2105 ECON EXAM I
NAME (print): _______________________
For the following six questions below please state whether the change will cause the US dollar
a)
appreciation (A)
b)
depreciation (B)
c)
leave the dollar unaffected (C)
Assume that all else is held constant
1)
Over the course of the last year the US Central Bank, the Federal Reserve, lowered the
interest rate in the US several times. B
2)
If, in light of the increased uncertainty about the future direction of the US financial
markets, more and more Americans start to invest into mutual funds that specialize
entirely in foreign investment (Americans start investing more overseas). This
investment trend is expected to cause the US dollar to . B
3)
A sharp increase in foreign tourism to Florida A
4)
A drop in the interest rates by major US trading partners, economies of China, EU,
Canada. A
5) In the US, the largest single component of the GDP is
a) Consumption
b) Investment
c) Government
d) Exports
e) Imports
6) Which of the following statements about the GDP is wrong?
a) The GDP represents the market value of all final goods and services produced
by the factors of production owned by the nation
b) The GDP represents the total sum of all the domestic value added in the production
during a period of time, such as one year
c) Imports enter the GDP with a negative number (they are subtracted) as they represent
spending on goods and services produced outside of the country
d) none of the above
7)
Modern economics is probably best defined as?
a) a business discipline that studies financial markets
b) a natural science
c) a social science
d) a philosophy
8)
Which of the following is not considered a resource in economics?
a) Labor
b) Capital
c) Money
d) Land
9)
The primary focus of economics is on?
a) Financial gains
b) Functions of the government
c) Efficiency
d) None of the above
10)
Which of the fundamental questions addresses resource allocation directly?
a) what to produce
b) how to produce
c) for whom to produce
d) none of the above
11)
Which of the fundamental questions addresses the output allocation directly?
a) What to produce
b) How to produce
c) For whom to produce
d) None of the above
12)
In a capitalist (market) economy, productive efficiency is achieved through
a) competition between firms
b) government regulations
c) legal system
d) political system
e) none of the above
13)
In a market economy what is being used to signal the information to resource owners
and hence effectively direct the allocation of those resources?
a) Prices
b) Government regulations
c) The legal system of the country
d) None of the above
14)
Which of the following economic systems uses prices to ration output and resources?
a) Socialism
b) Capitalism
c) Communism
d) None of the above
15)
Mercantilism is a form of
a) Trade policy aimed at running a trade surplus
b) Trade policy aimed at running a balanced trade
c) Trade policy aimed at running a trade deficit
d) None of the above
16)
Which of the following best describes most modern economies:
a) Most economies employ a mixed economic system where elements of
socialism are intermixed with capitalism
b) Most economies employ either a pure socialistic or a pure capitalist system
c) None of the above
17)
The presence of implicit costs will cause
a) the accounting cost to be equal to the economic cost
b) the accounting cost to exceed the economic cost
c) the accounting cost to be less than the economic cost
d) none of the above
18)
The cost of taking this class is
a) the tuition cost
b) the cost of the textbook and other materials needed for the class
c) the value of your time allocated to the class
d) the SUM of all of the above
e) none of the above
19)
Assume that on May 1st of this last year you purchased a stock in Countrywide
Financial Corp. at $40/share. Today, the price of the stock is about $4/share. If we
ignore the tax implications, then the opportunity cost of continuing the ownership stock of
this is
a) $40/share
b) $36/share
c) $4/share
d) $0/share, the stock was fully paid for at the time of the purchase
20)
Assume you purchase a used car (2001 Ford Focus) today from another individual and
you pay 2000 USD, but as part of the purchase you have the car examined at a local Goodyear
outlet for 50 dollars. How will this transaction be entered into the GDP?
a)
2050 USD will enter the consumption spending
b)
2000 USD will enter the consumption spending
c)
50 USD will enter the consumption spending
d)
zero will enter into the GDP for this year.
21)
Two goods can be considered to be in the same market if
a) the consumer considers them as complements
b) the consumer considers them as close substitutes
c) they are not related in consumption
d) none of the above
22)
Markets can be defined along the following dimension(s)?
a) Geographical
b) Product characteristics
c) Both, a and b choices
d) None of the above
23)
If two products are complements in consumption then as the price of one of these rises
a) The quantity sold of the other product is likely to rise as well
b) The quantity sold of the other product is likely to decrease
c) The quantity sold of the other product will remain the same
d) None of the above
24)
If two products are substitutes in production (the same inputs can be used to produce
either of these two products) then as the price of one of these products rises
a) The price of the other product is likely to rise
b) The price of the other product is likely to decrease
c) The price of the other product is likely to remain the same
25)
At present it seems that in many parts of the country the demand for housing is
decreasing. This is likely to cause
a) Surplus of housing to occur in the market
b) Prices of housing to start to decrease
c) Homeowners to experience reductions in their wealth and hence possibly reduce
their consumption spending
d) All of the above
26)
Which of the following statements is incorrect?
a) In a recession, normal goods manufacturers are expected to have a reduction in
the demand for their products
b) In a recession, inferior goods manufacturers are not expected to have reductions
in the demand for their products
c) All producers are going to be negatively impacted by a recession
d) None of the above
27)
If the demand increases at the same time as the supply increases, then we should
conclude that
a) The price will definitely increase
b) The price will definitely decrease
c) The equilibrium quantity will definitely increase
d) The equilibrium quantity will definitely decrease
28)
Consider the following scenario, the price of product X increases, as a result the sales
of product Y decrease, while the sales of product Z increase. Thus, we can conclude
that
a) X and Y are complements
b) X and Z are complements
c) X and Y are substitutes
d) None of the above
29)
Japan has been a major international investor over the last few decades. As a result of
this, many Japanese firms located their facilities overseas, and yet the presence of foreign firms in
the domestic economy of Japan is considerably smaller. Based on this Japan is likely to have
a)
its GDP exceed its GNP
b)
its GNP exceed its GDP
c)
its GDP be equal to its GNP
30)
Consider the following scenario, it takes me 30 minutes to replace a single panel of
siding on my house, and it takes me 10 minutes to paint a single panel of siding. It
takes my neighbor, who is helping me with these repairs, 10 minutes to replace the
panel of siding and 5 minutes to paint it. Obviously you can conclude that none of us
can qualify as a professional home repair person, but which one of us has the
COMPARATIVE advantage in painting the siding? In other words, which one of us
should concentrate on painting and leave the siding installation to the other one?
a) I have the comparative advantage in painting
b) My neighbor has the comparative advantage in painting
c) None of the above
Thanks for taking the test!