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Individualsareforcedtomakechoicesbecause:

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1. (TCO1)Individualsareforcedtomakechoicesbecause: (Points: 4);Wantsaresatiable.;Thesupplyofresourcesisinfinite.;Wantsareinsatiableandresourcesarescarce.;Resourcesaresatiable.;2. (TCO1)The'opportunitycost'ofowningacaris (Points: 4);Thepurchasingpriceofthecar.;Fillingthetanktwiceaweek.;Thecostofgettingyourcarinspectedonceayear.;ThevacationtoHawaiiyouhadtogiveupinordertomakeyourcarpayments.;3. (TCO1)Whichofthefollowingstatementsabouttheconceptof'opportunitycost'istrue? (Points: 4);Theopportunitycostofadecisionistheexplicitcostofpossiblealternativestothegoodproduced.;Manydecisionsdonotinvolveanopportunitycost.;IfyouhaveaneconomicsfinalexamandanAmericanhistoryfinalexamtomorrow,theopportunity;costofstudyingfivehoursforyoureconomicsexamisthefivehoursyoucannotstudyforyourhistory;exam.;Theopportunitycostofacollegeeducationataschoolwhereyouhavetodrive100milesperweekis;theexplicit(outofpocket)costofowningacartodrivetoandfromschool.;4. (TCO1)Whichofthefollowingstatementsabouttheproductionpossibilitiesfrontier(PPF)iscorrect?;(Points: 4);Ontheproductionpossibilitiesfrontierwehaveanabsolutezerounemployment.;Ontheproductionpossibilitiesfrontier,theeconomyisoperatingatfullemployment.;Withthecurrentresources,wecaneasilyproduceatsomepointbeyondourproductionpossibilities;frontier.;Tohaveeconomicgrowth,wemustpushtheproductionpossibilitiesfrontierinward.;5. (TCO1)Assumingthatanationalwaysoperatesonitsproductionpossibilitiescurve(PPC),anoutward;shiftofthecurveimplies (Points: 4);Economicgrowthhasoccurred.;Thesocietyismakinglessefficientuseofitsavailableresources.;Governmentspendinghasdecreased.;Capitalresourceshavedecreased.;6. (TCO1)Amixedeconomy: (Points: 4);Iscompletelycontrolledbythegovernment;Hasabsolutelynoprivateownershipofproperty;Isentirelyfreeofgovernmentregulation;Noneoftheabove;7. (TCO1)AdamSmith's"InvisibleHand"isNOTabout: (Points: 4);Maximizingprofits;Lookingafteryourownselfinterest;Tryingtopromotethepublicinterest.;TheMarketPrinciple;8. (TCO2)Adecreaseinthepriceofmovietickets,otherthingsequal,islikelytocausewhichofthe;followingeffectsinthemarketformoviepopcorns(Complement)? (Points: 4);adecreaseindemandformoviepopcorns.;anincreaseindemandformoviepopcorns.;anincreaseinquantitysuppliedofmoviepopcorns.;adecreaseinquantitydemandedofmoviepopcorns.;adecreaseinthequantitysuppliedofmoviepopcorns.;9. (TCO2)Whichofthefollowingwouldshiftthesupplycurveforagoodtotheleft? (Points: 4);anincreaseinthepriceofthatgood.;adecreaseinthepriceofanalternativegood.;animprovementintechnologyforproducingthatgood.;anincreaseinthecostofanimportantresourceusedtomakethatgood.;anincreaseinthenumberofproducers.;10. (TCO2)Whenamarketisinequilibrium, (Points: 4);producersearnprofits.;theminimumpossiblepriceisachieved.;thereisnoincentiveforconsumersorproducerstochangetheircurrentbehavior.;excessdemandislessthanexcesssupply.;themaximumpossiblepriceisachieved.;11. (TCO2)Supposeamarketisinequilibriumandthena'priceceiling'isestablishedbelowthe;equilibriumprice.Whichofthefollowingwillhappen? (Points: 