1 John just bought shares of stock in IBM for $10,000 and paid a $90 commission to his broker How did this affect GDP A) It had no impact on GDP B) GDP increased by $90 C) GDP increased by $10,000 D) GDP increased by $9,990 E) GDP increased by $10,090 2 Opportunity cost is the alternative forfeited when a choice is made A) least valued B) most highly valued C) most convenient D) most recently considered 3 If there is an increase in the amount of good B foregone as every additional unit of good A is produced, the PPF between A and B would A) be a straight line B) be a bowed outward curve C) be a bowed inward curve D) not exist 4 Persons who are retired or engaged in own home housework are considered to be in which of the following categories A) in the civilian labor force B) not in the labor force C) employed D) unemployed 5 A recessionary gap exists if (actual) Real GDP is Natural Real GDP A) less than B) greater than C) equal to D) b and c E) none of the above 6 Decision making at the margin means making a choice based on of a decision A) the total benefits B) the total costs C) comparing the total benefits and costs D) comparing the additional benefits and costs 7 When Claudia trades $100 for good X, economists assume that she is A) trading something of less value to her for something of more value to her B) trading something of more value to her for something of less value to her C) trading something that gives her less utility for something that gives her more utility D) a and c E) none of the above 8 An increase in investment at a given price level A) shifts the AD curve to the right B) shifts the AD curve to the left C) causes an upward movement along the existing AD curve D) causes a downward movement along the existing AD curve E) none of the above 9 If the demand for a good falls by less than the supply of the good rises, then equilibrium price will and equilibrium quantity will A) rise fall B) rise rise C) fall fall D) fall rise 10 The CPI was 140 in one year and 144 the following year Approximately how much did prices rise between the two years A) 2 86 percent B) 2 78 percent C) 0 03 percent D) 1 03 percent E) none of the above 11 The expenditure approach to measuring GDP sums A) consumption, investment, government purchases, and net exports B) sales, revenues, income, and wages C) profits, compensation of employees, consumption, and investment D) net exports, consumption, wages, and salaries 12 Which of the following would not be included in the calculation of this year's GDP A) a headlight bulb purchased at Joe's Auto Supply by Susan to replace a burnt out bulb in her car B) a headlight bulb purchased by Ford Motor Co from a supplier C) a headlight bulb produced but not sold this year and thus ending up as inventory D) none of the above, i e , all would be included 13 Suppose the government decides that every family should own its own home To bring this about, the government decides to subsidize the home construction industry by giving the home construction companies $10,000 for every house that they build As a result of this, A) the supply curve of new houses would shift leftward, since it now costs $10,000 more for builders to produce a house B) the demand curve for new houses would shift rightward, since now every family would want to buy a house C) the demand curve for new houses would shift leftward D) the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price E) c and d 14 Which set of changes will raise demand A) an increase in income (assuming demand is for a normal good), a decline in wage rates, and a rise in the per unit tax placed on the production of a good B) an increase in the number of buyers, a decline in the price of a substitute, and an increase in the prices of relevant resources C) an increase in the price of a substitute, a decrease in the price of a complement, and an increase in expected (future) price D) a decline in the number of buyers, an increase in the price of a complement, and a decline in a per unit tax placed on the production of a good E) none of the above 15 Both country 1 and country 2 are located on their respective production possibilities frontiers (PPFs), but country 1 produces twice the output that country 2 produces It follows that A) country 1's PPF lies further to the right than country 2's PPF B) country 1 has a smaller population than country 2 C) country 1 has a bigger population than country 2 D) country 1 is efficient and country 2 is inefficient E) none of the above 16 Suppose aggregate demand is too low to bring about the Natural Real GDP level A Keynesian policy prescription would call for a(n) to close this recessionary gap A) increase in government spending B) decrease in government spending C) increase in taxes D) decrease in taxes E) a or d 17 The structural unemployment rate is 3 1 percent, the frictional unemployment rate is 2 1 percent, and the current unemployment rate is 4 9 percent The economy is in A) a recessionary gap producing less than Natural Real GDP B) an inflationary gap producing more than Natural Real GDP C) long run equilibrium D) an inflationary gap producing Natural Real GDP E) a recessionary gap producing more than Natural Real GDP 18 A fall in the price level changes the purchasing power of money This is relevant to the effect A) international