Do You Know Macro?
This is a quick test quiz i just typed up. It's good for studying macro.
- 1.
If the demand for money increases,
- A.
The interest rate will fall
- B.
There will be a movement downward along the money demand curve
- C.
There will be a a movement upward (to the left) along the money demand curve
- D.
There will be a rightward shift of the money demand curve
- E.
There will be a leftward shift of the money demand curve
Correct Answer
D. There will be a rightward shift of the money demand curveExplanation
When the demand for money increases, it means that people want to hold more money for various reasons such as increased transactions or precautionary purposes. This increased demand will lead to a rightward shift of the money demand curve. A rightward shift indicates that at any given interest rate, people are willing to hold a higher quantity of money. This shift does not affect the interest rate directly, but it can lead to a decrease in the interest rate if the money supply remains constant.Rate this question:
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- 2.
Of the following, the major influence on th supply of money is
- A.
Interest rates
- B.
Prices
- C.
The transactions demand for money
- D.
GDP
- E.
The Fed
Correct Answer
E. The FedExplanation
The Federal Reserve (the Fed) has the major influence on the supply of money. As the central bank of the United States, the Fed has the authority to control the money supply through various monetary policy tools. It can increase or decrease the supply of money by adjusting interest rates, conducting open market operations, and setting reserve requirements for banks. By manipulating these factors, the Fed can influence the amount of money available in the economy, which in turn affects economic activity and inflation.Rate this question:
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- 3.
Over the past 40 years, he most frequent target for the Fed's monetary policy has been
- A.
The prime interest rate
- B.
The federal funds rate
- C.
The M1 money supply
- D.
The M2 money supply
- E.
The M3 money supply
Correct Answer
B. The federal funds rateExplanation
The correct answer is the federal funds rate. The Federal Reserve uses the federal funds rate as a tool to implement monetary policy. This rate refers to the interest rate at which depository institutions lend funds to each other overnight, and it serves as a benchmark for other interest rates in the economy. By adjusting the federal funds rate, the Fed can influence borrowing costs, stimulate or slow down economic activity, and control inflation. Therefore, it has been the most frequent target for the Fed's monetary policy over the past 40 years.Rate this question:
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- 4.
Discretionary fiscal policy is policy that
- A.
Is developed in secret
- B.
Applies to some states but not others
- C.
Applies to some industries but not others
- D.
Works automaticaly without public announcement or plan
- E.
Is an intentional change in taxation or government spending
Correct Answer
E. Is an intentional change in taxation or government spendingExplanation
Discretionary fiscal policy refers to deliberate and intentional changes made by the government in taxation or government spending. This policy is not developed in secret, nor does it apply selectively to certain states or industries. It also does not work automatically without public announcement or plan. The correct answer accurately describes discretionary fiscal policy as an intentional change in taxation or government spending.Rate this question:
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- 5.
Assume autonomous net taxes fall by $300, the MPC -2/3. Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed. Disposable income will initially
- A.
Remain unchanged
- B.
Rise by $300
- C.
Rise by $200
- D.
Rise by $900
- E.
Fall by $300
Correct Answer
B. Rise by $300Explanation
If autonomous net taxes fall by $300 and the MPC is -2/3, it means that for every $1 decrease in taxes, disposable income will increase by $2/3. Therefore, if net taxes fall by $300, disposable income will rise by $300.Rate this question:
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- 6.
To close a contractionary gap using fiscal policy, the government can
- A.
Increase government spending by the size of the gap
- B.
Decrease government spending by the size of the gap
- C.
Increase government spending by more than the size of the gap
- D.
Increase government spending by less than the size of the gap
- E.
Decrease government spending by more than the size of the gap
Correct Answer
D. Increase government spending by less than the size of the gapExplanation
To close a contractionary gap using fiscal policy, the government can increase government spending by less than the size of the gap. This means that the government should increase spending, but not by the full amount of the gap. By doing so, the government can stimulate economic activity and increase aggregate demand, which helps to close the gap. Increasing spending by less than the size of the gap is a more conservative approach that allows for a gradual adjustment and avoids excessive government spending.Rate this question:
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- 7.
The opposite of a laissez-faire economic policy is
- A.
Active government intervention
- B.
A reliance on prices to adjust to changing market conditions
- C.
Classical economics
- D.
Neoclassical economics
- E.
