WorksheetsECN 151 Final S22
Total questions: 65
Worksheet time: 34mins
Jacob and Morgan go to a diner that sells burritos for $5 and tacos for $3. They agree to split the lunch bill evenly. Mason chooses a taco. The marginal cost of Jacob ordering a burrito instead of a taco is
$3
$2.50
$1
$2
Economic choice and competitive behavior are the result of
Private ownership of resources.
Poverty.
Basic human greed.
Scarcity.
With voluntary exchange,
The seller will be made better off, while the buyer will be made worse off.
Both the buyer and the seller will be made better off.
The buyer will be made better off, but the seller will be made worse off.
Both the buyer and the seller will be made worse off.
Other things constant, a decrease in the demand for hair dryers will
Increase the demand for hair dryer manufacturing workers.
Increase the quantity supplied of hair dryers.
Increase the price of hair dryers.
Decrease the demand for hair dryer manufacturing workers.
When a price floor is above the equilibrium price,
Quantity demanded will exceed quantity supplied, so there will be a shortage.
The market will be in equilibrium.
Quantity supplied will exceed quantity demanded, so there will be a surplus.
This is a trick question because price floors are generally set below the equilibrium price.
Which of the following would most likely increase the demand for peanut butter?
The discovery that excessive consumption of peanut butter is harmful to one’s health
Crop failures that raise the price of peanuts
The invention of a new product that consumers think is a good substitute for peanut butter
A decrease in the price of jelly, a good that is often used with peanut butter
“A reduction in gasoline prices caused the demand for gasoline to increase. The lower gas prices also led to an increase in demand for large cars, causing their prices to rise.” Theses statements
Are essentially correct.
Contain one error; the lower gasoline prices would cause an increase in the quantity demanded of gasoline, not an increase in demand.
Contain two errors; the lower gasoline prices would cause the quantity demanded of gasoline (rather than demand) to increase, and the lower gasoline price would cause and increase in quantity demanded (rather than demand) for large cars.
Contain one error; the lower gasoline prices would increase the quantity demanded of larger cars, not the demand
When the market for a good is in equilibrium,
Consumer surplus will equal producer surplus
All units valued more highly than the opportunity cost of production will be supplied
The total value created for consumers will equal the total cost of production for business firms
All units that have value will be produced, regardless of their cost of production
If cable TV service and satellite TV are substitutes,
An increase in the price of the cable will decrease the demand for satellite TV.
An increase in the price of cable will shift the demand curve for satellite TV to the left.
A decrease in the price of cable will decrease the demand for satellite TV.
An increase in the price of cable will generally have no effect on demand for satellite TV.
Which of the following sayings best reflects the concept of opportunity cost?
“You can’t teach an old dog new tricks.”
“I have a baker’s dozen”
“Times is money.”
“There’s no business like show business”
The number of people willing to buy tickets to the Super Bowl is invariably greater than the number of tickets (and seats) available. This is evidence that the price of the ticket is
Higher than the equilibrium price when the demand is inelastic but lower when the demand is elastic
Equal to the equilibrium price since the number of tickets bought equals the numbers sold.
Lower than the equilibrium price.
Higher than the equilibrium price.
Which of the following will most likely occur under a system of clearly defined and enforced property rights?
Resource owners will fail to conserve vital resources even if they expect their supply to be highly limited in the future.
Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources.
Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned.
Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.
The exchange rate is
The rate at which good trade for one another across international boarders.
Another term for “interest rate.”
The price of one currency in terms of another currency.
Another term for “growth rate.”
Gross domestic product
Is the sum of all exchanges of goods and services during a period.
Is the sum of expenditures for both intermediate and final user goods.
Is the sum of the total spending on all final user goods and services produced domestically.
Includes financial transactions such as the purchase of stocks or bonds during a period.
If a used car dealer purchases a used car for $3,000, makes repairs and refurbishes it, then sells it for $8,000, the
Dealer contributes nothing to production because only existing goods are involved.
Dealer contributes value added equal to $5,000, but nothing is added to GDP.
Dealer contributes value added equal to $5,000, and consequently $5,000 is added to GDP.
Dealer contributes value added equal to $8,000, but only $5,000 is added to GDP.
Gross domestic product during a period is measured by adding
Factor payments made by domestic firms minus retained earrings and indirect business taxes.
