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Questions in this quiz (164)
1Assume a toy company hires an additional worker to assemble toys, and the size of the factory and amount of equipment remain constant. Asa result, the level of output increases but by a smaller amount than when the previous additional worker was hired. This is an example of:
- Athe law of supply
- Bthe law of diminishing returns
- Cthe law of demand
- Dthe law of substitution
2Using all available resources, the US can produce 30 burgers or 20 tacos and Mexico can produce 10 burgers or 18 tacos. Who has absolute advantage?
- AMexico has an absolute advantage in producing both goods
- BThe U.S. has an absolute advantage in producing both goods
3The price elasticity of demand for canned soup is estimated at -1.62. What happens to the sales revenue if the price of canned soup rises?
- Ait falls
- Bit rises
4What will always increase as output increases?
- Atotal cost
- Baverage total cost
- Cmarginal cost
- Dfixed costs
5In economics, which of the following is the best example of capital?
- Amoney held in a checking account
- Ba computer used by a lawyer to prepare legal documents
- Cinvestment in training for employees in an accounting firm
- Dthe executive producer of a new adventure movie
6Which of the following will cause the demand for pizza to increase in a college town?
- Aa new pizza restaurant opens up near campus
- Ba decrease in the costs associated with pizza production
- Ca decrease in the price of tacos
- Dan increase in the number of students who eat pizza
7The demand for all carbonated beverages is likely to be _____ the demand for Dr. Pepper
- Amore elastic than
- Bperfectly elastic compared to
- Cmore inelastic than
- Dperfectly inelastic compared to
8Which of the following is an example of labor as a factor of production?
- Apeople who bring together the skills necessary for creating products and services
- Bthe skills and abilities of workers
- Cpeople who are paid an hourly wage but not those paid a salary
- Da college or university that educates people
9Specialization and trade benefits:
- Aboth rich countries and poor countries
- Brich countries but not poor countries
- Cpoor countries but not rich countries
- Dlarge countries but not small countries
10Which of the following is a positive economic statement?
- Athe standard of living in the United States should be higher
- Bif the price of iPhones falls, a larger quantity of iPhones will be purchased
- Cthe government should revamp the health care system
- Dthe government should not have bailed out the auto manufacturers
11How are the fundamental economic questions answered in a mixed economy?
- Athe government alone decides the answers
- Bhouseholds, firms, and the government interact in markets to decide the answers
- Chouseholds and firms interact in markets to decide the answers
- Dlarge corporations alone decide the answers
12Rising marginal costs result from:
- Arising marginal physical product
- Bfalling prices of variable inputs
- Cfalling marginal physical product
- Drising prices of fixed inputs
13With a greater amount of consumption, total utility:
- Aalways decreases
- Bincreases as long as marginal utility is positive
- Cincreases only if marginal utility increases
- Dalways increases
14A price floor is:
- Aa lower limit on the price of a good
- Bbelow the equilibrium price
- Can upper limit on the price of a good
- Da limit on the price of goods sold to foreigners
15Which of the following statements concerning the relationship between total product and marginal physical product is NOT correct?
- ATP will continue to rise even though MPP is falling but greater than zero
- BTP in increasing at an increasing rate if MPP is increasing
- CTP will fall if MPP is negative
- DTP will fall is MPP is falling
16Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect?
- Aan increase in the price of olive oil presses
- Ba decrease in the cost of transporting olive oil to markets
- Can increase in the price of land used to plant olives
- Dresearch finds that consumption of olive oil reduces the risk of heart disease
17Marginal utility refers to:
- Aadditional utility from consuming one more unit of a good
- Baverage utility from the last unit consumed
- Cutility derived from consuming all of the good
- Dopportunity cost of the good
18Which of the following events would most likely cause the production possibilities curve to shift inward?