Quantity supplied creates its own quantity demanded
Correct Answer
A. Active government interventionExplanation
The opposite of a laissez-faire economic policy is active government intervention. Laissez-faire refers to a hands-off approach by the government, allowing the market to operate freely without interference. On the other hand, active government intervention involves the government actively intervening in the economy through regulations, policies, and actions to influence and control market outcomes. This can include measures such as setting minimum wage, implementing trade tariffs, providing subsidies, and regulating industries.Rate this question:
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- 8.
Which of the following is an example of an automatic stabilizer?
- A.
Tax reductions passed by Congress in times of unemployment
- B.
Tax reductions passed by Congress in times of inflation
- C.
Government defense spending
- D.
Unemployment compensation
- E.
Welfare programs
Correct Answer
D. Unemployment compensationExplanation
Unemployment compensation is an example of an automatic stabilizer because it is a government program that provides financial assistance to individuals who are unemployed. During times of economic downturns and high unemployment rates, more individuals are eligible for and receive unemployment compensation, which helps to stabilize their income and support their basic needs. This automatic stabilizer helps to stimulate the economy by providing income to those who are out of work, which in turn helps to maintain consumer spending and overall economic activity.Rate this question:
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- 9.
One thing that policy makers often overlook is
- A.
How quickly fiscal policy can respond to changes in economic conditions
- B.
How fiscal policies unintentionally affect individual incentive to work, spend, save, and invest
- C.
How fiscal policy affects the price level
- D.
How fiscal policy affects the economy's output
- E.
How voters might respond to a policy that increases taxes
Correct Answer
B. How fiscal policies unintentionally affect individual incentive to work, spend, save, and investExplanation
Policy makers often overlook how fiscal policies unintentionally affect individual incentive to work, spend, save, and invest. This means that when formulating fiscal policies, policy makers may not fully consider the unintended consequences these policies may have on people's motivation to work, their willingness to spend and save, and their inclination to invest in the economy. This oversight can lead to policies that have unintended negative effects on individuals' behavior and overall economic performance.Rate this question:
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- 10.
A nominal wage is
- A.
Not about the legal minimum
- B.
Always about the legal minimum
- C.
Measured in terms of goods and services it can buy
- D.
Measured in current dollars rather than in constant dollars
- E.
Measured in constant dollars rather than in current dollars
Correct Answer
D. Measured in current dollars rather than in constant dollarsExplanation
A nominal wage refers to the wage that is measured in current dollars, meaning it is not adjusted for inflation or changes in purchasing power over time. It represents the actual dollar amount received by an individual for their work, without considering the effects of inflation or changes in the value of money. This is different from measuring wages in constant dollars, which adjusts for inflation and allows for a more accurate comparison of wages over different time periods.Rate this question:
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- 11.
The expected price level is significant because
- A.
It is the equilibrium price level in the short run
- B.
It determines the actual price level in the short run
- C.
It determines the actual price level in the long run
- D.
Firms and resource owners make long-term agreements based on the expected price level
- E.
The difference between the expected price level and actual price levels is equal to the actual inflation rate
Correct Answer
D. Firms and resource owners make long-term agreements based on the expected price levelExplanation
Firms and resource owners make long-term agreements based on the expected price level because they need to anticipate and plan for future costs and revenues. By knowing the expected price level, they can negotiate contracts, set prices, and make investment decisions accordingly. This helps them to mitigate risks and ensure profitability in the long run.Rate this question:
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- 12.
If the price level rises by 4% and the nominal wage rises to 6%, the real wage
- A.
Falls by 2%
- B.
Falls by 10%
- C.
Rises by 2%
- D.
Rises by 10%
- E.
Remains constant
Correct Answer
C. Rises by 2%Explanation
If the price level rises by 4% and the nominal wage rises to 6%, the real wage will rise by 2%. This is because the real wage is calculated by dividing the nominal wage by the price level. When the price level increases, it means that the cost of goods and services also increases. However, if the nominal wage increases by a larger percentage than the price level, the real wage will still increase. In this case, the nominal wage increases by 6% while the price level only increases by 4%, resulting in a 2% increase in the real wage.Rate this question:
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- 13.
The theory that the longer the unemployment rate remains above the natural rate, the higher will be the natural rate, is known as
- A.
Hysteresis
- B.
Hysterical analysis
- C.
Historical analysis
- D.
Histoplasmosis
- E.
