-traditional roles of women and children in society low per capita GDP rapid population growth dependency on agricultural production limited resources 2168. The Uruguay Round of the General Agreement on Tariffs and Trade (GATT) resolved to do all of the following EXCEPT a. eliminate import quotas on textiles b. create the World Trade Organization (WTO) IV.??? c. establish a dispute settlement process d. protect intellectual property rights e. promote the use of agricultural subsidies 2169. Which concept does NOT fit within the context of discussing gains from trade? a. specialization b. division of labor c. comparative advantage d. interdependence e. elasticity of supply IV.??? 2170. The balance on the current account includes all of the following components EXCEPT a. net export of goods b. net export of services IV.??? c. net investment income d. net deferred revenue e. net transfer payments 2171. The Maastricht Treaty led to the creation of the a. World Bank b. World Health Organization c. General Agreement on Tariffs and Trade d. European Economic Community e. European Union 2172. Which of the following is NOT a consequence of tariffs and import quotas? a. The domestic price of the good in question increases. b. The economic welfare of domestic consumers declines. c. The economic welfare of domestic producers increases. d. Deadweight losses develop. e. The economic welfare of foreign producers increases. 2173. Which document led to the European Economic and Monetary Union? a. the Munich Protocol b. the Doha Agenda c. the Bretton Woods Papers d. the Maastricht Treaty e. the Basel Framework 2174. The 1944 Bretton Woods conference a. exacerbated the Latin American debt crisis b. formalized the North American Free Trade Agreement c. established the World Bank and the International Monetary Fund d. was the inaugural meeting of the World Trade Organization IV.??? IV.??? IV.??? IV.??? e. renamed the European Community as the European Union 2175. Many people living in the developing world often work as a. industrial laborers b. financial advisors c. corporate employees d. service workers e. subsistence farmers IV.??? 2176. Which trade agreement recently entered into by the United States, Canada, and Mexico? a. NAFTA b. CAFTA IV.??? c. GATT d. NATO e. UNTO 2177. If a person can produce a good at a lower opportunity cost than others: a. The person has a comparative advantage in that good b. The person has an absolute advantage in that good c. The person has monopoly control over that good d. The person has a marginal advantage in that good e. The person has lower productivity for that good 2178. Appreciation of a country’s currency makes a. imports relatively cheaper, helping domestic producers b. imports relatively more expensive, helping foreign consumers c. exports relatively cheaper, helping domestic consumers d. exports relatively cheaper, helping foreign producers e. exports relatively more expensive, hurting domestic producers IV.??? IV.??? 2179. In the market for cars and computers, Japan has an absolute advantage in computers over Germany but a comparative disadvantage. Which of the following should Japan do? a. produce both computers and cars and refuse to trade with Germany b. produce cars and trade with Germany for computers IV.??? c. produce computers and trade with Germany for cars d. produce both computers and cars but trade the cars to Germany for computers e. produce neither and instead find another market to pursue 2180. Which of the following is a feature of NAFTA? a. Member nations set their own foreign exchange rates. b. Member nations use a common currency. c. A free trade zone is established across member nations. d. The United Nations oversees enforcement of the agreement. e. The World Trade Organization oversees enforcement of the agreement. 2181. If the price of coffee beans in California is higher than the price of coffee beans in Louisiana, which of the following will MOST likely happen to prices? a. Both the Californian price and the Louisianan price will not change. b. The Californian price will drop to meet the Louisianan price. c. The Louisianan price will rise to meet the Californian price. d. The Californian price will drop while the Louisianan price rises until they meet. IV.??? IV.??? e. Both the Californian and the Louisianan price will fall 2182. The United States is: a. the world’s largest importer. b. the world’s fifth-largest exporter. c. ranked first on the HDI. d. the world’s second-largest economy. e. the country with the highest per capita income. 2183. Which of the following countries has the highest per capita Gross National Income? a. India b. Saudia Arabia c. Italy d. China e. Russia 2184. Which of the following is a characteristic NOT shared by developing countries? a. low per capita GDP b. limited resources c. slow population growth d. dependency on agricultural production e. inefficient use of resources 2185. Which of the following countries is classified as developed? a. Turkey b. Nigeria c. India d. Mexico e. Australia 2186. Which multinational organization assumed GATT’s responsibilities for overseeing trade agreements and resolving trade conflicts? a. IMF b. WTO c. GATT-2 d. NAFTA e. Export - Import Bank 2187. The International Monetary Fund was created by the a. Bretton Woods agreement b. World Bank c. European Union d. NAFTA e. World Trade Organization 2188. What measurement includes all purchases and sales of financial assets to and from citizens and companies of other nations? a. capital account balance b. exchange rate c. current account balance d. trade deficit e. capital accumulation IV.??? IV.A.1 IV.A.2 IV.A.2 IV.A.3 IV.A.3 IV.A.3 2189. Which country gave the most in unofficial assistance to other countries in 1999? a. Germany b. France c. United Kingdom d. Netherlands e. Italy 2190. What factor determines any nation’s comparative advantage? a. economies of scale b. lowest price levels c. opportunity costs d. lowest exchange rates e. regulations IV.A.6 IV.B.1 2191. With floating foreign exchange rates, the value of a currency is determined by the laws of a. the country that prints the currency b. the General Agreement on Tariffs and Trade IV.B.2 c. the International Monetary Fund d. the Bretton Woods Treaty e. demand and supply 2192. If the exchange rate changes from 1 euro equals $1.38 to 1 euro equals $1.50, then the U.S. dollar: a. Has appreciated b. Has depreciated c. Is overvalued d. Is undervalued e. Unchanged in value 2193. Which of the following exists when the exchange rate between two currencies reflects the relative purchasing power of those currencies? a. balance of payments b. balance of trade c. purchasing power balance d. purchasing power equilibrium e. purchasing power parity 2194. Which type of exchange rates were introduced at the Bretton Woods Conference of 1944? a. Wartime b. Floating c. Adjustable-peg d. Pegged e. International 2195. Export-oriented plants, most often, but not exclusively, located near the U.S.-Mexico border are called _____. a. border plants b. Mexican plants c. Mexican border plants d. Maquiladoras e. haciendas IV.B.2 IV.B.2 IV.B.2 IV.C.1 2196. The European Union (EU) abolished tariffs on products _____ and established a common system of tariffs on products _____. a. Traded among member nations; imported from outside the EU b. Imported from outside the EU; traded among member nations c. Exported outside the EU; imported from outside the EU d. Imported from outside the EU; exported outside the EU e. Traded among member nations; exported outside the EU 2197. Which organization enforces the rules established by the General Agreement on Tariffs and Trade? a. World Trade Organization b. United Nations Security Council c. International Monetary Fund d. International Trade Association e. Trade Enforcement Council 2198. GATT is an abbreviation for a. General Accounting Trade Techniques b. Global Automated Traveler Tracking c. General Agreement on Tariffs and Trade d. Global Agreement on Trade and Tariffs e. General Agreement on Trade and Technology IV.D.1 IV.D.1 IV.D.1 2199. One of the unfortunate consequences of the globalization of U.S. economy is a. an unfavorable balance of trade b. an unfavorable balance of payments IV.D.1 c. the loss of high-paying jobs to other countries d. the loss of low-paying jobs to other countries e. a higher rate of inflation 2200. Which region of the world has the greatest external debt service as a percentage of gross national income? a. South Asia b. Sub-Saharan Africa c. Latin America and Caribbean d. East Asia and Pacific e. Middle East and North Africa 2201. The output of each additional unit of labor is referred to