question

Which of the following is a factor of production?

answer

Money

question

In a production possibilities graph with just two products in an economy, the graph shows the quantity of:

answer

One product on the vertical axis and the quantity of the another product on the horizontal axis

question

If the opportunity cost of producing extra units of one good (expressed in terms of the amount of another good that is sacrificed) remains constant, then the shape of the production possibilities curve is:

answer

A straight downsloping line

question

Which statement is an economic rationale for the law of increasing opportunity costs?

answer

Many economic resources are better at producing one product than another

question

When a society is under-allocating resources to the production of a good or service, then the:

answer

Marginal benefit is greater than the marginal cost

question

In a graph of the marginal benefit (MB) and marginal cost (MC) of national defense goods, a rightward shift or increase in the MB curve will:

answer

Increase the allocation of resources to national defense

question

To improve the rate of growth of labor productivity a number of economists have suggested that there needs to be:

answer

An increase in investment relative to consumption

question

One major assumption of the economic perspective is:

answer

That individuals' behavior reflect rational self-interest

question

The purpose of the ceteris paribus assumption used in economic analysis is to:

answer

Focus on the effect of a single factor on a certain variable

question

Assume that a consumer purchases only two products and there is a decrease in the consumer's income. The prices of the two products stay the same. The change in income will result in a

answer

Shift of the budget line inward to the left

question

The production possibilities curve represents:

answer

The maximum combinations of products that can be produced with fixed resources and technology

question

The circular flow model:

answer

Illustrates the interdependence of businesses and consumers

question

Which statement is correct?

answer

In a market system, prices serve to ration goods and services to consumers

question

A characteristic of the market system is:

answer

Extensive use of barter

question

The system where workers concentrate on specialized tasks to make a product is referred to as:

answer

Division of labor

question

Consider a barter system where you have pens, but you want pencils. To satisfy your want there must be:

answer

Coincidence of wants

question

The production technique that is most efficient is the one that produces a given amount of output:

answer

at the lowest total cost

question

As new firms enter an expanding industry:

answer

Economic profits tend to decline

question

"For whom is a given mix of goods and services to be produced? How, in other words, are the society's outputs to be distributed among its members?" In a market economy, this problem is resolved primarily in the:

answer

Private sector through the earning and spending of income

question

Which fundamental economic question does a market system primarily address by focusing on technological advance and capital accumulation?

answer

How will the system promote progress?

question

The development of the Internet and e-mail to replace regular mail would be an example of:

answer

Creative destruction

question

The money income of households consists of the sum of:

answer

Wages plus rents plus interest plus profits

question

In the circular flow diagram, households:

answer

Make consumption expenditures and receive goods and services

question

In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are:

answer

substitute goods and the higher price for oil increased the demand for natural gas.

question

If products A and B are complements and the price of B decreases the:

answer

demand for A will increase and the quantity of B demanded will increase.

question

When an economist says that the demand for a product has increased, this means that:

answer

consumers are now willing to purchase more of this product at each possible price.

question

The term "quantity demanded":

answer

refers to the amount of a product that will be purchased at some specific price.

question

If we say that a price is too high to clear the market, we mean that:

answer

quantity supplied exceeds quantity demanded.

question

Allocative efficiency refers to:

answer

the production of the product mix most wanted by society.

question

A government subsidy per unit of output increases supply.

answer

True

question

A government tax per unit of output reduces supply.

answer

True

question

If two goods are complements:

answer

a decrease in the price of one will increase the demand for the other.

question

An increase in the quantity demanded means that:

answer

price has declined and consumers therefore want to purchase more of the product.

question

An improvement in production technology will:

answer

shift the supply curve to the right.

question

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n):

answer

increase in the supply of gasoline.

question

At the current price there is a shortage of a product. We would expect price to:

answer

increase, quantity demanded to decrease, and quantity supplied to increase.

question

Which of the following is a consequence of rent controls established to keep housing affordable for the poor?

answer

All of these

question

The business cycle depicts:

answer

short-run fluctuations in output and employment.

question

Real GDP measures the:

answer

value of final goods and services produced within the borders of a country, corrected for price changes.

question

Real GDP is preferred to nominal GDP as a measure of economic performance because:

answer

nominal GDP uses current prices and thus may over- or understate true changes in output.

question

For an economy to increase investment, it must:

answer

increase saving.

question

Prices tend to be sticky because:

answer

firms are worried that frequent price changes would annoy consumers.

question

(Consider This) The U.S. recession which occurred in 2008 and 2009 represented a case where:

answer

prices were relatively sticky and most of the impact was on total output.

question

The business cycle is primarily concerned with changes in the level of overall prices over time.

answer

False

question

Modern economic growth refers to any situation where a nation's output increases.

answer

False

question

(Consider This) If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment.

answer

False

question

In situations of sticky prices and negative demand shocks we would expect firms to:

answer

build up inventories before reducing production.

question

(Consider This) What is the difference between financial investment and economic investment?

answer

Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

question

The business cycle reflects both short-run fluctuations in output and long-run economic growth.

