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Question;Multiple;Choice Questions (Enter your answers on the enclosed answer sheet) 1) The study;of economics arises due to;a.;greed.;b.;scarcity.;c.;resources.;d.;money.;2) Economists assume that individuals;a.;are;rational and respond to incentives.;b.;prefer;to live in a society that values fairness above all else.;c.;will;never take actions to help others.;d.;behave;in unpredictable ways.;3);Your;roommate, Serafina, a psychology major, said, ?The problem with economics is;that it assumes that consumers and firms always make the correct decision. But;we know that everyone?s human, and we all make mistakes.? Is Serafina?s;criticism ac-curate?;a.;No.;If we cannot assume that decisions are correct, then we will not be able to;exam-ine the moral implications of these decisions.;b.;Yes.;One cannot make predictions about economic behavior because in reality people;make incorrect choices in many situations.;c. No.;Economics assumes that economic agents behave rationally, meaning they make the;best decisions given their knowledge of the costs and benefits of these;decisions.;d.;Yes.;Economic theory should allow for irrational behavior so that we can have more;reliable predictions.;4);In;Austria a woman can get up to 48 months of pension benefits and is guaranteed a;maternity allowance two months before and after she gives birth. Further, the;Aus-trian government gives monthly payouts ranging from $132 to $547, depending;on the age of offspring and offers generous tax benefits for families with;children. How will these benefits affect a woman?s decision to have children?;a.;These;incentives will encourage women to have children and increase the birth rate.;b.;These;incentives will encourage only less educated women to have more children.;c.;These;incentives will encourage only women with high opportunity costs to have more;children.;d.;These;incentives will have no effect on having children, the decision to have;children is a social and psychological decision, not an economic decision.;5) Making ?marginal? decisions involves;a. calculating the total;benefits of an activity and determining if you are satisfied with that amount.;b.;calculating;the total costs of an activity and determining if you can afford to incur that;expenditure.;c.;comparing;the additional benefits and the additional costs of an activity.;d.;calculating;the average benefit and the average cost of an activity to determine if it is;worthwhile to undertake that activity.;Scenario 1-1;Suppose a cell-phone;manufacturer currently sells 20,000 cell-phones per week and makes a profit of;$5,000 per week. A manager at the plant observes, ?Although the last 3,000 cell;phones we produced and sold increased our revenue by $6,000 and our costs by;$6,700, we are still making an overall profit of $5,000 per week so I think;we?re on the right track. We are producing the optimal number of cell phones.?;6);Refer;to Scenario 1-1. Using marginal analysis terminology, what is another economic;term for the incremental revenue received from the sale of the last 3,000 cell;phones?;a. gross profit;b.;marginal;revenue;c.;gross;earnings;d.;sales;revenue;7);Automobile;manufacturers produce a range of automobiles such as sports utility vehicles;luxury sedans, pickup trucks and compact cars. What fundamental econom-ic;question are they addressing by making this range of products?;a. How to produce goods that;consumers want?;b.;What;goods and services will be produced?;c.;Who;to produce automobiles for?;d.;Why;produce a variety of automobiles?;8) Which of the following contributes to the;efficiency of markets?;a. Markets promote equal;standards of living.;b.;Markets;promote competition and voluntary exchange.;c.;Governments;play an active role in the day-to-day operations of markets.;d.;Markets;are able to bring about an equitable distribution of goods and services.;54;Principles;of Economics;Unit 1 Examination;Figure 1-4;9);Refer;to Figure 1-4. Which of the following statements is true?;a. The;slope of the tangent at E is positive and the slope