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Worksheetsmacroeconomics
Total questions: 88
Worksheet time: 44mins
Malika just got a full-coverage car insurance. Because Malika obtained full-coverage car insurance, Malika will have an incentive to..... because of......
A) Drive more cautiously than if she didn't have insurance; adverse selection
B) Drive less cautiously than if she didn't have insurance; moral hazard
C) Drive more cautiously than if she didn't have insurance; moral hazard
D) Drive less cautiously than if she didn't have insurance; adverse selection
Which of the following is most likely to be a fixed factor of production at a pizza restaurant?
A) The amount of electricity
B) The size of the seating area
C) The amount of pizza dough
D) The number of waiters
The main problem with public subsidies is that they:
A) Lead to a decrease in demand
B) Are not effective at lowering prices
C) Lower total economic surplus
D) Do not help the poor afford essential goods and services
If fast food is an inferior good then
the demand for fast food will fall as the income rise
the demand for fast food will fall as the price of fast food rises.
the demand for fast food will fall as income falls.
the quantity of fast food demanded will rise as the price of fast food rises.
The benefits to specialization are even greater when two trading partners have
similar consumption preferences.
absolute advantages in producing the same goods.
large differences in opportunity costs.
very similar opportunity costs.
A firm earns a normal profit when its
economic profit is zero.
accounting profit is positive.
economic profit is positive.
accounting profit is zero.
Airlines that charge higher prices for customers who purchase their tickets at the last minute are
perfect price discriminators.
price discriminating by identifying passengers with higher reservation prices.
lowering total economie surplus.
not price discriminating because the cost of the ticket is not the same
A seller's supply curve shows the seller's
hourly wage for producing an additional unit of output at each quantity
opportunity cost of producing an additional unit of output at each quantity
willingness to pay for an additional unit of output at each quantity
profit from producing an additional unit of output at each quantity
when the price of a good rises, marginal utility per dollar spent on that good...., leading consumers to purchase ... of that good
falls, more
falls, less
rises, more
rises, less
Diet Coke is a close substitute for Diet Pepsi. When Coca-Cola introduced Diet Coke in 1982, the price elasticity of demand for Diet Pepsi ... and PepsiCo's ability to raise revenues through price increases...
had no effect, was reduced
increased, increased
decreased, was reduced
increased, was reduced
If low-income households spend a larger share of their income on food than do high-income households, then a tax on food is
a regressive tax.
a way to redistribute from the wealthy to the poor.
a progressive tax.
a proportional tax.
In markets with incomplete information, middlemen tend to...total economic surplus by....
increase; raising prices
reduce; giving misleading information
increase; matching sellers with buyers who have high reservation prices
reduce; raising prices
Suppose you want to maximize your total utility. If your marginal utility per dollar spent is higher for one good than for all others, then you should
reallocate your spending towards that good.
spend less on all goods.
reallocate your spending away from that good.
spend more on all goods.
If the consumption of good generates an external benefit, then the market equilibrium quantity will be
socially optimal.
equal to zero.
greater than the socially optimal quantity.
less than the socially optimal quantity.
The inputs used to produce cupcakes (e.g., flour, sugar, butter, and labor) are also used to produce cookies, cakes, muffins, pies, and many other goods. This suggests that
the elasticity of supply of cupcakes is relatively high.
cupcakes are a normal good.
the elasticity of supply of cupcakes is relatively low.
the supply curve for cupcakes is downward sloping.
As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called
the substitution effect of a price change.
the income effect of a price change.
a decrease in demand.
a decrease in reservation price.
The cross-price elasticity of demand between bread and potatoes is estimated to be 0.5. This implies bread and potatoes are
substitutes
unrelated
complements
normal goods
Sejal's reservation price for her economies textbook is $100. The week before the semester begins, Sejal finds a copy of her textbook online for $75. Sejals consumer surplus from buying the textbook online is
$100
$75
$25
$125
In an open economy, a society's consumption possibilities are typically.... its production possibilities.
less than
greater than
equal to
unrelated to
If the equilibrium quantity of a good is also the socially optimal quantity, then
it's possible to make at least one person better off without hurting anyone else.
the marginal benefit to consumers of another unit of the good is zero
the marginal cost to producers of another unit of the good is zero
total economic surplus has been maximized.
Which of the following statements is true?
Absolute advantage requires comparative advantage.
Comparative advantage requires absolute advantage.
Absolute advantage implies comparative advantage.
Comparative advantage does not require absolute advantage.
If a firm is experiencing economies of scale, then as the firm's output rises, its average total cost
does not change.
falls.
rises.
becomes negative.
