Econ Final Review

53 Questions  I  By Sarah3gibson
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Economics Quizzes & Trivia

  
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  • 1. 
    The two loops of the circular flow diagram represent the flow of 
    • A. 

      Goods and the flow of services

    • B. 

      Dollars and the flow of financial assets

    • C. 

      Inputs and outputs and the flow of dollars

    • D. 

      Capital goods and the flow of consumer goods


  • 2. 
    In the circular flow diagram, 
    • A. 

      Income from factors of production flows from firms to households.

    • B. 

      Goods and services flow from households to firms.

    • C. 

      Factors of production flow from firms to households.

    • D. 

      Spending on goods and services flow from firms to households.


  • 3. 
    Scarcity exists when
    • A. 

      There is less than an infinite amount of a resource or good.

    • B. 

      Society can meet the wants of every individual.

    • C. 

      There is less of a good or resource available than people wish to have.

    • D. 

      The government fails to produce goods.


  • 4. 
    People make decisions at the margin by
    • A. 

      Following tradition.

    • B. 

      Experience.

    • C. 

      Calculating dollar costs.

    • D. 

      Comparing costs and benefits.


  • 5. 
    Without trade
    • A. 

      A country is better off because it will become self-sufficient.

    • B. 

      A country's production possibilities frontier is also its consumption possibilities frontier.

    • C. 

      A country can still benefit from international specialization.

    • D. 

      More product variety is available in a country.


  • 6. 
    Suppose that a new advertising campaign extolling the virtues of apple juice is unsuccessful, and a major freeze destroys half the country's apple crop. What happens to the price and quantity of apple juice?
    • A. 

      The equilibrium price of apple juice falls and the equilibrium quantity of apple juice rises.

    • B. 

      The equilibrium price of apple juice might rise or fall and the equilibrium quantity of apple juice rises.

    • C. 

      The equilibrium price of apple juice will rise and the equilibrium quantity might rise or fall.

    • D. 

      The equilibrium price of apple juice might rise or fall and the equilibrium quantity of apple juice falls.


  • 7. 
    Suppose that in October the price of a cafe latte was $1.50 and 400 lattes were consumed. In November the price of a latte was $2.00 and 200 lattes were consumed. What might have caused this change?
    • A. 

      The price of tea (a substitute for cafe lattes) fell

    • B. 

      The price of tea (a substitute for cafe lattes) rose

    • C. 

      The price of coffee beans (an input of production of cafe lattes) rose

    • D. 

      The price of coffee beans (an input of production of cafe lattes) fell


  • 8. 
    Peaches and cream are complements. When the price of peaches rises, and the price of raw milk (used to make cream) falls,
    • A. 

      The equilibrium price of cream rises and the equilibrium quantity of cream might rise or fall.

    • B. 

      The equilibrium price of cream falls and the equilibrium quantity of cream might rise or fall.

    • C. 

      The equilibrium price of cream falls and the equilibrium quantity of cream rises.

    • D. 

      The equilibrium quantity of cream falls and the equilibrium price of cream might rise or fall.


  • 9. 
    Suppose that people expect that the price of orange juice will rise next month. We could predict that the equilibrium quantity of orange juice will ______ and the equilibrium price of range juice will ______ this month.
    • A. 

      Fall; fall

    • B. 

      Fall; rise

    • C. 

      Rise; fall

    • D. 

      Rise; rise


  • 10. 
    Suppose that steak is a normal good. When income decreases, the equilibrium quantity of steak will _____ and the equilibrium price of steak will _____.
    • A. 

      Rise; rise

    • B. 

      Rise; fall

    • C. 

      Fall; rise

    • D. 

      Fall; fall


  • 11. 
    Suppose that demand for pizza is given by Q=40-3p and the supply of pizza is given by Q=P-8. The equilibrium price of pizza is _____ and the equilibrium quantity of pizza is _____.
    • A. 

      8; 12

    • B. 

      12; 4

    • C. 

      12; 12

    • D. 

      16; 8


  • 12. 
    An inferior good is defined as a good for which demand increases when 
    • A. 

