Economics

Q2

1 Point

When the United States trades with Singapore,

neither country will benefit since the United States is more efficient than Singapore at producing all goods.

both countries are likely made better off.

only Singapore benefits since the United States can produce all goods at a higher level of quality than Singapore.

only the United States benefits since Singapore’s low wages guarantee profitable firms in Singapore regardless of trade.

Q3

1 Point

Which of the following statements about models is correct?

Models cannot be used to make predictions.

The more details a model includes, the better the model.

Models assume away irrelevant details.

Models cannot be used to explain how the economy functions.

Q4

1 Point

A production possibilities frontier can shift outward if

the economy abandons inefficient production methods in favor of efficient production methods.

government increases the amount of money in the economy.

there is a technological improvement.

resources are shifted from the production of one good to the production of the other good.

Q5 PPF Graph 1

2 Points

Q5.1

1 Point

Refer to the graph above. This economy has the ability to produce at which point(s)?

J, K, M, N

K, M, N

K, N

M

Q5.2

1 Point

Refer to the graph above. Efficient production is represented by which point(s)?

J, K, N

K, M, N

K, N

L, M

Q6

1 Point

When an economist evaluates a positive statement, he or she is primarily

examining evidence.

evaluating values as well as facts.

acting as a policy adviser.

concerned with making a sound decision on how the world ought to be.

Q7

1 Point

Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is

0.36 bushel of corn.

2.8 bushels of corn.

14 bushels of corn.

70 bushels of corn.

Q8

1 Point

A competitive market is one in which

there is only one seller, but there are many buyers.

there are many sellers and each seller has the ability to set the price of his product.

there are many sellers and they compete with one another in such a way that some sellers are always being forced out of the market.

there are so many buyers and so many sellers that each has a negligible impact on the price of the product.

Q9

1 Point

The law of demand states that, other things equal,

when the price of a good falls, the quantity demanded of the good rises.

when the price of a good falls, the demand for the good rises.

when the price of a good rises, the quantity demanded of the good rises.

when the price of a good rises, the demand for the good falls.

Q10

1 Point

If Francis experiences a decrease in his income, then we would expect Francis’s demand for

each good he purchases to remain unchanged.

normal goods to decrease.

luxury goods to increase.

inferior goods to decrease.

Q11

1 Point

An increase in supply is represented by

a movement downward and to the left along a supply curve.

a movement upward and to the right along a supply curve.

a rightward shift of a supply curve.

a leftward shift of a supply curve.

Q12

1 Point

A university's football stadium is never more than half-full during football games. This indicates

the ticket price is above the equilibrium price.

the ticket price is below the equilibrium price.

the ticket price is at the equilibrium price.

nothing about the equilibrium price.

Q13

1 Point

Suppose the incomes of buyers in a market for a particular normal good decrease and there is also a reduction in input prices. What would we expect to occur in this market?

Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.

Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Q14

1 Point

The price paid by buyers in a market will increase if the government

increases a binding price floor in that market.

increases a binding price ceiling in that market.

decreases a tax on the good sold in that market.

More than one of the above is correct.

Q15

1 Point

If the government imposes a price ceiling of $2 on this market, then the result is a

shortage of 0 units of the good.

shortage of 40 units of the good.

shortage of 60 units of the good.

shortage of 85 units of the good.

Q16

1 Point

Which is most accurate: Price ceilings and price floors that are binding

are imposed because they can make the poor in the economy better off without causing adverse effects.

are desirable because they make markets more efficient and more fair

cause surpluses and shortages to persist since price cannot adjust to the market equilibrium price.

can have the effect of restoring a perfectly competitive market to equilibrium.

Q17

1 Point

If a tax is imposed on a market with inelastic demand and elastic supply, then

buyers will bear most of the burden of the tax.

sellers will bear most of the burden of the tax.

the burden of the tax will be shared equally between buyers and sellers.

it is impossible to determine how the burden of the tax will be shared.

Q18 Taxes - Supply and Demand

2 Points

The vertical distance between points A and B represents the tax in the market.

Q18.1

1 Point

The effective price that sellers receive after the tax is imposed is

$6.

$10.

$16.

$24.

Q18.2

1 Point

The per-unit burden of the tax on buyers is

$6.

$8.

$14.

$24.

Q19

1 Point

Consumer surplus in a market can be represented by the

area below the demand curve and above the price.

distance from the demand curve to the horizontal axis.

distance from the demand curve to the vertical axis.

area below the demand curve and above the horizontal axis.

Q20

1 Point

All else equal, what happens to consumer surplus if the price of a good increases?

Consumer surplus increases.