- Athe labor supply grows
- Bnew factories were built
- Ca technological breakthrough occurs that makes the production of all goods more efficient
- Da major earthquake destroys several industrial centers
19If consumer receives 20 total units of utility from consuming two candy bars, and 25 total units of utility from consuming three candy bars, the marginal utility of the second candy bar is:
- A25 utility units
- B20 utility units
- C5 utility units
- Dunknown as more information is needed to determine the answer
20When the price of potato chips rises, the demand for pretzels also rises. This indicates that potato chips and pretzels are:
- Asubstitutes
- Bcomplements
- Cprice inelastic goods
- Dprice elastic goods
21Comparative advantage refers to a country's
- Aability to produce a specific good with fewer resources than another country
- Bmonopoly power in the world market for a specific good
- Cability to sell a specific good for a higher price than another country
- Dability to produce a specific good at a lower opportunity cost than another country
22The study of economics focuses on:
- Athe behavior of successful businesses
- Bthe role of money in our economy
- Chow best to allocate scarce resources
- Dthe elimination of opportunity costs
23According to the law of supply, if the price of lawn mowing decreases from $50 per lawn to $45 per lawn, then the:
- Aquantity supplied of lawn mowing will decrease
- Bsupply curve for lawn mowing will shift to the right
- Cquantity supplied of lawn mowing will increase
24When economists talk about a trade off between "guns and butter" they mean:
- Asociety can produce more military goods without giving up any consumer goods
- Bmilitary goods are an efficient use of resources
- Cthe production of more military goods may require fewer consumer goods
25Given that resources are scarce:
- Aa "free lunch" is possible, but only for a limited number of people
- Bpoor countries must make choices, but rich countries do not have to make choices
- Copportunity costs are experienced whenever choices are made
26All points on the production possibility curve:
- Arepresent the use of all available resources
- Bare equally desirable
- Crepresent the same mix of output
27Ben says, "an increase in tax on gasoline will raise its price." Holly argues "taxes should be increased because car emissions are harmful for the environment." We can conclude that:
- ABen's statement is normative, but Holly's is positive
- BHolly's statement is normative, but Ben's is positive
- CBoth statements are normative
28Assuming the level of resources and technology are constant, if France decreases its size of its military then:
- Aits production possibilities curve shift outward
- Bits production possibilities curve will shift inward
- Cits production of consumer goods can increase
29The quantity demanded of a good will decrease in response to:
- Ahigher income
- Ba higher price for the good
- Ca rightward shift of the supply curve
- Da lower price for the good
30Economists make a distinction between changes in quantity demanded and changes in demand:
- Abecause the supply curve shifts whenever there is a change in demand
- Bbecause the demand curve shifts whenever there is a change in quantity demanded
- Cto distinguish a movement along a demand curve from a shift of the demand curve
31When there is a shortage in a market, prices are likely to:
- Afall because buyers do not wish to buy as much as sellers want to sell
- Brise because some buyers will offer to pay a higher price
- Cfall because sellers are likely to reduce their production if prices rise
32If an increase in income leads to an increase in the demand for peanut butter, then peanut butter is a:
- Acomplementary good
- Bnormal good
- Cinferior good
33The factors of production include:
- Amoney
- Bprofit
- Cland, labor, capital, and entrepreneurship
34If the first, second, third and fourth worker employed by the firm add 15, 21, 12 and 8 units of total product respectively, we can conclude:
- Athe marginal product of all four workers is 14
- Bthe total product of two workers 42
- Cthat after the second worker marginal product declines
35As more labor is hired in the short run, diminishing returns are observed because:
- Athe new workers are lazy
- Bthe new workers have less capital and land to work with
- Call the workers begin to socialize more and work less
36If a firm increases output, total costs will rise because of a change in:
- Afixed costs
- Babsolute costs
- Cvariable costs
37If marginal utility is negative, then:
- Atotal utility is at a minimum
- Btotal utility will increase with additional consumption
- Ctotal utility will decrease with additional consumption
38According to the Law of Demand:
- Aas the price of a good rises, the quantity demanded will increase in a given time period
- Bas the price of a good falls, the quantity supplied will increase in a given time period
- Cas the price of a good falls, the quantity demanded will increase in a given time period
39In which of the following instances will total revenue decline?