of the tangent at F is;negative.;b.;The;slope of the tangent at E and the slope of the tangent at F are negative.;c. The;slope of the tangent at E is negative and the slope of the tangent at F is;positive.;d.;The;slope of the tangent at E and the slope of the tangent at F are positive.;10);The;production possibilities frontier model assumes all of the following except;a. the economy produces only;two products.;b.;the;level of technology is fixed and unchanging.;c.;labor;capital, land and natural resources are fixed in quantity.;d.;production;of goods requires full employment of all resources.;Figure 2-2;Figure 2-2 above shows the;production possibilities frontier for Mendonca, an agrarian na-tion that;produces two goods, meat and vegetables.;11);Refer;to Figure 2-2. The linear production possibilities frontier in the figure;indicates that;a.;the;tradeoff between meat and vegetables is constant.;b.;Mendonca;has a comparative advantage in the production of vegetables.;c.;it;is progressively more expensive to produce meat.;d.;Mendonca;has a comparative disadvantage in the production of meat.;Table 2-3;One Digital Camera;Wheat (per pound);China;100 hours;4 hours;South Korea;60 hours;3 hours;Table 2-3 shows the number;of labor hours required to produce a digital camera and a pound of wheat in;China and South Korea.;12);Refer;to Table 2-3. What is South Korea?s opportunity cost of producing one pound of;wheat?;a. 20 digital cameras;b.;0.05;units of a digital camera;c.;60;digital cameras;d.;5;digital cameras;13) Which of the following;are flows in the circular flow model?;a. the flow of income earned;by factors of production and the flow of expenditures on goods and services;b.;the;flow of goods and the flow of services;c.;the;flow of costs and the flow of revenue;d.;the;flow of income received by households and the flow of tax revenues paid by;house-holds;14. Which of the following;statements about a simple circular flow model is true?;a. Producers are neither;buyers nor sellers in the product market.;b.;Households;are sellers in the product market.;c.;Producers;are buyers in the factor market.;d.;Households;are neither buyers nor sellers in the factor marke;15) The term ?property;rights? refers to;a.;the;ability to exercise control over one?s own resources within the confines of the;law.;b.;the;government?s right to appropriate land from wealthy individuals to redistribute;to low income families.;c.;the;physical possession of a house or any other property which the owner legally;pur-chased.;d.;the;right of a business not to have its assets confiscated by the government in the;event that the business is accused of committing fraud.;Table 3-1;Loose leaf Tea;Sunil?s;Mia?s;Rest of Market;Market;Price per lb.;Quantity De-;Quantity De-;Quantity;Quantity de-;(dollars);manded (lbs);manded (lbs);Demanded (lbs);manded (lbs);$8;4;0;30;6;7;2;40;5;9;3;51;4;12;5;64;3;15;8;90;16) Refer to Table 3-1. The;table above shows the demand schedules for loose-leaf tee of two individuals;(Sunil and Mia) and the rest of the market. If the price of loose-leaf tea;rises from $3 to $4 the market quantity demanded would;a. decrease by 32 pounds.;b.;decrease;by 64 pounds.;c.;increase;by 64 pounds.;d.;increase;by 32 pounds.;17) If a firm expects that;the price of its product to be higher in the future than it is today;a.;the;firm has an incentive to decrease supply now and increase supply in the future.;b.;the;firm has an incentive to decrease quantity supplied now and increase quantity;supplied in the future.;c.;the;firm will go out of business.;d.;the;firm has an incentive to increase supply now and decrease supply in the future.;57;Principles;of Economics;Unit 1 Examination;18) Which of the following;is the correct way to describe equilibrium in a market?;a.;At;equilibrium, demand equals supply.;b.;At;equilibrium, quantity demanded equals quantity supplied.;c.;At;equilibrium, scarcity is eliminated.;d.;At;equilibrium, market forces no longer apply.;Figure 3-4;19);Refer;to Figure 3-4. The figure represents the market for canvas tote bags. Assume;that the price of