Econ 110 Final Al-Hamdi - Assignment Essays

question

The basic principle in economic studies
a. Trade-off
b. Scarcity
c. money
d. efficiency

answer

Scarcity

question

The assumption that people are ________ is one of the basic assumptions in economic studies
a. emotional
b. generous
c. rational
d. smart

answer

Rational

question

Marginal analysis is involving comparing
a. MC and AC
b. MB and MC
c. MB and AC
d. MC and VC

answer

MB and MC

question

Every society faces a trade-off between
a. Equality and efficiency
b. efficiency and effectiveness
c. equality and fair distribution
d. efficiency and production

answer

Equality and Efficiency

question

We need to privatize the social security program in the state of Kansas is a
a. normative statement
b. positive statement
c. social statement
d. market statement

answer

Normative Statement

question

The opportunity cost of the good on the x-axis is the ______ of the PPF
a. height
b. slope
c. y-intercept
d. inverse of the slope

answer

Slope

question

If the PPF is linear, then the opportunity cost of producing a good or service is
a. decreasing
b. constant
c. increasing
d. stay the same

answer

Constant

question

The circular flow diagram shows how firms and households interact in the markets of
a. goods and services
b. money
c. goods and services and inputs
d. all of the above

answer

All of the above

question

Economic decline happens when the PPF shifts
a. outward
b. inward
c. outside
d. none of the above

answer

Outward

question

One of the basic principles of economics is that the trade makes
a. everyone better off
b. everyone worse off
c. some people better off and other worse off
d. none of the above

answer

Everyone better off

question

In a perfectly competitive market; the buyer and sellers are price
a. makers
b. takers
c. neutral
d. fixers

answer

Takers

question

The law of demand is the rule that, ________, as the price of a good or service decreases, the quantity demanded increases
a. crius partus
b. ceteris paribus
c. paribus ceteris
d. cyrous parallel

answer

Cetris Paribus

question

As the income increases and people buy less of the good, then the good is called
a. complementary good
b. normal good
c. inferior good
d. substitute good

answer

Inferior good

question

The change in price of the same good or service causes a change in
a. demand
b. quantity demanded
c. shift
d. growth

answer

Quantity demanded

question

The supply curve has a
a. negative slope
b. positive slope
c. perfect slope
d. undetermined slope

answer

Positive slope

question

The improvement in technology will lead to increase in the
a. supply
b. quantity supplies
c. cost of production
d. number of firms

answer

Supply

question

Shortage happens when quantity supplies are _______ quantity demanded
a. greater
b. smaller
c. equal
d. none of the above

answer

Smaller

question

An increase in demand and supply by the same size will cause the price of the good to
a. increase
b. decrease
c. stay the same
d. all of the above

answer

Stay the same

question

Trade among nations is based off the
a. absolute advantage
b. comparative advantage
c. less advantage
d. more advantage

answer

comparative advantage

question

The equilibrium quantity is the quantity that appears in the market at the
a. demand price
b. supply price
c. equilibrium price
d. none of the above

answer

Equilibrium price

question

The GDP deﬂator is a ratio of _________ prices
a. current to ﬁxed
b. ﬁxed to current
c. old to new
d. new to old

answer

Current to fixed

question

Net Export is calculated as
a. Imports—Export,
b. Export—Imports,
c. Outputs — Inputs
d. Inputs-Outputs

answer

Exports-Imports

question

New houses are included in the component of the GDP.
a. Consumption,
b. investment,
c. mortgage,
d. Equity

answer

Invesment

question

Inﬂation rate is measured as percentage change in prices from one period to the______ period
a. Base
b. Next
c. Past
d. All of the above.

answer

question

The GDP is not a perfect measure of standard of living because it does not take ________ of increasing production into account
a. Social classes
b. Social problems
c. Social surplus
d. Social shortage

answer

Social problems

question

The government purchases do not include the
a. Money transfer,
b. transfer purchases,
c. transfer payments,
d. military expenditure

answer

transfer payments

question

The GDP is the market value of goods and services produced by ________ of a country.
a. Nationals,
b. Foreigners,
c. Visitors,
d. Residents.

answer

Residents

question

The equation of the GDP components is:
a. Y=C+I+GX+NX
b. Y=C+I+G-NX
c. Y=C+I+G+NX
d. None of the above

answer

Y=C+I+G+NX

question

For a good to be included in the GDP, it must be produced
a. ofﬁcially,
b. legally,
c. publically,
d. totally

answer

Legally

question

Durable good is a good that can be used for:
a. One period
b. more than one period
c. two periods
d. service

answer

more than one period

question

A bond is an:
a. OUI
b. IOU
c. UOI
d. IUO

answer

IOU

question

Credit risk refers to the case when a borrower ________ on his debt
a. Flout
b. Pay
c. Receive
d. default

answer

default

question

A stock is a claim on _______ in a ﬁrm
a. Hardship
b. Ownership
c. Partnership
d. None of the above

answer

Ownership

question

A bond is called a ______ ﬁnancing
a. equity
b. equality
c. efficiency
d. debt

answer

Debt

question

Financial markets consists of ______
a. Bonds and Banks
b. Banks and stocks
c. Stocks and Mutual funds
d. None of the above

answer

None of the above

question

The second important function of banks is:
a. Check cleaning
b. Check issuing
c. Check clearing
d. All of the above

answer

Check clearing

question

In a closed economy:
a. S=I
b. S=NX
c. I=NX
d. All of the above

answer

S=I

question

The National saving equals
a. Public Saving — Private saving
b. Public + NX
c. Private Saving — Public Saving
d. None of the above

answer

None of the above

question

Budget Deﬁcit means:
a. T>G
b. T<G
c. T=G
d. None of the above

answer

T<G

question

The credit union is different than a bank in the type of:
a. ownership
b. partnership
c. profit
d. all of the above

answer

Ownership

question

Labor force is _____ workers in the economy.
a. Employed + laid off
b. Employed + Underemployed
c. Employed + Not employed
d. Employed + Unemployed

answer

Employed + Unemployed

question

Natural rate of unemployment is the sum of:
a. Cyclical + Frictional
b. Structural + Frictional
c. Frictional + Efﬁciency
d. None of the above

answer

Structural + Frictional

question

The labor force participation rate measures the percentage of ______ in the labor force:
a. Employed
b. Unemployed
c. Adult population
d. All of the above

answer

Adult population

question

All modern dynamic economies are characterized by ________ of jobs.
a. creative-destruction
b. Creative-saving
c. destruction-saving
d. stability-destruction

answer

creative-destruction

question

The deviation of unemployment from its natural rate is called
a. the economic rate of unemployment.
b. cyclical unemployment.
c. frictional unemployment.
d. structural unemployment.

answer

Cyclical unemployment

question

The designation "natural" implies that the natural rate of unemployment
a. is desirable.
b. is constant over time.
c. is impervious to economic policy.
d. does not go away on its own even in the long run.

answer

does not go away on its own even in the long run

question

The Bureau of Labor Statistics produces data on unemployment and other aspects of the labor
market from a regular survey of households called the:
a. Census.
b. Labor Survey.
c. Survey of Economic Indicators.
d. Current Population Survey.

answer

Current population survey

question

The Bureau of Labor Statistics produces data on unemployment
a. weekly.
b. monthly.
c. quarterly.
d. yearly.

answer

Monthly

question

Which of the following is not one of the categories into which the bureau of labor statistics places each adult of each surveyed household?
a. employed
b. unemployed
c. underemployed
d. not in the labor force

answer

Underemployed

question

Since 1960, the natural rate of unemployment in the U.S. has been between:
a. 0% and 1%
b. 5% and 6%
c. 10% and 12%
d. 12% and 24%

answer

5% and 6%

question

Between 1880 and 1896 the average level of prices in the U.S. economy
a. fell 23%
b. fell 4%
c. rose 23%,
d. rose 50%.

answer

Fell 23%

question

With value of money on the vertical axis, the money supply curve is
a. upward-sloping
b. downward-sloping,
c. horizontal
d. vertical.

answer

Vertical

question

Primary reason people hold money is to
a. keep wealth in less liquid form
b. use it as medium of exchange
c. use it for investment,
d. earn interest.

answer

Use it as a medium of exchange

question

Monetary neutrality means that money:
a. Does not matter
b. Affects real variables
c. Affects actual variables
d. Does not affect real variables

answer

Does not affect real variables

question

The Quantity Equation of money is:
a. MX-=YxV
b. MxV=PxG
c. MxV=PxY,
d. MxY=PxV

answer

MxV=PxY

question

Barter system requires double coincidence of:
a. needs
b. action
c. wants
d. None of the above

answer

Wants

question

Store of value means:
a. money in the bank
b. Money used to buy items
c. commodity money
d. None of the above

answer

None of the above

question

Fiat money means:
a. with intrinsic value
b. backed by gold
c. without intrinsic value
d. unit of account

answer

Without intrinsic value

question

Saving deposits are in:
a. M1 but not M2
b. M2 but not M1
c. M1 and M2
d. None of the above

answer

M2 but not M1

question

Money multiplier equals:
a. 1/R
b. 1/1-R
c. R
d. None of the above

answer

1/R

question

The overriding reason why households and societies face many decisions is that
a. Resources are scarce
b. goods and services are not scarce.
c. incomes fluctuate with business cycles.
d. people, by nature, tend to disagree.

answer

resources are scarce

question

Making rational decisions "at the margin" means that people
a. make those decisions that do not impose a marginal cost.
B. evaluate how easily a decision can be reversed if problems arise.
C. compare the marginal costs and marginal benefits of each decision.
D. always calculate the dollar costs for each decision.

answer

compare the marginal costs and marginal benefits of each decision

question

Refer to Figure below. If Chile and Colombia switch from each country dividing its time equally between the production of coffee and soybeans to each country spending all of its time producing the good in which it has a comparative advantage, then total production of soybeans will increase by
a. 3 pounds.
B. 6 pounds.
C. 9 pounds.
D. 12 pounds.

answer

3 pounds

question

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?
a. There is no such thing as a free lunch.
B. People buy more when prices are low than when prices are high.
C. No matter how much people earn, they tend to spend more than they earn.
D. Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

answer

Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

question

Prices direct economic activity in a market economy by
a. influencing the actions of buyers and sellers.
B. reducing scarcity of the goods and services produced.
C. eliminating the need for government intervention.
D. allocating goods and services in the most equitable way.

answer

influencing the actions of buyers and sellers.

question

Most economists believe that an increase in the quantity of money results in
a. an increase in the demand for goods and services.
B. lower unemployment in the short run.
C. higher inflation in the long run.
D. All of the above are correct.

answer

All of the above are correct.

question

Refer to Figure above. Which of the following statements is not correct?
a. When the price is $10, quantity supplied equals quantity demanded.
B. When the price is $6, there is a surplus of 8 units.
C. When the price is $12, there is a surplus of 4 units.
D. When the price is $16, quantity supplied exceeds quantity demanded by 12 units,

answer

When the price is $6, there is a surplus of 8 units.

question

Refer to Figure Above. Which of the following statements best relates the figure to the events that occurred in the United States in the 1970s?
a. Buyers of gasoline paid a price of P1 before 1973; they paid a price of P2 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price.
B. Buyers of gasoline paid a price of P1 before 1973; they paid a price of P3 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price.
C. Buyers of gasoline paid a price of P2 before 1973; they paid a price of P3 after OPEC increased the price of crude oil in 1973, with no shortage of gasoline at that price.
D. The price ceiling was binding before 1973; the price ceiling was no longer binding after OPEC increased the price of crude oil in 1973.

answer

Buyers of gasoline paid a price of P1 before 1973; they paid a price of P2 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price.

question

Rent control is an example of
a. a subsidy for low-skilled workers.
B. a price floor.
C. a price ceiling.
D. a black market.

answer

a price ceiling.

question

Refer to Figure above. Suppose a tax of $2 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?
a. $3
B. between $3 and $5
C. between $5 and $7
D. $7

answer

question

When a production possibilities frontier is bowed outward, the opportunity cost of
producing an additional unit of a good
a. increases as more of the good is produced.
B. decreases as more of the good is produced.
C. does not change as more of the good is produced.
D. may increase, decrease, or not change as more of the good is produced.

answer

increases as more of the good is produced.

question

Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour. Refer to Table above. Using marginal analysis, determine how many hours should Lydia extend her nail salon's hours of operations?
a. 2 hours
B. 3 hours
C. 4 hours
D. 5 hours

answer

5 hours

question

Society faces a trade-off in all of the following situations except
a. when deciding who will receive the goods and services produced.
B. when deciding what goods and services will be produced.
C. when deciding how goods and services will be produced.
D. when some previously unemployed workers find jobs.

answer

when some previously unemployed workers find jobs.

question

Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision?
a. zero, since she will no longer be earning a salary
B. It depends on the "going rate" for home-care providers.
C. at least $125,000
D. the value she attributes to the satisfaction she receives from taking care of her parents

answer

at least $125,000

question

The decision about what goods and services will be produced made in a market economy is made by
a. lawmakers in the government voting on what will be produced
B. producers deciding what society wants most.
C. consumers and firms choosing which goods and services to buy or produce.
D. consumers dictating to firms what they need most

answer

consumers and firms choosing which goods and services to buy or produce.

question

Who receives the most of what is produced in a market economy?
a. lawmakers and other politically favored groups
B. those who are willing and able to buy them
C. everyone receives an equal amount
D. people who earn the highest incomes

answer

those who are willing and able to buy them

question

Total output in an economy increases when each person specializes because
a. there is less competition for the same resources.
B. each person spends more time producing that product in which he or she has a comparative advantage
C. a wider variety of products will be produced within each country due to specialization.
D. government necessarily plays a larger role in the economy due to specialization.

answer

each person spends more time producing that product in which he or she has a comparative advantage

question

Which of the following is a result of a market economy?
a. environmental protection
B. an equal income distribution
C. Agreement on equality
D. voluntary exchange

answer

voluntary exchange

question

Which of the following is a positive economic statement?
a. People should not buy SUVs.
B. The government should mandate electric automobiles.
C. Scarcity necessitates that people make trade-offs.
D. Foreign workers should not be allowed to work for lower wages than the citizens of a country.

answer

Scarcity necessitates that people make trade-offs.

question

Which of the following is a macroeconomics question?
a. what determines the inflation rate?
B. What determines the production of DVDs?
C. What factors determine the price of carrots?
D. What determines the wage of auto workers?

answer

what determines the inflation rate?

question

What is the difference between an "increase in demand" and an "increase in quantity demanded"?
a. There is no difference between the two terms; they both refer to a shift of the demand
B. An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
C. There is no difference between the two terms; they both refer to a movement downward along a given demand curve.
D. An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve.

answer

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

question

The law of demand implies, holding everything else constant, that
a. as the price of bagels increases, the quantity of bagels demanded will decrease.
B. as the price of bagels increases, the demand for bagels will decrease.
C. as the price of bagels increases, the quantity of bagels demanded will increase.
D. as the price of bagels increases, the demand for bagels will increase.

answer

as the price of bagels increases, the quantity of bagels demanded will decrease.

question

A change in all of the following variables will change the market demand for a product except
a. the price of the product.
B. population and demographics.
C. Income.
D. tastes.

answer

the price of the product.

question

An economic theory about international trade that is based on the assumption that there are only two countries trading two goods
a. is useless, since the real world has many countries trading many goods,
B. can be useful only in situations involving two countries and two goods.
C. can be useful in the classroom, but is useless in the real world.
D. can be useful in helping economists understand the complex world of international trade involving many countries and many goods.

answer

can be useful in helping economists understand the complex world of international trade involving many countries and many goods.

question

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is
a. an inferior good.
B. a neutral good.
C. a necessity.
D. a normal good.

answer

an inferior good.

question

Refer to Figure above. The movement from point A to point B on the graph shows a(n
a. decrease in demand.
B. increase in demand.
C. decrease in quantity demanded.
D. increase in quantity demanded.

answer

increase in quantity demanded.

question

If, in the market for oranges, the supply has increased then
a. the supply curve for oranges has shifted to the right.
B. the supply curve for oranges has shifted to the left.
C. there has been a movement upwards along the supply curve for oranges.
D. there has been a movement downwards along the supply curve for oranges.

answer

the supply curve for oranges has shifted to the right.

question

One would speak of a change in the quantity of a good supplied, rather than a change in supply, if
a. supplier expectations about future prices change.
B. the price of the good changes.
C. the cost of producing the good changes.
D. prices of substitutes in production change.

answer

the price of the good changes.

question

In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U.S.?
a. The supply curve shifted to the left.
B. The supply curve shifted to the right.
C. The demand curve shifted to the right.
D. The demand curve shifted to the left.

answer

The supply curve shifted to the left.

question

If a firm has an incentive to increase supply now and decrease supply in the future, the firm expects that the
a. price of its product will be lower in the future than it is today.
B. price of its product will be higher in the future than it is today.
C. price of inputs will be lower in the future than they are today.
D. demand for the product will be lower in the future than it is today

answer

price of its product will be lower in the future than it is today.

question

If society decides it wants more of one good and all resources are fully utilized, then
a. it is unable to do this unless technology advances.
B. additional resource supplies will have to be found.
C. it has to give up some of another good and incur some opportunity costs
D. more unemployment will occur.

