ECO101102 - 1.1.1 f (1) QID: 12876 The opportunity cost of...

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Unformatted text preview: 1.1.1 f (1) QID: 12876 The opportunity cost of any particular choice is the least expensive alternative to the choice. the best alternative to the choice. the price that one pays for the choice. the most expensive alternative to the choice. (2) QID: 12879 If you wait in line one hour to buy a concert ticket for $30, the opportunity cost of that ticket is the best alternative use of the $30. the best alternative to the one hour it took to buy the ticket. the best alternative to both the $30 and the one hour. not measurable because there is no opportunity cost to consumption. (3) QID: 12880 Scarcity is a problem only during a recession or depression. is a problem only in developing countries. is a problem only among poor people. requires people to make choices. (4) QID: 12883 The study of economics is primarily concerned with determining the most equitable distribution of income in the economy. choices which have to be made concerning the use of scarce resources. demonstrating the superior nature of capitalist economies. keeping businesses from losing money. (5) QID: 13997 Which of the following is a correct statement? During a depression or recession, economic principles are not neccessarily valid. Economics laws are important because they allow us to predict and possibly control economic events. Economics laws are as precise as laws in physics or chemistry. Economics laws are concerned with judging outcomes and therefore are not scientific. (6) QID: 15243 The opportunity cost of a college education is the cost of books and tuition. the time you spend studying for tests. the salary that you made at a part-time job last year. the highest salary that you could make if you worked full time instead of going to school. (7) QID: 15244 Which of the following is not a scarce good? Air Space Water Garbage (8) QID: 15245 A good is not scarce if everybody can have all they want of it. if someone can buy all he/she wants of the good. if people who make enough money can buy all they want of the good. if there is a limited amount of it available. (9) QID: 15247 Scarcity is defined as the unlimited availability of goods and services. the imbalance between rational choice and irrational choice. the imbalance between what is wanted and what is freely available. none of the above. (10) QID: 15248 Rational choice requires the undertaking of costs-benefits analysis. is impossible under conditions of scarcity. is defined as self-interested decision-making. both A and C. (11) QID: 15249 Which of the following best illustrates the concept of opportunity costs? The choice of a pizza purchased today versus a hot dog purchased last month The choice of immediately studying an additional two hours or immediately going to sleep Eating both bacon and eggs for breakfast this morning All of the above illustrate the concept of opportunity costs. (12) QID: 15250 If everyone made rational choices, then everyone would make identical choices. there would be no tradeoffs in any choice. resources would exceed material wants. individuals differ in their choices because their information and constraints are different. (13) QID: 15252 The opportunity cost of attending college does not include the income you could have earned while in classes. the travel expenses that you incur while traveling to classes. the money spent on books and tuition. money spent on meals while at school. (14) QID: 15253 Which of the following choices involves giving up something? Buying a new house Studying for a test Watching television All of the above involve giving up something. (15) QID: 15254 A rational person makes a choice if the choice makes money. the benefits outweigh the costs. the costs outweigh the benefits. the choice is ethical. BCDBB DDACD BDDDB 1.1.2 (1) QID: 12884 Economics addresses such issues as how goods will be produced. what goods to produce. who will get the goods that are produced. All the above are correct. (2) QID: 12887 Economists use economic models to maintain real-world complexity. to appear as precise as physical scientists. to understand how the real world works. to include every detail in their analyses. (3) QID: 12888 Economics is the study of how businesses generate profits. how society allocates scarce resources. how to more equitably distribute income. how money is used in our culture. (4) QID: 12890 The main reason that testing theories is more difficult in economics than in the physical sciences is the difficulty in performing an experiment on an economic system. the difficulty in devising an experiment. the difficulty in evaluating the results of an experiment. the difficulty in developing a theory of the economy. (5) QID: 12891 Normative statements make statements about how the world is. make statements about the normal conditions in the economy. make statements about how much production the economy could have. make statements about how the world ought to be. (6) QID: 12892 Which of the following is an example of how economists may differ in their scientific judgments? A disagreement about whether a reduction in inflation is more important than a reduction in unemployment. A disagreement on the effects of a change in tax laws on consumer behavior. A disagreement on the fairness of income distribution. A disagreement on whether the minimum wage should be increased. (7) QID: 12893 In economics the term "ceteris paribus" means central variable hold all other variables constant in the "unlikely event that. . ." none of the above (8) QID: 12895 Positive statements are evaluated on the basis of evidence while normative statements are evaluated on the basis of an individual's judgment. True False (9) QID: 12900 Economic value is created when the benefits of a trade exceed the costs of the trade. a customer gets a product for less than the cost of producing it. a store can sell an inferior product for full price. the costs of a trade are exactly equal to the benefits of the trade. (10) QID: 13995 Economics is mainly concerned with the study of money. scarcity. profits. unemployment. DCBAD BBAAB 1.1.3 (1) QID: 12903 An example of a topic that macroeconomists study is consumer demand for automobiles. the change in the nation's unemployment rate. the market structure of the electric power industry. the shortage of labor in high-tech industries. (2) QID: 12905 An example of a real variable is the change in the number of cars produced from one year to the next. the change in the price of cars from one year to the next. the change in a person's salary from one year to the next. the increase in the minimum wage. (3) QID: 12907 An example of a topic that microeconomists study is Ford Motor Company's market share. the change in the unemployment rate. the change in inflation. the change in real GDP. (4) QID: 12909 Microeconomics is the study of individual firms, households, and markets. True False (5) QID: 12910 Which of the following is not a macroeconomic variable? Real GDP The unemployment rate The rate of inflation The price of pizzas (6) QID: 12913 Macroeconomics approaches the study of economics from the viewpoint of specific product and factor markets. government. consumers. the entire economy. (7) QID: 13726 An economist believes that theory is used to ignore reality. support one's opinions. describe a situation. explain the reasons behind real-world phenomena. (8) QID: 13727 Macroeconomics and microeconomics rely on the same set of tools, which are national legislation and government contracts. antitrust laws. supply and demand analysis. the theories of John Maynard Keynes. (9) QID: 13728 The defining difference between macroeconomics and microeconomics is that macroeconomics focuses on economic aggregates, and microeconomics focuses on individual choices. microeconomics focuses on economic aggregates, and macroeconomics focuses on individual choices. microeconomics uses supply and demand analysis, while macroeconomics is interested in government action. microeconomics is interested in profit analysis, while macroeconomics is interested in developing countries. (10) QID: 13996 Which of the following activities is associated with macroeconomics? An investigation into the relationship between price level and unemployment since World War II An examination of cattle prices over the last decade A study of pricing in the automobile industry An examination of market structure in the software industry BAAAD DDCAA 1.1.4 (1) QID: 12914 Which of the following is not a concern of an economic system? The allocation of scarce resources The distribution of the economy's output The mix of goods and services that an economy produces The fair distribution of income among all citizens (2) QID: 12916 Planned economic systems encourage entrepreneurship and innovation under the direction of a central planning authority. True False (3) QID: 12917 In a market economy, there is no room for individual initiative. a great amount of central planning. a great concentration of economic power in the hands of a few corporations. reliance on the price system to allocate resources. (4) QID: 12921 To decide how to allocate scarce resources, a laissez-faire economic system relies on central planning. prices. barter. a mix of planning and markets. (5) QID: 12923 Which of the following is the least serious problem for laissez-faire economies? Unemployment Consumer sovereignty Providing public goods Income distribution (6) QID: 12924 In a mixed economy, the role of the government is to regulate the balance of laissez-faire and planned economic systems. discourage self-interest. move a laissez-faire economy toward a planned economy. move a planed economy toward a laissez-faire economy. (7) QID: 12926 The American economy is called a mixed system because the answers to economic problems are partially determined by the government and partially determined by private interests. the products of private enterprise are often purchased by government. the capital of most private enterprises comes from government loans. a majority of private enterprises are jointly owned by the government and private enterprise. (8) QID: 12928 One of the main features of a laissez-faire economic system is central economic planning. limits on the right to own property. a limited role for government. extensive government control of the market. (9) QID: 12929 One of the characteristics of a planned economy is the pursuit of self-interest with no central direction. consumer sovereignty. well-developed markets. extensive government control of the market. (10) QID: 12933 In the real world, all economic systems are mixed systems. A mixed system means that governments may be used to improve economic outcomes. extensive consumer choices exist even in an economy that has government regulation. markets exist side-by-side with government-controlled enterprises. All of the above are correct. (11) QID: 12934 Which of the following situations would not demand that governments get involved in the economy? Resource allocation is efficient. Income distribution may be unfair. Market systems may fail to produce some goods that society values. Periods of unemployment and inflation may cause instability in the system. (12) QID: 12936 Many examples of both laissez-faire systems and purely planned systems exist in the world. True False (13) QID: 12937 Consumers generally express their self-interest by attempting to find the lowest price for a product. maximizing profits. finding jobs with the highest wages. minimizing their economic losses. (14) QID: 12939 Both market systems and planned systems must find a method to centralize all decision making in a government agency. promote production efficiency but ignore the distribution of income. promote fairness in income distribution but ignore production efficiency. communicate and coordinate the individual choices of consumers, producers, and resource suppliers. DBDBB AACDD ABAD 1.2.1 (1) QID: 15259 Economists notice specific relationships between data points. True False (2) QID: 15260 Which of the following examples represents a method of presenting data in terms of the relative size of vertical columns? A pie chart A bar graph A scatter plot A line graph (3) QID: 15262 Each point on a two-dimensional graph consists of combinations of four pieces of information. numbers that do not represent information. combinations of variables that represent two pieces of information. no variables. (4) QID: 15264 Each coordinate of a graph is written as the vertical axis y and the horizontal axis x (y,x). the horizontal axis x and the vertical axis y (x,y). a point not representing an axis. the vertical axis x and the horizontal axis y (y,x). (5) QID: 15265 A scatter plot is information arrayed in a two-dimensional space to represent two variables for each data point. a line graph that connects coordinates of a graph. information arrayed in a two-dimensional space to represent three variables for each data point. used when drawing a bar graph. (6) QID: 15266 If two variables, consumption and income, are directly related we can say that a change in consumption will change income but not vice versa. if income increases, then consumption increases. if income increases, then consumption will change but it is impossible to say in which direction it will change. if income increases, then consumption will decrease. BBCBA B 1.2.2 (1) QID: 12972 The slope of a line on a graph is defined as the change in the x-axis variable divided by the change in the y-axis variable. the change in the y-axis variable divided by the change in the x-axis variable. "rise over run." B and C. (2) QID: 12974 Which statement about slopes is accurate? A horizontal line has a slope of 2, and a vertical line has a slope of -2. A horizontal line has an infinite slope, and a vertical line has a slope of zero. A horizontal line has a zero slope, and a vertical line has an infinite slope. The slopes for horizontal and vertical lines cannot be calculated. (3) QID: 12977 If the price of a soft drink changes from $1.00 to $2.00, then the demand curve shifts inward. there is a decrease in the quantity demanded. the demand curve shifts outward. there is an increase in the quantity demanded. (4) QID: 15271 The slope of a demand curve describes consumer behavior by showing that the consumers increase their consumption of a good when price goes down. that suppliers provide more of the good as price goes up. that consumers increase their quantity demanded as price goes up. that consumers do not care about price. (5) QID: 15272 The slope of a demand curve is the change in the x-axis variable divided by the change in the y-axis variable. True False (6) QID: 15273 The slope of the line is defined by the coefficient of Q in the demand formula P = $12 - .50Q. the vertical intercept. the change in y divided by the change