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Review #2

c. is unlikely to affect GDP.

Question 1

d. is likely to increase government transfer payments.

All of the following are sources of economic growth except:

Question 5

a. increases in human capital.

The largest component of factor income is:

b. an increase in the savings rate.

a. rental income.

c. an increase in consumption spending to stimulate production.

b. profits.

d. increases in physical capital.

c. employee compensation.

Question 2

d. consumption.

Which of the following is an example of an investment in human capital?

Question 6 Potential output is:

a. enrolling in a course to improve your computer skills b. purchasing a computer to increase the productivity of your workers c. installing a new piece of software on your computer which enables you to read documents online

Select one: a. the level of real GDP that exists when the economy is experiencing only cyclical and structural unemployment. b. the level of real GDP that exists when the quantity of labor supplied is equal

d. accepting a job in the computer industry

Question 3

to the quantity of labor demanded.

To practice effective price discrimination, a firm must:

c. the level of real GDP that exists when the actual rate of unemployment is zero.

Select one:

d. the level of real GDP that exists when the economy is experiencing only frictional and cyclical unemployment.

a. have some degree of monopoly power. b. avoid detection by government regulatory agencies. c. enable the resale of goods between groups of buyers.

Question 7 Money that some authority has declared legal tender is called:

d. calculate the utility level of each buyer in the market.

Select one:

Question 4

a. fiat money.

All else constant, an outbreak of avian flu:

b. currency.

Select one:

d. commodity money.

a. is likely to increase GDP because it drives up health-care spending.

Question 8

b. is likely to decrease GDP because output is likely to fall.

c. convertible paper money.

In a competitive market, when price is below the equilibrium price, there will be pressure for the price to:

a. normative

Select one: a. fall.

Select one:

b. stay the same.

b. ceteris paribus c. positive

d. fallacy of false cause

c. rise.

Question 11

d. change only if demand and/or supply change.

For a factor of production to be called capital it must:

Question 9

Select one: 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 12 Which of the following exemplifies the outlet bias in the computation of the CPI? Select one: a. Roxanna refuses to shop at factory outlet stores because she says that the layouts of the stores are too chaotic and therefore is too time-consuming. b. Yu-Jen does most of her family's shopping at Costco instead of Safeway

In this exhibit (Simultaneous Shifts in Demand and Supply), D1 and S1 are original supply and demand curves, and S 2 and D2 are new curves. In this market, the change in supply may have resulted from: Select one:

because the prices at Costco are more competitive. c. Katie prefers to buy her groceries at Whole Foods because they carry a wide selection oforganic produce.

a. wage increases for the workers.

d. Diana does her holiday shopping when she travels to China to take advantage of the "great deals" on most items.

b. an improvement in technology.

Question 13

c. a decrease in the number of sellers.

Which of the following will not lead to economic growth?

d. all of the above.

Select one:

Question 10

a. increased immigration

The current rate of unemployment of 5 percent is too high. This is a _______ statement.

b. restrictions on international trade

d. opening all federal lands to mining

Suppose that the price elasticity of demand for grapefruit is -2.8. The introduction of a new variety that is cheaper to grow should cause consumer expenditures for grapefruit to:

Question 14

Select one:

The branch of economics that examines the impact of choices on aggregates in the economy is:

a. rise.

Select one:

b. fall.

a. positive economics.

d. it is not possible to answer with the information given.

b. normative economics.

Question 18

c. introduction of faster computers

c. remain unchanged.

Changes in nominal GDP:

c. macroeconomics.

Select one:

d. microeconomics.

a. are due to changes in price only while changes in real GDP are attributed to movements in output and price.

Question 15 The incorrect presumption that because two events tend to occur together, one must cause the other is the:

b. are due to changes in output and price while changes in real GDP are

Select one:

attributed to movements in output only.

a. confusion of economists.

c. are due to changes in output and price while changes in real GDP are attributed to movements in price only.

b. blunder of science.

d. and changes in real GDP are due to changes in output and price.

c. fallacy of false cause.