answer

it has to give up some of another good and incur some opportunity costs

question

Refer to Figure above. If the economy is currently producing at point Y, what is the opportunity cost of moving to point W2.
a. 2 million tons of steel
B. Zero
C. 9 million tons of paper
D. 16 million tons of paper

answer

Zero

question

Table above shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces. Refer to Table above. Which of the following statements is true?
a. Haley has an absolute advantage in making both products.
B. Serena has an absolute advantage in making both products.
C. Haley has an absolute advantage in making bracelets and Serena in making necklaces.
D. Haley has an absolute advantage in making necklaces and Serena in making bracelets.

answer

Haley has an absolute advantage in making bracelets and Serena in making necklaces.

question

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except
a. engage in mutually beneficial trade with other nations.
B. increase the variety of products that it can consume with no increase in resources.
C. consume a combination of goods that lies outside its own production possibilities frontier.
D. produce a combination of goods that lies outside itos own production possibilities fronteir

answer

produce a combination of goods that lies outside itos own production possibilities fronteir

question

Figure above shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.Refer to Figure above. Which country has a comparative advantage in the production of cotton?
a. Indonesia
B. They have equal productive abilities.
C. Pakistan
D. neither country

answer

Indonesia

question

The slope of a line is equal to
a. the change in the value of x divided by the change in the value of y.
B. the change in the value of y divided by the change in the value of x.
C. the horizontal distance divided by the vertical distance.
D. the value of y divided by the value of x.

answer

the change in the value of y divided by the change in the value of x.

question

The _______ demonstrates the roles played by households and firms in the market system.
a. production possibilities frontier
B. circular flow model
C. theory of comparative advantage
D. business cycle

answer

circular flow model

question

Which of the following is a flow in the circular flow model?
a. the flow of goods and services from households to firms
B. the flow of profit and the flow of revenue
C. the flow of income earned by firms and the flow of expenditures earned by households
D. the flow of revenue received by firms and the flow of payments to resource owners

answer

the flow of revenue received by firms and the flow of payments to resource owners

question

Refer to Figure above. One segment of the circular flow diagram in the figure shows the flow of goods and services from market C to economic agents A. What is market C and who are economic agents A
a. C = factor markets; A = households
B. C = product markets; A = households
C. C = factor markets; A = firms
D. C= product markets; A = firms

answer

C = product markets; A = households

question

The term "property rights" refers to
a. the physical possession of a house or any other property which the owner legally purchased.
B. the ability to exercise control over one's own resources within the confines of the law.
C. the government's right to appropriate land from wealthy land owners to redistribute to peasants.
D. the right of a business not to have its assets confiscated by the government in the event that the business is accused of committing fraud.

answer

the ability to exercise control over one's own resources within the confines of the law.

question

Any output combination outside a production possibility frontier is associated with unused or underutilized resources.
True or False?

answer

False

question

If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a comparative advantage in shucking Oysters.
True or False?

answer

False

question

If a country produces only two goods, it is possible to have a comparative advantage in the production of both those goods?
True or False?

answer

False

question

In a free market there are virtually no restrictions, or at best few restrictions on how
factors of production can be employed?
True or False?

answer

True

question

An economic model is a simplified version of reality used to analyze real-world
economic situations.
True or False?

answer

True

question

One desirable outcome of a market economy is that it leads to a more equitable distribution of income.
True or False?

answer

False

question

Chips and salsa are complements. If the price of salsa decreases, the demand for chips will increase.
True or False?

answer

True

question

An increase in the number of firms in a market will cause the quantity of a good supplied to increase.
True or False?

answer

False

question

If the demand curve for a product is vertical, any tax increase on the product is paid
for entirely by the consumer?
True or False?

answer

True

question

The minimum wage is an example of a price ceiling.
True or False?

answer

False

question

During a business cycle expansion, total production _______ and total employment _______.
a. Increases; increases
B. increases; decreases
C. decreases; increases
D. decreases; decreases

answer

increases; increases

question

In calculating gross domestic product, the Bureau of Economic Analysis (BEA) uses the sum of the market value of final goods and services produced. This means that the BEA
a. simply counts the total number of goods produced in the market place and then adds them up.
B. values goods at their market prices, multiplies them by the quantity produced, and then adds them up.
C. simply counts the total number of goods and services produced in the marketplace and then adds them up.
D. values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.

answer

values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up

question

Which of the following transactions represents the purchase of a final good?
a. Starbucks purchases coffee beans.
B. Delta buys a new European-made jetliner.
C. Apple computer buys computer processors from Intel.
D. Your father buys a new John Deere riding lawnmower.

answer

Your father buys a new John Deere riding lawnmower.

question

Refer to Table above. Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals
a. $7,400.
B. $6,400.
C. $5,800.
D. 2,440 units.

answer

$6,400

question

The nominal GDP of the U.S. in 2010 was approximately $14.6 trillion. This means that
a. the value of output in 2010 was around $14.6 trillion.
B. total income in 2010 was around $14.6 trillion.
C. total spending in 2010 was around $14.6 trillion.
D. all of the above are true.

answer

all of the above are true

question

An example of business fixed investment spending is
a. a purchase of a home by a household.
B. a purchase of a computer by an accounting firm.
C. a purchase of a bond by General Electric Corporation.
D. $200 million of unsold cars at a car dealership.

answer

a purchase of a computer by an accounting firm

question

Expenditures on a nation's domestic production
a. are less than its domestic production.
B. are equal to its domestic production.
C. are greater than its domestic production.
D. could be less than, equal to, or greater than its domestic production.

answer

are equal to its domestic production

question

Refer to Table above. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals
a. $2,200.
B. $1,600.
C. $1,400.
D. $1,200.

answer

$1,200

question

Gross domestic product understates the total production of final goods and services because of the omission of
a. Exports.
B. inflation.
C. intermediate goods.
D. household production.

answer

household production

question

A sharp increase in the divorce rate increases the number of lawyers hired to determine divorce settlements. This will
a. increase GDP and increase well being in the economy.
B. increase GDP and decrease well being in the economy.
C. decrease GDP and increase well being in the economy.
D. decrease GDP and decrease well being in the economy.

answer

increase GDP and decrease well being in the economy

question

Over the last century, U.S. real GDP per person grew at a rate of about
a. 2 percent per year, so that it is now 2 times as high as it was a century ago.
B. 2 percent per year, so that it is now 8 times as high as it was a century ago.
C. 4 percent per year, so that it is now 2 times as high as it was a century ago.
D. 4 percent per year, so that it is now 8 times as high as it was a century ago.

answer

2 percent per year, so that it is now 8 times as high as it was a century ago.

question

Which of the following measures how the level of well-being in a country has changed over time?
a. level of nominal GDP per person.
B. growth rate of nominal GDP.
C. growth rate of real GDP.
D. growth rate of real GDP per person

answer

growth rate of real GDP per person

question

In 2010, the imaginary nation of Bovina had a population of 5,000 and real GDP of 600,000. In 2011 it had a population of 5,200 and real GDP of 636,480. During 2011 real GDP per person in Bovina grew by
a. 2 percent, which is high compared to average U.S. growth over the last one-hundred years.
B. 2 percent, which is about the same as average U.S. growth over the last one-hundred years.
C. 4 percent, which is high compared to average U.S. growth over the last one-hundred years.
D. 4 percent, which is about the same as average U.S. growth over the last one-hundred years.

answer

2 percent, which is about the same as average U.S. growth over the last one-hundred years.

question

The one variable that stands out as the most significant explanation of large variations in living standards around the world is
a. Productivity.
B. population.
C. preferences.
D. prices.

answer

productivity

question

Which of the following is a correct way to measure productivity?
a. Divide the number of hours worked by the quantity of output.
B. divide the quantity of output by the number of hours worked,
C. Determine how much output is produced in a given time.
D. Determine how much time it takes to produce a unit of output.

answer

divide the quantity of output by the number of hours worked,

question

Over the last ten years productivity grew more slowly in Iberia than in Aire while the population and total hours worked remained the same in both countries. It follows that
a. real GDP per person must be lower in Iberia than in Aire.
B. real GDP per person grew more slowly in Iberia than in Aire.
C. the standard of living must be higher in Iberia than in Aire.
D. All of the above are correct.

answer

real GDP per person grew more slowly in Iberia than in Aire

question

Industrial machinery is an example of
a. a factor of production that in the past was an output from the production process.
B. technological knowledge.
C. a production function.
D. an item which always has the property called constant returns to scale.

answer

a factor of production that in the past was an output from the production process.

question

Which of the following is considered human capital? Knowledge acquired from
a. early childhood education programs
B. job training
C. on-the-job experience
D. all of the above are correct.

answer

all of the above are correct.

question

Natural resources
a. are inputs provided by nature.
B. include land, rivers, and mineral deposits.
C. take two forms: renewable and nonrenewable.
D. All of the above are correct.

answer

all of the above are correct.

question

Your company discovers a better way to produce mousetraps, but your better methods are not apparent from the mousetraps themselves. Your knowledge of how to more efficiently produce mouse traps is
a. common technological knowledge.
B. common, but not technological, knowledge.
C. proprietary technological knowledge.
D. proprietary, but not technological, knowledge.

answer

proprietary technological knowledge

question

The average price of goods and services in the economy is also known as
a. the price level.
B. the inflation rate.
C. a market basket.
D. the cost of living.

answer

the price level.

question

The consumer price index is the
a. cost of a market basket of goods and services typically consumed in the base year.
B. cost of a market basket of goods and services typically consumed in the current period.
C. average of the prices of the goods and services purchased by a typical urban family of four.
D. average of the prices of new final goods and services produced in the economy over a period of time.

answer

average of the prices of the goods and services purchased by a typical urban family of four.

question

The percent increase in the CPI from one year to the next is a measure of the
a. GDP deflator.
B. unemployment rate.
C. interest rate.
D. inflation rate.

answer

inflation rate.

question

A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket
a. equaled $160 in 1996.
B. equaled $160 in 1983.
C. rose 160% from the cost of the market basket in the base year.
D. rose 60% from the cost of the market basket in the base year.

answer

rose 60% from the cost of the market basket in the base year.

question

Refer to Table above. Consider the following values of the consumer price index for 1996, 1997, and 1998: The inflation rate for 1997 was equal to
a. 1.2 percent.
B. 2.0 percent.
C. 2.5 percent.
D. 4.0 percent.

answer

2.5 percent.

question

If we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level, we would base our measure of inflation on
a. the producer price index.
B. the consumer price index.
C. the GDP deflator.
D. the household price index.

answer

the producer price index

question

The substitution bias in the consumer price index refers to the idea that consumers _______ the quantity of products they buy in response to price, and the CPI does not reflect this and _______ the cost of the market basket.
a. change; over-estimates
B. change; under-estimates
C. do not change; over-estimates
D. do not change; under-estimates

answer

change; over-estimates

question

The "new product bias" in the consumer price index refers to the idea that
a. consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers.
B. consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers.
C. consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers.
D. new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.

answer

new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.

question

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent, then the real interest rate is
a. -16 percent.
B. -4 percent.
C. 4 percent.
D. 16 percent.

answer

4 percent.

question

You earned $30,000 in 1990, and your salary rose to $80,000 in 2011. If the CPI rose from 82 to 202 between 1990 and 2011, which of the following is true?
a. There was deflation between 1990 and 2011.
B. The purchasing power of your salary fell between 1990 and 2011.
C. The purchasing power of your salary remained constant between 1990 and 2011.
D. The purchasing power of your salary increased between 1900 and 2011.

answer

The purchasing power of your salary increased between 1900 and 2011.

question

Technological advances generally result in
a. decreased incomes.
B. increased life expectancy.
C. increased infant mortality rates
D. increased average number of hours worked per day.

answer

increased life expectancy.

question

As long as prices are rising over time, then
a. the nominal interest rate exceeds the real interest rate.
B. the real interest rate exceeds the nominal interest rate.
C. the real interest rate is positive.
D. the nominal interest rate is a better indicator than the real interest rate of how fast the purchasing power of your bank account is changing over time.

answer

the nominal interest rate exceeds the real interest rate.

question

In an economy where net exports are zero, if saving rises in some period, then in that period
a. consumption and investment fall.
B. consumption falls and investment rises.
C. consumption rises and investment falls
D. consumption rises and investment falls.

answer

consumption falls and investment rises.

question

"When workers have a relatively small quantity of capital to use in producing goods and services, giving them an additional unit of capital increases their productivity by a relatively large amount." This statement
a. is an assertion that production functions have the property of constant returns to scale.
B. is consistent with the view that capital is subject to diminishing returns.
C. is inconsistent with the view that it is easier for a country to grow fast if it starts out
relatively poor.
D. All of the above are correct.

answer

is consistent with the view that capital is subject to diminishing returns.

question

On the horizontal axis, K/L represents capital (K) per worker (L). On the vertical axis, Y/L represents output (Y) per worker (L). Refer to Figure above. The curve becomes flatter as the amount of capital per worker increases because of
a. increasing returns to capital.
B. increasing returns to labor.
C. diminishing returns to capital.
D. diminishing returns to labor.

answer

diminishing returns to capital.

question

Suppose that a country increased its saving rate. In the long run it would have
a. higher productivity, and another unit of capital would increase output by more than before.
B. higher productivity, but another unit of capital would increase output by less than before.
C. lower productivity, and another unit of capital would increase output by more than before.
D. lower productivity, but another unit of capital would increase output by less than before.

answer

higher productivity, but another unit of capital would increase output by less than before.

question

The catch-up effect refers to the idea that
a. saving will always catch-up with investment spending.
B. it is easier for a country to grow fast and so catch-up if it starts out relatively poor.
C. population eventually catches-up with increased output.
D. if investment spending is low, increased saving will help investment to "catch-up."

answer

it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

question

Investment from abroad
a. is a way for poor countries to learn the state-of-the-art technologies developed and used in richer countries.
B. is viewed by economists as a way to increase growth.
C. often requires removing restrictions that governments have imposed on foreign ownership of domestic capital.
D. All of the above are correct.

answer

All of the above are correct

question

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was
a. 100.0.
B. 100.7.
C. 83.3.
D. 84.6.

answer

83.3

question

Refer to Table Above. The inflation rate was
a. 24.3 percent in 2013 and 22.5 percent in 2014.
B. 23.8 percent in 2013 and 9.5 percent in 2014.
C. 23.8 percent in 2013 and 7.7 percent in 2014.
D. 24.3 percent in 2013 and 7.3 percent in 2014.

answer

24.3 percent in 2013 and 7.3 percent in 2014.

question

Accumulating a greater number of inputs will ensure that an economy will experience economic growth.
True or False?

answer

False

question

In some countries in Sub-Saharan Africa real GDP per person has been stagnant for many years.
True or False?

answer

True

question

The population growth rate tends to be higher in developed countries than in developing countries.
True or False?

answer

False

question

The GDP deflator is the best measure that reflects the prices of goods and services purchased by the typical household.
True or False?

answer

False

question

Nominal income is equal to real if the CPI is less than 100.
True or False?

answer

False

question

If inflationary expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant.
True or False?

answer

True

question

The content of the basket of goods and services used to compute the CPI changes every month.
True or False?

answer

False

question

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator,
True or False?

answer

False

question

Kristine has a savings account at a bank. If the nominal interest rate she earns exceeds the rate of inflation, then her purchasing power increases over time.
True or False?

answer

True

question

Transfer payments are subtracted from government purchases when calculating the GDP.
True or False?

answer

False

question

Cyclical unemployment refers to
a. the portion of unemployment created by job search.
B. short-run fluctuations around the natural rate of unemployment.
C. changes in unemployment due to changes in the natural rate of unemployment.
D. the portion of unemployment created by wages set above the equilibrium level.

answer

short-run fluctuations around the natural rate of unemployment.

question

Who of the following is not included in the Bureau of Labor Statistics' "employed" category?
a. those who worked in their own business
B. those who worked as unpaid workers in a family member's business
C. those waiting to be recalled to a job from which they had been laid off
D. those who were temporarily absent from work because of vacation.

answer

those waiting to be recalled to a job from which they had been laid off

question

Who is included in the labor force by the Bureau of Labor Statistics?
a. Dia, an unpaid homemaker not looking for other work
B. Kevin, a full-time student not looking for work
C. Sarah, who does not have a job but is looking for work
D. None of the above is correct.

answer

Sarah, who does not have a job but is looking for work

question

The labor-force participation rate is computed as
a. (Employed / Adult Population) × 100.
B. (Employed / Labor Force) × 100.
C. (Labor Force / Adult Population) × 100,
D. (Adult Population / Labor Force) × 100.

answer

(Labor Force / Adult Population) × 100,

question

Suppose that some country had an adult population of about 46 million, a labor-force participation rate of 75 percent, and an unemployment rate of 8 percent. How many people were unemployed?
a. 2.54 million
B. 2.76 million
C. 3.68 million
D. 8 million

answer

2.76 million

question

If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by definition there is
a. cyclical unemployment amounting to 0.5 percent of the labor force.
B. frictional unemployment amounting to 0.5 percent of the labor force.
C. structural unemployment amounting to 0.5 percent of the labor force.
D. search unemployment amounting to 0.5 percent of the labor force.

answer

cyclical unemployment amounting to 0.5 percent of the labor force.

question

Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has
a. gradually increased.
B. remained constant.
C. gradually decreased.
D. been eliminated.

answer

gradually decreased.

question

Which of the following is not an explanation for the existence of structural unemployment?
a. efficiency wages
B. job search
C. minimum-wage laws
D. unions

answer

job search

question

Refer to Figure above. If the government imposes a minimum wage of $4, how many workers will be employed?
a. 3,000
B. 4,000
C. 5,000
D. 7,000

answer

5,000

question

Minimum-wage laws, unions, and efficiency wages contribute to
a. both structural unemployment and the natural rate of unemployment.
B. neither structural unemployment nor the natural rate of unemployment,
C. structural unemployment, but not the natural rate of unemployment.
D. the natural rate of unemployment, but not structural unemployment.