answer

True

question

The gross domestic product (GDP) concept accounts for society's valuation of the relative worth of goods and services by using:

answer

A monetary measure

question

The two ways of looking at GDP are the:

answer

Expenditures approach and income approach

question

When gross private domestic investment exceeds depreciation, it can be concluded that:

answer

Net investment is positive

question

If the price index is 130, this means that:

answer

Prices are 30 percent higher than in the base year

question

Nominal GDP differs from real GDP because:

answer

Real GDP results from adjusting for changes in the price level

question

The value added in an industry includes the wages earned by workers in the industry.

answer

True

question

The total volume of business sales in our economy is several times larger than GDP because:

answer

The GDP excludes intermediate transactions

question

Money spent on the purchase of a new house is included in the GDP as a part of:

answer

Gross domestic private investment

question

Gross private domestic investment is the value of capital goods bought by firms plus:

answer

All construction and changes in business inventories

question

In an economy that is experiencing a shrinking production capacity:

answer

Depreciation exceeds gross investment

question

In the expenditures approach of national income accounting, C, Ig, and G include expenditures for:

answer

Domestically produced as well as imported goods and services

question

The expenditures or output approach to GDP measures it by summing up:

answer

The total spending for consumption, investment, net exports, and government purchases

question

Which of the following represents an income flow in the circular flow of domestic output and national income?

answer

Corporate profits

question

The amount of new output produced per year for both consumption and additions to capital stock is measured by:

answer

NDP

question

The value of a sale of a share of stock is considered to be an investment in national income accounting.

answer

False

question

Changes in business inventories are included as part of investment in the national income accounts.

answer

True

question

If the University of Missouri builds a new laboratory, it will be counted as part of Ig in GDP.

answer

False

question

Which of the following is a demand factor in economic growth?

answer

An increase in total spending in the economy

question

Economic growth can best be portrayed as a:

answer

Rightward shift of the production possibilities curve

question

Real GDP or total output in any year is equal to:

answer

Number of worker-hours multiplied by labor productivity

question

Society can increase its output and income by increasing basically one or both of two factors:

answer

Its resources and the productivity of the resources

question

The number of worker-hours available in an economy is determined by the following, except:

answer

Unemployment rate of the workforce

question

Which of the following will NOT increase the average productivity of labor?

answer

An increase in the size of the labor force

question

The growth of per capita income in China is largely the result of:

answer

An increased use of capital goods

question

The "rule of 70" is a formula for determining the approximate number of:

answer

Years that it would take for a value (like real GDP) to double

question

Historically, the total amount of real capital per worker in the United States has:

answer

Increased significantly and made labor more productive

question

Which of the following is a main source of increasing returns in recent years?

answer

More learning by doing

question

Over the past twenty-five years China has experienced nearly a:

answer

9 percent average annual growth rate and real output has more than quadrupled

question

In which industry or sector of the economy is output least likely to be affected by the business cycle?

answer

Agricultural commodities

question

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

answer

Cyclical

question

Search and wait unemployment is another way to describe:

answer

Frictional unemployment

question

A high unemployment rate most likely means that there is a:

answer

Large GDP gap in the economy

question

"Depression means idleness. And idleness means loss of skills, loss of self-respect, plummeting morale, family disintegration, and sociopolitical unrest." This quote describes some of the:

answer

Noneconomic costs of unemployment

question

When inflation occurs:

answer

The purchasing power of money decreases

question

Inflation caused by an increase in aggregate spending is referred to as:

answer

Demand-pull inflation

question

Inflation that occurs when total spending is greater than the economy's ability to produce output at the existing price level is:

answer

Demand-pull inflation

question

The duration of a recession measures the decline in real output during the recession.

answer

False

question

Which phase of the business cycle would be most closely associated with an economic contraction?

answer

Recession

question

Unemployment that occurs when there is deficient demand for the goods and services of an economy is called:

answer

Cyclical unemployment

question

A mismatch between the geographic location of workers and the location of job openings would result in what type of unemployment?

answer

Structural

question

"Full employment" refers to the situation when there is:

answer

No cyclical unemployment

question

Which of the following is a correct statement?

answer

Demand-pull inflation will continue so long as there is excess total spending in the economy

question

Personal saving is equal to:

answer

Disposable income minus consumption

question

Which of the following would shift the consumption schedule downward?

answer

An increase in the probability of a recession

question

An investment demand curve shows the varying amounts of investment that would be undertaken at various levels of:

answer

Real interest rate

question

The multiplier effect relates:

answer

Changes in spending to changes in real GDP

question

The change in real GDP resulting from an initial change in spending can be calculated by:

answer

Multiplying the multiplier by the initial change in spending

question

When the consumption schedule is plotted on a graph:

answer

Consumption is on the vertical axis and disposable income is on the horizontal axis

question

The fraction, or percentage, of total income which is consumed is called the:

answer

Average propensity to consume

question

If businesses feel more optimistic about the state of the economy, then this change is likely to:

answer

Shift the investment demand curve to the right

question

Saving equals disposable income minus consumption.

answer

True

question

If people saved more of any extra income that they receive, then the consumption schedule will become flatter.

answer

False

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