trade B) real balance C) aggregate demand D) interest rate E) aggregate supply 19 An economic policy initiative results in the AD curve shifting to the right As a result, A) the price level will rise B) the price level will stay constant C) the price level will fall D) Real GDP will rise in the short run E) a and d 20 Which of the following is consistent with the classical position on wages and prices A) Wages and prices are sticky in the downward direction B) Wages are sticky in the downward direction, but prices are flexible C) Wages and prices are flexible D) Prices are sticky in the downward direction, but wages are flexible 21 If the bottom half of all U S income tax payers were allowed to stop paying the income tax entirely and the top 50 continued to pay as they do now, tax revenues to the government would drop by about A) 3 6 percent B) 10 2 percent C) 13 9 percent D) 33 3 percent 22 Which of the following is most nearly consistent with Say's law A) When a person produces one good, he or she plans to demand other goods B) When a person produces a good, he or she plans to sell it C) When a person buys a good, he or she plans to pay for it with money D) When a person goes to work, he or she plans to produce 23 The economy was at point A producing 100X and 200Y It moved to point B where it produces 200X and 300Y It follows that A) point A may have been a point below the economy's PPF, while point B may lie on the PPF B) the economy's PPF could have shifted outward and point A was a point on the economy's old PPF C) the economy has moved from one point on its PPF to another point on the same PPF D) a or b E) a or c 24 The condition in an economy that makes a rationing device a necessity is the fact that A) the economy is organized around free markets B) the economy is centrally planned by the government C) scarcity exists D) there are fewer types of goods than there are people in the economy 25 Expansionary fiscal policy actions include government spending and or taxes, while contractionary fiscal policy actions include government spending and or taxes A) increasing increasing decreasing decreasing B) decreasing decreasing increasing increasing C) increasing decreasing increasing decreasing D) decreasing increasing increasing decreasing E) increasing decreasing decreasing increasing 26 A price ceiling is a government mandated A) minimum price below which legal trades cannot be made B) maximum price above which legal trades cannot be made C) minimum price above which legal trades cannot be made D) maximum price below which legal trades cannot be made 27 In year 1 the CPI is 144 1, and in year 2 the CPI is 151 If Sarah's salary was $33,500 in year 1, what salary in year 2 would cause her to exactly keep up with inflation A) $50,585 B) $48,274 C) $40,508 D) $35,104 28 One measure of the inflation rate is the A) sum of the CPIs of adjacent years B) percentage change in the CPI of adjacent years C) percentage change in the Real GDP of adjacent years D) GDP minus the Real GDP in a year 29 Expansionary fiscal policy is ineffective if A) there are idle resources in the economy B) the MPC is less than 0 60 C) the government has a budget surplus D) there is complete crowding out E) a and d 30 Suppose the economy goes from a point on its unchanging PPF to a point down and to the left of it This could be due to A) a gain of resources B) a loss of resources C) technological improvement in the production of both goods D) a new law that interferes with economic efficiency 31 A decrease in the price of electricity will cause A) a movement down the SRAS curve B) a movement up the SRAS curve C) a leftward shift in the SRAS curve D) a rightward shift in the SRAS curve E) no change regarding the SRAS curve 32 Which of the following is an example of crowding out A) A decrease in the rate of growth of the stock of money decreases GDP B) A deficit causes an increase in interest rates, which causes a decrease in investment spending C) An increase in tariffs causes a decrease in imports D) A decrease in government housing subsidies causes an increase in private spending on housing 33 A rightward shift in the demand curve for tennis balls could be caused by A) a fall in the price of tennis balls B) a fall in the price of tennis rackets C) a rise in the price of tennis lessons D) a fall in income, assuming tennis balls are a normal good 34 Here is a consumption function C C0 MPC(Yd) If MPC is 0 80, then we know that A) as Yd rises by $1, Co rises by $0 80 B) as Yd rises by $1, C rises by $0 80 C) Yd rises by $0 80 D) as C0 rises by $0 80, Yd rises by $1 35 Suppose a drop in stock prices makes people feel less wealthy This would cause the economy's AD curve A) movement down along B) movement up along C) a rightward shift of D) a leftward shift of 36 An economy is producing its Natural Real GDP when the rate of unemployment is equal to the unemployment rate A) frictional B) structural C) sum of the frictional unemployment rate and the structural D) seasonal E) cyclical 37 Who would be most likely to agree that People do not always save more as interest rates rise A) a classical economist B) John Maynard Keynes C) an efficiency wage theorist D) a and b E) a, b, and c 38 The U S income tax is currently a tax A) progressive B) proportional C) regressive D) proactive 39 