- Aprice rises and demand is inelastic
- Bprice rises and demand is elastic
- Cprice falls and demand is elastic
40Suppose the price elasticity of demand for tacos is -0.80. If the price of tacos increases by 10 percent, then the demand for tacos should:
- Adecrease by 8 percent
- Bincrease by 8 percent
- Cdecrease by 1.25 percent
41If a firm finds that it can sell 20,000 units at a price of $5 per unit and 25,000 units at a price of $4 per unit, the price range is:
- Aelastic
- Binelastic
- Cunitary elastic
42When income decreases, the demand for most products:
- Aincreases and the demand curve shifts to the right
- Bdecreases and the demand curve shifts to the left
- Cdecreases and the demand curve shifts to the right
43International trade:
- Abenefits rich countries but not poor countries
- Ballows all countries to consume beyond their production possibilities
- Cforces poor countries to consume exactly what they produce
44Comparative advantage refers to the:
- Atotal amount of resources needed to produce a good
- Bgains from trade that some countries are able to experience
- Ccomparison of production processes in two different countries
- Drelative opportunity costs of producing a particular good
45If a country has an absolutely advantage, it has:
- Athe ability to produce a specific good at a lower opportunity cost than its trading partners
- Btotal market domination in the production and sales of a specific good
- Cthe ability to produce a specific good with fewer resources than its trading partners
46Assume the market for organic produce sold at farmers' markets is perfectly competitive. All else equal, as more farmers choose to produce and sell organic produce at farmers' markets, what is likely to happen to the equilibrium price of the produce and profits of the organic farmers in the long run?
- Athe equilibrium price is likely to remain unchanged and profits are likely to increase
- Bthe equilibrium price is likely to decrease and profits are likely to decrease
- Cthe equilibrium price is likely to increase and profits are likely to increase
47Which of the following is not a characteristic of a perfectly competitive market structure?
- Athere are a very large number of firms that are small compared to the market
- Ball firms sell identical products
- Cthere are restrictions on exit of firms
48A very large number of small sellers who sell identical products imply
- Aa multitude of vastly different selling prices
- Ba downward sloping demand for each seller's product
- Cthe inability of one seller to influence price
49The price of a seller's product in perfect competition is determined by
- Athe individual seller
- Ba few of the sellers
- Cmarket demand and market supply
50Both buyers and sellers are price takers in a perfectly competitive market because
- Athe price is determined by government intervention and dictated to buyers and sellers
- Beach buyer and seller knows it is illegal to conspire to affect price
- Ceach buyer and seller is too small relative to others to independently affect the market price
51If, for a perfectly competitive firm, price exceeds the marginal costs of production, the firm should
- Aincrease its output
- Breduce its output
- Ckeep output constant and enjoy the above normal profit
52A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The price of each good is $10. Calculate the firm's short-run profit or loss.
- Aloss of $6,000
- Bprofit of $6,000
- Cprofit of $30,000
53Which of the following is involved in a competitive firm's short run decision?
- Adeciding whether to build an additional factory or not
- Bchoosing a rate of output using existing plant and equipment
- Cchanging the scale of operations
54If a perfectly competitive firm produces and sells more output, its ___ will definitely increase.
- Atotal profit
- Btotal revenue
- Caverage total cost
55Competition in a market results in:
- Aeconomic losses in the long run
- Bthe optimal mix of goods and services being produced
- Cguaranteed economic profit
56Suppose a perfectly competitive firm increases its output. In order to sell this additional output, the firm:
- Ashould price it at the market price
- Bmust lower its price to sell the additional output
- Cwill not be able to sell the additional output at any price because of the many competitive firms
57A monopolist faces
- Aa perfectly elastic demand curve
- Ba perfectly inelastic demand curve
- Ca downward-sloping demand curve
58A merger between U.S. steel and general motors would be an example of a
- Avertical merger
- Bhorizontal merger
- Cconglomerate merger
59Which of the following might be used to protect a monopoly from competition?
