question

Economics is a social science concerned with

answer

the best use of scarce resources to achieve the maximum satisfaction of economic wants.

question

The idea in economics that "there is no free lunch" means that

answer

there are opportunity costs when scarce resources are used for free lunches.

question

Which expression is another way of saying "marginal cost"?

answer

additional cost

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The role of an assumption in an economic theory is to

answer

simplify the theory.

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Another description for ceteris paribus is

answer

other things equal.

question

Which is an illustration of a microeconomic question?

answer

Will a new type of television set increase the number of buyers?

question

Macroeconomics focuses on

answer

total output and the general level of prices in the economy.

question

Refer to the budget line shown in the diagram above. If the consumer's money income is $20, which of the following combinations of goods is unattainable? https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302088_2/xid-69302088_2

answer

4 units of C, and 6 units of D.

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The four factors of production are

answer

land, labor, capital, and entrepreneurial ability

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The production possibilities curve represents

answer

maximum combinations of products available with fixed resources and technology.

question

Refer to the above diagram. This economy will experience unemployment if it produces at point https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302079_2/xid-69302079_2

answer

D. D.

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Capitalism is an economic system that

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gives private individuals and corporations the right to own productive resources.

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What to produce in a market economy is ultimately determined by the

answer

spending decisions of households.

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In the circular flow model, households

answer

buy products and sell resources.

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Markets in which firms sell their output of goods and services are called

answer

product markets.

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A market

answer

is an institution that brings together potential buyers and potential sellers.

question

The demand curve shows the relationship between

answer

price and quantity demanded.

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The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is _____.

answer

direct, inverse

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When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes

answer

the income effect.

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Which of the following would not shift the demand curve for beef?

answer

a reduction in the price of cattle feed

question

MP3 players and MP3 files are

answer

complementary goods.

question

Which of the following is most likely to be an inferior good?

answer

used clothing

question

In the figure below, a decrease in demand is shown by a https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302083_2/xid-69302083_2

answer

shift from D2 to D1.

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The law of supply indicates that

answer

producers will offer more of a product at high prices than they will at low prices.

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The location of the product supply curve depends on

answer

production technology.

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Refer to the table below. If demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5), equilibrium price and quantity will be https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302089_2/xid-69302089_2

answer

$8 and 60 units.

question

Refer to the diagram below. The equilibrium price and quantity in this market will be https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302078_2/xid-69302078_2

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$1.00 and 200.

question

Refer to the diagram below. A surplus of 160 units would be encountered if price was https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302091_2/xid-69302091_2

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$1.60.

question

A television station reports that the price of orange juice has declined but the quantity sold has increased. This situation would be caused by a(n)

answer

increase in supply.

question

In a market with supply and demand curves as shown below, a legal price ceiling of $2.50 will result in https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302086_2/xid-69302086_2

answer

no shortage or surplus.

question

A nation's gross domestic product (GDP)

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can be found by summing C + Ig + G + Xn.

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The GDP is the

answer

monetary value of all final goods and services produced within a nation in a particular year.

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GDP includes

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final, but not intermediate, goods.

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The largest component of total expenditures in the United States is

answer

consumption.

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Value added refers to

answer

the difference between the value of a firm's output and the value of the inputs purchased from others.

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Refer to the data below. GDP is https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302082_2/xid-69302082_2

answer

$121.

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Refer to the data below. NDP is https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302090_2/xid-69302090_2

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$116.

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Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?

answer

The child-care services provided by stay-at-home parents.

question

Refer to the data below. The gross domestic product is https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302085_2/xid-69302085_2

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$307.

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Refer to the data below. The net domestic product is https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302084_2/xid-69302084_2

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$255.

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Refer to the data below. The national income is https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302087_2/xid-69302087_2

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$265.

question

According to the concept of comparative advantage, a good should be produced in that nation where

answer

its domestic opportunity cost is least.

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The primary benefits of international trade include

answer

the more efficient use of world resources and higher living standards.

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Refer to the tables below. The domestic opportunity cost of one unit of X in Alpha is https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302081_2/xid-69302081_2

answer

4 units of Y.

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Refer to the above tables. The domestic opportunity cost of one unit of X in Beta is https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302080_2/xid-69302080_2

answer

2 units of Y.

question

Refer to the tables below. According to the concept of comparative advantage https://learn.vccs.edu/bbcswebdav/pid-77491011-dt-content-rid-69302092_2/xid-69302092_2

answer

Beta should specialize in X; Alpha in Y.

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Other things equal, Canadian imports of U.S. goods

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create a supply of Canadian dollars in the foreign exchange market.

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Import quotas are

answer

maximum limits on the quantity or total value of specific products imported to a nation.

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The World Trade Organization (WTO)

answer

hears and rules on trade disputes between nations.