in x. A and C. (7) QID: 15275 The vertical intercept in the demand equation is the constant number. True False (8) QID: 15276 Given the demand formula for frisbees of P = $8.30 - 1.23Q, what is the proper interpretation of the value of $8.30? $8.30 represents the highest price the consumer would pay for one frisbee. $8.30 represents the price that would cause the purchases of frisbees to drop to zero. $8.30 represents the slope of the demand formula. Only B and C are correct. (9) QID: 15277 A graph of the demand curve measures the horizontal axis using price and the vertical axis using quantity. the relationship of supply in a market. the inverse relationship between the price of a product and the quantity demanded. the difference between supply and demand. (10) QID: 15278 At what price will eight pizzas be demanded? $12.00 $11.00 $10.00 $8.00 (11) QID: 15279 If the price drops from $12 to $6, how many more pizzas will be demanded? Five Three Eight Six DCBAB DABCD C 1.2.3 (1) QID: 12983 Given the equation for a linear function, y = a + bx, which term represents the intercept? b x bx a (2) QID: 12984 Given the equation for a linear function, y = 20 + .67x, what is the value of y when x is zero? 20 67 13.4 zero (3) QID: 12988 In the consumption function C = $1000 + .3Y, C is consumption and Y is income. How much is consumption when income is zero? zero $1000 $300 The answer is indeterminate. (4) QID: 12989 If one variable increases when another one increases, then we say that the two variables are inversely related. directly related. nonlinear. negatively related. (5) QID: 15292 A decrease in a consumer's income causes his demand curve to shift outward. shift inward. change slope. remain the same. (6) QID: 15467 When the demand curve shifts, the intercept remains the same. True False (7) QID: 15468 When a demand curve shifts, the slope of the curve remains the same. True False (8) QID: 15469 A shift in the demand curve is caused by a change in price. a change in quantity demanded. an exogenous variable. an endogenous variable. (9) QID: 15470 Exogenous variables on a demand curve are changes in consumer income. changes in the price of other goods. changes in consumer expectations. all of the above. (10) QID: 15472 A shift in the demand curve illustrates a change from one point on the demand curve to another point. can only shift forward. can only shift backward. shifts the whole demand curve inward or outward. (11) QID: 15473 A negative relationship between variables exists when there is no relationship. one variable increases while the other variable decreases. there is a direct relationship. there is a positive relationship. (12) QID: 15476 On a demand curve, an increase in the price of a good will cause a shift in the demand curve. cause an increase in the quantity demanded. cause a decrease in the quantity demanded. cause no change. (13) QID: 15477 Consider the equation of linear function y = -4 + 7x. If it were graphed, the intercept would be 7. 4. -4. -7. DABBB BACDD BCC 1.2.4 (1) QID: 15441 Suppose a line shows that every time a family's income increases by $1.00, the family's spending increases by $.90. If income increases by $300.00, spending must increase by $500.00. $270.00. $333.33. an indeterminate amount. (2) QID: 15442 A relatively flat demand curve indicates that the demand for a product is very sensitive to a change in price. True False (3) QID: 15443 Economists prefer elasticities for all of the following reasons except that they do not depend on units of measurement. they are based on total changes in units. they are based on percentage changes. they depict a relationship independent of how the variables are measured. (4) QID: 15446 The slope of the demand curve is measured by the change in quantity demanded divided by the change in price. the change in the price of one good plus the change in quantity demanded of that good. the change in price divided by the change in the quantity demanded. price divided by quantity. (5) QID: 15447 A steeply-sloping demand curve shows that the change in quantity demanded is very sensitive to a change in price. that the change in one variable is not affected by a change in another variable. that the price and quantity demanded have a direct relationship. that the change in quantity demanded is not very sensitive to a change in price. (6) QID: 15449 The slope of a linear function depends on the units of measurement. True False (7) QID: 15450 Consider the equation of linear function y = -4 + 7x. If it were graphed, the slope would be 7. 4. -4. -7. BABCD AA 1.3.1 (1) QID: 12449 To calculate the slope of the total product curve, take the change in y divided by the change in x. find the slope of a line tangent to the TP curve. subtract the change in y from the change in x. subtract the change in x from the change in y. (2) QID: 12450 All of the following are true of the tangent line except the tangent line just touches total production curve. the slope of the tangent line is equal to the slope of the TP curve at a specific point. the tangent line is used to find the slope of the TP curve. the tangent line cannot be used to find the slope of the TP curve. (3) QID: 12451 The slope of the production function is flatter near the bottom of the curve. True False (4) QID: 12452 On an exponentially increasing curve, the slope is not constant. the slope is constant. there is no slope. the slope equals zero. (5) QID: 12453 The total product curve is the curve of the production function. is not linear. has a varying slope. all of the above. BDAAD 1.4.1 (1) QID: 12227 Which point on the graph is not attainable? A D C All points are attainable. (2) QID: 12228 When increasing opportunity costs exist, resources are not perfectly substitutable for each other. True False (3) QID: 12231 The production possibilities frontier (PPF) represents a collection of points indicating a minimum amount of one good produced for a given quantity of another good produced. all the possibilities of an economy, including ones that are not attainable. a collection of points indicating a maximum amount of one good produced for a given quantity of another good produced. an inefficient use of resources. (4) QID: 12232 The idea of opportunity costs indicates that if the production of one good is increased, the production of another good must decrease. you can produce whatever you have the opportunity to. you can produce anything if you can cover your costs. all of the above. (5) QID: 12233 Any combination of two goods lying outside the production possibilities frontier represents the most efficient use of resources. requires fewer resources than are presently available. represents an unattainable combination of goods. represents an inefficient combination of goods. (6) QID: 12234 The PPF is a tool in economics to illustrate the study of scarcity in situations of rational choice. the study of rational choice in situations of scarcity. the study of supply and demand. none of the above. (7) QID: 13748 Referring to the graph, if this economy moves from point A to point B, it must give up food to get more military equipment. it must give up military equipment to get more food. it has to give up both military equipment and food. it gains both military equipment and food. (8) QID: 13749 In this production possibilities frontier, if the consumer moves from A to B, the consumer is choosing more leisure and less income. the consumer is choosing more income and less leisure. the consumer is choosing more of both leisure and income. the consumer is choosing less of both leisure and income. (9) QID: 13751 In the production possibilities frontier, points A, B, and C represent feasible outcomes for this society. True False (10) QID: 13753 According to the graph, the society has to give up _______ pounds of food to build one car. 10 100 1/10 1000 (11) QID: 13754 According to the graph, the society has to give up _______ cars to produce another pound of food. 1/10 100 10 1000 (12) QID: 13755 Points on the production possibilities frontier are the only efficient production points. True False CACAC BBABC CA 1.4.2 (1) QID: 12238 Mandatory retirement at age 55 will cause an inward shift in the PPF. True False (2) QID: 12239 When a production possibilities frontier shifts outward, society experiences falling production. economic growth. an allocation of resources from rich people to poor people. a change in the income distribution. (3) QID: 12240 An inward shift in the PPF could be caused by the destruction of resources in a war. consumers' preferences to save more than they consume. a decrease in government spending. unemployment. (4) QID: 12241 In a farming economy of wheat and rice, a warming trend occurs. This trend increases the production of both goods. However, the rice production is affected more than the wheat. The production possibilities frontier will shift outward for both goods, but the wheat axis will shift further. shift inward for both goods, but the rice axis will have a greater decrease. shift outward for both goods, but the wheat axis will have a greater decrease. shift outward for both goods, but the rice axis will shift further. (5) QID: 12242 The production possibilities frontier illustrates the supply side of an economy because it makes an engineering statement on efficiency. it tells nothing about consumer preferences. both A and B. none of the above. (6) QID: 12243 An inward shift in the production possibilities frontier (PPF) could be the result of a decline in the general level of education. True False (7) QID: 12244 A shift in the production possibilities frontier curve will occur as a result of all of the following except a change in the endowment of resources. a change in technology. a change in the production of one good relative to another good. a change in land, labor, or capital. (8) QID: 12245 A choice to produce more of one good and less of another results in a movement along the PPF curve. a shift in the PPF curve. expansion of the economy. none of the above. (9) QID: 12246 In a farming economy that produces barley and flax, a new fertilizer is invented. The fertilzer only works on barley. The production possibilities frontier will only shift outward from the barley axis. only shift inward from the barley axis. shift outward from both axes. shift inward from both axes. (10) QID: 15848 A PPF has computers on the horizontal axis and services on the vertical axis. Since 1985, that PPF has become flatter. True False (11) QID: 15849 If a country's PPF shows capital goods on one axis and consumer goods on the other axis, the country's PPF will shift out faster if it spends more on consumer goods in the current time period. True False (12) QID: 15850 Suppose a PPF has capital goods on the vertical axis and consumption goods on the horizontal axis. The PPF has a constant slope with a vertical intercept of 80 and a horizontal intercept of 160. Last year, 160 units of consumption goods were produced, so the economy produced __________ units of capital goods. zero 80 160 240 (13) QID: 15852 In an economy, assume that labor is the only factor of production. One worker can produce either twelve pounds of food a year or six rifles. The slope of the country's PPF is -2 if rifles are on the horizontal axis. True False (14) QID: 18644 Examine the accompanying graph of a society's PPF. The most likely cause of the shift from PPF1 to PPF2 is a decrease in society's preference for food. a decrease in society's preference for the military. destruction of resources because of a war. A and B. (15) QID: 18649 Examine the accompanying graph of a PPF for an agricultural society. The most likely cause of the shift of the PPF is discovery of a new fertilizer that works only on rice. a drought in wheat-producing states. a general decrease in agricultural technology. a shift in society's preference for wheat relative to rice. ABADC ACAAA BAACB 1.4.3 (1) QID: 12247 200 pounds of coffee 40 pounds of coffee 160 pounds of coffee 1 pound of coffee (2) QID: 12249 3 less units of Good A 1 less unit of Good A 2 more units of Good B There are no opportunity costs associated with the increase in production of Good B. (3) QID: 12250 True False (4) QID: 12251 coffee = 90 + 40 (tea) coffee = 200 - 1 (tea) coffee = 160 + 3 -------------------------------------------------------------------------------- 4 (tea) coffee = 160 - 2 -------------------------------------------------------------------------------- 5 (tea) (5) QID: 12252 Bobby can vacuum two rooms in ten minutes or dust two rooms in twenty minutes. The opportunity cost of dusting one more room is vacuuming one room. vacuuming two rooms. that he will not give up vacuuming any rooms. none of the above. (6) QID: 12253 The production possibilities frontier is a straight line when the opportunity cost is zero. the opportunity cost is constant. the opportunity cost is increasing. the opportunity cost is decreasing. (7) QID: 12254 The most output that can be simultaneously produced is nine units of Good A and four units of Good B. The optimal combination is six units of Good A and three units of Good B. If the economy produces eight units of Good A, it can simultaneously produce only two units of Good B. If the production of Good B increases from zero units to two units, the production of Good A falls by three units. (8) QID: 12255 Bobby can vacuum two rooms in ten minutes or dust two rooms in twenty minutes. Using his unit labor requirement, Bobby's potential for vacuuming is twelve rooms per hour or dusting is four rooms per hour. six rooms per hour or dusting is six rooms per hour. twelve rooms per hour or dusting is six rooms per hour. ten rooms per hour or dusting is six rooms per hour. (9) QID: 12256 Bobby can vacuum two rooms in ten minutes or dust two rooms in twenty minutes. Bobby's schedule of possibilities indicates that he can dust two rooms and vacuum six rooms in one hour. he can dust four rooms and vacuum eight rooms in one hour. he can dust three rooms and vacuum six rooms in one hour. all of the above. (10) QID: 12257 Bobby can vacuum two rooms in ten minutes or dust two rooms in twenty minutes. Assuming that dusting is on the vertical axis, the slope of Bobby's production possibilities frontier is 2. - 4. 