Exam Name___________________________________ MULTIPLECHOICE.Choosetheonealternativethatbestcompletesthestatementor answersthequestion. 1) hemostfundamentaleconomicproblemis T A security. ) B) ealth. h C) carcity. s D thefacttheUnitedStatesbuysmoregoodsfromforeignersthanwesell ) toforeigners. 2) conomistspointoutthatscarcityconfronts E A thepoorbutnottherich. ) C) oththepoorandtherich. b 3) conomicsisthestudyof E A thedistributionofsurplusgoodstothoseinneed.

ed. ) B) ffluenceinamorallybankruptworld. a C) aystoreducewantstoeliminatetheproblemofscarcity. w D thechoiceswemakebecauseofscarcity. ) 4) hichofthefollowingisamacroeconomictopic? W A whyplumbersearnmorethanjanitors ) B) hetherthearmyshouldbuymoretanksormorerockets w C) hereasonsforariseinthepriceoforangejuice t D thereasonsfortheriseinaverageprices ) 5) icroeconomicsfocusesonallofthefollowingEXCEPTthe M A effectoninflationofincreasingthemoneysupply. ) B) urchasingdecisionsmadebyanindividualconsumer. p C) iringdecisionsmadebyabusiness. h D effectoncigarettesalesofanincreaseinthetaxoncigarettes. ) 6) tudyingthedeterminationofpricesinindividualmarketsisprimarilya S concernof A ) m acroeconomics. B) herichbutnotthepoor. t D neitherthepoornortherich. )

B) egativeeconomics. n C) ositiveeconomics. p D microeconomics. )

7) .S.producersdecidetoproducemorecompactcarsandfewerSUVsas U thepriceofgasolinerises.Producersareansweringthe________question. A how ) many B) when C) how D what )

8) namarketeconomy,whatpeopledointhepursuitoftheirself-interest I A isalwaysinconflictwiththesocialinterest. ) B) suallyforwardsthesocialinterest. u C) lwaysforwardsthesocialinterest. a D isusuallyinconflictwiththesocialinterest. ) 9) henauniversitydecidestoaddtothefootballstadiuminsteadof W addingtothebaseballstadium,itfacesthe A howtradeoff. ) C) whattradeoff. 10) hehowtradeoffoccurswhen T A thegovernmentincreasesincometaxespaidbytherich. ) B) firmdecidestoproducerefrigeratorsinsteadofdishwashers. a C) eanswerthemacroeconomicquestion. w D afarmusesmachinerytopickorangesinsteadofemployingmigrant ) workers. 11) ecausewefacescarcity,everychoiceinvolves B A thequestionwhat. ) C) ivingupsomethingfor g nothing. 12) pportunitycostmeansthe O A monetarycostsofanactivity. ) B) ccountingcostminusthemarginalcost. a C) ighest-valuedalternativeforgone. h D accountingcostminusthemarginalbenefit. ) B) nopportunitycost a D money ) B) forwhomtradeoff. D macroeconomicquestion. )

13) upposeyouplantotakesummercourses.Thecostoftuitionand S textbooksis$1,200,housingwillcostyou$400,andyoullspend$300on food.Ifyoudecidenottotakecoursesinthesummer,youllliveinyour parentshouseforfreeandspendonly$100onfood.Also,ifyoudont takecoursesinthesummer,youllworkfulltimeandcouldearnatleast $5,000.Youcanstillworkparttimewhiletakingcourses,butthemostyou canearnis$1,000.Whatisyouropportunitycostoftakingcoursesinthe summer? A $6,900 B) 5,800 $ C) 1,900 $ D $4,000 ) ) 14) upposethatyouarespendingtwohoursadaystudyingeconomics,and S yourgradeis85percent.Youwantahighergradeanddecidetostudyfor anextrahouraday.Asaresult,yourgraderisesto90percent.Your marginalbenefitisthe A highergradethatyouget. ) B) xtrahourperdayyouspendonstudying. e C) hreehoursperdayyouspendonstudying. t D 5pointincreaseinyourgrade. ) 15) positivestatementis A A validonlyinthecontextofamodelwithsimpleassumptions. ) B) boutwhatis. a C) boutwhatoughttobe. a D theresultofamodelsnormativeassumptions. ) 16) hichofthefollowingisanexampleofapositivestatement? W A TheFederalReserveoughttocuttheinterestrate. ) B) eshouldcutbackonouruseofcarbon-basedfuelssuchascoaland W oil. C) veryAmericanshouldhaveequalaccesstohealthcare. E D Increasingtheminimumwageresultsinmoreunemployment. ) 17) tatementsaboutwhatoughttobearecalled S A positivestatements. ) C) mplications. i B) ssumptions. a D normativestatements. )

18) tleast7outofevery10economistsagreewiththefollowing A propositions.Whichofthesepropositionsisnormative?