      The price increases.

    • B. 

      Income increases.

    • C. 

      The price decreases.

    • D. 

      Income decreases.


  • 13. 
    Hops are used to produce beer. If the price of hops increases
    • A. 

      The demand for beer increases.

    • B. 

      The demand for beer decreases.

    • C. 

      The supply of beer increases.

    • D. 

      The supply of beer decreases.


  • 14. 
    If the equilibrium price of a good increases and the equilibrium quantity of the good decreases, we can conclude that
    • A. 

      Demand increased.

    • B. 

      Demand decreased.

    • C. 

      Supply increased.

    • D. 

      Supply decreased.


  • 15. 
    The CPI is a measure of the overall cost of
    • A. 

      Inputs purchased by a typical producer.

    • B. 

      Goods and services bought by a typical consumer.

    • C. 

      Goods and services produced in the economy.

    • D. 

      Stocks on the New York Stock Exchange.


  • 16. 
    Which of the following is the correct definition of GDP?
    • A. 

      The market value of all goods produced within a country.

    • B. 

      The market value of all final goods and services produced by the citizens of a country.

    • C. 

      The market value of all final goods and services produced within a country.

    • D. 

      None of the above are correct.


  • 17. 
    Over the last few decades Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, 
    • A. 

      Increased measured GDP.

    • B. 

      Reduced measured GDP.

    • C. 

      Did not affect measured GDP.

    • D. 

      Affected measured GDP only to the extent that people eat more at restaurants than at home.


  • 18. 
    If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, the real interest rate is
    • A. 

      11 percent

    • B. 

      24 percent

    • C. 

      5 percent

    • D. 

      3.75 percent


  • 19. 
    The substitution bias in the consumer price index refers to the
    • A. 

      Substitution of new goods for old goods in the purchases of consumers.

    • B. 

      Substitution of quality for quantity in consumer purchases over time.

    • C. 

      Fact that consumers substitute toward goods that have become relatively less expensive.

    • D. 

      Substitution of new prices for old prices in the basket of goods from one year to the next.


  • 20. 
    A transfer payment is
    • A. 

      A payment for moving expenses a worker receives when he or she is transferred by an employer to a new location.

    • B. 

      A payment that is automatically transferred from your bank account to pay your utility bill.

    • C. 

      The term that is used to indicate that your paycheck has been automatically deposited into your bank account.

    • D. 

      A form of government spending that is not made in exchange for a currently produced good or service.


  • 21. 
    If nominal GDP is $10 trillion and real GDP is $8 trillion, the GDP deflator is
    • A. 

      0.8

    • B. 

      1.25

    • C. 

      80

    • D. 

      125


  • 22. 
    Assume that chicken and beef are substitutes. When the price of beef increases,
    • A. 

      The demand for chicken decreases

    • B. 

      The demand for chicken increases

    • C. 

      The supply of chicken increases

    • D. 

      The supply of chicken decreases


  • 23. 
    Suppose that consumers expect the price of a product to decrease in the future. The result is that
    • A. 

      The current demand for the product increases.

    • B. 

      The current demand for the product decreases.

    • C. 

      The current supply of the product increases.

    • D. 

      The current supply of the product decreases.


  • 24. 
    Suppose that tea and coffee are normal goods and that the price of coffee rises. If the income effect outweighs the substitution effect, we would predict that people will consume _____ coffee and _____ tea.
    • A. 

      More; more

    • B. 

      More; less

    • C. 

      Less; more

    • D. 

      Less; less


  • 25. 
    When the price of peanuts falls,
    • A. 

      The demand for peanuts decreases

    • B. 

      The demand for peanuts increases

    • C. 

      The quantity demanded of peanuts decreases

    • D. 

      The quantity demanded of peanuts increases


  • 26. 
    Suppose that in 1996, 12 million cars were purchased at $15,000 each, while in 1997, 10 million cars were purchased at $12,000 each. What might have caused this change?
    • A. 

      The price of airplane tickets (a substitute for cars) fell.