Hypoglycemia
Correct Answer
A. HysteresisExplanation
Hysteresis refers to the theory that the longer the unemployment rate remains above the natural rate, the higher the natural rate will become. This suggests that prolonged periods of high unemployment can have a lasting impact on the economy, leading to a higher baseline level of unemployment even after the economy recovers. This concept highlights the importance of addressing unemployment in a timely manner to prevent long-term negative effects on the labor market.Rate this question:
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- 14.
If planned spending exceeds planned output, the result is
- A.
Unintended inventory increases
- B.
A reduction in GP
- C.
A decrease in imports
- D.
An increase in government purchases
- E.
Unintended inventory reductions
Correct Answer
E. Unintended inventory reductionsExplanation
When planned spending exceeds planned output, it means that consumers are not purchasing goods and services as much as businesses are producing them. This leads to an accumulation of unsold inventory, which is not desirable for businesses. To rectify this situation, businesses will have to reduce their production levels, resulting in unintended inventory reductions.Rate this question:
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- 15.
If the multiplier is 4, a $10 billion increase in autonomous investment will casue a
- A.
$10 billion increase in equilibrium investment
- B.
$40 billion increase in equilibrium investment
- C.
$40 billion increase in equilibrium real GDP demanded
- D.
$400 billion increase in equilibrium real GDP demanded
- E.
$40 billion increase in consumption spending
Correct Answer
C. $40 billion increase in equilibrium real GDP demandedExplanation
A multiplier of 4 means that any increase in autonomous investment will be magnified by a factor of 4 in the equilibrium real GDP demanded. Therefore, a $10 billion increase in autonomous investment will result in a $40 billion increase in equilibrium real GDP demanded.Rate this question:
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- 16.
Job losses soon after the September 11 attacks could be viewed as just part of the 1st round of reduced aggregate expeniture. The 2nd round occured when
- A.
Government started spending more on national security
- B.
People who lost jobs or feared they would lose their jobs started spending less
- C.
Business invested in back-up data centers in case their main computers were attacked
- D.
Consumers went back to shopping at the urging of gov't officials
- E.
All of the above
Correct Answer
B. People who lost jobs or feared they would lose their jobs started spending lessExplanation
After the September 11 attacks, job losses occurred as a result of reduced aggregate expenditure. This can be seen as the first round of economic impact. The second round occurred when people who lost their jobs or were afraid of losing their jobs started spending less. This decrease in consumer spending further affected the economy. Therefore, the correct answer is that people who lost jobs or feared they would lose their jobs started spending less, contributing to the second round of reduced aggregate expenditure.Rate this question:
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- 17.
If the MPC is 4/5, the value of the simple multiplier is
- A.
4
- B.
1/5
- C.
4/5
- D.
5/4
- E.
5
Correct Answer
E. 5Explanation
The value of the simple multiplier is determined by the formula 1/(1-MPC), where MPC represents the marginal propensity to consume. In this case, the MPC is given as 4/5. Plugging this value into the formula, we get 1/(1-4/5) = 1/(1/5) = 5. Therefore, the value of the simple multiplier is 5.Rate this question:
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- 18.
A household that expects a decrease in DI in the future will
- A.
Increase it's current C spending
- B.
Decrease it's current C spending
- C.
Maintain "
- D.
Increase it's current C spending, then increase spening when income falls
- E.
Decrease it's current C spending, then increase spening when income falls
Correct Answer
B. Decrease it's current C spendingExplanation
If a household expects a decrease in disposable income (DI) in the future, it would decrease its current consumption (C) spending. This is because the household anticipates having less income available in the future, so it would adjust its current spending to align with the expected decrease in income. By reducing its current consumption spending, the household can better prepare for the anticipated decrease in income and ensure that its spending remains within its means.Rate this question:
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- 19.
Investment
- A.
Is about as volatile as consumption, except during recession years
- B.
Has averaged about 1/6 of GDP over the psat decade
- C.
Is about a volatile as GP, except during recession years
- D.
Is the largest component of A.Spending
- E.
Have averaged about 2/3 of GDP over the past decade
Correct Answer
B. Has averaged about 1/6 of GDP over the psat decadeExplanation
The answer states that investment has averaged about 1/6 of GDP over the past decade. This means that, on average, investment has accounted for approximately one-sixth of the total value of goods and services produced in the economy over the past ten years. This suggests that investment plays a significant role in the overall economic activity of the country.Rate this question:
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- 20.