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A nation's true gain from international trade is

answer

an overall increase in output obtained through specialization and exchange.

question

Which of the following is a measure of economic growth that is most useful for comparing living standards?

answer

Increases in real GDP per capita

question

Labor productivity is measured by

answer

real output per worker hour

question

Refer to the diagram below. The phases of the business cycle from points A to D are, respectively https://learn.vccs.edu/bbcswebdav/pid-77491154-dt-content-rid-69302094_2/xid-69302094_2

answer

Peak, recession, trough, expansion

question

What is the primary reason that changes in total spending lead to cyclical changes in output and employment?

answer

Prices are sticky in the short run

question

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are

answer

Excluded from the labor force

question

Cyclical unemployment results from

answer

a deficiency of spending on goods and services

question

The best example of a "frictionally unemployed" worker is one who

answer

Is in the process of voluntarily switching jobs

question

When inflation occurs

answer

The purchasing power of money decreases

question

The annual rate of inflation can be found by subtracting

answer

last year's price index from this year's price index and dividing the difference by last year's price index

question

Unanticipated inflation tends to penalize

answer

People who save money in financial institutions

question

Real income is found by

answer

dividing nominal income by the price index (in hundredths)

question

The consumption schedule shows the relationship of household consumption to the level of

answer

Disposable income

question

The MPC can be defined as the

answer

Change in consumption divided by the change in income

question

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

answer

Real interest rate

question

If the slope of the consumption schedule is .75, then the slope of the saving schedule is

answer

0.25

question

Which of the following may shift the consumption schedule upward?

answer

A decrease in interest rates

question

As the consumption and saving schedules relate to real GDP, an increase in taxes will shift

answer

Downward both the consumption and saving schedules

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

The multiplier effect relates

answer

Changes in spending to changes in real GDP

question

Injections into the income-expenditure stream include

answer

Investment and exports

question

Leakages from the income-expenditure stream are

answer

Saving, taxes, and imports

question

Planned investment is $20 billion and saving is $9 billion at the $175 billion level of output in a private, closed economy. Actual investment at this level must be

answer

$9 billion

question

Refer to the graph below. If this economy was an open economy without a government sector, the level of GDP would be https://learn.vccs.edu/bbcswebdav/pid-77491154-dt-content-rid-69302096_2/xid-69302096_2

answer

$300 billion

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Refer to the graph below. The size of the multiplier associated with changes in government spending in this economy is https://learn.vccs.edu/bbcswebdav/pid-77491154-dt-content-rid-69302095_2/xid-69302095_2

answer

5.00

question

In a recessionary expenditure gap, the equilibrium level of real GDP is

answer

Less than full-employment GDP

question

The amount by which aggregate expenditures exceed those associated with the full-employment level of domestic output can best be described as

answer

An inflationary expenditure gap

question

In 2008, the Federal government provided tax rebate checks to taxpayers in the hope that

answer

C would shift up

question

The aggregate demand curve is the relationship between the total demand for output and the

answer

Price level

question

The foreign purchases, interest rate, and real-balances effects explain why the

answer

Aggregate demand curve is downward-sloping

question

An expected decline in the prices of consumer goods will

answer

Decrease aggregate demand

question

An increase in expected future income will

answer

Increase aggregate demand

question

An aggregate supply curve represents the relationship between the

answer

Price level and the production of real domestic output

question

The upward slope of the short-run aggregate supply curve is based on the assumption that

answer

Wages and other resource prices do not respond to price level changes

question

A fall in labor costs will cause aggregate

answer

Supply to increase

question

A decrease in aggregate supply means

answer

The real domestic output would decrease and the price level would rise

question

When the Federal government uses taxation and spending actions to stimulate the economy it is conducting

answer

Fiscal policy

question

If Congress passes legislation to increase government spending to counter the effects of a recession, then this would be an example of a(n)

answer

Expansionary fiscal policy

question

Refer to the graph below. What combination would most likely cause a shift from AD1 to AD3? https://learn.vccs.edu/bbcswebdav/pid-77491741-dt-content-rid-69302074_2/xid-69302074_2

answer

An increase in taxes and a decrease in government spending

question

The economy starts out with a balanced Federal budget. If the government then implements expansionary fiscal policy, then there will be a

answer

Budget deficit

question

You are given the following information about aggregate demand at the existing price level for an economy (1) consumption = $500 billion; (2) investment = $50 billion; (3) government purchases = $100 billion; and (4) net export = $20 billion. If the full-employment level of GDP for this economy is $620 billion, then what combination of actions would be most consistent with closing the GDP-gap here?

