Practice Econ Test

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Quiz by , created almost 6 years ago

Econ 101 Quiz on Practice Econ Test, created by mjheg on 03/05/2013.

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Created by mjheg almost 6 years ago
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Question 1

Question
Consider the employment situation for the following three people: William lost his job four months ago. He would like to work, but gave up searching for a job six weeks ago. Frank quit his job six weeks ago and went back to school full time. Elizabeth lost her full-time job last month. Since then, she's worked one day per week through a temp agency
Answer
  • Elizabeth and William
  • Frank and Elizabeth
  • Frank and William
  • All of them are considered unemployed
  • None of them are considered unemployed

Question 2

Question
Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?
Answer
  • Allocative efficiency
  • Productive efficiency
  • Profit maximization
  • Marginal efficiency
  • Allocation maximization

Question 3

Question
Which one of the following scenarios would be least likely to change one's behavior?
Answer
  • The city of Saskatoon pays everyone a penny for each can they recycle to promote environmental protection
  • To make people eat healthier, the city of Bakersville tells its resident to eat whole wheat bread instead of white bread.
  • The country of Ravamock enacts a policy to fine companies 20% of their earnings if the safety standards are not acceptable.
  • A basketball team hires three new famous basketball stars who then clamor for other players to come and join their team to win the guaranteed championship.

Question 4

Question
Fiscal and monetary policies are less effective when
Answer
  • the a recession is caused by a real shock
  • the recession is caused by inflation
  • a firm has market dominance
  • the economic boom is caused by a real shock

Question 5

Question
Which of the following describes the process whose ultimate result is illustrated by the multiplier?
Answer
  • When people spend money, the money ends up in the hands or bank accounts of other people who then use that money in some way
  • When people see the government spending more money, they realize that the government thinks prices are low and thus a good time to buy things
  • When people see others spending money, they know that the economy is about to improve and so they also spend money
  • The multiplier exists because money today is always more valuable than money spent in the future due to inflation and interest. As such, when money is spent today, its value to the economy is a multiple of the value to the economy of money spent in the future.

Question 6

Question
As interest rates ________ , investment ___________.
Answer
  • decreases; decreases
  • increases; increases
  • increases; stays the same
  • decreases; increases
  • stays the same; decreases

Question 7

Question
The unemployment rate __________ if the number of discouraged workers increases.
Answer
  • decreases
  • increases
  • stays the same
  • There is not enough information to determine and answer

Question 8

Question
What is not a way to increase the money supply (Expansionary Policy)
Answer
  • Open market purchases
  • Lower the discount rate
  • Open market sales
  • Lower the reserve requirement

Question 9

Question
As the income tax increases, labor force participation _______, and as incentive _______ labor force increases.
Answer
  • decreases; increases
  • decreases; decreases
  • increases; increases
  • increases; decreases

Question 10

Question
Which of the following is not a problem with inflation
Answer
  • Interacts with other taxes
  • Causes price confusion and money illusion
  • Painful to stop
  • Redistributes wealth
  • Can cause a closed economy

Question 11

Question
Maggie gets a 10% raise, and therefore decides to take on a higher mortgage. Inflation during this period has increased by 10%. What has Maggie experienced?
Answer
  • Money illusion
  • Wealth redistribution
  • Real GDP growth
  • Price confusion
  • Interaction with other taxes

Question 12

Question
What happens when inflation is higher than the expected inflation rate?
Answer
  • Nothing happens
  • Wealth is redistributed from the lender to the borrower
  • Wealth is redistributed from the borrower to the lender
  • Both the borrower and the lender are benefited.

Question 13

Question
John's real returns on his loan to Tim are negative. What should John do?
Answer
  • Save the money so someone else can borrow it and therefore increase investment
  • Spend the money because it is gaining value
  • Spend the money because it is losing value
  • Do nothing

Question 14

Question
If the Reserve releases $1,000 and the reserve rate is 5%, how much will the money supply change?
Answer
  • 10,000
  • 5,000
  • 20,000
  • 21,000
  • 15,000

Question 15

Question
Which is not a way to decrease the money supply (Contractionary Policy)
Answer
  • Conduct open market sales
  • Raise discount rate
  • Lower discount rate
  • Raise Reserve requirement

Question 16

Question
What is one problem that arises from bank bailouts?
Answer
  • Systematic risk
  • Moral hazard
  • Confidence risk
  • Inflation

Question 17

Question
What is not a limit to fiscal policy?
Answer
  • Crowding Out
  • Drop in the Bucket
  • Matter of Timing
  • Real Shocks
  • Aggregate Demand Shocks

Question 18

Question
Which is not considered money?
Answer
  • Currency
  • Reserves
  • Checkable deposits
  • Savings deposits
  • Credit Cards

Question 19

Question
Which of the following is not a major role of the Federal Reserve?
Answer
  • Controlling the money supply
  • Setting income taxes
  • Clearing checks between banks
  • Lender of last resort

Question 20

Question
If your nominal wage rises faster than the price level then we can say your real wage has _______ and the purchasing power of your income has ________
Answer
  • risen;fallen
  • fallen;fallen
  • risen;risen
  • fallen;risen

Question 21

Question
What is market failure?
Answer
  • It refers to the inability of a market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.
  • It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost.
  • It refers to a situation where an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event.
  • It refers to a breakdown in a market economy because of widespread corruption in government.

Question 22

Question
Which of the following is an example of a good/service that is non-excludable and rival in consumption?
Answer
  • Radio Spectrum
  • National Defense
  • Charitable Donations
  • Lighthouse

Question 23

Question
Don't forget the markup in monopoly graphs! (Cover ATC)
Answer
  • Okay
  • What?

Question 24

Question
In a noncompetetive market, if the average cost is higher than the price, the market will
Answer
  • Suffer a loss
  • Break even
  • Make a profit
  • Be forced to exit the market

Question 25

Question
Why does the short run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?
Answer
  • Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices.
  • Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.
  • Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices.
  • Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices.

Question 26

Question
An increase in government spending growth will cause the Solow growth curve to
Answer
  • shift outward
  • shift inward
  • remain unchanged
  • first shift outward then shift inward

Question 27

Question
Which of the following will not cause aggregate demand to increase?
Answer
  • decreased imports and lower taxes
  • higher government spending and increased exports
  • increased net exports and higher taxes
  • faster money growth rate and increased wealth