The market value of all goods and services produced domestically and then subtracting net exports from that figure.
Incomes received by households minus the sale of factor services supplied domestically.
Expenditures on new final goods and services produced domestically.
The annual rate of inflation is
The percentage increase in the total value of the good and services produced from one year to the next.
The percentage change in the general level of prices from one year to the next.
A change in real incomes of workers from one year to the next.
The increase in the purchasing power of the dollar from one year to the next.
Why is it important to use real rather than nominal GDP figures when making comparisons of output across time periods?
The real figures will reflect changes in quantity of output and not changes in the general level of prices.
The real GDP figures adjust for changes in the level of employment.
The real figures will reflect changes in the general level of prices as well as changes in the quantity of output.
The real GDP figures are a better measure of changes in the general level of prices.
Because of transactions which take place in the underground economy, the
Value of the GDP calculation will be equal to the value the national income calculation.
Value of the GDP calculation through the expenditure approach will be greater then the value calculated through the income approach.
GDP calculation tends to understate the actual value of goods sold in the economy.
GDP calculation tends to accurately portray the value of goods sold in the economy.
GDP calculation tends to overstate the actual value of goods sold in the economy.
Isabella is on a temporary layoff from her factory job. If Isabella participates in the BLS survey, she will be classified as
Employed and in the labor force.
Unemployed and in the labor force.
Employed and out of the labor force.
Unemployed and out of the labor force.
Nicole has just finished high school and started looking for her first job, but has not found one yet. As a result, the unemployment rate
Increases, and the labor force participation rate decreases
Is unaffected, and the labor-force participation rate increases
Increases, and the labor-force participation rate is unaffected
Increases, and the labor-force participation rate increases
Which type of unemployment is most likely to help the economy be more efficient?
Structural
Underemployment
Frictional
Seasonal
Cyclical
The primary source of frictional unemployment is
The lack of training and marketable qualifications in job seekers
Fluctuations in aggregate demand
Inaccurate and costly information about job opportunities
Discouraged workers who give up looking for work
The economy’s potential output is
Present when 100 percent the labor force is employed
The minimum output that could be achieved during a recession
The maximum sustainable output of the economy given its resources
The maximum output that could be achieved temporarily during a time of economic boom
Actual GDP will be below potential GDP
During an economic boom
When resources are fully utilized
During a recession
When the economy is at full employment
When the inflation rate of a country is high over a lengthy time period,
The year-to-year variability in the rate of inflation is generally large
The year-to-year variability in the rate of inflation is generally small
Decision makers will be able to forecast future rates of inflation accurately
There is no reason to believe that the inflation will exert harmful side effects on real output and the prosperity of the country
If the consumer price index was 125 at year-end of 2008 and 132.5 at year-end 2009, inflation during 2009 was,
6.0 percent
Zero; the prices were stable during 2009
12.5 percent
7.5 percent
Fiscal policy
The use of government taxation and expenditures to achieve macroeconomic goals
The operation of business enterprises by the government
The deliberate control of the money supply to achieve macroeconomic goals`
The use of the government’s regulatory powers to improve economic efficiency
Monetary policy can be most accurately described as
The use of the government’s regulatory powers to improve economic efficiency
The use of government taxation and expenditures to achieve macroeconomic goals
The government provision of goods to improve economic effeciency
The deliberate control of the money supply to achieve macroecomnomic goals
Which of the following properly describes the interest-rate effect or aggregate demand?
A higher price level leads to higher money demand, higher money demand leads to higher interest rates, a higher interest rate increases the quantity of goods and services demanded. d
A lower price level leads to lower money demand, lower money demand leads to lower interest rates, a lower interest rate reduces the quantity of goods and services demanded.
A higher price level leads to higher money demand, higher money demand leads to lower interest rates, a higher interest rate reduces the quantity of goods and services demanded.
A lower price level leads to lower money demand, lower money demand leads to lower interest rates, a lower interest rate increases the quantity of goods and services demanded.
Other things constant, a decrease in the price level makes the dollars people hold worth
More, so they are willing to spend more.
Less, so they are willing to spend ore
More, so they are willing to spend less
Less, so they are willing to spend less
The macroeconomy is said to be in long-run equilibrium only if
The economy is operating along its short-run aggregate supply curve.
