Do You Know Macro?

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  • 1/55 Questions

    If the demand for money increases,

    • The interest rate will fall
    • There will be a movement downward along the money demand curve
    • There will be a a movement upward (to the left) along the money demand curve
    • There will be a rightward shift of the money demand curve
    • There will be a leftward shift of the money demand curve
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About This Quiz

This is a quick test quiz i just typed up. It's good for studying macro.

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  • 2. 

    Of the following, the major influence on th supply of money is

    • Interest rates

    • Prices

    • The transactions demand for money

    • GDP

    • The Fed

    Correct Answer
    A. The Fed
    Explanation
    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.

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  • 3. 

    Over the past 40 years, he most frequent target for the Fed's monetary policy has been

    • The prime interest rate

    • The federal funds rate

    • The M1 money supply

    • The M2 money supply

    • The M3 money supply

    Correct Answer
    A. The federal funds rate
    Explanation
    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.

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  • 4. 

    Discretionary fiscal policy is policy that

    • Is developed in secret

    • Applies to some states but not others

    • Applies to some industries but not others

    • Works automaticaly without public announcement or plan

    • Is an intentional change in taxation or government spending

    Correct Answer
    A. Is an intentional change in taxation or government spending
    Explanation
    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.

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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

    • Remain unchanged

    • Rise by $300

    • Rise by $200

    • Rise by $900

    • Fall by $300

    Correct Answer
    A. Rise by $300
    Explanation
    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.

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  • 6. 

    To close a contractionary gap using fiscal policy, the government can

    • Increase government spending by the size of the gap

    • Decrease government spending by the size of the gap

    • Increase government spending by more than the size of the gap

    • Increase government spending by less than the size of the gap

    • Decrease government spending by more than the size of the gap

    Correct Answer
    A. Increase government spending by less than the size of the gap
    Explanation
    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.

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  • 7. 

    The opposite of a laissez-faire economic policy is

    • Active government intervention

    • A reliance on prices to adjust to changing market conditions

    • Classical economics

    • Neoclassical economics

    • Quantity supplied creates its own quantity demanded

    Correct Answer
    A. Active government intervention
    Explanation
    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.

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  • 8. 

    Which of the following is an example of an automatic stabilizer?

    • Tax reductions passed by Congress in times of unemployment

    • Tax reductions passed by Congress in times of inflation

    • Government defense spending

    • Unemployment compensation

    • Welfare programs

    Correct Answer
    A. Unemployment compensation
    Explanation
    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.

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  • 9. 

    One thing that policy makers often overlook is

    • How quickly fiscal policy can respond to changes in economic conditions

    • How fiscal policies unintentionally affect individual incentive to work, spend, save, and invest

    • How fiscal policy affects the price level

    • How fiscal policy affects the economy's output

    • How voters might respond to a policy that increases taxes

    Correct Answer
    A. How fiscal policies unintentionally affect individual incentive to work, spend, save, and invest
    Explanation
    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.

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  • 10. 

    A nominal wage is

    • Not about the legal minimum

    • Always about the legal minimum

    • Measured in terms of goods and services it can buy

    • Measured in current dollars rather than in constant dollars

    • Measured in constant dollars rather than in current dollars

    Correct Answer
    A. Measured in current dollars rather than in constant dollars
    Explanation
    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.

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  • 11. 

    The expected price level is significant because

    • It is the equilibrium price level in the short run

    • It determines the actual price level in the short run

    • It determines the actual price level in the long run

    • Firms and resource owners make long-term agreements based on the expected price level

    • The difference between the expected price level and actual price levels is equal to the actual inflation rate

    Correct Answer
    A. Firms and resource owners make long-term agreements based on the expected price level
    Explanation
    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.

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  • 12. 

    If the price level rises by 4% and the nominal wage rises to 6%, the real wage

    • Falls by 2%

    • Falls by 10%

    • Rises by 2%

    • Rises by 10%

    • Remains constant

    Correct Answer
    A. 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.

