Macroeconomics Final
- 1.
Suppose that you discover that, ceteris paribus, when the price of tomatoes increases, the demand for bleu cheese decreases. From this you conclude that:
- A.
Tomatoes and blue cheese are substitutes.
- B.
Tomatoes are inferior goods and blue cheese is a normal good.
- C.
Tomatoes and blue cheese are complements.
- D.
The demand curve for tomatoes has shifted to the left.
Correct Answer
C. Tomatoes and blue cheese are complements. -
- 2.
All of the following are considered key ideas of economics except:
- A.
Choice and scarcity force tradeoffs.
- B.
People follow incentives.
- C.
Irrational behavior requires thinking on the margin.
- D.
Information is important.
Correct Answer
C. Irrational behavior requires thinking on the margin. -
- 3.
The field of economics that is concerned about the broader issues in the economy such as inflation, unemployment, and national output of goods and services is called:
- A.
Macroeconomics.
- B.
Microeconomics.
- C.
National economics
- D.
Labor force economics.
Correct Answer
A. Macroeconomics. -
- 4.
All of the following are categories of resources except:
- A.
Entrepreneurial Ability
- B.
Computers
- C.
Labor
- D.
Land
Correct Answer
B. Computers -
- 5.
Econoimcs is often defined as the study of how society allocates ____________ resources to satisfy unlimited ___________.
- A.
Abundant; needs
- B.
Scarce; wants.
- C.
Abundant; wants.
- D.
Scarce; needs.
Correct Answer
B. Scarce; wants. -
- 6.
Increasing opportunity costs occur along the PPF because:
- A.
Of unemployment in the economy.
- B.
Not all resources are alike in the production of goods and services.
- C.
Of the negative relationship between price and quantity demanded
- D.
Of inequities in the distribution of income.
Correct Answer
B. Not all resources are alike in the production of goods and services. -
- 7.
Which of the following is not a determinant of demand?
- A.
Price of the good
- B.
Income
- C.
Number of buyers
- D.
Expectations
Correct Answer
A. Price of the good -
- 8.
If one country has a comparative advantage over another, this means:
- A.
It can produce one product at a lower opportunity cost than can the other country.
- B.
Its products are the best in the world.
- C.
It can produce more of all products than the other country.
- D.
It has a bigger market share than the other country.
Correct Answer
A. It can produce one product at a lower opportunity cost than can the other country. -
- 9.
Who is considered the Father of Economics?
- A.
David Ricardo
- B.
Joseph Schumpeter
- C.
Alfred Marshall
- D.
Adam Smith
Correct Answer
D. Adam Smith -
- 10.
The maximum amount of a product that sellers are willing and able to provide for sale over some time period at various prices, ceteris paribus, is called:
- A.
Sales volume.
- B.
Profit.
- C.
Supply.
- D.
Maximal output.
Correct Answer
C. Supply. -
- 11.
Trade can benefit society as a whole because it allows:
- A.
For a more efficient use of resources.
- B.
For goods to be obtained at a lower opportunity cost.
- C.
People to specialize in activities in which they have a comparative advantage.
- D.
All of the above are correct.
Correct Answer
D. All of the above are correct. -
- 12.
Consider the U.S. auto market. Suppose the following two changes take place: (1) Chrysler goes out of business and (2) a flood of new immigrants raises the U.S. population. What happens to the equilibrium price and equilibrium quantity for autos?
- A.
The equilibrium price and the equilibrium quantity rise.
- B.
The equilibrium price falls, but the equilibrium quantity is uncertain
- C.
The equilibrium price is uncertain and the equilibrium quantity rises.
- D.
The equilibrium price rises, but the equilibrium quantity is uncertain.
Correct Answer
D. The equilibrium price rises, but the equilibrium quantity is uncertain. -
- 13.
Suppose in the market for iPhones, the following two changes take place: (1) there is new production technology that allows for less labor to be used and (2) more consumers prefer iPhones over alternative technologies. What happens to the equilibrium price and the equilibrium quantity?
- A.
The equilibrium price and the equilibrium quantity rise.
- B.