    • B. 

      The price of airplane tickets (a substitute for cars) rose.

    • C. 

      Automobile manufacturing technology increased.

    • D. 

      Automobile manufacturing technology decreased.


  • 27. 
    A supply curve is defined as the relationship between 
    • A. 

      The price of a good and the quantity that consumers are willing to buy.

    • B. 

      The price of a good and the quantity that producers are willing to sell.

    • C. 

      The income of consumers and the quantity of a product consumers are willing to buy.

    • D. 

      The income of consumers and the quantity of a product that producers are willing to sell.


  • 28. 
    Which of the following DOES NOT affect the quantity demanded of a product?
    • A. 

      The price of the product.

    • B. 

      The price of related goods.

    • C. 

      Consumer income.

    • D. 

      The cost of producing the product.


  • 29. 
    If a technological advance makes it possible to produce bananas at a lower cost,
    • A. 

      The demand for bananas increases.

    • B. 

      The demand for bananas decreases.

    • C. 

      The supply of bananas increases.

    • D. 

      The supply of bananas decreases.


  • 30. 
    New products are invented every year. Consequently, real GDP growth
    • A. 

      Probably underestimates the rate of real economic growth.

    • B. 

      Probably overestimates the rate of real economic growth.

    • C. 

      Probably accurately estimates the rate of real economic growth.

    • D. 

      Is rarely used.


  • 31. 
    In 2000 in Japan, the unemployment rate was about 4.8 percent, the labor force participation rate was about 62 percent, and the adult population was about 108 million. How many people were employed and how many were unemployed?
    • A. 

      About 63.8 million and 3.2 million

    • B. 

      About 63.8 million and 5.2 million

    • C. 

      About 67 million and 3.2 million

    • D. 

      About 67 million and 5.2 million


  • 32. 
    The average amount of goods and services produced from each hour of a worker's time is called
    • A. 

      Per capita GDP

    • B. 

      Per capita GNP

    • C. 

      Productivity

    • D. 

      Human capital


  • 33. 
    In 2002 real GDP in Oceania was 561 billion and the population was 2.2 million. In 2001 real GDP was 500 billion and the population was 2 million. What was the approximate growth rate of real GDP per person?
    • A. 

      12 percent

    • B. 

      10 percent

    • C. 

      4 percent

    • D. 

      2 percent


  • 34. 
    Which of the following is the correct way to measure productivity?
    • A. 

      Divide the number of hours worked by output

    • B. 

      Divide output by the number of hours worked

    • C. 

      Compute output growth

    • D. 

      Divide the change in output by the change in number of hours worked


  • 35. 
    A person who is NOT counted as unemployed by the BLS is
    • A. 

      In the labor force.

    • B. 

      Must be looking for work or on temporary layoff.

    • C. 

      Be age 16 or over.

    • D. 

      Unemployed and not looking for work.


  • 36. 
    Which of the following would NOT be considered physical capital?
    • A. 

      A new factory building

    • B. 

      A computer used to help keep track of orders

    • C. 

      On-the-job training

    • D. 

      A desk used in an accountant's office


  • 37. 
    Which of the following is generally an opportunity cost of investment in human capital?
    • A. 

      Future job security

    • B. 

      Forgone wages at present

    • C. 

      Increased earning potential

    • D. 

      All of the above are correct


  • 38. 
    Human capital is
    • A. 

      Knowledge and skills that workers acquire through education, training, and experience.

    • B. 

      Stock of equipment and structures that is used to produce goods and services.

    • C. 

      Total number of hours worked in an economy.

    • D. 

      Same thing as technological knowledge.


  • 39. 
    Rick loses his job and immediately begins looking for another. Ceteris paribus, the unemployment rate
    • A. 

      Increases, and the labor force participation rate decreases.

    • B. 

      Increases, and the labor force participation rate is unaffected.

    • C. 

      Is unaffected, and the labor force participation rate increases.

    • D. 

      Decreases, and the labor force participation rate is unaffected.


  • 40. 
    Unemployment insurance
    • A. 

