1. In 2009, the yearly tuition at a state university is $20,000. In 2017, the yearly tuition at the same state university is $31,000.

Using the price of tuition for reference, the inflation rate of the U.S. dollar increased by a factor of __________ in eight years.

a.)1.65

b.)0.35

c.)0.65

d.)1.55

2. In January 2008, a bag of rice cost five million Zimbabwean dollars. Several months later, the same bag of rice cost 250 million Zimbabwean dollars.

Using the price of rice for reference, the inflation rate of the Zimbabwean dollar increased by a factor of __________ in just a few months.

a.)20

b.)2

c.)50

d.)5

3. When GDP growth is at its maximum, given current resources, the business cycle is said to be in which phase?

a.)Peak

b.)Trough

c.)Expansion

d.)Contraction

4. A _________ is a decline in economic activity that lasts more than a few months and is visible in _________.

a.)trough; expansion

b.)recession; expansion

c.)recession; real GDP

d.)trough; real GDP

5. Which of the following policies is implemented when the economy is growing too quickly?

a.)A spending increase by the government

b.)Lowered interest rates by a central bank

c.)A tax increase by the government

d.)Lowered reserve requirement by a central bank

6. Which of the following choices is a form of government sponsored automatic stabilizers in the U.S.?

a.)Monetary policy

b.)National defense

c.)Police protection

d.)Progressive income tax

7. When quantity supplied and quantity demanded are the same, a market is said to be in __________.

a.)a surplus

b.)equilibrium

c.)a downturn

d.)a shortage

8. Cross-price elasticity refers to changes in demand that happen due to changes in price of related goods.

If this value is negative for two goods or services, then they are __________.

If this value is positive, then they are __________.

a.)substitutes; complementary

b.)complementary; substitutes

c.)luxury; inferior

d.)inferior; luxury

9. Minimum wage is a type of __________ that enforces a lower limit on wages. When these occur, they create a __________ of labor, because there are more people who want to be paid at this rate than there are firms that are willing to pay them.

a.)price floor; shortage

b.)price ceiling; shortage

c.)price ceiling; surplus

d.)price floor; surplus

10. What happens on a graph for a good when a tax is imposed?

a.)The supply curve shifts to the left.

b.)The supply curve shifts to the right

c.)The demand curve shifts to the right.

d.)The demand curve shifts to the left.

11. The price for borrowing money is known as the __________.

a.)exchange rate

b.)deposit rate

c.)time deposit

d.)interest rate

12. Unemployment as a result of people's skills not matching those needed for jobs in a changing economy is known as __________ unemployment.

a.)structural

b.)full

c.)frictional

d.)cyclical

13. Which of the following examples corresponds with frictional unemployment?

a.)This type of unemployment occurs when the economy changes and people with skills that were once desirable can no longer find work.

b.)This type of unemployment occurs only when the economy is at a peak.

c.)This type of unemployment occurs when college students graduate and look for full time work.

d.)This type of unemployment occurs only during a recession.

14. Which of the following statements corresponds with the wealth effect?

a.)As the price level falls, people feel as if they have more money and purchase more goods.

b.)As the price level falls, demand stays the same.

c.)As the price of borrowing declines, purchases of durable goods (cars, houses) increase and so do investments.

d.)As the price level falls in other countries, Americans buy more goods abroad.

15. If the demand for a country's currency increases, what happens to the currency?

a.)It is impossible to predict.

b.)It will appreciate.

c.)It will depreciate.

d.)It will not change; money supply is fixed.

16. When the Current Account and the Capital Account are added together, __________.

a.)the sum will be negative

b.)it is impossible to predict, given changes in trade patterns

c.)the sum will be zero

d.)the sum will be positive

17. Which of the following statements is FALSE relating to the Law of Demand?

a.)If the producer increases the price of a good, consumers will demand a lower quantity.

b.)Perfectly inelastic demand is an exception to the Law of Demand.

c.)The Law of Demand takes into account all other variables in the market.

d.)Consumers can usually find substitutes to the good in question.

18. During the 18th Century, as troubles with Britain escalated, American colonists stopped drinking British tea, and instead started drinking coffee.

This is an example of which factor of demand?

a.)Change in the price of the good

b.)Change in taste/preference

c.)Change in price of a substitute

d.)Change in the price of a complement

19. As prices increase, producers are willing to __________.

a.)demand less of a good or service

b.)produce less of a good or service

c.)supply a larger quantity of a good or service

d.)demand more of a good or service

20. Which of the following causes a shift in supply to the left?

a.)A decrease in the price of inputs

b.)An increase in technology

c.)Education that leads to a more skilled workforce

d.)A natural disaster that destroys farms and factories

21. Suppose you are willing to pay $3 for an ice cream cone.The price at the local creamery is $1.75.

What is your consumer surplus?

a.)$3.00

b.)$4.75

c.)$1.75

d.)$1.25

22. A firm would stop producing when producer surplus is __________.

a.)equal to opportunity cost

b.)smaller than deadweight loss

c.)negative

d.)equal to zero

23. If the price of organic vegetables reaches equilibrium, which of the following describes what will happen?

a.)There will be a shortage because the organic vegetables will sell out.

b.)The price will eventually fall.

c.)The price will continue to rise.

d.)There will be no market basis for the price to change.

24. When price decreases, the quantity supplied will __________.

a.)increase or decrease in price, depending on elasticity of supply

b.)increase

c.)decrease

d.)remain the same

25. A shortage exists when the __________.

a.)quantity demanded is greater than the quantity supplied

b.)market is in equilibrium

c.)quantity supplied is greater than the quantity demanded

d.)reservation price is not met

26. When are consumer and producer surplus maximized?

a.)When a price floor is imposed

b.)At equilibrium

c.)When a price ceiling is imposed

d.)When deadweight loss is highest

27. A tax effectively shifts ___________.

a.)demand to the left, decreasing the price that consumers pay

b.)supply to the right, decreasing the price that consumers pay

c.)supply to the left, increasing the price that consumers pay

d.)demand to the right, increasing the price that consumers pay

28. Which of the statements about aggregate demand is true?

a.)Interest rates have no effect on aggregate demand.

b.)AD represents the downward sloping relationship between price level and RGDP.

c.)The exchange rate has no effect on aggregate demand.

d.)The Wealth Effect causes a decrease in consumption as prices fall.

29. Which statement below is NOT true about the LRAS?

a.)An outward shift in LRAS will occur at the same rate as growth in the economy.

b.)The LRAS remains fixed over time.

c.)The LRAS will shift outward if resources allow for a higher sustainable output level.

d.)The LRAS represents the maximum output level an economy can sustain given its current resources.

30. When an economy is producing to the left of the LRAS, __________.

a.)contractionary monetary policies should be put in place

b.)expansionary fiscal policies should be put in place

c.)the LRAS curve will shift to the left to meet the current price level and GDP

d.)resources are over-utilized