answer

both structural unemployment and the natural rate of unemployment.

question

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,
a. invest in physical capital
B. use equity finance.
C. sell bonds.
D. purchase bonds,

answer

sell bonds

question

The length of time until a bond matures is called the
a. Perpetuity.
B. term.
C. maturity.
D. intermediation.

answer

term.

question

Retained earnings are
a. earnings of a company that are not paid out to stockholders.
B. the amount of revenue a corporation receives for the sale of its products minus its \o costs of production as measured by its accountants
C. the single most important piece of information about a stock.
D. computed by multiplying the dividend yield by the price of the stock,

answer

earnings of a company that are not paid out to stockholders.

question

Which of the following are financial intermediaries?
a. both banks and mutual funds
B. banks but not mutual funds
C. mutual funds but not banks
D. neither banks or mutual funds

answer

both banks and mutual funds

question

If national saving in a closed economy is greater than zero, which of the following must be true?
a. Either public saving or private saving must be greater than Zero.
B. Investment is positive.
C. Y-C-G>0.
D. All of the above are correct,

answer

All of the above are correct

question

In a small closed economy investment is $50 billion and private saving is $45 billion. What
are public saving and national saving?
a. $5 billion and $45 billion
B. -$5 billion and $45 billion
C. $5 billion and $50 billion
D. -$5 billion and $50 billion

answer

$5 billion and $50 billion

question

When the government has a budget surplus
a. it buys more of its bonds from the public than it sells to the public.
B. it spends more than it receives in tax revenue,
C. private Saving is greater than zero.
D. exports are greater than imports,

answer

it buys more of its bonds from the public than it sells to the public.

question

The slope of the supply of loanable funds curve represents the
a. positive relation between the real interest rate and investment,
B. positive relation between the real interest rate and saving.
C. negative relation between the real interest rate and investment.
D. negative relation between the real interest rate and saving.

answer

positive relation between the real interest rate and saving.

question

Refer to figure below. Which of the following movements shows the effects of the government going from a budget surplus to a budget deficit?
a. a movement from Point A to Point B
B. a movement from Point B to Point A
C. a movement from Point A to Point F
D. a movement from Point B to Point C

answer

a movement from Point A to Point B

question

In which case would people desire to borrow the most?
a. the nominal interest rate is 8% and the inflation rate is 7%
B. the nominal interest rate is 7% and the inflation rate is 5%
C. the nominal interest rate is 6% and the inflation rate is 3%
D. the nominal interest rate is 5% and the inflation rate is 1%

answer

the nominal interest rate is 8% and the inflation rate is 7%

question

Deflation
a. increases incomes and enhances the ability of debtors to pay off their debts.
B. increases incomes and reduces the ability of debtors to pay off their debts.
C. decreases incomes and enhances the ability of debtors to pay off their debts.
D. decreases incomes and reduces the ability of debtors to pay off their debts,

answer

decreases incomes and reduces the ability of debtors to pay off their debts,

question

The supply of money is determined by
a. the price level.
B. the Treasury and Congressional Budget Office.
C. the Federal Reserve System
D. the demand for money,

answer

the Federal Reserve System

question

Refer to Figure above. Which of the following events could explain a shift of the
money-demand curve from MD1 to MD2?
a. an increase in the value of money
B. a decrease in the price level
C. an open-market purchase of bonds by the Federal Reserve
D. none of the above is correct.

answer

none of the above is correct.

question

Refer to Figure above. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the economy's real GDP is 20,000 for the year. If the money market is in equilibrium, then how many times per year is the typical dollar bill used to pay for a newly produced good or service?
a. 4
B. 2
C. 8
D. 10

answer

question

If the value of a dollar falls, then the quantity of money demanded
a. rises, meaning people want to hold more of their wealth in a liquid form.
B. rises, meaning people desire to work more so their income rises.
C. falls, meaning people want to hold less of their wealth in a liquid form.
D. falls, meaning people want to work less so their income falls.

answer

rises, meaning people want to hold more of their wealth in a liquid form.

question

When the money market is drawn with the value of money on the vertical axis, a decrease in the money supply leads people to
a. spend more so the value of a dollar rises.
B. spend more so the value of a dollar falls.
C. spend less so the value of a dollar rises
D. spend less so the value of a dollar falls.

answer

spend less so the value of a dollar rises

question

You put money in the bank. The increase in the dollar value of your savings
a. and the change in the number of goods you can buy with your savings are both nominal variables.
B. and the change in the number of goods you can buy with your savings are both real variables.
C. is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable.
D. is a real variable, but the change in the number of goods you buy with your savings is a nominal variable.

answer

is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable.

question

If money is neutral and velocity is stable, an increase in the money supply creates a proportional increase in
a. real output only.
B. nominal output only,
C. the price level only,
D. both the price level and nominal output.

answer

both the price level and nominal output.

question

If a country experienced deflation, then
a. the nominal interest rate would be greater than the real interest rate.
B. the real interest rate would be greater than the nominal interest rate.
C. the real interest rate would equal the nominal interest rate,
D. nominal GDP would be greater than the money supply.

answer

the real interest rate would be greater than the nominal interest rate.

question

The costs of changing price tags and price listings are known as
a. inflation-induced tax distortions.
B. relative-price variability costs.
C. shoe leather costs.
D. menu costs.

answer

menu costs.

question

Which of the following is an example of barter?
a. A parent gives a teenager a $10 bill in exchange for her babysitting services.
B. A homeowner gives an exterminator a check for $50 in exchange for extermination services.
C. A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.
D. All of the above are examples of barter.

answer

A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.

question

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money
a. being a unit of account.
B. being a medium of exchange,
C. serving as a store of value.
D. having intrinsic value.

answer

being a medium of exchange,

question

Which list ranks assets from most to least liquid?
a. currency, fine art, stocks
B. currency, stocks, fine art
C. fine art, currency, stocks
D. fine art, stocks, currency

answer

currency, stocks, fine art

question

Which of the following is included in both M1 and M2?
a. Savings deposits
B. demand deposits
C. small time deposits
D. money market mutual funds

answer

demand deposits

question

The agency responsible for regulating the U.S. monetary system is the
a. U.S. Treasury
B. Federal Reserve
C. Department of Justice
D. Federal Trade Commission

answer

Federal Reserve

question

Who can vote on Federal Open Market Committee decisions?
a. all of the members of the Board of Governors and all of the Federal Reserve Bank presidents
B. all of the members of the Board of Governors and some of the Federal Reserve Bank presidents
C. Some of the members of the Board of Governors and all of the Federal Reserve Bank presidents
D. Some of the members of the Board of Governors and some of the Federal Reserve Bank presidents

answer

all of the members of the Board of Governors and some of the Federal Reserve Bank presidents

question

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement.
a. It has $25 in reserves and $4,975 in loans.
B. It has $250 in reserves and $4,750 in loans.
C. It has $1,000 in reserves and $4,000 in loans.
D. None of the above is correct.

answer

It has $250 in reserves and $4,750 in loans.

question

An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $45,750. The T-account of the bank is shown below. Refer to Table above. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is
a. 9.33,
B. 1.09.
C. 10.76.
D. 11.76.

answer

11.76

question

When the Fed conducts open-market purchases,
a. it buys Treasury securities, which increases the money supply,
B. it buys Treasury securities, which decreases the money supply,
C. it borrows money from member banks, which increases the money supply.
D. it lends money to member banks, which decreases the money supply.

answer

it buys Treasury securities, which increases the money supply,

question

If the public decides to hold more currency and fewer deposits in banks, bank reserves
a. decrease and the money supply eventually decreases,
B. decrease but the money supply does not change.
C. increase and the money supply eventually increases.
D. increase but the money supply does not change.

answer

decrease and the money supply eventually decreases,

question

Every adult who was not employed during the previous four weeks is included in the Bureau of Labor Statistics' "unemployed" category.
True or False?

answer

False

question

Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate sometimes is close to zero.
True or False?

answer

True

question

Other things the same, the higher the rate of saving and investment in a country, the higher will be the standard of living in the future.
True or False?

answer

True

question

All financial intermediaries are financial institutions, but not all financial institutions are financial intermediaries,
True or False?

answer

True

question

The term crowding out refers to decreases in the interest rate caused by government budget surpluses.
True or False?

answer

False

question

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services,
True or False?

answer

True

question

Dollar prices and relative prices are both nominal variables.
True or False?

answer

False

question

According to the Fisher effect, if inflation rises then the nominal interest rate rises,
True or False?

answer

True

question

Money allows people to specialize in what they do best, thereby raising everyone's standard of living.
True or False?

answer

True

question

Credit cards are a medium of exchange.
True or False?

answer

False

question

The word "economy" comes from the Greek word oikonomos, which means
a. environment
B. production
C. one who manages a household
D. one who makes decisions

answer

one who manages a household

question

In considering how to allocate its scarce resources among its various members, a household considers
a. each member's abilities.
B. each member's efforts
C. each member's desires
D. All of the above are correct

answer

All of the above are correct

question

The overriding reason why households and societies face many decisions is that
a. resources are scarce.
B. goods and services are not scarce
C. incomes fluctuate with business cycles
D. people, by nature, tend to disagree

answer

resources are scarce.

question

Economics is the study of
a. production methods.
B. how society manages its scarce resources.
C. how households decide who performs which tasks.
D. the interaction of business and government.

answer

how society manages its scarce resources.

question

In most societies, resources are allocated by
a. a single central planner.
B. a small number of central planners
C. those firms that use resources to provide goods and services.
D. the combined actions of millions of households and firms.

answer

the combined actions of millions of households and firms.

question

The phrase "no such thing as a free lunch" means
a. people must face tradeoffs.
B. rational people think at the margin.
C. people respond to incentives.
D. trade can make everyone better off.

answer

people must face tradeoffs.

question

Guns and butter are used to represent the classic societal tradeoff between spending on
a. durable and nondurable goods.
B. imports and exports.
C. national defense and consumer goods.
D. law enforcement and agriculture.

answer

national defense and consumer goods.

question

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between
a. guns and butter.
B. efficiency and equality.
C. inflation and unemployment.
D. work and leisure.

answer

efficiency and equality.

question

High-school athletes who skip college to become professional athletes
a. obviously do not understand the value of a college education.
B. usually do so because they cannot get into college.
C. understand that the opportunity cost of attending college is very high.
D. are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high-school athletes.

answer

understand that the opportunity cost of attending college is very high.

question

Consider Paul's decision to go to college. If he goes to college, he will spend $90,000 on tuition, $15,000 on room and board, and $7,000 on books. If he does not go to college, he will earn $22,000 working at a construction job and he will spend $11,000 on room and board. Paul's cost of going to college is
a. $96,000.
B. $110,000.
C. $114,000.
D. $123,000.

answer

$123,000.

question

Rational people make decisions at the margin by
a. following marginal traditions.
B. behaving in a random fashion.
C. thinking in black-and-white terms.
D. comparing marginal costs and marginal benefits.

answer

comparing marginal costs and marginal benefits.

question

People are likely to respond to a policy change
a. only if they think the policy is a good one.
B. only if the policy change changes the costs of their behavior.
C. only if the policy change changes the benefits of their behavior.
D. if the policy changes either the costs or benefits of their behavior.

answer

if the policy changes either the costs or benefits of their behavior.

question

The principle that "trade can make everyone better off" applies to interactions and trade between
a. families
B. states within the United States.
C. nations
D. All of the above are correct.

answer

All of the above are correct.

question

The basic principles of economics suggest that
a. markets are seldom, if ever, a good way to organize economic activity.
B. government should become involved in markets when trade between countries is involved
C. government should become involved in markets when those markets fail to produce efficient or fair outcomes.
D. All of the above are correct.

answer

government should become involved in markets when those markets fail to produce efficient or fair outcomes.

question

answer

influencing the actions of buyers and sellers.

question

One reason we need government, even in a market economy, is that
a. there is insufficient market power in the absence of government.
B. property rights are too strong in the absence of government.
C. the invisible hand is not perfect.
D. Both a and b are correct.

answer

the invisible hand is not perfect.

question

The term used to describe a situation in which markets do not allocate resources efficiently is
a. economic meltdown.
B. market failure.
C. equilibrium.
D. the effect of the invisible hand.

answer

market failure.

question

The term "productivity"
a. means the same thing as "efficiency."
B. is seldom used by economists, as its meaning is not precise.
C. refers to the quantity of goods and services produced from each unit of labor input.
D. refers to the variety of goods and services from which households can choose when they shop.

answer

refers to the quantity of goods and services produced from each unit of labor input.

question

Large or persistent inflation is almost always caused by
a. excessive government spending.
B. excessive growth in the quantity of money.
C. foreign competition.
D. higher-than-normal levels of productivity.

answer

excessive growth in the quantity of money.

question

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because
a. the Federal Reserve is worried about inflation.
B. the Federal Reserve is worried about unemployment.
C. the Federal Reserve is hoping to reduce the demand for goods and services.
D. the Federal Reserve is worried that the economy is growing too quickly.

answer

the Federal Reserve is worried about unemployment.

question

Economists use some familiar terms in specialized ways
a. to make the subject sound more complex than it is.
B. because every respectable field of study has its own language.
C. to provide a new and useful way of thinking about the world.
D. because it was too difficult to come up with new terms.

answer

to provide a new and useful way of thinking about the world.

question

The essence of science is
a. the laboratory experiment.
B. the scientific method.
C. the study of nature, but not the study of society.
D. All of the above are correct.

answer

the scientific method

question

The goal of an economist who formulates new theories is to
a. provide an interesting framework of analysis, whether or not the framework turns out to be of much use in understanding how the world works.
B. provoke stimulating debate in scientific journals.
C. contribute to an understanding of how the world works.
D. demonstrate that economists, like other scientists, can formulate testable theories.

answer

contribute to an understanding of how the world works.

question

Because it is difficult for economists to use experiments to generate data, they generally must
a. do without data.
B. substitute assumptions for data when data are unavailable.
C. rely upon hypothetical data that were previously concocted by other economists.
D. use whatever data the world gives them.

answer

use whatever data the world gives them

question

Economists make assumptions to
a. mimic the methodologies employed by other scientists.
B. minimize the number of experiments that yield no useful data.
C. minimize the likelihood that some aspect of the problem at hand is being overlooked.
D. focus their thinking on the essence of the problem at hand.

answer

focus their thinking on the essence of the problem at hand.

question

When studying the effects of public policy changes, economists
a. always refrain from making assumptions.
B. sometimes make different assumptions about the short run and the long run.
C. consider only the direct effects of those policy changes and not the indirect effects.
D. consider only the short-run effects of those policy changes and not the long-run effects.

answer

sometimes make different assumptions about the short run and the long run.

question

Economic models
a. cannot be useful if they are based on false assumptions.
B. were once thought to be useful, but that is no longer true.
C. must incorporate all aspects of the economy if they are to be useful.
D. can be useful, even if they are not particularly realistic.

answer

can be useful, even if they are not particularly realistic

question

A circular-flow diagram is a model that
a. helps to explain how participants in the economy interact with one another.
B. helps to explain how the economy is organized.
C. incorporates all aspects of the real economy.
D. Both (a) and (b) are correct.

answer

Both (a) and (b) are correct.

question

The two loops in the circular-flow diagram represent
a. the flow of goods and the flow of services.
B. the flow of dollars and the flow of financial assets.
C. the flow of inputs into production processes and the flow of outputs from production processes
D. the flows of inputs and outputs and the flow of dollars.

answer

the flows of inputs and outputs and the flow of dollars.

question

Refer to Figure below. Devin works as an attorney for a corporation and is paid a salary in exchange for the legal services he performs. Juan owns office buildings and rents his buildings to companies in exchange for rent payments. If Devin's income is represented by a flow of dollars from Box D to Box B of this circular flow diagram, then Juan's income is represented by a flow of dollars
a. from Box A to Box C.
B. from Box C to Box A.
C. from Box B to Box D.
D. from Box D to Box B.

answer

from Box D to Box B.

question

Any point on a country's production possibilities frontier represents a combination of two goods that an economy
a. will never be able to produce.
B. can produce using all available resources and technology.
C. can produce using some portion, but not all, of its resources and technology.
D. may be able to produce in the future with more resources and/or superior technology.

answer

can produce using all available resources and technology.

question

The bowed shape of the production possibilities frontier can be explained by the fact that
a. all resources are scarce.
B. economic growth is always occurring.
C. the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.
D. the only way to get more of one good is to get less of the other

answer

the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.

question

Refer to Figure above. This economy has the ability to produce at which point(s)?
a. Q, R, T, U
B. R, T, U
C. R, U
D. T

answer

R, T, U

question

Refer to Figure above. The opportunity cost of obtaining 40 additional dryers by moving from point D to point C is
a. 0 washers.
B. 20 washers.
C. 40 washers.
D. None of the above; the economy cannot move from point D to point C.

answer

None of the above; the economy cannot move from point D to point C.

question

Refer to Figure above. The shift of the production possibilities frontier from A to B illustrates
a. simultaneous technological advances in the book and DVD industries.
B. a reallocation of resources away from the production of DVDs and toward the production of books.
C. economic growth.
D. All of the above are correct.

answer

economic growth

question

A macroeconomist — as opposed to a microeconomist — might study the effect of
a. changes in the money supply on the inflation rate.
B. an increase in the gas tax on fuel consumption.
C. a technological advance on the natural gas industry.
D. a hurricane on prices in the orange industry.