During recession years
- A.
Investment declines while C increase
- B.
I increases while C declines
- C.
I is constant while C declines
- D.
I declines much faster than GDP declines
- E.
C declines much faster than GDP declines
Correct Answer
D. I declines much faster than GDP declinesExplanation
During recession years, investment (I) tends to decline at a faster rate compared to the decline in GDP. This means that the decrease in investment is more significant and impactful on the overall economy than the decline in GDP. This can be attributed to the cautious behavior of businesses and investors during economic downturns, as they reduce their spending and investment activities in response to the uncertain and challenging economic conditions.Rate this question:
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- 21.
Fluctuations is in investment
- A.
Account for almost all of the variability in GDP during expansions
- B.
Account for almost all of the variability in GDP
- C.
Account for almost all of the variability in GDP during recessions
- D.
Are larger during expansions than during recessions
- E.
Account for more of the variability in GDP than consumption does
Correct Answer
E. Account for more of the variability in GDP than consumption doesExplanation
Fluctuations in investment have a greater impact on the variability in GDP compared to consumption. This means that changes in investment levels have a larger effect on the overall fluctuations in the economy and can lead to greater variations in GDP during different economic periods.Rate this question:
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- 22.
Households act as suppliers when they provide
- A.
Goods and services to firms and government
- B.
Resources to firms and governments
- C.
Tax payments to governments
- D.
The demand for only what firms supply or make available
- E.
Money to firms in exchange for goods and services
Correct Answer
B. Resources to firms and governmentsExplanation
Households act as suppliers when they provide resources to firms and governments. This means that households supply the necessary inputs such as labor, land, and capital to businesses and government entities. These resources are essential for the production of goods and services. Without the supply of resources from households, firms and governments would not be able to operate and provide the goods and services that are demanded by consumers.Rate this question:
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- 23.
Which of the following is true about sole proprietorship in the US?
- A.
It is the most comon form of business organization
- B.
It is responsible for a large portion of total production of goods and services
- C.
It offers the owner the least personal liability of any form of business organization
- D.
There is no opportunity cost to operating the business
- E.
Only one individual can work in such a firm
Correct Answer
A. It is the most comon form of business organizationExplanation
Sole proprietorship is the most common form of business organization in the US because it is easy to set up and requires minimal legal formalities. It is a business owned and operated by a single individual, who has complete control over the business decisions and receives all the profits. Unlike other forms of business organizations, such as partnerships or corporations, the owner of a sole proprietorship has unlimited personal liability for the business's debts and obligations. This means that the owner's personal assets can be used to satisfy business debts.Rate this question:
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- 24.
Which of hte following have their profits taxed twice
- A.
Sole proprietorshops
- B.
Partnerships
- C.
Corporations
- D.
Nonprofit institutions
- E.
S-corporations
Correct Answer
C. CorporationsExplanation
Corporations have their profits taxed twice because they are subject to both corporate income tax and individual income tax. The corporation itself is taxed on its profits at the corporate tax rate, and then when the corporation distributes those profits to its shareholders as dividends, the shareholders are also taxed on those dividends as part of their personal income. This results in double taxation of the same profits.Rate this question:
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- 25.
Which of the following is true about government activity in the US?
- A.
Macroeconomic policy is handly mainly at the state level.
- B.
Higher education is handled mainly at the national level.
- C.
Primary and secondary education is handled mainly at the local level.
- D.
Primary and secondary education is handled mainly at the national level.
- E.
Police and fire protection are handled mainly at the state level.
Correct Answer
C. Primary and secondary education is handled mainly at the local level.Explanation
In the US, primary and secondary education is primarily the responsibility of local governments, such as school districts and boards of education. Each state has its own system of public schools, but the funding and administration of these schools are largely controlled at the local level. This allows for more localized decision-making and tailoring of education policies to the specific needs of the community.Rate this question:
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- 26.
Which of the following statements about GDP is not true?
- A.
It is a stock variable
- B.
It is measured for a particular time period, usually one year.
- C.
It is perhaps the most effective means of viewing the same economy over time.
- D.
It is a measure of the economy's performance.
- E.
It is a flow variable, not a stock variable.