The question of U S budget deficits and their impact on the U S economy is dealt with in the study of A) microeconomics B) managerial economics C) macroeconomics D) consumer economics 40 John Maynard Keynes believed that wages may be inflexible in the downward direction Consequently, an economy A) could get stuck in long run equilibrium B) could get stuck in a recessionary gap C) could get stuck in an inflationary gap D) would always produce more than Natural Real GDP E) b and c Part B The study looked at a range of economic, health and social factors to try and explain why there is a link between arts engagement and living longer although as an observational study it can't establish cause Part of the reason, the study said, comes down to social and economic differences among those who go and don't go to museums, exhibitions and art galleries Wealth, they found, explained about 7 of the association Cognitive differences, social and civic engagement, mental health, mobility and disability and deprivation also played a role Things like free time and occupational status made no material difference, said Fancourt Part of the association is attributable to differences in socioeconomic status among those who do and do not engage In the arts, which aligns with research that suggests engagement in cultural activities is socially patterned, the study said However, sald Fancourt, over half the association is independent of all the factors we identifed that could explain the link She said that engaging with the arts can act as a buffer against stress and build creativity that allows people to adapt to changing circumstances, It also helps people build social capital accessing emotional support and Information that helps people age more successfully We also thought that a greater sense of purpose could play a role, she said, If this (studyl is added to the larger body of evidence, we are getting an increasingly rich picture on how arts can benefit health and It's not about one single outcome It can have wide ranging benents and support healthier lives lived longer This study did not look at the effects of taking part in art related activities but a World Health Organization review of available evidence published earlier this year found that both receptive participation, like visiting a museum, and active participation, like singing In a choir, had health benefits

Question

1  John just bought shares of stock in IBM for $10,000 and paid a $90 commission to his broker  How did this affect GDP  A) It had no impact on GDP  B) GDP increased by $90  C) GDP increased by $10,000  D) GDP increased by $9,990  E) GDP increased by $10,090  2  Opportunity cost is the      alternative forfeited when a choice is made  A) least valued B) most highly valued C) most convenient D) most recently considered 3  If there is an increase in the amount of good B foregone as every additional unit of good A is produced, the PPF between A and B would A) be a straight line  B) be a bowed outward curve  C) be a bowed inward curve  D) not exist  4  Persons who are retired or engaged in own home housework are considered to be in which of the following categories  A) in the civilian labor force B) not in the labor force C) employed D) unemployed 5  A recessionary gap exists if (actual) Real GDP is      Natural Real GDP  A) less than B) greater than C) equal to D) b and c E) none of the above 6  Decision making  at the margin  means making a choice based on      of a decision  A) the total benefits B) the total costs C) comparing the total benefits and costs D) comparing the additional benefits and costs 7  When Claudia trades $100 for good X, economists assume that she is A) trading something of less value to her for something of more value to her  B) trading something of more value to her for something of less value to her  C) trading something that gives her less utility for something that gives her more utility  D) a and c E) none of the above 8  An increase in investment at a given price level A) shifts the AD curve to the right  B) shifts the AD curve to the left  C) causes an upward movement along the existing AD curve  D) causes a downward movement along the existing AD curve  E) none of the above 9  If the demand for a good falls by less than the supply of the good rises, then equilibrium price will      and equilibrium quantity will       A) rise  fall B) rise  rise C) fall  fall D) fall  rise 10  The CPI was 140 in one year and 144 the following year  Approximately how much did prices rise between the two years  A) 2 86 percent B) 2 78 percent C) 0 03 percent D) 1 03 percent E) none of the above 11  The expenditure approach to measuring GDP sums A) consumption, investment, government purchases, and net exports  B) sales, revenues, income, and wages  C) profits, compensation of employees, consumption, and investment  D) net exports, consumption, wages, and salaries  12  Which of the following would not be included in the calculation of this year's GDP  A) a headlight bulb purchased at Joe's Auto Supply by Susan to replace a burnt out bulb in her car B) a headlight bulb purchased by Ford Motor Co  from a supplier C) a headlight bulb produced but not sold this year and thus ending up as inventory D) none of the above, i e , all would be included 13  Suppose the government