answer

changes in the money supply on the inflation rate.

question

Which of the following statements is correct about the roles of economists?
a. Economists are best viewed as policy advisers.
B. Economists are best viewed as scientists.
C. In trying to explain the world, economists are policy advisers; in trying to improve the world, they are scientists.
D. In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.

answer

In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.

question

One way to characterize the difference between positive statements and normative statements is as follows:
a. Positive statements tend to reflect optimism about the economy and its future, whereas normative statements tend to reflect pessimism about the economy and its future.
B. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be.
C. Positive statements involve advice on policy matters, whereas normative statements are supported by scientific theory and observation.
D. Economists outside of government tend to make normative statements, whereas government-employed economists tend to make positive statements.

answer

Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be.

question

With the resources it has, an economy can produce at any point on or outside the production possibilities frontier, but it cannot produce at points inside the
True or False?

answer

False

question

When a production possibilities frontier is bowed outward, the opportunity cost of one good in terms of the other is
True or False?

answer

True

question

When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all
a. rely upon the government to provide us with the basic necessities of life.
B. rely upon one another for the goods and services we consume.
C. have similar tastes and abilities.
D. are concerned about one another's well being.

answer

rely upon one another for the goods and services we consume

question

An economy's production possibilities frontier is also its consumption possibilities frontier
a. under all circumstances.
B. under no circumstances.
C. when the economy is self-sufficient.
D. when the rate of tradeoff between the two goods being produced is constant.

answer

when the economy is self-sufficient.

question

The most obvious benefit of specialization and trade is that they allow us to
a. work more hours per week than we otherwise would be able to work.
B. consume more goods than we otherwise would be able to consume.
C. spend more money on goods that are beneficial to society, and less money on goods that are harmful to society.
D. consume more goods by forcing people in other countries to consume fewer goods.

answer

consume more goods than we otherwise would be able to consume.

question

Assume that England and Holland can switch between producing milk and oats at a constant rate. Refer to Table above. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for Holland. If we were to do this, measuring milk along the horizontal axis, then
a. the slope of England's production possibilities frontier would be 10/4 and the slope of Holland's production possibilities frontier would be -4/3.
B. the slope of England's production possibilities frontier would be 4/10 and the slope of Holland's production possibilities frontier would be -3/4.
C. the slope of England's production possibilities frontier would be 10/4 and the slope of Holland's production possibilities frontier would be 4/3.
D. the slope of England's production possibilities frontier would be 4/10 and the slope of Holland's production possibilities frontier would be 3/4.

answer

the slope of England's production possibilities frontier would be 4/10 and the slope of Holland's production possibilities frontier would be 3/4.

question

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. Refer to Table above. Assume that the farmer and the rancher each has 24 labor hours available. If each person divides his time equally between the production of meat and potatoes, then total production is
a. 6 pounds of meat and 4.5 pounds of potatoes.
B. 5.5 pounds of meat and 8 pounds of potatoes.
C. 12 pounds of meat and 9 pounds of potatoes.
D. 5 pounds of meat and 5.5 pounds of potatoes.

answer

6 pounds of meat and 4.5 pounds of potatoes.

question

Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.Refer to Table above. We could use the information in the table to draw a production possibilities frontier for Japan and a second production possibilities frontier for Korea. If we were to do this, measuring cars along the horizontal axis, then
a. the slope of Japan's production possibilities frontier would be 5 and the slope of Korea's production possibilities frontier would be -3.
B. the slope of Japan's production possibilities frontier would be 0.2 and the slope of Korea's production possibilities frontier would be -0.33.
C. the slope of Japan's production possibilities frontier would be 0.2 and the slope of Korea's production possibilities frontier would be 0.33.
D. the slope of Japan's production possibilities frontier would be 5 and the slope of Korea's production possibilities frontier would be 3.

answer

the slope of Japan's production possibilities frontier would be 5 and the slope of Korea's production possibilities frontier would be 3.

question

Refer to Figure below. If the production possibilities frontier shown is for 24 hours of production, then how long does it take Brazil to make one cashew?Brazil's Production Possibilities Frontier.
a. 1/10 hour
B. 1/3 hour
C. 3 hours
D. 10 hours

answer

1/10 hour

question

Chile's Production Possibilities Frontier Colombia's Production Possibilities Frontier Refer to Figure above. If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of coffee and soybeans could Chile and Colombia together make in a given day?
a. 4 pounds of coffee and 16 pounds of soybeans
B. 8 pounds of coffee and 15 pounds of soybeans
C. 16 pounds of coffee and 10 pounds of soybeans
D. 24 pounds of coffee and 4 pounds of soybeans

answer

4 pounds of coffee and 16 pounds of soybeans

question

Alice and Betty's Production Possibilities in one 8-hour day. Refer to Figure above. If point A represents Alice's current production and point B represents Betty's current production, under what circumstances can both Alice and Betty benefit from specialization and trade?
a. Alice produces more pizzas and Betty produces more lemonade.
B. Alice produces more lemonade and Betty produces more pizzas.
C. Both Alice and Betty produce only pizzas.
D. There are no circumstances under which both Alice and Betty can benefit from specialization and trade.

answer

Alice produces more lemonade and Betty produces more pizzas.

question

A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton
a. is equal to 0.
B. is between 0 and 1.
C. is equal to 1.
D. is greater than 1.

answer

is equal to 1.

question

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is
a. 1/6 table for Ken and 1/3 table for Traci.
B. 1/6 table for Ken and 3 tables for Traci.
C. 6 tables for Ken and 1/3 table for Traci.
D. 6 tables for Ken and 3 tables for Traci.

answer

1/6 table for Ken and 1/3 table for Traci.

question

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,
a. has a low opportunity cost of producing that good, relative to the opportunity costs of other producers.
B. has a comparative advantage in the production of that good.
C. has an absolute advantage in the production of that good.
D. should be the only producer of that good.

answer

has an absolute advantage in the production of that good.

question

Refer to Figure above. If Chile and Colombia switch from each country dividing its time equally between the production of coffee and soybeans to each country spending all of its time producing the good in which it has a comparative advantage, then total production of soybeans will increase by
a. 3 pounds.
B. 6 pounds.
C. 9 pounds.
D. 12 pounds.

answer

3 pounds.

question

Refer to Figure above. At which of the following prices would both Chile and Colombia gain from trade with each other?
a. 6 pounds of soybeans for 9 pounds of coffee
B. 8 pounds of soybeans for 20 pounds of coffee
C. 11 pounds of soybeans for 33 pounds of coffee
D. Chile and Colombia could not both gain from trade with each other at any price.

answer

6 pounds of soybeans for 9 pounds of coffee

question

US and French Production Opportunities Refer to Table above. France has an absolute advantage in the production of
a. wine
B. Cheese
C. Both wine and cheese.
D. Neither wine nor cheese.

answer

Neither wine nor cheese

question

Adam Smith asserted that a person should never attempt to make at home
a. What it will cost him more to make than to buy.
B. Any good in which that person does not have an absolute advantage.
C. Any luxury good.
D. Any necessity.

answer

What it will cost him more to make than to buy

question

It is possible for the U.S. to gain from trade with Germany even if it takes U.S. workers fewer hours to produce every good than it takes German workers.
True or False?

answer

True

question

Opportunity cost refers to how many inputs a producer requires to produce a good.
True or False?

answer

False

question

Differences in opportunity cost allow for gains from trade.
True or False?

answer

True

question

In a market economy,
a. supply determines demand and demand, in turn, determines prices.
B. demand determines supply and supply, in turn, determines prices.
C. the allocation of scarce resources determines prices and prices, in turn, determine supply and demand.
D. supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.

answer

supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.

question

A group of buyers and sellers of a particular good or service is called a(n)
a. coalition
B. economy
C. market
D. competition

answer

market

question

A competitive market is a market in which
a. an auctioneer helps set prices and arrange sales.
B. there are only a few sellers.
C. the forces of supply and demand do not apply.
D. no individual buyer or seller has any significant impact on the market price.

answer

no individual buyer or seller has any significant impact on the market price.

question

Which of the following characteristics is required for a perfectly competitive market?
a. The goods offered for sale are exactly the same.
B. There are so many buyers and sellers that no single buyer or seller has any influence over the market price.
C. It is difficult for new sellers to enter the market.
D. Both a and b are correct.

answer

Both a and b are correct.

question

An increase in quantity demanded
a. results in a movement downward and to the right along a demand curve.
B. results in a movement upward and to the left along a demand curve.
C. shifts the demand curve to the left.
D. shifts the demand curve to the right.

answer

results in a movement downward and to the right along a demand curve.

question

A downward-sloping demand curve illustrates
a. that demand decreases over time.
B. that prices fall over time.
C. the relationship between income and quantity demanded.
D. the law of demand.

answer

the law of demand.

question

When we move along a given demand curve,
a. only price is held constant.
B. income and price are held constant.
C. all nonprice determinants of demand are held constant.
D. all determinants of quantity demanded are held constant.

answer

all nonprice determinants of demand are held constant.

question

Refer to Figure above. Which of the following would cause the demand curve to shift from Demand A to Demand B in the market for oranges in the United States?
a. a freeze in Florida
B. a technological advance that allows oranges to ripen faster
C. a decrease in the price of apples
D. an announcement by the FDA that oranges prevent heart disease

answer

an announcement by the FDA that oranges prevent heart disease

question

Suppose that when income rises, the demand curve for doctor's visits shifts to the right. In this case, we know doctor's visits are
a. inferior goods.
B. normal goods.
C. perfectly competitive goods.
D. durable goods.

answer

normal goods

question

Refer to Figure above. The movement from Point A to Point B represents a(n)
a. shift in the supply curve.
B. decrease in the quantity supplied.
C. increase in the quantity supplied.
D. Both a and b are correct.

answer

decrease in the quantity supplied.

question

A supply curve slopes upward because
a. as more is produced, total cost of production falls.
B. an increase in input prices increases supply.
C. the quantity supplied of most goods and services increases over time.
D. an increase in price gives producers an incentive to supply a larger quantity.

answer

an increase in price gives producers an incentive to supply a larger quantity.

question

Refer to Figure above. The shift from S to S' could be caused by an
a. increase in the price of the good.
B. improvement in production technology.
C. increase in income.
D. increase in input prices.

answer

improvement in production technology.

question

Which of the following events must cause equilibrium quantity to rise?
a. demand increases and supply decreases
B. demand and supply both decrease
C. demand decreases and supply increases
D. demand and supply both increase

answer

demand and supply both increase

question

Refer to Figure above. If the price is $25, then there would be an excess
a. supply of 100 units, and price would fall.
B. supply of 300 units, and price would fall.
C. demand of 100 units, and price would fall.
D. demand of 300 units, and price would fall.

answer

supply of 300 units, and price would fall.

question

Refer to Figure above. Which of the following movements would illustrate the effect in the market for Ramen noodles of a decrease in the incomes of young adults, assuming that Ramen noodles are an inferior good?
a. Point A to Point B
B. Point C to Point B
C. Point C to Point D
D. Point A to Point D

answer

Point A to Point D

question

Adam Smith suggested that an invisible hand guides market economies. In this analogy, what is the baton that the invisible hand uses to conduct the economic orchestra?
a. the government
B. prices
C. subsidies
D. the Federal Reserve

answer

prices

question

In a perfectly competitive market, the goods offered for sale are all exactly the same.
True or False?

answer

True

question

Individual demand curves are summed vertically to obtain the market demand curve.
True or False?

answer

False

question

A decrease in the price of a complement will shift the demand curve for a good to the left.
True or False?

answer

False

question

If the demand for movies increases at the same time as the movie industry adopts labor-saving technology for producing movies, the equilibrium price for movies will increase, but the effect on the equilibrium quantity of movies is ambiguous.
True or False?

answer

False

question

Price controls are usually enacted
a. as a means of raising revenue for public purposes.
B. when policymakers believe that the market price of a good or service is unfair to buyers or sellers.
C. when policymakers tax a good.
D. All of the above are correct.

answer

when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

question

A price ceiling is
a. often imposed on markets in which "cutthroat competition" would prevail without a price ceiling.
B. a legal maximum on the price at which a good can be sold.
C. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling.
D. All of the above are correct.

answer

a legal maximum on the price at which a good can be sold.

question

If the government removes a binding price ceiling from a market, then the price paid by buyers will
a. increase, and the quantity sold in the market will increase.
B. increase, and the quantity sold in the market will decrease.
C. decrease, and the quantity sold in the market will increase.
D. decrease, and the quantity sold in the market will decrease.

answer

increase, and the quantity sold in the market will increase.

question

A price ceiling is binding when it is set
a. above the equilibrium price, causing a shortage.
B. above the equilibrium price, causing a surplus.
C. below the equilibrium price, causing a shortage.
D. below the equilibrium price, causing a surplus.

answer

below the equilibrium price, causing a shortage

question

Refer to Figure above. The price ceiling causes quantity
a. supplied to exceed quantity demanded by 45 units.
B. supplied to exceed quantity demanded by 85 units.
C. demanded to exceed quantity supplied by 45 units.
D. demanded to exceed quantity supplied by 85 units.

answer

demanded to exceed quantity supplied by 85 units

question

After a binding price floor becomes effective, a
a. smaller quantity of the good is bought and sold.
B. a larger quantity of the good is demanded.
C. a smaller quantity of the good is supplied.
D. All of the above are correct.

answer

smaller quantity of the good is bought and sold.

question

When a binding price floor is imposed on a market,
a. price no longer serves as a rationing device.
B. the quantity supplied at the price floor exceeds the quantity that would have been supplied without the price floor.
C. only some sellers benefit.
D. All of the above are correct.

answer

All of the above are correct.

question

When a binding price floor is imposed on a market to benefit sellers,
a. every seller in the market benefits.
B. all buyers and sellers benefit.
C. every seller who wants to sell the good will be able to do so, but only if he appeals to the personal biases of the buyers.
D. some sellers will not be able to sell any amount of the good.

answer

some sellers will not be able to sell any amount of the good.

question

Refer to Figure above. A government-imposed price of $24 in this market is an example of a
a. binding price ceiling that creates a shortage.
B. non-binding price ceiling that creates a shortage.
C. binding price floor that creates a surplus.
D. non-binding price floor that creates a surplus.

answer

binding price floor that creates a surplus.

question

An outcome that can result from either a price ceiling or a price floor is
a. a surplus in the market.
B. a shortage in the market.
C. a nonbinding price control.
D. long lines of frustrated buyers.

answer

a nonbinding price control.

question

Refer to Figure above. If the government imposes a price ceiling of $8 on this market, then there will be
a. no shortage.
B. a shortage of 10 units.
C. a shortage of 20 units.
D. a shortage of 40 units.

answer

no shortage

question

Refer to Figure above. When the price ceiling applies in this market, and the supply curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought and sold is
a. less than Q3.
B. Q3
C. between Q1 and Q3.
D. at least Q1.

answer

less than Q3.

question

Refer to Figure above. If the horizontal line on the graph represents a price floor, then the price floor is
a. binding and creates a shortage of 20 units of the good.
B. binding and creates a shortage of 40 units of the good.
C. not binding but creates a shortage of 40 units of the good.
D. not binding, and there will be no surplus or shortage of the good.

answer

not binding, and there will be no surplus or shortage of the good.

question

An example of a price floor is
a. the regulation of gasoline prices in the U.S. in the 1970s.
B. rent control.
C. the minimum wage.
D. any restriction on price that leads to a shortage.

answer

the minimum wage

question

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would
a. increase by more than $1,000.
B. increase by exactly $1,000.
C. increase by less than $1,000.
D. decrease by an indeterminate amount.

answer

increase by less than $1,000

question

Refer to Figure above. The price that buyers pay after the tax is imposed is
a. $8.00.
B. $9.00.
C. $10.50.
D. $12.00.

answer

$12.00

question

A price ceiling is a legal minimum on the price at which a good or service can be sold.
True or False?

answer

False

question

All buyers benefit from a binding price ceiling.
True or False?

answer

False

question

The wedge between the buyers' price and the sellers' price is the same, regardless of whether the tax is levied on buyers or sellers.
True or False?

answer

True

question

The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy.
True or False?

answer

True

question

Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?
a. the unemployment rate
B. the inflation rate
C. gross domestic product
D. the trade deficit

answer

gross domestic product

question

For an economy as a whole,
a. wages must equal profit.
B. consumption must equal income.
C. income must equal expenditure.
D. consumption must equal saving.

answer

income must equal expenditure.

question

Which of the following is a way to compute GDP?
a. add up the wages paid to all workers
B. add up the quantities of all final goods and services
C. add up the market values of all final goods and services
D. add up the difference between the market values of all final goods and services and then subtract the costs of producing those goods and services

answer

add up the market values of all final goods and services

question

The value of the housing services provided by the economy's owner-occupied houses is
a. included in GDP, and the estimated rental values of the houses are used to place a value on these housing services.
B. included in GDP, and the actual mortgage payments made on the houses are used to estimate the value of these rental services.
C. excluded from GDP since these services are not sold in any market.
D. excluded from GDP since the value of these housing services cannot be estimated with any degree of precision.

answer

included in GDP, and the estimated rental values of the houses are used to place a value on these housing services.

question

Grapes are considered intermediate goods
a. whether the purchaser uses them to make wine to sell or eats them.
B. if the purchaser uses them to make wine to sell others but not if the purchaser eats them.
C. if the purchaser eats them, but not if the purchaser uses to them to make wine to sell.
D. None of the above is correct.

