QUESTION 1

Suppose that the U.S. can make 15 cars or 20 bottles of wine with one year's worth of labor. France can make 10 cars or 18 bottles of wine with one year's worth of labor. From these numbers, we can conclude

1. a.the U.S. has a comparative advantage in the production of cars.
2. b.France has a comparative advantage in the production of wine.
3. c.the U.S. has a absolute advantage in the production of wine.
4. d.all of the above are conclusions are correct.

1 points (Extra Credit)

QUESTION 2

A price index can fall from one year to the next:

1. a.even when nominal GDP falls.
2. b.even when real GDP falls.
3. c.even when some individual good's prices rise.
4. d.in any of the above circumstances.

1 points

QUESTION 3

Which of the following helps explain how the multiplier and crowding-out effect impact the size of the shift in aggregate demand from a tax change.

1. a.Tax cuts stimulate consumer spending, earnings and profits rise, which further stimulates consumer spendingthe multiplier effect.
2. b.The higher income leads to an increase in the demand for money, which tends to lead to higher interest rates.
3. c.The higher interest rates make borrowing more costly and reduce investment spendingthe crowding-out effect.
4. d.All of the above

1 points

QUESTION 4

Typically, the budget deficit is financed by:

1. a.printing money.
2. b.issuing debt.
3. c.raising taxes.
4. d.both a. and c.

1 points

QUESTION 5

In an open economy, as the price level increases, a(n) ____ in demand in the quantity of domestic goods results in a(n) ____ in the quantity of RGDP demanded.

1. a.decrease, decrease
2. b.increase, increase
3. c.decrease, increase
4. d.increase, decrease

1 points

QUESTION 6

If a bank receiving a new deposit of $200,000 would be able, as a result, to increase their lending by at most $120,000, then the required reserve ratio equals:

1. a.4%.
2. b.25%.
3. c.40%.
4. d.50%.

1 points

QUESTION 7

Health insurance is subject to

1. a.moral hazard problems but not asymmetric information problems
2. b.Asymmetric information problems but not moral hazard problems
3. c.Both asymmetric information problems and moral hazard problems
4. d.Neither asymmetric information problems nor moral hazard problems

1 points (Extra Credit)

QUESTION 8

Decisions regarding purchases and sales of securities by the Fed are made by:

1. a.FDIC.
2. b.Discount Committee.
3. c.Federal Open Market Committee.
4. d.Federal Funds Committee.

1 points

QUESTION 9

What is the measure of the income received by owners of resources used in making final goods and services?

1. a.indirect earnings
2. b.product payments
3. c.direct earnings
4. d.factor payments

1 points

QUESTION 10

At an equilibrium price:

1. a.quantity demanded exceeds quantity supplied.
2. b.quantity demanded is less than quantity supplied.
3. c.quantity demanded equals quantity supplied.
4. d.there is no scarcity.

1 points

QUESTION 11

If banks faced a 100 percent reserve requirement, a $10,000 reduction in banking reserves would decrease the money supply by:

1. a.$1,000.
2. b.$100,000.
3. c.$1,000,000.
4. d.$10,000.

1 points

QUESTION 12

Fixed investment includes all of the following except:

1. a.all spending on capital goods.
2. b.all purchases by businesses that add to their inventories.
3. c.all spending on goods that increase future production capabilities.
4. d.all spending on producer goods.

1 points

QUESTION 13

Which of the following is correct?

1. a.A decrease in the productivity of labor leads to economic growth.
2. b.Japan and Hong Kong are rich in natural resources.
3. c.An increase in the quantity of labor always leads to economic growth.
4. d.Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.

1 points

QUESTION 14

A system of transferable pollution rights:

1. a.is not as cost-effective in reducing pollution as a system based on compliance standards.
2. b.is characterized by none of the above.
3. c.increases the quantity of pollution generated.
4. d.provides firms with an incentive to develop new pollution-abatement technologies.

1 points (Extra Credit)

QUESTION 15

Aggregate demand includes:

1. a.the demand for investment, including stocks, bonds, and gold.
2. b.the demand for final goods and services.
3. c.the demand for intermediate goods and final goods.
4. d.all monetary and nonmonetary transactions.

1 points

QUESTION 16

Which of the following is not true when there is an inflationary gap?

1. a.Real output exceeds the natural level of real output.
2. b.Employment exceeds full employment.
3. c.Unemployment exceeds the natural rate of unemployment.
4. d.All of the abovearenot true when there is an inflationary gap.