tote bags is $15. At this price;a. the quantity demanded;exceeds the quantity supplied of tote bags by 75. The price will eventually;rise to $25 where quantity demanded will equal quantity supplied.;b.;there;is a shortage, equal to 55 tote bags, the price of tote bags will rise until;demand is equal to supply.;c. the demand exceeds the;supply of tote bags by 55. Some consumers will have an incentive to offer to;buy tote bags at a higher price.;d.;there;is a shortage, equal to 55 tote bags, that will be eliminated when the price;rises to $25.;20);Which;of the following would cause the equilibrium price of white bread to decrease;and the equilibrium quantity of white bread to increase?;a. a decrease in the price of;flour;b.;an;increase in the price of butter, a complement for white bread;c.;an;increase in the price of rye bread, a substitute for white bread;d.;an;increase in the price of flour;Figure 4-6;Figure 4-6 shows the market;for apartments in Bay City. Recently, the government im-posed a rent ceiling at;R0.;21);Refer;to Figure 4-6. What is the area that represents the producer surplus after the;imposition of the ceiling?;a. F + G;b.;F;c.;A;+ B + D + F + G;d.;D;+ F + G;22) Which term refers to a;legally determined minimum price that sellers may receive?;a. A subsidy.;b.;A;tariff.;c.;A;price floor.;d.;A;price ceiling.;23) A positive externality;causes;a. the marginal social benefit;to be equal to the marginal private cost of the last unit produced.;b.;the;marginal social benefit to exceed the marginal private cost of the last unit;pro-duced.;c.;the;marginal social benefit to be less than the marginal private cost of the last;unit produced.;d.;the;marginal private benefit to exceed the marginal social cost of the last unit;pro-duced.;Figure 4-15;Companies;producing toilet paper bleach the paper to make it white. The bleach is;dis-charged into rivers and lakes and causes substantial environmental damage.;Figure 4-15 illustrates this situation in the toilet paper market.;24);Refer;to Figure 4-15. An efficient way to get the firm to produce the socially;optimal output level is;a. to assign property rights;to the firms in the industry.;b.;to;impose a tax to make the industry bear the external costs it creates.;c. to grant a subsidy to;enable the industry to internalize the external costs of produc-tion.;d.;for;government to set a quota on the quantity of toilet paper that the toilet paper;industry can produce.;25) What is the rationale behind a;tradable emissions allowance scheme?;a. to create a market for;externalities: the scheme brings together buyers and sellers of marketable;permits;b.;to;raise revenue for the government through the sale of emission permits and at;the same time set an emissions target;c. to;provide firms with the incentive to consider less costly alternatives to;pollution reduction by making firms pay for the right to pollute beyond their;specified allowance;d.;to;discipline polluting firms by specifying the maximum amount of emissions;allowed and giving them permits to pollute up to their allowance;Unit 2;Multiple;Choice Questions (Enter your answers on the enclosed answer sheet) 1) What type;of business is the easiest to set up?;a.;a;partnership;b.;a;sole proprietorship;c.;a;corporation;d. all types of business;require the same amount of effort and expense.;2) Which type of business has the most;government rules and regulations affecting it?;a.;a;corporation;b.;a;partnership;c.;a;sole proprietorship;d. All types of business have;the same set of rules and regulations.;3) Who controls a sole proprietorship?;a. bondholders;b.;the;sole proprietor;c.;stockholders;d. All of above;4);Jeremy;is thinking of starting up a small business selling NASCAR memorabilia. He is;considering setting up his business as a sole proprietorship. What is one;advantage to Jeremy of setting up his business as a sole proprietorship?;a. As a sole proprietor, Jeremy;would face limited liability.;b. As;a sole proprietor, Jeremy would have both ownership and control over the;business.;c.;As;a sole proprietor, Jeremy would have the ability to share