- Aa horizontal demand curve
- Bmarginal revenue
- Ca patent
60Which of the following is not true for a monopoly?
- Ait has no direct competitors
- Bit can use market power to charge higher prices than a competitive firm
- Cit is a price taker
61Since a monopoly has market power,
- Aits demand curve is upward sloping
- Bits marginal revenue curve is below its demand curve
- Cit must hold price constant in order to sell an additional unit
62Which of the following is true for a monopolist?
- Ait is a price taker
- Bthe firm faces a flat demand curve
- Cit will earn zero economic profit in the long run
- Dprofit is maximized where marginal cost equals marginal revenue
63A monopolist sets price at a point on the ___, corresponding to the rate of output determined by the intersection of ____
- Ademand; marginal revenue and marginal cost
- Bmarginal revenue; marginal revenue and marginal cost
- Caverage total cost; price and marginal cost
64If an increase in the size of a factor results in reductions in minimum average total costs, this is known as:
- Amarginal cost pricing
- Bdiminishing marginal returns
- Crising average total cost
- Deconomies of scale
65Which of the following is an economic justification for a policy of laissez-faire?
- Athe free-rider dilemma
- Bthe efficiency of the market mechanism
- Cpublic goods
66Market failure occurs when
- Amarket prices are signal producers to produce the optimal mix of output
- Bproducers supply the good that earn the greatest profit
- Can imperfection in the market mechanism prevents an optimal outcome
67Which of the following does not explain why the market sometimes fails to produce the optimal mix of output?
- Asome producers have market power
- Bpublic goods can have free riders
- Cprivate goods cannot be consumed jointly
68Social demand is equal to market
- Ademand plus externalities
- Bsupply plus market demand
- Cdemand minus externalities
69Which of the following is not an example of market failure?
- Apublic goods
- Bgovernment intervention
- Cmarket power
70A private good is a good that
- Ais financed by private dollars instead of taxes
- Bcan be jointly consumed
- Ccan be denied to those who do not pay for it
71If the economy relies entirely on markets to answer the WHAT question, it tends to ___ goods with external benefits and ___ goods with external costs
- Aoverproduce; overproduce
- Boverproduce; underproduce
- Cunder produce; overproduce
72A public good is a good that
- Acan be jointly consumed
- Bcan by consumed by just one person
- Cis financed by the public sector, not the private sector
73Which of the following is most likely a public good?
- Aa bank
- Belectricity
- Ca computer
- Dsocial security payments
74The communal nature of a highway means that no one individual is motivated to pay for it because even those who do not pay will still benefit from using it. This is an example of
- Athe free rider dilemma
- Bgovernment failure
- Cinequity
75The free rider dilemma arises because
- Amost public goods involve illegal activity
- Bpeople prefer private goods
- Cpublic goods can be jointly consumed
76The term externalities refers to
- Athe inequitable distribution of output
- Ball costs and benefits of a market activity borne by a third party
- Cthe impact that imported goods have on domestic markets
77Whenever external benefits exist
- Amarket demand will exceed social demand
- Bsocial demand will exceed market demand
- Cmarket demand and social demand will be equal
78Which of the following is characteristic of a downturn in the business cycle?
- Ahigher unemployment rates
- Bhigher prices
- Cgrowth in real output
79Nominal GDP is defined as the
- Avalue of output in current dollars
- Bdollar value of services but not goods
- Coutput produced by domestically owned factors of production regardless of where factors are located
80After quitting one job, some people with marketable skills find that it takes several months to find a new job. This is an example of which type of unemployment?