The resource, loanable funds, foreign exchange, and goods and services markets are all in equilibrium.
Prices were incorrectly estimated by decision makers.
The output of the economy exceeds the full-employment level output.
If a country’s currency depreciates, which of the following will most likely happen?
Net exports will rise and aggregate demand will increase.
Net exports will rise and aggregate demand will decrease.
Net exports will fall and aggregate demand will decrease.
Net exports will fall and aggregate demand will increase.
Which of the following will most likely increase aggregate demand?
A decrease in stock market prices
A decrease in the expected inflation rate
A decrease in real GDP
A lower real interest rate
Other things constant, a reduction in the real interest rate will
Cause consumers to cut back on their purchases of durable items like automobiles.
Increase the natural rate of unemployment.
Increase the actual rate of unemployment.
Induce businesses to increase their level of investment.
A large grain crop resulting from favorable weather conditions would shift which of the following curves?
Only aggregate demand
Only short-run aggregate supply
Aggregate demand and short-run aggregate supply
Only long-run aggregate supply
According to the crowding-out effect, expansionary fiscal policy will lead to
Reduced interest rates, an appreciated dollar, and increased net exports.
Higher interest rates, an appreciated dollar, and increased net exports.
Higher interest rates, an appreciated dollar, and reduced net exports.
Reduced interest rates, an appreciated dollar, and reduced net exports.
In a world where capital moves rapidly across national boundaries, if a larger budget deficit leads to higher real interest rates
There will be an outflow of foreign capital, which will cause the dollar to appreciate and net exports to decline.
There will be an outflow of foreign capital, which will cause the dollar to depreciate and net exports to increase.
There will be an inflow of foreign capital, which will cause the dollar to appreciate and net exports to decline.
There will be an inflow of foreign capital, which will cause the dollar to depreciate and net exports to increase.
Which of the following is most likely to throw an economy into a recession?
An unanticipated increase in aggregate demand
An unanticipated increase in short-run aggregate supply
A reduction in the real interest rate
An unanticipated reduction in aggregate demand
If the general level of prices is higher than business decision makers anticipated when they entered long-term contracts for raw materials and other resources, which of the following is most likely to occur?
An unemployment rate that is less than the economy’s natural rate of unemployment.
Output less than the economy’s long-run potential.
A recession
A sharp reduction in imports
If policy makers believe that an inflationary boom is about to begin, the Keynesian view indicated that they should
Hold government spending constant and decrease taxes
Increase the budget deficit
Decrease government spending and/or raise taxes
Increase government spending and hold taxes constant
It will be difficult to institute fiscal policy in a stabilizing manner because politicians will find
Budget deficits attractive during a recession, but they will be reluctant to run budget surpluses during an expansion.
Budget surpluses attractive during a recession, but they will be reluctant to run budget deficits during an expansion.
It is more attractive to raise taxes than to increase spending.
It attractive to increase taxes during recession, but they will be reluctant to reduce them during an expansion.
In the long run, the primary effect of rapid monetary growth is
Inflation
An increase in real output
Lower nominal interest rates
Reduced unemployment
In order for barter trades to occur, there must be a
Bargaining intermediary
Double coincidence of wants
Singularity of interests
Sufficient supply of cash
Money is
Widely used in a barter economy.
An object to be consumed.
A highly illiquid asset.
Whatever is generally accepted in exchange for goods and services.
The value (purchasing power) of each unit of money
Tends to increase as the money supply expands.
Is largely independent of the money supply.
Increases as price rises.
Tends to decline as the money supply expands in relation to the availability of goods and services.
Are outstanding credit card balances counted as part of the money supply?
No; credit card balances reflect funds that have been borrowed. Unlike money, they cannot be used as a means of payment.
They are included in the M1 money supply, but not the M2 figures.
Yes; they are used to purchase things and therefore the are included in the money supply figures.
They are included in the M2 money supply, but not the M1 figures.
Other things constant, which of the following would cause the M2 money supply to decline?
A shift of funds from money market funds into stock and bonds mutual funds because fees to invest in the latter have declined.
A shift of funds from interest-earning checking accounts to money market mutual funds.
A shift of funds from interest-earning checking accounts to money market mutual funds.