Correct Answer
A. It is a stock variableExplanation
GDP is not a stock variable, but a flow variable. Stock variables represent a quantity at a specific point in time, while flow variables represent a quantity per unit of time. GDP measures the total value of goods and services produced within a country's borders over a specific time period, usually one year. Therefore, it is a flow variable that captures the economic performance of a nation over time.Rate this question:
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- 27.
Which of the following is a stock variable?
- A.
GDP
- B.
Consumption spending
- C.
The federal government's spending on Social Security
- D.
The money supply
- E.
Federal income tax revenue
Correct Answer
D. The money supplyExplanation
A stock variable is a measure of a quantity at a specific point in time. In this case, the money supply represents the total amount of money in circulation in an economy at a given time. It is a stock variable because it provides a snapshot of the quantity of money available in the economy at a particular moment. GDP, consumption spending, the federal government's spending on Social Security, and federal income tax revenue are all flow variables, as they represent the rate at which money is being generated or spent over a period of time.Rate this question:
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- 28.
A recession is best defined as a period during which
- A.
The % of the population employed is declining
- B.
Employment, output, and income decline
- C.
The price level is declining
- D.
More resources are used
- E.
The budget deficit and trade deficit are both growing
Correct Answer
B. Employment, output, and income declineExplanation
A recession is best defined as a period during which employment, output, and income decline. This means that during a recession, there is a decrease in the number of people employed, a decrease in the amount of goods and services produced, and a decrease in the amount of income earned by individuals and businesses. This decline in employment, output, and income is a characteristic feature of a recession and is used to identify and measure the severity of an economic downturn.Rate this question:
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- 29.
Theory in economics
- A.
Involves some implification of reality
- B.
Bears no relation to reality
- C.
Approached reality in all its complexity
- D.
Involves so much distortion of reality that it is worthles
- E.
Focuses on the unique aspects of each situation
Correct Answer
A. Involves some implification of realityExplanation
The correct answer suggests that theory in economics involves simplification of reality. This means that economic theories are not exact replicas of real-world situations, but rather simplified models that aim to explain and predict economic behavior. By simplifying reality, economists are able to isolate and analyze specific variables and their relationships, making it easier to understand and make predictions about complex economic systems. However, it is important to note that this simplification may not capture all the complexities and nuances of real-world economic phenomena.Rate this question:
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- 30.
An outward shift of the production possibilities frontier
- A.
Reflects economic stability
- B.
Reflects economic growth
- C.
Reflects economic decline
- D.
Does not relate to the state of the economy
- E.
Is always a parallel shift
Correct Answer
B. Reflects economic growthExplanation
An outward shift of the production possibilities frontier reflects economic growth because it indicates that an economy is able to produce more goods and services than before. This could be due to factors such as technological advancements, increased efficiency, or an expansion of resources. Overall, it suggests that the economy is expanding and becoming more productive, which is a positive sign of economic growth.Rate this question:
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- 31.
A mixed capitalist economy is one in which
- A.
Decisions are bades primarilly on religion or custom
- B.
All resources are publicly owned and economic planning is centralized
- C.
All resources are privately owened and prices are used to coordinate economic activity
- D.
Resources are both publicly and privately owned and some markets are regulated
- E.
All resources are publicly owned and prices are used to coordinate economic activity
Correct Answer
D. Resources are both publicly and privately owned and some markets are regulatedExplanation
In a mixed capitalist economy, resources are both publicly and privately owned and some markets are regulated. This means that some industries and sectors are controlled by the government or public entities, while others are owned and operated by private individuals or businesses. Additionally, certain markets may have regulations in place to ensure fair competition and protect consumers. This combination allows for a balance between government intervention and free market principles, aiming to promote economic growth and social welfare.Rate this question:
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- 32.
Which of the following is a result of increased real wages in the US?
- A.
A decrease in the quality of services demanded by households
- B.
An increase in the opportunity cost of remaining employed in the home
- C.
A decrease in the opportunity cost of working outside the home
- D.
A decline in the number of households providing labor outside the home
- E.
Reduced use of labor-saving devices in the household
Correct Answer
B. An increase in the opportunity cost of remaining employed in the homeExplanation
When real wages in the US increase, it means that workers are earning higher wages adjusted for inflation. This increase in wages makes it more costly for individuals to choose to remain employed in their homes instead of seeking employment outside the home. As the opportunity cost of staying at home increases, individuals are more likely to enter the labor force and seek employment outside the home. Therefore, an increase in the opportunity cost of remaining employed in the home is a result of increased real wages in the US.Rate this question:
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- 33.