4. - 1/2. DBBBB BCCCD 1.5.1 (1) QID: 15913 If there is an agricultural economy in which land can be used either as pasture for cattle or as crop land for wheat, the opportunity cost of converting one acre from pasture to wheat production is the profits from the extra wheat production. the pounds of beef that are lost. the number of bushels of wheat produced on an acre. the total number of pounds of beef produced. (2) QID: 15915 For country A to have a comparative advantage in the production of agricultural products means that, relative to country B, with the same resources, country A is better at producing agricultural products than industrial products. country A is better at producing both agricultural products and industrial products. country A can produce fewer industrial products than country B. country A can produce more agricultural products than country B can produce. (3) QID: 16060 Suppose Canada produces only beer and oil. One unit of labor can produce, in a one hour period, either 100 barrels of beer or 10 barrels of oil. Examine the PPF for Canada. What is Canada's opportunity cost for one barrel of oil? 10 barrels of beer 100 barrels of beer 10 hours of labor 1/10 of a barrel of beer (4) QID: 16067 Suppose Canada produces only beer and oil. One unit of labor can produce, in a one hour period, either 100 barrels of beer or 10 barrels of oil. Examine the PPF for Canada. What is Canada's opportunity cost for one barrel of beer? 10 barrels of oil 1/10 of a barrel of oil 1 labor hour 100 barrels of beer BAAB 1.5.2 (1) QID: 15917 The economic term "specialization" refers to the behavior of trading partners when each partner produces goods, the resources for which are scarce. produces only those goods for which it has a comparative advantage produces only those goods for which it has an absolute advantage produces goods, the resources for which are abundant. (2) QID: 15919 The term "comparative disadvantage" means one party in a trade has a lower opportunity cost than its trading partner. has a higher opportunity cost than its trading partner. has an absolute advantage in the goods that it is trading. has no basis for trade with a trading partner. (3) QID: 15921 When each trading partner specializes in the production of a good for which it has a comparative advantage, each partner can gain from trade, but total production remains unchanged. True False (4) QID: 15922 In any trade between two trading partners and two goods, it is possible for one of the partners to have a comparative advantage in both goods. True False (5) QID: 15923 In a two-person, two-good trading model, the individual with a flatter production possibilities frontier has a comparative advantage in neither good. both goods. the good on the horizontal axis. the good on the vertical axis. (6) QID: 15925 Suppose a person can produce either two bushels of wheat per hour or six bushels of corn per hour. This person's opportunity cost of one bushel of corn is three bushels of wheat. one-third of a bushel of wheat. two bushels of wheat. six bushels of wheat. (7) QID: 15926 Suppose a person can produce either two bushels of wheat per hour or six bushels of corn per hour. This person's opportunity cost of one bushel of wheat is three bushels of corn. one-third of a bushel of corn. two bushels of corn. six bushels of corn. (8) QID: 15927 When two people divide their labor according to their comparative advantages, one person will have to work harder than the other person does to complete a given task. more work can be completed in a given period of time. less work can be completed in a given period of time. the same amount of work can be completed as when they divide the labor by absolute advantage. (9) QID: 15928 Two producers can gain from trade if the trade is based on absolute advantage. comparative advantage. the relative resource endowments the two partners have. the relative size of each partner's total output. (10) QID: 15930 When a country is a closed economy, that is, it does not engage in trade with other countries, one should assume that its production possibilities are the same as its consumption possibilities. are set by its ability to find a trading partner. are not limited by its own production. are greater than its consumption possibilities. BBBBC BABBA 1.5.3 (1) QID: 12267 A country that has an absolute advantage in a good should restrict imports of that good. can produce the good at a lower opportunity cost than its trading partner. should specialize in the production of that good. can produce the good using fewer resources than its trading partner. (2) QID: 12268 Russia can produce a bushel of corn with four workers and a bushel of rice with three workers. China can produce a bushel of corn with three workers and a bushel of rice with two workers. Which country has a comparative advantage in the production of corn and which has a comparative advantage in rice? Russia has a comparative advantage in the production of corn, and China has a comparative advantage for the production of rice. Russia has a comparative advantage in the production of rice, and China has a comparative advantage for the production of corn. Russia has a comparative advantage in the production of rice. Neither country has a comparative advantage for corn. China has a comparative advantage in the production of rice. Neither country has a comparative advantage for corn. (3) QID: 12274 Russia can produce a bushel of corn with four workers and a bushel of rice with three workers. China can produce a bushel of corn with three workers and a bushel of rice with two workers. Which country has an absolute advantage for either good? Russia has an absolute advantage for both goods. China has an absolute advantage for rice. China has an absolute advantage for both goods. Russia has an absolute advantage for corn. (4) QID: 12271 If trade benefits one country, it will make the other country worse off. True False (5) QID: 12272 Russia can produce a bushel of corn with four workers and a bushel of rice with three workers. China can produce a bushel of corn with three workers and a bushel of rice with two workers. The opportunity cost for Russia to produce one bushel of corn is one bushel of rice. two bushels of rice. one and one-third bushels of rice. four bushels of rice. (6) QID: 12273 Russia can produce a bushel of corn with four workers and a bushel of rice with three workers. China can produce a bushel of corn with three workers and a bushel of rice with two workers. The opportunity cost for China to produce one bushel of corn is one bushel of rice. one and a half bushels of rice. two bushels of rice. three bushels of corn. (7) QID: 12269 Russia can produce a bushel of corn with four workers and a bushel of rice with three workers. China can produce a bushel of corn with three workers and a bushel of rice with two workers. How would these countries specialize? China would produce corn, and Russia would produce rice. China would produce rice, and Russia would produce corn. China would produce all the rice and all the corn because it has an absolute advantage. None of the above DACBC BB ------------------------------------------------- 2.1.1 (1) QID: 6012 For most goods, if a consumer's income increases, his/her demand for the goods will decrease. increase. remain unchanged. none of the above. (2) QID: 6013 If you expect to get a large salary increase next month, your demand for most goods will decrease. increase. remain the same. none of the above. (3) QID: 6014 Besides the price of substitutes and complements, other determinants of demand are the price of inputs and natural resources. technology and the number of sellers. the price of the product, income, and consumers' tastes. A and C. (4) QID: 6015 To economists, the Latin phrase ceteris paribus means "all other things equal." True False (5) QID: 6017 Demand is defined by the behavior of producers. the behavior of consumers or households. the behavior of producers and consumers or households. none of the above. (6) QID: 6018 When the price of a substitute for good X rises, the demand for good X increases. decreases. stays constant. will increase at first but decreases over time. (7) QID: 6019 When the price of a complement for good X rises, the demand for good X increases. decreases. stays constant. will decrease at first but increases over time. (8) QID: 6021 If a type of clothing suddenly becomes fashionable, there will be a movement down this goods demand curve. movement up this goods demand curve. shift outward in the goods demand curve. shift inward of the good's demand curve. (9) QID: 6022 Which of the following is not a determinant of an individuals demand for a good? Income The price of substitutes and complements The price of the good The number of buyers (10) QID: 6023 The law of demand states, all other things being equal, that goods will be supplied to just equal consumer demand. that consumer demand will determine the level of firm supply. that consumers will buy more of a good if the price rises. that consumers will buy more of a good if the price falls. (11) QID: 6024 An increase in the price of Fords will have what likely effect in the market for Chevrolets? It will have no effect. The demand for Chevrolets will decrease. The demand for Chevrolets will increase. The supply of Chevrolets will increase. (12) QID: 6016 A demand function is a mathematical formula that specifies the relationship between the demand for a good or service and the variables that influence that demand. True False BBCAB ABCDD CA 2.1.2 (1) QID: 12284 A demand schedule shows the relationship between demand and supply. the relationship between the price of a good and the quantity demanded of the good. the amount of a good purchased at different points in time. the change in demand when a consumer's income changes. (2) QID: 12285 When the price of a good rises, consumers will stop buying the more expensive goods and switch to substitutes. This behavior is explained by the income effect. the substitution effect. both the income and substitution effects. none of the above. (3) QID: 12286 The income effect says that when the price of a good increases, consumers buy less of the good because their purchasing power is shrinking in terms of that particular good. True False (4) QID: 12287 Assuming that hamburgers and mustard are complements, a decrease in the price of hamburgers would increase the demand for mustard. True False (5) QID: 12288 The demand curve shows the relationship between the price of a good and the quantity that the consumer is willing and able to purchase in a given period of time, holding all other factors that influence consumer behavior constant. shows the relationship between the price of a good and the quantity that the producer is willing and able to supply in a given period of time, holding all other factors that influence producer behavior constant. shows the relationship between the price of a good and the quantity that the consumer is willing and able to purchase in a given period of time, without holding all other factors that influence consumer behavior constant. none of the above. (6) QID: 12289 A change in price of a particular good indicates all of the following except a change on the demand curve. a change in the quantity demanded. a shift in the demand curve. demand has moved to a new point on the demand curve. (7) QID: 12290 The demand curve is downward-sloping because as the price of the good rises, the quantity demanded falls. the law of demand states that as price increases, consumers are willing and able to purchase less. none of the above. A and B. (8) QID: 13766 On a demand curve, a consumers income and the goods price are held constant. only the price is held constant. all determinants are held constant. all nonprice determinants are held constant. (9) QID: 13768 The law of demand states, all other things equal, that goods will be supplied to just equal consumer demand. that consumers demand will determine the level of firm supply. that consumers will buy more of a good if price rises. that consumers will buy more of a good if price falls. BBAAA CDDD 2.1.3 (1) QID: 12291 If a household's income decreases, the demand for normal goods will decrease, and the demand curve will shift outward. the demand for normal goods will decrease, and the demand curve will shift inward. the supply of normal goods will decrease, and the supply curve will shift inward. the supply of normal goods will decrease, and the supply curve will shift outward. (2) QID: 12293 If the price of bread falls from $3 per loaf to $1.50 per loaf, the demand curve for bread will shift inward. the demand curve for bread will shift outward. the demand curve's slope changes. households will demand a different quantity of bread. (3) QID: 12294 A decrease in income will cause the demand curve for a particular good to shift outward. shift inward. remain constant. none of the above. (4) QID: 12295 A movement along the demand curve for a particular good is a response to the change in price of a particular good. True False (5) QID: 12296 A shift in the demand curve is caused by a change in one of the variables that affects the demand curve and is called a change in the quantity demanded. True False (6) QID: 12297 Households will buy more of a normal good at every price when the household income increases. the household income decreases. the household income stays the same. none of the above. (7) QID: 12298 A decrease in income will cause the quantity demanded for a normal good to increase and the demand curve to shift outward. the quantity demanded for a normal good to decrease and the demand curve to shift inward. an increase in the demand for a normal good at every price. a decrease in the demand for a normal good at every price. (8) QID: 13774 Which of the following would be a determinant of quantity demanded? The price of the good The price of related goods Income Expectations about the future price of the product (9) QID: 13775 What will happen to the current market for bread if there is a severe drought in wheat-producing states? The demand for bread will increase. The demand for bread will not be affected. The supply of bread will increase. The demand for bread will decrease. (10) QID: 13776 Which of the following would not change the demand for a good? A change in income A change in the price of an input good A change in the expected future price of the good A change in the number of sellers BDBAB ADAAD 2.1.4 (1) QID: 12299 Inferior goods are those that most consumers would prefer not to consume but often do because of low income. True False (2) QID: 12300 If you expect the price of ice cream to increase next week, your demand curve for ice cream will shift inward. You will buy next week. shift inward. You decide not to buy ice cream for a long time. shift outward. You will buy at the lower price today. not shift at all. (3) QID: 12301 Factors that shift the demand curve are changes in income. changes in the price of substitutes and complements. changes in the expected future prices. all of the above. (4) QID: 12302 In the demand and supply model, when the price of a good increases, income usually increases. the model shows the change by shifting the demand curve. there is movement along the demand curve but it does not shift. all other determinants of demand can also change. (5) QID: 12304 What happens to the demand curve for hot dogs when the price of hot dog buns decreases? The demand curve for hot dogs will shift outward. The demand curve for hot dogs will shift inward. The demand curve for hot dogs will not