answer

if the purchaser uses them to make wine to sell others but not if the purchaser eats them

question

A U.S.-owned automobile factory uses $100,000 worth of parts purchased from foreign countries along with U.S. inputs to produce 30 cars worth $20,000 each. Twenty of these cars are sold and 10 are left in inventory. How much did these actions add to GDP?
a. $300,000
B. $500,000
C. $600,000
D. $700,000

answer

$500,000

question

Sheri, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included
a. in both German GDP and U.S. GDP.
B. in German GDP, but is not included in U.S. GDP.
C. in U.S. GDP, but is not included in German GDP.
D. in neither German GDP nor U.S. GDP.

answer

in German GDP, but is not included in U.S. GDP

question

The consumption component of GDP includes spending on
a. durable goods and nondurable goods, but not spending on services.
B. durable goods and services, but not spending on nondurable goods.
C. nondurable goods and services, but not spending on durable goods.
D. durable goods, nondurable goods, and services.

answer

durable goods, nondurable goods, and services.

question

For the purpose of calculating GDP, investment is spending on
a. stocks, bonds, and other financial assets.
B. real estate and financial assets such as stocks and bonds.
C. capital equipment, inventories, and structures, including household purchases of new housing.
D. capital equipment, inventories, and structures, excluding household purchases of new housing.

answer

capital equipment, inventories, and structures, including household purchases of new housing.

question

Which of the following is included in government purchases?
a. unemployment benefits a state pays
B. Social Security payments the U.S. government makes
C. the services of a U.S. government attorney valued at the cost of her salary
D. All of the above are correct.

answer

the services of a U.S. government attorney valued at the cost of her salary

question

Net exports equal
a. exports plus imports.
B. imports minus exports.
C. Y - (C + I + G).
D. Y - (C - I - G).

answer

Y - (C + I + G).

question

Changes in nominal GDP reflect
a. only changes in prices.
B. only changes in the amounts being produced.
C. both changes in prices and changes in the amounts being produced.
D. neither changes in prices nor changes in the amounts being produced.

answer

both changes in prices and changes in the amounts being produced

question

A country's real GDP rose from $500 to $530 while its nominal GDP rose from $600 to $700. What was this country's inflation rate?
a. 16.7%.
B. 10.0%.
C. 15.0%.
D. -9.1%.

answer

10.0%.

question

The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2015. Refer to Table above. In 2016, this country's
a. real GDP was $880, and the GDP deflator was 111.4.
B. real GDP was $780, and the GDP deflator was 88.6.
C. real GDP was $880, and the GDP deflator was 112.8.
D. real GDP was $780, and the GDP deflator was 112.8.

answer

real GDP was $780, and the GDP deflator was 112.8

question

Refer to Table above. This country's inflation rate from 2017 to 2018 was
a. 20.0%.
B. 21.8%.
C. 38.9%.
D. 28.0%.

answer

28.0%.

question

GDP does not reflect
a. the value of leisure.
B. the value of goods and services produced at home.
C. the quality of the environment.
D. All of the above are correct.

answer

All of the above are correct

question

GDP is the market value of all final goods and services produced by a country's citizens in a given period of time.
True or False?

answer

False

question

New home construction is included in the consumption component of GDP.
True or False?

answer

False

question

Changes in the GDP deflator reflect only changes in the prices of goods and services.
True or False?

answer

True

question

Other things equal, in countries with higher levels of real GDP per person, life expectancy and literacy rates are higher than in countries with lower levels of real GDP per person.
True or False?

answer

True

question

The consumer price index is used to
a. monitor changes in the level of wholesale prices in the economy.
B. monitor changes in the cost of living over time.
C. monitor changes in the level of real GDP over time.
D. monitor changes in the stock market.

answer

monitor changes in the cost of living over time.

question

The inflation rate you are likely to hear on the nightly news is calculated from
a. the GDP deflator.
B. the CPI.
C. the Dow Jones Industrial Average.
D. the unemployment rate.

answer

the CPI

question

To calculate the CPI, the Bureau of Labor Statistics uses
a. the prices of all goods and services produced domestically.
B. the prices of all final goods and services.
C. the prices of all consumer goods.
D. the prices of some consumer goods.

answer

the prices of some consumer goods.

question

If 2012 is the base year, then the inflation rate for 2012 equals.
a. a.
B. b.
C. c.
D. d.

answer

question

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was
a. 100 in 2012.
B. 105 in 2013.
C. 109.5 in 2014.
D. All of the above are correct.

answer

All of the above are correct

question

The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?
a. 1.04 percent
B. 4.41 percent
C. 6.00 percent
D. 42.00 percent

answer

4.41 percent

question

If the CPI was 125 this year and 120 last year, then
a. the cost of the CPI basket of goods and services increased by 4.2 percent this year.
B. the price level increased by 4.2 percent this year.
C. the inflation rate for this year was 4.2 percent.
D. All of the above are correct.

answer

All of the above are correct.

question

Refer to Table above. If 2013 is the base year, then the consumer price index was
a. 80.8 in 2012, 100 in 2013, and 107.7 in 2014.
B. 80.5 in 2012, 100 in 2013, and 107.3 in 2014.
C. 247.5 in 2012, 307.5 in 2013, and 330 in 2014.
D. 210 in 2012, 260 in 2013, and 280 in 2014.

answer

80.8 in 2012, 100 in 2013, and 107.7 in 2014.

question

One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods that have become relatively less expensive and smaller quantities of goods that have become relatively more expensive. This problem is called
a. price-change neglect.
B. unmeasured quality change.
C. substitution bias.
D. relative bias.

answer

substitution bias

question

If the CPI was 104 in 1967 and is 390 today, then $10 in 1967 purchased the same amount of goods and services as
a. $2.67 purchases today.
B. $37.50 purchases today.
C. $39.00 purchases today.
D. $104.00 purchases today.

answer

$37.50 purchases today

question

Henri earned a salary of $50,000 in 2001 and $70,000 in 2006. The consumer price index was 177 in 2001 and 265.5 in 2006. Henri's 2006 salary in 2001 dollars is
a. $35,000.00.
B. $46,666.67.
C. $61,950.00
D. $105,000.00.

answer

$46,666.67.

question

Indexation refers to
a. a process of adjusting the nominal interest rate so that it is equal to the real interest rate.
B. using a law or contract to automatically correct a dollar amount for the effects of inflation.
C. using a price index to deflate dollar values.
D. an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator.

answer

using a law or contract to automatically correct a dollar amount for the effects of inflation.

question

The nominal interest rate tells you
a. how fast the number of dollars in your bank account rises over time.
B. how fast the purchasing power of your bank account rises over time.
C. the number of dollars in your bank account today.
D. the purchasing power of your bank account today.

answer

how fast the number of dollars in your bank account rises over time.

question

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is
a. -5 percent.
B. 1.67 percent.
C. 5 percent.
D. 11 percent.

answer

5 percent.

question

The consumer price index was 120 in 2013 and 126 in 2014. The nominal interest rate during this period was 8 What was the real interest rate during this period?
a. 3 percent
B. 2 percent
C. 3.3 percent
D. 12.8 percent

answer

3 percent

question

Which of the following is not correct?
a. The U.S. economy has never experienced deflation.
B. Since 1965, the U.S. nominal interest rate has exceeded the U.S. real interest rate.
C. Since 1965, the U.S. economy has experienced rising consumer prices in most years.
D. During deflation, the real interest rate exceeds the nominal interest rate.

answer

The U.S. economy has never experienced deflation

question

The CPI is a measure of the overall cost of the goods and services bought by a typical consumer
True or False?

answer

True

question

Data from the Bureau of Labor Statistics show that consumer spending on transportation is only slightly higher than consumer spending on food and beverages.
True or False?

answer

True

question

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.
True or False?

answer

True

question

Over the past century in the United States, real GDP per person has grown, on average, by about
a. 1 percent per year.
B. 2 percent per year.
C. 3 percent per year.
D. 5 percent per year.

answer

2 percent per year.

question

A nation's standard of living is determined by
a. the percentage of its GDP that is accounted for by government purchases.
B. the quantity of natural resources with which it is endowed.
C. the productivity of its workers.
D. factors and events that are beyond the nation's control.

answer

the productivity of its workers.

question

In 2010, real GDP per person in Bangladesh was
a. about 3 times as high as it was in the U.S. in 1870.
B. about twice as high as it was in the U.S. in 1870.
C. about the same as it was in the U.S. in 1870.
D. less than it was in the U.S. in 1870.

answer

less than it was in the U.S. in 1870

question

answer

growth rate of real GDP per person.

question

Which of the following nations experienced average rates of economic growth of a bit under 2% over the last 100 years or so?
a. Mexico
B. Brazil
C. the United States
D. All of the above are correct.

answer

the United States

question

Last year real GDP in the imaginary nation of Populia was 907.5 billion and the population was 3.3 million. The year before real GDP was 750 billion and the population was 3 million. What was the growth rate of real GDP per person during the year?
a. 10 percent
B. 14 percent
C. 17 percent
D. 21 percent

answer

10 percent

question

Which of the following is a correct way to measure productivity?
a. Divide the number of hours worked by the quantity of output.
B. Divide the quantity of output by the number of hours worked.
C. Determine how much output is produced in a given time.
D. Determine how much time it takes to produce a unit of output.

answer

Divide the quantity of output by the number of hours worked

question

Suppose that real GDP grew more in Country A than in Country B last year.
a. Country A must have a higher standard of living than country B.
B. Country A's productivity must have grown faster than country B's.
C. Both of the above are correct.
D. None of the above are correct.

answer

None of the above are correct.

question

Industrial machinery is an example of
a. a factor of production that in the past was an output from the production process.
B. physical capital.
C. something that influences productivity.
D. All of the above are correct.

answer

All of the above are correct

question

Which of the following is an example of human capital?
a. the comfortable chair in your dorm room where you read economics texts
B. the amount you get paid each week to work at the library
C. the things you have learned this semester
D. any capital goods that require a human to be present to operate

answer

the things you have learned this semester

question

Proprietary technology is knowledge that is
a. known but no longer used much.
B. known, but only recently discovered.
C. known mostly by only those in a certain profession.
D. known only by the company that discovered it.

answer

known only by the company that discovered it

question

answer

consumption falls and investment rises.

question

The traditional view of the production process is that capital is subject to
a. constant returns.
B. increasing returns.
C. diminishing returns.
D. diminishing returns for low levels of capital, and increasing returns for high levels of capital.

answer

diminishing returns

question

In recent decades Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in
a. foreign portfolio investment.
B. indirect domestic investment.
C. foreign direct investment.
D. foreign indirect investment.

answer

foreign portfolio investment.

question

According to research by Robert Fogel, what proportion of the increase in the standard of living in Britain between 1790 and 1980 can be accounted for by greater caloric intake?
a. 10 percent
B. 20 percent
C. 30 percent
D. 40 percent

answer

30 percent

question

Which of the following will increase a country's real GDP per person?
a. imposing restrictions on foreign trade and foreign investment
B. imposing restrictions on foreign trade and reducing restrictions on foreign investment
C. reducing restrictions on foreign trade and imposing restrictions on foreign investment
D. reducing restrictions on foreign trade and foreign investment

answer

reducing restrictions on foreign trade and foreign investment

question

All else equal, which of the following would tend to cause real GDP per person to rise?
a. a change from inward-oriented policies to outward-oriented policies
B. an increase in investment in human capital
C. strengthening of property rights.
D. All of the above are correct.

answer

All of the above are correct

question

Although growth rates across countries vary some, rankings of countries by income remain pretty much the same over time.
True or False

answer

False

question

Studies confirm that controlling for other variables such as the percentage of GDP devoted to investment, poor countries tend to grow at a faster rate than rich countries.
True or False

answer

True

question

Economist Michael Kremer found that world growth rates fell as population increased.
True or False

answer

False

question

Institutions that help to match one person's saving with another person's investment are collectively called the
a. Federal Reserve system.
B. banking system.
C. monetary system.
D. financial system.

answer

financial system

question

Which of the following statements about the term of a bond is correct?
a. Term refers to the various characteristics of a bond, including its interest rate and tax treatment.
B. The term of a bond is determined entirely by its credit risk.
C. The term of a bond is determined entirely by how much sales charge the buyer of the bond pays when he or she purchases the bond.
D. Interest rates on long-term bonds are usually higher than interest rates on short-term bonds.

answer

Interest rates on long-term bonds are usually higher than interest rates on short-term bonds

question

Refer to Figure above. Which of the following events would shift the demand curve from D1 to D2?
a. The government goes from running a budget deficit to running a budget surplus.
B. Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories.
C. A change in the tax laws encourages people to consume less and save more.
D. A change in the tax laws encourages people to consume more and save less.

answer

Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories

question

Municipal bonds pay a relatively
a. low rate of interest because of their high default risk and because the interest they pay is subject to federal income tax.
B. low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.
C. high rate of interest because of their high default risk and because federal taxes must be paid on the interest they pay.
D. high rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.

answer

low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.

question

The sale of stocks
a. and bonds to raise money is called debt finance.
B. and bonds to raise money is called equity finance.
C. to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance.
D. to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.

answer

to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance

question

If Huedepool Beer runs into financial difficulty, the stockholders as
a. part owners of Huedepool are paid before bondholders get paid anything at all.
B. part owners of Huedepool are paid after bondholders get paid.
C. creditors of Huedepool are paid before bondholders get paid anything at all.
D. creditors of Huedepool are paid after bondholders get paid.

answer

part owners of Huedepool are paid after bondholders get paid

question

The Dow Jones Industrial Average is now based on the prices of the stocks of
a. 30 major U.S. corporations.
B. 100 major U.S. corporations.
C. 500 representative U.S. corporations.
D. 1,000 representative U.S. corporations.

answer

30 major U.S. corporations

question

Which of the following is an example of financial intermediation?
a. John buys shares of stock issued by a fast food company.
B. A foreign government buys bonds issued by the U.S. Treasury.
C. Susan makes a deposit at a bank and the bank uses this money to make an auto loan to Ferguson.
D. None of the above is correct.

answer

Susan makes a deposit at a bank and the bank uses this money to make an auto loan to Ferguson.

question

The primary advantage of mutual funds is that they
a. always provide the highest return.
B. always allow people to "beat the market."
C. allow people to diversify and reduce risk.
D. allow people to diversify, which increases risk and return.

answer

allow people to diversify and reduce risk

question

If national saving in a closed economy is greater than zero, which of the following must be true?
a. Either public saving or private saving must be greater than zero.
B. Investment is positive.
C. Y - C - G > 0.
D. All of the above are correct.

answer

All of the above are correct

question

In a closed economy, what does (Y - T - C) represent?
a. national saving
B. government tax revenue
C. public saving
D. private saving

answer

private saving

question

Suppose private saving in a closed economy is $12b and investment is $10b.
a. National saving must equal $12b.
B. Public saving must equal $2b.
C. The government budget surplus must equal $2b.
D. The government budget deficit must equal $2b.

answer

The government budget deficit must equal $2b

question

According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in taxes would
a. raise both national saving and private saving.
B. raise national saving and reduce private saving.
C. leave national saving and private saving unchanged.
D. leave national saving unchanged and reduce private saving.

answer

leave national saving unchanged and reduce private saving.

question

Other things the same, when the interest rate rises,
a. people would want to lend more, making the supply of loanable funds increase.
B. people would want to lend less, making the supply of loanable funds decrease.
C. people would want to lend more, making the quantity of loanable funds supplied increase.
D. people would want to lend less, making the quantity of loanable funds supplied decrease.

answer

people would want to lend more, making the quantity of loanable funds supplied increase.

question

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,
a. there is a surplus and the interest rate is above the equilibrium level.
B. there is a surplus and the interest rate is below the equilibrium level.
C. there is a shortage and the interest rate is above the equilibrium level.
D. there is a shortage and the interest rate is below the equilibrium level.

answer

there is a surplus and the interest rate is above the equilibrium level.

question

If the government institutes policies that diminish incentives to save, then in the loanable funds market
a. the demand for loanable funds shifts rightward.
B. the demand for loanable funds shifts leftward.
C. the supply of loanable funds shifts rightward.
D. the supply of loanable funds shifts leftward.

answer

the supply of loanable funds shifts leftward.

question

Crowding out occurs when investment declines because
a. a budget deficit makes interest rates rise.
B. a budget deficit makes interest rates fall.
C. a budget surplus makes interest rates rise.
D. a budget surplus makes interest rates fall.

answer

a budget deficit makes interest rates rise

question

Corporations receive no proceeds from the resale of their stocks.
True or False

answer

True

question

Anything other than a change in the interest rate that decreases national saving shifts the supply of loanable funds to the left.
True or False

answer

True

question

National saving is equal to Y - T - C.
True or False

answer

False

question

The natural unemployment rate includes
a. both frictional and structural unemployment.
B. neither fictional nor structural unemployment.
C. structural but not frictional unemployment.
D. frictional but not structural unemployment.

answer

both frictional and structural unemployment

question

Cyclical unemployment
a. has a different explanation than does the natural rate of unemployment.
B. refers to the year to year fluctuation in unemployment around an economy's natural rate of unemployment.
C. is closely associated with short-run ups and downs of economic activity.
D. All of the above are correct.

answer

All of the above are correct

question

The Bureau of Labor Statistics produces data on unemployment and other aspects of the labor market from a regular survey of households called the
a. Census
B. Labor Survey.
C. Survey of Economic Indicators.
D. Current Population Survey.