      And unions both create structural unemployment.

    • B. 

      And unions both create frictional unemployment.

    • C. 

      Creates frictional unemployment and unions create structural unemployment.

    • D. 

      Creates structural unemployment and unions create frictional unemployment.


  • 41. 
    An organization that tries to encourage the flow of investment to poor countries is the
    • A. 

      World Bank.

    • B. 

      Organization of Less Developed Countries.

    • C. 

      Alliance of Developing Countries.

    • D. 

      International Development Alliance.


  • 42. 
    Which of the following is an example of "brain drain"?
    • A. 

      A country's most highly educated workers emigrate to rich countries.

    • B. 

      A country has such a poor educational system that knowledge is lost over time.

    • C. 

      The population of a country grows so fast that the educational system can't keep up.

    • D. 

      A country steals patented technology from another country.


  • 43. 
    Property rights refer to 
    • A. 

      A document stating the rights of ownership that accompany owning property.

    • B. 

      The ability of people to exercise authority over the resources they own.

    • C. 

      The right of the government to exercise authority over property owners.

    • D. 

      The fact that some countries have greater natural resources.


  • 44. 
    Which of the following contributes to low growth of real GDP per person?
    • A. 

      Strong private property rights.

    • B. 

      Tariffs and quotas.

    • C. 

      Encouraging foreign investment.

    • D. 

      Low population growth.


  • 45. 
    Most spells of unemployment are
    • A. 

      Long, and most unemployment observed at any given time is long term.

    • B. 

      Long, but most unemployment observed at any given time is short term.

    • C. 

      Short, but most unemployment observed at any given time is long term.

    • D. 

      Short, and most unemployment observed at any given time is short term.


  • 46. 
    Which of the following is adverse selection?
    • A. 

      The risk associated with selecting sticks in only a few specific companies

    • B. 

      The risk that a person will become overconfident in his ability to select stocks

    • C. 

      A high-risk person being more likely to apply for insurance

    • D. 

      After obtaining insurance a person having less incentive to be careful


  • 47. 
    When opening a restaurant you need to buy ovens, freezers, tables and cash registers. Economists call these expenditures 
    • A. 

      Capital investment

    • B. 

      Investment in human capital

    • C. 

      Business consumption expenditures

    • D. 

      None of the above are correct


  • 48. 
    Real GDP per person 
    • A. 

      Minus real GDP per person from the previous period equals the growth rate of real GDP per person.

    • B. 

      Provides more meaningful comparisons across time and countries than real GDP.

    • C. 

      Is population divided by GDP.

    • D. 

      All of the above are correct.


  • 49. 
    Inward-oriented policies 
    • A. 

      Include imposing tariffs and other trade restrictions.

    • B. 

      Have generally increased productivity and growth in the countries that pursued them.

    • C. 

      Promote production of goods and services that the country that adopts them can produce most efficiently.

    • D. 

      All of the above are correct


  • 50. 
    Institutions in the economy that help to match one person's saving with another person's investment are collectively called the
    • A. 

      Federal Reserve System.

    • B. 

      Banking system.

    • C. 

      Monetary system.

    • D. 

      Financial system


  • 51. 
    The primary reason that U.S. living standards are higher today than a century ago is that
    • A. 

      More productive natural resources have been discovered.

    • B. 

      Physical capital per worker has increased.

    • C. 

      Technological knowledge has increased.

    • D. 

      Human capital has increased.


  • 52. 
    If the government's expenditures exceeded its receipts, it would likely
    • A. 

      Lend money to a bank or other financial intermediary.

    • B. 

      Borrow money from a bank or other financial intermediary.

    • C. 

      Directly buy bonds from the public.

    • D. 

      Directly sell bonds to the public.


  • 53. 
    A perpetuity is distinguished from other bonds in that it
    • A. 

      Pays continuously compounded interest.

    • B. 

      Pays interest only when it matures.

    • C. 

      Never matures.

    • D. 

      Will be used to purchase another bond when it matures unless the owner specifies otherwise.


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