Consumer surplus decreases.

Consumer surplus is unchanged.

Consumer surplus may increase, decrease, or remain unchanged.

Q21 Taxes 2 - Supply and Demand and Surplus

4 Points

Q21.1

1 Point

Suppose the government imposes a tax of P’ - P’’’. The area measured by I+J+K+L+M+Y represents

total surplus before the tax.

total surplus after the tax.

consumer surplus before the tax.

deadweight loss from the tax.

Q21.2

1 Point

Suppose the government imposes a tax of P’ - P’’’. The area measured by K+L represents

tax revenue.

consumer surplus before the tax.

producer surplus after the tax.

total surplus before the tax.

Q21.3

1 Point

Suppose the government imposes a tax of P’ - P’’’. The producer surplus after the tax is measured by the area

M.

L+M+N+Y+B.

L+M+Y.

J.

Q21.4

1 Point

Suppose the government imposes a tax of P’ - P’’’. The area measured by I+Y represents the

deadweight loss due to the tax.

loss in consumer surplus due to the tax.

loss in producer surplus due to the tax.

total surplus before the tax.

Q22 Trade

3 Points

Q22.1

1 Point

With trade, New Zealand will

export 11 units of wool.

export 5 units of wool.

import 15 units of wool.

import 6 units of wool.

Q22.2

1 Point

When trade in wool is allowed, consumer surplus in New Zealand

increases by the area B + D.

increases by the area C + F.

decreases by the area B + D.

decreases by the area D + G.

Q22.3

1 Point

When trade in wool is allowed,

New Zealand producers of wool become better off and New Zealand consumers of wool become worse off.

New Zealand consumers of wool become better off and New Zealand producers of wool become worse off.

both New Zealand producers and consumers of wool become better off.

both New Zealand producers and consumers of wool become worse off.

Q23

1 Point

We would expect a macroeconomist, as opposed to a microeconomist, to be particularly interested in

explaining how economic changes affect prices of particular goods.

devising policies to deal with market failures such as externalities and market power.

devising policies to promote low inflation.

identifying those markets that are competitive and those that are not competitive.

Q24

1 Point

GDP is defined as

the market value of all goods and services produced within a country in a given period of time.

the market value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

the market value of all final goods and services produced within a country in a given period of time.

the market value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

Q25

1 Point

James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent by doing so. How much do the housing services provided by the two houses contribute to GDP?

$0

$10,000

$12,000

$22,000

Q26

1 Point

Which of the following is included in GDP?

medical marijuana purchased from a government-run pharmacy by a glaucoma patient

recreational marijuana purchased from a drug dealer by a college student

recreational marijuana produced and consumed by a man in his attic

All of the above are included in GDP.

Q27

1 Point

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

$150 to GDP.

$250 to GDP.

between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle.

$400 to GDP.

Q28

1 Point

Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?

spending on education

the purchase of stocks and bonds

the purchase of a new house

the purchase of durable goods such as stoves and washing machines

Q29

1 Point

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

U.S. investment and GDP increase, but German GDP is unaffected.

U.S. investment and German GDP increase, but U.S. GDP is unaffected.

U.S. investment, U.S. GDP, and German GDP are unaffected, because tractors are intermediate goods.

U.S. investment, U.S. GDP, and German GDP all increase.

Q30

1 Point

If nominal GDP is $10 trillion and real GDP is $8 trillion, then the GDP deflator is

80, and this indicates that the price level has decreased by 20 percent since the base year.

80, and this indicates that the price level has increased by 80 percent since the base year.

125, and this indicates that the price level has increased by 25 percent since the base year.

125, and this indicates that the price level has increased by 125 percent since the base year.

Q31

1 Point

GDP does not reflect

the value of leisure.

the value of goods and services produced at home.

the quality of the environment.

All of the above are correct.

Q32

1 Point

The inflation rate you are likely to hear on the nightly news is calculated from

the GDP deflator.

the CPI.

the Dow Jones Industrial Average.

the unemployment rate.

Q33

1 Point

The CPI is a measure of the overall cost of the goods and services bought by

a typical firm.

the government.

a typical consumer.

All of the above are correct.

Q34 Economy Calculations

4 Points

The table below pertains to Wrexington, an economy in which the typical consumer’s basket consists of 20 pounds of meat and 10 toys.

YEAR	PRICE OF MEAT	PRICE OF A TOY
2004	$3 per pound	$2
2005	$1 per pound	$7
2006	$4 per pound	$5

Q34.1

1 Point

The cost of the basket in 2006 was

$9.

$130.

$140.

$270.