answer

Current Population Survey

question

answer

those waiting to be recalled to a job from which they had been laid off

question

To be counted as "employed" in the U.S. labor force statistics, a person
a. must be working for pay and be working full time.
B. must be working for pay but does not have to be working full time.
C. does not have to be working for pay if they are working for a family business but must be employed full time.
D. does not have to be working for pay if they are working for a family business and does not have to be working full time

answer

does not have to be working for pay if they are working for a family business and does not have to be working full time

question

For the Bureau of Labor Statistics to place someone in the "unemployed" category, that person must
a. be available for work.
B. have tried to find employment during the previous week.
C. have previously been employed.
D. All of the above are correct.

answer

be available for work.

question

Josh is a full-time college student who is not working or looking for a job. The Bureau of Labor Statistics counts Josh as
a. unemployed and in the labor force.
B. unemployed but not in the labor force.
C. in the labor force but not unemployed.
D. neither in the labor force nor unemployed.

answer

neither in the labor force nor unemployed.

question

Which of the following is correct?
a. Labor force = number of employed.
B. Labor force = population - number of unemployed.
C. Unemployment Rate = number of unemployed ÷ (number of employed + number of unemployed) × 100.
D. Unemployment Rate = number of unemployed ÷ adult population × 100.

answer

Unemployment Rate = number of unemployed ÷ (number of employed + number of unemployed) × 100.

question

Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate is
a. always zero.
B. sometimes zero.
C. rarely zero.
D. never zero.

answer

never zero.

question

In 2009, based on concepts similar to those used to estimate U.S. employment figures, the Japanese adult non- institutionalized population was 110.272 million, the labor force was 65.362 million, and the number of people employed was 62.242 million. According to these numbers, the Japanese labor-force participation rate and unemployment rate were about
a. 56.4% and 2.8%.
B. 56.4% and 4.8%.
C. 59.3% and 2.8%.
D. 59.3% and 4.8%.

answer

59.3% and 4.8%.

question

Suppose that some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were employed?
a. 1.5 million
B. 28.5 million
C. 30 million
D. 47.5 million

answer

28.5 million

question

Which of the following is not a commonly-cited explanation for the dramatically increasing labor-force participation rates for women from 1950 to the present?
a. availability of reliable birth control
B. invention of household labor-saving devices such as dishwashers and microwave ovens
C. an increasing number of women who work to support their parents
D. changing social attitudes about working mothers

answer

an increasing number of women who work to support their parents

question

The Bureau of Labor Statistics classifies people who would like to work but have given up looking for a job as
a. unemployed. If they were classified as out of the labor force, the reported unemployment rate would be larger.
B. unemployed. If they were classified as out of the labor force, the reported unemployment rate would be smaller.
C. out of the labor force. If they were classified as unemployed, the reported unemployment rate would be larger.
D. out of the labor force. If they were classified as unemployed, the reported unemployment rate would be smaller.

answer

out of the labor force. If they were classified as unemployed, the reported unemployment rate would be larger.

question

Frictional unemployment is inevitable because
a. sectoral shifts are always happening.
B. there is a federal minimum-wage law in the U.S.
C. some people do not want to be employed.
D. unions are very popular in the U.S.

answer

sectoral shifts are always happening

question

Evidence from research studies by economists
a. shows that increased unemployment benefits decrease the job search efforts of the unemployed.
B. shows that increased unemployment benefits have virtually no effect on the job search efforts of the unemployed.
C. shows that increased unemployment benefits increase the job search efforts of the unemployed.
D. is conflicting on what increased unemployment benefits do to the job search efforts of the unemployed.

answer

shows that increased unemployment benefits decrease the job search efforts of the unemployed

question

Refer to Figure 28-5. If the minimum wage is set at $125, then
a. the quantity of labor demanded will equal 20, and the quantity of labor supplied will equal 35.
B. There will be 15 units of labor working
C. the surplus of labor will equal 25.
D. unemployment will equal 10.

answer

There will be 15 units of labor working

question

Which of the following is correct?
a. In unionized industries, wages are above the level that would prevail in competitive markets.
B. The introduction of a union in some industry reduces the quantity of labor demanded in that industry, causes some workers in that industry to be unemployed, and reduces wages in the rest of the economy.
C. Critics argue that the allocation of labor resulting from unions is both inefficient and inequitable.
D. All of the above are correct.

answer

All of the above are correct

question

The natural rate of unemployment is constant over time.
True or False

answer

False

question

Every week, the Bureau of Labor Statistics produces data on unemployment.
True or False

answer

False

question

Efficiency wage is the same as equilibrium wage.
True or False

answer

False

question

In an economy that relies upon barter,
a. trade does not require a double coincidence of wants.
B. scarce resources are allocated just as easily as they are in economies that do not rely upon barter.
C. there is no item in the economy that is widely accepted in exchange for goods and services.
D. All of the above are correct.

answer

there is no item in the economy that is widely accepted in exchange for goods and services.

question

You receive money as payment for babysitting your neighbor's' children. This best illustrates which function of money?
a. medium of exchange
B. unit of account
C. store of value
D. liquidity

answer

medium of exchange

question

Money
a. is a perfect store of value.
B. is the most liquid asset.
C. has intrinsic value, regardless of which form it takes.
D. All of the above are correct.

answer

is the most liquid asset

question

Which of the following best illustrates the unit of account function of money?
a. You list prices for candy sold on your Web site, www.sweettooth.com, in dollars.
B. You pay for your theater tickets with dollars.
C. You hold currency even though you don't intend to spend it right away.
D. None of the above is correct.

answer

You list prices for candy sold on your Web site, www.sweettooth.com, in dollars.

question

The legal tender requirement means that
a. people are more likely to accept the dollar as a medium of exchange.
B. the government must hold enough gold to redeem all currency.
C. people may not make trades with anything else.
D. All of the above are correct.

answer

people are more likely to accept the dollar as a medium of exchange.

question

M1 equals currency plus demand deposits plus
a. nothing else.
B. other checkable deposits.
C. traveler's checks plus other checkable deposits.
D. traveler's checks plus other checkable deposits plus savings deposits.

answer

traveler's checks plus other checkable deposits.

question

If traveler's checks were $1000 higher and saving deposits were $500 higher, M1 would be
a. $500 higher and M2 would be $1,500 higher.
B. $1,000 higher and M2 would be $1,500 higher.
C. M2 and M1 would be $1,500 higher.
D. $1,000 high and M2 would be $500 higher.

answer

$1,000 higher and M2 would be $1,500 higher.

question

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy
a. a central bank.
B. a charter bank.
C. a national bank.
D. a state bank.

answer

a central bank

question

The Board of Governors
a. is chaired by the U.S. Secretary of the Treasury.
B. members are elected by the U.S. public.
C. has 7 members.
D. All of the above are correct.

answer

has 7 members.

question

The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of
a. the Board of Governors.
B. the FOMC.
C. the regional Federal Reserve Bank presidents.
D. the U.S. Treasury.

answer

the FOMC.

question

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to
a. $8.
B. $80.
C. $92.
D. $920.

answer

$80.

question

Reserves are
a. the central bank of the U.S.
B. deposits that banks hold in excess of the required amount.
C. the purchase of bonds by the Federal Open Market Committee.
D. deposits that banks have received but have not yet loaned out.

answer

deposits that banks have received but have not yet loaned out.

question

If the reserve ratio is 5 percent, then $5,600 of money can be generated by
a. $64 of new reserves.
B. $448 of new reserves.
C. $700 of new reserves.
D. $800 of new reserves.

answer

$700 of new reserves.

question

An economy starts with $50,000 in currency. All of this currency is deposited into a single bank, and then bank then makes loans totaling $45,750. The T-account of the bank is shown below. Refer to the Table above. If all banks in the economy have the same reserve ratio as this bank, then the value of the economy's money multiplier is
a. 9.33.
B. 1.09.
C. 10.76.
D. 11.76.

answer

11.76

question

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold
a. fewer reserves, so the money multiplier will fall.
B. fewer reserves, so the money multiplier will rise.
C. more reserves, so the money multiplier will fall.
D. more reserves, so the money multiplier will rise.

answer

more reserves, so the money multiplier will fall

question

Money allows people to specialize in what they do best, thereby raising everyone's standard of living.
True or False

answer

True

question

Federal Reserve governors are given long terms to insulate them from politics.
True or False

answer

True

question

Inflation can be measured by the
a. change in the consumer price index. Inflation in the U.S. has averaged about 2.5% over the last 80 years.
B. change in the consumer price index. Inflation in the U.S. has averaged about 4% over the last 80 years.
C. percentage change in the consumer price index. Inflation in the U.S. has averaged about 3.6% over the last 80 years.
D. percentage change in the consumer price index. Inflation in the U.S. has averaged about 4% over the last 80 years.

answer

percentage change in the consumer price index. Inflation in the U.S. has averaged about 3.6% over the last 80 years.

question

When prices are falling, economists say that there is
a. disinflation
B. deflation
C. a contraction.
D. an inverted inflation.

answer

deflation

question

The classical theory of inflation
a. is also known as the quantity theory of money.
B. was developed by some of the earliest economic thinkers.
C. is used by most modern economists to explain the long-run determinants of the inflation rate.
D. All of the above are correct.

answer

All of the above are correct.

question

To explain the long-run determinants of the price level and the inflation rate, most economists today rely on the
a. quantity theory of money.
B. price-index theory of money.
C. theory of hyperinflation.
D. disequilibrium theory of money and inflation.

answer

quantity theory of money.

question

If P denotes the price of goods and services measured in terms of money, then
a. 1/P represents the value of money measured in terms of goods and services.
B. P can be regarded as the "overall price level."
C. an increase in the value of money is associated with a decrease in P.
D. All of the above are correct.

answer

All of the above are correct.

question

In the long run, money demand and money supply determine
a. the price level and the real interest rate.
B. the price level but not the real interest rate.
C. the real interest rate but not the price level.
D. neither the price level nor the real interest rate.

answer

the price level but not the real interest rate

question

When the money market is drawn with the value of money on the vertical axis, as the price level decreases the quantity of money
a. demanded increases.
B. demanded decreases.
C. supplied increases.
D. supplied decreases.

answer

demanded decreases.

question

A decrease in the money supply creates an excess
a. supply of money that is eliminated by rising prices.
B. supply of money that is eliminated by falling prices.
C. demand for money that is eliminated by rising prices.
D. demand for money that is eliminated by falling prices.

answer

demand for money that is eliminated by falling prices.

question

The price level rises if either
a. money demand or money supply shifts rightward.
B. money demand shifts rightward or money supply shifts leftward.
C. money demand shifts leftward or money supply shifts rightward.
D. money demand or money supply shifts leftward.

answer

money demand shifts leftward or money supply shifts rightward.

question

On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axis. Refer to figure above. Which of the following events could explain a shift of the money-demand curve from MD1 to MD2?
a. an increase in the value of money
B. a decrease in the price level
C. an open-market purchase of bonds by the Federal Reserve
D. None of the above is correct.

answer

None of the above is correct

question

Interest rates adjusted for the effects of inflation
a. and inflation are nominal variables.
B. and inflation are real variables.
C. are real variables; inflation is a nominal variable.
D. are nominal variables; inflation is a real variable.

answer

are real variables; inflation is a nominal variable.

question

Most economists believe that monetary neutrality provides
a. a good description of both the long run and the short run.
B. a good description of neither the long run nor the short run.
C. a good description of the short run, but not the long run.
D. a good description of the long run, but not the short run.

answer

a good description of the long run, but not the short run

question

Based on the quantity equation, if M = 8,000, P = 3, and Y = 12,000, then V =
a. 0.33.
B. 2.0.
C. 4.5.
D. 0.5.

answer

4.5

question

According to the assumptions of the quantity theory of money, if the money supply increases by 5 percent, then
a. nominal and real GDP would rise by 5 percent.
B. nominal GDP would rise by 5 percent; real GDP would be unchanged.
C. nominal GDP would be unchanged; real GDP would rise by 5 percent.
D. neither nominal GDP nor real GDP would change.

answer

nominal GDP would rise by 5 percent; real GDP would be unchanged

question

Suppose monetary neutrality holds and velocity is constant. A 4 percent increase in the money supply
a. increases the price level by more than 4 percent.
B. increases the price level by 4 percent.
C. increases the price level by less than 4 percent.
D. increases real GDP by 4 percent.

answer

increases the price level by 4 percent.

question

According to the assumptions of the quantity theory of money, if the money supply increases 5 percent, then
a. both the price level and nominal GDP would rise by 5 percent.
B. the price level would rise by 5 percent and nominal GDP would be unchanged.
C. the price level would be unchanged and nominal GDP would rise by 5 percent.
D. both the price level and nominal GDP would be unchanged.

answer

both the price level and nominal GDP would rise by 5 percent.

question

The price level is determined by the supply of, and demand for money.
True or False

answer

True

question

An excess supply of money is eliminated by a falling price level.
True or False

answer

False

question

The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system, and real variables are not.
True or False

answer

True

question

Suppose the price level rises, but the number of dollars you are paid per hour stays the same. This means that your
a. nominal wage is higher.
B. nominal wage is lower.
C. real wage is higher.
D. real wage is lower.

answer

real wage is lower

question

An increase in the reserve requirement increases reserves and decreases the money supply.
True or False

answer

True

question

The rate at which the Fed lends money to banks is
a. the prime rate.
B. fixed at 4%.
C. the federal funds rate.
D. the discount rate.

answer

the discount rate.

question

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,
a. those assets are government bonds and the Fed's reason for selling them is to increase the money supply.
B. those assets are government bonds and the Fed's reason for selling them is to decrease the money supply.
C. those assets are items that are included in M2 and the Fed's reason for selling them is to increase the money supply.
D. those assets are items that are included in M2 and the Fed's reason for selling them is to decrease the money supply.

answer

those assets are government bonds and the Fed's reason for selling them is to decrease the money supply.

question

For both parties to gain from trade, the price at which they trade must lie between the two opportunity costs.
True or False?

answer

True

question

The real interest rate tells you how fast the purchasing power of your bank account rises over time.
True or False?

answer

True

1 of 450

question

The basic principle in economic studies
a. Trade-off
b. Scarcity
c. money
d. efficiency

answer

Scarcity

question

The assumption that people are ________ is one of the basic assumptions in economic studies
a. emotional
b. generous
c. rational
d. smart

answer

Rational

question

Marginal analysis is involving comparing
a. MC and AC
b. MB and MC
c. MB and AC
d. MC and VC

answer

MB and MC

question

Every society faces a trade-off between
a. Equality and efficiency
b. efficiency and effectiveness
c. equality and fair distribution
d. efficiency and production

answer

Equality and Efficiency

question

We need to privatize the social security program in the state of Kansas is a
a. normative statement
b. positive statement
c. social statement
d. market statement

answer

Normative Statement

question

The opportunity cost of the good on the x-axis is the ______ of the PPF
a. height
b. slope
c. y-intercept
d. inverse of the slope

answer

Slope

question

If the PPF is linear, then the opportunity cost of producing a good or service is
a. decreasing
b. constant
c. increasing
d. stay the same

answer

Constant

question

The circular flow diagram shows how firms and households interact in the markets of
a. goods and services
b. money
c. goods and services and inputs
d. all of the above

answer

All of the above

question

Economic decline happens when the PPF shifts
a. outward
b. inward
c. outside
d. none of the above

answer

Outward

question

One of the basic principles of economics is that the trade makes
a. everyone better off
b. everyone worse off
c. some people better off and other worse off
d. none of the above

answer

Everyone better off

question

In a perfectly competitive market; the buyer and sellers are price
a. makers
b. takers
c. neutral
d. fixers

answer

Takers

question

The law of demand is the rule that, ________, as the price of a good or service decreases, the quantity demanded increases
a. crius partus
b. ceteris paribus
c. paribus ceteris
d. cyrous parallel

answer

Cetris Paribus

question

As the income increases and people buy less of the good, then the good is called
a. complementary good
b. normal good
c. inferior good
d. substitute good

answer

Inferior good

question

The change in price of the same good or service causes a change in
a. demand
b. quantity demanded
c. shift
d. growth

answer

Quantity demanded

question

The supply curve has a
a. negative slope
b. positive slope
c. perfect slope
d. undetermined slope

answer

Positive slope

question

The improvement in technology will lead to increase in the
a. supply
b. quantity supplies
c. cost of production
d. number of firms

answer

Supply

question

Shortage happens when quantity supplies are _______ quantity demanded
a. greater
b. smaller
c. equal
d. none of the above

answer

Smaller

question

An increase in demand and supply by the same size will cause the price of the good to
a. increase
b. decrease
c. stay the same
d. all of the above

answer

Stay the same

question

Trade among nations is based off the
a. absolute advantage
b. comparative advantage
c. less advantage
d. more advantage

answer

comparative advantage

question

The equilibrium quantity is the quantity that appears in the market at the
a. demand price
b. supply price
c. equilibrium price
d. none of the above

answer

Equilibrium price

question

The GDP deﬂator is a ratio of _________ prices
a. current to ﬁxed
b. ﬁxed to current
c. old to new
d. new to old

answer

Current to fixed

question

Net Export is calculated as
a. Imports—Export,
b. Export—Imports,
c. Outputs — Inputs
d. Inputs-Outputs

answer

Exports-Imports

question

New houses are included in the component of the GDP.
a. Consumption,
b. investment,
c. mortgage,
d. Equity

answer

Invesment

question

Inﬂation rate is measured as percentage change in prices from one period to the______ period
a. Base
b. Next
c. Past
d. All of the above.