risk with;shareholders.;d. All of the above would be;advantages of setting up his business as a sole proprietor-ship.;5) Which of the following is;not an advantage of starting a new business as a corpora-tion?;a. separation of ownership and;business liability;b.;ability;to share risks;c.;possibility;of double taxation;d. enhanced ability to raise;funds;6) Who operates and controls a corporation in;its day-to-day activities?;a. the employees;b.;the;board of directors;c.;the;corporation?s management;d. the stockholders;7) What do economists call a;situation where a hired manager does not have the same interests as the owners;of a business?;a.;a;financial intermediary problem;b.;the;financial problem;c.;conquest;and control;d. a principal-agent problem;8) Which of the following does not take place in;the direct finance market?;a.;Corporate;bonds are sold to savers.;b.;Deposits;from savers are accumulated and loans made to borrowers.;c.;Ownership;in corporations is sold in the form of common stock.;d. Ownership in corporations;is sold in the form of preferred stock.;9) If a corporation earns a profit, how do;owners of the firm share in the profit?;a. by raising the interest;rate on bonds;b.;dividend;payments on shares of that firm?s stock;c.;coupon;payments on that firm?s bonds;d. by selling any bonds or;stocks owned and realizing a capital gain;10);If;a corporation retains all its profits and distributes none of the profit to;owners, how can owners benefit?;a. If;the retained earnings are expected to create future profits, the market price;of the firm?s stock will increase and create a capital gain for stockholders if;the stock is sold.;b.;Owners;will only benefit if some profits are paid out in the form of dividends.;c.;Shares;of stock can be converted into bonds so stockholders will be able to earn;cou-pon payments.;d.;The;owners? federal income tax liability is reduced by their share of the;corporation?s retained earnings.;11) David;Myers, former controller for WorldCom, pleaded guilty to falsely reported costs;for WorldCom that were ________ than they actually were, resulting in reported;ac-counting profits for WorldCom that were ________ than their actual level.;a. higher, higher;b.;higher;lower;c.;lower;lower;d. lower, higher;12) Most;people would prefer to drive a luxury car that has all the options, but more;people buy less expensive cars even though they could afford the luxury car;because;a.;car;buyers are irrational.;b.;the;marginal utility per dollar spent on the less expensive car is higher than that;spent on luxury cars.;c.;the;total utility of less expensive cars is greater than that of luxury cars.;d. luxury cars cost a lot more;than non-luxury cars.;Table 6-2;Quantity of Soup;Total Utility;Quantity of Sand-;Total Utility;(cups);wiches;1;40;1;45;2;60;2;75;3;72;3;102;4;82;4;120;5;88;5;135;6;90;6;145;Table 6-2 shows Keira?s;utility from soup and sandwiches. The price of soup is $2 per cup and the price;of a sandwich is $3. Keira has $18 to spend on these two goods.;13);Refer;to Table 6-2. What is Keira?s marginal utility per dollar spent on the third;cup of soup?;a. 72 units of utility;b.;36;units of utility;c.;6;units of utility;d. 12 units of utility;14) Firms pay famous;individuals to endorse their products because;a.;the;firms are irrational and are wasting advertising expenditures.;b.;famous;people obviously know what are the best goods and services.;c.;famous;people only consume high quality products.;d. apparently demand is;affected not just by the number of people who use a product but also by the;type of person that uses the product.;15);If;20 units of a good are sold at a price of $50 and 30 units are sold at a price;of $40, what is the absolute value of the price elasticity of demand? Use the;midpoint formula.;a. 1.;b.;0.56.;c.;2.5;d. 1.8.;16);At a price of $100;Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to;$125, 9 canoes were rented. Calculate the absolute value of the price;elasticity of demand for canoe rentals, using the midpoint formula.;a.;0.75;b.;0.9;c.;2;d. 1.25;17) A demand curve that