16) For any given product, _____ is determined by what the market will bear.

a) price

b) quality

c) None of the answers is correct.

d) quantity

17) Which of sequence is in the correct order, according to the business cycle?

a) peak; trough; recession; recovery

b) peak; recession; recovery; trough

c) peak; trough; recovery; recession

d) peak; recession; trough; recovery

18) For which situation would the yield curve MOST likely predict that a recession will occur?

a) short-term interest rate = 3%; long-term interest rate = 3%

b) short-term interest rate = 4%; long-term interest rate = 3%

c) short-term interest rate = 2%; long-term interest rate = 4%

d) short-term interest rate = 0%; long-term interest rate = 5%

19) Which activity is an example of a nonmarket transaction?

a) hiring a nanny to take care of your children

b) growing your own food in a vegetable garden

c) hiring a maid to clean your home

d) employing a lawn service worker to trim your bushes

20) When investors believe an economic slowdown is likely, they buy short-term bonds to lock in interest rates.

a) False

b) True

21) Which statement explains why the size and the direction of the gap between long- and short-term interest rates is a predictor of stages in the business cycle?

a) The time period with higher rates is likely to have higher economic activity than the time period with lower rates.

b) When the rates are equal, the economy is in expansion or contraction; when the rates are unequal, the economy is in a peak or trough.

c) The time period with higher rates is likely to have slower economic activity than the time period with lower rates.

d) When the rates are unequal, the economy is in expansion or contraction; when the rates are equal, the economy is in a peak or trough.

22) Martin purchases 500 shares of stock in ABC Company at a price of $10 per share. He pays his stockbroker a commission of $50 for helping with the transaction. How much does GDP change as a result of Martin's commission payment?

a) GDP rises by $50.

b) There is no change in GDP.

c) GDP rises by $5,000.

d) GDP rises by $5,050.

23) Emilio is saving for college by putting his summer earnings into a fixed-rate savings account. If inflation unexpectedly increases, then so too will Emilio's summer earnings.

a) True

b) False

24) The establishment survey interviews households regarding their employment status.

a) False

b) True

25) When the increase in prices goes from 5% to 2%, this is referred to as

a) hyperinflation.

b) disinflation.

c) deflation.

d) inflation.

26) Which group is considered part of the labor force?

a) a prisoner who works in the prison library

b) a retired police officer who collects a pension from the government

c) a 22-year-old unpaid family worker who works 30 hours per week on the family farm

d) a 13-year-old teenager who delivers newspapers after school

27) Danielle worked as a cashier in a restaurant but lost her job when the restaurant installed machines at the tables where customers can now pay for their meals. Danielle is cyclically unemployed.

a) False

b) True

28) The existence of discouraged workers tends to cause the official unemployment rate to understate the actual rate.

a) True

b) False

29) As a clergyman and an economist, Thomas Malthus believed that society could eliminate poverty and create a heaven on earth.

a) False

b) True

30) Which statement is NOT true with respect to measures of economic freedom?

a) Higher levels of economic freedom generally correlate with higher average incomes.

b) An economic freedom index is a way to measure a country's overall infrastructure quality.

c) Assigning values of economic freedom uses defined objective measures.

d) Property rights, trade, and investment are factors used in measuring economic freedom.

31) If a country's growth rate is 1.25%, then it will take about 40 years for its output to double.

a) False

b) True

32) The government decides to give tax-exempt status to a new organization whose mission is to award college scholarships to members of the armed forces. In doing so, the government is acting in its role to promote economic growth by:

a) ensuring a stable and secure financial system.

b) enhancing physical and human capital.

c) promoting free and competitive markets.

d) ensuring a stable legal system.