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Devry Eco312 final exam spring 2014




Question;Page 1;Question;1.1.(TCO;1) As a consequence of the problem of scarcity (Points: 4);there is never enough of;anything.individuals have to make;choices from among alternatives.production has to be planned;by government.things which are plentiful;have relatively high prices.;Question;2.2.(TCO1);Which is not a factor of production? (Points: 4);MoneyLandLaborCapital;Question;3.3.(TCO1);A point inside the production possibilities curve is (Points: 4);attainable and the economy is;efficient.attainable, but the economy;is inefficient.unattainable, but the economy;is inefficient.unattainable and the economy;is efficient.;Question;4.4.(TCO1);Which would not be characteristic of a capitalist economy? (Points: 4);Government ownership of most;factors of productionCompetition and unrestricted;marketsReliance on the market systemFreedom of enterprise and;choice;Question;5.5.(TCO;2) The rationale for the law of demand can best be understood on the;basis of (Points;4);diminishing marginal utility.capitalist markets.the invisible hand.the rationing function of;price.;Question;6.6.(TCO;2) What combination of changes would most likely decrease the equilibrium;price? (Points;4);When supply decreases and;demand increasesWhen demand increases and;supply increasesWhen demand decreases and;supply decreasesWhen supply increases and;demand decreases;Question;7.7.(TCO;2) When the price of movie tickets in a certain town was reduced, the;movie theaters' revenues did not change. This suggests that the;demand for movie tickets in that town has a price-elasticity coefficient;of (Points;4);1.0.greater than;Question;8.8.(TCO;2) Which of the following factors will make the demand for a product;relatively elastic? (Points;4);There are few substitutes.The time interval considered;is long.The good is considered a;necessity.Purchases of the good require;a small portion of consumers' budgets.;Question;9.9.(TCO;2) Which is true for a purely competitive firm in short-run equilibrium? (Points: 4);The firm is making only;normal profits.The firm's marginal cost is;greater than its marginal revenue.The firm's marginal revenue;is equal to its marginal cost.A decrease in output would;lead to a rise in profits.;Question;10.10.(TCO;2) Consumers who clip and redeem discount coupons (Points: 4);exhibit the same price;elasticity of demand for a given product than consumers who do not clip and;redeem coupons.exhibit more price elasticity;of demand for a given product than consumers who do not clip and redeem;coupons.exhibit less price elasticity;of demand for a given product than consumers who do not clip and redeem;coupons.cause total revenue to;decrease for firms that issue coupons for their products.;Question;11.11.(TCO;3) A cartel is (Points;4);a form of covert; in the United States.always successful in raising;profits.a formal agreement among;firms to collude.;Question;12.12.(TCO;3) In the short run (Points;4);a firm cannot vary its;output level.all factors of production can;be varied.a firm can change its;fixed inputs.output is raised or reduced;by changing the levels of variable inputs.;Question;13.13.;(TCO;4) Refer to the diagram. The phases of the business cycle from;points A to D are, respectively;Graph Description;(Points;4);Peak, recession, expansion;troughTrough, recovery, expansion;peakExpansion, recession, trough;peakPeak, recession, trough;expansion;Question;14.14.(TCO;4) In calculating the unemployment rate, part-time workers are (Points: 4);counted as unemployed because;they are not working full-time.counted as employed because;they are receiving payment for work.used to determine the size of;the labor force, but not the unemployment rate.treated the same as;discouraged" workers who are not actively seeking employment.;Question;15.15.(TCO;4) Adding the market value of all intermediate goods and services to;those of final goods and services in an economy in a given year;would result in (Points;4);the calculation of GDP for;that year.the calculation of NDP for;that amount less than GDP for;that amount greater than GDP;for that year.;Question;16.16.(TCO;4) GDP tends to overstate economic well-being because it takes into;account (Points;4);improvements in product;quality over time.expenditures undertaken to;correct pollution.illegal activities of;individuals and businesses.nonmarket activities, such as;the productive work of homemakers.;Question;17.17.(TCO;6) When the federal government uses taxation and spending actions to;stimulate the economy it is conducting (Points: 4);fiscal policy.incomes policy.monetary policy.employment policy.;Question;18.18.(TCO;6) Refer to the graph. What combination would most likely cause a;shift from AD1 to AD3? Graph Description (Points: 4);Increases in taxes;and government spendingDecrease in taxes;and increase in government spendingIncrease in taxes;and decrease in government spendingDecreases in taxes;and government spending;Question;19.19.(TCO;6) The American Recovery and Reinvestment Act of 2009 included mostly (Points: 4);increases in taxes;and government spending.decreases in taxes;and government spending.increases in government;spending and decreases in taxes.decreases in government;spending and increases in taxes.;Question;20.20.(TCO;6) The time which elapses between the beginning of a recession or an;inflationary episode and the identification of the macroeconomic problem;is referred to as a(n) (Points: 4);budget lag.recognition lag.operational lag.administrative lag.;Page 2;Question;1.1.(TCO;5) An increase in aggregate demand is most likely to be caused by a;decrease in (Points;4);the wealth of consumers.consumer and business;confidence.expected returns on;investment.the tax rates on household;income.;Question;2.2.(TCO;5) The short-run aggregate supply curve (Points: 4);becomes flatter at output;levels above the full-employment output.becomes vertical at;output levels above the full-employment upward-sloping with a;constant horizontal.;Question;3.3.(TCO;5) If the price of crude oil decreases, then this event would most likely (Points: 4);decrease aggregate supply in;the U.S.increase aggregate supply in;the U.S.increase aggregate demand in;the U.S.decrease aggregate demand in;the U.S.;Question;4.4.