is;horizontal indicates that the commodity;a.;is;a necessity.;b.;must;be very cheap.;c.;has;a large number of substitutes.;d. has few substitutes.;18) With the increased usage of;cell-phone services, what has happened to the price elasticity of demand for;land-line telephone services?;a. It has become more elastic.;b.;It;has become more a luxury.;c.;It;has become unit-elastic.;d. It has become more;inelastic.;19);Suppose;the absolute value of the price elasticity of demand for meals at Fortune;Buffet House is?. What happens to sales revenue if the restaurant increases;its price by 5 percent?;a. Sales revenue falls by less;than 5 percent.;b.;Sales;revenue remains unchanged.;c.;Sales;revenue cannot be determined without information on prices.;d. Sales revenue falls to;zero.;20) A characteristic of the;long run is;a. plant capacity cannot be;increased or decreased.;b.;all;inputs can be varied.;c.;there;are both fixed and variable inputs;d. there are fixed input;Figure 7-1;21) Refer to Figure 7-1.;The average product of the 4th worker;a. is 68.;b.;is;11.;c.;is;17.;d. cannot be determined.;22) Average total cost is;equal to;a.;total;cost divided by the number of workers.;b.;marginal;cost plus variable cost.;c.;average;fixed cost minus average variable cost.;d.;total;cost divided by the quantity of output produced.;23);Adam;spent $10,000 on new equipment for his small business, ?Adam?s Fitness Studio.?;Membership at his fitness center is very low and at this rate, Adam needs an;additional $12,000 per year to keep his studio open. Which of the following is;true?;a. The variable cost of;running the studio is $22,000.;b.;The;fixed cost of running the studio is $22,000.;c.;The;$10,000 Adam spent on equipment is the total cost of starting the business and;the $12,000 he?ll need to continue operations is a marginal cost.;d.;The;$10,000 Adam spent on equipment is a fixed cost of business and the $12,000;he?ll need to continue operations is a variable cost.;24) Long run average cost;curves are U-shaped because;a. of the law of diminishing;returns.;b.;of;the law of demand.;c.;of;economies and diseconomies of scale.;d. of the law of supply;25) Manufacturers;of flat-panel televisions expect continued rapid increases in the de-mand for;their products. In response to this forecast, manufacturers are building;increasingly larger plants. At the same time, they expect to sell flat-panel;televisions at lower prices. Which of the following must be true if;manufacturers plan to lower prices and yet expect to cover the average cost of;production in their larger plants?;a.;They;expect that the demand for flat-panels televisions is relatively elastic and;there-fore lowering prices will lead to an increase in total revenue which will;comfortably cover the cost of production.;b. The cost of building a;larger plant must be lower than the cost of building smaller plants.;c.;Larger;plants are more efficient than smaller plants because the bulk of the cost of;production is fixed costs.;d. They expect that economies;of scale will make the cost of production in the larger plants lower than the;cost of production in the smaller plants.;UNIT3;Multiple Choice Questions;(Enter your answers on the enclosed answer sheet);1);?Between;1997 and 2001, many apple farmers switched from traditional to organic growing;methods, increasing production of organically grown apples from 1.2 million;boxes per year to more than 3 million boxes.? If the market for organic apples;is per-fectly competitive, which of the following statements is inconsistent;with the state-ment above?;a.;Organic;apple farmers earned short-run economic profits between 1997 and 2001.;b.;The;price of organic apples is likely to rise over time as more and more farmers;switch to organic methods of farming.;c.;The;additional supply of organic apples resulted in a lower price for organic;apples.;d. It is relatively easy to;enter the organic apples market.;Table 8-1;Quantity;Total Cost;Variable Cost;(Dollars);(Dollars);0;$1,000;$0;100;1,360;360;200;1,560;560;300;1,960;960;400;2,760;1,760;500;4,000;3,000;600;5,800;4,800;Table 