The equilibrium price falls, but the equilibrium quantity is uncertain
- C.
The equilibrium price is uncertain and the equilibrium quantity rises.
- D.
The equilibrium price rises, but the equilibrium quantity is uncertain.
Correct Answer
C. The equilibrium price is uncertain and the equilibrium quantity rises. -
- 14.
The ________ shows the combination of two goods that are possible for a society to produce at full employment.
- A.
Full employment line
- B.
Production possibilities frontier
- C.
Goods and services frontier
- D.
Maximal productivity curve
Correct Answer
B. Production possibilities frontier -
- 15.
___________ occurs when the mix of goods society decides to produce is produced at the lowest possible resource or opportunity cost.
- A.
Allocative efficiency
- B.
Production efficiency
- C.
Opportunity cost
- D.
Cost allocation
Correct Answer
B. Production efficiency -
- 16.
_____ is an assumption used in economics in which other relevant factors or variables are held constant.
- A.
Caveat emptor
- B.
Habeas corpus
- C.
Montani semper liberi
- D.
Ceteris paribus
Correct Answer
D. Ceteris paribus -
- 17.
If one country has a(n) ____________ in the production of one item, it can always produce more of the item than another nation.
- A.
Comparative advantage
- B.
Absolute advantage
- C.
Special advantage
- D.
Trade advantage
Correct Answer
B. Absolute advantage -
- 18.
Suppose the equilibrium price of a one-bedroom apartment in Manhattan, KS is $700. The city council decides to institute a price ceiling at $500. All of the following are expected to occur except:
- A.
A surplus of apartments
- B.
A shortage of apartments
- C.
Apartment quality will deteriorate
- D.
Apartments will be converted to alternative uses, such as offices or condos.
Correct Answer
A. A surplus of apartments -
- 19.
The basic proposition of the law of demand is that:
- A.
Prices must adhere to all of a nation's laws.
- B.
Higher prices elicit more demand.
- C.
As the price of a good rises, a lower quantity of it is demanded
- D.
Buyers demand lower prices.
Correct Answer
C. As the price of a good rises, a lower quantity of it is demanded -
- 20.
-Suppose that after watching Food, Inc., milions of college students across the country become vegetarians. Consequently, the demand for tofu(which is made primarily from soybeans) increases. What will happen to the supply of tofu?
- A.
Increase
- B.
Decrease
- C.
It depends upon the magnitude of the demand shift
- D.
Nothing
Correct Answer
D. Nothing -
- 21.
Boeing sells an airplane to British Airways. This transaction is included in which category of GDP?
- A.
C
- B.
I
- C.
G
- D.
NX
- E.
Not Included
Correct Answer
D. NX -
- 22.
When calculating GDP, government purchases include ________ and ________ but not ________.
- A.
Wages and salaries; transfers payments; the purchase of goods and services
- B.
Transfer payments; the purchase of goods and services; wages and salaries
- C.
Wages and salaries; the purchase of goods and services; transfer payments
- D.
None of the above are correct: Government expenditures include wages and salaries, transfer payments, and the purchase of goods and services.
Correct Answer
C. Wages and salaries; the purchase of goods and services; transfer payments -
- 23.
The reason why investment in human capital is so important is that:
- A.
Humans need capital.
- B.
It lowers the total wage bill.
- C.
It increases labor productivity.
- D.
It improves morale.
Correct Answer
C. It increases labor productivity. -
- 24.
A decline in overall prices throughout the economy is called __________.
- A.
Inflation
- B.
Hyperinflation
- C.
Deflation
- D.
Disinflation
Correct Answer
C. Deflation -
- 25.
Using the value added approach ensures that there is(are) no !!!!!!!!!!!!!!!!!!! in our GDP figures.
- A.
Used goods
- B.
Double-counting
- C.
Foreign investments
- D.
Inflation
Correct Answer
B. Double-counting -
- 26.
All of the following are included in GDP using the expenditures approach except:
- A.
An entrepreneur buys a WWII ammunition bunker from the U.S. government that he plans to turn into a storage facility.
- B.
While on vacation in the U.S., a Japanese tourist breaks his leg and must visit the emergency room.