- Astructural unemployment
- Bfrictional unemployment
- Ccyclical unemployment
81The Consumer Price Index is
- Aa measure of changes in the relative prices of significant consumer goods
- Ba measure of changes in the price of all goods and services
- Ca measure of changes in the average price of consumer goods and services
82If the Consumer Price Index had a value of 128 in year Z, this means that during the period between the base year and year Z:
- Aall prices increased by 28 percent
- Ball prices increased by an average of 1.28 percent
- Cprices of goods and services that the typical consumer buys increased by an average of 28 percent
83A good measure of the standard of living is
- Areal GDP per capita
- Bnominal GDP per capita
- Ctotal real GDP
84One reason our full employment is not zero percent is because
- Africtional unemployment will always exist
- Bcyclical unemployment will always exist
- Cpopulation growth makes such a goal impossible
85Which of the following is an example of structural unemployment?
- AShelly is looking for work but never finished high school, so her skills are seen as limited by employers
- BSean just graduated from college and is planning to apply for professional positions
- CDuc Cao was laid off as an architect because the economy is in a recession
86A tax subsidy is involved in employer financed health insurance because
- Aall working adults are covered by Medicare
- Ball working adults are covered by Medicaid
- Cemployer payments for health insurance are not subject to income or payroll taxes
87Suppose you go to a doctor but your health insurance plan does not reimburse you because you have not yet paid enough out of pocket for the year to qualify for insurance benefits. This is an example of
- Acoinsurance
- Ba deductible
- Cmonopsony power
88If labor productivity in the health care industry rises very slowly relative to wages and salaries in the industry, this would tend to
- Adecrease the demand for healthcare
- Bincrease the supply of healthcare
- Cincrease the cost of healthcare
89The availability of health insurance tends to
- Adecrease the quantity of health care demanded and cause an under allocation of resources to the healthcare industry
- Bincrease the quantity of healthcare demanded and cause an under allocation of resources
- Cincrease the quantity of healthcare demanded and cause an over allocation of resources
90The employer mandate of the PPACA requires that
- Aevery firm must purchase health insurance for their full-time employees or pay $2,000 fine per employee
- Bevery firm with 50 or more full-time employees must purchase health insurance for their full-time employees or pay a $2,000 fine per employee
- Cevery firm with fewer than 50 full-time employees must purchase health insurance for their full-time employees or pay a $2,000 fine per employee
91Defensive medicine refers to the idea that
- Ait is more cost-efficient to prevent illnesses than to cure them
- Bphysicians may require unnecessary testing as a means of protecting themselves against malpractice suits
- Cdoctors know much more about diagnosing and treating illnesses than do health care consumers
92Which of the following statements is true about health care costs in the United States?
- Acosts have risen because increases in the price of healthcare have more than offset reductions in the quantity of healthcare provided
- Bcosts have risen because increases in the quantity of care provided have more than offset price reductions realized through economies of scale
- Ccosts have risen because both the price of healthcare and quantity provided have risen
93The price elasticity of demand of healthcare is
- Aperfectly inelastic
- Brelatively inelastic
- Crelatively elastic
94What does the terms "medical loss" refer to in the healthcare industry?
- Aa premium paid by patients
- Ba payment made by an insurance company for a claim
- Cdeductibles
95Externalities are a type of market failure because
- Abuyers do not have complete information about the product
- Bproducers have too much power
- Cthird parties bears the costs or benefits of a market activity
96The PPACA was intended to expand health care coverage to Americans. Which of the following was not one of the problems with the law in terms of that goal?
- Afirms avoided the employer mandate by cutting worker hours to part-time status
- Binsurance providers are allowed to deny coverage to those with preexisting conditions
- Cmany poor workers were ineligible to receive the subsidies necessary to help them fulfill the personal mandate
97In a perfectly competitive industry, firms are likely to
- Aexit when there are economic profits because they know profits will not last
- Breduce the level of production when there are economic profits
- Center when there are economic profits
98Insurance exchanges:
- Aare government regulated markets where individuals can purchase health insurance to satisfy the personal mandate provision of the PPACA
- Bare expected to significantly increase health care costs by expanding government regulation
- Care government regulated markets where prices are set directly by federal regulators
99A monopoly is characterized by all of the following except
- Athere are only a few sellers each selling a unique product
- Bentry barriers are high
- Cthere are no close substitutes
100Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit maximizing outputs?