8-1 shows the;short-run cost data of a perfectly competitive firm that produces plas-tic;camera cases. Assume that output can only be increased in batches of 100 units.;2) Refer to Table 8-1. If the;market price of each camera case is $8 what is the firm?s total revenue?;a. $2,400;b. $3,200;c. $4000;d. $4,800;Figure 8-2;3);Refer;to Figure 8-2. Suppose the firm is currently producing Q2 units. What happens;if it expands output to Q3 units?;a.;It;will be moving toward its profit-maximizing output.;b.;It;makes less profit.;c.;It;incurs a loss.;d.;Its;profit increases by the size of the vertical distance df.;4);For;a perfectly competitive firm, which of the following is not true at profit;maximiza-tion?;a. Total revenue minus total;cost is maximized.;b.;Marginal;revenue equals marginal cost.;c.;Price;equals marginal cost.;d. Market price is greater;than marginal cost.;5) A firm?s total profit can be calculated as;all of the following except;a.;marginal;profit times quantity sold.;b.;average;profit per unit times quantity sold.;c.;total;revenue minus total cost.;d.;(price;minus average total cost) times quantity sold.Figure 8-4;Figure 8-4 shows the cost;and demand curves for a profit-maximizing firm in a perfectly competitive;market.;6) Refer to Figure 8-4. If the;market price is $30, should the firm represented in the diagram continue to;stay in business?;a. Yes, because it is covering;part of its fixed cost.;b.;No;it should shut down because it cannot cover its variable cost.;c.;Yes;because it is making a profit.;d. No, it should shut down;because it is making a loss.;7);If;for a given output level, a perfectly competitive firm?s price is less than its;average variable cost, the firm;a. should increase output.;b.;should;shut down.;c.;should;increase price.;d. is earning a profit.;173;Principles;of Economics;Unit 3 Examination;Figure 9-7;Figure 9-7;shows the cost and demand curves for the Erickson Power Company.;8) Refer to Figure 9-7. The firm would maximize;profit by producing;a. Q1 units.;b.;Q2;units.;c.;Q3;units.;d. Q4 units.;Figure 9-1;Figure 9-1 above shows the;demand and cost curves facing a monopolist.;9) Refer to Figure 9-1. If the firm?s average;total cost curve is ATC3 the firm will;a.;break;even.;b.;make;a profit.;c.;suffer;a loss.;d. face competition.;Table 9-1;Price per unit;Quantity demanded;Total cost of production;(Units);$200;1;$200;180;2;300;160;3;350;140;4;360;120;5;375;100;6;395;80;7;425;A;monopoly producer of a foreign language translation software package faces the;demand and cost structure given in Table 9-1.;10) Refer to Table 9-1.;What is the marginal revenue from the sale of the third unit?;a. -$5;b.;$160;c.;$120;d. $80;Figure 9-3 shows the demand;and cost curves for a monopolist.;11) Refer to Figure 9-3.;What is the monopoly?s profit?;a. $2,700;b.;$12,600;c.;$10,400;d. $4,200;12) A market economy;benefits from market power;a.;under;no circumstances.;b.;if;the majority of the population are entrepreneurs.;c.;if;firms with market power do research and development with the profits earned.;d.;if;market power gets so bad the government creates public enterprises.;13) Economic efficiency;requires that a natural monopoly?s price be;a. equal to the lowest price;the firm can charge and still make a normal profit.;b. equal to average variable;cost (AVC) where the AVC curve intersects the demand curve.;c. equal;to average total cost (ATC) where the ATC curve intersects the demand curve.;d. equal to marginal cost (MC);where the MC curve intersects the demand curve.;14) If a firm faces a;downward-sloping demand curve;a.;it;will always make a profit.;b.;it;can control both price and quantity sold.;c.;it;must reduce its price to sell more output.;d. the demand for its product;must be inelastic.;15) A monopolistically;competitive firm will;a.;have;some control over its price because its product is differentiated.;b.;always;produce at the minimum efficient scale of production.;c.;charge;the same price as its competitors do.;d. produce an output level;that is productively and allocatively efficient.;Table 10-1;Quantity;Price (Dollars);Total Revenue (Dollars);1;$7.50;$7.50;2;7.00;14.00;3;6.50;19.50;4;6.00;24.00;5;5.50;27.50;6;5.00;30.00;16) Refer to Table 10-1.;The table shows;a. an inelastic segment of the;demand curve.;b.;a;demand curve with an elastic segment of the demand curve from $7.50 to $6.50;followed by an inelastic segment.;c. an elastic segment of the;demand curve.;d. a demand curve with an;inelastic segment of the demand curve from $7.50 to $6.50 followed by an;elastic segment;Figure;10-3 shows short run cost and demand curves for a monopolistically competitive;firm in the market for designer watches.;17) Refer to Figure 10-3.;What area represents the total variable cost of production?;a. 0P0aQa;b. P0abP1;c. P1bdP3;d. 0P1bQa;Figure 10-7;Figure 10-7 shows short-run;cost and demand curves for a monopolistically competitive firm in the market;for designer watches.;18) Refer to Figure 10-7. If;the diagram represents a typical firm in the designer watch market, what is;likely to happen in the long run?;a.;Some;firms will exit the market causing demand to increase for firms remaining in;the market.;b.;Inefficient;firms will exit the market and new cost efficient firms will enter the market.;c.;The;firms that are making losses will be purchased by their more successful rivals.;d. Firms will have to raise;their prices to cover costs of production.;19);Suppose;in 2006 you purchased a house built in 2000. Which of the following would be;included in gross domestic product for 2006?;a. The value of the house in;2006 minus depreciation;b.;The;value of the house in 2000;c.;The;value of the services of the real estate agent;d. The value of the house in;2006;Scenario 11-1;CANOES-R-US makes canoes.;It buys the shell of the canoe from another firm for $300 and uses its labor;and intermediate goods to make the canoe. It sells the finished canoe to a;retail canoe store for $800. The retail canoe store then sells the canoe to a consumer;for $1,200.;20) Refer to Scenario 11-1.;The value of each canoe in gross domestic product equals;a. $400.;b.;$800.;c.;$1,200.;d. $500.;21);Suppose;Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry;and have eight children. Bob stops working for Mary in order to care for the;children. What will be the effect on GDP?;a. GDP will not change.;b.;GDP;will decrease.;c.;GDP;will increase.;d. GDP may increase or may;decrease depending on inflation.;22) Disposable personal;income equals personal income;a.;minus;government transfer payments plus personal tax payments.;b.;plus;government transfer payments.;c.;minus;personal tax payments plus government transfer payments.;d. minus personal tax;payments.;23);The;Bureau of Labor Statistics would categorize a retiree who is not working as;a.;a;discouraged worker;b.;unemployed;c.;employed;d. out of the labor force;Table 12-1;Total Population;20,000;Working-Age Population;15,000;Employment;1,000;Unemployment;100;Consider the data above for;a simple economy.;24) Refer to Table 12-1. The;labor force participation rate for this simple economy equals;a. (1,000/1,100) x 100.;b.;(1,100/15,000);x 100.;c.;(1,100/20,000);x 100.;d. (1,000/15,000) x 100.;25);Suppose;that at the beginning of a loan contract the real interest rate is 4% and;expected inflation is 6%. If actual inflation turns out to be 7% over the loan;contract period, then;a. lenders gain 3%.;b.;borrowers;lose 3%.;c.;borrowers;gain 1%.;d. lenders gain 1%.;Unit 4;Multiple;Choice Questions (Enter your answers on the enclosed answer sheet);Year;Real GDP (Billion;of 2000 dollars);2002;$8,700;2003;8,875;2004;9,000;2005;9,280;1);Refer to Table 13-1. Calculate the average annual growth rate from 2002;to 2005.;a. 3%;b.;1%;c.;2%;d. 1.5%;2);What two factors are the keys to determining labor productivity?;a. the average level of;education of the workforce and the price level;b.;the;business cycle and the growth rate of real GDP;c.;technology;and the quantity of capital per hour worked;d. the growth rate of real GDP;and the interest rate;3);Long-run economic growth requires all of the following except;a. technological change.;b.;government;provision