QUESTION 1

1. Economics is best defined as the study of
2. A.the role of government policy in satisfying basic human wants.
3. B.the allocation of scarce resources among their alternative uses.
4. C.the classification of resources used to produce final goods and services.
5. D.how technology can be used to change scarce resources into abundant resources.

QUESTION 2

1. The opportunity cost of attending a football game is:
2. A.the price of the ticket required to attend the game.
3. B.the subjective value of the hardship that may result if your favorite team loses.
4. C.the sum of the values of everything you could have done if you had not attended the game.
5. D.the highest valued alternative that is lost because of the time and money required to attend the game.

QUESTION 3

1. The production possibility frontier illustrates the basic principle that:
2. A.there is no limit to the production of any one good.
3. B.an economy's capacity to produce increases only if there is an increase in the amount of its resources.
4. C.if all the resources of an economy are in use, more of one good can be produced only if less of another is produced.
5. D.an economy will automatically seek that level of output at which all of its resources are fully and efficiently employed.

QUESTION 4

1. "Currently unemployment is decreasing, GDP is increasing, and we are experiencing economic growth." Does the quotation use the term economic growth correctly?
2. A.yes, because any increase in GDP is a sign of economic growth.
3. B.yes, because economic growth cannot happen unless unemployment decreases.
4. C.no, because if unemployment is decreasing the productive capacity of the economy must also decrease and therefore economic growth cannot take place.
5. D.no, because if unemployment is decreasing increases in the GDP is due to utilizing idle resources rather than increase in productive capacity of the economy.

QUESTION 5

1. Question no. 5 is based on the following table of combinations of missiles and cornonthe production possibilities frontier for a hypothetical economy:
2. NumberofBillionsof
3. Point on PPFMissiles/yearBushels of Corn/year
4. A10,0000
5. B8,0004.0
6. C5,0008.0
7. D2,00010.0
8. E011.0
9. A total annual output of 5,000 missiles and 6.0 billion bushels of corn for the economy in the above table:
10. A.is impossible given the amount of scarce resources.
11. B.involves efficient use of the society's scarce resources.
12. C.involves an inefficient use of the society's scarce resources.
13. D.is possible only if this society experiences economic growth.

QUESTION 6

1. Suppose that last year (the year 2019) you bought a 2015 car from a car dealer for $10,000, and immediately realized that its transmission must be replaced and spent another $1,000 to install a new transmission on your car. You can say that as the result of your purchase and repair of the car the GDP for the year 2019:
2. A.increased by $1,000.
3. B.increased by $10,000.
4. C.increased by $11,000.
5. D.did not increase at all because the car was not produced in the year 2019.

QUESTION 7

1. People in the country of Easyland have been able to increase the production of all goods and services with the same amount of resources, capital, and state of technology as before. This indicates that initially their allocation of resources was:
2. A.efficient and they have been able to move from a point on their PPF to a point beyond it.
3. B.inefficient and they have been able to move from a point on their PPF to a point beyond it.
4. C.efficient and they have been able to move from a point inside of their PPF to a point on their PPF.
5. D.inefficient and they have been able to move from a point inside of their PPF to a point on their PPF.

QUESTION 8

1. Which of the following will be included in the calculation of US Gross Domestic Product?
2. A.stocks of John Deer company purchased by your father.
3. B.cotton fabric purchased by Wrangler company for production of jeans.
4. C.new textbooks you purchased for your courses during the current semester.
5. D.unemployment benefit payments received by workers who have lost their jobs.

QUESTION 9

1. If a firm buys $1,000,000 worth of raw materials, and after processing it sells its output for $2,000,000, the contribution of this firm to Gross Domestic Product is:
2. A.$1,000,000
3. B.$2,000,000
4. C.$3,000,000
5. D.cannot be determined with the given information.

QUESTION 10

1. An American worker employed by an insurance company is reassigned to one of the company's offices overseas with the same salary he was paid in the U.S.. We can say that because of this worker's move overseas:
2. A.both US GDP and US GNP increase.
3. B.both US GDP and US GNP decrease.
4. C.US GNP decrease and US GDP remains constant.
5. D.US GDP decrease and US GNP remains constant.

QUESTION 11

1. The nominal GDP for 2009 was $14,418 billion and for 2014 it was $17,419 billion. The GDP chain price index for 2009 was 100.00 and for 2014 it was 108.29. On the basis of this Information we can say that:
2. A.the real GDP for 2009 and 2014 were equal.
3. B.the real GDP for 2009 was greater than the real GDP for 2014.
4. C.the real GDP for 2014 was greater than the real GDP for 2009.
5. D.it is impossible to determine the real GDP for 2009 and 2014 with the information given.

QUESTION 12

1. Which of the following is a good reason to believe that the official GDP figures are an overestimation of the true value of the total output produced in the country:
2. A.measurement of government output
3. B.non-market transactions
4. C.illegal transactions
5. D.none of the above

QUESTION 13

1. Which of the following statements about nominal GDP and the real GDP is true?
2. A.nominal GDP is affected by changes in prices and the quantity of output, but real GDP is affected only by changes in the quantity of output.
3. B.nominal GDP is affected only by changes in the quantity of output, but real GDP is affected by changes in prices and the quantity of output.
4. C.nominal GDP is affected only by changes in prices, but real GDP is affected only by changes in the quantity of output.
5. D.nominal GDP is affected only by changes in the quantity of output, but real GDP is affected only by changes in prices.

QUESTION 14

1. From the official statistical point of view which of the following individuals would be considered unemployed:
2. A.a retired government employee.
3. B.an auto worker who has been laid off due to slow sales.
4. C.a student taking a full load of courses at Morton College.
5. D.a cancer patient who is recovering in a hospital after a surgery.

QUESTION 15

1. Suppose that in a hypothetical economy total population is 300 million. Of these 135 million are employed, 15 million are unemployed, another 50 million are in the armed forces, and the civilian labor force is 150 million. On the basis of this information we can say that the unemployment rate in this economy is:
2. A.10 %
3. B.8.11 %
4. C.7.5 %
5. D.5 %

QUESTION 16

1. Cyclical unemployment is the kind of unemployment which is due to:
2. A.general downturn in business activity and economic recession.
3. B.the fact that workers' skills do not match with the jobs' requirements.
4. C.normal functioning of the economy and the movement of workers between jobs.
5. D.seasonal activities such as agriculture and construction and hence occurs during all years.

QUESTION 17

1. Structural unemployment is the kind of unemployment which is due to:
2. A.general downturn in business activity and economic recession.
3. B.the fact that workers' skills do not match with the jobs' requirements.
4. C.normal functioning of the economy and the movement of workers between jobs.
5. D.seasonal activities such as agriculture and construction and hence occurs during all years.

QUESTION 18

1. The official unemployment rate gives an underestimation of the true rate of unemployment because of which of the following groups:
2. A.underemployed workers
3. B.discouraged workers.
4. C.part-time workers.
5. D.all of the above.

QUESTION 19

1. The full-employment output, or potential real GDP, is:
2. A.the maximum output that the economy can produce.
3. B.the rate of output that the economy can produce when operating in the absence of seasonal unemployment.
4. C.the rate of output that the economy can produce when operating in the absence of cyclical unemployment.
5. D.the rate of output that the economy can produce when operating in the absence of structural unemployment.

QUESTION 20

1. The GDP gap:
2. A.increases during a period of economic recovery.
3. B.increases during a period of economic recession.
4. C.is at its maximum during the peak phase of the business cycle.
5. D.is at its minimum during the trough phase of the business cycle.