- Amarginal revenue equals marginal cost
- Bmarginal revenue is less than price
- Cprice equals marginal cost
101To maintain a monopoly, a firm must have
- Aa perfectly inelastic demand
- Ban insurmountable barrier to entry
- Cmarginal revenue equal to demand
102which of the following is likely to be a monopolist?
- Aa small firm with patent granting it the exclusive right to produce a drug
- Ba large firm, such as HP, that produces a substantial portion of the printer market
- CBell Helicopter that is one of the largest producers of helicopters in the world
103Suppose a monopoly firm produces a medical device and can sell 15 items per month at a price of $2000 each. In order to increase sales by one item per month, the monopolist must lower the price of its medical device by $100 to $1900. What is the marginal revenue for the 16th item?
- A$100
- B$400
- C$1900
104In the documentary Sicko, Donna Keys calls 911 for her 18 month old daughter who has a fever of 104. The ambulance brings her to the closest hospital but the hospital refuses to treat the girl despite Donna's begging. She is escorted out of the hospital and her child passes away. Why did the hospital refuse treatment?
- ADonna's child had a pre-existing condition so her insurance would not cover treatment
- BDonna did not have health insurance
- CDonna did have health insurance for her daughter but the hospital was out of network- she could only be treated at a Kaiser Permanente hospital
105A private good is unique because:
- Anon payers can be preventing from consuming it
- Bit can be enjoyed exclusively by free riders
- Cthe market is likely to produce too little of it
106Which of the following is a basic measure of macroeconomic performance?
- Athe U.S. stock market
- Bgrowth in output
- Cthe U.S. bond market
107Assume the market for organically-grown produce is perfectly competitive. All else equal, as farmers find it less profitable to produce and sell organic produce in this market.
- Athe demand curve will shift to the left and the equilibrium price will decrease
- Bthe supply curve will shift to the left the equilibrium price will increase
- Cthe supply curve will shift to the right, the demand curve will shift to the left, and the equilibrium price will decrease
108Whenever external costs in consumption exist
- Asocial demand is less than market demand
- Bmarket demand is less than social demand
- Cmarket demand and social demand are equal
109If the level of productivity for a perfectly competitive firm increases, then:
- Athe marginal cost curve shifts upward
- Bmarket price increases
- Cthe marginal cost curve shifts downward
110Since those who do not pay for the goods still get to benefit, ____ goods have ___.
- Aprivate; joint-consumers
- Bprivate; free-payers
- Cpublic; minimal costs
- Dpublic; free-riders
111Real GDP measures changes in
- Aprices but not output
- Boutput but not prices
- Cprices and output
112The labor force is smaller than the total population because the labor force does not include:
- Apeople who have jobs
- Bthe very young and very old
- Cpeople looking for a job
113Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry changes $21. Which of the following will happen?
- Athe firm's profits will increase
- Bthe firm's revenue will increase
- Cthe firm will not sell any output
114The Consumer Price Index is used specifically to measure the:
- Ainflation rate for all goods and services
- Bgrowth rate of the economy
- Cinflation rate for a basket of consumer goods and services in the economy
115The unemployed are disproportionally represented among the uninsured because:
- Aone must be working to qualify for Medicaid
- Bmost workers obtain health insurance through their employer
- Cmost are young and in excellent health, so they choose not to purchase health insurance
116In a market economy, producers will produce the goods and services that:
- Aare least expensive to produce
- Bconsumer needs the most
- Cconsumers demand
117If a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54, then to maximize profits the firm should
- Acontinue producing at the current output
- Bproduce a larger level of output
- Cproduce a smaller level of output
118A critical macroeconomic controversy is whether a market economy is inherently:
- Astable or unstable
- Bfair or unfair
- Ccorrupt or uncorrupt
119If an economy is experiencing a recession, the classical approach to achieving full employment is to:
- Ado nothing and wait for the natural market forces to improve the economy
- Bincrease the growth of the money supply
- Cuse all available supply-side options
120The aggregate supply curve is positively sloped because as the price level increases:
- Aprofit margins increase in the short run
- Bcosts of production decline in the short run
- Cthe purchasing power of money increases
121Which of the following is not a reason for the downward slope of the aggregate demand curve?