Which of the following taxes is based on the ability-to-pay principle?
- A.
Tolls on a bridge
- B.
Income taxes
- C.
Gasoline excise taxes
- D.
Property taxes
- E.
User fees that collect the same amount from each person
Correct Answer
B. Income taxesExplanation
Income taxes are based on the ability-to-pay principle because they are levied on individuals based on their income levels. This means that individuals who earn higher incomes are required to pay a higher percentage of their income in taxes, while those with lower incomes pay a lower percentage. This principle recognizes that individuals with higher incomes have a greater ability to pay taxes and contribute more to the overall tax revenue. Therefore, income taxes are considered to be a fair and progressive form of taxation.Rate this question:
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- 34.
Christina Sierra developed software that she made available for zero cost and allowed others to modify and redistribute it to anyone. Such software is known by the term
- A.
Free
- B.
Junk
- C.
Copyrighted
- D.
Closed
- E.
Hobby-ware
Correct Answer
A. FreeExplanation
The correct answer is "free". Christina Sierra developed software that she made available for zero cost and allowed others to modify and redistribute it to anyone. This type of software is commonly referred to as "free" software.Rate this question:
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- 35.
Which of the following statements about the subsitution effect of a price change is true?
- A.
It is caused by a change in relative prices
- B.
It affects the conumer's ability, rather than willingness, to purchase a good
- C.
It assumes that the consumer substitutes more expensive goods for cheaper ones when income increase
- D.
It is usually equal to the income effect
- E.
It may cause the consumer to buy less of the good when its price falls
Correct Answer
A. It is caused by a change in relative pricesExplanation
The substitution effect of a price change is true because it is caused by a change in relative prices. This means that when the price of one good increases, consumers are likely to substitute it with a cheaper alternative. The substitution effect focuses on the consumer's decision to switch to a different product due to the change in prices, rather than their willingness or ability to purchase the good. The income effect, on the other hand, refers to the change in purchasing power due to a change in income. The statement that the substitution effect is usually equal to the income effect is incorrect, as they are separate concepts. Additionally, the substitution effect may cause the consumer to buy less of a good when its price falls, as they may switch to other alternatives.Rate this question:
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- 36.
Suppose there are only 2 goods: apples and oranges. What happens if the price of each good increases by 15%?
- A.
The consumer will sub. apples for oranges
- B.
The consumer will sub. oranges for apples
- C.
There is no subsitution effect because relative prices have remained constant
- D.
Demand for both goods increase
- E.
Demand for both goods decrease
Correct Answer
C. There is no subsitution effect because relative prices have remained constantExplanation
The correct answer is that there is no substitution effect because relative prices have remained constant. When the price of both goods increases by the same percentage, the relative price between the two goods remains the same. Therefore, there is no incentive for the consumer to switch from one good to another. The substitution effect occurs when the relative prices of goods change, leading consumers to substitute one good for another. In this scenario, since the relative prices have not changed, there is no substitution effect.Rate this question:
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- 37.
The effect of a decrease in the price of personal computers, otc, is likely to be best represented by which of the following?
- A.
A leftward shift of the D curve
- B.
A movement leftward along the D curve
- C.
A rightward shift of the D curve
- D.
A movement rightward along the D curve
- E.
A rightward shift of the D curve
Correct Answer
C. A rightward shift of the D curveExplanation
A decrease in the price of personal computers would lead to an increase in the quantity demanded of personal computers. This means that consumers would be willing and able to purchase more computers at the lower price. A rightward shift of the demand (D) curve represents an increase in quantity demanded at each price level. Therefore, a rightward shift of the D curve best represents the effect of a decrease in the price of personal computers.Rate this question:
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- 38.
If D for personal computers increases as a result of an income increase,
- A.
Personal computers must be a normal good
- B.
Personal computers must be an inferior good
- C.
Personal computers must be a complement
- D.
The sub. for personal computers must be inferior goods
- E.
The subsititue effect is larger than the income effect
Correct Answer
A. Personal computers must be a normal goodExplanation
If the demand for personal computers increases as a result of an income increase, it suggests that personal computers are a normal good. This means that as people's income increases, they are willing to spend more on personal computers, indicating a positive relationship between income and demand for personal computers.Rate this question:
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- 39.
Which of the following is true of an increase in the QS of a given good?
- A.
