MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

_____1) The analysis of the behavior of individual decision-making units is the definition of A) microeconomics. B) macroeconomics. C) positive economics. D) normative economics.

_____2) As an economic concept, scarcity applies to A) neither time nor money. B) both money and time. C) time but not money. D) money but not time.

_____ 3) Which of the following is a macroeconomic topic? A) why plumbers earn more than janitors B) the reasons for the rise in average prices C) whether the army should buy more tanks or more rockets D) the reasons for a rise in the price of orange juice

_____4) Which of the following is a microeconomic topic? A) the reasons for a decline in average prices B) the reasons why Kathy buys less orange juice C) the cause of why total employment may decrease D) the effect of the government budget deficit on inflation

_______ 5) Ceteris paribus is the Latin expression for A) a statement about the way the economic world ought to be. B) an expression that means "other things being equal." C) the (false) statement that what is true of the parts is true of the whole or what is true of the whole is true of the parts. D) the error of reasoning that a first event causes

_______6) Domestic income A) is the sum total of factor incomes generated within the domestic territory of a country. B) is generated by the normal residents as well as non- residents within the domestic territory of a nation. C) is equal to national income when net factor income from abroad is zero D) All of these

______7. Which of the following is not included in inventory investment? A) Stock of finished goods B) Stock of semi-finished goods C) Consumer goods sold to the households during the Accounting year D) Stock of raw materials

_____ 8. Cars, TVs, computers belong in which part of the GDP formula? GDP = C+I+G+(X-M) A) Consumption Expenditures B) Investment Expenditures C) Government Expenditures

______9. GDP is calculated by? A) Adding up the cost of goods used in producing the item B) Subtracting all costs from total revenue C) Adding consumption + investment +government spending+ (exports sold - imports bought)

_____10. The trade in exotic animals being illegally sold as pets is a multi-billion-dollar-a-year industry. Is this included in GDP? A) Yes - Government Spending B) No - Underground Economy C) Yes - Consumer spending

_____11. Following is an example of leakage from the circular flow of income : (a) Investment (b) Exports (c) Taxes (d) Consumption expenditure.

_____12. Following is an example of injection into the circular flow of income : (a) Saving (b) Taxes (c) Imports (d) Government expenditure

______13. Which of the following is included in the circular flow of income? (a) Real flow (b) Money flow (c) Both (a) and (b) (d) None of these

_______14. Explain the arrow (black box)

A) Households save part of their income (deposit it banks) B) Firms borrow money from the bank to expand (investment) C) Households pay tax to the Government D) Government spends money on public works

. ______ 15. A person stocks shelves at a grocery store and receives a wage. They have completed an exchange in which part of the circular flow model? A) Individuals B) Business C) Factor Market D) Product Market

______ 16. Suppose a family's consumption exceeds its disposable income. This means that its: A) MPS is negative. B) MPC is greater than 1. C) APC is greater than 1. D) APS is positive.

_______ 17. Dissaving means: A) that households are spending more than their current incomes. B) the same thing as disinvesting. C) that saving and investment are equal. D) that disposable income is less than zero.

_______ 18. Which one of the following will cause a movement up along an economy's saving schedule? A) An increase in interest rates. B) An increase in household borrowing. C) An increase in disposable income. D) An increase in stock prices.

_______ 19. In the circular flow diagram firms pay wages for which factor of production? A) Land B) Labor C) Entrepreneurship D) Raw materials

_______ 20. Money exchanged between businesses and individuals for labor. A. wages B. revenue C. spending D. profit

_______ 21. To be an importer of a product the country must have its domestic price of the product be _____ the foreign price a. higher than b. lower than c. equal to _______ 22. To be an exporter of a product the country must have its domestic price of the product be _____ the foreign price a. higher than b. lower than c. equal to

_______ 23. Which of the following will help a country become an exporter of a product (assume that the product is a normal good given the median consumer income)? a. An increase in incomes of domestic consumers b. A recession abroad c. An increased productivity of domestic labor d. An increased cost of domestic labor

_______ 24.In 2010 Russia was affected by a significant draught. Russia is a major producer and exporter of several agricultural commodities. As a result of the draught, Russia reduced some of its agricultural exports. In the context of the world supply/demand model for the affected agricultural commodities we should observe: a. Reduced demand and reduced supply b. Reduced supply and unchanged demand c. Reduced supply and increased demand d. Increased supply and unchanged demand e. Increased supply and reduced demand

_______ 25. In November of 2010 the US Central Bank, the Federal Reserve, embarked on a policy of quantitative easing. Since this policy essentially represents an increase in the supply of money, it may create inflationary expectations. Let's assume (and this is a strong assumption), that as a result of this policy, US households start to expect inflation (price increases) in the housing market. The effect on the housing market will be: a. A rise in the demand, causing prices to increase b. A rise in the supply, causing prices to decrease c. A decline in the demand, causing prices to decrease d. None of the above #