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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

    • Hysteresis

    • Hysterical analysis

    • Historical analysis

    • Histoplasmosis

    • Hypoglycemia

    Correct Answer
    A. Hysteresis
    Explanation
    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.

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  • 14. 

    If planned spending exceeds planned output, the result is

    • Unintended inventory increases

    • A reduction in GP

    • A decrease in imports

    • An increase in government purchases

    • Unintended inventory reductions

    Correct Answer
    A. Unintended inventory reductions
    Explanation
    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.

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  • 15. 

    If the multiplier is 4, a $10 billion increase in autonomous investment will casue a

    • $10 billion increase in equilibrium investment

    • $40 billion increase in equilibrium investment

    • $40 billion increase in equilibrium real GDP demanded

    • $400 billion increase in equilibrium real GDP demanded

    • $40 billion increase in consumption spending

    Correct Answer
    A. $40 billion increase in equilibrium real GDP demanded
    Explanation
    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.

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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

    • Government started spending more on national security

    • People who lost jobs or feared they would lose their jobs started spending less

    • Business invested in back-up data centers in case their main computers were attacked

    • Consumers went back to shopping at the urging of gov't officials

    • All of the above

    Correct Answer
    A. People who lost jobs or feared they would lose their jobs started spending less
    Explanation
    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.

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  • 17. 

    If the MPC is 4/5, the value of the simple multiplier is

    • 4

    • 1/5

    • 4/5

    • 5/4

    • 5

    Correct Answer
    A. 5
    Explanation
    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.

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  • 18. 

    A household that expects a decrease in DI in the future will

    • Increase it's current C spending

    • Decrease it's current C spending

    • Maintain "

    • Increase it's current C spending, then increase spening when income falls

    • Decrease it's current C spending, then increase spening when income falls

    Correct Answer
    A. Decrease it's current C spending
    Explanation
    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.

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  • 19. 

    Investment

    • Is about as volatile as consumption, except during recession years

    • Has averaged about 1/6 of GDP over the psat decade

    • Is about a volatile as GP, except during recession years

    • Is the largest component of A.Spending

    • Have averaged about 2/3 of GDP over the past decade

    Correct Answer
    A. Has averaged about 1/6 of GDP over the psat decade
    Explanation
    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.

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  • 20. 

    During recession years

    • Investment declines while C increase

    • I increases while C declines

    • I is constant while C declines

    • I declines much faster than GDP declines

    • C declines much faster than GDP declines

    Correct Answer
    A. I declines much faster than GDP declines
    Explanation
    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.

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  • 21. 

    Fluctuations is in investment

    • Account for almost all of the variability in GDP during expansions

    • Account for almost all of the variability in GDP

    • Account for almost all of the variability in GDP during recessions

    • Are larger during expansions than during recessions

    • Account for more of the variability in GDP than consumption does

    Correct Answer
    A. Account for more of the variability in GDP than consumption does
    Explanation
    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.

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  • 22. 

    Households act as suppliers when they provide

    • Goods and services to firms and government

    • Resources to firms and governments

    • Tax payments to governments

    • The demand for only what firms supply or make available

    • Money to firms in exchange for goods and services

    Correct Answer
    A. Resources to firms and governments
    Explanation
    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.

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  • 23. 

    Which of the following is true about sole proprietorship in the US?

    • It is the most comon form of business organization

    • It is responsible for a large portion of total production of goods and services

    • It offers the owner the least personal liability of any form of business organization

    • There is no opportunity cost to operating the business

    • Only one individual can work in such a firm

    Correct Answer
    A. It is the most comon form of business organization
    Explanation
    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.

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  • 24. 

    Which of hte following have their profits taxed twice

    • Sole proprietorshops

    • Partnerships

    • Corporations

    • Nonprofit institutions

    • S-corporations

    Correct Answer
    A. Corporations
    Explanation
    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.

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  • 25. 

    Which of the following is true about government activity in the US?

    • Macroeconomic policy is handly mainly at the state level.

    • Higher education is handled mainly at the national level.

    • Primary and secondary education is handled mainly at the local level.

    • Primary and secondary education is handled mainly at the national level.