4);quantitydemandedwilldecrease.;asurpluswilldevelop.;ashortagewilldevelop.;thequantitysoldwillrise.;themarketwillremaininequilibrium.;12. (TCO2)Ifaluxuryproducthasan'elasticdemand,'thefirmwould_______toincreasetotalrevenue.;(Points: 4);decreaseprice;increaseprice;holdpricesteady;stopselling;13. (TCO2)Your'income'hasrecentlydroppedfrom$60,000peryearto$45,000peryear.Youhave;cometorealizethatyouareonlybuyingthreebottlesofwineaweeknowwhereasyouusedtobuysix;bottlesofwinewhenyoumade$60,000ayear.Giventhissituationyouwoulddescribewineasa;(Points: 4);inferiorgood;substitutegood;normalgood;complementarygood;14. (TCO3)Thepriceleadershipmodelisanattempttoexplainthebehaviorofa____marketstructure.;(Points: 4);perfectivelycompetitive;monopolisticallycompetitive;oligopolistic;monopolistic;15. (TCO3)Whywouldaneconomistarguethatafirmcanmake'zeroeconomicprofit'andstillbeokay?;Thefirm (Points: 4);hasmadezeroaccountingprofit;hasmadeanaccountingloss;hascovereditsnormalprofit[breakeven];doesnotknowwhattodo;16. (TCO3)Asthenumberoffirmsinamonopolisticallycompetitivemarketgrows,thebestcasescenario;forthefirmsinthelongrunisthattheywillmake: (Points: 4);largeaccountingprofits;averylargeloss;zeroeconomicprofit;accountingprofits;17. (TCO3)Whydoestheaveragevariablecostcurveinitiallyslopedownward? (Points: 4);diseconomiesofscale;lawofdiminishingreturns;decreasingreturnstoscale;increasingmarginaloutput;18. (TCO3)Inthe'shortrun,' (Points: 4);allcostsarefixedcosts;allcostsarevariablecosts;somecostsarefixedcosts;allcostsaremarginalcosts;19. (TCO3)Howlongistheshortrun? (Points: 4);24hours;thecurrentyear;untilthemortgageispaidoff;aslongasthereareanyfixedcostsinanoperation;20. (TCO3)Patopenedhisrestaurant10yearsago.Hehasa15yearmortgageonhis$200,000building.;Hejustpaidoffallofhisequipmentlastyear.Hehasapayrollof$400,000ayear,andhiscostforproduct;was$600,000lastyear.Anewfreewaysectionjustopenedwhichbypasseshismarketarea.Traffichas;droppedby60%.Herealizesthathecannolongerstayinbusinesssohechoosesto'shuthisoperation;down.'Whichofthefollowingisnottrue? (Points: 4);Fixedcostwillbezero;Variablecostwillbezero;Totalrevenuewillbezero;Fixedcoststillremains.;21. (TCO4)ThelargestsectoroftheU.S.GDPis: (Points: 4);investment;governmentspending;netexports;consumption;22. (TCO4)GDPmaybefoundby: (Points: 4);addingtogethermoneyspentongoodsandservicesandincomesreceivedbythefactorsof;production;subtractingincomesreceivedbythefactorsofproductionfromthemoneyspentongoodsand;services;subtractingthemoneyspentongoodsandservicesfromtheincomesreceivedbythefactorsof;production;addingthemoneyspentonfinalgoodsandservices;23. (TCO4)WhichofthefollowingitemswouldbeincludedinGDP? (Points: 4);ThevalueofFrenchstockspurchasedbyaU.S.investor;TheoutputofaU.S.ownedsoftwarecompanyinCalifornia;Thevalueofcleanair;ThecoffeesalesinStarbucksshopsinJapan;24. (TCO4)Historically,nominalGDPintheUnitedStateshasbeenincreasingfasterthanrealGDP;because (Points: 