Question 19

d. error of inclusion.

Which of the following is true regarding a budget constraint?

Question 16

Select one:

Assume an economy is operating on its production possibilities curve, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods:

a. The budget constraint indicates that consumers desire more income.

Select one:

possibilities for a consumer.

a. will increase too.

b. will not change.

c. must decrease. d. may increase or decrease.

Question 17

b. The budget constraint indicates that there are limits on the consumption

c. The budget constraint is based on some, but not all of the prices for goods that consumers may want to buy. d. All of the above statements describe the budget constraint.

Question 20 The economic way of thinking includes:

Select one:

c. level of technology.

a. attention paid to the opportunity costs involved in any choice.

d. quantity of the good supplied.

b. the assumption that individuals choose to average out some objective.

Question 24

c. concern with the biological make up of decision makers.

In the second of the three ranges of production:

d. emphasis on how choices affect total values rather than marginal values.

Select one:

Question 21

a. the total product curve has an increasing slope.

All other things unchanged, a tax on a product that leads to an increase in the cost of production would:

b. the marginal product curve has a negative slope.

Select one: a. lead to an increase in supply. b. lead to a decrease in demand. c. result in an increased price. d. lead to a decrease in supply.

Question 22

c. the marginal product curve intersects the total product curve. d. marginal product is negative.

Question 25 Using the aggregate demand-aggregate supply model, predict what happens in the short run when the federal government enacts a cut in the personal income tax rates. Select one:

All the following explain price stickiness except:

a. The aggregate supply curve shifts right; the aggregate demand curve is not affected; price level decreases; real GDP increases.

Select one:

b. The aggregate supply curve shifts left; the aggregate demand curve is not affected; price level increases; real GDP decreases.

a. firms choose not to adjust prices until they can assess if changes in sales are temporary or permanent.

c. The aggregate demand curve shifts right; the aggregate supply curve is not

b. the more firms produce, the lower the average cost of production. Therefore, affected; price level and real GDP increase. firms are willing not raise prices as long as they can sell more. c. firms may be concerned that consumers may be angered by price increases.

d. The aggregate demand curve shifts left; the aggregate supply curve is not affected; price level and real GDP decrease.

d. firms may be concerned that their rivals may not match their price increases.

Question 23 An important determinant of the price elasticity of demand is the:

Review #3

Question 1

Select one: a. time period. b. price of related goods.

Which of the following is the best measure for comparing the standard of living across countries?

Select one: a. productivity

b. gross national product

c. real gross national product d. real gross national product per person

Question 2 A firm's total output times the price at which it sells that output is:

d. The income effect shows how a change in income at a given price will affect the quantity of a good purchased.

Question 4 What is the relationship between average household income and standard of living? Select one: a. There is no relationship. Increasing average income says nothing about income distribution. b. Rising income enables households to acquire more of the goods and

Select one: services that improve their material standard of living. a. net revenue. c. Rising income tends to increase the crime rate and violence, thereby lowering a country's standard of living. b. total revenue. c. average revenue.

d. There is no relationship. Standard of living depends on productivity not household income.

d. marginal revenue.

Question 5

Question 3 The income effect of a price change is described by which of the following statements?

The value of a unit of money, such as the dollar, always varies: Select one:

Select one: a. directly with the price of gold. a. When the price of a good falls, consumers have an implicit increase in b. inversely with the price of gold. income and can now buy more of the good. c. inversely with the average price of gold and silver. b. When the price of a good falls, consumers will now substitute this lower priced good for more higher priced goods. c. The income effect is the relative change in the amount of a good consumed when the price of another good changes.

d. inversely with the average level of prices.

Question 6 Which of the following statements is true about velocity?

Select one:

c. makes credit available to financial institutions in crises.

a. In the short run, velocity varies but in the long run, velocity is relatively d. buys or sells previously issued government bonds. 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.