as a. average product revenue b. average physical revenue c. marginal physical revenue d. marginal physical product e. marginal revenue product 2202. The MOST IMPORTANT factor in determining workers’ incomes is a. the market value of what they produce b. the profit rate of their employers c. the industry in which they are employed d. their level of education e. their level of union membership 2203. Maximum wages are BEST determined by a. marginal product b. marginal revenue IV.F.2 labor labor labor c. marginal physical product d. marginal revenue product e. marginal physical revenue 2204. How are different workers of the same labor supply curve related? a. Those on the higher portion earn higher wages b. They are productively identical c. They live in the same area d. Those on the lower portion are less productive e. Those on the lower portion are more educated 2205. The labor demand curve is downward-sloping due to a. increasingly high wages demanded by monopsonists b. the prevalence of labor unions c. the law of diminishing marginal returns d. the tendency for labor productivity to decrease over time e. the free rider problem 2206. The labor force does NOT include a. unemployed people b. full-time workers c. part-time workers d. military personnel e. any workers under age 18 2207. In a perfectly competitive economy, workers will be paid according to the value of their: a. Total productivity b. Marginal revenue product c. Average revenue product d. Marginal disutility of labor e. Marginal rate of substitution 2208. Who is MOST associated with the economic theory of monetarism? a. Garrett Hardin b. Milton Friedman c. Adam Smith d. David Ricardo e. Karl Marx 2209. To achieve economic growth, monetarists favor a steady increase in a. The money supply b. Aggregate demand c. Government spending d. Nominal interest rates e. Real interest rates 2210. Monetarists believe that the velocity of money a. is constant b. varies inversely with the rate of inflation c. is relatively stable d. is not related to the rate of inflation e. varies inversely with the price level 2211. The effect of open-market operations on the money supply is determined MOST DIRECTLY by labor labor demand curve labor force marginal revenue prod monetarism monetarists monetarists monetary policy a. b. c. d. e. the required reserve ratio the expenditure multiplier the velocity of money the level of excess reserves demand for money 2212. A bank’s least risky customers can borrow at the a. prime rate b. discount rate c. federal funds rate d. surplus rate e. internal rate monetary policy 2213. Relative to tight monetary policy, loose monetary policy is characterized by a. a more restricted money supply b. a lower rate of inflation monetary c. a higher discount rate policy d. lower interest rates e. increased government spending 2214. Monetary policy in the US is overseen by a. the Federal Reserve b. the Office of Management and Budget c. the Bureau of Labor Statistics d. the Office of the President e. state governments 2215. A policy that the Federal Reserve will MOST LIKELY implement to counteract a recession is known as a(n) a. contractionary money policy b. inflationary money policy c. tight money policy d. loose money policy e. hard money policy 2216. Unlike currency, savings accounts a. are subject to Gresham's law b. must be backed by commodities c. are relatively liquid d. are not intrinsically valuable e. are included in M2 2217. Bananas CANNOT function as a(n) a. store of value b. medium of exchange c. standard of value d. divisible currency e. available currency 2218. Money that you can exchange at a fixed rate for gold is called a. fiat money b. demand money c. hard money d. commodity money e. barter money monetary policy monetary policy money money money 2219. Anything that is generally accepted in exchange as a payment for goods or services is called a. profit b. income money c. savings d. money e. demand 2220. Which of the following will decrease the gold content of a currency on the gold standard? a. an increase in gold reserves b. a decrease in gold reserves c. a trade deficit d. an increase in foreign investment e. a debasement 2221. Place the following in order of liquidity from lowest to highest. I. Savings accounts II. Currency III. Demand deposits a. III, I, II b. I, III, II c. I, II, III d. II, III, I e. III, II, I money money 2222. Money is a standard on which prices are based. This is an example of what function of money? a. exchange rate b. unit of account money c. medium of exchange d. store of value e. relative price 2223. Which measure of the money supply comprises ONLY currency? a. M0 b. M1 c. M2 d. M3 e. L 2224. The frequency with which a given unit of currency is spent is its a. velocity b. expenditure multiplier c. balanced multiplier d. supply e. derived demand 2225. The demand for money is the relationship between the amount of money people want to hold and what other factor? a. the supply of money b. transaction demand c. the exchange rate d. the interest rate e. opportunity cost money money money 2226. Which of the following BEST describes the ability of money to pay for purchases of any price? a. scarcity b. portability c. durability d. stability e. divisibility 2227. Which of the following is NOT included in M1? a. currency b. demand deposits c. travelers’ checks d. NOW accounts e. money market accounts 2228. Which of the following is the broadest measure of money supply? a. M1 b. M2 c. M3 d. M4 e. M5 2229. Which of the following is NOT one of the characteristics of money? a. portability b. rarity c. durability d. acceptability e. stability 2230. All of the following are components of M2 EXCEPT a. demand deposits b. eurodollars c. money market accounts d. savings accounts e. currency 2231. The money supply can also be known as a. M1 b. M2 c. M3 d. the current account e. disposable income 2232. What is the economic term for money in checking accounts at commercial banks? a. money market funds b. demand deposits c. certificates of deposit d. reserves e. hard currencies 2233. Hard currencies are a. intrinsically valuable b. pegged to the US dollar c. backed by gold d. exchanged on a floating exchange rate system money money money money money money money money e. in high international demand 2234. What is NOT included in the measurement of the M2 money supply? a. travelers checks b. money market mutual funds c. currency and coins held by the public d. savings accounts e. credit card accounts 2235. Money that has value because of a central authority is called a. margin money b. fiat money c. hard money d. commodity money e. demand money 2236. How are demand deposits accessed? a. by trading currency b. by withdrawing CDs c. by trading commodities d. by writing checks e. by repaying loans 2237. The money market consists of a. demand deposits b. short-term deposits c. savings accounts d. hard currency e. corporate stocks 2238. Money with no intrinsic value is called a. fiat money b. common money c. free money d. good money e. bad money 2239. Savings accounts with over $100,000 are included in a. M1 b. M2 c. M3 d. M1 and M2 e. M1, M2, and M3 2240. Effective money must be all of the following EXCEPT a. durable b. indivisible c. portable d. scarce e. acceptable 2241. Money is categorized into M1, M2, and M3 based on its a. liquidity b. interest collecting power c. worth d. divisibility money money money money money money money money e. susceptibility to ifnlation 2242. The largest component of M1 is a. checkable deposits b. savings accounts c. money market accounts d. currency e. traveler’s checks 2243. Currency differs from money in that it a. requires a coincidence of wants b. cannot be used as a store of value c. is issued by a central authority d. cannot be converted from one form to another e. is not available on demand 2244. Funds that earn interest, but can be withdrawn from depository institutions at any time are called: a. Time deposits b. Certificates of deposit c. Savings deposits d. Traveler’s checks e. Currency 2245. Money in savings accounts is functioning as a a. unit of account b. medium of exchange c. measure of demand d. indicator of wealth e. store of value money money money money 2246. Given that the US dollar is a fiat currency, which of the following will happen if the Treasury sells gold on the open market? a. people will lose faith in the dollar b. real wages will decrease money c. the supply of dolalrs will increase d. the dollar will appreciate e. the dollar will not be affected 2247. As of 2009, the largest officially published component of the money supply is a. L b. M0 c. M1 d. M2 e. M3 money 2248. Assuming that the marginal