1- Three students are planning their careers. Robert says he is meticulous and wants to be responsible for financial records and reports at a large corporation. Suzanne says she is a risk-taker and wants to MAKE a new product and bring it to market. William plans to put his people skills to good use in winning new customers for a financial services firm. How would Robert, Suzanne and William's work be classified? Select one:

a. labor, entrepreneur, and service

b. labor, professional, and service

c. labor, labor, and labor

d. professional, inventor, and capitalist

Which factor of production describes manufactured aids used in producing consumer goods or services?

Select one:

a. entrepreneurial ability

b. land

c. labor

d. capital

Given that there is scarcity in the world, economic decisions involve:

Select one:

a. analysis of efficient use of unlimited resources

b. comparison of marginal benefit and marginal cost

c. an examination of negative marginal utility

d. the assumption that humans are selfish

Producers face trade-offs when creating goods and services because

Select one:

a. only a limited number of productive resources are available at a given time.

b. the marginal benefits of production seldom exceed the marginal costs.

c. production is often inefficient due to taxation and other government interventions.

d. ethical considerations limit what people are willing to produce or purchase.

As a person's income increases, which of the following will they have to consider in the context of their budget line?

Select one:

a. labor costs

b. opportunity cost

c. natural resources

d. capital goods

Which of the following best characterizes a scarce good?

Select one:

a. zero marginal costs

b. positive opportunity cost

c. zero opportunity cost

d. positive marginal benefits

Which of the following would lead to a movement along a supply curve?

Select one:

a. The price of the good changes.

b. The suppliers' expectations about the future price of the good change.

c. The cost of production changes.

d. The prices of substitutes in production change.

If the wage of workers in the car manufacturing industry increases significantly while all other factors of production remain unchanged, we might expect the

Select one:

a. the quantity of cars supplied to decrease along a stable supply curve.

b. the supply of cars to increase.

c. the quantity of cars supplied to increase along a stable supply curve.

d. the supply of cars to decrease.

A manufacturer produces bicycles and scooters. If the price of bicycles increases next year, all else equal, how would this price affect the manufacturer's production of bicycles and scooters next year?

Select one:

a. The manufacturer's marginal cost of bicycle production will increase.

b. The manufacturer will shift some production of scooters to bicycles.

c. The manufacturer's marginal profit of bicycle production will decrease.

d. The manufacturer will stop producing bicycles.

When the price of beef rises, Karen increases her purchases of chicken. To Karen,

Select one:

a. beef and chicken are substitutes.

b. beef and chicken are normal goods.

c. beef and chicken are inferior goods.

d. beef and chicken are complements.

Competitive markets result in

Select one:

a. productive efficiency and allocative equity.

b. productive equity and allocative efficiency.

c. productive and allocative equity.

d. productive and allocative efficiency.

A market is in equilibrium when the

Select one:

a. quantity demanded exceeds quantity supplied.

b. demand exceeds supply.

c. quantity demanded equals quantity supplied.

d. demand equals supply.

Consider the market for kale given in the table above. The market for kale is initially in equilibrium. However, to promote healthy eating, the government decides to set a price ceiling on the market price of kale at $0.50. What is the market outcome from the price ceiling?

Select one:

a. There will be a surplus of 40 bundles.

b. There will be a shortage of 40 bundles.

c. There will be a surplus of 60 bundles.

d. There will be a shortage of 60 bundles

The market for televisions is initially at equilibrium in June. In July, both the supply and demand for televisions shift to the right. Using this information, which of the following explains what happens to the equilibrium price and equilibrium quantity in the market for televisions in July?

Select one:

a. The equilibrium price increases, but the equilibrium quantity may increase or decrease.

b. The equilibrium price decreases, but the equilibrium quantity may increase or decrease.

c. The equilibrium quantity decreases, but the equilibrium price may increase or decrease.

d. The equilibrium quantity increases, but the equilibrium price may increase or decrease.

