Practice Exam 1 - Macroexam1-uml-Winter2007(practice)...

Practice Exam 1
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Macroexam1-uml-Winter2007(practice) Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. The main reason that finished goods are scarce is that a. raw material resources are scarce. b. factories are not operated efficiently. c. distribution systems are clogged. d. taxes are destroying work incentives. e. All of the above are correct. ____ 2. How are the slope of a production possibilities frontier and the opportunity cost of the goods related? a. The slope is a graphical representation of the cost of expanding production of both goods. b. The slope is a graphical measure of the growth rate of the economy. c. The slope is a graphical representation of the cost of decreasing unemployment. d. The slope is a graphical representation of the rate of trade-off between the goods. e. The slope is a graphical representation of the cost of economic growth in the economy. ____ 3. A production possibilities curve has a downward slope because a. increased production of one good always reduces the additional profit of production. b. decreased production of one good is associated with lower profit from that good. c. economists have a negative view of life and human nature. d. increased production of one good always reduces production of the other. e. increased production of one good necessarily causes production of other goods to increase. ____ 4. If an economy is operating inefficiently, then a. the economy can increase production of consumption goods without reducing capital goods. b. there is always a positive opportunity cost to increasing output. c. output can only be increased through capital investment. d. output cannot be increased. ____ 5. Employment discrimination is a source of a. economic inefficiency. b. increased economic growth. c. innovation. d. shifting production possibilities. e. All of the above are correct. ____ 6. Specialization in production a. raises productivity. b. requires money. c. stimulates exchange. d. All of the above are correct. ____ 7. The division of labor benefits society only if a. a system of exchange exists. b. society uses all of its resources efficiently. c. society has no specialized resources. d. labor resources are not scarce. ____ 8. The most basic investigative tool of economics is the a. concept of scarcity. b. mechanism of supply and demand. c. coordination and trade syndrome.
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d. inflation-unemployment trade-off. e. regulation of business. Figure 4-2 ____ 9. If the government has stated that it will buy any amount of good X offered at $30, which demand curve in Figure 4-2 is appropriate? a. 1 b. 2 c. 3 d. 4 ____ 10. Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is the interest rate. What happens to the demand for money if the interest rate increases? a.
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