1 points

QUESTION 17

Assume that the reserve requirement is 20 percent. First National Bank has vault cash and deposits with the Fed of $80 million, loans and securities of $320 million, and demand deposits of $400 million. First National:

1. a.is not in a position to extend additional loans.
2. b.could extend a maximum of $10 million of additional loans.
3. c.could extend a maximum of $20 million of additional loans.
4. d.could extend a maximum of $40 million of additional loans.

1 points

QUESTION 18

The purchase of a new scanner by a computer graphics business is included in which expenditure category of GDP?

1. a.net exports
2. b.government purchases
3. c.investment
4. d.consumption

1 points

QUESTION 19

Which of the following is not a major trading partner of the U.S.?

1. a.Canada
2. b.Russia
3. c.Mexico
4. d.China

1 points

QUESTION 21

If the overall unemployment rate is 8 percent, it is likely that:

1. a.It is greater than 8 percent for teenagers.
2. b.It is less than 8 percent for college=educated middle-aged men.
3. c.It is more than 8 percent for those without a high school diploma.
4. d.All of the above are true.

1 points

QUESTION 22

A major difference between a tariff and a quota is that a tariff

1. a.typically generates tax revenue while a quota does not.
2. b.can easily be rescinded but a quota cannot.
3. c.will reduce imports but a quota generally will not.
4. d.will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods, but a quota will not affect the demand of foreigners for the nation's exports.

1 points

QUESTION 23

Which of the following factors that affect our well-being does GDP fail to adequately account for?

1. a.changes in the quality of goods
2. b.externalities
3. c.leisure
4. d.all of the above

1 points

QUESTION 24

Discouraged workers are defined as those:

1. a.who are counted as structurally unemployed, lacking training for the skilled positions for which they are applying.
2. b.who have given up looking for a job and are not counted as unemployed.
3. c.whose productivity is low because working in dead-end jobs reduces their morale.
4. d.who are counted as frictionally unemployed, having become dissatisfied with their previous jobs.

1 points

QUESTION 25

According to the interest rate effect, as the price level decreases, households and firms' holdings of money ____, interest rates ____, investments ____, and the quantity RGDP demanded ____.

1. a.increases, increase, decrease, decreases
2. b.increases, increase, increase, decreases
3. c.increases, decrease, increase, decreases
4. d.decreases, decrease, increase, increases

1 points

QUESTION 26

A reserve requirement of 40 percent would mean that each dollar of reserves could support ____ of demand deposits.

1. a.$0.40
2. b.$2.50
3. c.$4.00
4. d.$1.60

1 points

QUESTION 27

In Bangladesh one person can produce 330 pounds of rice or 110 shirts in one year. In Singapore one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true?

1. a.Singapore has a comparative advantage in the production of rice.
2. b.Singapore has both an absolute and comparative advantage in the production of rice.
3. c.Bangladesh has an absolute advantage in the production of rice.
4. d.Bangladesh has a comparative advantage in the production of rice.

1 points (Extra Credit)

QUESTION 28

If the government sought to end a recession, which of the following would be an appropriate policy?

1. a.Increase taxes.
2. b.Decrease government purchases.
3. c.Decrease taxes and increase government purchases.
4. d.None of the above

1 points

QUESTION 30

Which of the following guarantees the deposits in almost all banks up to a limit of $250,000?

1. a.the FDIC
2. b.Bank of America Corporation
3. c.the Federal Reserve
4. d.the U.S. Treasury

1 points

QUESTION 32

Which of the following willnotcause consumption, and as a result, aggregate demand, to increase?

1. a.an increase in consumer confidence
2. b.an optimistic business forecast of future income growth
3. c.a tax increase
4. d.a tax cut

1 points

QUESTION 33

Which of the following would increase prices for U.S. consumers?

1. a.a tariff on imported automobiles
2. b.an automobile import quota
3. c.a foreign government subsidizing auto production
4. d.(a) and (b) above only

1 points

QUESTION 34

Unemployment rises in ____, and falls in ____.

1. a.expansions; contractions
2. b.peaks; troughs
3. c.contractions; expansions
4. d.booms; recessions

1 points

QUESTION 35

If a minimum wage law is passed imposing a price floor above the equilibrium price of unskilled labor:

1. a.the quantity of unskilled labor supplied will equal the quantity of unskilled labor demanded.
2. b.the demand for unskilled labor will decrease.
3. c.the quantity of unskilled labor demanded will exceed the quantity of unskilled labor supplied.
4. d.the quantity of unskilled labor supplied will exceed the quantity of unskilled labor demanded.

