hw1
TRANSCRIPT
Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question.
1) The most fundamental economic problem is
A
)
security.
B) health.
C) scarcity.
D
)
the fact the United States buys more goods from foreigners than we sell
to foreigners.
2) Economists point out that scarcity confronts
A
)
the poor but not the rich. B) the rich but not the poor.
C) both the poor and the rich. D
)
neither the poor nor the rich.
3) Economics is the study of
A
)
the distribution of surplus goods to those in need.
B) affluence in a morally bankrupt world.
C) ways to reduce wants to eliminate the problem of scarcity.
D
)
the choices we make because of scarcity.
4) Which of the following is a macroeconomic topic?
A
)
why plumbers earn more than janitors
B) whether the army should buy more tanks or more rockets
C) the reasons for a rise in the price of orange juice
D
)
the reasons for the rise in average prices
5) Microeconomics focuses on all of the following EXCEPT the
A
)
effect on inflation of increasing the money supply.
B) purchasing decisions made by an individual consumer.
C) hiring decisions made by a business.
D
)
effect on cigarette sales of an increase in the tax on cigarettes.
6) Studying the determination of prices in individual markets is primarily a
concern of
A ) m acroeconomics.
B) negative economics.
C) positive economics. D
)
microeconomics.
7) U.S. producers decide to produce more compact cars and fewer SUVs as
the price of gasoline rises. Producers are answering the ________ question.
A
)
ʺhow
manyʺ
B) ̋whenʺ C) ̋howʺ D
)
ʺwhatʺ
8) In a market economy, what people do in the pursuit of their self-interest
A
)
is always in conflict with the social interest.
B) usually forwards the social interest.
C) always forwards the social interest.
D
)
is usually in conflict with the social interest.
9) When a university decides to add to the football stadium instead of
adding to the baseball stadium, it faces the
A
)
ʺhowʺ tradeoff. B) ̋ for whomʺ tradeoff.
C) ̋whatʺ tradeoff. D
)
macroeconomic question.
10) The ʺhowʺ tradeoff occurs when
A
)
the government increases income taxes paid by the rich.
B) a firm decides to produce refrigerators instead of dishwashers.
C) we answer the macroeconomic question.
D
)
a farm uses machinery to pick oranges instead of employing migrant
workers.
11) Because we face scarcity, every choice involves
A
)
the question ʺwhat.ʺ B) an opportunity cost
C) giving up something for
nothing.
D
)
money
12) Opportunity cost means the
A
)
monetary costs of an activity.
B) accounting cost minus the marginal cost.
C) highest-valued alternative forgone.
D
)
accounting cost minus the marginal benefit.
13) Suppose you plan to take summer courses. The cost of tuition and
textbooks is $1,200, housing will cost you $400, and youʹll spend $300 on
food. If you decide not to take courses in the summer, youʹll live in your
parentsʹ house for free and spend only $100 on food. Also, if you donʹt
take courses in the summer, youʹll work full time and could earn at least
$5,000. You can still work part time while taking courses, but the most you
can earn is $1,000. What is your opportunity cost of taking courses in the
summer?
A
)
$6,900 B) $5,800 C) $1,900 D
)
$4,000
14) Suppose that you are spending two hours a day studying economics, and
your grade is 85 percent. You want a higher grade and decide to study for
an extra hour a day. As a result, your grade rises to 90 percent. Your
marginal benefit is the
A
)
higher grade that you get.
B) extra hour per day you spend on studying.
C) three hours per day you spend on studying.
D
)
5 point increase in your grade.
15) A positive statement is
A
)
valid only in the context of a model with simple assumptions.
B) about what is.
C) about what ought to be.
D
)
the result of a modelʹs normative assumptions.
16) Which of the following is an example of a positive statement?
A
)
The Federal Reserve ought to cut the interest rate.
B) We should cut back on our use of carbon-based fuels such as coal and
oil.
C) Every American should have equal access to health care.
D
)
Increasing the minimum wage results in more unemployment.
17) Statements about what ought to be are called
A
)
positive statements. B) assumptions.
C) implications. D
)
normative statements.
18) At least 7 out of every 10 economists agree with the following
propositions. Which of these propositions is normative?
A
)
Cash payments to welfare recipients make them better off than do
transfers-in-kind of equal cash value.
B) The redistribution of income is a legitimate role for the U.S.
government.
C) Rent controls cut the availability of housing.
D
)
Tariffs and import restrictions make most people worse off.
19) ̋Government should act to reduce poverty levels.ʺ
A
)
This statement is an example of the fallacy of composition.
B) This statement is an example of the post hoc fallacy.
C) This statement is a positive statement.
D
)
This statement is a normative statement.
20) An economic theory is
A
)
usually more complex than the real world.
B) always a mathematical, or nonverbal, model.
C) a generalization that summarizes what we understand about economic
choices.
D
)
a positive statement that cannot use the ceteris paribus clause.
21) Economic models
A
)
make only assumptions that have been proved.
B) are better if they include most of the detail of the real economy.
C) cannot use the ceteris paribus clause.
D
)
rely on simplification.
22) Three steps that economists take to discover how the economic world
works are
A
)
observation and measurement; model building; and, testing models.
B) speculation; observation and measurement; and, drawing
conclusions.
C) data mining; data testing; and, drawing conclusions.
D
)
model building; speculation; and, revision.
23) Who wrote The Wealth of Nations?
A
)
Karl Marx. B) Michael Parkin.
C) Adam Smith. D
)
Thomas Jefferson.
24) One student in a football stadium with 30,000 students can see the game
better if he or she stands up. Assuming that all 30,000 students can each
see the game better if they all stand is an example of the
A
)
fallacy of ceteris paribus. B) fallacy of composition.