shift. The change will occur on the existing demand curve. (6) QID: 12305 When the price of bagels decreases, the demand for English muffins increases. decreases. shifts to a new point of the existing demand curve. none of the above. (7) QID: 12306 When income decreases, the demand for inferior goods decreases. increases. remains constant. none of the above. (8) QID: 13777 An increase in the price of Fords will have what likely effect in the market for Chevrolets? It will have no effect. The demand for Chevrolets will decrease. The demand for Chevrolets will increase. The supply of Chevrolets will increase. (9) QID: 13779 If the demand for steak falls when a consumers income rises, then there is evidence that steak is a normal good. True False (10) QID: 13780 Which of the following items go together? Change in quantity demanded and movement along a demand curve Change in income and movement along a demand curve Change in price and shift of the demand curve Change in quantity demanded and shift in the demand curve ACDCA BBCBA 2.1.5 (1) QID: 12307 To derive a market demand curve, add the quantity demanded by each individual in the market at each price and construct a new demand schedule. True False (2) QID: 12308 Suppose the market for automobiles is a national market. If personal income nationwide increases, the market demand for automobiles is likely to decrease. to increase. to remain constant. to be unrelated to national income. (3) QID: 12309 In order to find the market quantity demanded, subtract each individual's quantity demanded from the total market quantity demanded. add the quantity demanded of the individuals within the market and take the average. add the individual quantities demanded represented in the market. none of the above. (4) QID: 12310 If Sue demands six packs of gum at seventy-five cents each and John demands four packs of gum at seventy-five cents, the market quantity demanded at that price is two. five. three. ten. (5) QID: 12311 Factors that shift the market demand curves are the same as for the individual demand curves. different than the factors for individual demand curves. not relevant in the individual demand. not capable of shifting the market demand curve enough to make a difference. (6) QID: 13783 When an economist analyzes market demand in a particular market, the economist is referring to a particular amount demanded at that point in time. one point on the market demand curve. one entry in a demand schedule. the entire demand curve. (7) QID: 13786 The determinants of market demand include all determinants of individual demand plus the number of buyers in the market. True False (8) QID: 13787 If the population of a market area increases, demand in the market will decrease. supply in the market will increase demand in the market will increase. supply in the market will decrease. (9) QID: 15860 If businesses rapidly expand during a period of time, they would likely want to hire more workers. This increase in demand is shown by a movement down the demand curve. a movement up the demand curve. shifting the demand curve to the right. shifting the demand curve to the left. ABCDA DACC 2.2.1 (1) QID: 12321 Suppose a baker invents a new oven that reduces baking time by one-half. The baker would then produce the same quantity of bread but close the bakery half the time. increase bread production. decrease bread production. produce the same amount of bread using the previous technology. (2) QID: 12322 If sellers expect prices to rise in the future, prices today will rise because sellers might reduce current supply and wait for higher prices. True False (3) QID: 12323 The supply of coal is fixed because there is only a finite amount in the ground that can be mined. True False (4) QID: 12324 All of the following factors influence how much of a product is supplied to a market except the industry's technology. the price of the product. consumers' income. the price of inputs used to manufacture the product. (5) QID: 12327 A supply function is a mathematical representation of the quantity of a good that a firm is willing to supply the market, profitably, as a function of all the variables that influence the firm's decision. True False (6) QID: 12328 If a producer of bread thinks that the price of bread will fall next week, the producer will stop making bread this week. hold some of this week's bread for next week when consumers will want more. sell all the bread this week if possible. be unaffected by the price next week. (7) QID: 12329 The determinants of supply are factors that will only shift the supply curve. factors that will only change the quantity demanded. the same as the determinants of demand. factors that influence the quantity of a product that producers choose to put on the market. (8) QID: 12330 Profit is the difference between marginal costs and total revenue. the difference between the revenue earned and the cost of providing a service. the total amount of revenue a firm earns from selling its product. the total revenue earned plus income from investments. (9) QID: 12331 If the price of inputs for making pizza increases, there will be less pizza supplied because the costs are increasing. there will be more pizza supplied because the costs are increasing. there will be more pizza supplied because the costs are decreasing. there will be less pizza supplied because the costs are decreasing. (10) QID: 13788 The relationship between price and quantity supplied is positive. negative. the same as the relationship between price and quantity demanded. nonexistent. There is no relationship between these two variables. (11) QID: 13791 If a jeweler sees a fall in the price of gold, we would expect the jeweler to be willing and able to produce more jewelry at each possible price. the jeweler to be willing and able to produce less jewelry at each possible price. the demand for jewelry to increase. the demand for jewelry to fall. BABCA CDBAA A 2.2.2 (1) QID: 12332 A supply schedule is a mathematical representation of the quantity of a good that a supplier will put on the market. a table showing the amount of a good consumers are willing to buy at various prices. a graph showing the relationship between the price of a good and the quantity supplied. a table showing the relationship between the price of a good and the quantity supplied. (2) QID: 12333 In analyzing a supply function and then drawing a supply curve from it, you hold the price of a good constant but change the values of the other variables. True False (3) QID: 12334 In a market for a product, why is the price of the product higher at higher output levels? Because production costs are higher at higher levels of output Because producers' opportunity costs are higher at higher output levels Because consumers are willing to pay more at higher output levels Because producers want more money and realize that consumers are willing to pay for it (4) QID: 12335 The supply curve is a collection of points representing the quantity of a particular good that a producer is willing and able to offer for sale in a given period of time as a function of the price of the particular good. True False (5) QID: 12336 The upward-sloping supply curve is representative of the law of supply. shows that as the price of a good or service increases, the quantity offered for sale generally increases. illustrates increasing opportunity costs. all of the above. (6) QID: 12338 The opportunity cost of supplying more of a particular good falls as the quantity supplied increases. rises as the quantity supplied increases. stays the same as quantity supplied increases. is irrelevant to suppliers because they are interested in profits. (7) QID: 12954 Suppose a soybean farmer expects a lower price for soybeans at harvest time than the market price at the time of planting. This farmer is likely to plant fewer acres in soybeans. ignore the future price of soybeans. ignore the prices and plant the same soybeans as the previous year. plant more acres in soybeans. (8) QID: 12956 Suppose a soybean farmer expects a higher price for soybeans at harvest time than the market price at the time of planting. This farmer is likely to plant fewer acres of soybeans. plant the same number of acres in soybeans as the previous year. plant more acres in soybeans to take advantage of the expected higher price. get out of farming. (9) QID: 12996 The reason that producers supply more to a market at higher prices is that as the price increases, the producers' opportunity cost of not producing that good falls. as the price increases, the producers' opportunity cost of not producing that good increases. as the price increases, consumers demand a larger quantity, so producers must supply more. as the price increases, producers' costs decrease, so they produce more at the same cost. (10) QID: 13239 According to the graph if the price of bread is $1.50 per loaf, the producer will supply ________ loaves of bread. nine six two four (11) QID: 13263 According to the supply curve, if the price of bread is $3.00 per loaf, the producer will supply __________ loaves of bread. seven fourteen zero two (12) QID: 13792 The law of supply states that, when the price of a good rises, the quantity supplied of the good falls. True False DBBAD BACBD AB 2.2.3 (1) QID: 12339 Changes in the input prices or technology are represented by a movement along the supply curve and are called changes in quantity supplied. True False (2) QID: 12340 A supply curve is a collection of points on a graph illustrating the relationship between the quantity supplied for a particular product and the quantity demanded. the product's price. the price of the product's inputs. the firm's expectations about future prices. (3) QID: 12341 If the price for a main input for a particular product increases and all other factors are constant, the quantity supplied decreases. there will be a change in demand for the product. the supply curve will shift inward. there will be no change in other variables. (4) QID: 12342 An increase in the market price of a product, all other things equal, results in a change of position along the existing supply curve, decreasing the quantity supplied. a change of position along the existing supply curve, increasing the quantity supplied. a shift of the supply curve inward. a shift of the supply curve outward. (5) QID: 12343 In the hamburger restaurant business, an increase in the price for ground beef represents a change in the market price for hamburgers. a change in the price of inputs. a change in technology. a change in future expectations. (6) QID: 12344 In a hamburger restaurant, an increase in the price of ground beef causes a movement along the existing supply curve, decreasing the quantity supplied. a movement along the existing supply curve, increasing the quantity supplied. an inward shift of the supply curve. an outward shift of the supply curve. (7) QID: 12345 If the market price of hamburgers increases, the supply curve shifts outward. True False (8) QID: 13793 Along a given supply curve for any product, supply increases as price increases. supply increases as technology improves. quantity supplied increases as price increases. quantity supplied increases as input prices fall. (9) QID: 13794 As the price of apples increases, apple growers will decrease the supply of apples. increase the supply of apples. switch to less expensive methods of growing apples. increase the quantity of apples supplied. (10) QID: 15865 Suppose that New York does not recognize the physician licensing laws from other states. This non-recognition shifts New York's demand for medical services to the left. demand for medical services to the right. supply of medical services to the left. supply of medical services to the right. BBCBB CBCDC 2.2.4 (1) QID: 12346 A change in supply is the same as a change in quantity supplied. True False (2) QID: 12347 Factors other than the price of a particular product will shift the supply curve. True False (3) QID: 12349 If the pretzel baker expects that pretzel prices will fall at the end of the month, his firm will save its supply for selling at a future date. increase its supply at the current price. ignore the information and continue as before. wait to supply any pretzels until the market is more stable. (4) QID: 12350 If the cost of flour increases, what will be the effect on a baking firm's supply curve for bread? The supply curve will shift inward due to the change in input prices. The supply curve will shift inward due to the change in future expectations. The supply curve will shift outward due to the change in input prices. The supply curve will shift inward due to the change in technology. (5) QID: 12351 If the cost of flour decreases, the result(s) for a bread baking firm will be a decrease in the cost of production. an increase in the supply of bread. a shift outward in the supply curve for bread. all of the above. (6) QID: 12352 If a bread-baking firm improves its technology by using a new machine that speeds the baking process, the technological improvement will increase the cost of production. shift the supply curve shift inward. increase the supply of bread. increase demand. (7) QID: 12353 A pretzel firm experiences a loss when several of its employees are hurt in an accident and are permanently disabled and can no longer work. This loss means that the cost of production becomes higher and supply falls. the cost of production falls. supply increases. supply remains constant because the firm replaces the employees. (8) QID: 12354 If a pretzel firm expects the price of pretzels to rise next week, it will sell more pretzels this week. sell fewer pretzels this week and save the supply for the price increase. sell no pretzels next week. do nothing. (9) QID: 13796 A decrease in the supply of Ford and Chevrolet cars might be caused by an increase in the price of Japanese cars. an increase in wages of U.S. car workers. an increase in demand for cars. a fall in the price of steel. BABAD CABB 2.2.5 (1) QID: 12355 Assume that all employees in an industry receive a raise based on a new labor contract. How will this raise affect the product market for the product these employees manufacture? Market demand will increase. Output will rise. Market supply will increase. Market supply will decrease. (2) QID: 12356 A technological improvement in agriculture makes it possible to grow three times as much wheat per acre as had been possible in the past. The most likely result will be that farmers would switch from wheat to corn production and use the extra land for wheat. an increase in the demand for wheat because of the decreasing price of wheat. a decrease in the supply of wheat due to the expensive new technology. an increase in the supply of wheat because of the reduced cost of production. (3) QID: 12360 Which of the following will cause an outward shift of the market supply curve? A rise in the price of