- Athe real balances effect
- Bthe foreign trade effect
- Cthe cost effect
122A leftward shift in of the aggregate supply curve will cause the equilibrium price level to __ and equilibrium real output to ___.
- Aincrease; decrease
- Bincrease; increase
- Cdecrease; increase
123Which of the following is likely to occur if OPEC increases the amount of oil it supplies and domestic energy prices fall?
- Aaggregate supply will shift to the left
- Baggregate supply will shift to the right
- Caggregate demand will shift to the right
124At macro equilibrium:
- Aexports equals imports
- Bmoney supply equals money demand
- Caggregate demand equals aggregate supply
125According to supply-side theories, if the costs of production rise, then aggregate:
- Ademand shifts to the left
- Bdemand shifts to the right
- Csupply shifts to the left
126Monetary policy
- Arefers to the use of government spending
- Bshifts the aggregate supply curve
- Cis controlled by the Federal Reserve
127If the unemployment rate is lower than the full employment rate and prices are higher than normal, what may have caused this?
- Alack of consumer confidence
- Bincrease in consumer confidence
- Csudden increase in gasoline prices
128Which of the following is likely to occur if people reduce their spending because they are worried about an economic downturn?
- Aaggregate supply will increase or shift to the right
- Baggregate demand will increase or shift to the right
- Caggregate demand will decrease or shift to the left
129What fiscal policy tools are used to shift the aggregate demand curve?
- Agovernment spending and interest rates
- Btaxes and interest rates
- Cgovernment spending and taxes
130Fiscal policy includes:
- Aa decrease in immigration restrictions
- Ba decrease in import barriers
- Can increase in government spending
131____ in consumer confidence will cause ___ in aggregate demand
- Aa decrease; a decrease
- Ba decrease; no change
- Can increase; a decrease
132In a graph of the aggregate demand curve, a decrease in investment by businesses is represented by a
- Aleftward shift of the curve
- Brightward shift of the curve
- Cmovement up the curve
133Which of the following will occur if aggregate demand is below full employment GDP?
- Arecession
- Bexcessive aggregate demand
- Cinflation
134How can we describe a typical recession with AD and AS curves?
- AAD curve shifts right and AS curve shifts right
- BAD curve shifts left and AS curve is constant
- CAD curve shifts left and AS curve shifts left
135The purpose of fiscal stimulus is to shift aggregate:
- Ademand to the left
- Bdemand to the right
- Csupply to the left
136A tax cut is known as:
- Aaggregate demand excess
- Bthe GDP gap
- Cfiscal stimulus
137If consumers spend 98 cents out of every extra dollar received, the:
- AMPC is 98
- BMPS is 1.02
- CMPC is 0.98
138If the government increases taxes and the MPC is 0.5, how will this affect the economy?
- Aoutput increases
- Boutput decreases
- Coutput stays the same
139The marginal propensity to save is:
- Aequal to (1+MPC)
- Bthe fraction of each additional dollar of saving that goes to the stock market
- Cthe fraction of each additional dollar of disposable income that goes to saving
140If government spending increases by 500 million and the MPS is 0.8, what will be the total effect of the government spending in the economy?
- A400 million
- B2.500 million
- C625 million
141Assume an MPC of 0.75. The change in total spending for the economy as a result of a $20 billion new government spending injection would be:
- A$80 billion
- B$27 billion
- C$22 billion
142If aggregate supply is upward sloping, an increase in aggregate demand will result in:
- Aan increase in prices and a decrease in output
- Ban increase in prices and an increase in output
- Ca decrease in prices and a decrease in output
143A period of inflation requires the government to
- Areduce its spending and reduce tax rates
- Breduce its spending and increase tax rates
- Cincrease its spending and reduce tax rates
144Which of the following is not an essential characteristic of money?