Question 7 The value of gross domestic product (GDP) differs from the value of gross national product (GNP) when: Select one: a. net exports are excluded from GDP but included in GNP. b. production in one country employs factors of production owned by residents

Question 9 Suppose a country has a national debt of $5,000 billion, a GDP of $20,000 billion, and a budget surplus of $130 billion. How much will its new national debt be? Select one: a. $5,130 billion

b. $4, 870 billion

c. $15,130 billion

d. $19, 870 billion

Question 10 Following an income-compensated price change, you decide to decrease the quantity of ice cream purchased each month when the price increases and purchase more frozen yogurt instead. This is an indication of the: Select one:

of other countries. a. substitution effect. c. production in one country employs only factors of production owned by its residents. d. when domestic firms that produce in factories abroad are exempt from paying domestic taxes.

Question 8 When the Federal Reserve conducts open market transactions, it: Select one: a. buys or sells corporate bonds in the bond market. b. issues government bonds to raise funds for the government.

b. utility effect. d. consumption effect.

Question 11

c. income effect.

Select one: a. total cost resulting from a 1-unit change in a variable input. b. total cost resulting from a 1-unit change in quantity. c. total cost resulting from a 1-unit change in average cost. d. average cost resulting from a 1-unit change in quantity.

Question 14 The short run is a period that is: Select one:

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: Select one: a. F.

a. less than one week.

b. less than one month.

c. long enough in which to vary output but not plant capacity. d. long enough in which to make all economic adjustments.

b. G.

c. H.

d. I.

Question 12 If an industry's long-run supply curve is upward sloping, the industry is characterized by:

Question 15 Profit computed using explicit costs as the only measure of costs is: Select one: a. explicit profit.

Select one: b. accounting profit. a. increasing cost. b. decreasing cost.

c. implicit profit. c. constant cost.

d. economic profit.

Question 16

Question 13

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%?

Marginal cost is the change in:

Select one:

d. high overhead cost.

a. The bank's required reserves will decrease to $500. b. The bank's excess reserves will increase to $1,000.

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 19

c. The bank's required reserves will increase to $1,000. d. The bank's ability to create loans increases by 5%.

Question 17 Freema withdraws $1,000 from her checking account to purchase a $1,000 time-deposit. As a result of her transaction: Select one:

This exhibit (Table 6-4), shows some output and income data for Manna Land. What is the value of Manna Land's net foreign income? Select one:

a. M1 and M2 decrease. a. –$100 billion

b. $1,100 billion

b. M1 decreases and M2 increases. c. $100 billion c. M1 decreases and M2 is unaffected. d. $200 billion d. M1 and M2 are unaffected.

Question 18

Question 20

Generational accounting:

The second of the three ranges of production is characterized by _______ marginal returns.

Select one:

Select one:

a. is a method of assessing the impact of fiscal policy lags from one generation to another.

a. increasing b. constant

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.

c. diminishing d. negative

Question 21 Which of the following reduces the duration of frictional unemployment?

Select one: a. retraining unemployed workers to equip them with new skills b. subsidizing firms that are willing to train new entrants in the labor market c. establishing employment agencies which give out information about job

d. charges a higher price than if perfectly competitive firms characterized the same industry.

Question 24 A decrease in the demand facing a monopoly firm would _______ quantity and _______ price. The demand is inelastic.

vacancies

Select one:

d. establishing labor unions which will protect workers from being laid off.

a. increase; increase

Question 22

b. increase; decrease

Economic growth can be represented by: Select one:

c. decrease; increase

a. an increasing equilibrium output level

d. decrease; decrease

b. a rightward shift of an economy's short-run aggregate supply curve.

Question 25

c. a rightward shift of an economy's long-run aggregate demand curve.

If your local government gives you the exclusive right to sell breakfast bagels in your community, your monopoly would result from: Select one:

d. a rightward shift of an economy's long-run aggregate supply curve.

Question 23 A feature of monopoly that leads to unfavorable consequences is that it:

a. sunk costs.

b. location.

c. economies of scale.

Select one: d. government restrictions. a. reduces income inequality. b. sets marginal cost equal to price. c. produces more output than if perfectly competitive firms characterized the same industry....