It is represented by a rightwardshift in the supply curve
- B.
It could result from a technological improvement
- C.
The price of a key resource used to produce the good may have decreased
- D.
It is caused by an increase in the price of a good
- E.
The price of an alternative good has increased.
Correct Answer
D. It is caused by an increase in the price of a goodExplanation
An increase in the QS (quantity supplied) of a given good is caused by an increase in the price of the good. When the price of a good increases, suppliers are motivated to produce more of that good in order to maximize their profits. As a result, the quantity supplied of the good increases. This is represented by a movement along the supply curve, not a shift. A rightward shift in the supply curve would indicate an increase in the supply of the good, not an increase in the quantity supplied.Rate this question:
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- 40.
Which of the following would shift the supply curve for a product to the right?
- A.
An increase in the price of a resouce used in the good's production
- B.
The expectation of a higher price in the near future
- C.
An increase in the price of the product
- D.
An increase in the price of an alternative good
- E.
An improvement in the technology for producing the good
Correct Answer
E. An improvement in the technology for producing the goodExplanation
An improvement in the technology for producing the good would shift the supply curve for the product to the right. This is because with improved technology, producers are able to produce more output with the same amount of inputs or resources. As a result, the cost of production decreases, leading to an increase in the quantity supplied at each price level. This shift in the supply curve indicates that producers are willing and able to supply a greater quantity of the product at every price.Rate this question:
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- 41.
If there is a shortage in the market for jeans,
- A.
Producers' inventories will increase
- B.
The price should begin to rise
- C.
The demand curve will shift to restore equilibrium in the market
- D.
The supply curve will shift to restore equilibrium in the market
- E.
Producers expect gov't to impose a price ceiling
Correct Answer
B. The price should begin to riseExplanation
If there is a shortage in the market for jeans, the price should begin to rise. This is because when there is a shortage, the demand for jeans exceeds the supply available in the market. As a result, producers can increase the price of jeans to take advantage of the high demand and limited supply. By increasing the price, producers can also discourage excessive demand and encourage consumers to purchase alternative products, which helps to restore equilibrium in the market.Rate this question:
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- 42.
A decrease in demand will result in a(n)
- A.
Increase in equilibrium price and quantity
- B.
Decrease in equilibrium price and quantity
- C.
Decrease in equilibrium price and an increase in equilibrium quantity
- D.
Increase in equilibrium price and a decrease in equilibrium quantity
- E.
Change in equilibrium price and quantity only if supply changes too
Correct Answer
A. Increase in equilibrium price and quantityExplanation
A decrease in demand will result in an increase in equilibrium price and quantity because when demand decreases, there is less competition among buyers for the product. As a result, sellers can increase the price without losing customers, leading to a higher equilibrium price. Additionally, with less demand, there is excess supply in the market, which encourages sellers to lower prices to attract more buyers. This combination of higher prices and increased quantity supplied leads to an increase in equilibrium price and quantity.Rate this question:
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- 43.
A rightward (up) shift of the demand curve illustrates
- A.
Decrease in demand
- B.
Decrease in quantity demand
- C.
Increase in quantity demand
- D.
Increase in demand
- E.
Increase in supply
Correct Answer
D. Increase in demandExplanation
A rightward (up) shift of the demand curve illustrates an increase in demand. This means that at every price level, consumers are willing to buy more of the product. It could be due to factors such as an increase in consumer income, a change in consumer preferences, or an increase in the population. This shift indicates that there is a higher demand for the product at all price levels, resulting in an increase in the quantity demanded.Rate this question:
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- 44.
Which of the following would shift the supply curve for CDs to the right?
- A.
A decrease in the price of materials used to make CDS
- B.
A decrease in the # of suppliers
- C.
An increase in the price of CDs
- D.
An increase in the price of audio cassettes
- E.
A rise in the cost of labor used to make CDs
Correct Answer
A. A decrease in the price of materials used to make CDSExplanation
A decrease in the price of materials used to make CDs would shift the supply curve for CDs to the right. When the cost of materials decreases, it becomes cheaper for suppliers to produce CDs. As a result, suppliers are incentivized to increase their production and offer more CDs in the market. This leads to a rightward shift in the supply curve, indicating an increase in the quantity of CDs supplied at each price level.Rate this question:
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- 45.
Which of the following is an example of a normative statement
- A.
If the money supply falls, interest rates will rise
- B.
