question

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

answer

Government

question

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

answer

market-oriented economy

question

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

answer

Division of Labor

question

If macroeconomics looks at the economy as a whole, it focuses on which of the following? A.households B.business firms C.unemployed people D.the division of labor

answer

C.unemployed people

question

In the ____________, households work and receive payment from firms. A.financial investment market B.financial capital market C.labor market D.savings market

answer

C. Labor Market

question

In the ______________, households receive goods and services and pay firms for them. A.labor market B.financial capital market C.goods and services market D.savings market

answer

C. Goods and Services market

question

Which of the following best describes a monetary policy tool? A.interest rates B.taxes C.household savings D.government spending

answer

A. Interest Rates

question

Which of the following best describes a fiscal policy tool? A.government spending B.bank lending C.financial capital markets D.household spending

answer

A. Government Spending

question

The basic difference between macroeconomics and microeconomics is: A.microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. B.microeconomics concentrates on the behaviour of individual consumers while macroeconomics focuses on the behaviour of firms. C.microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. D.microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

answer

C. microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

question

Macroeconomic topics do not usually include: A.the profit maximizing decisions of an individual manufacturer. B.the rate of inflation. C.the rate of unemployment. D.economic growth.

answer

A.the profit maximizing decisions of an individual manufacturer.

question

Specialization: A.leads to greater self-sufficiency. B.can lead to an increase in overall production. C.allows workers to develop skills by working on a large number of tasks D.is always the result of an inefficient use of resources

answer

Correct B.can lead to an increase in overall production.

question

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: A.all consumers. B.buyers and sellers. C.producers and input suppliers. D.producers and government planning committees.

answer

Correct B.buyers and sellers.

question

The circular flow diagram of economic activity is a model of the: A.flow of goods, services, and payments between households and firms. B.influence of government on business behaviour. C.role of unions and government in the economy. D.interaction among taxes, prices, and profits.

answer

Correct A.flow of goods, services, and payments between households and firms.

question

Which of the following best characterizes the circular flow of income? A.Businesses buy resources from the government, and households buy goods and services from businesses. B.Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. C.The government purchases resources from businesses and households and then sells goods and services to businesses and households. D.Households buy factors of production from businesses, and businesses buy goods and services from households.

answer

Correct B.Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

question

_____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines. A.Skill B.Specialization C.Economies of scale D.Division of labor

answer

Correct C.Economies of scale

question

Why is there scarcity? A.Because the opportunity set determines this. B.Because theory dictates it. C.Because our unlimited wants exceed our limited resources D.Because human wants are limited.

answer

C. Because our unlimited wants

question

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: A.nothing, because he enjoys playing basketball more than studying. B.the increase in skill he obtains from playing basketball for that hour. C.the benefit to his grades from studying for an hour D.nothing, because he had a free pass into the sports complex to play basketball.

answer

Correct C.the benefit to his grades from studying for an hour

question

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. A.utility B.marginal analysis C.the budget constraint D.consumption

answer

Correct B.marginal analysis

question

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. A.marginal utility B.sunk costs C.marginal analysis D.budget constraints

answer

Correct B.sunk costs

question

Economists refer to this pattern, the ___________________________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines. A.law of trade-offs B.law of diminishing marginal utility C.production possibilities frontier D.law of increasing marginal utility

answer

Correct B.law of diminishing marginal utility

question

As a consequence of the problem of scarcity: A.There is never enough of anything B.Individuals have to make choices from among alternatives C.Production has to be planned by government D.Things which are plentiful have relatively high prices

answer

B.Individuals have to make choices from among alternatives

question

A schedule or curve that shows the various combinations of two products a consumer can purchase with a specific amount of money income is: A.A budget line B.A tradeoff C.A tangent point D.An optimal output

answer

A.A budget line

question

Assume that a consumer has $12 in income and she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. If the consumer spent all of her money on either apples or bananas, how many apples or how many bananas would she be able to buy? A.12 apples or 8 bananas B.8 apples or 12 bananas C.16 apples or 12 bananas D.8 apples or 16 bananas