1 points (Extra Credit)

QUESTION 36

The larger the MPC:

1. a.the larger the effect of business taxes which reduce investment on aggregate demand.
2. b.the less powerful changes in individual taxes will be in changing aggregate demand.
3. c.the smaller the multiplier.
4. d.the smaller the effect of a given increase in government purchases on consumption purchases.

1 points

QUESTION 37

If pollution is reduced below the socially efficient level:

1. a.the marginal cost of pollution abatement is less than the marginal benefit of pollution abatement.
2. b.nothing can be said about the relationship between the marginal cost and marginal benefit of pollution abatement.
3. c.the marginal cost of pollution abatement exceeds the marginal benefit of pollution abatement.
4. d.the marginal cost of pollution abatement equals the marginal benefit of pollution abatement.

1 points

QUESTION 38

In the simplest Keynesian expenditure model, which of the following is fixed to allow for easy evaluation of changes in demand due to real income?

1. a.future expectations
2. b.the price level
3. c.tastes and preferences
4. d.interest rates

1 points

QUESTION 39

If an economy is operating inside its production possibilities curve for tanks and bread:

1. a.production of bread and tanks can both increase.
2. b.production of bread can only increase by sacrificing the production of tanks.
3. c.all resources are being used efficiently.
4. d.scarcity does not exist.

1 points

QUESTION 40

The time span between the beginning of a downturn and the time by which hard data to indicate a downturn is made available is called:

1. a.the implementation lag.
2. b.the recognition lag.
3. c.the signal lag.
4. d.the impact lag.

1 points

QUESTION 41

Ceteris paribus, expanding loans made by the commercial banking system:

1. a.would help to stabilize an economy experiencing rapid inflation.
2. b.changes the composition, but not the magnitude, of the money supply.
3. c.decreases the money supply.
4. d.increases the money supply.

1 points

QUESTION 42

Which of the following would constitute contractionary monetary policy by the Fed?

1. a.An increase in income tax rates, a cut in government spending, and an elimination of the investment tax credit
2. b.Open market sales of government securities, an increase in the discount rate, and an increase in reserve requirements
3. c.An increase in tariffs on imported goods and a decrease in foreign aid
4. d.Open market purchases of government securities, a cut in the discount rate, and an increase in reserve requirements

1 points

QUESTION 43

Which of the following would shift a supply curve to the right?

1. a.Taxes
2. b.Subsidies
3. c.Import duties
4. d.Import restrictions

1 points

QUESTION 44

The concavity (bowed-out shape) of the production possibilities curve is the result of:

1. a.the law of supply.
2. b.the law of demand.
3. c.the law of increasing opportunity cost.
4. d.complementarily in consumption.

1 points

QUESTION 45

Which of the following would not cause a change in the demand for cheese?

1. a.an increase in the price of crackers, which are consumed with cheese
2. b.an increase in the price of cheese
3. c.an increase in the income of cheese consumers
4. d.an increase in the population of cheese lovers

1 points

QUESTION 46

With the invention of banking, one important aspect of money was that:

1. a.individuals have no discretion over the money supply.
2. b.banks have some discretion over the money supply.
3. c.government lost all control over the money supply.
4. d.banks have full control over the money supply.

1 points

QUESTION 47

Expansionary fiscal policy, other things being equal, will tend to:

1. a.increase interest rates.
2. b.increase investment.
3. c.increase net exports.
4. d.all of the above

1 points

QUESTION 48

If a positive externality results from the consumption of higher education, then the marginal benefit students receive from education:

1. a.exceeds the marginal social benefit.
2. b.is less than the marginal social benefit.
3. c.equals the marginal social benefit.
4. d.includes the marginal external benefit.

1 points

QUESTION 49

Which of the following are true?

1. a.Negative externalities are real costs, but, unlike the other resources a firm uses in production, no one owns the air, so a firm does not have to pay for its use.
2. b.In the case of external costs, firms tend to produce too much from society's standpoint, causing an efficiency loss due to an overallocation of scarce resources to the production of the good.
3. c.If government could impose a pollution tax equal to the exact size of the external costs imposed by a firm, then the firm would produce at the socially desired level of output.
4. d.All of the above are true.

1 points

QUESTION 50

Which of the following is an example of a pure market economy?

1. a.United States
2. b.Switzerland
3. c.Singapore
4. d.No nation has a pure market economy