propensity to consume is 0.5, if the government intends to increase aggregate output by $1,000,000,000, it should reduce taxes by a. $500,000,000 b. $750,000,000 money c. $1,000,000,000 multiplier d. $1,500,000,000 e. $2,000,000,000 2249. If the reserve requirement is 10 percent, a bank with $500,000 in demand deposits can loan out a maximum of a. $50000 b. $150000 c. $250000 d. $350000 e. $450000 2250. In a perfectly competitive market, a profit-maximizing firm will produce the quantity of output at which marginal cost: a. Equals price (as long as price exceeds average variable costs) b. Is maximized c. Is minimized d. Equals the minimum average variable cost (as long as marginal cost exceeds price) e. Equals the minimum average fixed cost (as long as marginal cost exceeds price) 2251. Most of the US National Debt is owed to a. private domestic investors b. private foreign investors c. the Treasury d. the World Bank e. foreign governments money multiplier mr=mc national debt 2252. The costs imposed on individuals who hold less cash as a result of inflation are referred to as: a. Menu costs b. Shoe-leather costs Outside info c. Sunk costs d. Uncertainty costs e. Sticky costs 2253. A person that is willing and able to work but not seeking work is considered: a. Marginally unemployed b. Cyclically unemployed c. Structurally unemployed Outside info d. A disgruntled worker e. A discouraged worker 2254. M1 consists of: a. Coins b. Coins and paper money c. Coins, paper money, and checkable deposits d. Coins, paper money, checkable deposits, and savings deposits e. Coins, paper money, checkable deposits, savings deposits, and time deposits Outside info 2255. Which of the following refers to price levels increasing at a decreasing rate? a. Deflation b. Disinflation c. Hyperinflation Outside info d. Stagflation e. Reflation 2256. When a government raises revenue by printing money, it is engaging in: a. An inflation tax b. An inflationary spiral c. An unemployment tax d. A sin tax e. A supply-side tax 2257. Eurodollars are: a. Short-term loans that are usually resold the following day b. The official currency of the Eurozone c. Savings accounts held in European countries d. Dollar-denominated demand deposits held in banks outside the United States e. Government issued bonds from members of the European Union 2258. What are Maquiladoras? a. South Americans who immigrate into the United States legally b. Export firms that are exempt from paying import duties on raw materials c. Gangs of Mexican bandits who raid small U.S. towns just over the U.S. Mexico border d. A type of food popular in the southwest United States among immigrants e. Mexican diplomats 2259. A river polluted with waste dumped by businesses is an example of: a. A normative economic issue b. A public good c. The tragedy of the commons d. A positive externality e. The double coincidence of wants 2260. What is frictional unemployment? a. Unemployment caused by the time it takes to look for a job b. Unemployment caused by insufficient aggregate demand c. Unemployment caused by a decrease in business activity d. Unemployment caused by changes in the weather e. Unemployment caused by an increase in discouraged workers 2261. The transaction demand for money is: a. Inversely related to interest rates b. Directly related to interest rates c. Inversely related to nominal GDP d. Directly related to nominal GDP e. Inversely related to real GDP 2262. The sticky-wage theory provides justification for: a. The aggregate supply curve's positive slope b. The aggregate supply curve's horizontal slope c. The aggregate supply curve's vertical slope d. The aggregate demand curve's positive slope e. The aggregate demand curve's negative slope 2263. Workers without jobs because the current wage exceeds the competitive equilibrium wage are considered: a. Structurally unemployed b. Frictionally unemployed c. Cyclically unemployed Outside info Outside info Outside info Outside info Outside info Outside info Outside info Outside info d. Seasonally unemployed e. Not a part of the labor force 2264. The costs incurred when firms are forced to change prices as a result of inflation are known as: a. Sticky costs b. Menu costs c. Sunk costs d. Aggregate costs e. Pricing costs 2265. The CPI-U measures changes in the prices of: a. Final goods and services purchased by urban consumers b. Final goods and services produced by urban producers c. Final goods and services produced by unemployed consumers d. Final goods and services purchased by rural consumers e. Final goods and services purchased by underage consumers 2266. How many years do US utility patents last? a. 7 b. 12 c. 20 d. 70 e. 100 2267. The Phillips curve illustrates the a. combination of goods that can be produced b. trade-off between inflation and unemployment c. distribution of income in a population d. dependency between two goods or services e. revenue generated from taxation 2268. A linear production possibilities curve demonstrates a. the law of increasing opportunity costs b. the law of diminishing marginal returns c. the invisible hand d. constant opportunity costs e. the income effect 2269. Under optimal conditions, a country operating at its natural rate of unemployment will produce a. below its aggregate demand curve b. on the Keynesian range of its aggregate supply curve c. inside its production possibilities curve d. on its production possibilities curve e. above its aggregate demand curve Outside info Outside info patents phillips ppf ppf 2270. Which of the following would NOT cause a production possibilities curve to shift outward? a. increased worker productivity b. focusing on the production of one good ppfs c. advances in technology d. increased capital investment e. a larger labor pool 2271. Which of these situations is NOT considered to be part of microeconomics? a. determining the best price for public goods b. deciding how many employees to hire c. determining the unemployment rate price controls d. solving a quality control problem at a factory e. setting a price ceiling on gasoline 2272. If Daniel secures a job that pays minimum wage, then a. he remains unemployed b. he is defying Say's law c. he is earning an equilibrium wage d. his productivity is worth at least minimum wage e. the supply of labor is too great 2273. A surplus results when a a. price ceiling is set below the equilibrium price b. price ceiling is set above the equilibrium price c. price floor is set below the equilibrium price d. price floor is set above the equilibrium price e. price floor is set at the equilibrium price 2274. A shortage of goods results when a a. price ceiling is set below the equilibrium price b. price ceiling is set above the equilibrium price c. price floor is set below the equilibrium price d. price floor is set above the equilibrium price e. price floor is set at the equilibrium price 2275. A legally established maximum price that a good can be sold at is referred to as a: a. Price ceiling b. Price floor c. Quota d. Subsidy e. Market clearing price 2276. What results when the quantity supplied of a good is GREATER than the quantity demanded? a. deficit b. competition c. surplus d. marginal cost e. monopoly 2277. When the quantity producers are willing and able to supply exceeds the amount consumers are willing and able to demand, what results? a. shift in demand b. equilibrium c. shortage d. shift in supply e. surplus 2278. A shortage of farm produce could be caused by a. A decrease in the price of diesel b. A price ceiling on produce c. An increase in demand for produce price controls price controls price controls price controls price controls price controls price controls d. A price floor on farm equipment e. A price ceiling on farm equipment 2279. A government-mandated maximum price that can be charged for a good or service is known as a a. ceiling b. floor price controls c. limit d. maximum e. bound 2280. An unintended consequence of enacting a minimum wage would MOST likely be a(n): a. decrease in the supply of labor b. increase in the supply of labor c. labor shortage d. labor surplus e. trade surplus price controls 2281. Which of the following could be considered an unintended consequence of rent control? a. An increase in housing prices b. A decrease in housing prices price controls c. A housing shortage d. A housing surplus e. An increase in housing quality 2282. Which of the following statements are TRUE regarding prices? I. they facilitate product comparison II. they help producers gauge profitability III. they help consumers obtain maximum utility from their incomes IV. they serve as a store of value a. I and IV only b. II and III only