answer

Correct D.8 apples or 16 bananas

question

Assume that a consumer has $12 in income and she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. If the consumer decides to buy 4 apples, how many bananas can she also buy with the rest of her income? A.8 bananas B.4 bananas C.6 bananas D.10 bananas

answer

Correct A.8 bananas

question

Assume that a consumer has $12 in income and she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. For this consumer, the opportunity cost of buying one more apple is A.0.5 of a banana B.0.75 of a banana C.1 banana D.2 bananas

answer

Correct D.2 bananas

question

The production possibilities curve represents: A.The maximum amount of labor and capital available for production B.The combinations of goods and services among which consumers are indifferent C.The maximum combinations of products that can be produced with fixed resources and technology D.The maximum rate of growth of capital and labor in an economy over time

answer

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

question

Along a production possibilities curve, an increase in the production of one good can be accomplished only by: A.Decreasing the production of the other good B.Increasing the production of the other good C.Holding constant the production of the other good D.Decreasing the price of the other good

answer

Correct A.Decreasing the production of the other good

question

The law of increasing opportunity costs says that: A.Costs of production increase and then decrease B.Increases in wages cause increases in the costs of production C.Along a production possibilities curve, increases in the production of one good require larger and larger sacrifices of the other good D.Along a production possibilities curve, increases in the production of one good make the production of that good become easier and easier

answer

Correct C.Along a production possibilities curve, increases in the production of one good require larger and larger sacrifices of the other good

question

Which statement is an economic rationale for the law of increasing opportunity costs? A.The economy is employing all of its available resources B.Many economic resources are better at producing one product than another C.In any economy, the state of technology is changing and resources are variable D.The economy is achieving productive efficiency by producing goods at the least cost

answer

B.Many economic resources are better at producing one product than another

question

A nation that devotes more of its resources to capital investment is likely to: A.Cause its production possibilities curve to shift outward B.Cause its production possibilities curve to shift inward C.Increase the slope of its production possibilities curve D.Decrease the slope of its production possibilities curve

answer

Correct A.Cause its production possibilities curve to shift outward

question

The nature of demand indicates that as the price of a good increases: A.suppliers wish to sell less of it. B.more of it is produced. C.more of it is desired. D.buyers desire to purchase less of it.

answer

Correct D.buyers desire to purchase less of it.

question

In economics, the demand for a good refers to the amount of the good that people: A.would like to have if the good were free. B.will buy at various prices. C.need to achieve a minimum standard of living. D.will buy at alternative income levels.

answer

B.will buy at various prices.

question

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________. A.demand schedule B.market price C.quantity supplied D.demand curve

answer

Correct C.quantity supplied

question

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is: A.no change; only the supply curve for beef is likely to be affected. B.a shift of the demand curve for beef to the left. C.a movement down along the demand curve for beef to the right. D.a shift of the demand curve for beef to the right.

answer

B.a shift of the demand curve for beef to the left.

question

If new manufacturers enter the computer industry, then (ceteris paribus): A.the supply curve shifts to the left. B.the supply curve shifts to the right. C.the demand curve shifts to the left. D.some established manufacturers must exit the industry.

answer

B.the supply curve shifts to the right.

question

When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right. A.prices rise B.equilibrium is achieved C.costs of production fall D.there is a population increase

answer

Correct C.costs of production fall

question

Which of the following would reduce the supply of microcomputers? A.a technological improvement that lowers the cost of producing the computers B.higher wage rates for the workers that assemble the computers C.a reduction in the price of computer chips used to produce the computers D.a reduction in the price of computers.

answer

B.higher wage rates for the workers that assemble the computers

question

______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling. A.Rent controls B.Price ceilings C.Price floors D.Subsidies

answer

Correct C.Price floors

question

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that: A.the price of Good Y will increase. B.Goods X and Y are normal goods. C.Goods X and Y are substitute goods. D.Goods X and Y are complement goods.

answer

D.Goods X and Y are complement goods.

question

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________ A.excess supply B.excess demand C.ceteris paribus D.a price ceiling

answer

B.excess demand

question

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? A.an increase in supply. B.an increase in demand. C.a decrease in supply. D.a decrease in demand.

answer

A.an increase in supply.

