Question 1

Economics is the study of:

a. the allocation of scarce resources to satisfy peoples unlimited wants.

b. the methods that human decision makers use to transform a scarce good into a non-economic good.

c. how to operate a business successfully.

d. a utopian society.

Question 2

In economics, the concept of opportunity cost is:

a. negated by ensuring that the government has a role in a capitalist society.

b. defined to be the highest-valued alternative that must be forgone when a choice is made.

c. best illustrated by knowing why consumers choose one good over another.

d. quantifiable only if you know the real dollar price of the goods and services you are giving up to consume something.

Question 3

According to the law of demand, if the price of movie rentals decreases, ceteris paribus,:

a. the demand for movie rentals would increase.

b. the quantity demanded of movie rentals would decrease.

c. the quantity demanded of movie rentals would increase.

d. the demand for movie rentals would decrease.

Question 4

Which of the following institutions form the public sector in an economy?

a. Government

b. Consumption and government

c. Consumption, investment, and net exports

d. Consumption and investment only

Question 5

When the government's spending is less than tax revenue, it implies that:

a. the government budget is balanced.

b. the government is running a deficit.

c. there is a budget surplus.

d. there is a higher chance of default by the government.

Question 6

The official unemployment rate is:

a. the number of unemployed people divided by the number of employed people times 100.

b. the number of unemployed people divided by the total size of the population times 100.

c. the number of unemployed people divided by the size of the non-institutionalized population times 100.

d. the number of unemployed people divided by the size of the labor force times 100.

Question 7

_____ is the primary determinant of consumption and is usually measured in terms of current disposable income.

a. Income

b. Wealth

c. Expectation

d. Interest rate

Question 8

Which of the following accounts for the largest percentage of GDP in the United States using the expenditure approach?

a. Government

b. Investment

c. Consumption

d. Banks

Question 9

Which of the following government agencies oversees monetary policy in the U.S.?

a. The Federal Reserve System

b. Congress

c. The Treasury Department

d. The Federal Trade Commission

Question 10

A rise in the value of a currency in relation to another currency in the international market is called:

a. appreciation.

b. depreciation.

c. devaluation.

d. conservation.

Question 11

Which of the following could contribute to cost-push inflation?

a. Greater demand for exports

b. Higher cost of resources

c. An increase in consumption demand

d. Higher government spending

Question 12

When the government uses taxes and spending to change Gross Domestic Product or output, it is engaging in:

a. fiscal policy.

b. monetary policy.

c. interest rate policy.

d. trade policy.

Question 13

An increase in the reserve requirement from 20 percent to 25 percent is most likely to:

a. reduce total deposits in the banking system.

b. reduce excess reserves and the deposit expansion multiplier.

c. increase the money supply.

d. reduce the amount of reserves required.

Question 14

The buying and selling of government bonds by the FOMC constitutes:

a. an open market operation.

b. a federal funds adjustment.

c. a discount rate adjustment.

d. a change in the reserve requirement.

Question 15

In the 1970s, the price of oil was very high. This shock caused

a. a shift to the left of the AS curve

b. a change in the slope of the AD curve

c. no change in the AS curve

d. a shift to the right of the AS curve.

Question 16

How will a negative supply shock affect price levels and unemployment levels?

a. a negative supply shock will make both levels fall

b. a negative supply shock will not change either

c. a negative supply shock will decrease unemployment and increase prices

d. a negative supply shock will make both levels rise.

Question 17

A limitation of a countercyclical fiscal policy is that

a. it has a weaker impact than monetary policy

b. it has a shorter implementation lag than monetary policy

c. higher taxes and lower government spending can be difficult to make happen during economic

booms

d. politicians are too eager to increase taxes and reduce spending during recessions.

Question 18

A neoclassical policy to address unemployment is likely to

a. try to increase the natural rate of unemployment

b. offer larger or longer benefits for the unemployed

c. work to reduce obstacles that lengthen the period of frictional unemployment

d. encourage the Fed to increase interest rates.

Question 19

A weaker US $ typically

a. makes US exports cheaper to other countries

b. makes goods imported into the US cheaper to US consumers

c. hurts US exporters by making their goods more expensive to the rest of the world

d. increases US demand for iimports.

Question 20

A stronger Euro will hurt

a. German tourists traveling abroad

b. American tourists traveling in France

c. Canadian firms selling products in Germany

d. Brazilian firms selling products in Spain.