A Cashpaymentstowelfarerecipientsmakethembetteroffthando ) transfers-in-kindofequalcashvalue. B) heredistributionofincomeisalegitimaterolefortheU.S. T government. C) entcontrolscuttheavailabilityofhousing. R D Tariffsandimportrestrictionsmakemostpeopleworseoff. ) 19) Governmentshouldacttoreducepovertylevels. A Thisstatementisanexampleofthefallacyofcomposition. ) B) hisstatementisanexampleoftheposthocfallacy. T C) hisstatementisapositivestatement. T D Thisstatementisanormativestatement. ) 20) neconomictheoryis A A usuallymorecomplexthantherealworld. ) B) lwaysamathematical,ornonverbal,model. a C) generalizationthatsummarizeswhatweunderstandabouteconomic a choices. D apositivestatementthatcannotusetheceterisparibusclause. ) 21) conomicmodels E A makeonlyassumptionsthathavebeenproved. ) B) rebetteriftheyincludemostofthedetailoftherealeconomy. a C) annotusetheceterisparibusclause. c D relyonsimplification. ) 22) hreestepsthateconomiststaketodiscoverhowtheeconomicworld T worksare A observationandmeasurement;modelbuilding;and,testingmodels. ) s B) peculation;observationandmeasurement;and,drawing conclusions. C) atamining;datatesting;and,drawingconclusions. d D modelbuilding;speculation;and,revision. ) 23) howroteTheWealthofNations? W A KarlMarx. ) B) ichaelParkin. M

C) damSmith. A

D ThomasJefferson. )

24) nestudentinafootballstadiumwith30,000studentscanseethegame O betterifheorshestandsup.Assumingthatall30,000studentscaneach seethegamebetteriftheyallstandisanexampleofthe A fallacyofceterisparibus. ) C) osthocfallacy. p B) allacyofcomposition. f D fallacyoflargenumbers. )

25) conomistsgenerallyagreethat________. E A minimumwagesincreasetheemploymentoflow-skilledworkers ) B) ariffsmakepeoplebetteroff t C) entceilingscuttheavailabilityofhousing r D alargebudgetdeficitmakesnosignificantdifference )

26) ntheabovefigure,theamountofclothfabricsoldovertimeexhibits I A adownwardtrend. ) B) nupwardtrend. a C) otrend. n D Noneoftheabovebecausethefigurecannotshowthetrendofthe ) amountofclothfabricsold. 27) trendis A A

the

maximumvalueofavariable. B) measureofclosenessonascatterdiagram. a C) generaltendencyforavariabletoriseorfall. a D theminimumvalueofavariable. )

28) nthefigureabove,whenincomeequals$20,000,whatdoesconsumption I equal? A $20,000 B) 0 $ ) C) 10,000 $ D impossibletotell )

29) ntheabovefigure, I A consumptionexpendituresarealinearfunctionoflaborincome. ) B) onsumptionexpendituresarepositivelyrelatedtolaborincome. c C) heslopeofthefunctiondepictedis0.9. t D Alloftheaboveanswersarecorrect. )

30) hichofthefollowingcorrectlydescribestheabovefigure? W A Thereisapositiverelationshipbetweenxandy. ) B) hereisanegativerelationshipbetweenxandy. T C) hereisnorelationshipbetweenxandy. T D Noneoftheaboveanswersarecorrect. ) 31) hesocialarrangementsthatgoverntheownership,use,anddisposalof T propertyarereferredtoas A propertyrights. B) rivateenterprise. p ) C) hedoublecoincidenceof t D capitalism. wants. ) 32) ndividualeconomicdecisionsarecoordinatedby I A marketsthroughadjustmentsinprices. ) B) overnmentthroughadjustmentsinsalestaxes. g C) arketsthroughadjustmentsinsaleslevels. m D governmentthroughadjustmentsinincometaxes. )