- Ait is a store of value
- Bit is backed by gold or silver
- Cit is a standard of value
145The basic money supply includes
- Acurrency, transaction accounts, and traveler's checks
- Bcurrency, transaction accounts, and savings account balances
- Ccurrency, transaction accounts, and credit card balances
146Suppose First National Bank has zero excess reserves. If the required reserve ratio increases, which of the following will happen immediately?
- Abank assets will decrease
- Bthe bank will not have enough required reserves
- Cthe money multiplier will increase
147Money creation occurs when
- Aa person puts cash in a bank
- Ba person deposits a payroll check in their checking account
- Cbanks make loans to borrowers
148Which of the following does not occur when a bank makes a loan?
- Ait creates money
- Bthe money supply increases
- Cit transfers money from spenders to savers
149The money supply becomes smaller when
- Athe federal reserve reduces the reserve requirement
- Ban individual deposits currency into her transaction account
- Can individual repays the money that he borrowed form a bank
150The statement, :My iPhone is worth $300", represents money's function as
- Aa medium of exchange
- Ba deposit creation
- Ca standard of value
151Which of the following functions of money would be violated if inflation were high?
- Aunit of account
- Bstore of value
- Ccertificate of gold
152Which of the following determines the amount of money the banking system as a whole can create?
- Athe quantity of bank reserves
- Bthe quantity of vault cash held by banks
- Cthe gold reserves held by the Federal Reserve
153Which of the following would occur if the Federal Reserve raises the reserve requirement?
- Aaggregate supply curve should shift leftward
- Baggregate supply curve should shift rightward
- Caggregate demand curve should shift leftward
154If the Fed sells more bonds to the public, then the money supply will
- Aincrease and the aggregate demand curve will shift to the right
- Bdecrease and the aggregate demand curve will shift to the right
- Cdecrease the aggregate demand curve will shift to the left
155To decrease the money supply, the Fed can
- Areduce the reserve requirement, raise the discount rate, or sell bonds
- Braise the reserve requirement, raise the discount rate, or sell bonds
- Craise the reserve requirement, reduce the discount rate, or buy bonds
156The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as
- Aopen-market operations
- Bclosed-market operations
- Cdiscounting
157Which of the following is not true about excess reserves?
- Athey change when the reserve requirement changes
- Bthey are equal to the reserve ratio times transaction deposits
- Cthey are bank reserves beyond what the bank is required to hold
158the money multiplier
- Ais equal to the required reserve ratio times transaction deposits
- Bgets larger as the required reserve ratio increases
- Cgets smaller as the required reserve ratio increases
159Monetary policy affects aggregate demand
- Adirectly through the money supply
- Bindirectly through the interest rate
- Cindirectly through the tax level
160When the Fed makes bonds more or less attractive, it influences the
- Aopen market decision
- Bmoney mulitplier
- Cportfolio decision
161Which of the following is not a monetary policy tool for shifting the aggregate demand curve?
- Aopen-market operations
- Bgovernment spending
- Cthe discount rate
162Using aggregate supply and demand curves drawn according to the Keynesian view, which of the following will occur if the Fed buys bonds in the open market and the economy is below full employment?
- Aaggregate demand will shift to the left and the unemployment rate will rise
- Baggregate demand will shift to the right and the unemployment rate will fall
- Caggregate demand will shift to the left and the price level will remain unchanged
163Given an upward-sloping supply curve, attempts to reduce the unemployment through monetary policy could result in inflation when:
- Aaggregate demand shifts too far to the left
- Baggregate demand shifts too far to the right
- Cthe money multiplier is small
164Required reserves
- Amust be held at the regional Fed bank
- Brepresent the dollars that a bank can lend
- Care the minimum amount of reserves a bank is required to hold
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- Quiz on Untitled, created by kcarro14 on 08/12/2014.
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- kcarro14
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