question

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will: A.increase equilibrium price and quantity if the product is a normal good. B.decrease equilibrium price and quantity if the product is a normal good. C.have no effect on equilibrium price and quantity. D.reduce the quantity demanded, but not shift the demand curve.

answer

Correct A.increase equilibrium price and quantity if the product is a normal good.

question

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will: A.increase equilibrium price and quantity. B.decrease equilibrium price and quantity. C.decrease equilibrium price and increase equilibrium quantity. D.increase equilibrium price and decrease equilibrium quantity.

answer

Correct C.decrease equilibrium price and increase equilibrium quantity.

question

Given a downsloping demand curve and an upsloping supply curve for a product, an increase in the price of a substitute good will: A.increase equilibrium price and quantity. B.decrease equilibrium price and quantity. C.increase equilibrium price and decrease equilibrium quantity. D.decrease equilibrium price and increase equilibrium quantity.

answer

Correct A.increase equilibrium price and quantity.

question

If the supply and demand curves for a product both decrease, then equilibrium: A.quantity must fall and equilibrium price must rise. B.price must fall, but equilibrium quantity may either rise, fall, or remain unchanged. C.quantity must decline, but equilibrium price may either rise, fall, or remain unchanged. D.quantity and equilibrium price must both decline.

answer

Correct C.quantity must decline, but equilibrium price may either rise, fall, or remain unchanged.

question

The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied. A.price B.demand C.supply D.quantity

answer

Correct A.price

question

Improvements in the productivity of labor will tend to: A.decrease wages. B.decrease the supply of labor. C.increase wages. D.increase the supply of labor.

answer

Correct C.increase wages.

question

Which of the following results in a rightward shift of the market demand curve for labor? A.a decrease in labor productivity B.a decrease in the firm's product price C.an increase in the wage rate D.an increase in demand for the firm's product

answer

Correct D.an increase in demand for the firm's product

question

Which of the following will not result in a rightward shift of the market supply curve for labor? A.a decrease in non-wage income B.an increase in the working-age population C.an increase in labor productivity D.an increase in immigration

answer

C.an increase in labor productivity

question

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________. A.the quantity demanded of financial capital at any given interest rate will remain unchanged. B.the quantity demanded of financial capital at any given interest rate will shift to the left. C.the quantity demanded of financial capital at any given interest rate will shift to the right. D.the quantity demanded of financial capital at any given interest rate will achieve equilibrium.

answer

Correct C.the quantity demanded of financial capital at any given interest rate will shift to the right.

question

The wages of plumbers are likely to increase when: A.Licensing standards for the occupation are increased B.There is an increase in the cost of plumbing supplies C.The length of the training period for plumbers is decreased D.More do-it-yourself home improvement centers open across the nation

answer

B.

question

Critics of the minimum wage argue that an increase in the minimum wage rate above the equilibrium rate of a purely competitive labor market would: A.Increase unemployment in the labor market B.Increase firms' demand for labor C.Decrease the supply of labor D.Cause firms to substitute labor for capital

answer

Correct A.Increase unemployment in the labor market

question

Critics contend that imposing a minimum wage higher than the equilibrium wage in a competitive industry would: A.Decrease the number of workers employed in that industry B.Decrease the quantity of labor supplied to that industry C.Increase the demand for labor in the industry D.Increase employment in that industry

answer

Correct A.Decrease the number of workers employed in that industry

question

In the labor market shown above, if the demand for labor increases so that the equilibrium wage rate goes above the minimum wage Wm, then the minimum-wage law will: A.Cause higher unemployment B.Cause lower unemployment C.Labor supply to decrease D.Become ineffective in the market

answer

Correct D.Become ineffective in the market

question

If the tax rate on saving is increased, the supply of loanable funds will A.Become horizontal B.Become vertical C.shift to the left D.shift to the right

answer

C

question

If the tax rate on saving is increased, in the market for loanable funds the interest rate will A.shift to the right B.shift to the left C.decrease D.increase

answer

Correct D.increase

question

Effective usury laws A.lead to a shortage of credit B.lead to a surplus of credit C.have no impact on the amount of credit. D.will yield you no extra credit in this class.