c. I, II, and III only d. I, III, and IV only e. I, II, III, and IV 2283. To encourage innovation the government can grant temporary monopoly rights through the use of a. patents b. price leadership c. collective bargaining d. antitrust laws e. subsidization 2284. All of the following are property rights EXCEPT a. copyrights b. legal contracts c. land ownership d. rent controls e. patents 2285. Property rights are the central issue when discussing a. externalities b. economies of scale price signals property rights property rights property rights c. supply shock d. intellectual property e. eminent domain 2286. Which of the following is required for an economy to function efficiently? a. a consistent trade surplus b. enforceable contracts c. self-sufficiency d. floating exchange rates e. the business cycle 2287. Which of the following represents a protectionist policy? a. the Sherman Act b. the Reciprocal Trade Agreements Act c. the Social Security Act d. the Hawley-Smoot Act e. the Treaty of Rome 2288. Which law states that “supply creates its own demand”? a. the law of diminishing returns b. Says law c. Ricardos law d. the law of supply e. the law of demand 2289. The combination of high unemployment, inflation, and slow economic growth is called a. stagflation b. supply-side economics c. frictional unemployment d. bankruptcy e. price indexing 2290. Inflation coupled with a decrease in real output is referred to as a. Stagflation b. Disinflation c. Demand-pull inflation d. Creeping inflation e. A depression 2291. All of the following measure a nation’s standard of living EXCEPT a. GDP per capita b. average grade completed c. literacy rate d. income per capita e. net national income property rights? protectionism say's law stagflation stagflation standard of living 2292. The best measure available to compare changes in the standard of living in a county over time is: a. Real GDP b. Nominal GDP standard of c. Real GDP per capita living d. Nominal GDP per capita e. Nominal GDP per worker 2293. If an economy accumulates more capital per worker, what will happen to labor productivity and standard of living? a. Labor productivity will increase and standard of living will decrease. b. Labor productivity will decrease and standard of living will increase. c. Labor productivity will decrease and standard of living will decrease. d. Labor productivity will increase and standard of living will increase. e. Labor productivity will increase, but standard of living is not affected. 2294. Agricultural subsidies are intended to a. reduce agricultural exports b. reduce the use of pesticides c. increase agricultural output d. reduce an unwanted surplus of food e. eliminate inefficient producers 2295. The market supply curve demonstrates that a. demand and price are inversely related b. price and quantity supplied are inversely related c. price and quantity supplied are directly related d. demand and quantity supplied are directly related e. demand and quantity supplied are inversely related 2296. The relationship between price and quantity supplied is known as a. demand b. supply c. equilibrium d. the market e. the wealth effect 2297. The long-run aggregate supply curve is a. downward-sloping b. upward-sloping c. indeterminate d. horizontal e. vertical standard of living subsidies supply supply supply 2298. A table showing the relationship between price and quantity supplied is a(n) a. supply curve b. demand curve supply c. supply schedule schedule d. demand schedule e. expenditure schedule 2299. According to supply-side economists, economic growth is derived MOST DIRECTLY from a. tax cuts b. a steadily growing money supply c. increased private investment d. increased consumption e. decreased government expenditure 2300. What is a surplus? a. the amount which quantity demanded exceeds quantity supplied b. the amount which quantity supplied exceeds quantity demanded c. the result of a price floor below the equilibrium price d. the result of a price ceiling above the equilibrium price supply-side economics surplus e. the point where marginal cost equals marginal revenue 2301. The addition of tariffs to a free market that is otherwise in equilibrium creates a. producer surplus b. sunk costs c. social costs d. deadweight loss e. consumer surplus 2302. The largest source of revenue for the federal government is a. tariffs b. capital gains tax c. personal income tax d. corporate income tax e. sales tax 2303. David makes $100,000 a year and pays $30,000 in income taxes. Bryan makes $10,000 a year and pays $3,000 in income taxes. This is an example of what kind of income tax system? a. progressive b. value-added c. regressive d. corporate e. proportional 2304. The government can equalize income distribution by increasing all of the following EXCEPT a. income taxes b. sales taxes c. inheritance taxes d. welfare payments e. luxury taxes 2305. The deforestation of a national forest for lumber would be an example of a. environmentally conscious economic policy b. the redistribution of wealth for the common good c. unreasonable seizure of property by the government d. the overuse of common resources for self-interest e. an action that has a positive externality 2306. What is the name for a good that is rival but not excludable? a. common good b. public good c. private good d. club good e. rare good 2307. All of the following are true of public goods EXCEPT a. there is no direct link between their consumption and payment for them b. they are produced for free c. they encounter the free-rider problem d. they are non-excludable e. they are often provided by the government tariffs tax tax systems taxes tragedy of the commons types of goods types of goods 2308. Which of the following are substitute goods? a. coffee and sugar b. automobiles and gasoline c. fishing poles and tackle d. apples and oranges e. movie tickets and popcorn 2309. Public goods are: a. All goods provided by all levels of government b. Only the goods provided by state and local governments c. Goods that are produced by private businesses d. Goods that no one can be excluded from consuming e. Goods that have positive externalities 2310. An increase in income results in a decrease in demand for a. normal goods b. free goods c. common goods d. market goods e. inferior goods 2311. A rare good is a. not naturally occurring b. found in large quantities c. not necessarily scarce d. always needed by someone e. not valuable 2312. Which of the following is an example of a public good? a. ice cream b. roads c. oil d. music e. airplanes 2313. What largely funds public goods? a. donations from philanthropists b. community service work c. government borrowing d. taxation e. nothing, public goods are free to produce 2314. Air and sunlight are two examples of a. inferior goods b. free goods c. utilitarian goods d. market goods e. economic goods 2315. A public bench falls into disrepair due to overuse. This is an example of a. the free rider problem b. the communal problem c. the indifference problem d. consumer negligence e. the tragedy of the commons types of goods types of goods types of goods types of goods types of goods types of goods types of goods types of goods 2316. A congested non-toll road is an example of a. a public good b. a private good c. a common good d. a club good e. a non-scarce good 2317. Public goods must be BOTH a. rivaled and excludable b. non-rivaled and excludable c. non-rivaled and non-excludable d. rivaled and non-excludable e. free and non-excludable types of goods types of goods 2318. The existence of which of the following is LEAST LIKELY to lead to a market failure? a. public goods b. positive externalities types of c. imperfect competition goods d. government subsidies e. free goods 2319. Who published The Tragedy of the Commons in 1968? a. Adam Smith b. Garrett Hardin c. David Ricardo d. John Maynard Keynes e. Karl Marx 2320. A good that is not scarce is considered: a. A public good b. A free good c. A common good d. A rare good e. An unwanted good 2321. Which of the following is the BEST example of an inferior good? a. steak b. donuts c. wine d. sushi e. cheesecake 2322. An example of a common good is a. a congested toll road b. national defense c. a rock d. the environment e. electricity 2323. A good that is scarce is called a(n): a. Rare good b. Free good c. Economic good d. Private good types of goods types of goods types of goods types of goods types of goods e. Common good 2324. The ability of many people to view a fireworks display and the difficulty of excluding people from viewing a fireworks display are characteristics that make a fireworks display an example of what type of