Question 3(Multiple Choice Worth 3 points)

If consumer confidence decreases then aggregate demand will

increase and output and price level will increase as well.

decrease and output and price level will decrease as well.

increase and output will increase but price level will decrease.

increase and output will decrease but price level will increase.

decrease and output will decrease but price level will increase.

Question 4(Multiple Choice Worth 3 points)

Which of the following scenarios will cause a leftward shift of aggregate demand?

Profit expectations soar.

Consumer debt increases.

Disposable personal income increases.

Interest rates decrease.

Exports increase.

Question 5(Multiple Choice Worth 3 points)

Suppose the wages of the cafeteria workers on campus increase by 10% forcing the price of meals to increase at the same time your scholarship income doubles. (Cafeteria meals are an inferior good.) How will these changes impact the quantity and price levels in the cafeteria food market?

Quantity / Price

Increase / Indeterminate

Increase / Decrease

Decrease / Indeterminate

Decrease / Increase

Indeterminate / Decrease

Question 6(Multiple Choice Worth 3 points)

A production possibilities curve that is concave from the origin shows that

supply increases when demand increases.

demand for both goods changes as you increase demand for one good.

as you increase demand for one good, you must give up demand for the other good.

as you increase production of one good, you must give up increasing units of the other good.

as you increase demand for one good, you must give up supply of the other good.

Question 7(Multiple Choice Worth 3 points)

Katie Dough is a successful dentist and a wonderful pastry chef. She earns $800 a day on average in her dental practice. Her friends often cajole her into preparing mouth-watering pastries for their weekend card parties rather than using the catering service that charges the group $100 to prepare the pastries. If she makes the pastries, she must find time in her busy day to do so instead of practicing dentistry. Should Katie agree to make pastries for her friends?

No, because the opportunity cost of dentistry is higher than the opportunity cost of creating pastries.

Yes, because Katie has a comparative advantage in creating pastries.

No, because Katie can do both equally well and has an absolute advantage in both.

Yes, because she enjoys making the pastries for her friends.

Yes, because the opportunity cost of dentistry is higher than the opportunity cost of creating pastries.

Question 8(Multiple Choice Worth 3 points)

If real GDP grew at 3.5% last year and prices increased by 3% over the same time period then

the average consumer is better off.

the average consumer is worse off.

the average consumer is unaffected.

the average producer is unaffected.

the average producer is worse off.

Question 10(Multiple Choice Worth 3 points)

Christine is an unemployed stenographer who cannot find work in Florida. There are several companies hiring stenographers in New York. Christine is

structurally unemployed.

cyclically unemployed.

frictionally unemployed.

employed.

not unemployed.

Question 14(Multiple Choice Worth 3 points)

Economic growth is most often measured by

a change in real GDP.

the stock market.

the standard of living in the nation.

the real GDP per capita.

the size of the working population.

Question 15(Multiple Choice Worth 3 points)

Which of the following would economists identify as the strongest source of long term economic growth in an economy?

Higher investment tax credits

Higher consumer spending

Fewer capital stock purchases

A tariff on foreign imports

Higher government spending

Question 16(Multiple Choice Worth 3 points)

Pineland and Vineland are two nations located in the same region. Pineland's real GDP is now growing at a rate of 7% due to aggressive government policies while Vineland's real GDP is slowly increasing at a rate of 2%. How quickly will it take for Pineland's real GDP to double if growth continues at this rate?

7 years

10 years

14 years

35 years

70 years

Question 17(Multiple Choice Worth 3 points)

Which of the following would cause a rightward shift of LRAS, ceteris paribus?

An increase in government spending

A decrease in government spending

A decrease in personal income taxes

An increase in business taxes

A decrease in business taxes

Question 18(Multiple Choice Worth 3 points)

An increase in technology would mean

real capital is less productive with the same amounts of resources.

financial capital is more productive with the same amounts of resources.

financial capital is less productive with the same amounts of resources.

human capital is less productive with the same amount of resources.

human capital is more productive with the same amounts of resources.

Question 19(Multiple Choice Worth 3 points)

All of the following would cause a shift in the aggregate supply curveexcept

a change in the price level.

an increase in the real wages of workers.

a decrease in productivity.

the emergence of a new production technology.

a tax on all manufactured goods.

Question 20(Multiple Choice Worth 3 points)

When consumer spending increases in the vertical range of SRAS, then the price level will

increase and output will decrease.

decrease and output will increase.

increase and output will increase.

decrease and output will decrease.

increase and output will change very little.

Question 21(Multiple Choice Worth 3 points)

In the long-run, aggregate supply

is down sloping at all production levels.

is up sloping at all production levels.

is vertical at full employment output.

is horizontal, then vertical, then up sloping.

is horizontal, then upsloping, then vertical.

Question 23(Multiple Choice Worth 3 points)

In order to counter the current recession, Congress increases welfare and unemployment transfers. What is the short-run impact of the government's actions on price level and output?

Price Level / Output

Increase / Increase

Increase / Decrease

Decrease / Decrease

Decrease / Increase

No change / Increase

Question 24(Multiple Choice Worth 3 points)

If an economy was operating below full employment,

the intersection of AD and SRAS would be to the right of LRAS.

the intersection of AD and SRAS would be to the left of LRAS.

the intersection of AD and SRAS would be equal to LRAS.

Congress would use contractionary fiscal policy to shift LRAS into equilibrium.

Congress would use expansionary fiscal policy to shift LRAS into equilibrium.

Question 25(Multiple Choice Worth 3 points)

Which of the following illustrates the most correct cause and effect chain for a decrease in taxes?

C increases, shifting AD to the right, increasing output and price level

C increases, shifting AD to the right, increasing output and decreasing price level

DI increases, increasing C, increasing output and price level

DI increases, increasing C, shifting AD to the right, increasing output and price level

DI increases, increasing C, shifting AD to the right, increasing output and decreasing price level

Question 26(Multiple Choice Worth 3 points)

If real GDP is $150 billion, full employment GDP is $600 billion, and the marginal propensity to consume is 0.8, then Congress should

decrease taxes by $450 billion.

increase taxes by $112.5 billion.

decrease government purchases by $90 billion.

increase government purchases by $90 billion.

increase government purchases by $450 billion.

Question 30(Multiple Choice Worth 3 points)

A decrease in aggregate demand might be caused by

a decrease in taxes.

a decrease in productivity.

an increase in productivity.

a decrease in government purchases.

an increase in government purchases.

Question 31(Multiple Choice Worth 3 points)

If Congress cuts personal income taxes and business taxes at the same time, then aggregate demand, short-run aggregate supply, and price level will change in which of the following ways:

AD / SRAS / Price Level

Increase / No Change / Increase

No Change / Increase / Increase

Increase / Increase / Indeterminate

Increase / No Change / Indeterminate

No Change / Increase / Indeterminate