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NAME Exam (please PRINT):________MIM_______________
In Questions 1-7: indicate whether the stated event, all else held constant, is expected to lead to
appreciation (A), depreciation (B), or no change in the value (C) of the USD
1)
Increased US tourism to overseas destinations
DEPRECIATION
2)
Increase in US exports
APPRECIATION
3)
Increase in US imports
DEPRECIATION
4)
Increase in foreign investment into the US
APPRECIATION
5)
Increase in the US interest rates
APPRECIATION
6)
Increase in US investment overseas
DEPRECIATION
7)
Increase in the degree of risk associated with investing into the US
DEPRECIATION
For multiple choice questions just circle your answer choice
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Which of the following best defines modern economics?
a. A social science that studies allocation of resources
b. A natural science that studies human behavior
c. A business discipline that studies financial markets
d. None of the above
Economics is primarily concerned with
a. efficiency
b. financial gains
c. functions of government
d. none of the above
Which of the following is not considered a resource in economics?
a. labor
b. physical capital
c. money
d. human capital
e. none of the above
What ensures productive efficiency in a capitalist economy?
a. competition between firms
b. government regulations
c. legal system
d. none of the above
Which of the following statements is incorrect?
a. most modern economies have a mixed economic system where elements of capitalism are
intermixed with elements of socialism
b. Western European economies tend to have a greater presence of socialism in their
economies than the US
c. In the 1990s the Eastern European economies underwent a transition to a capitalist (or
mixed), market based economic system
d. Capitalism does not require an individual to be selfless, while both, communism and
socialism do require some degree of selfishness on the part of the individual (in order
for either of them to be voluntarily accepted as an economic system)
e. None of the above
There is a typo in D and that makes D an appropriate answer
Which of the following fundamental economic questions deals with resource allocation?
a. what to produce
b. how to produce
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c. for whom to produce
A is clearly the right choice, however, allocative efficiency has two dimensions: resource
allocation and output allocation. Resource allocation determines what will be produced,
i.e. how many workers we allocate to road construction, agriculture
Which of the following fundamental economic questions deals with productive efficiency?
a. what to produce
b. how to produce
c. for whom to produce
If there are no implicit costs then we are likely to have
a. accounting costs and economic costs being the same
b. accounting costs exceeding economic costs
c. economic costs exceeding accounting costs
d. none of the above
Presence of implicit costs tends to lead to
a. economic costs being greater than accounting costs
b. economic costs being lower than accounting costs
c. economic and accounting costs being the same
d. none of the above
The cost of taking this class is
a. the tuition cost
b. the cost of the textbook and other materials needed for the class plus the cost of tuition
c. part b plus the value of your time allocated to this class
d. none of the above
Macroeconomics is best defined as
a. the branch of economics that studies the economy as a whole
b. the branch of economics that studies the behavior of individual economic entities, such as
firms, consumers
c. all of the above
d. none of the above
In a market economy, resource allocation is determined through
a. consumer demand
b. government regulations
c. competition
d. none of the above
Assume that Delta Airlines purchased fuel three months ago at $3.00/gallon, and currently the
price of that fuel is $2.50/gallon. Delta still has that fuel and considers using it today. What is
the economic cost of using that today?
a. fuel $3.00/gallon
b. $2.50/gallon
c. $0.50/gallon
d. $0.00/gallon
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 the consumption decision
d. none of the above
Markets can be defined along the following dimension(s)?
a. geographical
b. product characteristics
c. both a and b
d. none of the above
Which of the following statements is incorrect?
a. in a recession, normal goods manufacturers are expected to have a reduction in the demand
b. in a recession, inferior goods manufacturers are not expected to have reductions in the
demand
c. all producers are going to be negatively effected in a recession
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d. none of the above
If both, supply and demand decrease at the same time then we should expect
a. the equilibrium quantity to decrease
b. the price to increase
c. the price to decrease
d. the equilibrium quantity to increase
e. none of the above
If supply decreases while demand increases then
a. the price is expected to increase
b. the price is expected to decrease
c. the equilibrium quantity is expected to increase
d. the equilibrium quantity is expected to decrease
e. none of the above
In which scenario an increase in the minimum wage would lead to substantial reduction in
employment of low-paid workers?
a. if the demand for output produced by low-skilled workers is not price sensitive
b. if the demand for output produced by low-skilled workers is very price sensitive
c. if there is no substitutability for the domestic low-skilled labor
d. none of the above
Which of the following statements about the minimum wage is incorrect?
a. minimum wage is an example of a price floor
b. if the minimum wage is set below the market clearing price then it will have no real effect
on the market
c. if the minimum wage is set above the market clearing price then it will lead to
unemployment
d. if the demand for the output produced by minimum wage paid workers is vertical, then any
increase in the minimum wage will lead to inflation in the output market
e. none of the above statements are correct
During the second half of the 1990s the USD appreciated against most other currencies. We
can attribute it to
a. the strong relative performance of the US economy in the second half of the 1990s
that lead to increased influx of foreign investment
b. growing US trade deficit
c. purchases of the USD by the US Central Bank (the Fed)
d. none of the above played any role in the dollar appreciation
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
True [T] / False[F]
30)
Employment in the durable goods manufacturing sector can be viewed as a leading indicator,
i.e. a predictor of the future state of the economic activity
31)
Yesterday I went to fill up my car at a gas station in the Indian Reservation just northeast
of the campus. The price of gasoline there was about 20 cents lower than in all the other
gas stations in the area, and yet the difference in the sales taxation is much larger than
that. This observation suggests that the burden of sales taxes is entirely on the consumer.
32)
Market equilibrium maximizes the sum of consumer and producer surpluses
33)
The US trade deficit is currently being financed through influx of foreign investment into the
US, i.e. international borrowing.
BONUS (if answered correctly will add 3 points to your grade, the approximate weight of one question, but if
attempted and answered INCORRECTLY, will result in a decrease of your grade by 1 point)
PRINT THE NAME OF THE CURRENT CHAIR OF THE FEDERAL RESERVE BANK OF THE US:
______Ben Bernanke________________________
Thank you for taking the test