good? a. Competitive b. Private c. Positive d. Public e. Monopoly 2325. Two goods are substitutes if an increase in the price of one good a. decreases the demand of the other good b. increases the demand of the other good c. increases the supply of the other good d. decreases the supply of the other good e. does not affect the other good’s supply or demand 2326. The free rider problem arises with a. Airplanes b. Free goods c. Club goods d. Private goods e. Non-excludable goods 2327. Why are public goods often provided by the government rather than by private firms? a. Because they are non-rivaled b. Because they are non-excludable c. In order to reduce private profits d. Because they are not demanded e. In order to increase government revenue 2328. A discouraged worker is a. a person who is both structurally and cyclically unemployed b. an unemployed person who is no longer searching for work c. a full-time worker who is considering quitting d. a part-time worker who is considering quitting e. included in the labor force 2329. The long term decline in the steel industry led to severe amounts of a. structural unemployment b. frictional unemployment c. seasonal unemployment d. cyclical unemployment e. underemployment 2330. Which of the following is NOT included in the labor force? a. a person who works full time b. an unemployed worker who last looked for a job two years ago c. an unemployed worker who has been fired and is looking for work d. a college student looking for work e. an unemployed worker looking for work in a different area 2331. Which type of unemployment is most sensitive to the business cycle? a. structural unemployment types of goods types of goods types of goods types of goods unemployme nt unemployme nt unemployme nt unemployme nt b. c. d. e. frictional unemployment seasonal unemployment cyclical unemployment underemployment 2332. Recent college graduates searching for their first job experience what type of unemployment? a. structural b. cyclical c. frictional d. educational e. temporary 2333. The unemployment rate is calculated as a percentage of a. real GDP b. the total population c. nominal GDP d. the labor force e. national income 2334. All of the following are TRUE of the Bureau of Labor Statistics' measure of the unemployment rate EXCEPT a. it does not count people working part time seeking full time work b. it does not count people who have become discouraged from seeking work c. it does not account for those seeking jobs for the first time d. it does not count people who stopped receiving unemployment checks e. it does not account for the wage differences in new and old jobs 2335. A recent college graduate who is looking for a job is BEST described as a. Structurally unemployed b. Not in the labor force c. Frictionally unemployed d. Cyclically unemployed e. Employed 2336. The U.S. unemployment rate is approximately a. 1 percent b. 5 percent c. 10 percent d. 15 percent e. 20 percent 2337. Frictional unemployment can best be seen with a. a union worker striking for better wages b. a worker laid off due to a slow economy dragging down the companies profits c. a worker quitting his job to search for a job in a better location d. a worker being laid off because their job is not required any more e. a worker who has not looked for a job in 8 weeks 2338. Frictional unemployment exists because workers are a. unwilling to move to new locations to find work b. seeking jobs to best suit their skills c. being replaced by machines d. laid off during an economic recession unemployme nt unemployme nt unemployme nt unemployme nt unemployme nt unemployme nt unemployme nt e. lacking necessary job skills 2339. Mrs. Smith quit her job as a clerk at the grocery store to find a job as a sales representative. The time Mrs. Smith spends looking for a job is a. structural unemployment b. cyclical unemployment unemployme c. underemployment nt d. frictional unemployment e. temporary unemployment 2340. If a country has a population of 1,000,000, a labor force of 800,000, and 200,000 unemployed people, what is its rate of unemployment? a. 0.2 b. 0.25 c. 0.4 d. 0.75 e. 0.8 2341. The labor force participation rate measures the amount of people that are a. employed as a percentage of labor force b. employed as a percentage of total population c. unemployed as a percentage of total population d. employed as a percentage of the unemployed population e. employed or actively seeking work as a percentage of the population 2342. The size of the labor force is underestimated because it does NOT include a. part-time workers b. discouraged workers c. waiters d. business owners e. unemployed people 2343. If the country was running at the full employment level of unemployment, which of the following would exist? a. structural unemployment b. frictional unemployment c. marginal unemployment d. cyclical unemployment e. no unemployment 2344. If Mary's job is eliminated in order to cut costs, then she CANNOT be a. in the labor force b. cyclically unemployed c. a skilled worker d. an unskilled worker e. frictionally unemployed 2345. What level of unemployment is considered full employment? a. 0% b. 1% c. 2% d. 3% e. 4% 2346. Which of the following would correctly measure the labor force? a. unemployment rate times population unemployme nt unemployme nt unemployme nt unemployme nt unemployme nt unemployme nt unemployme nt b. c. d. e. (employed workers minus unemployed workers) / unemployment rate unemployment rate divided by labor force participation rate (1 / labor force participation rate) times employed workers employed workers plus unemployed workers 2347. A worker that loses his or her job during a recession is BEST described as a. a discouraged worker b. not in the labor force c. cyclically unemployed d. structurally unemployed e. frictionally unemployed 2348. In the United States, the labor force consists of: a. Everyone in a population b. Everyone 16 and older in a population c. Everyone 16 and older who is employed d. Everyone 16 and older who wants to be employed e. Everyone 16 and older who is employed or seeking employment 2349. US unemployment statistics are regularly compiled by a. the Department of the Treasury b. the Federal Trade Commission c. the Bureau of Labor Statistics d. the Federal Reserve e. the Internal Revenue Service unemployme nt unemployme nt unemployme nt 2350. If Henry is fired because his programming knowledge is out of date, then he is a. Industrially unemployed b. Cyclically unemployed unemployme c. Frictionally unemployed nt d. Horizontally unemployed e. Structurally unemployed 2351. A union initiative to negotiate wage rates or other working conditions is known as a. collusion b. a cartel c. collective bargaining d. a picket e. a strike union 2352. During a labor dispute, a group of employees refuses to work. This strategy is known as a. collusion b. a lockout unions c. an embargo d. a picket e. a strike 2353. An employer excluding employees from the workplace is using which of the following labor dispute strategies? a. a lockout unions b. collective bargaining c. a picket d. an embargo e. a strike 2354. Which 1935 act recognized the legal right of US workers to unionize? a. the Employee Free Choice Act b. the Sherman-Clayton Act c. the Taft-Hartley Act d. the Wagner Act e. the Landrum-Griffin Act 2355. Unionization MOST DIRECTLY affects a. demand for labor b. the supply of labor c. employer profits d. the unemployment rate e. inflation 2356. How can unions raise wages for their members? a. by lobbying for additional imports b. by decreasing demand for labor c. through collective bargaining d. by enforcing yellow-dog contracts e. by increasing the supply of labor 2357. The utility that Shirley gains from watching a movie in the movie theater is twice that of renting a movie. Based on this information, which of the following statements is TRUE? a. Shirley watches two movies for every movie she rents b. the marginal utility of renting a movie is greater c. Shirley would pay more for a movie rental than a movie ticket d. the opportunity cost of a movie ticket is half a rental e. Shirley gets just as much utility out of one movie as two rentals unions unions unions utility 2358. Jim is eating burgers. He will reach the point of diminishing marginal returns when the utility of his next burger a. is less than its marginal cost b. is negative utility c. is zero d. exceeds its marginal cost e. decreases 2359. The principle of diminishing marginal utility predicts that consumers will a. buy higher priced goods over lower priced items b. buy more of a product as price decreases c. have higher incomes as demand for a good increases d. spend less