Q34.2

1 Point

If the base year is 2004, then the CPI in 2004 was

0.

1.

80.

100.

Q34.3

1 Point

If the base year is 2004, then the inflation rate in 2006 was

44.4%.

50%.

62.5%.

80%.

Q34.4

1 Point

If the base year is 2006, then the inflation rate in 2005 was

-44.5%.

-30.8%.

7.7%.

12.5%.

Q35

1 Point

As long as prices are rising over time, then

the nominal interest rate exceeds the real interest rate.

the real interest rate exceeds the nominal interest rate.

the real interest rate is positive.

the nominal interest rate is a better indicator than the real interest rate of how fast the purchasing power of your bank account is changing over time.

Q36

1 Point

If the nominal interest rate is 8 percent and the real interest rate is 5.5 percent, then the inflation rate is

-2.5 percent.

0.45 percent.

2.5 percent.

13.5 percent.

Q37

1 Point

Last year real GDP per person in the imaginary nation of Olympus was 4,500. The year before it was 4,250. By about what percentage did Olympian real GDP per person grow during the period?

4.6 percent

5.2 percent

5.9 percent

6.5 percent

Q38

1 Point

The average amount of goods and services produced from each hour of a worker's time is called

GDP.

per capita GDP.

productivity.

technological knowledge.

Q39

1 Point

The saws, lathes, and drill presses that woodworkers at Cedar Valley Furniture use to produce furniture are called

human capital.

physical capital.

natural resources.

technological knowledge.

Q40

1 Point

Which of the following best illustrates the human capital of a survivor stranded on an island?

the fishing poles she has produced

the invention of a better fishing lure

the fresh fruit and fish on and around the island

her previous training in a survival course

Q41

1 Point

If your firm’s production function has constant returns to scale, and if you doubled all your inputs, then your firm's output would

not change.

increase, but by less than double.

double.

more than double.

Q42

1 Point

In a closed economy, what does (Y - T - C) represent?

national saving

government tax revenue

public saving

private saving

Q43

1 Point

Suppose a closed economy had public saving of $3 trillion and private saving of $2 trillion. What are national saving and investment for this country?

$5 trillion, $5 trillion

$5 trillion, $2 trillion

$1 trillion, $5 trillion

$1 trillion, $2 trillion

Q44

1 Point

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000. What are private saving, public saving, and national saving?

1,500, 1,000, and 500, respectively

1,000, 500, and 1,500, respectively

500, 1,500, and 1,000, respectively

None of the above is correct.

Q45

1 Point

If the tax revenue of the federal government exceeds spending, then the government necessarily

runs a budget deficit.

runs a budget surplus.

runs a national debt.

will increase taxes.

Q46

1 Point

Larry buys stock in A to Z Express Company. Curly Corporation builds a new factory. Whose transaction would be an act of investment in the language of macroeconomics?

only Larry’s

only Curly Corporation’s

Larry’s and Curly Corporation’s

neither Larry’s nor Curly Corporation’s

Q47

1 Point

Which of the following has a present value that is within $0.01 of $100?

$110 in two years when the interest rate is 5 percent

$112.36 in two years when the interest rate is 6 percent

$117.49 in two years when the interest rate is 7 percent

None of the above are correct to the nearest cent.

Q48

1 Point

You have a choice among three options. Option 1: receive $900 immediately. Option 2: receive $1,200 one year from now. Option 3: receive $2,000 five years from now. The interest rate is 15 percent. Rank these three options from highest present value to lowest present value.

Option 1; Option 2; Option 3

Option 3; Option 2; Option 1

Option 2; Option 3; Option 1

Option 3; Option 1; Option 2

Q49

1 Point

A manufacturing company is thinking about building a new factory. The factory, if built, will yield the company $300 million in 7 years, and it would cost $220 million today to build. The company will decide to build the factory if the interest rate is

no less than 4.53 percent.

no greater than 4.53 percent.

no less than 5.81 percent.

no greater than 5.81 percent.

Q50

1 Point

The deviation of unemployment from its natural rate is called

the unnatural rate of unemployment.

structural unemployment.

frictional unemployment.

cyclical unemployment.

Q51

1 Point

Acarapi is a full-time homemaker not currently searching for other work. Ximena is a full-time student who is not looking for a job. Who is included in the labor force by the Bureau of Labor Statistics?

only Acarapi

only Ximena

both Acarapi and Ximena

neither Acarapi nor Ximena

Q52

1 Point

Eponine works part-time as a babysitter. The Bureau of Labor Statistics counts Eponine as

unemployed and in the labor force.

unemployed and not in the labor force.

employed and in the labor force.

employed and not in the labor force.