If sellers have more information about the quality of goods than do buyers, then
buyers always will be exploited.
buyers will never make purchases.
sellers of lower-than-average goods will have difficulty getting their asking price.
sellers of better-than-average goods will have difficulty getting their asking price.
Suppose Monique is willing to pay up to $15,000 for a used Ford pick-up truck. If she buys one for $12,000, her economic..... would be.....
cost; $15,000
surplus; $3,000
Surpus, $12,000
Benefit; $12,000
Suppose a government is considering imposing either a tariff or a quota on imported grain, and either policy will result in exactly 750 tons of grain being imported. How do these policies differ?
Domestic production will be higher with the quota than with the tariff
The price of grain under the quota will be higher than the price under the tariff
The quota will generate revenue for the firms that hold import licenses, while the tariff will generate revenue for the government.
The price of grain under the tariff will be higher than the price under the quota
Natural monopolies are most likely to arise when firms have
low start-up costs and high marginal costs.
low start-up costs and low marginal costs.
high start-up costs and high marginal costs.
high start-up costs and low marginal costs.
If the marginal cost of reducing pollution is positive, then
pollution should be reduced as much as technically feasible.
the optimal amount of pollution is zero.
the marginal benefit of reducing pollution is zero.
the optimal amount of pollution is greater than zero.
If a monopolist's marginal revenue exceeds its marginal cost at its current level of output, then to maximize its profit the monopolist should
increase output until marginal revenue equals marginal cost.
do nothing
increase output until price equals marginal cost.
decrease output in order to increase the gap between marginal revenue and marginal cost
The financial system consists of financial...., such as commercial banks, and financial markets, such as the stock market
brokers
intermediaries
allocations
corporations
The opportunity cost of capital investment is the
value of the marginal product of labor.
value of the marginal product of capital.
real interest rate
price of new capital goods.
In the short run with predetermined prices, when output is less than planned aggregate expenditure, firms will
decrease planned aggregate expenditure.
increase production
reduce production.
increase planned aggregate expenditure.
Starting from long-run equilibrium, the long-run impact of a war that raises goverment purchases, compared to the original equilibrium, is
lower inflation and lower output
higher inflation and higher output
higher inflation and the same output.
lower inflation and the same output.
The value of intermediate goods is excluded from the measurement of GDP in order to
adjust for inflation.
measure GDP in constant prices.
index economic activity.
avoid double counting.
When the coupon rate on newly issued bonds increases from 5 percent to 6 percent, the prices of existing bonds
remain unchanged.
increase
decrease.
increase only if the coupon rate is less than 6 percent.
When recessions are the result of slow growth in potential output, the government's best policy is
increase aggregate demand.
reduce government spending.
promote saving and investment.
decrease aggregate supply.
According to the AD-AS diagram, in the short-term, an anti-inflation policy creates
higher output.
higher unemployment.
lower inflation
higher inflation.
Which of the following does not describe a characteristic of short-term economic fluctuations?
Expansions and recessions are felt in only a few sectors of the economy.
Durable-goods industries are more sensitive to short-term fluctuations than service and nondurable industries.
Expansions and recessions are irregular in length and severity.
The unemployment rate rises during recessions.
One shortcoming of real GDP as an indicator of society's social well-being is that it fails to take into account the
growth in productivity
change in the price level
non-market production.
increase in the quantity of goods.
Money serves as a store of value when
it is a basic measure of economic value.
it is a means of holding wealth.
it is used to purchase goods and services.
there is direct trade of goods and services.
When a U.S. restaurant purchases French wine and the French wine company uses the proceeds to buy U.S government debt, U.S. ......and there is a capital ......the United States.
Imports increase: inflow to
exports increase; outflow from
imports increase; outflow from
imports decrease; inflow to
The "true" costs of inflation to an economy include all of the following except
noise in the price system.
higher relative prices.
unexpected redistribution of wealth
shoe-leather costs
The CPI is a measure of the
average level of prices relative to prices in the base year.
price of a specific good or service
rate of inflation.
real wage.
Larger increases in the demand for labor than in the supply of labor explain
skill-biased technological change.
the substantial increase in real wages.
the slowdown in real wage growth.
increasing wage inequality.
If planned aggregate spending in an economy can be written as PAE = 15,000 + 0.6Y - 20,000r, and potential output equals 35,000, what real interest rate must the Federal Reserve set to bring the economy to full employment?
2 percent
5 percent
4 percent
3 percent
Spending on new capital goods, new homes, and the addition of unsold goods to company inventories is included in
Government purchases
investment spending
service spending.
consumption expenditures.
