1.Which of the following would decrease the demand for butter (i.e., shift the demand curve to the left)?

a. An increase in the price of margarine (a substitute for butter).

b. A finding that butter contributes to heart disease.

c. A decrease in the price of bread (a complement to butter).

d. An increase in the price of butter.

2.According to the law of demand, we would expect

a. the demand curve to be negatively sloped.

b. the demand curve to be positively sloped.

c. the total quantity demanded by the market to move in the same direction as price.

d. income to increase as quantity demanded increases.

3.

If a country is operating at a point inside its production possibilities frontier, it

a. has unemployed resources.

b. must decrease production of one good to increase production of the other good.

c. cannot experience economic growth.

d. has full employment.

4.In the U.S., it requires 20 labor hours to produce one bushel of wheat and 80 labor hours to produce one computer. In France, it requires 25 labor hours to produce one bushel of wheat and 75 labor hours to produce one computer. The opportunity cost of one computer in France is

a. 3 bushels of wheat.

b. 1/3 bushel of wheat.

c. 4 computers.

d. 75 labor hours.

5.The slope is defined as:

a. Rise + run

b. The rise divided by the run.

c. Change in X divided by the change in Y

d. Simply the change in the Y variable

6.The term "business cycles" refers to

a. changes in overall business activity, as evidenced by changes in real GDP, employment, and the price level.

b. changes in the general price level from inflation to deflation, or vice versa.

c. changes in the full employment level.

d. changes in the value of the dollar.

7.Demand-pull inflation is usually associated with a growing economy.

a.True

b.False

8.Nominal GDP measures output in terms of current prices. Therefore, part of an increase in nominal GDP can be attributed to inflation.

a. True.

b. False.

9.The price of labor is the wage rate. What happens to the quantity of labor demanded if wages increase?

a. It increases.

b. It decreases.

c. It does not change.

d. Uncertain. Economic theory has no answer to this question.

10.Which of the following statements is correct?

a. Because higher quality goods cost more, the CPI adjusts for quality changes when it takes into account the higher prices of goods.

b. Because we consume less energy as goods become more energy efficient, the CPI accounts for improved energy efficiency by counting energy use less.

c. The CPI compares spending in different years. Because spending depends on the goods consumed, the CPI accounts for changing consumption patterns.

d. None of the above.

11.

Which of the following is NOT a likely outcome of unemployment insurance?

a. a reduction in the financial suffering of unemployed workers.

b. an increase in overall unemployment

c. a reduction in frictional unemployment

d. an increase in the average amount of time workers spend between jobs

12.point outside a production possibilities curve indicates

a. that resources are not being used efficiently.

b. an output combination that society cannot attain given its current level of resources and technology.

c. that resources are being used very efficiently.

d. that both goods are characterized by increasing costs.