for every extra unit demanded e. derive less satisfaction from each additional unit of a good utility 2360. George is reading and gaining utility in the form of preparation for an exam. He should continue doing so until a. His marginal utility equals his marginal cost b. His marginal cost equals zero utility c. His average utility is maximized d. His total utility is maximized e. He reaches the point of diminishing marginal returns 2361. The benefit gained from the consumption of an additional unit is called a. average utility b. marginal utility c. average revenue d. average factor revenue e. net factor revenue 2362. The Maximum attempted to a. increase wages b. decrease wages c. set a price floor on wages d. set a price ceiling on wages e. hold wages constant 2363. Which of the following measures undermined attempts to shore up the French currency in the late 1790s? a. forcing loans on the rich b. selling crown lands c. selling national forests d. raising interior customs e. conscription 2364. As the French Civil War escalated, France’s economy changed from a _____ economy to a _____ economy. a. market, command b. command, market c. traditional, market d. traditional, command e. command, traditional utility V. V. V. 2365. The lack of government power after the Reign of Terror was exemplified by a. the popularity of smuggling b. Napoleon’s military defeats c. a lack of trade with Great Britain V. d. the execution of King Louis XVI e. the depression of the 1780s 2366. Income inequality in France was perpetuated by all of the following EXCEPT a. tax exemptions b. royal birthright c. the Great Fear V. d. seigneurial rights e. commercial rights 2367. All of the following groups were exempt from military service in France’s first universal draft EXCEPT a. shipbuilders b. carters V. c. arms workers d. women e. farmers 2368. In eighteenth-century France, which of the following textile products was the LEAST successful? V. a. lace b. wool c. cotton d. ribbon e. stockings 2369. Total French foreign trade before 1789 was _____ that of British foreign trade and was expanding _____. a. smaller than, more quickly b. larger than, more slowly c. about equal to, more quickly d. larger than, more quickly e. smaller than, more slowly 2370. Prior to November 1790, the assignat a. was a default currency b. was a fiat currency c. was backed by national forests d. was a hard currency e. was a de facto currency 2371. As Parisians demanded additional wage hikes, the government eventually responded by a. imprisoning the protestors b. introducing the Maximum c. disbanding their workshops d. executing the protestors e. reducing nominal wages 2372. France declared bankruptcy in a. 1789 b. 1795 c. 1796 d. 1797 e. 1907 2373. Which of the following areas experienced the greatest economic decline during the French Revolution? a. rural areas b. urban areas c. ports d. northern France e. eastern France 2374. Firms whose prices were set by the Maximum MOST LIKELY faced a a. less elastic cost curve b. less elastic demand curve c. more elastic cost curve d. price ceiling e. unit elastic cost curve 2375. The perpetrators of the Great Fear were a. industrialists b. loyalists c. federalists d. seigneurs e. peasants V. V. V. V. V. V. V. 2376. The General Maximum unintentionally provided an incentive for producers to sell locally because a. it forced producers to sell at the most needy markets b. it undervalued transportation costs c. its prices were only enforced in urban centers d. people willingly paid more for locally produced goods e. prices were lowest in urban centers V. 2377. Why did the French government force loans on the richest taxpayers in the 1790s? a. to help control smuggling b. to remove the assignat from circulation V. c. to help pay its debts d. to force the nobility out of the country e. to help stabilize wage controls 2378. In 1798-1799, which area conquered during Napoleon’s Italian campaign paid the most taxes to France? a. the Roman Republic b. the Cisalpine Republic c. the Helvetic Republic d. the Parthenopean Republic e. the Ligurian Republic 2379. The Old Regime and the French Revolution was published in 1856 by a. Claude Berthollet b. Gaspard Monge c. Jean-Antoine Chaptal d. Alexandre Vandermonde e. Alexis de Tocqueville 2380. Manufactured British goods that displaced French goods after the 1786 commercial treaty could be considered a. complementary goods b. substitute goods c. luxury goods d. common goods e. inferior goods 2381. What was rural Italy’s response to French occupation? a. machine breaking b. open revolt c. smuggling d. support for the French e. tax strikes and draft dodging 2382. The onset of the depression of the 1780s was accelerated by a. an overly simplified tax system b. triangular trade c. high interior customs d. the White Terror e. the Allard Law 2383. Which of the following countries experienced a business crisis in 1786? a. Great Britain b. the Netherlands V. V. V. V. V. V. c. Portugal d. Spain e. Prussia 2384. In 1787, France imported the MOST goods from a. the French colonies b. the Ottoman Empire c. German lands d. England e. the Italian peninsula 2385. The Maximum initially controlled a. arms production b. market supply zones c. grain and bread prices d. industrial profits e. transportation costs 2386. Under the General Maximum, wholesaler profits were set at a. 0% b. 2% c. 5% d. 10% e. 12% 2387. Why were the Maximum’s wage limitations not strictly enforced? a. because they were contributing to inflation b. because they were impossible to enforce on a large scale c. because actual wages were far above mandated levels d. because they were not fully standardized e. because most workers operated in the black market 2388. Which region of France was first affected by the agricultural revolution? a. western France b. central France c. southern France d. eastern France e. northern France 2389. French “hothouse industries” of the 1790s temporarily survived because they were protected by a. fixed wages b. tariffs c. quotas d. the Allard Law e. exclusive access to foreign markets 2390. The Maximum MOST LIKELY caused a(n) a. shortage of goods b. surplus of labor c. price floor on goods d. surplus of goods e. increase in wages 2391. State planning was MOST prevalent during a. the Directory’s rule V. V. V. V. V. V. V. V. b. c. d. e. the Great Fear machine breaking the Reign of Terror King Louis XVI’s reign 2392. The assignat was originally intended to a. fund the purchase of church lands b. stabilize the money supply c. replace the livre d. help establish a central bank e. provide temporary government revenue V. 2393. A rapid collapse in a currency’s value such as that of the assignat in 1795 is known as a. hyperinflation b. creeping inflation V. c. mark-up inflation d. stagflation e. demand-pull inflation 2394. Prior to nationalization, about what percentage of French land was owned by the church? a. 0% b. 10% c. 20% d. 30% e. 50% 2395. Which country was a French colony until 1763? a. Canada b. India c. Puerto Rico d. Suriname e. Italy 2396. Prices of the General Maximum were standardized by the a. Polytechnic Institute b. National Assembly c. National Convention d. military e. Committee of Public Safety 2397. The mandats territoriaux was initially backed by the sale of a. national forests b. assignats c. church lands d. military appropriations e. nobles’ estates V. V. V. V. 2398. Which popular figure believed he was following Gracchus Babeuf’s “general strategy”? a. Napoleon Bonaparte V. b. Vladimir Lenin c. Maximilien Robespierre d. Alexis de Tocqueville e. King Louis XVI 2399. The ideology of economic liberalism associated with the early French Revolution is known as a. minimalism b. levée en masse c. egalitarianism d. laissez-faire e. socialism 2400. All of the following were established in France in 1791 EXCEPT a. the Allard law b. universal manhood suffrage c. a new patent system d. the end of quality inspection e. the Le Chapelier law 2401. France gained all of the following from its conquests EXCEPT a. fines collected from the conquered b. seized gold bullion c. an improved transportation network d. increased entrepreneurial ability e. increased access to commodities 2402. All of the following led the French government to force loans on the richest taxpayers in the 1790s EXCEPT a. inflation b. military needs c. the elimination of the assignat d. smuggling e. poor financial discipline 2403. Which of the following changes did the Allard Law MOST LIKELY cause? a. an increase in aggregate demand b. an increase in the supply of labor c. a decrease in worker coalitions d. an increase in demand for labor e. a decrease in aggregate demand 