33) hescienceofmacroeconomics T A emergedduringthedecadeoftheGreatDepression. ) B) olvedtheGreatDepression. s C) idnotevolveuntilafterWorldWarIIsohadnoconnectiontothe d GreatDepression. D didnotsolvetheGreatDepressionbutkepttheU.S.economyfrom ) suffering. 34) n1933,theworstyearoftheGreatDepression,totalproductioninthe I UnitedStateswas A 50percentofits1929level,and5percentofthelaborforcewas ) unemployed. B) 0percentofits1929level,and5percentofthelaborforcewas 9 unemployed. C) 5percentofits1929level,and70percentofthelaborforcewas 2 unemployed. D 70percentofits1929level,and25percentofthelaborforcewas ) unemployed. 35) nTheGeneralTheoryofEmployment,Interest,andMoney,JohnMaynard I Keynesarguedthattoeliminateadepressiongovernmentsshouldspend A lesstooffsetexcessiveprivatespending. ) B) esstooffsetinsufficientprivatespending. l C) oretooffsetinsufficientprivatespending. m D moretooffsetexcessiveprivatespending. ) 36) ohnMaynardKeynes J A focusedonthelongterminattemptingtosolvetheGreatDepression. ) B) orriedmostlyaboutlongtermconsequencesofanygovernmental w action. C) arnedagainsttheuseofanyshorttermgovernmentalaction. w D focusedontheshortterminattemptingtosolvetheGreat ) Depression.. 37) hichofthefollowingareexamplesoflong-termeconomicpolicyissues? W A Inflationandrecessions. ) B) loweconomicgrowthandrecessions. S C) ersistentunemploymentandcuringadepression. P D Inflationandsloweconomicgrowth. ) 38) ealGDPis R A )

theworst haveoftotalproductionbecauseitmissesmuchofwhatisproduced. measurewe B) hebestmeasurewehavefortotalproductionbecauseitdoesntmiss t anything. C) hebestmeasurewehavefortotalproduction,thoughitdoeshave t someflaws. D ignoredasameasureoftotalproductionbecauseitisdoesnottake ) accountofinflation. 39) conomicgrowthisbestdefinedasthe E A rateofincreaseineconomicproductivity. ) B) usiness-cyclechangesintotaloutput. b C) ong-runexpansionofthenationsproductionpossibilities. l D rateofgrowthofemployment. ) 40) businesscycleis A A theincreaseinconsumerspendingthataccompaniesanincreasein ) disposableincome. B) hecyclicalchangeinthenationsbalanceoftrade. t C) hecyclicalmovementintheinterestrates. t D thepatternofshort-runupwardanddownwardmovementsintotal ) output. 41) recession A A followsatrough. ) B) saperiodduringwhichrealGDPexpands. i C) omesjustbeforeapeak. c D isdefinedasaperiodofnegativerealGDPgrowth. )

 42) ntheabovefigure,arecessionbeginsatpoint________andanexpansion I beginsatpoint________. A a;b B) ;c b C) ;c d D b;a ) ) 43) heunemploymentrategenerally________duringrecessionsand T ________duringexpansions. A falls;falls B) ises;rises r C) alls;rises f D rises;falls ) ) 44) nflationisa I A minorchangeinthepricelevel. ) B) rocessoffallingprices. p C) rocessofrisingprices. p D large,one-timefallinthepricelevel. ) 45) heCPIcanbeusedtomeasure T A theunemploymentratesofdiscouragedworkers. ) B) hangesinaveragepriceofthegoodsandservicesboughtbyatypical c urbanhousehold. C) xpectationsofthefuturerateofinflation. e D howconsumerunemploymenthaschanged. ) 46) hegovernmenthasabudgetdeficitwhengovernmentspending T B) xceedstaxreceipts. e A equalstaxreceipts. ) C) szero. i D )

islessthan taxreceipts. 47) hecurrentaccountis T A theamountofmoneythegovernmentkeepsonhandtopayitsbills ) takingaccountoftheinterestpaymentsonitsdebt. B) stheamountoftaxrevenuethatthegovernmentexpectstocollect. i C) hedifferencebetweenexportsandimports,alsotakingintoaccount t interestpaymentstoandfromtherestoftheworld. D isthetotalamountofinterestpaymentsthattheU.S.owestoforeign ) countries. 48) llofthefollowingarepartoffiscalpolicyEXCEPT A A settingtaxrates. ) B) ontrollingthemoneysupply. c C) hoosingthesizeofthegovernmentdeficit. c D settinggovernmentspending. ) 49) onetarypolicyiscontrolledby M A Congress. B) heTreasuryDepartment. t ) C) heFederalReserve. t D thepresident. ) 50) heprincipalgoalofmonetarypolicyisto T A keepthebudgetdeficitsmalland/orthebudgetsurpluslarge. ) B) aintainlowinflation m C) eversetheproductivitygrowthslowdown r D lowertaxes )

 1) C 2) C 3) D 4) D 5) A 6) D 7) D 8) B 9) C 10) D 11) B 12) C 13) B 14) D 15) B 16) D 17) D 18) B 19) D 20) C 21) D 22) A 23) C 24) B 25) C 26) B 27) C 28) D 29) D 30) C 31) A 32) A 33) A 34) D 35) C 36) D 37) D 38) C 39) C 40) D 41) D 42) A 43) D 44) C 45) B 46) B 47) C

48) B 49) C 50) B