C) post hoc fallacy. D
)
fallacy of large numbers.
25) Economists generally agree that ________.
A
)
minimum wages increase the employment of low-skilled workers
B) tariffs make people better off
C) rent ceilings cut the availability of housing
D
)
a large budget deficit makes no significant difference
26) In the above figure, the amount of cloth fabric sold over time exhibits
A
)
a downward trend.
B) an upward trend.
C) no trend.
D
)
None of the above because the figure cannot show the trend of the
amount of cloth fabric sold.
27) A trend is
A )
the maximum value of a variable.
B) a measure of closeness on a scatter diagram.
C) a general tendency for a variable to rise or fall.
D
)
the minimum value of a variable.
28) In the figure above, when income equals $20,000, what does consumption
equal?
A
)
$20,000 B) $0
C) $10,000 D
)
impossible to tell
29) In the above figure,
A
)
consumption expenditures are a linear function of labor income.
B) consumption expenditures are positively related to labor income.
C) the slope of the function depicted is 0.9.
D
)
All of the above answers are correct.
30) Which of the following correctly describes the above figure?
A
)
There is a positive relationship between x and y.
B) There is a negative relationship between x and y.
C) There is no relationship between x and y.
D
)
None of the above answers are correct.
31) The social arrangements that govern the ownership, use, and disposal of
property are referred to as
A
)
property rights. B) private enterprise.
C) the double coincidence of
wants.
D
)
capitalism.
32) Individual economic decisions are coordinated by
A
)
markets through adjustments in prices.
B) government through adjustments in sales taxes.
C) markets through adjustments in sales levels.
D
)
government through adjustments in income taxes.
33) The science of macroeconomics
A
)
emerged during the decade of the Great Depression.
B) solved the Great Depression.
C) did not evolve until after World War II so had no connection to the
Great Depression.
D
)
did not solve the Great Depression but kept the U.S. economy from
suffering.
34) In 1933, the worst year of the Great Depression, total production in the
United States was
A
)
50 percent of its 1929 level, and 5 percent of the labor force was
unemployed.
B) 90 percent of its 1929 level, and 5 percent of the labor force was
unemployed.
C) 25 percent of its 1929 level, and 70 percent of the labor force was
unemployed.
D
)
70 percent of its 1929 level, and 25 percent of the labor force was
unemployed.
35) In The General Theory of Employment, Interest, and Money, John Maynard
Keynes argued that to eliminate a depression governments should spend
A
)
less to offset excessive private spending.
B) less to offset insufficient private spending.
C) more to offset insufficient private spending.
D
)
more to offset excessive private spending.
36) John Maynard Keynes
A
)
focused on the long term in attempting to solve the Great Depression.
B) worried mostly about long term consequences of any governmental
action.
C) warned against the use of any short term governmental action.
D
)
focused on the short term in attempting to solve the Great
Depression..
37) Which of the following are examples of long-term economic policy issues?
A
)
Inflation and recessions.
B) Slow economic growth and recessions.
C) Persistent unemployment and curing a depression.
D
)
Inflation and slow economic growth.
38) Real GDP is
A )
the worst
measure we
have of total production because it misses much of what is produced.
B) the best measure we have for total production because it doesnʹt miss
anything.
C) the best measure we have for total production, though it does have
some flaws.
D
)
ignored as a measure of total production because it is does not take
account of inflation.
39) Economic growth is best defined as the
A
)
rate of increase in economic productivity.
B) business-cycle changes in total output.
C) long-run expansion of the nationʹs production possibilities.
D
)
rate of growth of employment.
40) A business cycle is
A
)
the increase in consumer spending that accompanies an increase in
disposable income.
B) the cyclical change in the nationʹs balance of trade.
C) the cyclical movement in the interest rates.
D
)
the pattern of short-run upward and downward movements in total
output.
41) A recession
A
)
follows a trough.
B) is a period during which real GDP expands.
C) comes just before a peak.
D
)
is defined as a period of negative real GDP growth.
42) In the above figure, a recession begins at point ________ and an expansion
begins at point ________.
A
)
a; b B) b; c C) d; c D
)
b; a
43) The unemployment rate generally ________ during recessions and
________ during expansions.
A
)
falls; falls B) rises; rises C) falls; rises D
)
rises; falls
44) Inflation is a
A
)
minor change in the price level.
B) process of falling prices.
C) process of rising prices.
D
)
large, one-time fall in the price level.
45) The CPI can be used to measure
A
)
the unemployment rates of discouraged workers.
B) changes in average price of the goods and services bought by a typical
urban household.
C) expectations of the future rate of inflation.
D
)
how consumer unemployment has changed.
46) The government has a budget deficit when government spending
A
)
equals tax receipts. B) exceeds tax receipts.
C) is zero. D )
is less than tax receipts.
47) The current account is
A
)
the amount of money the government keeps on hand to pay its bills
taking account of the interest payments on its debt.
B) is the amount of tax revenue that the government expects to collect.
C) the difference between exports and imports, also taking into account
interest payments to and from the rest of the world.
D
)
is the total amount of interest payments that the U.S. owes to foreign
countries.
48) All of the following are part of fiscal policy EXCEPT
A
)
setting tax rates.
B) controlling the money supply.
C) choosing the size of the government deficit.
D
)
setting government spending.
49) Monetary policy is controlled by
A
)
Congress. B) the Treasury Department.
C) the Federal Reserve. D
)
the president.
50) The principal goal of monetary policy is to
A
)
keep the budget deficit small and/or the budget surplus large.
B) maintain low inflation
C) reverse the productivity growth slowdown
D
)
lower taxes
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