1. An economic model is not :

a) a tool which the economist employs in order to predict;

b) one or collection of economic principles;

c) an ideal type of economy or an economic policy for which we ought to work;

d) an explanation of how the economy or a part of the economy functions in its

essential details.

2. The scientific method requires that:

a) the scientist use test tubes and have a clean lab;

b) the scientist be objective;

c) the scientist use predictable equipment;

d) only income theories are tested;

e) only correct theories are tested.

3. Copper is an example of:

a) physical capital;

b) a renewable natural resource;

c) non-renewable resource;

d) technology;

e) means of production.

4. Which of the following is not a factor of production:

a) land;

b) labor;

c) capital;

d) money;

e) all of the above.

5. When a production possibilities curve is written (or a production possibilities

curve is drawn) four assumption are made. Which of the following is not one of

those assumptions:

a) only two products are produced;

b) the nation is not at war;

c) the economy has both full employment and full production;

d) the quantities of resources available to the economy are fixed.

6. The production possibilities curve is:

a) concave;

b) convex;

c) linear;

d) positive.

7. The three fundamental questions of economic organization are:

a) closely related to the concept of economic scarcity;

b) not nearly as important today as they were at the dawn of civilization;

c) what, how and why;

d) land, labor and capital;

e) all of the above.

8. Which of the following forms of business organization can most effectively raise

money capital?:

a) proprietorship;

b) partnership;

c) corporation;

d) vertical combination.

9. The three main tools of monetary policy are:

a) government expenditures, taxation, and reserve requirements;

b) the money supply, government purchases, and taxation;

c) coin, currency, and demand deposits;

d) open market operating, reserve ratio, and discount rate;

e) fiat, commodity, and deposit money.

10. Commodity money:

a) has no intrinsic value;

b) has intrinsic value;

c) is used exclusively in Ukraine;

e) is used as reserves to back fait money.

11. In the country the velocity of money is constant. Real GDP grows by

5 percent per year, the money stock grows by 14 percent per year, and the nominal

interest rate is 11 percent. What is the real interest rate?

12. You read in a newspaper that the nominal interest rate is 12 percent

per year in Canada and 8 percent per year in the United States. Suppose that the

real interest rates are equalized in the two countries and that purchasing power

parity holds.

a. Using the Fisher equation, what can you infer about expected inflation in Canada

and in the United States?

b. What can you infer about the expected change in the exchange rate between the

Canadian dollar and the US dollar?