    • Police and fire protection are handled mainly at the state level.

    Correct Answer
    A. 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.

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  • 26. 

    Which of the following statements about GDP is not true?

    • It is a stock variable

    • It is measured for a particular time period, usually one year.

    • It is perhaps the most effective means of viewing the same economy over time.

    • It is a measure of the economy's performance.

    • It is a flow variable, not a stock variable.

    Correct Answer
    A. It is a stock variable
    Explanation
    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.

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  • 27. 

    Which of the following is a stock variable?

    • GDP

    • Consumption spending

    • The federal government's spending on Social Security

    • The money supply

    • Federal income tax revenue

    Correct Answer
    A. The money supply
    Explanation
    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.

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  • 28. 

    A recession is best defined as a period during which

    • The % of the population employed is declining

    • Employment, output, and income decline

    • The price level is declining

    • More resources are used

    • The budget deficit and trade deficit are both growing

    Correct Answer
    A. Employment, output, and income decline
    Explanation
    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.

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  • 29. 

    Theory in economics

    • Involves some implification of reality

    • Bears no relation to reality

    • Approached reality in all its complexity

    • Involves so much distortion of reality that it is worthles

    • Focuses on the unique aspects of each situation

    Correct Answer
    A. Involves some implification of reality
    Explanation
    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.

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  • 30. 

    An outward shift of the production possibilities frontier

    • Reflects economic stability

    • Reflects economic growth

    • Reflects economic decline

    • Does not relate to the state of the economy

    • Is always a parallel shift

    Correct Answer
    A. Reflects economic growth
    Explanation
    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.

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  • 31. 

    A mixed capitalist economy is one in which

    • Decisions are bades primarilly on religion or custom

    • All resources are publicly owned and economic planning is centralized

    • All resources are privately owened and prices are used to coordinate economic activity

    • Resources are both publicly and privately owned and some markets are regulated

    • All resources are publicly owned and prices are used to coordinate economic activity

    Correct Answer
    A. Resources are both publicly and privately owned and some markets are regulated
    Explanation
    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.

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  • 32. 

    Which of the following is a result of increased real wages in the US?

    • A decrease in the quality of services demanded by households

    • An increase in the opportunity cost of remaining employed in the home

    • A decrease in the opportunity cost of working outside the home

    • A decline in the number of households providing labor outside the home

    • Reduced use of labor-saving devices in the household

    Correct Answer
    A. An increase in the opportunity cost of remaining employed in the home
    Explanation
    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.

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  • 33. 

    Which of the following taxes is based on the ability-to-pay principle?

    • Tolls on a bridge

    • Income taxes

    • Gasoline excise taxes

    • Property taxes

    • User fees that collect the same amount from each person

    Correct Answer
    A. Income taxes
    Explanation
    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.

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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

    • Free

    • Junk

    • Copyrighted

    • Closed

    • Hobby-ware

    Correct Answer
    A. Free
    Explanation
    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.

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  • 35. 

    Which of the following statements about the subsitution effect of a price change is true?

    • It is caused by a change in relative prices

    • It affects the conumer's ability, rather than willingness, to purchase a good

    • It assumes that the consumer substitutes more expensive goods for cheaper ones when income increase

    • It is usually equal to the income effect

    • 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 prices
    Explanation
    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.

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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%?

    • The consumer will sub. apples for oranges

    • The consumer will sub. oranges for apples

    • There is no subsitution effect because relative prices have remained constant

    • Demand for both goods increase

    • Demand for both goods decrease

    Correct Answer
    A. There is no subsitution effect because relative prices have remained constant
    Explanation
    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.

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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 leftward shift of the D curve

    • A movement leftward along the D curve

    • A rightward shift of the D curve

    • A movement rightward along the D curve

    • A rightward shift of the D curve

    Correct Answer
    A. A rightward shift of the D curve
    Explanation
    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.

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  • 38. 

