1) A retail shop has an outside display which has the time and temperature that is always correct. This is an example of 1) _______

A) a positive externality. B) a breakdown in communication between the shop and its customers. C) an interference in the workings of the price system. D) a negative externality.

2) Public goods are 2) _______ A) rival, but not exclusive. B) exclusive, but not rival. C) rival and exclusive. D) neither exclusive nor rival.

3) Suppose that for the economy of Utopia, we have the following information for 2020: consumption expenditures = $5,000; wages = $3,500; gross private domestic investment = $1,200; government expenditures = $2,000; exports = $900; imports = $1,100. Using the expenditure approach what would the Gross Domestic Product (GDP) be for Utopia in 2020? 3) _______

A) $8,000 B) $8,400 C) $11,900 D) $6,200 E) $11,500

4) The downward slope of the aggregate demand curve shows that 4) _______ A) an increase in aggregate demand increases the long-run aggregate supply. B) a higher price level will cause planned purchase rates for final goods and services to be higher. C) a lower price level will cause planned purchase rates for final goods and services to be higher. D) an increase in aggregate demand reduces the long-run aggregate supply.

5) Suppose the income tax rate is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on all income above $70,000. Family X has income of $100,000 while Family Y has income of $40,000. The marginal tax rates faced by the two families are 5) _______

A) 30 percent on X and 20 percent on Y. B) 30 percent on X and 30 percent on Y. C) 40 percent on X and 10 percent on Y. D) 40 percent on X and 20 percent on Y.

6) In the circular flow model, 6) _______ A) households buy goods and services and firms supply goods. Resources are supplied by other firms. B) households buy goods and services while firms sell goods and services. Firms obtain labor from households, capital from government, and raw materials from firms. C) households demand goods and services which are supplied by firms, and the firms demand resources that are supplied by intermediate firms. D) households demand goods and services that are supplied by firms, while supplying resources that are demanded by firms.

7) The United States experienced a deep recession between 2007 and 2009. Which type of unemployment would most likely increase during that period of recession? 7) _______

A) cyclical unemployment B) frictional unemployment C) seasonal unemployment D) structural unemployment

8) A period of time in which the overall business activity is rising at a rapid rate is known as 8) _______ A) a contraction. B) an expansion. C) hyperinflation. D) inflation. 9) Assume that Mrs. Doe's income increased from $50,000 last year to $55,000 this year and that she paid an additional $2,000 in taxes. This would indicate that her marginal tax rate is 9) _______

A) 36 percent. B) 3.6 percent. C) 2 percent. D) 40 percent.

10) Markets tend to overallocate resources to the production of a good when 10) ______ A) equilibrium occurs. B) there are negative externalities. C) there are positive externalities. D) there are public goods produced.

11) Over time in a growing economy, the long run aggregate supply curve will 11) ______ A) move so as to match the short run aggregate supply (SRAS) curve. B) shift outward to the right. C) become increasingly steep. D) shift inward to the left.

12) The real-balance effect shows that 12) ______ A) a higher price level leads to higher interest rates. B) a lower price level will increase the purchasing power of currency and increase personal consumption. C) consumption and the price level are positively correlated. D) aggregate demand is upward sloping.

13) One major reason that economists are concerned about unemployment is that 13) ______ A) unemployment shifts the production possibilities curve outward. B) unemployment always leads to frictional unemployment. C) unemployment reduces the size of the labor force. D) the economy is producing less output than if there were full employment.

14) The greater the inflation rate, the 14) ______ A) slower the decrease in the purchasing power of money. B) better it is to put money into savings accounts. C) faster the decrease in the purchasing power of money. D) better it is to hold money as cash.

15) Ad valorem taxes 15) ______ A) are accessed based on the costs of producing the goods or services. B) are paid as a fixed percentage of a good's unit price. C) are based on income levels. D) are not used in the United States.