4);technologyhasbeenincreasing,resultinginmoreefficientproduction.;thegeneralpricelevelhasbeenincreasing.;indirectbusinesstaxeshavebeenincreasing.;totaloutputintheeconomyhasbeendecreasing.;25. (TCO5)Ingeneral,unanticipatedinflationcauses: (Points: 4);creditorsanddebtorstobegainers;creditorsanddebtorstobelosers;creditorstobegainersanddebtorstobelosers;creditorstobelosersanddebtorstobegainers;Time Remaining;1. (TCO5)Massivetaxcutsduringarecessionwillcreate: (Points: 5);abudgetsurplus;abudgetdeficit;abudgetbalance;2. (TCO6,10)Whichcombinationofpoliciesaremostappropriatetofightlongrecessions? (Points: 5);anincreaseingovernmentspendingandtaxes;anincreaseingovernmentspendingandadecreaseintaxes;adecreaseingovernmentspendingandtaxes;a decrease in government spending and an increase in taxes;3. (TCO6,10)Theeffectivenessofdiscretionaryfiscalpolicywillbereducedif: (Points: 5);borrowingincreasesinterestratesandcrowdsoutprivateinvestment;thedollardepreciatesbecauseofanincreasedoutflowofcurrency;thepricelevelfalls;stockpricesrise;4. (TCO6,10)The'crowdingouteffect'ofborrowingtofinanceanincreaseingovernmentexpenditures;(Points: 5);reducescurrentspendingforprivateinvestment.;increasestheincomeinequalityintheU.S.;reducestheeconomicburdenonfuturegenerations.;decreasestheneedforU.S.securities.;5. (TCO6,10)Duringtheearly1990s,federaldeficitsandthegrowingpublicdebtandthelegislative;effortstocontrolthemwerethemainfocusof: (Points: 5);inflationpolicy;fiscalpolicy;unemploymentpolicy;monetarypolicy;6. (TCO6,10)Theprimarybenefitofusingbudgetsurplusestopaydownthepublicdebtis: (Points: 5);alowerinterestrate,leadingtohigherinvestmentspending;animprovedbalanceoftrade;lowertaxratesinthefuture;ahigherinternationalvalueofthedollar;7. (TCO5,6)Amajorbenefitofautomaticstabilizersisthatthey (Points: 5);guaranteeabalancedbudgetoverthecourseofthebusinesscycle.;havethetendencytoreducethenationaldebt.;helpincreaserecessionarygapsintheeconomy.;moderatetheeffectoffluctuationsinthebusinesscycle.;requirelegislativereviewbyCongressbeforetheycanbeimplemented.;8. (TCO6,10)Whichofthefollowingexemplifiesthecrowdingouteffect? Anincreaseingovernment;spending: (Points: 5);isfinancedbyincreasingthemoneysupply,reducinginterestratesandcausingexportstofall;isfinancedbyborrowing,raisinginterestratesandcausinginvestmenttofall;causestaxestoriseautomatically,reducingconsumptionspending;causesthepriceleveltorise,reducingnetexports;9. (TCO7,10)U.S.FederalReserve'sMonetarypolicywouldnotinclude (Points: 5);increasinginterestratestocontrolthemoneysupply;apolicydirectedtowardcontrollingcredit;reducingthemoneysupplyinanefforttocontrolinflation;increasingtaxratesinanefforttocontrolinflation;10. (TCO7,10)TheFederalReservedecidestopursuean'expansionarymonetarypolicy.'Whichsetof;actionsbytheFedwouldbemostconsistentwiththispolicy? (Points: 5);buyinggovernmentsecuritiesandraisingthereserveratio;sellinggovernmentsecuritiesandraisingthereserveratio;buyinggovernmentsecuritiesandloweringthereserveratio;adecreaseincommercialbankloans;sellinggovernmentsecuritiesandloweringthereserveratio;11. (TCO5,6,10)Ifautomaticstabilizerskickinautomatically,whenrealGDPfalls, (Points: 