A currency appreciation is a(n)
reduction in the official value of a currency in a fixed-exchange-rate system.
decrease in the value of a currency relative to other currencies.
increase in the official value of a currency in a fixed-exchange-rate system.
increase in the value of a currency relative to other currencies
Provisions in the law that automatically increase government spending or decrease taxes when real output declines are called
automatic stabilizers
autonomous stabilizers
the marginal propensity to consume.
the income-expenditure multiplier.
When the Fed eases US monetary policy, domestic interest rates..., making US assets relatively less attractive to foreign investors, and.... the equilibrium exchange rate
rise; increasing
fall; increasing
rise; decreasing
fall; decreasing
Crowding out is the tendency for increased government deficits to
increase consumption spending
reduce investment spending
increase investment spending.
reduce consumption spending.
Because increases in inflation reduce planned spending and short-run equilibrium output, the
short-run aggregate supply line is downward sloping.
aggregate demand curve is upward sloping.
aggregate demand curve is downward sloping.
aggregate demand curve is horizontal.
The costs of unemployment are lowest (and perhaps even negative) for _unemployment.
structural
cyclical
frictional
cyclical and structural
The quantity and quality of human capital, physical capital, technology, natural resources, entrepreneurship, and the legal and political environment determine the
labor force participation rate.
real interest rate
unemployment rate.
average labor productivity.
If banks' desired reserve ratio increases from 0.10 to 0.15 and the public still desires to hold the same amount of currency, the money supply will
decrease.
increase.
either increase or decrease.
not change.
Stock prices tend to ....when the Federal Reserve raises interest rates because higher interest rates.... dividends.
fall; reduce
rise; increase
fall; increase
rise; reduce
Where Y is GDP, C is consumption, I is investment, G is government spending, T is net taxes, and there is no international trade, private saving equals
Y - T - C.
Y - C+T.
G-T.
T - G.
A fiscal policy action to close a recessionary gap is to
increase government purchases.
decrease transfer payments.
increase taxes.
increase the marginal propensity to consume.
The M1 measure of money consists of the sum of
currency and balances held in savings accounts.
currency, balances held in both checking accounts and savings accounts
balances held in both checking accounts and savings accounts
currency outstanding and balances held in checking accounts.
Government policies that are used to affect planned aggregate expenditure, with the objective of eliminating output gaps, are called .... policies
productivity
cyclical
stabilization
structural
Despite some problems with equating GDP with economic well-being, higher real GDP per person does imply greater economic well-being because it tends to be positively associated with
crime, pollution, and economic inequality.
better education, health, and life expectancy.
unemployment, availability of goods and services, and better education.
poverty, depletion of nonrenewable resources, and congestion.
An increase in unemployment insurance benefits will
increase the demand for labor.
decrease the demand for labor.
decrease job search efforts of unemployed workers.
increase job search efforts of unemployed workers.
In the basic Keynesian model, a decrease in transfer payments
increases short-run equilibrium output.
increases potential output.
reduces potential output.
reduces short-run equilibrium output.
Which of the following is consistent with a political and legal framework that discourages economic growth?
The allocation of bank credit by the government rather than by markets
Agricultural prices that are allowed to vary according to market conditions
A speedy approval process for new businesses
Taxation and regulation that are not very burdensome
The price of a gallon of gasoline at the pump increased by 10 percent at the same time that the inflation rate was 15 percent. The nominal price of gasoline..... and the real price of gasoline.....
decreased; increased
increased; did not change
increased; also increased
increased; decreased
The economy of Omega operates according to Okunts law. In Omega, the actual and the natural rates of unemployment equal 5 percent, and real GDP equals $10 trillion. What is potential GDP in Omega?
$10.5 trillion
$9.0 trillion
$10.0 trillion
$9.5 trillion
Cyclical unemployment is equal to zero when
there is no recessionary gap.
frictional unemployment equals structural unemployment.
there is no expansionary gap.
actual GDP and potential GDP are equal.
Starting from a long-run equilibrium, an increase in potential output leads to.... gap in the short run and to.... rates of inflation in the long run.
a recessionary; lower
an expansionary; lower
an expansionary; higher
a recessionary; higher
Goods and services provided by state and local governments are
excluded from GDP because they are publicly provided.
included in GDP at market prices.
excluded from GDP because they are not sold in markets.
included in GDP at cost.
Diminishing returns to capital is a consequence of firms' incentives to use each piece of capital as productively as possible and illustrates the
scarcity principle.
principle of increasing opportunity costs.
principle of comparative advantage.
cost-benefit principle.