A recent report indicates the unemployment rate is 5%, the number of people unemployed is 8,400,000, and the number of adults who are not actively seeking work is 2,500,000. What is the total number of people in the labor force?

Select one:

a. 168,860,000

b. 58,400,000

c. 50,000,000

d. 166,360,000

According to the Bureau of Labor Statistics, workers who want to work full-time and cannot find suitable full-time work or worked fewer hours than they wanted to fall into which of the following categories?

Select one:

a. unemployed

b. discouraged workers

c. part-time employed

d. marginally employed

An economy is experiencing a decline in total spending, which could result in

Select one:

a. an increase in cyclical unemployment.

b. a decline in natural unemployment.

c. an increase in structural unemployment.

d. a decline in frictional unemployment.

Which government agency is responsible for compiling the Consumer Price Index?

Select one:

a. the Department of the Treasury

b. the National Bureau of Economic Research

c. the Social Security Administration

d. the Bureau of Labor Statistics

The Consumer Price Index measures the prices paid by __________ for a __________ of 300 consumer goods and services.

Select one:

a. typical urban consumers; market basket

b. registered businesses; market auction

c. average American consumers; random sample

d. government agencies; purchase bundle

The Consumer Price Index in 2005 was 150. In 2006, it was 165. Calculate the rate of inflation.

Select one:

a. 7.5%

b. 15%

c. 3.4%

d. 10%

An economist calculates the current rate of inflation to be -3%. Which of the following would we conclude?

Select one:

a. He is mistaken; negative inflation is not possible.

b. Consumers are purchasing smaller market baskets.

c. The economy is in a state of hyperinflation.

d. The economy is currently in a state of deflation.

When might CPI mistakenly overstate inflation?

Select one:

a. when unanticipated inflation stifles technological innovation

b. when inflationary pressures diminish the quality of goods

c. when a product's price increases due to changes in quality

d. when supply shocks have a greater impact on inflation

When certain goods become more expensive, consumers may purchase less expensive substitutes. How would this affect the CPI?

Select one:

a. The CPI would reflect increased real income.

b. The CPI would understate inflation.

c. The CPI would overstate inflation.

d. The CPI would reflect reduced nominal income.

Which of the following is a consequence of hyperinflation?

Select one:

a. The production of goods and services accelerates at record rates.

b. Money becomes almost worthless as a medium of exchange.

c. Businesses sell off stockpiles of materials and finished products.

d. Gemstones and other non-productive wealth becomes worthless.

Which of the following could result from a large and unexpected increase in resource prices?

Select one:

a. full employment and expansion

b. reduced output and deflation

c. increased output and hyperinflation

d. reduced output and unemployment

Adidas, a German company, produces clothing in Vietnam for sale in the United States. This adds to which country's GDP?

Select one:

a. the United States, but not Germany or Vietnam

b. Vietnam, but not Germany or the United States

c. Germany, the United States, and Vietnam

d. the United States and Germany, but not Vietnam

Assume a very simple economy only produces four goods. Use the following table to calculate GDP.

Select one:

a. $1,950,000

b. $2,300,000

c. $2,100,000

d. $1,750,000

If a large number of workers are employed "off the books" or barter their services for other services, what impact will this have on GDP?

Select one:

a. GDP will be underestimated.

b. GDP will be overestimated.

c. GDP will be redistributed.

d. This will have no impact on GDP.

Over the last 100 years, the average number of hours worked per week in the US has fallen and the frequency of vacations and holidays has increased. What effect has this had on GDP?

Select one:

a. GDP has decreased because less time is devoted towards productive activities.

b. GDP has increased due to more unrecorded work done during vacation time.

c. It has had no effect because GDP does not account for the value of leisure time.

d. It has had no net effect because productivity losses are offset by leisure expenditures.

During a business cycle recession,

Select one:

a. total output increases and total employment increases.

b. total output increases and total employment decreases.

c. total output decreases and total employment decreases.

d. total output decreases and total employment increases.