5);taxrevenuesandtransferpaymentsbothshouldfall;taxrevenuesandtransferpaymentsbothshouldrise;taxrevenuesshouldfallandtransferpaymentsshouldrise;taxrevenuesshouldriseandtransferpaymentsshouldfall;12. (TCO5,6,10)Duringtimeofabigboomingeconomy,wewantto (Points: 5);lowertaxesandrunbudgetdeficits;reducesocialexpenditures;raisetaxesandreducegovernmentspending;lowertaxesandraisegovernmentspending;13. (TCO5,6,10)Budgetdeficitsaremostappropriateduring (Points: 5);inflations;hyperinflations;longrecessions;verybriefdeflations;14. (TCO5,6,10)Governmentspendingcanbefinancedbyallofthefollowing" except"(Points: 5);personalincometaxes;investmentspending;governmentborrowing;moneycreation;excisetaxes;15. (TCO8)Apersonhasa'comparativeadvantage'inproducingagoodif (Points: 5);thatpersoncanproducethegoodatalowerabsolutecostthananyoneelse.;thatpersoncanproducethegoodataloweropportunitycostthananyoneelse.;thatpersoncandoabetterjobthananyoneelse.;thatpersonspendslessmoneyinoutofpocketexpensesthananybodyelse.;16. (TCO8)Themajordifferencebetweentariffsandimportquotasisthat (Points: 5);tariffscreatedeadweightlosses,butimportquotasdonot.;tariffshelpdomesticconsumers,andimportquotashelpdomesticproducers.;tariffsraiserevenueforthegovernment,butimportquotascreateasurplusforimportlicenseholders.;Alloftheabovearecorrect.;17. (TCO9)IftheU.S.dollarisstrongerthantheFrencheuro,U.S.exportstoFrance (Points: 5);andFrenchexportstotheUnitedStatesrise.;andFrenchexportstotheUnitedStatesfall.;rise,andFrenchexportstotheUnitedStatesfall.;fall,andFrenchexportstotheUnitedStatesrise.;18. (TCO9)Underfloatingexchangerates,theexchangevalueoftheU.S.dollarisdeterminedby;(Points: 5);TheFederalReserve;TheInternationalMonetaryFund;SupplyandDemandfordollarinForeignMarkets;Negotiationsamongcentralbanksofmajorindustrializednations;19. (TCO8,9)Ifacountrydevaluesitscurrency,otherthingsbeingequal: (Points: 5);itstradesurpluswilldecrease;itsimportswillincrease;itsemploymentintheexportindustrywillincrease;itstradedeficitwillincrease;20. (TCO8,9)TheU.S.CurrentAccountBalancemostoftenshows(Points: 5);Asurplus;Adeficit;Zerobalance,equalnumberofdebitsandcredits;ThesmallestcurrentaccountdeficitsrelativetoitsGDPcomparedtoothercountries;(TCO7,10)1(a)Explainthoroughlywhycontrollingtherateofgrowthofthemoneysupplyisthemost;importantjoboftheFederalReserve.(20points);1(b)WhyistheFederalReserveusingacontractionarymonetarypolicy?Describethoroughlythis;monetarypolicy.(25points);(Points: 45);2. (TCO9,10)2(a)Howistheexchangeratedeterminedinafreelyfloatingratesystem?(15points);2(b)Forfewmonths,priortoyourvacationtriptoFrance,youfindthattheexchangerateforyourU.S.;dollarhasincreasedrelativetotheEuro.IfyouwereaU.S.citizenorresident,areyoupleased?Explain.;(15points);2(c)Explainwhyacurrencydepreciationleadstoanimprovementinanation'sbalanceoftrade.(15;points);(Points: 45)

 

Paper#22696 | Written in 18-Jul-2015

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