If interest rates go up, then construction activity will fall
- C.
Teenage unemployment would be lower if there were no minimum wage
- D.
The fed. gov't's total spending should be reduced
- E.
The quantity of shirts sold increases and the price decreases
Correct Answer
D. The fed. gov't's total spending should be reducedExplanation
The statement "The fed. gov't's total spending should be reduced" is an example of a normative statement because it expresses an opinion or value judgment about what should be done. It is not a statement of fact or a description of how things currently are.Rate this question:
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- 46.
Which of the following could NOT cause a rightward (up - increase) shift of the demand curve
- A.
A decrease in the price of the good in question
- B.
An increase in the number of consumers
- C.
A decrease in the price of a complement
- D.
An increase in the price of a substitute
- E.
A decrease in income if the good in question is an inferior good
Correct Answer
A. A decrease in the price of the good in questionExplanation
A decrease in the price of the good in question would cause a movement along the demand curve, rather than a shift. When the price of a good decreases, it leads to an increase in quantity demanded, resulting in a movement along the demand curve. A rightward shift of the demand curve is caused by factors other than price, such as an increase in the number of consumers, a decrease in the price of a complement, an increase in the price of a substitute, or a decrease in income if the good is an inferior good.Rate this question:
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- 47.
Which of the following would NOT shift the D curve for movie tickets?
- A.
A change in the income of the movie-goers
- B.
A change in the # of consumers
- C.
A change in the price of movie tickets
- D.
A change in the quality of television programs
- E.
A change in the cost of babysitting services
Correct Answer
C. A change in the price of movie ticketsExplanation
A change in the price of movie tickets would not shift the D curve for movie tickets because it is a movement along the demand curve rather than a shift of the entire curve. Shifts in the demand curve are caused by factors that affect the willingness and ability of consumers to buy movie tickets, such as changes in income, the number of consumers, the quality of television programs, and the cost of babysitting services. However, a change in the price of movie tickets would only result in a movement along the demand curve as it directly affects the quantity demanded.Rate this question:
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- 48.
In which of the following situations will the equilibrium price of wheat increase and the change in the equilibrium quantity of wheat be indeterminate?
- A.
If S remains constant and D rises
- B.
If S and D both rise
- C.
Id S rises and D declines
- D.
If S and D both decline
- E.
If S declines constant and D rises
Correct Answer
E. If S declines constant and D risesExplanation
If the supply of wheat declines while the demand for wheat rises, the equilibrium price of wheat will increase. However, the change in the equilibrium quantity of wheat will be indeterminate because the decrease in supply and increase in demand can have conflicting effects on the quantity traded. The decrease in supply tends to decrease the quantity traded, while the increase in demand tends to increase the quantity traded. Therefore, the net effect on the quantity traded cannot be determined without more information.Rate this question:
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- 49.
Suupose a market is in equilibrium and then a price ceiling is established below the equibrium price. Which of the following will happen?
- A.
QD will decrease
- B.
The quantity sold will rise
- C.
The market will remain in equilibrium
- D.
A shortage will develop
- E.
A surplus will develop
Correct Answer
D. A shortage will developExplanation
If a price ceiling is established below the equilibrium price in a market, it means that the maximum price at which a good or service can be sold is set lower than the market price. This will lead to an increase in demand (QD) as consumers will be incentivized to buy at the lower price. However, since the price is artificially capped, suppliers will be less willing to produce and sell at the lower price, leading to a decrease in the quantity supplied. The result is a shortage, where the quantity demanded exceeds the quantity supplied, as the market is unable to reach a new equilibrium at the price ceiling.Rate this question:
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- 50.
If the production possibilities curve is a downward-sloping straight line, that would indicate
- A.
Contant opportunity cost
- B.
Specialization
- C.
An absense of scarcity
- D.
That society cannot decide which good it prefers
- E.
Inefficiency
Correct Answer
A. Contant opportunity costExplanation
If the production possibilities curve is a downward-sloping straight line, it indicates constant opportunity cost. This means that the trade-off between producing one good and another remains the same throughout the production process. In other words, the resources used to produce one good can be easily and efficiently switched to produce another good without any additional cost. This implies that the resources are being allocated efficiently, and there is no wastage or inefficiency in the production process.Rate this question:
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Current Version
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Mar 21, 2023Quiz Edited by
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Apr 30, 2009Quiz Created by
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