inputs A change in the price of the good Improvements in technology A decrease in technology (4) QID: 12361 Which of the following would cause a decrease in the market supply for ice cream? An increase in the price of ice cream A decrease in the quantity demanded of ice cream An increase in the price of milk An expectation that the price of ice cream will be lower next week (5) QID: 12362 If technological advances are made in an industry, the market supply curve will shift inward. True False (6) QID: 12363 The total quantities of a product that all sellers, collectively, are willing and able to offer at alternative prices is the demand curve for a firm. the market demand curve. the market supply curve. the supply curve for a firm. (7) QID: 12364 Which of the following would not cause a shift in the market supply for pizza? A change in the price of pepperoni A change in the price of pizza A technological change made on the ovens used to bake pizzas A change in the price of pizza expected to be sold next week (8) QID: 12365 What will cause an increase in the market supply? An increase in the number of producers An increase in the number of consumers A decrease in the number of producers An increase in consumers' income (9) QID: 13801 The market supply curve for wheat depends on each of the following except the price of wheat-producing land. the price of wheat-producing technology. the tastes and preferences of wheat consumers. the number of wheat farmers. (10) QID: 13802 The market supply of a good or service is the sum of all individual supply curves for the good or service. is determined by all the determinants of individual supply and by the number of sellers. reflects a direct relationship between price and quantity supplied. all of the above. DDCCB CBACD 2.3.1 (1) QID: 12369 When excess supply exists in any economic market, the market price will rise until the excess supply is eliminated. True False (2) QID: 12372 When there is excess demand for sugar in the market, the bidding mechanism will push down the price of sugar. result in no change in the reservation prices of consumers. have no effect on the price of sugar. push up the price of sugar. (3) QID: 12374 When the quantity demanded for a particular good exceeds the quantity supplied for that good, the quantity demanded will increase as the price increases. the quantity demanded will decrease as the price increases. the quantity demanded will decrease as the price decreases. the quantity demanded will remain constant. (4) QID: 12375 When there is excess supply in the corn market, the bidding mechanism pushes down the price of corn. All of the following will occur except additional buyers will enter the market. some of the sellers will be pushed out of the market. fewer buyers will enter the market. the supply will be reduced. (5) QID: 12376 The competitive equilibrium point occurs when there is no tendency to change. there is no excess demand. there is no excess supply. all of the above. (6) QID: 13808 Suppose there is a surplus in the bread market. You could predict that price will increase, quantity demanded will fall, and quantity supplied will rise. price will increase, quantity demanded will rise, and quantity supplied will fall. price will decrease, quantity demanded will rise, and quantity supplied will fall. price will decrease, quantity demanded will fall, and quantity supplied will rise. BDBCD C 2.3.2 (1) QID: 12377 The first step in a three-step process for analyzing the market change is to determine how the change will affect the demand curve. True False (2) QID: 12378 Comparative statics is the study of the movement from one equilibrium to another. the change in competitve equilibrium when when one of the supply or demand determinants changes. the adjustment mechanism following a change in some factor affecting demand or supply. all of the above. (3) QID: 12379 Suppose chocolate bars and jelly beans are substitutes for each other. If the price of jelly beans increases, then the new competitive equilibrium for chocolate bars occurs where the original supply curve intercepts a new demand curve. the original demand curve intercepts a new supply curve. the original supply curve intercepts the original demand curve. none of the above. (4) QID: 12380 An increase in the demand for chocolate bars results in a price decrease and a quantity increase. a price increase and a quantity increase. a price decrease and a quantity decrease. a price increase and a quantity decrease. (5) QID: 12382 Assume that jelly beans and candy bars are substitute goods. If the price of jelly beans increases, the demand curve for jelly beans will shift inward. True False (6) QID: 12383 Which of the following is not a step in analyzing how a change in the market affects the supply and demand for a good? Identifying which side of the market is affected Identifying how the change will affect the curve Assuming that both curves will shift Identifying what happens to the equilibrium price and quantity (7) QID: 12385 Excess demand for chocolate bars will cause all of the following except an increase in the price of chocolate bars. some buyers to leave the market. new sellers to enter the market. the bidding mechanism to remain constant. (8) QID: 13810 When there is excess demand in a market, there is upward pressure on the price. there is downward pressure on the price. the market is in equilibrium. there are too many sellers. (9) QID: 13814 When there is excess supply in a market, there is upward pressure on the price. there is downward pressure on the price. the market is in equilibrium. there are too many buyers. BDABB CDAB 2.3.3 (1) QID: 12386 Which of the following events would not cause an outward shift of the demand curve? The price of tea, a coffee substitute, increases. A price war among producers that results in coffee selling for $1 per pound. A new FDA study shows that coffee cures colds. The price of sugar, a complement, decreases. (2) QID: 12387 A drought that destroys half of the corn crops in the Midwest would cause the equilibrium price and quantity of corn to be higher. the equilbrium price of corn to be higher and the equilibrium quantity to be lower. no change in equilibrium because demand and supply will shift equally. a lower equilibrium price and a lower quantity demanded. (3) QID: 12388 The discovery of mad cow disease in the country's cattle herds would likely decrease the demand for beef and increase the demand for chicken. decrease quantity demanded for both beef and chicken. decrease the quantity demanded for beef and increase the demand for chicken. decrease demand for beef and increase quantity demanded for chicken. (4) QID: 12389 If beer and pizza are complements, a decrease in the price of pizza would increase the demand for beer. True False (5) QID: 12390 If cheese is a main ingredient of pizza, what happens to the price of pizza when the price of cheese increases? Pizza prices rise. Pizza prices fall. There is no change in pizza prices. None of the above will occur. (6) QID: 12391 Which of the following would cause a decrease in supply? Improved technology Lower labor productivity Decreased price of substitutes Decreased demand (7) QID: 12393 If equilibrium price and quantity both rise, the cause is an increase in demand and a decrease in supply. an increase in demand without a change in supply. a decrease in both supply and demand. a decrease in demand and an increase in supply. (8) QID: 12394 An increase in the income of a consumer will cause his/her demand for a normal good to increase. How will an increase in income affect the equilibrium price and quantity? Both quantity and price increase. Quantity increases but price decreases. Quantity decreases but price increases. Both quantity and price decrease. (9) QID: 12395 Peanut butter and jelly are used together to make sandwiches. If the price of peanut butter increases, what changes will occur in the market for jelly? The supply curve for jelly shifts inward. The demand curve for jelly shifts outward. The demand curve for jelly shifts inward. The supply curve for jelly shifts outward. (10) QID: 12396 If a product's supply curve shifts outward, the new equilibrium quantity will be __________, and the new equilibrium price will be __________. lower; higher higher; lower higher; higher lower; lower (11) QID: 13818 Assume that in a competitve market, price is initially below the equilibrium level. What economic predictions can we make? Price will decrease, quantity demanded will decrease, and quantity supplied will increase. Price will decrease and both quantity demanded and quantity supplied will decrease. Price will decrease, quantity demanded will increase, and quantity supplied will decrease. Price will increase, quantity demanded will decrease, and quantity supplied will increase. (12) QID: 13821 For most goods or services, quantity demanded increases if supply increases. True False (13) QID: 13918 Suppose that in the market for an agricultural commodity such as corn, there is a large increase in the quantity traded. However, the price remains almost the same. The most likely explanation for this phenomenon is that supply has increased but demand has remained constant. supply has decreased but demand has increased. both supply and demand have increased. supply has increased and demand has decreased. BBAAA BBACB DAC 2.4.1 (1) QID: 12530 A price ceiling below the equilibrium price will cause excess supply. excess demand. a surplus. no change in the market. (2) QID: 12531 Shortages result from price controls above equilibrium. price controls below equilibrium. unlimited wants and limited resources. quantity supplied greater than quantity demanded. (3) QID: 12533 Economists may favor price controls if the controls improve equity. True False (4) QID: 12534 The economic value destroyed by a price control is called positive economic value. deadweight loss. economic value. tax revenue. (5) QID: 12535 A price floor that is less than the equilibrium price causes excess supply. excess demand. non-price competition. no change in the market. (6) QID: 12536 Price controls benefit markets because they help those with low incomes. True False (7) QID: 12537 Suppose the equilibrium price for an apartment in a market is $1,500 a month. The government controls the price by imposing a price ceiling of $750. However, the consumer may still pay $1,500 because tenants may agree to pay an extra $750 "off the books." the landlord may charge the tenant $750 for a key and central air and heat each month. both A and B. neither A nor B. (8) QID: 12538 When consumers and producers follow price controls, their costs can sometimes be as much as the original equilibrium price, if not more, because consumers are forced to pay for their rent-seeking activities and other practices of non-price competition. producers are forced to pay for their rent-seeking activities and other practices of non-price competition. consumers and producers may agree to pay the fines associated with violating the price ceiling. all of the above. (9) QID: 13607 Which of the market outcomes is likely to result from price controls on rental housing? A surplus of housing A decrease in the number of building permits for new rental property A decrease in the quantity of apartments demanded Higher-than-equilibrium rents paid by those who get the rent-controlled apartments (10) QID: 13646 In rental markets where price controls are in place, the law often says that the rent cannot increase as long as the lease is in effect. In these markets, tenants often sublet their apartments for more than the rent they pay. This practice is an example of a black market. overcrowding existing apartment space. a lassez-faire transaction. rent-seeking behavior. (11) QID: 13688 In a free market, what processes would eliminate the excess demand in a rental housing market? Rent-seeking activities The market bidding mechanism Government regulations The black market BBBBD BCDBA B 2.4.2 (1) QID: 12835 The institution of a minimum wage creates a surplus of jobs. a surplus of labor. a shortage of labor. a decrease in deadweight loss. (2) QID: 12837 The income effect of an increase in wages will cause an employee to perform fewer non-market activities, like mowing their own lawn. spend more hours working. spend fewer hours in leisure. spend more hours in leisure. (3) QID: 12838 The substitution effect of an increase in wages may cause a person to buy cheaper goods instead of more expensive goods. buy more leisure time. buy more expensive goods instead of cheaper goods. buy less leisure time. (4) QID: 13371 According to the graph, the market wage rate for this labor market is $6 per hour. $5 per hour. $3 per hour. indeterminate. (5) QID: 13383 According to the graph, if the government imposes a minimum wage of $6 per hour in this labor market, there will be an excess demand of 2,000 units of labor. an excess supply of 2,000 units of labor. no effect on the labor market. equilibrium in this market. (6) QID: 13395 According to the graph, if the government imposes a minimunm wage of $4 per hour in this labor market, there will be excess supply of 2,000 units of labor. excess demand of 2,000 units of labor. no effect on this labor market. an indeterminate effect. (7) QID: 13409 One method that employers could use to pass the costs of a government-imposed minimum wage to their employees would be to reduce employee vacations. make employees pay for their own medical insurance. stop the employer contributions to the employees' retirement systems. all of the above. (8) QID: 13562 Which of the following is not a result of minimum wage laws? An increase in the number of unskilled laborers in the job market An increase in production An increase in teenage unemployment An increase in school dropout rates (9) QID: 13575 Minimum-wage laws specify the highest wage that employers may pay workers. True False (10) QID: 13577 Generally, those people who advocate minimum-wage laws believe there are no negative effects of minimum-wage laws. there are some negative effects of the laws but the benefits outweigh the costs. minimum-wage laws will solve a maldistribution of income. that the market system should be replaced with a planned economy. (11) QID: 13597 The legislative intent of minimum-wage laws is to ensure a middle-class standard of living for all workers. employment for all who want it. unemployment insurance. a minimally adequate standard of living. BDDBB CDBBB D 2.4.3 (1) QID: 12475 In the absence of a tax wedge, the consumer surplus would be smaller. the producer surplus would not change. the consumer surplus and producer surplus would be smaller. the consumer surplus and producer surplus would be larger. (2) QID: 12476 If an excise tax is imposed on a producer, the producer raises the price, and the demand curve shifts inward. the supply curve shifts inward, and a smaller quantity is demanded at the