- C.
A U.S. firm adds to its inventories.
- D.
The City of Manhattan builds a new swimming pool.
Correct Answer
A. An entrepreneur buys a WWII ammunition bunker from the U.S. government that he plans to turn into a storage facility. -
- 27.
The historical evidence shows that:
- A.
Governments ruled under dictatorships invest wisely, because they have access to all relevant information
- B.
A country's degree of economic freedom is related to the level of economic growth.
- C.
Economic freedom is detrimental to growth, because market participants tend to make mistakes.
- D.
There is no connection between citizens' freedoms and economic prosperity.
Correct Answer
B. A country's degree of economic freedom is related to the level of economic growth. -
- 28.
GDP includes goods and services produced _____ but it does not include goods and services produced _____.
- A.
Inside the United States by foreign citizens; outside the United States by U.S. citizens.
- B.
Outside the United States by U.S. citizens; inside the United States by U.S. citizens.
- C.
Outside the United States by U.S. citizens; inside the United States by foreign citizens.
- D.
Inside the United States only by U.S. citizens; outside the United States only by U.S. citizens.
Correct Answer
A. Inside the United States by foreign citizens; outside the United States by U.S. citizens. -
- 29.
In class we discussed economic growth between various countries over the last 400-500 years. What was the main reason for the explosion in economic growth that occured in the 1800's?
- A.
Industrial revolution
- B.
American revolution
- C.
Kansas becoming a state
- D.
A dramatic increase in literacy rates
Correct Answer
A. Industrial revolution -
- 30.
One important aspect of modern growth theory is that:
- A.
Private businesses intentionally set out to do research to add knowledge to the public domain.
- B.
Most new knowledge disappears after five years.
- C.
Developments in technology have a public character; that is, they have spillover effects.
- D.
Patent law and copyrights prevent most knowledge from being made public.
Correct Answer
C. Developments in technology have a public character; that is, they have spillover effects. -
- 31.
In the absence of copyright and patent laws:
- A.
The quality of goods and services consumed by purchasers improves.
- B.
Innovators can invent more, because they don't have to spend resources navigating the legal system.
- C.
The profits of writers and inventors rise.
- D.
It is difficult for innovators to profit from their efforts.
Correct Answer
D. It is difficult for innovators to profit from their efforts. -
- 32.
The capital-to-labor ratio measures:
- A.
The average number of hours worked.
- B.
The financial resources of a company divided by the number of employees.
- C.
The rate of technological improvement.
- D.
The amount of capital per worker.
Correct Answer
D. The amount of capital per worker. -
- 33.
If the BLS counted discouraged workers and the underemployed as unemployed, the unemployment rate in the U.S. would be:
- A.
The same.
- B.
Lower.
- C.
Higher.
- D.
Uncertain; it depends on the number of underemployed workers who are over age 65.
Correct Answer
C. Higher. -
- 34.
Last week, Warren Buffet bought a 2009 Lear 45XR jet. This transaction is included in which category of GDP?
- A.
C
- B.
I
- C.
G
- D.
NX
- E.
Not Included
Correct Answer
E. Not Included -
- 35.
In the Keynesian model, assume that full employment occurs at an output of $10,000. With an APS=0.05, a MPC= 0.5 and equilibrium output currently at $9,600, by how much would government spending need to change to move the economy to full employment?
- A.
$200
- B.
$400
- C.
-$100
- D.
$20
Correct Answer
A. $200 -
- 36.
Your grandma says that people were lucky to make $1 a day in 1938. In real terms(2011 dollars), what is $1 a day equilvalent to? The CPI in 1938 was 14.1 and the CPI in 2011 is 223.5
- A.
$126.80
- B.
$15.85
- C.
$222.50
- D.
$14.85
Correct Answer
B. $15.85 -
- 37.
In the Classical model discussed in Ch. 7, workers are paid according to ___________.
- A.
The minimum wage
- B.
The rental rate of capital
- C.
Their productivity
- D.
The interest rate in the loanable funds market
Correct Answer
C. Their productivity -
- 38.
All of the following are issues with how the CPI is measured except:
- A.