answer

question

answer

Social problems

question

The government purchases do not include the
a. Money transfer,
b. transfer purchases,
c. transfer payments,
d. military expenditure

answer

transfer payments

question

The GDP is the market value of goods and services produced by ________ of a country.
a. Nationals,
b. Foreigners,
c. Visitors,
d. Residents.

answer

Residents

question

The equation of the GDP components is:
a. Y=C+I+GX+NX
b. Y=C+I+G-NX
c. Y=C+I+G+NX
d. None of the above

answer

Y=C+I+G+NX

question

For a good to be included in the GDP, it must be produced
a. ofﬁcially,
b. legally,
c. publically,
d. totally

answer

Legally

question

Durable good is a good that can be used for:
a. One period
b. more than one period
c. two periods
d. service

answer

more than one period

question

A bond is an:
a. OUI
b. IOU
c. UOI
d. IUO

answer

IOU

question

Credit risk refers to the case when a borrower ________ on his debt
a. Flout
b. Pay
c. Receive
d. default

answer

default

question

A stock is a claim on _______ in a ﬁrm
a. Hardship
b. Ownership
c. Partnership
d. None of the above

answer

Ownership

question

A bond is called a ______ ﬁnancing
a. equity
b. equality
c. efficiency
d. debt

answer

Debt

question

Financial markets consists of ______
a. Bonds and Banks
b. Banks and stocks
c. Stocks and Mutual funds
d. None of the above

answer

None of the above

question

The second important function of banks is:
a. Check cleaning
b. Check issuing
c. Check clearing
d. All of the above

answer

Check clearing

question

In a closed economy:
a. S=I
b. S=NX
c. I=NX
d. All of the above

answer

S=I

question

The National saving equals
a. Public Saving — Private saving
b. Public + NX
c. Private Saving — Public Saving
d. None of the above

answer

None of the above

question

Budget Deﬁcit means:
a. T>G
b. T<G
c. T=G
d. None of the above

answer

T<G

question

The credit union is different than a bank in the type of:
a. ownership
b. partnership
c. profit
d. all of the above

answer

Ownership

question

Labor force is _____ workers in the economy.
a. Employed + laid off
b. Employed + Underemployed
c. Employed + Not employed
d. Employed + Unemployed

answer

Employed + Unemployed

question

Natural rate of unemployment is the sum of:
a. Cyclical + Frictional
b. Structural + Frictional
c. Frictional + Efﬁciency
d. None of the above

answer

Structural + Frictional

question

The labor force participation rate measures the percentage of ______ in the labor force:
a. Employed
b. Unemployed
c. Adult population
d. All of the above

answer

Adult population

question

All modern dynamic economies are characterized by ________ of jobs.
a. creative-destruction
b. Creative-saving
c. destruction-saving
d. stability-destruction

answer

creative-destruction

question

The deviation of unemployment from its natural rate is called
a. the economic rate of unemployment.
b. cyclical unemployment.
c. frictional unemployment.
d. structural unemployment.

answer

Cyclical unemployment

question

answer

does not go away on its own even in the long run

question

answer

Current population survey

question

The Bureau of Labor Statistics produces data on unemployment
a. weekly.
b. monthly.
c. quarterly.
d. yearly.

answer

Monthly

question

answer

Underemployed

question

Since 1960, the natural rate of unemployment in the U.S. has been between:
a. 0% and 1%
b. 5% and 6%
c. 10% and 12%
d. 12% and 24%

answer

5% and 6%

question

Between 1880 and 1896 the average level of prices in the U.S. economy
a. fell 23%
b. fell 4%
c. rose 23%,
d. rose 50%.

answer

Fell 23%

question

With value of money on the vertical axis, the money supply curve is
a. upward-sloping
b. downward-sloping,
c. horizontal
d. vertical.

answer

Vertical

question

Primary reason people hold money is to
a. keep wealth in less liquid form
b. use it as medium of exchange
c. use it for investment,
d. earn interest.

answer

Use it as a medium of exchange

question

Monetary neutrality means that money:
a. Does not matter
b. Affects real variables
c. Affects actual variables
d. Does not affect real variables

answer

Does not affect real variables

question

The Quantity Equation of money is:
a. MX-=YxV
b. MxV=PxG
c. MxV=PxY,
d. MxY=PxV

answer

MxV=PxY

question

Barter system requires double coincidence of:
a. needs
b. action
c. wants
d. None of the above

answer

Wants

question

Store of value means:
a. money in the bank
b. Money used to buy items
c. commodity money
d. None of the above

answer

None of the above

question

Fiat money means:
a. with intrinsic value
b. backed by gold
c. without intrinsic value
d. unit of account

answer

Without intrinsic value

question

Saving deposits are in:
a. M1 but not M2
b. M2 but not M1
c. M1 and M2
d. None of the above

answer

M2 but not M1

question

Money multiplier equals:
a. 1/R
b. 1/1-R
c. R
d. None of the above

answer

1/R

question

answer

resources are scarce

question

answer

compare the marginal costs and marginal benefits of each decision

question

answer

3 pounds

question

answer

Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

question

answer

influencing the actions of buyers and sellers.

question

answer

All of the above are correct.

question

answer

When the price is $6, there is a surplus of 8 units.

question

answer

Buyers of gasoline paid a price of P1 before 1973; they paid a price of P2 after OPEC increased the price of crude oil in 1973, and there was a shortage of gasoline at that price.

question

Rent control is an example of
a. a subsidy for low-skilled workers.
B. a price floor.
C. a price ceiling.
D. a black market.

answer

a price ceiling.

question

Refer to Figure above. Suppose a tax of $2 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?
a. $3
B. between $3 and $5
C. between $5 and $7
D. $7

answer

question

answer

increases as more of the good is produced.

question

answer

5 hours

question

answer

when some previously unemployed workers find jobs.

question

answer

at least $125,000

question

answer

consumers and firms choosing which goods and services to buy or produce.

question

answer

those who are willing and able to buy them

question

answer

each person spends more time producing that product in which he or she has a comparative advantage

question

Which of the following is a result of a market economy?
a. environmental protection
B. an equal income distribution
C. Agreement on equality
D. voluntary exchange

answer

voluntary exchange

question

answer

Scarcity necessitates that people make trade-offs.

question

answer

what determines the inflation rate?

question

answer

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

question

answer

as the price of bagels increases, the quantity of bagels demanded will decrease.

question

A change in all of the following variables will change the market demand for a product except
a. the price of the product.
B. population and demographics.
C. Income.
D. tastes.

answer

the price of the product.

question

answer

can be useful in helping economists understand the complex world of international trade involving many countries and many goods.

question

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is
a. an inferior good.
B. a neutral good.
C. a necessity.
D. a normal good.

answer

an inferior good.

question

Refer to Figure above. The movement from point A to point B on the graph shows a(n
a. decrease in demand.
B. increase in demand.
C. decrease in quantity demanded.
D. increase in quantity demanded.

answer

increase in quantity demanded.

question

answer

the supply curve for oranges has shifted to the right.

question

answer

the price of the good changes.

question

answer

The supply curve shifted to the left.

question

answer

price of its product will be lower in the future than it is today.

question

answer

it has to give up some of another good and incur some opportunity costs

question

answer

Zero

question

answer

Haley has an absolute advantage in making bracelets and Serena in making necklaces.

question

answer

produce a combination of goods that lies outside itos own production possibilities fronteir

question

answer

Indonesia

question

answer

the change in the value of y divided by the change in the value of x.

question

answer

circular flow model

question

answer

the flow of revenue received by firms and the flow of payments to resource owners

question

answer

C = product markets; A = households

question

answer

the ability to exercise control over one's own resources within the confines of the law.

question

Any output combination outside a production possibility frontier is associated with unused or underutilized resources.
True or False?

answer

False

question

If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a comparative advantage in shucking Oysters.
True or False?

answer

False

question

If a country produces only two goods, it is possible to have a comparative advantage in the production of both those goods?
True or False?

answer

False

question

In a free market there are virtually no restrictions, or at best few restrictions on how
factors of production can be employed?
True or False?

answer

True

question

An economic model is a simplified version of reality used to analyze real-world
economic situations.
True or False?

answer

True

question

One desirable outcome of a market economy is that it leads to a more equitable distribution of income.
True or False?

answer

False

question

Chips and salsa are complements. If the price of salsa decreases, the demand for chips will increase.
True or False?

answer

True

question

An increase in the number of firms in a market will cause the quantity of a good supplied to increase.
True or False?

answer

False

question

If the demand curve for a product is vertical, any tax increase on the product is paid
for entirely by the consumer?
True or False?

answer

True

question

The minimum wage is an example of a price ceiling.
True or False?

answer

False

question

During a business cycle expansion, total production _______ and total employment _______.
a. Increases; increases
B. increases; decreases
C. decreases; increases
D. decreases; decreases

answer

increases; increases

question

answer

values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up

question

answer

Your father buys a new John Deere riding lawnmower.

question

answer

$6,400

question

answer

all of the above are true

question

answer

a purchase of a computer by an accounting firm

question

answer

are equal to its domestic production

question

answer

$1,200

question

Gross domestic product understates the total production of final goods and services because of the omission of
a. Exports.
B. inflation.
C. intermediate goods.
D. household production.

answer

household production

question

answer

increase GDP and decrease well being in the economy

question

answer

2 percent per year, so that it is now 8 times as high as it was a century ago.

question

answer

growth rate of real GDP per person

question

answer

2 percent, which is about the same as average U.S. growth over the last one-hundred years.

question

The one variable that stands out as the most significant explanation of large variations in living standards around the world is
a. Productivity.
B. population.
C. preferences.
D. prices.

answer

productivity

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answer

divide the quantity of output by the number of hours worked,

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answer

real GDP per person grew more slowly in Iberia than in Aire

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answer

a factor of production that in the past was an output from the production process.

question

Which of the following is considered human capital? Knowledge acquired from
a. early childhood education programs
B. job training
C. on-the-job experience
D. all of the above are correct.

answer

all of the above are correct.

question

Natural resources
a. are inputs provided by nature.
B. include land, rivers, and mineral deposits.
C. take two forms: renewable and nonrenewable.
D. All of the above are correct.

answer

all of the above are correct.

question

answer

proprietary technological knowledge

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The average price of goods and services in the economy is also known as
a. the price level.
B. the inflation rate.
C. a market basket.
D. the cost of living.

answer

the price level.

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answer

average of the prices of the goods and services purchased by a typical urban family of four.

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The percent increase in the CPI from one year to the next is a measure of the
a. GDP deflator.
B. unemployment rate.
C. interest rate.
D. inflation rate.

answer

inflation rate.

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answer

rose 60% from the cost of the market basket in the base year.

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answer

2.5 percent.

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answer

the producer price index

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answer

change; over-estimates

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answer

new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.

question

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent, then the real interest rate is
a. -16 percent.
B. -4 percent.
C. 4 percent.
D. 16 percent.

answer

4 percent.

question

answer

The purchasing power of your salary increased between 1900 and 2011.

question

Technological advances generally result in
a. decreased incomes.
B. increased life expectancy.
C. increased infant mortality rates
D. increased average number of hours worked per day.

answer

increased life expectancy.

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answer

the nominal interest rate exceeds the real interest rate.

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answer

consumption falls and investment rises.

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answer

is consistent with the view that capital is subject to diminishing returns.

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answer

diminishing returns to capital.

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answer

higher productivity, but another unit of capital would increase output by less than before.

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answer

it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

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answer

All of the above are correct

question

The price index was 92 in 2014, and the inflation rate was 8.7 percent between 2013 and 2014. The price index in 2013 was
a. 100.0.
B. 100.7.
C. 83.3.
D. 84.6.

answer

83.3

question

answer

24.3 percent in 2013 and 7.3 percent in 2014.

question

Accumulating a greater number of inputs will ensure that an economy will experience economic growth.
True or False?

answer

False

question

In some countries in Sub-Saharan Africa real GDP per person has been stagnant for many years.
True or False?

answer

True

question

The population growth rate tends to be higher in developed countries than in developing countries.
True or False?

answer

False

question

The GDP deflator is the best measure that reflects the prices of goods and services purchased by the typical household.
True or False?

answer

False

question

Nominal income is equal to real if the CPI is less than 100.
True or False?

answer

False

question

If inflationary expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant.
True or False?

answer

True

question

The content of the basket of goods and services used to compute the CPI changes every month.
True or False?

answer

False

question

When the price of nuclear missiles rises, this change is reflected in the CPI but not in the GDP deflator,
True or False?

answer

False

question

Kristine has a savings account at a bank. If the nominal interest rate she earns exceeds the rate of inflation, then her purchasing power increases over time.
True or False?

answer

True

question

Transfer payments are subtracted from government purchases when calculating the GDP.
True or False?

answer

False

question

answer

short-run fluctuations around the natural rate of unemployment.

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answer

those waiting to be recalled to a job from which they had been laid off

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answer

Sarah, who does not have a job but is looking for work

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answer

(Labor Force / Adult Population) × 100,

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answer

2.76 million

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answer

cyclical unemployment amounting to 0.5 percent of the labor force.

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answer

gradually decreased.

question

Which of the following is not an explanation for the existence of structural unemployment?
a. efficiency wages
B. job search
C. minimum-wage laws
D. unions

answer

job search

question

Refer to Figure above. If the government imposes a minimum wage of $4, how many workers will be employed?
a. 3,000
B. 4,000
C. 5,000
D. 7,000

answer

5,000

question

answer

both structural unemployment and the natural rate of unemployment.

question

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,
a. invest in physical capital
B. use equity finance.
C. sell bonds.
D. purchase bonds,

answer

sell bonds

question

The length of time until a bond matures is called the
a. Perpetuity.
B. term.
C. maturity.
D. intermediation.

answer

term.

question

answer

earnings of a company that are not paid out to stockholders.

question

Which of the following are financial intermediaries?
a. both banks and mutual funds
B. banks but not mutual funds
C. mutual funds but not banks
D. neither banks or mutual funds

answer

both banks and mutual funds

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answer

All of the above are correct

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answer

$5 billion and $50 billion

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answer

it buys more of its bonds from the public than it sells to the public.

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answer

positive relation between the real interest rate and saving.

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answer

a movement from Point A to Point B

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answer

the nominal interest rate is 8% and the inflation rate is 7%

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answer

decreases incomes and reduces the ability of debtors to pay off their debts,

question

The supply of money is determined by
a. the price level.
B. the Treasury and Congressional Budget Office.
C. the Federal Reserve System
D. the demand for money,

answer

the Federal Reserve System

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answer

none of the above is correct.

question

answer

question

answer

rises, meaning people want to hold more of their wealth in a liquid form.

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answer

spend less so the value of a dollar rises

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answer

is a nominal variable, but the change in the number of goods you can buy with your savings is a real variable.

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answer

both the price level and nominal output.

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answer

the real interest rate would be greater than the nominal interest rate.

question

The costs of changing price tags and price listings are known as
a. inflation-induced tax distortions.
B. relative-price variability costs.
C. shoe leather costs.
D. menu costs.

answer

menu costs.

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answer

A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.

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answer

being a medium of exchange,

question

Which list ranks assets from most to least liquid?
a. currency, fine art, stocks
B. currency, stocks, fine art
C. fine art, currency, stocks
D. fine art, stocks, currency

answer

currency, stocks, fine art

question

Which of the following is included in both M1 and M2?
a. Savings deposits
B. demand deposits
C. small time deposits
D. money market mutual funds

answer

demand deposits

question

The agency responsible for regulating the U.S. monetary system is the
a. U.S. Treasury
B. Federal Reserve
C. Department of Justice
D. Federal Trade Commission

answer

Federal Reserve

question

answer

all of the members of the Board of Governors and some of the Federal Reserve Bank presidents

question

answer

It has $250 in reserves and $4,750 in loans.

question

answer

11.76

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answer

it buys Treasury securities, which increases the money supply,

question

answer

decrease and the money supply eventually decreases,

question

Every adult who was not employed during the previous four weeks is included in the Bureau of Labor Statistics' "unemployed" category.
True or False?

answer

False

question

Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate sometimes is close to zero.
True or False?

answer

True

question

Other things the same, the higher the rate of saving and investment in a country, the higher will be the standard of living in the future.
True or False?

answer

True

question

All financial intermediaries are financial institutions, but not all financial institutions are financial intermediaries,
True or False?

answer

True

question

The term crowding out refers to decreases in the interest rate caused by government budget surpluses.
True or False?

answer

False

question

If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services,
True or False?

answer

True

question

Dollar prices and relative prices are both nominal variables.
True or False?

answer

False

question

According to the Fisher effect, if inflation rises then the nominal interest rate rises,
True or False?

answer

True

question

Money allows people to specialize in what they do best, thereby raising everyone's standard of living.
True or False?

answer

True

question

Credit cards are a medium of exchange.
True or False?

answer

False

question

The word "economy" comes from the Greek word oikonomos, which means
a. environment
B. production
C. one who manages a household
D. one who makes decisions

answer

one who manages a household

question

answer

All of the above are correct

question

answer

resources are scarce.

question

Economics is the study of
a. production methods.
B. how society manages its scarce resources.
C. how households decide who performs which tasks.
D. the interaction of business and government.

answer

how society manages its scarce resources.

question

answer

the combined actions of millions of households and firms.

question

The phrase "no such thing as a free lunch" means
a. people must face tradeoffs.
B. rational people think at the margin.
C. people respond to incentives.
D. trade can make everyone better off.

answer

people must face tradeoffs.

question

answer

national defense and consumer goods.