(TCO;5) Disinflation refers to a situation where (Points: 4);price level falls, but the;rate of inflation does not.Price level rises, but the;rate of inflation does not.the rate of inflation falls;but the price level does not.the rate of inflation rises;but the price level does not.;Question;5.5.(TCO;6) If a family's MPC is.7, it means that the family is (Points: 4);operating at the break-even;point.spending seven-tenths of;any additional income.necessarily dissaving.spending 70 percent of its;disposable income.;Question;6.6.(TCO;7) The M1 money supply is composed of (Points: 4);all coins and paper money;held by the general public and the deposits of households;and business deposits and mutual;funds.checkable deposits and;currency in circulation.;Question;7.7.(TCO;7) United States currency has value primarily because it (Points: 4);is legal tender, is generally;acceptable in exchange for goods or services, and is backed by the gold and;silver of the federal generally acceptable in;exchange for goods or services, is backed by the gold and silver of the;federal government, and facilitates relatively scarce, is;legal tender, and is generally acceptable in exchange for goods and;services.facilitates trade, is legal;tender, and permits the use of credit cards and near-monies.;Question;8.8.(TCO;7) The Federal Reserve System of the U.S. is the country's (Points: 4);financial adviser.comptroller or accountant.central bank.deposit insurance provider.;Question;9.9.(TCO;7) Which group is responsible for the policy of changing the money;supply? (Points;4);Federal Open Market CommitteeOffice of Management and;BudgetThrift Advisory CouncilFederal Advisory Council;Question;10.10.(TCO;7) The Federal funds rate is the rate that banks pay for loans from (Points: 4);the Fed.the U.S. Treasury.other banks.large corporations.;Question;11.11.(TCO;7) The establishment of a federal deposit insurance program resulted from;the (Points;4);establishment of the Federal;Reserve System in 1913.speculation during World War;I.stock market crash of panics of 1930-1933.;Question;12.12.(TCO;7) The purchase and sale of government securities by the Fed is called (Points: 4);federal funds market market transactions.term auction facility.;Question;13.13.(TCO;7) The tools of monetary policy for altering the reserves of commercial;banks are the (Points;4);tax rate, transfer payments;and level of government spending.consumer price index;inflation, and unemployment rate.public debt, budget surplus;budget deficit, and interest rate, reserve ratio;open market operations, and term auction facility.;Question;14.14.(TCO;8) Which nation has greatly increased its role in international trade in;recent years? (Points;4);JapanIranPeruChina;Question;15.15.(TCO;8) The principal concept behind comparative advantage is that a nation;should (Points;4);maximize its volume of trade;with other nations.use tariffs and quotas to;protect the production of vital products for the nation.concentrate production on;those products for which it has the lowest domestic opportunity cost.strive to be self-sufficient;in the production of essential goods and services.;Question;16.16.(TCO;8) A tariff is a (Points;4);tax.price ceiling.quantity limit.subsidy.;Question;17.17.(TCO;8) A key difference between import quotas and voluntary export restraints;(VERs) is that the (Points;4);domestic government;administers the former, whereas the foreign government administers the;latter.foreign government;administers the former, whereas the domestic government administers the; is a tax, whereas the;other is a quantity raises the price of the;imported product involved, whereas the other one does not.;Question;18.18.(TCO;8) Tariffs and import quotas would benefit the following groups, except (Points: 4);consumers of the product.domestic producers of the;product.workers in domestic firms;producing the product.the government of the;importing country.;Question;19.19.(TCO;8) Which organization meets regularly to establish rules and settle;disputes related to international trade? (Points: 4);The United Nations Commission;on Trade LawThe United Nations Conference;on Trade and DevelopmentThe World Trade OrganizationThe Federal Reserve Board;Question;20.20.(TCO;9) U.S. imports (Points;4);increase the foreign demand;for foreign currencies.increase the domestic demand;for foreign currencies.decrease the foreign supply;of foreign currencies.increase the domestic supply;of foreign currencies.;Page 3;Question;1.1.(TCO;9) Which of the following appears as a positive item on the balance of;payments account for the United States? (Points: 4);U.S. government sending aid;to natural disaster victims in AsiaAmerican tourists spending;money in the other countriesBuying of U.S. Treasury bonds;by a foreign bankPayment of stock dividends by;U.S. firms to foreign shareholders;Question;2.2.(TCO;9) A trade deficit means a net (Points: 4);inflow of payments for goods;and services.outflow of goods and;services.inflow of goods and services.excess of exports over;imports.;Question;3.3.(TCO;9) If an American can purchase 40,000 British pounds for $90,000, the;dollar rate of exchange for the pound is (Points: 4);$0.44.$0.23.$2.25.$2.00.;Question;4.4.(TCO;9) When the exchange rate between pounds and dollars moves from $2 = 1;pound to $1 = 1 pound, we say that the dollar has (Points: 4);depreciated.appreciated.inflated.deflated.;Question;5.5.(TCO;9) The monetary system for conducting international trade is usually;described as a system of (Points: 4);fixed exchange rates.freely floating exchange;rates.a managed gold standard.managed floating exchange;rates.;Question;6.6.;(TCO;8) a) Explain four problems with the argument that trade protection is;needed to protect American jobs. b) Describe the economic reasons why;businesses use offshoring.;(Points: 40);Question;7.7.;(TCO;6) a) Identify the four major tools of monetary policy. b);Describe how changes in the Fed?s major policy tools leads to [1];expansionary and [2] restrictive or contractionay monetary policies.;(Points: 40)


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