Business cycles

Select one:

a. determine long-term growth.

b. are unusual economic outcomes.

c. vary in length and intensity.

d. are predictable.

An economic recession makes many consumers pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve?

Select one:

a. Aggregate demand will shift to the right.

b. Aggregate demand will shift to the left.

c. The economy will move up along the aggregate demand curve.

d. The economy will move down along the aggregate demand curve.

The short-run aggregate supply curve is upward sloping because as total output rises,

Select one:

a. firms encounter bottlenecks from adding more inputs to constrained resources.

b. firms use their market power to increase prices.

c. firms become more efficient from adding more inputs.

d. firms increase wages faster than the prices of final goods.

Using the gross domestic product (GDP) accounting equation and the expenditures above, what is the nominal GDP for this hypothetical economy?

Select one:

a. $96,000

b. $99,000

c. $91,000

d. $88,000

Which of the following represents the purchase of a final good that would be counted in the consumption component of gross domestic product (GDP)?

Select one:

a. Sam buys a sandwich for lunch.

b. A lawn care company buys fertilizer.

c. Chris buys a foreign-made car.

d. A caf buys coffee beans.

In regard to the long-run aggregate supply curve,

Select one:

a. changes in the price level increase the aggregate quantity of nominal GDP supplied.

b. changes in the price level increase the aggregate quantity of real GDP supplied.

c. changes in the price level do not affect the aggregate quantity of real GDP supplied.

d. changes in the price level do not affect the aggregate quantity of nominal GDP supplied.

If a country loses a large percent of its capital stock and population due to war, then we would expect

Select one:

a. long-run aggregate supply to decrease.

b. long-run aggregate supply to increase.

c. the economy to move up along the long-run aggregate supply curve.

d. the economy to move down along the long-run aggregate supply curve.

An economy's potential output refers to

Select one:

a. nominal GDP when the economy is at full employment.

b. real GDP when the economy is at normal employment.

c. real GDP when the economy is at full employment.

d. nominal GDP when the economy is at normal employment.

Which of the following developments related to the aggregate demand and aggregate supply model depicts economic growth?

Select one:

a. an increase in both long-run aggregate supply and long-run aggregate demand

b. an increase in both long-run aggregate supply and short-run aggregate supply

c. an increase in both short-run aggregate supply and short-run aggregate demand

d. an increase in long-run aggregate supply and a smaller increase in short-run aggregate supply

According to the classical view, aggregate supply is

Select one:

a. horizontal until the full-employment level of real GDP and vertical at the full-employment level of real GDP because of Say's law and flexible prices and wages.

b. vertical because of Say's law and flexible prices and wages.

c. vertical because of downwardly inflexible prices and wages.

d. horizontal until the full-employment level of real GDP and vertical at the full-employment level of real GDP because prices and wages are downwardly inflexible.

The Keynesian view would suggest that problems of recession and demand-pull inflation

Select one:

a. can be corrected using discretionary fiscal and monetary policy.

b. require passive fiscal policy to keep inflation between one percent to two percent.

c. require a monetary rule to steadily increase the money supply.

d. are inevitable but self-correcting problems of modern economies.

Which of the following describes what happens to the federal budget, tax revenues, and federal spending on automatic stabilizers when the economy is in recession?

Select one:

a. The federal budget moves towards a deficit, tax revenues decrease, and spending on automatic stabilizers increases.

b. The federal budget moves towards a deficit, tax revenues increase, and spending on automatic stabilizers decreases.

c. The federal budget moves towards a surplus, tax revenues increase, and spending on automatic stabilizers decreases.

d. The federal budget moves towards a surplus, tax revenues decrease, and spending on automatic stabilizers increases.

Suppose the economy is currently at a long-run equilibrium where real GDP equals potential GDP. If economists expect real GDP to be higher than potential GDP and the price level to increase next year, then which of the following policies should Congress and the president pursue if they wish to keep real GDP equal to potential GDP?