    If D for personal computers increases as a result of an income increase,

    • Personal computers must be a normal good

    • Personal computers must be an inferior good

    • Personal computers must be a complement

    • The sub. for personal computers must be inferior goods

    • The subsititue effect is larger than the income effect

    Correct Answer
    A. Personal computers must be a normal good
    Explanation
    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.

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  • 39. 

    Which of the following is true of an increase in the QS of a given good?

    • It is represented by a rightwardshift in the supply curve

    • It could result from a technological improvement

    • The price of a key resource used to produce the good may have decreased

    • It is caused by an increase in the price of a good

    • The price of an alternative good has increased.

    Correct Answer
    A. It is caused by an increase in the price of a good
    Explanation
    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.

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  • 40. 

    Which of the following would shift the supply curve for a product to the right?

    • An increase in the price of a resouce used in the good's production

    • The expectation of a higher price in the near future

    • An increase in the price of the product

    • An increase in the price of an alternative good

    • An improvement in the technology for producing the good

    Correct Answer
    A. An improvement in the technology for producing the good
    Explanation
    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.

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  • 41. 

    If there is a shortage in the market for jeans,

    • Producers' inventories will increase

    • The price should begin to rise

    • The demand curve will shift to restore equilibrium in the market

    • The supply curve will shift to restore equilibrium in the market

    • Producers expect gov't to impose a price ceiling

    Correct Answer
    A. The price should begin to rise
    Explanation
    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.

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  • 42. 

    A decrease in demand will result in a(n)

    • Increase in equilibrium price and quantity

    • Decrease in equilibrium price and quantity

    • Decrease in equilibrium price and an increase in equilibrium quantity

    • Increase in equilibrium price and a decrease in equilibrium quantity

    • Change in equilibrium price and quantity only if supply changes too

    Correct Answer
    A. Increase in equilibrium price and quantity
    Explanation
    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.

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  • 43. 

    A rightward (up) shift of the demand curve illustrates

    • Decrease in demand

    • Decrease in quantity demand

    • Increase in quantity demand

    • Increase in demand

    • Increase in supply

    Correct Answer
    A. Increase in demand
    Explanation
    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.

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  • 44. 

    Which of the following would shift the supply curve for CDs to the right?

    • A decrease in the price of materials used to make CDS

    • A decrease in the # of suppliers

    • An increase in the price of CDs

    • An increase in the price of audio cassettes

    • A rise in the cost of labor used to make CDs

    Correct Answer
    A. A decrease in the price of materials used to make CDS
    Explanation
    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.

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  • 45. 

    Which of the following is an example of a normative statement

    • If the money supply falls, interest rates will rise

    • If interest rates go up, then construction activity will fall

    • Teenage unemployment would be lower if there were no minimum wage

    • The fed. gov't's total spending should be reduced

    • The quantity of shirts sold increases and the price decreases

    Correct Answer
    A. The fed. gov't's total spending should be reduced
    Explanation
    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.

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  • 46. 

    Which of the following could NOT cause a rightward (up - increase) shift of the demand curve

    • A decrease in the price of the good in question

    • An increase in the number of consumers

    • A decrease in the price of a complement

    • An increase in the price of a substitute

    • 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 question
    Explanation
    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.

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  • 47. 

    Which of the following would NOT shift the D curve for movie tickets?

    • A change in the income of the movie-goers

    • A change in the # of consumers

    • A change in the price of movie tickets

    • A change in the quality of television programs

    • A change in the cost of babysitting services

    Correct Answer
    A. A change in the price of movie tickets
    Explanation
    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.

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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?

    • If S remains constant and D rises

    • If S and D both rise

    • Id S rises and D declines

    • If S and D both decline

    • If S declines constant and D rises

    Correct Answer
    A. If S declines constant and D rises
    Explanation
    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.

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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?

    • QD will decrease

    • The quantity sold will rise

    • The market will remain in equilibrium

    • A shortage will develop

    • A surplus will develop

    Correct Answer
    A. A shortage will develop
    Explanation
    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.

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Quiz Review Timeline (Updated): Mar 21, 2023 +

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  • Current Version
  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 30, 2009
    Quiz Created by
    Stephelston

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