higher price. the seller will try to get the consumer to pay the entire tax. the supply curve shifts outward reflecting the producer's ability to impose the tax on buyers. (3) QID: 12477 If the government imposes a $2 tax on the sellers of a product, the supply curve shifts inward parallel to itself and intersects the demand curve at a lower price and higher quantity. True False (4) QID: 12481 The tax wedge can be identified as the difference between the consumer's demand price and the seller's price. the difference between the equilibrium price and the costs of producer inputs. the difference between total surplus and consumer surplus. graphically the area beneath the demand curve and above the equilibrium price. (5) QID: 12484 If an excise tax is imposed on consumers, the market demand curve will shift inward. True False (6) QID: 12479 A tax-distorted demand curve tells us what the buyer is willing to pay the government. the reservation price for the consumer. the opportunity cost of the seller. the prices that the consumer is willing to pay to the producer. DBBAA D 3.1.1 (1) QID: 13105 If a country is operating at a point inside its production possibilities frontier, it has unemployed resources. must decrease production of one good to increase production of the other. cannot experience economic growth. has full employment. (2) QID: 13106 Points on the PPF are the only efficient production points. True False (3) QID: 13109 An economy is efficient if it cannot produce more of one good without giving up some of another. it can produce more of one good without giving up some of the other. it can produce more of all its goods. it cannot increase its profits by producing more. (4) QID: 14002 All of the following events would affect the position of a country's production possibilities frontier except immigration laws. investment in new capital stock. discovery of new sources of energy. the level of unemployment. (5) QID: 15483 Which point on the graph is not attainable? A D C All points are attainable. (6) QID: 15484 When increasing opportunity costs exist, resources are not perfectly substitutable for each other. True False (7) QID: 15486 Which point on the graph does not represent an efficient combination of production of goods A and B? A B C Any point inside the PPF. (8) QID: 15488 The production possibilities frontier (PPF) represents a collection of points indicating a minimum amount of one good produced for a given quantity of another good produced. all the possibilities of an economy, including ones that are not attainable. a collection of points indicating a maximum amount of one good produced for a given quantity of another good produced. an inefficient use of resources. (9) QID: 15489 The idea of opportunity costs indicates that if the production of one good is increased, the production of another good must decrease. you can produce whatever you have the opportunity to. you can produce anything if you can cover your costs. all of the above. (10) QID: 15490 Any combination of two goods lying outside the production possibilities frontier represents the most efficient use of resources. requires fewer resources than are presently available. represents an unattainable combination of goods. represents an inefficient combination of goods. (11) QID: 15491 Economics is defined by the study of scarcity in situations of rational choice. the study of rational choice in situations of scarcity. the study of supply and demand. none of the above. (12) QID: 15492 Scarcity is described as limited quantities of resources that are used to satisfy unlimited wants. True False (13) QID: 15493 Efficiency means that you do the best with what you have. you produce large quantities of goods using limited quantities of resources. natural resources are conserved. none of the above. (14) QID: 15494 Referring to the graph, if this economy moves from point A to point B, it must give up food to get more military equipment. it must give up military equipment to get more food. it has to give up both military equipment and food. it gains both military equipment and food. (15) QID: 15495 In this production possibilities frontier, if the consumer moves from A to B, the consumer is choosing more leisure and less income. the consumer is choosing more income and less leisure. the consumer is choosing more of both leisure and income. the consumer is choosing less of both leisure and income. (16) QID: 15497 According to the production possibilities frontier curve shown below, points A, B, and C represent feasible outcomes for this society. True False (17) QID: 15498 According to the graph, the society has to give up _______ pounds of food to build one car. 10 100 1/10th 1000 (18) QID: 15499 According to the graph, the society has to give up _______ cars to produce another pound of food. 1/10 100 10 1000 (19) QID: 15500 Points on the production possibilities frontier are the only efficient production points. True False AAADC ADCAC BAABA BCCA 3.1.2 (1) QID: 13111 In a circular flow diagram, households and firms interact in financial markets. in only the market for goods and services. in both the market for goods and services and the market for factors of production. in only the market for factors of production. (2) QID: 13113 In a circular flow diagram, the two loops are the flow of goods loop and the flow of services loop. the flow of goods, services, and factors loop and the flow of dollars loop. the flow of dollars loop and the flow of factors loop. the flow of income loops. (3) QID: 13114 The circular flow model is a simple model that explains how the economy is organized. a geographic model that shows economic development in a region. a model that shows the flow of money in major financial institutions. an engineering model that shows water flow in storm water sewers. (4) QID: 13116 Factors of production are the relationship between inputs and outputs. the political considerations that affect economic output. the inputs in the production process. the weather as it affects the production process. (5) QID: 13117 The two markets found in the simple circular flow model are money market and stock market. goods and services (product) market and factors of production (resource) market. real market and nominal market. labor market and product market. (6) QID: 13120 In a circular flow model, firms supply both products and resources. demand both products and resources. demand products and supply resources. supply products and demand resources. (7) QID: 13122 In the circular flow model, equilibrium occurs when all the spending of households equals the spending of firms. all the spending of households and firms equals the income received by the factors and goods and services markets. the demand in the factors market equals the demand in the resource market. the demand of households equals the demand of firms. (8) QID: 13124 In the circular flow model, households supply both products and resources. demand both products and resources. demand products and supply resources. supply products and demand resources. (9) QID: 13125 Foreign trade allows exports to flow into the circular flow. allows money and resources to leak out of the circular flow. is a component of the factors market. is not a component of the circular flow model. CBACB DBCB 3.1.3 (1) QID: 13127 The national income accountants place a value on owner-occupied housing by estimating the rental value of the houses. using the monthly mortgage payment. using the total price of the house for the year in which it was sold. eliminating all owner-occupied houses from GDP calculation. (2) QID: 13129 Gross domestic product is the sum of all employees' compensation, corporate profits, and interest income. personal consumption expenditures and gross private domestic investment. the market value of all final goods and services produced within a country in one year. the market value of all final goods and services produced by a country's citizens within one year. (3) QID: 13131 GDP accounting includes the production represented by all illegal drug trade. the value that citizens place on leisure. the value of anti-pollution equipment sold in a year. the goods and services provided by household production. (4) QID: 13133 In order to compare GDP from one year to the next, it is necessary to "deflate" the GDP figure from the later year. True False (5) QID: 13135 Which of the following would be included in U.S. GDP? The value of a Japanese camera brought into the U.S. by an American tourist The total value of all exports from the U.S. The value of clean air The output of a family-owned farm in the Midwestern U.S. (6) QID: 13137 GNP is a better measure of total economic output in the U.S. than GDP. True False (7) QID: 13138 Nominal GDP equals price times quantity. uses a base year to hold prices constant. equals real GDP divided by the GDP deflator. measures inflation. (8) QID: 13140 Changes in real GDP indicate inflation. either inflation or deflation. how the actual physical output of the economy has changed. nothing about the economy. (9) QID: 13141 Nominal GDP measures output in terms of ________________, while real GDP measures output in terms of _____________. physical goods and services; actual dollar value production; prices base year production; base year prices actual dollar value; physical goods and services (10) QID: 13147 Which of the following would be included in U.S. GNP? The value of Canadian oil imported into the U.S. The value of a car produced at an American-owned factory in Germany The output of a Japanese factory in Chicago The box office revenue of an Italian film shown in the U.S. (11) QID: 13149 The GDP deflator measures how the overall price level has changed relative to the base year. equals real GDP divided by nominal GDP times 100. equals nominal GDP divided by real GDP times 100. A and C only. (12) QID: 13150 If nominal GDP is $6 billion and real GDP is $5 billion, the GDP deflator is equal to _____. .83 1.2 83.3 120 (13) QID: 13152 If nominal GDP is $7 million and the GDP deflator is 140, real GDP equals ______. $20,000 $50,000 $2,000,000 $5,000,000 ACCAD BACDB DDD 3.1.4 (1) QID: 13153 The chain-weighted procedure for measuring GDP uses the same prices, or weights, in each year. True False (2) QID: 13156 The main problem with fixed weights in constructing a price index for GDP is that structural changes in the economy make fixed price weights unrealistic. fixed price weights are more difficult to construct. fixed prices do not account for all production. fixed prices do not allow comparison between two countries. (3) QID: 13157 The substitution problem with a fixed-weight index means that the index does not accurately reflect the changes from one year to the next when the economy produces different products so the market basket changes. consumers demand less relatively high-priced goods and more relatively low-priced goods. suppliers try to sell higher profit items and cease producing lower profit items. structural changes occur in the economy. (4) QID: 13159 Assume that the government uses a fixed-weight method for calculating real GDP. Suppose that in the year after the base year, some prices go up a lot but others go down a little. The problem with the fixed-weight method for calculating GDP in the second year is that consumers substitute the now relatively more expensive goods for the now relatively less expensive goods, but the fixed-weight method values all purchases at base year prices. consumers substitute the now relatively less expensive goods for the now relatively more expensive goods, but the fixed-weight method values all purchases at base year prices. consumers are forced to buy higher-priced goods and services, even though some prices have fallen. the fixed-weight method uses the second year prices to calculate real GDP and thus overstates real GDP. (5) QID: 13160 The new BEA procedure for calculating real GDP corrects for substitution bias by moving the base year forward and computing the current year GDP with the previous year as the base year. True False BABBA 3.1.5 (1) QID: 13162 GDP is not a perfect measure of individual well-being in a society because it excludes some goods such as leisure, life expectancy, and environmental quality. True False (2) QID: 13164 GDP provides a good indication of the size of the economy because it gives increased weight to consumer goods. it measures all new goods and all used goods. is an estimate of individual income. it is a monetary measure of total production. (3) QID: 13167 GDP is a good measure of the well-being of a society. A better measure of individual well-being would be per capita GDP. per capita consumption goods. government spending per person. the level of exports per capita. (4) QID: 13169 If, last year, nominal GDP grew by 12%, the population grew by 4%, and the GDP deflator rose from 100 to 108, real per capita GDP increased by 12%. real per capita GDP increased by 4%. real per capita GDP was unchanged. real per capita GDP decreased by 8%. (5) QID: 13170 If the GDP of Japan is $10 trillion and the GDP of Mexico is $1 trillion, we can conclude that the average citizen of Japan is 10 times better off than the average citizen of Mexico. True False (6) QID: 13171 Although GDP does not measure such quality of life attributes as literacy and life expectancy, many international studies have shown that high per capita GDP is associated with longer life expectancy and lower rates of literacy. shorter life expectancy and higher rates of literacy. longer life expectancy and higher rates of literacy. shorter life expectancy and lower rates of literacy. (7) QID: 13172 The sale of stocks and bonds is included in GDP as investment. True False ADACB CB 3.2.1 (1) QID: 13176 The expenditures approach calculates GDP by summing the total spending on consumption, investment, net exports, and government purchases. compensation to employees, rental income, profits, interest income, business owners' income, government subsidies, indirect taxes, and depreciation. compensation to employees, rental income, profits, interest income, business owners' income, indirect taxes, and depreciation and subtracting government subsidies. compensation to employees, rental income, profits, interest income, and business owners' income. (2) QID: 13177 In national income accounting, income derived from the current year's production of all components of GDP is equal to gross private domestic investment minus depreciation. the total amount spent to purchase the current year's output. the sum of profits and compensation to employees. corporate profits and compensation to employees. (3) QID: 13179 If gross private domestic investment exceeds depreciation in a given year, it means that the economy has increased its productive capacity. True False (4) QID: 13181 Which of the following shows equilibrium from the expenditures approach? Y = C + I + G + (X - M) total output < total spending total output > total spending saving > investment (5) QID: 13182 If IBM finds that it has produced 100,000 more computers in a year than it sells in that year, the value of those computers will be accounted for as a loss because they cannot be counted as part of GDP. will be included in GDP in the year in which they are sold. will be counted in the current years' GDP as consumption. will be counted in current GDP as inventory investment. (6) QID: 13183 In every economy in the world, total income and total expenditures are not equal. True False (7) QID: 13184 Which of the following is not a component of GDP? Housing Foreign currency Investment Government spending (8) QID: 13185 GDP can be calculated by adding wages and salaries, consumption, investment, and net exports. government spending, gross private investment, net exports, and private consumption. transfer payments, gross private investment, net exports, and private consumption. wages, depreciation, government spending, and transfer payments. (9) QID: 13188 Which of the following is an example of consumption? Government spending on bridge repairs A firms purchase of a new generator Foreigners purchases of domestic goods A households purchase of a new television (10) QID: 13190 The expenditures approach to calculating GDP sums each component of total spending in an economy over a given period of time. equals the income approach to calculating GDP. is illustrated by the circular flow model. All of the above are correct. ABAAD BBBDD 3.2.2 (1) QID: 13227 The income approach includes employees' salaries and wages, corporate profits, interest paid to businesses, business owners' incomes, rental income, net payments to factors of production in the rest of the world, and depreciation. True False (2) QID: 13228 Which of the following statements best describes the equality between total income and total expenditures in the economy? Expenditures and income are equal because only households buy goods and services from firms. Expenditures and income are equal because firms and government spend money to pay for wages, rent, profits, and other income items. The government redistributes income by taxing firms and giving the taxes to households until expenditures equal income. All the choices are correct. (3) QID: 13229 In calculating real GDP, income and expenditures are equal only if households spend all their income by purchasing all the goods and services produced within the year. only if households spend all their income and do not save. only if firms pay out all their earnings for wages and other factors of production. even if households do not spend all their income or firms do not pay out all their earnings. (4) QID: 13231 Corporate profits are a component of which approach to calculating GDP? The expenditures approach The income approach The savings approach The total product approach (5) QID: 13232 Transfer payments are not included in GDP because they do not represent current production of goods and services. are included in GDP because they are individuals incomes. are not included in GDP unless they are Social Security payments. are included in GDP because they will be used for consumption. (6) QID: 13234 Proprietors' income is a component of which approach to calculating GDP? The expenditures approach The income approach The leakages approach The injections approach (7) QID: 13235 The income approach to calculating GDP sums all income received in an economy. is derived from the broad measure of national income. is illustrated by the circular flow model. All of the above are correct. (8) QID: 13236 National income is the total amount of money received in a country by the factors of production. True False (9) QID: 13237 Which of the following is not a component of national income? Employee compensation Transfer payments Rent for land Corporate profits (10) QID: 13240 Personal income minus personal income taxes equals national income. net domestic product. disposable income. gross national product. (11) QID: 13242 Net domestic product equals gross domestic product minus depreciated capital. personal income minus personal income taxes. the sum of national income, indirect business taxes, depreciation, and net foreign factor income. national income minus transfer payments. ABDBA BDABC A 3.3.1 (1) QID: 13243 A large increase in the price of military helicopters will have a larger impact on the consumer price index than on the price of gasoline. True False (2) QID: 13246 The market basket of goods from which the CPI is derived is composed of natural resources that firms use to produce final goods. total production in a year. products that a typical consumer would buy. household production such as child care and housework. (3) QID: 13247 The base year in any price index is always the same year. the year against which any changes are measured. the latest year for which the government has data. the year immediately prior to the one you are studying. (4) QID: 13248 The consumer price index (CPI) compares the cost of a basket of goods consumed in the base year to the cost of the same basket in another year. compares the cost of a basket of goods consumed in the base year to the cost of another basket of goods consumed in another year. measures the changes in the prices of goods included in GDP. is the ratio of the price of a basket of goods to its production costs. (5) QID: 13249 The GDP deflator is often used as the basis to increase Social Security benefits and cost-of-living allowances (COLAs) in labor contracts. True False (6) QID: 13250 Suppose inflation is predicted to be 6% in the coming year. If instead it is only 3%, which group of people will suffer an economic loss? Borrowers Lender Neither group because lower inflation benefits both Both groups because they both experience the same inflation rate (7) QID: 13251 If a person's income increases from $50,000 to $60,000 in a year and the CPI has increased from 120 to 144, the person's standard of living has most likely risen. fallen. remained the same. indeterminate because the base year is not given. (8) QID: 13252 The producer price index (PPI) that measures consumer prices is believed to be better than the CPI and is widely reported as a better measure of inflation. True False (9) QID: 13257 A change in the producer price index (PPI) is thought to be useful in predicting changes in the stock price index. changes in consumer confidence. changes in the consumer price index. changes in the rate of output of goods and services. (10) QID: 13258 The largest category of consumer spending in the U.S. is housing. food and beverages. transportation. medical care. (11) QID: 13259 If the nominal interest rate is 12% and the inflation rate is 5%, the real rate of return is 12%. 5%. 7%. The real rate of return cannot be determined from the information given. (12) QID: 13261 Which of the following changes in price indexes shows the greatest rate of inflation: 100 to 120, 150 to 180, or 190 to 228? 100 to 120 150 to 180 190 to 228 These three indexes show the same rate of inflation. BCBAB ACBCA CD 3.3.3 (1) QID: 13268 A price index in one year was 120. The next year the same index was 140. What was the approximate percentage change in the price level as measured by that price index? 12% 17% 20% 40% (2) QID: 13269 In 1990, the CPI was 150. In 2000 it was 200. What was the rate of inflation over this time period as measured by the CPI? 33% 50% 100% You cannot determine the rate without the base year. (3) QID: 13271 An increase in the price of imported electronic equipment is measured by the consumer price index but not by the GDP deflator. True False (4) QID: 13273 Which of the following is not a way to measure inflation? Increases in nominal GDP The GDP deflator The consumer price index The producer price index (5) QID: 13274 The First National Bank wants to earn a 5% profit on a $1000 student loan. The inflation rate this year was 3% but the bank expects the rate to rise next year to 6%. What interest rate should the bank charge for the loan? 3% 6% 11% 14% (6) QID: 13275 Suppose a county's entire GDP consists of wheat and rice. In 2000, the country produced 20 bushels of wheat and sold them for $4.00 per bushel. It produced 10 bushels of rice and sold them for $2.00 per bushel. If the base year prices are $1.00 per bushel for wheat and $2.00 per bushel for rice, nominal GDP in 2000 is $100.00 and real GDP is $40.00. nominal GDP in 2000 is $40.00 and real GDP is $100.00. nominal GDP in 2000 is $100.00 and real GDP is $100.00. nominal GDP in 2000 is $40.00 and real GDP is $40.00. (7) QID: 13276 Suppose a county's entire GDP consists of wheat and rice. In 2000, the country produced 20 bushels of wheat and sold them for $4.00 per bushel. It produced 10 bushels of rice and sold them for $2.00 per bushel. If the base year prices are $1.00 per bushel for wheat and $2.00 per bushel for rice, The GDP deflator for 2000 is 100. The GDP deflator for 2000 is 40. The GDP deflator for 2000 is 250. There is not enough information to calculate the GDP deflator. (8) QID: 13277 The difference in the way the CPI and the GDP deflator are calculated is that the GDP deflator uses a fixed basket of goods with base year prices while the CPI changes its basket of goods and the prices every year. the GDP deflator uses current year total production with base year prices while the CPI uses a fixed basket of goods and current year prices. the GDP deflator changes its basket every year and uses current prices while the CPI uses a fixed basket and base year prices. the GDP deflator and the CPI are both calculated by using a fixed basket of goods and current year's prices. (9) QID: 13280 Suppose the CPI increased from 100 to 110. We can conclude that the inflation rate was 10 percent. the economy has experienced stagflation. the inflation rate was 110 percent. the economy has experienced hyperinflation. (10) QID: 13281 The consumer price index measures changes in the gross domestic product over a period of time. True False (11) QID: 13282 Suppose a countrys entire GDP consists of wheat and rice. In 2000, the country produced 20 bushels of wheat and sold them for $4.00 per bushel. The country produced 10 bushels of rice and sold them for $2.00 per bushel. If the base year prices are $1.00 per bushel for wheat and $2.00 per bushel for rice, there is a 120% increase in inflation. there is a 125% increase in inflation. there is a 150% increase in inflation. There is not enough information to calculate a change in inflation. (12) QID: 13284 If the prices of American automobiles increase, the CPI will increase, while the GDP deflator will decrease. the CPI will decrease, while the GDP deflator will remain unchanged. both the CPI and the GDP deflator will increase. both the CPI and the GDP deflator will decrease. BAAAC ACBAB CC 3.3.4 (1) QID: 13288 Which of the following would cause both the U.S. consumer price index and the U.S. GDP deflator to increase? An increase in the price of Sony TVs produced in Japan and sold in the U.S. An increase in the price of Ford pickup trucks produced in the U.S. and sold in the U.S. An increase in the price of agricultural equipment made in the U.S. and sold in the U.S. An increase in the price of tanks for the U.S. military by General Motors (2) QID: 13292 The consumer price index is the index that government accountants use to adjust nominal GDP to get real GDP. True False (3) QID: 13293 If the price of bread rises and consumers decide to purchase less bread and more bagels, the CPI is experiencing a substitution bias. a quality improvement bias. a new goods bias. a measurement bias. (4) QID: 13296 Which of the following statements about the CPI and the GDP deflator is not true? The CPI tends to overstate the rate of inflation. The GDP deflator is a better measure of overall price changes. The GDP deflator is subject to substitution bias. The CPI is subject to substitution bias. (5) QID: 13297 In which of the following sectors would a 15% increase in price most affect the CPI? Transportation Food Housing All the above have the same impact because the sectors are equally weighted. (6) QID: 13299 If an increase in the price of gasoline causes people to ride bicycles more than before, the consumer price index will underestimate the cost of living. True False (7) QID: 13301 Unlike the consumer price index, the GDP deflator can be used to measure the increase in the cost of living for a typical US household. the increase in nominal GDP that is attributable to price increases rather than production increases. the increase in the federal government budget that is a attributable to price increases rather than increased real expenditures. the increase in real GDP that is attributable to price increases rather than production increases. (8) QID: 13304 Which of the following statements about the CPI is not correct? Quality changes are reflected in the CPI. The CPI's basket of goods does not change from year to year. The CPI has a base year from which changes in price are compared. The CPI uses a base year's basket of goods and the current year's prices to calculate inflation. (9) QID: 13306 An increase in the price of construction equipment will have a greater influence on the GDP deflator than it would on the consumer price index. True False (10) QID: 13307 The consumer price index fails to take into account the fact that consumers substitute less expensive goods for those goods whose prices have risen. True False (11) QID: 13310 The consumer price index is accurate in measuring changes in the quality of products. True False (12) QID: 13312 Empirical evidence has shown that the U.S. consumer price index and GDP deflator generally move in the same direction. True False BBACC BBAAA BA 3.4.1 (1) QID: 13315 Which of the following statements about the business cycle is true? Depressions are a mild form of a recession. The business cycle has regular and predictable fluctuations. A recession occurs when real GDP falls for two consecutive quarters. Recessions and depressions generally are accompanied by decreasing unemployment. (2) QID: 13316 A recession occurs when real GDP falls for two consecutive months. True False (3) QID: 13317 Which of the following is a phase of the stylized business cycle? Unemployment Inflation Seasonal unemployment Recession (4) QID: 13319 In the diagram of the business cycle, the trough of the business cycle is at point A B C D (5) QID: 13321 During a recession one would expect the price level to ___________ and unemployment to _____________. increase, increase decrease, decrease increase, decrease decrease, increase (6) QID: 13323 Recessions often have benefits associated with them. All of the following are examples of benefits provided by recessions except increases in investment. efficiency improvements. declining inflation. the balance of payments improvements. (7) QID: 13325 Suppose that over the past six