2404. As French ports were blockaded, the resultant lack of exports threatened French industry and therefore contributed to a. the Great Fear b. the Centralist movement c. the Federalist movement d. machine breaking e. the Industrialist movement V. V. V. V. V. V. 2405. The French Revolutionary government initiated all of the following economic reforms EXCEPT a. a new patent system b. the Allard Law V. c. the abolishment of primogeniture d. crop rotation e. simplified taxes 2406. All of the following were utilized in technological improvements for France’s war effort EXCEPT a. indigo b. steel V. c. saltpeter d. telegraphs e. hot air balloons 2407. Rapid inflation of the assignat in the late 1790s was damaging to all of the following groups EXCEPT a. borrowers b. wage earners c. potential investors d. savers e. creditors 2408. Which organization of the French Revolution was founded to promote education and technology? a. the Committee of Public Safety b. the Polytechnic Institute c. the National Assembly d. the National Scientific Institute e. the National Convention 2409. Prior to the Revolution of 1789, about what percentage of the French population lived in rural areas? a. 50% b. 60% c. 70% d. 80% e. 90% 2410. Slave labor in the Caribbean colonies provided all of the following commodities EXCEPT a. coffee b. timber c. indigo d. cotton e. cocoa 2411. Which 1791 law prohibited labor coalitions in France? a. the Babeuf Law b. the Allard Law c. the Chaptal Law d. the Le Chapelier Law e. the Vandermonde Law 2412. Skilled workers employed in government workshops by the Committee of Public Safety were given incentives in the form of a. commissions b. production quotas c. equal wages d. tax exemptions e. union membership V. V. V. V. V. V. 2413. All of the following resulted from the egalitarian attitude of the French Revolution EXCEPT a. the sale of church lands b. the sale of national lands c. concentrated land ownership d. reduced land prices e. the sale of crown lands 2414. The Civil Constitution of the Clergy was passed in 1778 a. 1782 b. 1785 c. 1790 d. 1793 e. domestic laborers 2415. The assignat was eventually replaced with the a. euro b. livre c. mandats territoriaux d. eurodollar e. mark V. V. V. 2416. Which of the following was NOT an economic policy of the Reign of Terror? a. a suspension of imports b. state charity c. wealth redistribution V. d. assured employment e. military appropriation 2417. 1783 marked the end of a. the Great Fear b. the American Revolutionary War c. the French Civil War d. the White Terror e. a major industrial depression 2418. “Triangular trade” occurred between a. France, Italy, and Africa b. Africa, the New World, and Asia c. Europe, Africa, and Asia d. Europe, the New World, and Asia e. Europe, Africa, and the New World 2419. Primogeniture, which was abolished during the Reign of Terror, is a. tax exemption b. feudal lordship c. naval transportation d. profiteering e. inheritance by the firstborn 2420. The heavily deflated assignat remained a viable currency due to the pressures of the a. clergy b. monarchy c. Le Chapelier Law V. V. V. V. d. Reign of Terror e. White Terror 2421. Who was the chemist that helped publish a pamphlet on steel manufacturing methods? a. Claude Berthollet b. Alexis de Tocqueville V. c. Alexandre Vandermonde d. Gaspard Monge e. Maximilien Robespierre 2422. The percentage change in the Consumer Price Index is a measure of a. nominal GDP b. the nominal interest rate c. the price level d. the inflation rate e. relative price changes 2423. To maximize society’s well-being, pollution emitting production should be a. reduced until no additional pollution is created b. reduced until the marginal costs equal the marginal benefits of eliminating the pollution c. reduced as long as the marginal benefit of pollution reduction is positive d. reduced until the social costs of pollution are zero e. reduced as long as the marginal cost of pollution reduction is positive 2424. The basic economic problem of scarcity implies that a. the unemployment rate will always be greater than zero percent b. some people will always exist in poverty c. market demand will exceed market supply d. everyone must make choices e. wealthy people do not have to face the basic economic problem 2425. The accumulated knowledge and skills that workers possess is called a. labor productivity b. consumer surplus c. technology d. entrepreneurship e. human capital 2426. The extra satisfaction you get from eating a third scoop of ice cream is called the a. marginal benefit b. consumer surplus c. positive externality d. public good e. comparative advantage CPI externalities I.A.1 I.A.2 I.B.2 2427. In a market system, goods are distributed according to _____, while in some command economies goods are distributed according to _____. a. comparative advantage; absolute advantage b. ability to pay; government planners I.C.2 c. political preferences; price d. the first-come/first-served principal; the least-cost principal e. household size; household income 2428. The choice made by an individual to drive a private car to and from work each day rather than relying on public transportation, when the individual perceives the total social and private costs of driving a private car to be lower than the total social and a. ignoring environmental damage I.D.1 b. responding to economic incentives c. poor economic judgment d. wasting economic resources e. inefficient decision making 2429. Places where buyers and sellers come together are called a. industries b. firms c. unions d. models e. markets I.E.1 2430. Holding other factors constant, when the price of computers decreases, the a. supply of computers increases b. quantity of computers supplied increases c. demand for computers increases II.B.1 d. demand for and supply of computers increases e. quantity of computers demanded increases 2431. Holding other factors constant, if the cost of lumber used in building houses increases, then the equilibrium price of houses will _____ and the equilibrium quantity of houses sold will _____. a. increase; increase b. increase; decrease II.B.4 c. remain constant; increase d. decrease; decrease e. decrease; increase 2432. If the price elasticity of demand equals 0.5 (in absolute value), then a 10% increase in the price of a product will result in a a. 0.5% increase in the quantity demanded b. 0.5% decrease in the quantity demanded c. 5% increase in the quantity demanded d. 5% decrease in the quantity demanded e. 10% decrease in the quantity demanded II.B.5 2433. Holding other factors constant. if the price of cell phone service plans (a complement in consumption with cell phones) increases, then the equilibrium price of cell phones will _____ and the equilibrium quantity of cell phones sold will _____. a. increase; increase II.B.5 b. increase; decrease c. remain constant; increase d. decrease; decrease e. decrease; increase 2434. Holding other factors constant, an increase in productivity of home health care workers will _____ the equilibrium wage of home health care workers and _____ the equilibrium quantity of home health care workers employed. a. increase; increase b. increase; decrease II.B.5 c. not change; increase d. decrease; decrease e. decrease; increase 2435. Which of the following will increase the equilibrium price of MP3 players and increase the equilibrium quantity of MP3 players sold, holding other factors constant? a. an increase in the price of components used in producing MP3 players b. a decrease in the price of components used in producing MP3 players II.B.5 c. an increase in the income of consumers of MP3 players d. a decrease in the number of firms manufacturing MP3 players e. a decrease in the price of iPods, a substitute in consumption for MP3 players 2436. If a perfectly competitive industry becomes a profit maximizing monopoly, then the quantity of output produced will _____ and the price of the product will _____. a. decrease; increase b. decrease; decrease c. remain the same; increase d. increase; increase e. increase; decrease II.C.3 2437. Suppose a firm is currently operating on the increasing portion of its marginal cost curve in a perfectly competitive market and producing a quantity of output so that the unit price of the product equals $5, the marginal cost equals $6, and average varia a. decrease the quantity produced II.C.3 b. increase the quantity produced c. continue to produce the current quantity d. shut down production e. raise the price of the product 2438. A firm operating in a perfectly competitive market will produce a quantity of output so that all of the following will be true EXCEPT a. price will equal marginal