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answer

efficiency and equality.

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answer

understand that the opportunity cost of attending college is very high.

question

answer

$123,000.

question

answer

comparing marginal costs and marginal benefits.

question

answer

if the policy changes either the costs or benefits of their behavior.

question

The principle that "trade can make everyone better off" applies to interactions and trade between
a. families
B. states within the United States.
C. nations
D. All of the above are correct.

answer

All of the above are correct.

question

answer

government should become involved in markets when those markets fail to produce efficient or fair outcomes.

question

answer

influencing the actions of buyers and sellers.

question

answer

the invisible hand is not perfect.

question

The term used to describe a situation in which markets do not allocate resources efficiently is
a. economic meltdown.
B. market failure.
C. equilibrium.
D. the effect of the invisible hand.

answer

market failure.

question

answer

refers to the quantity of goods and services produced from each unit of labor input.

question

answer

excessive growth in the quantity of money.

question

answer

the Federal Reserve is worried about unemployment.

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answer

to provide a new and useful way of thinking about the world.

question

The essence of science is
a. the laboratory experiment.
B. the scientific method.
C. the study of nature, but not the study of society.
D. All of the above are correct.

answer

the scientific method

question

answer

contribute to an understanding of how the world works.

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answer

use whatever data the world gives them

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answer

focus their thinking on the essence of the problem at hand.

question

answer

sometimes make different assumptions about the short run and the long run.

question

answer

can be useful, even if they are not particularly realistic

question

answer

Both (a) and (b) are correct.

question

answer

the flows of inputs and outputs and the flow of dollars.

question

answer

from Box D to Box B.

question

answer

can produce using all available resources and technology.

question

answer

the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.

question

Refer to Figure above. This economy has the ability to produce at which point(s)?
a. Q, R, T, U
B. R, T, U
C. R, U
D. T

answer

R, T, U

question

answer

None of the above; the economy cannot move from point D to point C.

question

answer

economic growth

question

answer

changes in the money supply on the inflation rate.

question

answer

In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.

question

answer

Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be.

question

With the resources it has, an economy can produce at any point on or outside the production possibilities frontier, but it cannot produce at points inside the
True or False?

answer

False

question

When a production possibilities frontier is bowed outward, the opportunity cost of one good in terms of the other is
True or False?

answer

True

question

answer

rely upon one another for the goods and services we consume

question

answer

when the economy is self-sufficient.

question

answer

consume more goods than we otherwise would be able to consume.

question

answer

the slope of England's production possibilities frontier would be 4/10 and the slope of Holland's production possibilities frontier would be 3/4.

question

answer

6 pounds of meat and 4.5 pounds of potatoes.

question

answer

the slope of Japan's production possibilities frontier would be 5 and the slope of Korea's production possibilities frontier would be 3.

question

answer

1/10 hour

question

answer

4 pounds of coffee and 16 pounds of soybeans

question

answer

Alice produces more lemonade and Betty produces more pizzas.

question

answer

is equal to 1.

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answer

1/6 table for Ken and 1/3 table for Traci.

question

answer

has an absolute advantage in the production of that good.

question

answer

3 pounds.

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answer

6 pounds of soybeans for 9 pounds of coffee

question

US and French Production Opportunities Refer to Table above. France has an absolute advantage in the production of
a. wine
B. Cheese
C. Both wine and cheese.
D. Neither wine nor cheese.

answer

Neither wine nor cheese

question

answer

What it will cost him more to make than to buy

question

It is possible for the U.S. to gain from trade with Germany even if it takes U.S. workers fewer hours to produce every good than it takes German workers.
True or False?

answer

True

question

Opportunity cost refers to how many inputs a producer requires to produce a good.
True or False?

answer

False

question

Differences in opportunity cost allow for gains from trade.
True or False?

answer

True

question

answer

supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.

question

A group of buyers and sellers of a particular good or service is called a(n)
a. coalition
B. economy
C. market
D. competition

answer

market

question

answer

no individual buyer or seller has any significant impact on the market price.

question

answer

Both a and b are correct.

question

answer

results in a movement downward and to the right along a demand curve.

question

A downward-sloping demand curve illustrates
a. that demand decreases over time.
B. that prices fall over time.
C. the relationship between income and quantity demanded.
D. the law of demand.

answer

the law of demand.

question

answer

all nonprice determinants of demand are held constant.

question

answer

an announcement by the FDA that oranges prevent heart disease

question

answer

normal goods

question

answer

decrease in the quantity supplied.

question

answer

an increase in price gives producers an incentive to supply a larger quantity.

question

Refer to Figure above. The shift from S to S' could be caused by an
a. increase in the price of the good.
B. improvement in production technology.
C. increase in income.
D. increase in input prices.

answer

improvement in production technology.

question

answer

demand and supply both increase

question

answer

supply of 300 units, and price would fall.

question

answer

Point A to Point D

question

answer

prices

question

In a perfectly competitive market, the goods offered for sale are all exactly the same.
True or False?

answer

True

question

Individual demand curves are summed vertically to obtain the market demand curve.
True or False?

answer

False

question

A decrease in the price of a complement will shift the demand curve for a good to the left.
True or False?

answer

False

question

answer

False

question

answer

when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

question

answer

a legal maximum on the price at which a good can be sold.

question

answer

increase, and the quantity sold in the market will increase.

question

answer

below the equilibrium price, causing a shortage

question

answer

demanded to exceed quantity supplied by 85 units

question

answer

smaller quantity of the good is bought and sold.

question

answer

All of the above are correct.

question

answer

some sellers will not be able to sell any amount of the good.

question

answer

binding price floor that creates a surplus.

question

An outcome that can result from either a price ceiling or a price floor is
a. a surplus in the market.
B. a shortage in the market.
C. a nonbinding price control.
D. long lines of frustrated buyers.

answer

a nonbinding price control.

question

answer

no shortage

question

answer

less than Q3.

question

answer

not binding, and there will be no surplus or shortage of the good.

question

An example of a price floor is
a. the regulation of gasoline prices in the U.S. in the 1970s.
B. rent control.
C. the minimum wage.
D. any restriction on price that leads to a shortage.

answer

the minimum wage

question

answer

increase by less than $1,000

question

Refer to Figure above. The price that buyers pay after the tax is imposed is
a. $8.00.
B. $9.00.
C. $10.50.
D. $12.00.

answer

$12.00

question

A price ceiling is a legal minimum on the price at which a good or service can be sold.
True or False?

answer

False

question

All buyers benefit from a binding price ceiling.
True or False?

answer

False

question

The wedge between the buyers' price and the sellers' price is the same, regardless of whether the tax is levied on buyers or sellers.
True or False?

answer

True

question

The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy.
True or False?

answer

True

question

answer

gross domestic product

question

For an economy as a whole,
a. wages must equal profit.
B. consumption must equal income.
C. income must equal expenditure.
D. consumption must equal saving.

answer

income must equal expenditure.

question

answer

add up the market values of all final goods and services

question

answer

included in GDP, and the estimated rental values of the houses are used to place a value on these housing services.

question

answer

if the purchaser uses them to make wine to sell others but not if the purchaser eats them

question

answer

$500,000

question

answer

in German GDP, but is not included in U.S. GDP

question

answer

durable goods, nondurable goods, and services.

question

answer

capital equipment, inventories, and structures, including household purchases of new housing.

question

answer

the services of a U.S. government attorney valued at the cost of her salary

question

Net exports equal
a. exports plus imports.
B. imports minus exports.
C. Y - (C + I + G).
D. Y - (C - I - G).

answer

Y - (C + I + G).

question

answer

both changes in prices and changes in the amounts being produced

question

A country's real GDP rose from $500 to $530 while its nominal GDP rose from $600 to $700. What was this country's inflation rate?
a. 16.7%.
B. 10.0%.
C. 15.0%.
D. -9.1%.

answer

10.0%.

question

answer

real GDP was $780, and the GDP deflator was 112.8

question

Refer to Table above. This country's inflation rate from 2017 to 2018 was
a. 20.0%.
B. 21.8%.
C. 38.9%.
D. 28.0%.

answer

28.0%.

question

GDP does not reflect
a. the value of leisure.
B. the value of goods and services produced at home.
C. the quality of the environment.
D. All of the above are correct.

answer

All of the above are correct

question

GDP is the market value of all final goods and services produced by a country's citizens in a given period of time.
True or False?

answer

False

question

New home construction is included in the consumption component of GDP.
True or False?

answer

False

question

Changes in the GDP deflator reflect only changes in the prices of goods and services.
True or False?

answer

True

question

Other things equal, in countries with higher levels of real GDP per person, life expectancy and literacy rates are higher than in countries with lower levels of real GDP per person.
True or False?

answer

True

question

answer

monitor changes in the cost of living over time.

question

The inflation rate you are likely to hear on the nightly news is calculated from
a. the GDP deflator.
B. the CPI.
C. the Dow Jones Industrial Average.
D. the unemployment rate.

answer

the CPI

question

answer

the prices of some consumer goods.

question

If 2012 is the base year, then the inflation rate for 2012 equals.
a. a.
B. b.
C. c.
D. d.

answer

question

answer

All of the above are correct

question

The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?
a. 1.04 percent
B. 4.41 percent
C. 6.00 percent
D. 42.00 percent

answer

4.41 percent

question

answer

All of the above are correct.

question

answer

80.8 in 2012, 100 in 2013, and 107.7 in 2014.

question

answer

substitution bias

question

answer

$37.50 purchases today

question

answer

$46,666.67.

question

answer

using a law or contract to automatically correct a dollar amount for the effects of inflation.

question

answer

how fast the number of dollars in your bank account rises over time.

question

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is
a. -5 percent.
B. 1.67 percent.
C. 5 percent.
D. 11 percent.

answer

5 percent.

question

answer

3 percent

question

answer

The U.S. economy has never experienced deflation

question

The CPI is a measure of the overall cost of the goods and services bought by a typical consumer
True or False?

answer

True

question

Data from the Bureau of Labor Statistics show that consumer spending on transportation is only slightly higher than consumer spending on food and beverages.
True or False?

answer

True

question

If the quality of a good deteriorates from one year to the next while its price remains the same, then the value of a dollar falls.
True or False?

answer

True

question

Over the past century in the United States, real GDP per person has grown, on average, by about
a. 1 percent per year.
B. 2 percent per year.
C. 3 percent per year.
D. 5 percent per year.

answer

2 percent per year.

question

answer

the productivity of its workers.

question

answer

less than it was in the U.S. in 1870

question

answer

growth rate of real GDP per person.

question

Which of the following nations experienced average rates of economic growth of a bit under 2% over the last 100 years or so?
a. Mexico
B. Brazil
C. the United States
D. All of the above are correct.

answer

the United States

question

answer

10 percent

question

answer

Divide the quantity of output by the number of hours worked

question

answer

None of the above are correct.

question

answer

All of the above are correct

question

answer

the things you have learned this semester

question

answer

known only by the company that discovered it

question

answer

consumption falls and investment rises.

question

answer

diminishing returns

question

answer

foreign portfolio investment.

question

answer

30 percent

question

answer

reducing restrictions on foreign trade and foreign investment

question

answer

All of the above are correct

question

Although growth rates across countries vary some, rankings of countries by income remain pretty much the same over time.
True or False

answer

False

question

Studies confirm that controlling for other variables such as the percentage of GDP devoted to investment, poor countries tend to grow at a faster rate than rich countries.
True or False

answer

True

question

Economist Michael Kremer found that world growth rates fell as population increased.
True or False

answer

False

question

Institutions that help to match one person's saving with another person's investment are collectively called the
a. Federal Reserve system.
B. banking system.
C. monetary system.
D. financial system.

answer

financial system

question

answer

Interest rates on long-term bonds are usually higher than interest rates on short-term bonds

question

answer

Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories

question

answer

low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.

question

answer

to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance

question

answer

part owners of Huedepool are paid after bondholders get paid

question

answer

30 major U.S. corporations

question

answer

Susan makes a deposit at a bank and the bank uses this money to make an auto loan to Ferguson.

question

answer

allow people to diversify and reduce risk

question

answer

All of the above are correct

question

In a closed economy, what does (Y - T - C) represent?
a. national saving
B. government tax revenue
C. public saving
D. private saving

answer

private saving

question

answer

The government budget deficit must equal $2b

question

answer

leave national saving unchanged and reduce private saving.

question

answer

people would want to lend more, making the quantity of loanable funds supplied increase.

question

answer

there is a surplus and the interest rate is above the equilibrium level.

question

answer

the supply of loanable funds shifts leftward.

question

answer

a budget deficit makes interest rates rise

question

Corporations receive no proceeds from the resale of their stocks.
True or False

answer

True

question

Anything other than a change in the interest rate that decreases national saving shifts the supply of loanable funds to the left.
True or False

answer

True

question

National saving is equal to Y - T - C.
True or False

answer

False

question

answer

both frictional and structural unemployment

question

answer

All of the above are correct

question

answer

Current Population Survey

question

answer

those waiting to be recalled to a job from which they had been laid off

question

answer

does not have to be working for pay if they are working for a family business and does not have to be working full time

question

answer

be available for work.

question

answer

neither in the labor force nor unemployed.

question

answer

Unemployment Rate = number of unemployed ÷ (number of employed + number of unemployed) × 100.

question

Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate is
a. always zero.
B. sometimes zero.
C. rarely zero.
D. never zero.

answer

never zero.

question

answer

59.3% and 4.8%.

question

answer

28.5 million

question

answer

an increasing number of women who work to support their parents

question

answer

out of the labor force. If they were classified as unemployed, the reported unemployment rate would be larger.

question

answer

sectoral shifts are always happening

question

answer

shows that increased unemployment benefits decrease the job search efforts of the unemployed

question

answer

There will be 15 units of labor working

question

answer

All of the above are correct

question

The natural rate of unemployment is constant over time.
True or False

answer

False

question

Every week, the Bureau of Labor Statistics produces data on unemployment.
True or False

answer

False

question

Efficiency wage is the same as equilibrium wage.
True or False

answer

False

question

answer

there is no item in the economy that is widely accepted in exchange for goods and services.

question

You receive money as payment for babysitting your neighbor's' children. This best illustrates which function of money?
a. medium of exchange
B. unit of account
C. store of value
D. liquidity

answer

medium of exchange

question

Money
a. is a perfect store of value.
B. is the most liquid asset.
C. has intrinsic value, regardless of which form it takes.
D. All of the above are correct.

answer

is the most liquid asset

question

answer

You list prices for candy sold on your Web site, www.sweettooth.com, in dollars.

question

answer

people are more likely to accept the dollar as a medium of exchange.

question

answer

traveler's checks plus other checkable deposits.

question

answer

$1,000 higher and M2 would be $1,500 higher.

question

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy
a. a central bank.
B. a charter bank.
C. a national bank.
D. a state bank.

answer

a central bank

question

The Board of Governors
a. is chaired by the U.S. Secretary of the Treasury.
B. members are elected by the U.S. public.
C. has 7 members.
D. All of the above are correct.

answer

has 7 members.

question

answer

the FOMC.

question

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to
a. $8.
B. $80.
C. $92.
D. $920.

answer

$80.

question

answer

deposits that banks have received but have not yet loaned out.

question

If the reserve ratio is 5 percent, then $5,600 of money can be generated by
a. $64 of new reserves.
B. $448 of new reserves.
C. $700 of new reserves.
D. $800 of new reserves.

answer

$700 of new reserves.

question

answer

11.76

question

answer

more reserves, so the money multiplier will fall

question

Money allows people to specialize in what they do best, thereby raising everyone's standard of living.
True or False

answer

True

question

Federal Reserve governors are given long terms to insulate them from politics.
True or False

answer

True

question

answer

percentage change in the consumer price index. Inflation in the U.S. has averaged about 3.6% over the last 80 years.

question

When prices are falling, economists say that there is
a. disinflation
B. deflation
C. a contraction.
D. an inverted inflation.

answer

deflation

question

answer

All of the above are correct.

question

answer

quantity theory of money.

question

answer

All of the above are correct.

question

answer

the price level but not the real interest rate

question

answer

demanded decreases.

question

answer

demand for money that is eliminated by falling prices.

question

answer

money demand shifts leftward or money supply shifts rightward.

question

answer

None of the above is correct

question

answer

are real variables; inflation is a nominal variable.

question

answer

a good description of the long run, but not the short run

question

Based on the quantity equation, if M = 8,000, P = 3, and Y = 12,000, then V =
a. 0.33.
B. 2.0.
C. 4.5.
D. 0.5.

answer

4.5

question

answer

nominal GDP would rise by 5 percent; real GDP would be unchanged

question

answer

increases the price level by 4 percent.

question

answer

both the price level and nominal GDP would rise by 5 percent.

question

The price level is determined by the supply of, and demand for money.
True or False

answer

True

question

An excess supply of money is eliminated by a falling price level.
True or False

answer

False

question

answer

True

question

answer

real wage is lower

question

An increase in the reserve requirement increases reserves and decreases the money supply.
True or False

answer

True

question

The rate at which the Fed lends money to banks is
a. the prime rate.
B. fixed at 4%.
C. the federal funds rate.
D. the discount rate.

answer

the discount rate.

question

answer

those assets are government bonds and the Fed's reason for selling them is to decrease the money supply.

question

For both parties to gain from trade, the price at which they trade must lie between the two opportunity costs.
True or False?

answer

True

question

The real interest rate tells you how fast the purchasing power of your bank account rises over time.
True or False?

answer

True

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