decides that every family should own its own home  To bring this about, the government decides to subsidize the home construction industry by giving the home construction companies $10,000 for every house that they build  As a result of this, A) the supply curve of new houses would shift leftward, since it now costs $10,000 more for builders to produce a house  B) the demand curve for new houses would shift rightward, since now every family would want to buy a house  C) the demand curve for new houses would shift leftward  D) the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price  E) c and d 14  Which set of changes will raise demand  A) an increase in income (assuming demand is for a normal good), a decline in wage rates, and a rise in the per unit tax placed on the production of a good B) an increase in the number of buyers, a decline in the price of a substitute, and an increase in the prices of relevant resources C) an increase in the price of a substitute, a decrease in the price of a complement, and an increase in expected (future) price D) a decline in the number of buyers, an increase in the price of a complement, and a decline in a per unit tax placed on the production of a good E) none of the above 15  Both country 1 and country 2 are located on their respective production possibilities frontiers (PPFs), but country 1 produces twice the output that country 2 produces  It follows that A) country 1's PPF lies further to the right than country 2's PPF  B) country 1 has a smaller population than country 2  C) country 1 has a bigger population than country 2  D) country 1 is efficient and country 2 is inefficient  E) none of the above 16  Suppose aggregate demand is too low to bring about the Natural Real GDP level  A Keynesian policy prescription would call for a(n)      to close this recessionary gap  A) increase in government spending B) decrease in government spending C) increase in taxes D) decrease in taxes E) a or d 17  The structural unemployment rate is 3 1 percent, the frictional unemployment rate is 2 1 percent, and the current unemployment rate is 4 9 percent  The economy is in A) a recessionary gap producing less than Natural Real GDP  B) an inflationary gap producing more than Natural Real GDP  C) long run equilibrium  D) an inflationary gap producing Natural Real GDP  E) a recessionary gap producing more than Natural Real GDP  18  A fall in the price level changes the purchasing power of money  This is relevant to the      effect  A) international trade B) real balance C) aggregate demand D) interest rate E) aggregate supply 19  An economic policy initiative results in the AD curve shifting to the right  As a result, A) the price level will rise  B) the price level will stay constant  C) the price level will fall  D) Real GDP will rise in the short run  E) a and d 20  Which of the following is consistent with the classical position on wages and prices  A) Wages and prices are sticky in the downward direction  B) Wages are sticky in the downward direction, but prices are flexible  C) Wages and prices are flexible  D) Prices are sticky in the downward direction, but wages are flexible  21  If the bottom half of all U S  income tax payers were allowed to stop paying the income tax entirely and the top 50  continued to pay as they do now, tax revenues to the government would drop by about A) 3 6 percent  B) 10 2 percent  C) 13 9 percent  D) 33 3 percent  22  Which of the following is most nearly consistent with Say's law  A) When a person produces one good, he or she plans to demand other goods  B) When a person produces a good, he or she plans to sell it  C) When a person buys a good, he or she plans to pay for it with money  D) When a person goes to work, he or she plans to produce  23  The economy was at point A producing 100X and 200Y  It moved to point B where it produces 200X and 300Y  It follows that A) point A may have been a point below the economy's PPF, while point B may lie on the PPF  B) the economy's PPF could have shifted outward and point A was a point on the economy's old PPF  C) the economy has moved from one point on its PPF to another point on the same PPF  D) a or b E) a or c 24  The condition in an economy that makes a  rationing device  a necessity is the fact that A) the economy is organized around free markets  B) the economy is centrally planned by the government  C) scarcity exists  D) there are fewer types of goods than there are people in the economy  25  Expansionary fiscal policy actions include      government spending and or      taxes, while contractionary fiscal policy actions include      government spending and or      taxes  A) increasing  increasing  decreasing  decreasing B) decreasing  decreasing  increasing  increasing C) increasing  decreasing  increasing  decreasing D) decreasing  increasing  increasing  decreasing E) increasing  decreasing  decreasing  increasing 26  A price ceiling is a government mandated A) minimum price below which legal trades cannot be made  B) maximum price above which legal trades cannot be made  C) minimum price above which legal trades cannot be made  D) maximum price below which legal trades cannot be made  27  In year 1 the CPI is 144 1, and in year 2 the CPI is 151  If Sarah's salary was $33,500 in year 1, what salary in year 2 would cause her to