answer

Decrease government spending and increase taxes

question

Which of the following is an example of built-in stability? As real GDP decreases, income tax revenues

answer

Decrease and transfer payments increase

question

Refer to the graph below. A budget surplus would be associated with GDP level https://learn.vccs.edu/bbcswebdav/pid-77491741-dt-content-rid-69302072_2/xid-69302072_2

answer

L

question

The cyclically-adjusted budget measures the Federal budget deficit or surplus if

answer

The economy was at full employment

question

Assume that the economy is in a recession and there is a budget deficit. A strict balanced-budget amendment that would require the Federal government to balance its budget during a recession would be

answer

Contractionary and worsen the effects of the recession

question

Refer to the data below. The direction of fiscal policy became more expansionary from https://learn.vccs.edu/bbcswebdav/pid-77491741-dt-content-rid-69302071_2/xid-69302071_2

answer

2002 to 2003

question

A Federal budget deficit is financed by the

answer

Government issuance or sale of Treasury securities

question

The public debt is the

answer

Total of all past deficits minus all past surpluses

question

The functions of money are to serve as a

answer

Unit of account, store of value, and medium of exchange

question

An asset's liquidity refers to its ability to be

answer

A means of payment

question

Which definition(s) of the money supply include(s) only items which are directly and immediately usable as a medium of exchange?

answer

M1

question

Refer to the table below. The size of the M2 money supply is https://learn.vccs.edu/bbcswebdav/pid-77491741-dt-content-rid-69302073_2/xid-69302073_2

answer

$4,330

question

United States currency has value primarily because it

answer

Is relatively scarce, is legal tender, and is generally acceptable in exchange for goods and services

question

If the price index rises from 100 to 130, then the purchasing power of the dollar will fall by about

answer

23 percent

question

The Federal Reserve System consists of which of the following?

answer

Board of Governors and the 12 Federal Reserve Banks

question

The Federal Reserve System of the U.S. is the country's

answer

Central bank

question

The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for

answer

Setting the Fed's monetary policy and directing the purchase and sale of government securities

question

How many Federal Reserve Banks are there?

answer

12

question

The main function of the Federal Reserve System is to

answer

Control the money supply

question

Which of the following financial institutions pool deposits of customers and use the money to buy a portfolio of stocks or bonds or both?

answer

Mutual funds

question

The use of a credit card is most similar to

answer

Obtaining a short-term loan

question

The fractional reserve system of banking started when goldsmiths began?

answer

Issuing paper receipts in excess of the amount of gold held

question

A bank's net worth is equal to its?

answer

Assets minus its liabilities

question

A checkable deposit at a commercial bank is a(n)?

answer

Asset to the depositor and a liability to the bank

question

Cash held by a bank in its vault is a part of the bank's?

answer

Reserves

question

The reserve ratio is equal to?

answer

A commercial bank's required reserves divided by its checkable-deposit liabilities

question

A commercial bank has checkable-deposit liabilities of $50,000 and a reserve ratio of 20 percent. What is the amount of required reserves?

answer

$10,000

question

Suppose that the reserve ratio is 6%, and applies only to checkable deposits. A bank has non-checkable time deposits of $300 million, checkable deposits of $100 million, and reserves of $8 million. What are the excess reserves of this bank?

answer

$2 million

question

A commercial bank has no excess reserves until a depositor places $2,000 in cash in the bank. The reserve ratio is 10%. The bank then lends $1,500 to a borrower. As a consequence of these transactions the bank's excess reserves are?

answer

Increased by $300

question

The multiple by which the commercial banking system can expand the supply of money is equal to?

answer

The reciprocal of the reserve ratio

question

The establishment of a Federal deposit insurance program resulted from the?

answer

Bank panics of 1930-1933

question

A consumer holds money to meet spending needs. This would be an example of the?

answer

Transactions demand for money

question

There is an asset demand for money primarily because of which function of money?

answer

Store of value

question

In which case would the quantity of money demanded by the public tend to increase by the greatest amount?

answer

The interest rate decreases and nominal GDP increases

question

An increase in the money supply is likely to reduce?

answer

Interest rates

question

Loans of the Federal Reserve Banks to commercial banks are?

answer

An asset of the Federal Reserve Banks and a liability for commercial banks

question

The purchase and sale of government securities by the Fed is called?

answer

Open market operations

question

Which of the following Fed actions increases the excess reserves of commercial banks?

answer

Lower the reserve ratio

question

The major purpose of the Federal Reserve buying government securities in open market operations is to?

answer

Allow banks to increase their lending

question

Which of the following statements is true?

answer

Bond prices and the interest rate are inversely related

question

When the interest rate falls, the?

answer

Total amount of money demanded increases

question

What policy tool of the Federal Reserve relies on bank borrowing to be effective?

answer

The discount rate

question

A newspaper headline reads

answer

"Fed Cuts Federal Funds Rate for Fifth Time This Year." This headline indicates that the Federal Reserve is most likely trying to?:Ease monetary policy

question

The interest rate that banks use as a benchmark rate for interest rates on a wide range of loans to businesses and individuals is the?

answer

Prime interest rate

question

The Federal Reserve can increase aggregate demand by?

answer

Reducing the discount rate

question

Other things equal, an increase in consumer wealth will?

answer

Increase aggregate demand

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