Healthcare bias
- B.
Store-brand bias
- C.
Subsitution bias
- D.
New product bias
Correct Answer
B. Store-brand bias -
- 39.
In the Keynesian framework, the way to fight a recession is to:
- A.
Cut taxes and/or increase government spending
- B.
Increase the money supply which reduces interest rates.
- C.
Increase the population with more immigration.
- D.
Do nothing and wait for the economy to return to full employment on its own.
Correct Answer
A. Cut taxes and/or increase government spending -
- 40.
If the average propensity to consume is 0.94, and the marginal propensity to save is 0.20, then a $375 tax increase will _________ income(Y) by ___________.
- A.
Increase; $1,762.50
- B.
Increase ; $1,500
- C.
Decrease; $1,762.50
- D.
Decrease ; $1,500
Correct Answer
D. Decrease ; $1,500 -
- 41.
Assume the U.S. population is 300 million, the number unemployed is 18 million, and the number employed is 182 million. Calculate the unemployment rate for the U.S.
- A.
91%
- B.
9%
- C.
39.3%
- D.
6%
Correct Answer
B. 9% -
- 42.
If the stock market collapses, consumption will:
- A.
Not be affected.
- B.
Increase because stocks can now be purchased cheaply
- C.
Decrease because people feel less wealthy.
- D.
Mildly increase.
Correct Answer
C. Decrease because people feel less wealthy. -
- 43.
In our Keynesian model with a linear savings curve, the marginal propensity to save:
- A.
Increases when income increases.
- B.
Is the change in saving associated with a change in income.
- C.
Is equal to saving divided by income.
- D.
Decreases when income increases.
Correct Answer
B. Is the change in saving associated with a change in income. -
- 44.
Jennifer did not work during college. She just obtained her MBA and she is now looking for a marketing job in the retail industry. Jennifer is considered:
- A.
Structurally unemployed.
- B.
Frictionally unemployed
- C.
Cyclically unemployed
- D.
Not in the labor force
Correct Answer
B. Frictionally unemployed -
- 45.
Scott has a Masters in sociology and drives a taxicab for a living. According to the BLS, Scott is categorized as:
- A.
Unemployed.
- B.
Underemployed.
- C.
Discouraged
- D.
Both B & C are correct.
Correct Answer
B. Underemployed. -
- 46.
All of the following are examples of infrastructure except:
- A.
Interestate highway system
- B.
Private education institutions
- C.
Dams
- D.
Telecommunication networks
Correct Answer
B. Private education institutions -
- 47.
In our Keynesian model, when withdrawals equal injections the economy:
- A.
Is losing money.
- B.
Still needs to adjust to bring both down to zero.
- C.
Is in a recession
- D.
Is in equilibrium
Correct Answer
D. Is in equilibrium -
- 48.
Due to the invention of ATMs, many bank tellers lost their jobs. This is an example of:
- A.
Structural unemployment.
- B.
Frictional unemployment
- C.
Cyclical unemployment
- D.
Statistical unemployment
Correct Answer
A. Structural unemployment. -
- 49.
If the amount of investment spending in an economy declines by $1,000 and the Marginal Propensity to Consume is 0.60, the effect on the economy would be a change of _____ in income/output.
- A.
-$600
- B.
$1,000
- C.
-$2,500
- D.
-$1,000
Correct Answer
C. -$2,500 -
- 50.
Which is the following best illustrates the wealth effect?
- A.
Jacob saved $25,000, which he put in the stock market. The market did very well and his wealth in stock rose to $36,000.
- B.
Simon felt he needed at least $800,000 to retire comfortably. He increased his saving to build up his wealth.
- C.
The Jones family has $50,000 in a bank. Prices at stores rose dramatically, so the purchasing power represented by that $50,000 diminished.
- D.
Margaret had her savings in Treasury bonds. She thought that stocks might offer her a better opportunity to increase her wealth, so she sold her bonds to buy stocks.
Correct Answer
C. The Jones family has $50,000 in a bank. Prices at stores rose dramatically, so the purchasing power represented by that $50,000 diminished. -
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