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1. The problem of scarcity is confronted by:
industrialized societies only.
poor societies only.
societies governed by communist philosophies only.
all societies.
2. Margo spends $10,000 on one year’s college tuition. The opportunity cost of spending one year in college for Margo is:
$10,000.
whatever she would have purchased with the $10,000 instead.
whatever she would have earned had she not been in college.
whatever she would have purchased with the $10,000 and whatever she would have earned had she not been in college.
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3.
Use the following figure to answer questions 3-4:
Look at the above figure. If the economy is operating at point Y and its relevant production possibility frontier is curve 1, this means that:
the economy is at full employment and is efficient.
the economy is less than fully employed.
the economy is not efficient.
economic growth is not possible in the future.
4. Look at the above figure. The movement from curve 1 to curve 2 indicates:
a growing ability of the economy to produce capital and consumer goods.
going from unemployment to full employment.
a decrease in the factors of production.
a shift of the production possibility frontier toward producing fewer goods.
5. An increase in the price of hamburger would probably result in ________ in the demand for hamburger buns.
a decrease
an increase
no change
random fluctuations
6. After graduation from college, you might have an increase in your income from a new job. If, as a result, you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered:
a normal good.
a substitute good.
a complementary good.
an inferior good.
7.
Use the following figure to answer question 7:
Look at the above figure. A factor that may have changed supply from S1 to S2 is:
better technology in the production of gasoline.
increased demand.
lower labor productivity in gasoline production.
increased prices of substitutes for gasoline.
8. Us the following to answer question 8:
Refer to the above table. If the price of chocolate-covered peanuts is $0.80, there is:
a surplus of 140 bags per month.
a shortage of 140 bags per month.
a surplus of 70 bags per month.
a shortage of 70 bags per month.
9. Use the following to answer question 9:
Look at the above figure. A temporary price of $2 in this market would result in:
a surplus of 4,000 bushels and we would expect prices to rise.
a shortage of 8,000 bushels and we would expect prices to rise.
a shortage of 10,000 bushels and we would expect prices to fall.
a surplus of 10,000 bushels and we would expect prices to fall.
10. In the market for tacos, you observe that the equilibrium price and quantity have increased. This can be caused only by:
an increase in the price of beef.
an increase in the wages of taco shop workers.
fewer taco shops.
an increase in the incomes of people who eat tacos.
11. High-fructose corn syrup is an important ingredient in the production of many soft drinks. If as a result of a drought, the price of corn and subsequently the price of high-fructose corn syrup increases, one would expect:
the supply curve for soft drinks to shift left.
the demand for soft drinks to decrease.
the demand for soft drinks to increase.
the supply curve for soft drinks to shift right.
12. An example of a government transfer is a(n):
expenditure on an interstate highway.
bequest from a deceased relative.
Social Security payment.
salary for a member of the armed forces.
13. Disposable income in a particular period is:
total income earned.
income earned plus government transfer payments.
income earned plus government transfer payments less taxes.
income earned plus government transfer payments less taxes and savings.
14. Use the following to answer
GDP in the table is:
$94 billion.
$188 billion.
$168 billion.
$139 billion.
15. The reason the dollar value of only final goods and services are counted in GDP is that: (Points : 2)
we can measure only the value of final goods and services, not the value of inputs (intermediate goods).
if we counted the value of all goods, we would count inputs (intermediate goods), like the value of steel in a new automobile, more than once.
inputs (intermediate goods) reduce GDP.
only final goods and services matter for the economy.
16. Which of the following would be included in the calculation of GDP?
expenditure on new construction
a retiree’s monthly Social Security check
buying an existing house
buying shares of Home Depot stock
17. If aggregate price level increase:
real GDP will increase faster than nominal GDP.
only nominal GDP will increase.
only real GDP will increase
Both real GDP and nominal GDP will increase.
18. An economy’s gross domestic product is made up of:
consumption, saving, investment, and government spending.
consumption, investment, government spending, and net exports.
consumption, saving, inventories, financial markets, and government spending.
consumption and saving.
19. Real per capita GDP is:
real GDP divided by the population.
real GDP divided by the amount of capital available in the economy.
not a good useful measure of human welfare.
rarely used as a tool to compare countries’ possible resources.
20. In order to be officially unemployed, a person must be:
looking for work in the past four weeks.
under 55 years old.
frictionally unemployed.
structurally unemployed.
21. The natural rate of unemployment is achieved when:
the actual rate of unemployment is equal to zero.
there is no frictional unemployment. .
the quantity of labor supplied is equal to the quantity of labor demanded.
there is no cyclical unemployment.
22. Consumer spending in the United States normally accounts for approximately ______ of the economy.
one-third.
one-half.
two-thirds.
three-fourths.
23. A downward shift in the consumption function can be caused by:
a decrease in disposable income.
an increase in disposable income.
an increase in consumer assets and wealth.
a decrease in consumer assets and wealth.