Select one:

a. increase the budget deficit

b. increase spending on automatic stabilizers

c. increase income taxes

d. increase government spending

Suppose the economy falls into a recession next year and the government takes no fiscal policy action. Given this information, we should expect the federal government to be in a

Select one:

a. cyclical surplus.

b. economic deficit.

c. cyclical deficit.

d. economic surplus.

To evaluate the size of the federal debt over time, the best measure to use is the

Select one:

a. federal debt and subtract the federal budget deficit or surplus.

b. federal debt as a percentage of GDP.

c. absolute value of the federal debt.

d. federal debt as a percentage of the federal budget.

As a medium of exchange, money

Select one:

a. eliminates the need for bartering of goods and services for trade.

b. is traded in money markets.

c. holds its value over time.

d. is used to price goods and services.

Paper currency serves as money because it

Select one:

a. has value independent of its use as money.

b. is accepted in exchange for goods and services.

c. is backed by government debt.

d. can be redeemed for gold with the government.

In the money market, a decrease in the interest rate

Select one:

a. increases the opportunity cost of holding money and decreases the quantity of money demanded.

b. increases the opportunity cost of holding money and decreases money demand.

c. decreases the opportunity cost of holding money and increases money demand.

d. decreases the opportunity cost of holding money and increases the quantity of money demanded.

Under a fractional reserve banking system, banks hold less than 100% of

Select one:

a. securities in reserves.

b. loans in reserves.

c. shareholder equity in reserves.

d. deposits in reserves.

If the required reserve ratio is 5%, what is the maximum increase in checking deposits from an initial increase of $1000 in deposits?

Select one:

a. $19,000

b. $4750

c. $5000

d. $20,000

In the United States, which of the following groups meets to discuss the purchase and sale of U.S. Treasury securities in conducting monetary policy?

Select one:

a. Congress and the President

b. the Board of Governors

c. the U.S. Treasury Department

d. the Federal Open Market Committee

In the event of a bank run, the Federal Reserve can help a bank survive by

Select one:

a. loaning money to the bank as the lender of last resort.

b. raising the discount rate for the bank to borrow funds.

c. issuing Federal Reserve notes to increase the money supply.

d. increasing the required reserve ratio to increase the bank's holdings of reserves.

If the Federal Reserve conducts expansionary monetary policy by purchasing U.S. Treasury securities from banks, then this should

Select one:

a. decrease reserves, encourage banks to reduce lending, and increase the money supply.

b. increase reserves, encourage banks to make more loans, and increase the money supply.

c. increase reserves, encourage banks to reduce lending, and increase the money supply.

d. decrease reserves, encourage banks to make more loans, and increase the money supply.

Which of the following would likely encourage technological advancement?

Select one:

a. higher interest rates on student loans

b. subsidies for research and development

c. tax rebates for consumption spending

d. higher corporate taxes

Comparative advantage can be defined as the ability of a country to produce a good

Select one:

a. at a lower total expense relative to another country.

b. at a higher rate of output relative to another country.

c. at a lower opportunity cost relative to another country.

d. at a higher profit margin relative to another country.

Specialization based on comparative advantage

Select one:

a. improves global resource allocation and increases total global output.

b. increases efficiency in resource allocation but decreases domestic output.

c. increases efficiency and expands the domestic production possibilities curve.

d. increases consumption across countries and reduces resource appropriation.

Which statement best explains why nations do not completely specialize in the production of goods in which they have a comparative advantage?

Select one:

a. Resource mixes and technological knowledge can decrease the marginal cost of other goods.

b. Opportunity costs typically rise as a given nation produces more of a particular good.

c. Free trade gives consumers a wider range of product choices, which hinders specialization.

d. The size of labor forces and rates of unemployment across countries differ significantly.

If Germany sells military equipment to the U.S. Defense Department, where would this be recorded on the United States' balance of payments?

Select one:

a. current account as a debit

b. financial account as a debit

c. imports account as a debit

d. capital account as a credit