of secure property rights.;c.;increases;in capital per hour worked.;d. political instability.;4);Which of the following is most liquid?;a. a dollar bill;b.;a;government bond;c.;a;corporate bond;d. a mutual fund share;5) Financial securities that;represent promises to repay a fixed amount of funds are known as;a.;stocks.;b.;insurance;premiums.;c.;pension;funds.;d. bonds.;6);In;a closed economy, public saving is equal to which of the following? (Y = GDP, C;= Consumption, G = Government purchases, T = Taxes, and TR = Transfers);a.;Y;- C - T;b.;Y;- C - T + TR;c.;Y;- G - T;d. T - G - TR;Scenario 13-1;Consider the following data;for a closed economy;Y = $12 trillion;C = $8 trillion;I= $4 trillion;TR = $2 trillion;T = $3 trillion;7);Refer;to Scenario 13-1. Based on the information above, what is the level of public;saving?;a. $2 trillion;b.;$0;c.;$1;trillion;d. negative $1 trillion (a;deficit of $1 trillion);8) What is investment in a;closed economy if you have the following economic data? Y = $10 trillion;C = $5 trillion TR = $2;trillion G = $2 trillion;a. $5 trillion;b.;$2;trillion;c.;$3;trillion;d. cannot be determined;without information on taxes (T);9) If Ebenezer Scrooge spends rather than saves;his vast wealth he will;a.;promote;economic growth because he is increasing the amount of funds available for;investment.;b. slow economic growth;because he is reducing the amount of funds available for in-vestment.;c. slow economic growth;because he is increasing the amount of funds available for investment.;d.;promote;economic growth because he is decreasing the amount of funds available for;investment.;10);Refer;to Figure 13-1. Which of the following is consistent with the graph depicted;above?;a. Technological change;increases the profitability of new investment.;b.;The;government runs a budget surplus.;c.;Households;become spendthrifts and begin to save less.;d. An expected recession;decreases the profitability of new investment.;11);Which;of the following would encourage economic growth through increases in the;capital stock?;a. an increase in household;savings;b.;a;change from an income tax to a consumption tax;c.;a;decrease in the government deficit;d. all of the above;12);During;the expansion phase of the business cycle, which of the following eventually;increases?;a. employment;b.;income;c.;production;d. all of the above;13) From 1991 until 2001;the United States was in a period of;a. business cycle peaks.;b.;business;cycle troughs.;c.;expansion.;d. recession.;14);As;the economy nears the end of a recession, which of the following do we;typically see?;a.;increased;spending on capital goods by firms;b.;increasing;interest rates;c.;further;decreases in consumer spending;d. all of the above;15);When;the economy enters a recessionary phase of the business cycle, unemployment;tends to;a. increase.;b.;decrease.;c.;be;unchanged.;d. change in the same;direction as the rate of inflation.;16) Since 1950, expansions in;the United States have become ________, while reces-sions have become ________.;a. shorter, longer;b.;longer;shorter;c.;shorter;shorter;d. longer, longer;17) The aggregate demand curve;shows the relationship between the ________ and;a. real interest rate;quantity of real GDP supplied;b.;nominal;interest rate, quantity of real GDP demanded;c.;inflation;rate, quantity of real GDP demanded;d. price level, quantity of;real GDP demanded;18) Which of the following;best describes the ?wealth effect??;a. When the price level falls;the nominal value of household wealth rises.;b.;When;the price level falls, the real value of household wealth rises.;c.;When;the price level falls, the real value of household wealth falls.;d. When the price level falls;the nominal value of household wealth falls;19) Potential GDP is also;referred to as;a.;politico-economic;GDP.;b.;balanced-budget;GDP.;c.;full-employment;GDP.;d. realized GDP.;20) The short-run aggregate;supply curve has a;a.;negative;slope.;b.;slope;equal to zero.;c.;slope;equal to infinity.;d.

 

Paper#56613 | Written in 18-Jul-2015

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