24. All of the following factors determine investment spending EXCEPT:
expected future real GDP.
expectations about future disposable income.
the market interest rate.
production capacity.
25. Use the following to answer question 25:
Look at the above figure. A movement from point C on AD2 to point A on AD1 may have been the result of:
an increase in investment demand due to optimistic GDP forecasts.
a decrease in investment due to pessimistic GDP forecasts.
decreases in the taxes paid by businesses.
lower interest rates.
26. Which of the following would likely cause the short-run aggregate supply curve to shift to the left?
a decrease in consumer spending
a decrease in the price of imported oil
an increase in the price of imported oil
an increase in consumer spending
27. Potential output:
is the level of output that the economy would produce if all prices, including nominal wages, were fully flexible.
varies with the price level.
is dependent on the level of consumer confidence.
is greater in periods of expansion than in recessions.
28. The long-run aggregate supply curve is vertical because in the long run:
technological progress outpaces raises in nominal wages.
all factors of production increase.
the price of labor is flexible, while the price of physical capital is fixed.
all prices are flexible.
29. Use the following to answer question 29:
Look at the above figure. A short run increase in net exports is illustrated by:
panel (a).
panel (b).
panel (c).
panel (d).
30. A negative supply shock often results in:
a leftward shift of the AD curve.
an increase in the aggregate price level and a decrease in aggregate output.
no change in the price level.
a drop in the unemployment level.
31. In an inflationary gap:
aggregate output is greater than potential output.
aggregate output equals potential output.
aggregate output is less than potential output.
short run flexibility will bring the economy back to its potential output without any intervention.
32. A change in taxes or a change in government transfers affects consumption through a change in:
autonomous consumption.
the marginal propensity to save.
disposable income.
government spending.
33. Use the following to answer question 33:
Using the above figure, which of the following would be the appropriate response of the government upon viewing the state of the economy?
Expand aggregate demand by increasing taxes to close the inflationary gap.
Reduce aggregate demand by cutting taxes to close the inflationary gap.
Expand aggregate demand by cutting taxes to close the recessionary gap.
Reduce aggregate demand by increasing taxes to close the recessionary gap.
34. Fiscal policy that increases aggregate demand is:
balanced.
supplemental.
contractionary.
expansionary.
35. Contractionary fiscal policy includes:
decreasing taxes.
increasing taxes.
increasing the money supply.
increasing government expenditures.
36. Use the following to answer question 36:
The above graph shows the current short-run equilibrium in the economy. Appropriate fiscal policy action in this situation would be:
a decrease in transfer payments.
an increase in government purchases.
a decrease in tax rates.
an increase in transfer payment
37. If the government’s total revenues are less than its total expenditures, then it has a budget:
deficit.
surplus.
balance.
equality.
38. Suppose that U.S. debt is $7 trillion at the beginning of the fiscal year. During the fiscal year, the government spending and government transfers are $2 trillion and tax revenues equal $1.5 trillion. At the end of the fiscal year, the debt is:
$10.5 trillion.
$6.5 trillion.
$9 trillion.
$7.5 trillion.
39. The 2009 American Recovery and Reinvestment Act was an example of:
an automatic stabilizer.
a contractionary government policy.
a contractionary monetary policy.
an expansionary fiscal policy.
40. The national debt:
is the sum of all past federal surpluses.
grows when the government runs a deficit.
grows when the government runs a surplus.
did not exist until 1998.
41. Suppose government increases its purchases of the military equipment by $85 billion and the marginal propensity to consume is 0.75.
A) calculate the multiplier.
B) calculate the change in RGDP as a result of increase in government spending. Show all your calculations
42. Explain the difference between automatic stabilizers and discretionary fiscal policy measures. Provide examples to clarify the distinctions.
43. A college student waits in line for hours to purchase a ticket to the Rose Bowl, but an attorney does not. Rather than spend hours in line, he purchases a much more expensive ticket through a ticket broker. Why?
44. Some economists argue that the official unemployment rate understates the true level of unemployment. In 3 or 4 sentences summarize these arguments.
45.
Refer to the above figure. Assume that the economy is in short-run equilibrium at E1. If the economy is left to correct itself there will be some changes that can return the economy to the long-run equilibrium. In 3 or 4 sentences explain those changes. (Points : 6)
46.
Consider the information provided in the above table.
A) Which year is most likely to be the base year?
B) According to the above table the CPI in 2011 was 110. What does that information tell you about change in Aggregate price level.
C) calculate the inflation rate between the years 2010 and 2011.
47.
Suppose you are given the above information about a hypothetical country:
A) Calculate the labor force.
B) Calculate the unemployment rate.
Show all your calculations
48. What is stagflation?
Which of the following events would lead to stagflation? In one or two sentences explain your answer.
a) As a result of an increase in the value of dollar in relation to other currencies, US exports decreases.
b) Greater union activity leads to higher wages.
c) An increase in the quantity of money by the Federal reserve.
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