exactly  keep up with inflation   A) $50,585 B) $48,274 C) $40,508 D) $35,104 28  One measure of the inflation rate is the A) sum of the CPIs of adjacent years  B) percentage change in the CPI of adjacent years  C) percentage change in the Real GDP of adjacent years  D) GDP minus the Real GDP in a year  29  Expansionary fiscal policy is ineffective if A) there are idle resources in the economy  B) the MPC is less than 0 60  C) the government has a budget surplus  D) there is complete crowding out  E) a and d 30  Suppose the economy goes from a point on its unchanging PPF to a point down and to the left of it  This could be due to A) a gain of resources  B) a loss of resources  C) technological improvement in the production of both goods  D) a new law that interferes with economic efficiency  31  A decrease in the price of electricity will cause A) a movement down the SRAS curve  B) a movement up the SRAS curve  C) a leftward shift in the SRAS curve  D) a rightward shift in the SRAS curve  E) no change regarding the SRAS curve 32  Which of the following is an example of crowding out  A) A decrease in the rate of growth of the stock of money decreases GDP  B) A deficit causes an increase in interest rates, which causes a decrease in investment spending  C) An increase in tariffs causes a decrease in imports  D) A decrease in government housing subsidies causes an increase in private spending on housing  33  A rightward shift in the demand curve for tennis balls could be caused by A) a fall in the price of tennis balls  B) a fall in the price of tennis rackets  C) a rise in the price of tennis lessons  D) a fall in income, assuming tennis balls are a normal good  34  Here is a consumption function  C   C0   MPC(Yd)  If MPC is 0 80, then we know that A) as Yd rises by $1, Co rises by $0 80  B) as Yd rises by $1, C rises by $0 80  C) Yd rises by $0 80  D) as C0 rises by $0 80, Yd rises by $1  35  Suppose a drop in stock prices makes people feel less wealthy  This would cause      the economy's AD curve  A) movement down along B) movement up along C) a rightward shift of D) a leftward shift of 36  An economy is producing its Natural Real GDP when the rate of unemployment is equal to the      unemployment rate  A) frictional B) structural C) sum of the frictional unemployment rate and the structural D) seasonal E) cyclical 37  Who would be most likely to agree that  People do not always save more as interest rates rise   A) a classical economist B) John Maynard Keynes C) an efficiency wage theorist D) a and b E) a, b, and c 38  The U S  income tax is currently a      tax  A) progressive B) proportional C) regressive D) proactive 39  The question of U S  budget deficits and their impact on the U S  economy is dealt with in the study of A) microeconomics  B) managerial economics  C) macroeconomics  D) consumer economics  40  John Maynard Keynes believed that wages may be inflexible in the downward direction  Consequently, an economy A) could get stuck in long run equilibrium  B) could get stuck in a recessionary gap  C) could get stuck in an inflationary gap  D) would always produce more than Natural Real GDP  E) b and c  Part B  The study looked at a range of economic, health and social factors to try and explain why there is a link between  arts engagement  and living longer  although as an observational study it can't establish cause  Part of the reason, the study said, comes down to social and economic differences among those who go and don't go to museums, exhibitions and art galleries  Wealth, they found, explained about 7   of the association  Cognitive differences, social and civic engagement, mental health, mobility and disability and deprivation also played a role  Things like free time and occupational status made no material difference, said Fancourt   Part of the association is attributable to differences in socioeconomic status among those who do and do not engage In the arts, which aligns with research that suggests engagement in cultural activities is socially patterned,  the study said  However, sald Fancourt,  over half the association is independent of all the factors we identifed that could explain the link   She said that engaging with the arts can act as a buffer against stress and build creativity that allows people to adapt to changing circumstances, It also helps people build social capital    accessing emotional support and Information that helps people age more successfully   We also thought that a greater sense of purpose could play a role,  she said,  If this (studyl is added to the larger body of evidence, we are getting an increasingly rich picture on how arts can benefit health and It's not about one single outcome  It can have wide ranging benents and support healthier lives lived longer  This study did not look at the effects of taking part in art related activities but a World Health Organization review of available evidence published earlier this year found that both receptive participation, like visiting a museum, and active participation, like singing In a choir, had health benefits

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1. John just bought shares of stock in IBM for $10,000 and paid a $90 commission to his broker. How did this affect GDP? A)

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