Structural unemployment will decrease when
unemployment insurance benefits are increased.
the minimum wage is increased.
union wages are increased.
the minimum wage is decreased.
To the extent that households are target savers who save to reach a specific goal, an increase in the interest rate.... household saving and a decrease in the interest rate.....household saving.
increases; does not affect
decreases; increases
does not affect; increases
increases; decreases
The coupon rate is the
amount originally lent.
maximum interest rate that can be paid on a bond.
interest rate promised when a bond is issued.
regular payment of interest to a bondholder.
An example of structural policy is
the provision of additional cash to the banking system.
a reduction in income tax rates.
an attempt to reduce the government budget deficit by reducing spending.
a decision by a developing country to reduce government control of the economy and to become more market-oriented.
money supply leads to According to the quantity equation, if velocity and output are constant, then an increase in the money supply leads to .....in inflation.
the same percentage increase
a less than proportional increase
a less than proportional decreases
a greater than proportional increase
For a given level of inflation, if concerns about future weakness in the economy cause businesses to reduce their spending on new capital, then the .....shifts....
short-run aggregate supply line; downward
aggregate demand curve; left
short-run aggregate supply line; upward
aggregate demand curve; right
Which of the following does not describe a characteristic of short-term economic fluctuations?
Expansions and recessions are irregular in length and severity
Durable-goods industries are less sensitive to short-term fluctuations than service and nondurable industries.
The unemployment rate rises during recessions.
Expansions and recessions are felt throughout the economy.
When the interest rate on newly issued bonds increases, the price of existing bonds
decreases.
increases only if the coupon rate is below the new rate.
may either increase or decrease.
increases.
Making more frequent, but smaller cash withdrawals from banks ..... the inflation losses from holding cash and..... the shoe leather costs of inflation.
reduces; has no impact on
reduces; increases
increases; increases
increases; reduces
The income-expenditure multiplier leads to greater than one-for-one changes in output when autonomous spending changes because
multiple deposits are generated when new reserves are produced through fractional reserve banking.
autonomous spending supports more output than induced spending.
planned changes in inventories signal producers to adjust the level of output.
the direct changes in spending change the income of producers, which leads to additional changes in spending.
In the long run the real interest rate is determined by....., and in the short run the Federal Reserve can control the real interest rate by setting the nominal interest rate if inflation adjusts.....
the Federal Reserve; to equal the increase in the money supply
saving and investment; slowly
saving and investment; quickly
the Federal Reserve; slowly
Suppose a borrower and lender agree to an interest rate on a loan when inflation is expected to be 6 percent. The borrower would benefit the most if which of the following inflation rates actually occurred?
9 percent
0 percent
6 percent
3 percent
If domestic saving is less than domestic investment, then a country will have a..... and positive net capital....
trade surplus; outflows
trade deficit; inflows
trade deficit; outflows
trade balance; inflows
If potential output equals 4,000 and short-run equilibrium output equals 3,500, there is a ....gap and the Federal Reserve must.... real interest rates in order to close the gap.
recessionary; reduce
recessionary; not change
expansionary; raise
recessionary; raise
Public saving is positive when
after-tax income of households and businesses is less than consumption expenditures.
the government's budget is balanced.
after-tax income of households and businesses is greater than consumption expenditures.
there is a government budget surplus.
Graphically inflation shocks shift the.... and shocks to potential output shift the .....
aggregate demand curve; short-run aggregate supply line
aggregate demand curve; long-run aggregate supply line
short-run aggregate supply line; long-run aggregate supply line
long-run aggregate supply line; short-run aggregate supply line
When an individual deposits currency into a checking account
bank reserves are unchanged.
bank reserves increase, which allows banks to lend more and increases the money supply.
bank liabilities increase, which reduces the amount banks can lend and reduces the growth of the money supply.
bank reserves decrease, which reduces the amount banks can lend and reduces the growth of the money supply.
In the Keynesian model, it is assumed that, when demand for a firm's product changes, the firm changes
prices to meet the demand.
production levels to meet the demand.
prices, but holds production levels constant, to meet the demand.
prices and production levels to meet demand.
To compare the change in physical production (GDP) between 2017 and 2020, we should compare .... GDP in 2017 with.... GDP in 2020.
real; nominal
current dollar; current dollar
nominal; nominal
real; real
Easy monetary policy will ... net exports as a result of a .....currency,
decrease; stronger
increase; weaker
increase; stronger
decrease; weaker
