Econ 1 Final Practice Exam Pt. 1 – Flashcards

Which of the following is FALSE about the Great Recession in the US?

According to Keynesian Theory, recessions are caused by a downfall in Aggregate Demand

Which of the following statements explains the mechanism through which Wage Stickiness contributes to fall in Aggregate Demand

According to the Monetarists, excessive increase in Money Supply causes inflation

Which of the following is a good example of a Technology Shock according to Real Business Cycle Theory

Suppose a bout of severe weather drives up agricultural costs, increases the costs of transporting goods and services, and increases the costs of producing goods and services in this economy. The short-run economic outcome resulting from the increase in production costs is known as Now suppose that the government decides not to take any action in response to the short-run economic impact of the severe weather. In the long-run, when the government does nothing, the output in the economy will be $110 billion billion and the price level will be $110

In 1932 during the Great Depression, when higher interest rates caused many businesses and banks to fail, what did the Federal Reserve do to stabilize the economy?

If Aggregate Demand falls because of falling Consumption, what would be an appropriate Fiscal Policy?

Which of the following is a good example of an expansionary monetary policy

Economics is best defined as the study of

Your opportunity cost of going to a movie is

A marginal change is one that

Adam Smith's phrase "invisible hand" refers to

Governments may intervene in a market economy in order to

If a nation has high and persistent inflation, the most likely explanation is

Which of the following describe some of the trade-offs faced by a family deciding whether to buy a new car? Check all that apply

Which of the following describe some of the trade-offs faced by a member of Congress deciding how much to spend on national parks? Check all that apply

You are trying to decide whether to take a vacation. Most of the costs of the vacation (airfare, hotel, and forgone wages) are measured in dollars, but the benefits of the vacation are psychological.

You were planning to spend Saturday working at your part-time job, but a friend asks you to go skiing. 1. Which of the following are included in the true cost of going skiing? Check all that apply. Now suppose you had been planning to spend the day studying at the library. 2. What is the cost of going skiing in this case? Check all that apply.

The company that you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent meeting, your salespeople report that the introduction of competing products has reduced the expected sales of your new product to $3 million. If it would cost $1 million to finish development and make the product, you _______ go ahead and do so. The most you should pay to complete development is _____ million.

The provision of Social Security gives people the incentive to save ____ Correct while working. Moreover, the reduction in benefits associated with higher earnings gives people the incentive to __________ Correct past age 65.

This change gives people the incentive to find a job ________ quickly than if welfare benefits lasted forever. The loss of benefits after two years will result in the distribution of income becoming ______ equal. In addition, the economy will be ______ efficient because of the change in working incentives.

Regulating cable TV prices Providing some poor people with vouchers that can be used to buy food Prohibiting smoking in public places Breaking up Standard Oil (which once owned 90% of all oil refineries) into several smaller companies Imposing higher personal income tax rates on people with higher incomes Instituting laws against driving while intoxicated

1. Which of the following statements support the reality that your standard of living is different from that of your parents or grandparents when they were your age? Check all that apply. 2. True or False: Labor unions are the primary reason the standard of living in the United States has changed over time.

During the Revolutionary War, the American colonies could not raise enough tax revenue to fund the war effort fully; to make up the difference, the colonies decided to print more money. Printing money to cover expenditures is sometimes referred to as an inflation tax. Who is being taxed when more money is printed?

An economic model is

The circular-flow diagram illustrates that, in markets for the factors of production,

A point inside the production possibilities frontier is

An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were to change consumers' preferences, it would

All of the following topics fall within the study of microeconomics EXCEPT

Which of the following is a positive, rather than a normative, statement?

Selena pays a storekeeper $1 for a quart of milk. Stuart earns $4.50 per hour working at a fast-food restaurant. Shanna spends $30 to get a haircut. Salma earns $10,000 from her 10% ownership of Acme Industrial.

The production possibilities frontier has a bowed-out shape because the quantity of guns the economy must give up in order to produce more butter _________________ the more butter is produced. In other words, the opportunity cost of butter _______ with increased production.

Show what happens to the production possibilities frontier (PPF) if new technology develops that makes cleaning the air cheaper.

An economy consists of three workers: Larry, Moe, and Curly. Each works 10 hours a day and can produce two services: mowing lawns and washing cars. In an hour, Larry can either mow 1 lawn or wash 1 car; Moe can either mow 1 lawn or wash 2 cars; and Curly can either mow 2 lawns or wash 1 car.

1. A family's decision about how much income to save 2. The effect of government regulations on auto emissions 3. The impact of higher national saving on economic growth 4. A firm's decision about how many workers to hire 5. The relationship between the inflation rate and changes in the quantity of money

1. Society faces a short-run trade-off between inflation and unemployment. 2. A reduction in the rate of money growth will reduce the rate of inflation. 3. The Federal Reserve should reduce the rate of money growth. 4. Society ought to require welfare recipients to look for jobs. 5. Lower tax rates encourage more work and more saving.