Q53

1 Point

In 2004, based on concepts similar to those used to estimate U.S. employment figures, the Japanese adult non-institutionalized population was 109.684 million, the labor force was 65.760 million, and the number of people employed was 62.630 million. According to these numbers, the Japanese labor-force participation rate and unemployment rate were about

57.1% and 2.9%.

57.1% and 4.8%.

60% and 2.9%.

60% and 4.8%.

Q54

1 Point

When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the result is a

shortage of labor and a shortage of jobs.

shortage of labor and a surplus of jobs.

surplus of labor and a shortage of jobs.

surplus of labor and a surplus of jobs.

Q55

1 Point

Quinn, the CEO of a corporation operating in a relatively poor country where wages are low, decides to raise the wages of her workers even though she faces an excess supply of labor. Her decision

might increase profits if it means that the wage is high enough for her workers to eat a nutritious diet that makes them more productive.

will help eliminate the excess supply of labor.

may cause her workers to increase shirking (slacking off).

All of the above are correct.

Q56

1 Point

Ellen decides to hire some additional workers for her vinyl siding factory. The equilibrium wage is $14 per hour. Efficiency wage theory suggests that it is reasonable for Ellen to offer

$14 per hour.

less than $14 per hour, since some people would be willing to work for less.

less than $14 an hour to prevent shirking.

more than $14 per hour, so as to attract a better pool of applicants.

Q57

1 Point

The Federal Reserve does all except which of the following?

It controls the supply of money.

It acts as a lender of last resort to banks.

It makes loans to large business firms.

It tries to ensure the health of the banking system.

Q58

1 Point

The money supply decreases if the Fed

sells Treasury bonds. The larger the reserve requirement, the larger the decrease will be.

sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.

buys Treasury bonds. The larger the reserve requirement, the larger the decrease will be.

buys Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.

Q59

1 Point

The Fed increases the reserve requirement and makes open market purchases. Which of these by itself will increase the money supply?

neither the increase in the reserve requirement nor the open market purchases

both the increase in the reserve requirement and the open market purchases

only the increase in the reserve requirement

only the open market purchases

Q60

1 Point

The value of money falls as the price level

falls, because the number of dollars needed to buy a representative basket of goods falls.

rises, because the number of dollars needed to buy a representative basket of goods rises.

rises, because the number of dollars needed to buy a representative basket of goods falls.

falls, because the number of dollars needed to buy a representative basket of goods rises.

Q61

1 Point

The quantity of money has no real impact on things people really care about like whether or not they have a job. Most economists would agree that this statement is appropriate concerning

both the short run and the long run.

the short run, but not the long run.

the long run, but not the short run.

neither the long run nor the short run.

Q62

1 Point

The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected,

production is more profitable and employment rises.

production is more profitable and employment falls.

production is less profitable and employment rises

production is less profitable and employment falls.

Q63

1 Point

According to liquidity preference theory, the slope of the money demand curve is explained as follows:

Interest rates rise as the Fed reduces the quantity of money demanded.

Interest rates fall as the Fed reduces the supply of money.

People will want to hold less money as the cost of holding it falls.

People will want to hold more money as the cost of holding it falls.

Q64

1 Point

If the MPC is 0.80 and there are no crowding-out or accelerator effects, then an initial increase in aggregate demand of $100 billion will eventually shift the aggregate demand curve to the right by

$80 billion.

$125 billion.

$500 billion.

$800 billion.

Q65

1 Point

According to the AS-AD model, in the long run, changes in the money supply affect

prices.

output.

unemployment rates.

All of the above.

Q66 The Fed raised interest rates in 2004 and 2005. This implies, other things the same, that the Fed

1 Point

increased the money supply because it was concerned about unemployment.

increased the money supply because it was concerned about inflation.

decreased the money supply because it was concerned about unemployment.

decreased the money supply because it was concerned about inflation.

Q67 Money Supply / Money Demand Graph

12 Points

Suppose the Fed lowers the interest rate paid on reserves. Draw the money supply / money demand graph, starting from the initial equilibrium, then show clearly the impact on the real interest rate and the quantity of money. Use good labels. Upload your graph.

Please select file(s)

Select file(s)

Q68 Aggregate Supply / Aggregate Demand Graph

12 Points

Suppose the Fed lowers the interest rate paid on reserves. Draw the Aggregate supply / aggregate demand graph, starting from the initial equilibrium, then show clearly the impact on prices and on GDP in both the short run and in the long run. Label the short run outcomes Ps and Ys and the long run outcomes P-L and Y-L.