Question 1 If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are: a. unrelated goods. b. superior goods. c. inferior goods. d. substitute goods. Question 2 A decrease in the demand facing a monopoly firm would _______ quantity and _______ price. The demand is inelastic. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease Question 3 Economic growth can be represented by: a. an increasing equilibrium output level b. a rightward shift of an economy's short-run aggregate supply curve. c. a rightward shift of an economy's long-run aggregate demand curve. d. a rightward shift of an economy's long-run aggregate supply curve. Question 4 A firm's total output times the price at which it sells that output is: a. net revenue. b. total revenue. c. average revenue. d. marginal revenue. Question 5 Suppose a bank has $10,000 in deposits and $1,000 in reserves. The required reserve ratio is 5%. Which of the following occurs if the required reserve ratio is increased to 10%? a. The bank's required reserves will decrease to $500. b. The bank's excess reserves will increase to $1,000. c. The bank's required reserves will increase to $1,000. d. The bank's ability to create loans increases by 5%. Question 6 In this exhibit (Consumer Equilibrium 3), assume that you are consuming the combination of goods at point K. Given budget constraint FL, utility can be increased by moving to point: a. F. b. G. c. H. d. I. Question 7 If the federal budget is initially balanced and government expenditures remain constant, then an increase in GDP will _________ tax revenues and cause a budget _________. a. increase; surplus b. increase; deficit c. decrease; surplus d. decrease; deficit Question 8 In 1984, the Department of Justice reached an agreement with AT&T that: a. allowed AT&T to continue to provide local telecommunications service to established customers but prevented it from accepting any new customers. b. allowed the so-called Baby Bells to provide long-distance service to their local customers. c. separated AT&T from the regional Bell operating companies. d. led to significant degrees of competition and the reduction of monopoly power in local markets with most of the change coming within 10 years after the agreement. Question 9 An important determinant of the price elasticity of demand is the: a. time period. b. price of related goods. c. level of technology. d. quantity of the good supplied. Question 10 For a factor of production to be called capital it must: a. be produced. b. occur in the natural environment. c. be a part of human skill. d. be a result of a stock issue. Question 11 The congressional act that established the U.S. central banking system in 1913 was the: a. Federal Reserve Act. b. Gramm-Rudman Act. c. Employment Act. d. Humphrey-Hawkins Act. Question 12 The second of the three ranges of production is characterized by _______ marginal returns. a. increasing b. constant c. diminishing d. negative Question 13 Profit computed using explicit costs as the only measure of costs is: a. explicit profit. b. accounting profit. c. implicit profit. d. economic profit. Question 14 The branch of economics that examines the impact of choices on aggregates in the economy is: a. positive economics. b. normative economics. c. macroeconomics. d. microeconomics. Question 15 Generational accounting: a. is a method of assessing the impact of fiscal policy lags from one generation to another. b. measures the number of generations it takes to pay off the national debt at a given point in time. c. evaluates the impact of current fiscal policies on different generations in the economy, including future generations. d. is an accounting method that defers to the future, the cost of any government policy the rewards of which will be reaped in the future. Question 16 Which of the following statements is true about velocity? a. In the short run, velocity varies but in the long run, velocity is relatively constant. b. In the short run, velocity is relatively constant but in the long run, velocity varies. c. Velocity is relatively constant in the short run and in the long run. d. Velocity fluctuates with fluctuations in economic activity and changes in the growth rate of money supply.

Exhibit: Table 6-4 Item $ billions Gross Domestic Product 1,000 Earnings received by residents from foreign producers 200 Payments by domestic producers to foreign owners of factors of production 100Exhibit: Figure 7-4 Price level I RAS BRAS C P2 A D P 1 AD Y1 Y2 Real GDP per yearExhibit: Monopoly Through Collusion Price, marginal revenue, marginal cost A P3 A P2 C MC P1 MR D = MR. D2 O Quantity per periodExhibit: Simultaneous Shifts in Demand and Supply Price per unit 52 D1 Quantity per periodExhibit: Figure 12-2 Price LRAS level SRAS, K K AD Y P Real GDP per year\fExhibit: The Supply of Videotape Rentals Price (a) Price (b) S S' CO 0 0 Quantity per period Quantity per period Price (C) Price S S Quantity per period 0 Quantity per period