Question for FelixGenius Only

1. (TCO 1) As a consequence of the problem of scarcity (Points : 4)

       there is never enough of anything.
       individuals have to make choices from among alternatives.
       production has to be planned by government.
       things which are plentiful have relatively high prices.

2. (TCO1) Which is not a factor of production? (Points : 4)

       Money
       Land
       Labor
       Capital

3. (TCO1) A point outside the production possibilities curve is (Points : 4)

       attainable, but there is not full employment.
       attainable, but there is not optimal allocation.
       unattainable because the economy is inefficient.
       unattainable because of limited resources.

4. (TCO1) Which would not be characteristic of a capitalist economy? (Points : 4)

       Government ownership of most factors of production
       Competition and unrestricted markets
       Reliance on the market system
       Freedom of enterprise and choice

5. (TCO 2) The rationale for the law of demand can best be understood on the basis of (Points : 4)

       diminishing marginal utility.
       capitalist markets.
       the invisible hand.
       the rationing function of price.

6. (TCO 2) A decrease in supply and a decrease in demand will (Points : 4)

       increase price and affect the equilibrium quantity in an indeterminate way.
       decrease the equilibrium quantity and decrease price.
       increase the equilibrium quantity and affect price in an indeterminate way.
       decrease the equilibrium quantity and affect price in an indeterminate way.

7. (TCO 2) You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than one.  To increase total revenues, you should (Points : 4)

       increase the price of the software.
       decrease the price of the software.
       hold the price of the software constant.
       increase the supply of the software.

8. (TCO 2) Which of the following factors will make the demand for a product relatively elastic? (Points : 4)

       There are few substitutes.
       The time interval considered is long.
       The good is considered a necessity.
       Purchases of the good require a small portion of consumers’ budgets.

9. (TCO 2) A profit-maximizing firm in the short run will expand output (Points : 4)

       until marginal cost begins to rise.
       until total revenue equals total cost.
       until marginal cost equals average variable cost.
       as long as marginal revenue is greater than marginal cost.

10. (TCO 2) Which would definitely not be an example of price discrimination? (Points : 4)

       A theater charges children less than adults for a movie.
       Universities charge higher tuition for out-of-state residents.
       A doctor charges for services according to the income of patients.
       An electric power company charges less for electricity used during off-peak hours when production costs are lower.

11. (TCO 3) A cartel is (Points : 4)

       a form of covert collusion.
       legal in the United States.
       always successful in raising profits.
       a formal agreement among firms to collude.

12. (TCO 3) The main difference between the short run and the long run is that (Points : 4)

       firms earn zero profits in the long run.
       the long run always refers to a time period of one year or longer.
       in the short run, some inputs are fixed.
       in the long run, all inputs are fixed.

13.
(TCO 4) Refer to the diagram.  The phases of the business cycle from points A to D are, respectively:

Graph Description

(Points : 4)

       Peak, recession, expansion, trough
       Trough, recovery, expansion, peak
       Expansion, recession, trough, peak
       Peak, recession, trough, expansion

14. (TCO 4) Official unemployment rate statistics may (Points : 4)

       overstate the amount of unemployment by including part-time workers in the calculations.
       understate the amount of unemployment by excluding part-time workers in the calculations.
       overstate the amount of unemployment because of the presence of “discouraged” workers who are not actively seeking employment.
       understate the amount of unemployment because of the presence of “discouraged” workers who are not actively seeking employment.

15. (TCO 4) GDP is the market value of (Points : 4)

       resources (land, labor, capita, and entrepreneurship) in an economy in a given year.
       all final goods and services produced in an economy in a given year.
       consumption and investment spending in an economy in a given year.
       all output produced and accumulated over the years.

16. (TCO 4) The service a homeowner performs when she mows her yard is not included in GDP because (Points : 4)

       this is a nonmarket transaction.
       this is a nonproduction activity.
       this is a noninvestment transaction.
       multiple counting would be involved.

17. (TCO 6) Fiscal policy is enacted through changes in (Points : 4)

       interest rates and the price level.
       the supply of money and foreign exchange.
       unemployment and inflation.
       taxation and government spending.

18. (TCO 6) Refer to the figure.  The economy is at equilibrium at Point B.  What would expansionary fiscal policy do? 
 

Graph Description

(Points : 4)

       Shift aggregate demand from AD2 to AD1
       Shift aggregate demand from AD2 to AD3
       Move the economy from Point B downward along AD2
       Move the economy from Point B upward along AD2

19. (TCO 6) The American Recovery and Reinvestment Act of 2009 included mostly (Points : 4)

       increases in taxes and government spending.
       decreases in taxes and government spending.
       increases in government spending and decreases in taxes.
       decreases in government spending and increases in taxes.

20. (TCO 6) The time which elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n) (Points : 4)

       budget lag.
       recognition lag.
       operational lag.
       administrative lag.

1. (TCO 5) An increase in aggregate demand is most likely to be caused by a decrease in (Points : 4)

       the wealth of consumers.
       consumer and business confidence.
       expected returns on investment.
       the tax rates on household income.

2. (TCO 5) The long-run aggregate supply curve is (Points : 4)

       upward-sloping and becomes steeper at output levels above the full-employment output.
       upward-sloping and becomes flatter at output levels above the full-employment output.
       horizontal.
       vertical.