answer

C.have no impact on the amount of credit.

question

If foreigners loss confidence in our financial markets, the amount of loanable funds traded A.Not change B.Fall C.increase D.increase tremendously.

answer

Correct B.Fall

question

GDP is: A.the sum of all currency and coins in circulation. B.the value of all final goods and services produced by a government. C.the value of all final good and services produced anywhere in the world by a nation's firms. D.the value of all final goods and services produced domestically.

answer

Correct D.the value of all final goods and services produced domestically.

question

Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then: A.exports exceed imports by $50 billion. B.imports exceed exports by $50 billion. C.imports exceed exports by $150 billion. D.exports exceed imports by $150 billion.

answer

Correct B.imports exceed exports by $50 billion.

question

In order to avoid double counting, statisticians just count the __________________. A.final inventories B.final goods and services C.intermediate goods and services D.durable goods and nondurable goods

answer

Correct B.final goods and services

question

Tom Atoe grows tomatoes for home consumption. This activity is: A.excluded from GDP in order to avoid double counting. B.excluded from GDP because an intermediate good is involved. C.productive but is excluded from GDP because no market transaction occurs. D.included in GDP because it reflects production.

answer

Correct C.productive but is excluded from GDP because no market transaction occurs.

question

In national income accounting, consumption expenditures include: A.purchases of both new and used consumer goods. B.consumer durable goods and consumer nondurable goods, but not services. C.consumer durable goods, consumer nondurable goods, and services. D.changes in business inventories.

answer

Correct C.consumer durable goods, consumer nondurable goods, and services.

question

Which of the following is not counted as a part of GDP? A.the purchase of 100 shares of AT&T stock by your grandfather. B.the purchase of a snow plough by the city of Minneapolis. C.the unsold additions to inventory at an appliances store D.the purchase of a loaf of bread by a consumer

answer

Correct A.the purchase of 100 shares of AT&T stock by your grandfather.

question

Investment (I) includes: A.the amount spent on new factories and machinery. B.the amount spent on stocks and bonds. C.the amount spent on consumer goods that last more than one year. D.the amount spent on purchases of art.

answer

Correct A.the amount spent on new factories and machinery.

question

Which of the following is true? A.A depression is a recession that is mild and relatively brief. B.The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude. C.The timing of business fluctuations is regular and therefore easily predictable. D.During the contractionary phase of the business cycle, the rate of unemployment is generally quite low.

answer

Correct B.The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude.

question

The total amount of income earned by U.S. resource suppliers in a year, plus taxes on production and imports, is measured by: A.gross domestic product. B.national income. C.personal income. D.disposable income.

answer

Correct B.national income.

question

The difference between nominal GDP and real GDP is: A.nominal GDP measures actual productivity B.nominal GDP adjusts for inflation C.real GDP adjusts for inflation D.real GDP excludes imports and exports

answer

Correct C.real GDP adjusts for inflation

question

True or False: If 8.813 pesos can be traded for 1 US dollar and in Mexico GDP is 15,502 billion pesos, then the GDP in Mexico is like 1,759 billion dollars in the US. A.True B.False

answer

True

question

Real GDP and nominal GDP differ because the real GDP: A.is adjusted for changes in the volume of intermediate transactions. B.includes the economic effects of international trade. C.has been adjusted for changes in the price level. D.excludes depreciation charges.

answer

Correct C.has been adjusted for changes in the price level.

question

If nominal GDP in some year is $280 and real GDP is $160. The GDP price index for that year is: A175. B.57. C.160. D.280.

answer

Correct A 175.

question

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000. The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000. Between 1990 and 2000 real GDP: A.increased by $60 billion. B.decreased by $32 billion. C.increased by $100 billion. D.increased by $117 billion.

answer

Correct A.increased by $60 billion.

question

Net foreign factor income is A.imports minus exports. B.exports minus imports. C.the income foreigners gain from supplying resources in the US minus the income Americans gain from supplying resources abroad. D.the income Americans gain from supplying resources abroad minus the income foreigners gain from supplying resources in the US.

answer

Correct D.the income Americans gain from supplying resources abroad minus the income foreigners gain from supplying resources in the US.

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