A reduction in the general public’s holdings of currency outside of banks because debit cards have become more popular and widely accepted.
An increase in the quantity of US currency held overseas.
If you deposit $100 of currency into a demand deposit at a bank, this action by itself
Does not change money supply
Increases the money supply
Decreases the money supply
Has an indeterminant effect on the money supply
Reserves that banks are required by law to keep on hand to back up their deposits are called
Excess reserves
Borrowed reserves
Required reserves
Actual reserves
The Fed is institutionally independent. A major advantage of this is that monetary policy
Is not controlled by politicians
Is usually coordinated with fiscal policy
Is subject to regular congressional scrutiny
Will often offset fiscal policy
Open market purchases by the Fed make the money supply
Increase, which tends to decrease the value of money
Increase, which tends to increase the value of money
Decrease, which tends to decrease the value of money
Decrease, which tends to increase the value of money
When the required reserve ratio is lowered,
There is no change in either the money multiplier or the amount of excess reserves in the banking system
The money multiplier increases, and the amount of excess reserves decreases in the banking system
The money multiplier decreases, and the amount of excess reserves decreases in the banking system
The money multiplier increases, and the amount of excess reserves increases in the banking system
The money multiplier decreases, and the amount of excess reserves increases in the banking system
When the interest rate decreases, the opportunity cost of holding money
Decreases, so the quantity of money demanded decreases.
Increases, so the quantity of money demanded decreases.
Decreases, so the quantity of money demanded increases.
Increases, so the quantity of money demanded increases.
In the short run, an unanticipated shift to a more expansionary monetary policy is most likely to result in
An increase in employment
A reduction in aggregate demand
An increase in short-term interest rates
A reduction in inflation rate
If the Fed sells bonds and, thereby, unexpectedly shifts to a more restrictive monetary policy, in the short run, the primary impact of this policy will tend to
Reduce unemployment
Increase real interest rates
Increase real output
Increase inflation
In the aggregate demand-aggregate supply model, the short-run effects of an unanticipated increase in the money supply will be
Lower real interest rates and an increase in aggregate demand.
Higher real interest rates and an increase in aggregate demand.
Lower real interest rate and a reduction in aggregate demand.
Higher real interest rates and a reduction in aggregate demand.
Which of the following would be most likely to reduce the rate of unemployment?
A rise in minimum wage
A internet job listing system that makes it easier to get information about job openings and available employees
An increase in unemployment compensation benefits
A business recession
Which of the following about unemployment is true?
The unemployment rates of the major European economies have been lower than that of the United States during the last decade.
Compared to the US, European labor markets are characterized by less extensive regulation and less generous unemployment benefits.
High unemployment rates over lengthy time periods are indicative of structural factors that are adversely affecting the natural rate of unemployment.
The natural rate of unemployment decreases when youthful workers expand as a proportion of the workforce.
Suppose the population (age 16 over) of Japan is 100 million; 5 million are unemployed, and 70 million hold jobs. The employment/population ratio of Japan is
5%
70%
85%
65%
Other things constant, a decrease in AD will
Lead to a decrease in demand for resources.
Reduce the rate of unemployment.
Result in higher nominal wage rates.
Cause an increase in the general level of prices.
When an economy is experiencing an economic boom and operating beyond its long-run capacity
Strong demand for investment funds will push interest rates upward.
Weak demand for investment funds will cause the real interest rate to decline.
The unemployment rate will be greater than its natural rate.
Weak demand for resources will push the prices of resources downward.
Within the AD/AS model, if an unanticipated reduction in AD results in less than full employment rate of output,
Lower resource prices and declining interest rates will direct the economy back to full employment.
Higher resource prices and rising interest rates will direct the economy back to full employment.
The natural rate of unemployment will increase.
Long-run aggregate supply will increase.
When the Fed lowers the discount rate, it makes it
More difficult for banks to accept deposits.
Cheaper for banks to borrow from each other.
Cheaper for banks to obtain additional reserves by borrowing from the Fed.
More difficult for banks to extend loans.
Suppose the CPI was 95 in 1955, and suppose currently the CPI is 475. According to the CPI, $100 today purchases the same amount of goods and services as
$33.33 purchased in 1955.
None of the above.
$20.00 purchased in 1955.
$47.50 purchased in 1955.