3. (TCO 5) If the price of crude oil decreases, then this event would most likely (Points : 4)

       decrease aggregate supply in the U.S.
       increase aggregate supply in the U.S.
       increase aggregate demand in the U.S.
       decrease aggregate demand in the U.S.

4. (TCO 5) Disinflation refers to a situation where (Points : 4)

       price level falls, but the rate of inflation does not.
       Price level rises, but the rate of inflation does not.
       the rate of inflation falls, but the price level does not.
       the rate of inflation rises, but the price level does not.

5. (TCO 6) If a family’s MPC is .7, it means that the family is (Points : 4)

       operating at the break-even point.
       spending seven-tenths of any additional income.
       necessarily dissaving.
       spending 70 percent of its disposable income.

6. (TCO 7) Which definition(s) of the money supply include(s) only items which are directly and immediately usable as a medium of exchange? (Points : 4)

       M1
       M2
       Neither M1 nor M2
       M1 and M2

7. (TCO 7) The basic requirement of money is that it be (Points : 4)

       backed by precious metals–gold or silver.
       authorized as legal tender by the central government.
       generally accepted as a medium of exchange.
       some form of debt or credit.

8. (TCO 7) The Federal Reserve System of the U.S. is the country’s (Points : 4)

       financial adviser.
       comptroller or accountant.
       central bank.
       deposit insurance provider.

9. (TCO 7) Which group is responsible for the policy of changing the money supply? (Points : 4)

       Federal Open Market Committee
       Office of Management and Budget
       Thrift Advisory Council
       Federal Advisory Council

10. (TCO 7) Other things being equal, an expansion of commercial bank lending (Points : 4)

       changes the composition, but not the size, of the money supply.
       is desirable during a period of demand-pull inflation.
       reduces the money supply.
       increases the money supply.

11. (TCO 7) The establishment of a federal deposit insurance program resulted from the (Points : 4)

       establishment of the Federal Reserve System in 1913.
       speculation during World War I.
       stock market crash of 1987.
       bank panics of 1930-1933.

12. (TCO 7) Which one of the following is a tool of monetary policy for altering the reserves of commercial banks? (Points : 4)

       Issuing currency
       Check collection
       Open-market operations
       Acting as the fiscal agent for the federal government

13. (TCO 7) The Federal Reserve could reduce the money supply by (Points : 4)

       selling government bonds in the open market.
       buying government bonds in the open market.
       operating the term auction facility.
       reducing the discount rate.

14. (TCO 8) Which country is the United States’ largest trading partner in terms of volume of trade? (Points : 4)

       Mexico
       Japan
       China
       Canada

15. (TCO 8) In a two-nation world, comparative advantage means that one nation can produce (Points : 4)

       a product with fewer inputs than the other nation.
       a product at lower average cost than the other nation.
       a product at a lower domestic opportunity cost than the other nation.
       more of a product than the other nation.

16. (TCO 8) An excise tax on imported commodities is known as a(n) (Points : 4)

       quota.
       tariff.
       export restriction.
       price ceiling.

17. (TCO 8) A key difference between import quotas and voluntary export restraints (VERs) is that the (Points : 4)

       domestic government administers the former, whereas the foreign government administers the latter.
       foreign government administers the former, whereas the domestic government administers the latter.
       one is a tax, whereas the other is a quantity limit.
       one raises the price of the imported product involved, whereas the other one does not.

18. (TCO 8) Tariffs and import quotas would benefit the following groups, except (Points : 4)

       consumers of the product.
       domestic producers of the product.
       workers in domestic firms producing the product.
       the government of the importing country.

19. (TCO 8) About how many nations belonged to the World Trade Organization as of 2010? (Points : 4)

       35
       72
       153
       210

20. (TCO 9) U.S. businesses are demanders of foreign currencies because they need them to (Points : 4)

       produce goods and services exported to foreign countries.
       pay for goods and services imported from foreign countries.
       receive interest payments from foreign governments.
       receive interest payments from foreign businesses.

1. (TCO 9) In the balance of payments statement, a current account surplus will be matched by a (Points : 4)

       capital and financial accounts deficit.
       capital and financial accounts surplus.
       trade deficit.
       trade surplus.

2. (TCO 9) Comparing everything that the United States owes to other nations, and what they owe to the United States, the United States is currently a(n) (Points : 4)

       net creditor.
       net debtor.
       international banking asset.
       international banking liability.

3. (TCO 9) If a Japanese importer could buy $1,000 U.S. for 122,000 yen, the rate of exchange for $1 would be (Points : 4)

       8.19 yen.
       122 yen.
       820 yen.
       1,220 yen.

4. (TCO 9) If the exchange rate is $1 = 0.7841 euro, then a French DVD priced at 20 euros would cost an American buyer (excluding taxes and other fees) (Points : 4)

       $15.68.
       $20.78.
       $25.51.
       $27.84.

5. (TCO 9) The monetary system for conducting international trade is usually described as a system of (Points : 4)

       fixed exchange rates.
       freely floating exchange rates.
       a managed gold standard.
       managed floating exchange rates.