cost b. marginal revenue will equal marginal cost II.C.3 c. total revenue will be maximized d. total profits will be maximized e. the difference between total revenue and total costs will be maximized 2439. The economic rationale for the government granting of copyright protection to authors of books, films, and computer software is to a. guarantee that the creators will earn a profit b. provide incentive to develop new books, films, and software II.D.3 c. protect the public from faulty products d. generate government revenue from the copyrighting process e. eliminate dishonest and unethical behavior 2440. In the Keynesian model, if the income expenditure multiplier equals 4, then a $100 billion increase in government spending will lead to a. a $100 billion increase in output b. a $100 billion decrease in output III.??? c. a greater than $100 billion increase in output d. a greater than $100 billion decrease in output e. no change in output 2441. The phase of the business cycle during which there is a widespread decline in income, output, and employment that lasts for several quarters is called a(n) a. trough b. recession III.??? c. output gap d. supply shock e. productivity residual 2442. In the Country of Acme, 75 million people are employed and 5 million are unemployed out of 100 million people in the working age population. What is the unemployment rate in the Country of Acme? a. 5% b. 6.25% c. 6.67% d. 7.25% e. 10% III.??? 2443. If a household withdraws funds from its savings account and holds the funds as currency, then a. M1 increases and M2 decreases b. M1 increases and M2 increases III.??? c. M1 increases and M2 remains unchanged d. M1 decreases and M2 increases e. M1 decreases and M2 decreases 2444. In order to increase the money supply and lower interest rates, the Federal Reserve should a. raise the Federal Reserve discount (primary credit) rate b. raise reserve requirements III.??? c. conduct open market purchases d. conduct open market sales e. increase the Federal budget deficit 2445. Based on the expenditure approach to calculating GDP, which of the following would be counted as investment spending? a. A U.S. household buys a share of stock in a U.S. corporation that makes tractors. b. The U.S. government purchases a U.S. made tractor. c. A farming business in India purchases a U.S. made tractor. d. A farming business in Indiana purchases a U.S. made tractor. e. A U.S. family buys a small tractor to use for mowing their grass. III.??? 2446. If the nominal rate of interest is 8% and the expected rate of inflation is 5%, then the real rate of interest equals a. 3% b. 5% III.??? c. 8% d. 10% e. 13% 2447. When the Federal Reserve buys bonds in an open market purchase, the Fed pays for the bonds a. with the interest the Fed earns on loans made to banks b. with newly created bank reserves c. using the balance of funds in the accounts of the U.S. government held at the Federal Reserve III.??? d. with funds borrowed from banks e. using the earnings from funds invested in interest bearing assets 2448. Specific taxes on items such as cigarettes, gasoline, and beer are examples of _____ taxes. a. income b. sales III.??? c. excise d. property e. death 2449. Holding other factors constant, an increase in technology that increases the rate of return on investments in new capital equipment will _____ the equilibrium real interest rate and _____ the equilibrium quantity of borrowing and investing in the financia a. increase; increase III.??? b. increase; decrease c. not change; increase d. decrease; decrease e. decrease; increase 2450. If the price level has been rising continuously, then real GDP will a. always be less than nominal GDP b. always be greater than nominal GDP c. be less than nominal GDP in years prior to the base year d. be greater than nominal GDP in years prior to the base year e. grow more rapidly than nominal GDP 2451. In the Keynesian model, an increase in the money supply _____ interest rates and _____ the equilibrium level of real GDP. a. increases; increases b. increases; decreases c. increases; does not change d. decreases; decreases e. decreases; increases III.??? III.??? 2452. Which of the following is an example of frictional unemployment? a. Jane quits her job in a restaurant to search for a job with hours that better suit her life style. b. John loses his job and begins to search for a new job when the restaurant reduces the number of hours it operates during a recession. c. Jose is searching for a job in the town where he lives, but he does not have the skills necessary for the jobs that are vacant. III.??? d. Jerry is looking for work as a newspaper reporter, but few jobs are available as the industry is shrinking because technological change has reduced the demand for newspapers. e. Jennifer is searching for a job, but does not have the college decree that is required for the jobs that are available. 2453. An organization of employees that has the legal right to bargain with employers about wages and working conditions is called a a. monopoly b. union c. monopsony d. cartel III.??? e. conglomerate 2454. To close a recessionary gap, the government could undertake which of the following policies? a. lower interest rates b. lower taxes III.??? c. lower government spending d. decrease government transfer payments e. decrease the money supply 2455. The 7 Governors of the Board of Governors and 5 of the 12 Presidents of the regional Federal Reserve Banks make up the voting membership of the a. Securities and Exchange Commission b. Federal Reserve System c. Federal Deposit Insurance Corporation d. Council of Economic Advisors e. Federal Open Market Committee III.F.3 2456. In order to maximize the gains from trade, both countries and individuals must a. diversify the resources used up in the production process b. specialize in producing goods or services for which they have a comparative advantage c. limit trade to only those goods or services that are in excess supply IV.??? d. produce goods or services with the highest opportunity costs in order to achieve higher profits e. reduce their own consumption choices by specializing in producing goods or services for trade 2457. Free trade zones, such as the one created by the North American Free Trade Agreement (NAFTA) are predicted to increase productivity by a. increasing population growth rates b. reducing income taxes c. increasing global competition d. lowering interest rates e. reducing government budget deficits 2458. The BEST measure of current living standards in a country is the a. growth rate of nominal GDP b. growth rate of real GDP c. growth rate of real GDP per capita d. level of real GDP e. level of real GDP per capita IV.??? IV.??? 2459. A tariff that increases the price of imported textiles into the United States is expected to have all of the following effects EXCEPT a. save jobs in the U.S. textile industry b. increase U.S. government revenue IV.??? c. reduce jobs in the U.S. non-textile industries d. lower the cost of textiles to U.S. consumers e. reduce the quantity of textiles purchased by U.S. consumers 2460. When U.S. exports are less than U.S. imports, the U.S. has a a. budget deficit b. budget surplus c. trade balance IV.??? d. trade deficit e. trade surplus 2461. The production functions of both Country A and Country B are linear. Given their resources, in one week Country A can produce either 250 cars or 1,000 computers and Country B can produce either 100 cars or 600 computers. Which statement below BEST descr a. Country A has a comparative advantage and absolute advantage in car production. b. Country A has a comparative advantage and absolute advantage in IV.??? computer production. c. Country A has a comparative advantage in both car and computer production. d. Country B has a comparative and absolute advantage in car production. e. Country B has a comparative and absolute advantage in computer production. 2462. Typical characteristics of developing countries include all of the following EXCEPT: a. low levels of labor productivity b. high rates of unemployment c. minimal levels of capital d. low rates of population growth e. low levels of industrialization 2463. With a flexible exchange rate system and holding other things constant, if interest rates in the United States rise relative to those in Europe, there will be a. an appreciation of the dollar and no change in the euro b. a depreciation of the dollar and no change in the euro c. an appreciation of the dollar and a depreciation of the euro d. a depreciation of the dollar and an appreciation of the euro e. an appreciation of the dollar and an appreciation of the euro IV.??? IV.???