months, the unemployment rate has fallen from 5.0% to 4.5%, and real GDP has increased by .7%. You could conclude that inflation is a serious problem in this economy. a recession is in progress in this economy. an expansionary phase of the business cycle is in progress. a trough is about to be reached. (8) QID: 13326 The business cycle can generally be described as the short-run movement in interest rates. the short-run upward and downward movements in total output. the cyclical movement in the balance of trade. the increase in consumer spending that accompanies an increase in output. (9) QID: 13328 Changes in the business cycle correspond with changes in which of the following? Political environment The money supply Business conditions The commodity market (10) QID: 13329 Which of the following will occur during a recession? Personal income rises; investment spending falls; corporate profits rise. Personal income falls; investment spending falls; corporate profits fall. Personal income falls; investment spending rises; corporate profits rise. Personal income rises; investment spending rises; corporate profits rise. (11) QID: 13330 Which of the following is true about the unemployment rate at the end of a recession? The unemployment rate will remain unchanged. The unemployment rate will gradually rise. The unemployment rate will gradually fall. The unemployment rate will equal zero. (12) QID: 13331 The fluctuations of an economy are regular and can be predicted. True False CBDCD ACBCB CB 3.4.2 (1) QID: 13334 According to real business cycle theory, business cycles can be explained by the fact that investment is volatile and causes instability in the economy. changes in resources and technology affect the productive capacity of the economy and cause long-run growth to be volatile. too much money from the Federal government budget deficits causes excess demand within the economy, thus affecting long-run growth. most recessions are due to rapid increases in the money supply. (2) QID: 13336 Real business cycle theory claims that real output only changes with a change in the price level. True False (3) QID: 13338 New classical economists believe that the economy cannot correct itself when it is in a recession and must be corrected with monetary or fiscal policy or some combination of both. True False (4) QID: 13340 The idea that policy can be used to stabilize the fluctuations in the business cycle is known as new classical economics. new Keynesian economics. stabilization policy. business-cycle management. (5) QID: 13342 Mainstream economists believe that business cycles are caused by changes in the level of total spending. erratic changes in the money supply. changes in technology and resources. political uncertainty. (6) QID: 13345 The Marxian view of the business cycle is that economic fluctuations occur because capitalism must increase the rate of exploitation of workers in order to increase profits. consumers are not spending enough to stimulate growth in the economy. the government does not have enough planning to be able to stop the cycles. "creative destruction" forces major changes in the composition of the economy. BBBCA A 3.5.1 (1) QID: 13348 The labor force is defined as all persons who are qualified and able but not working. all non-institutionalized persons over age 16 who are working plus those persons who are looking for jobs. only persons who are working. all persons working plus those persons who are not working and have quit looking for a job. (2) QID: 13349 The labor force participation rate is (the labor force divided by the total population) times 100. (the labor force divided by the adult population) times 100. (the number of employed divided by the adult population) times 100. (the number of unemployed divided by the adult population) times 100. (3) QID: 13353 If the total population in the country is 250 million, the adult population is 175 million, the number of unemployed is 7 million, and the number of employed is 120 million, then the labor force participation rate is _____. 5.5% 72.6% 50.8% 70% (4) QID: 13354 In a recession, the discouraged worker effect tends to increase the unemployment rate. True False (5) QID: 13357 According to the Bureau of Labor Statistics, a househusband who chooses to stay at home to take care of children is underemployed. not in the labor force. unemployed. a discouraged worker. (6) QID: 13359 One criticism of the Bureau of Labor Statistic's data-gathering methodology is that the effect of the underground economy may underestimate unemployment. part-time workers are not counted in the labor force. discouraged workers are not counted as part of the labor force. workers who are temporarily between jobs are not counted as unemployed. (7) QID: 13360 Suppose a state has an adult population of 10 million people, and the labor force participation rate is 80%. The number of people in the state with jobs is 7,280,000. The unemployment rate in this state is _____. 7% 8% 9% 10% (8) QID: 13362 Since World War II, the labor force participation rate for males has declined and for females has risen. True False (9) QID: 13363 Assume that the population of a city is 500,000. It has 360,000 people employed, 40,000 unemployed, and 100,000 not in the labor force. What is this city's unemployment rate? 8% 10% 12% 25% (10) QID: 13365 Assume that the adult population of a city is 500,000. It has 360,000 people employed, 40,000 unemployed, and 100,000 not in the labor force. What is this city's labor force participation rate? 10% 40% 72% 80% (11) QID: 13366 General Motors sometimes temporarily lays off employees when it begins retooling to produce a new model car. The laid-off employees are called back to work after the retooling. These employees are counted as out of the labor force. discouraged workers. employed. unemployed. (12) QID: 13370 As the economy moves out of a recession, the discouraged-worker effect will tend to ___________________ the unemployment rate. increase decrease have no effect on fluctuate around BBBBB CCABD DA 3.5.2 (1) QID: 13372 Frictional unemployment is unemployment caused by a changing economy. unemployment caused by a lack of jobs in declining industries. long-term unemployment. unemployment caused by a temporary, voluntary change in jobs. (2) QID: 13374 A worker who loses a job at a coal mine because consumers' electric utilities are switching from coal-burning power plants to natural gas power plants is experiencing cyclical unemployment. frictional unemployment. structural unemployment. seasonal unemployment. (3) QID: 13375 Even in a recession, the group least affected by unemployment is teenagers. women. white males. African-Americans. (4) QID: 13376 When there is no cyclical unemployment in the economy, structural unemployment is zero. frictional unemployment is zero. unemployment is the sum of frictional and structural unemployment. unemployment is only structural unemployment. (5) QID: 13377 During a recession, some people become discouraged because they cannot find a job. These discouraged workers drop out of the labor force. This phenomenon is most likely to affect males in their prime working years. teenage males and females. females in their prime working years. males aged 25-64. (6) QID: 13378 The main economic cost of cyclical unemployment is lost economic output. True False (7) QID: 13381 In the Keynesian view, insufficient total spending in the economy results in frictional unemployment. structural unemployment. cyclical unemployment. disguised unemployment. (8) QID: 13382 During the Great Depression, the U.S. unemployment rate reached almost 25%. Most of these unemployed people were frictionally unemployed. structurally unemployed. cyclically unemployed. discouraged workers. (9) QID: 13384 The main difference between cyclically unemployed workers and structurally unemployed workers is that cyclically unemployed workers do not have marketable skills while structurally unemployed workers do have marketable skills. True False (10) QID: 13385 Which of the following statements is true regarding cyclical unemployment? Cyclical unemployment is the span of unemployment a worker experiences over his/her life cycle. Cyclical unemployment is associated with fluctuations in the natural rate of unemployment. Cyclical unemployment is associated with the short-run ups and downs of the economy. Cyclical unemployment refers to long-term trends in unemployment. (11) QID: 13387 Which group has the highest unemployment rate among teenagers? Black, male White, male Black, female White, female (12) QID: 13388 The unemployment rate is defined as the percentage of the adult population that is either unemployed or no longer looking for work. True False DCCCB ACCBC AB 3.6.1 (1) QID: 13394 The concept of the natural rate of unemployment is the idea that the economy is stable at the short-run natural rate of unemployment. the long-run natural rate of unemployment. the short-run rate of inflation. the long-run rate of inflation. (2) QID: 13396 When the economy is at the natural rate of unemployment there is no frictional unemployment. cyclical unemployment. structural unemployment. seasonal unemployment. (3) QID: 13398 The natural rate of unemployment theory argues that unemployment is always above the natural rate in the short run. unemployment is always below the natural rate in the short run. unemployment is always equal to the natural rate. in the long run, the unemployment rate returns to the natural rate. (4) QID: 13399 Supply shocks that cause an inward shift in the aggregate supply curve with aggregate demand remaining constant will permanently increase the natural rate of unemployment. permanently decrease the natural rate of unemployment. temporarily increase the natural rate of unemployment. temporarily decrease the natural rate of unemployment. (5) QID: 13402 Which of the following would be a contributing factor to the decline of the natural rate of unemployment in the late 1990s and early part of the twenty-first century? Employees are working harder and for longer hours. Electronic technology has increased the efficiency of the economy. There have been few demands for wage increases. All of the above are contributing factors. (6) QID: 13404 Economists who subscribe to the natural rate hypothesis believe that the long-run Phillips curve is vertical. horizontal. upward sloping. downward sloping. (7) QID: 13405 The main characteristic of the natural rate of unemployment is that it is permanently fixed. changes over time. is automatically adjusted. is not measurable. (8) QID: 13406 According to the natural rate of unemployment theory, an increase in aggregate demand may temporarily reduce unemployment, but when people adjust their expectations of inflation, the unemployment rate returns to the natural rate. True False (9) QID: 13408 The natural rate of unemployment is set by Congress. the rate of unemployment at which an economy operates efficiently. the inflation-adjusted rate of unemployment. zero percent. (10) QID: 14142 The trade-off between inflation and unemployment that the downward-sloping Phillips curve illustrates can only be represented in the short run. True False (11) QID: 14148 The Bureau of Economic Analysis (BEA) measures the unemployment rate. True False BBDCD ABABA B 3.7.1 (1) QID: 13413 A minimum wage is likely to have a greater impact on the market for unskilled workers than on the market for skilled workers. True False (2) QID: 13415 A minimum wage tends to create more unemployment in high-skill job markets. have no impact on unemployment as long as it is set above the equilibrium wage. create more unemployment in low-skill job markets. help teenage employees because they receive a higher wage than they otherwise would. (3) QID: 13416 Employees who earn a minimum wage can generally afford only the basic necessities. have incomes much higher than the U.S. median. have incomes close to the average U.S. income. have incomes double the poverty level. (4) QID: 13417 The minimum wage is a price floor. price ceiling. a voluntary wage. a tax on employers. (5) QID: 13419 A minimum wage that is above the market wage increases the quantity of labor supplied. reduces the quantity of labor demanded. causes a surplus of labor. All of the above are true. (6) QID: 13421 If two unskilled workers at a wage of $4 per hour each can produce as much as one skilled worker at a wage of $9 per hour, a rational employer would hire the one skilled worker. True False (7) QID: 13422 The legislative intent of minimum wage laws is to ensure a middle-class standard of living for all workers. employment for all who want it. unemployment compensation. a minimally adequate standard of living. (8) QID: 13424 If two unskilled workers at a wage of $4 per hour each can produce as much as one skilled worker at a wage of $9 per hour, the effect of a $5 per hour minimum wage on this labor market is that the two unskilled employees get a wage increase. that the skilled employee gets a wage decrease. that the unskilled workers lose their jobs. that the skilled worker loses his job. (9) QID: 13425 The U.S. cannot afford to trade with low-wage countries because U.S industries cannot be competitive with the industries in those countries. True False (10) QID: 13428 Generally, those who advocate minimum wages believe that there are no negative effects of minimum wage laws. there are minimal negative effects and higher minimum wage helps the poor. the minimum wage will solve a maldistribution of income problem. the market system should be replaced with a planned economy. (11) QID: 13429 Minimum wage laws specify the highest wage that employers may pay workers. True False (12) QID: 13431 Which of the following is not a result of the minimum wage legislation? An increase in the number of teenagers in the job market An increase in production An increase in teenage unemployment An increase in school dropout rates (13) QID: 13432 Which of the following statements is true regarding minimum wage laws? Effective minimum wage laws raise the quantity of labor supplied and raise the quantity of labor demanded compared to the competitive equilibrium level. Effective minimum wage laws raise the quantity of labor supplied and lower the quantity of labor demanded compared to the competitive equilibrium level. Effective minimum wage laws lower the quantity of labor supplied and lower the quantity of labor demanded compared to the competitive equilibrium level. Effective minimum wage laws lower the quantity of labor supplied and raise the quantity of labor demanded compared to the competitive equilibrium level. ACAAD BDCBB BBB 3.7.2 (1) QID: 13436 Unions may increase the disparity in pay between members and non-members by increasing the quantity of workers demanded in the unionized sector of the labor market. decreasing the quantity of workers demanded in the unionized sector of the labor market. increasing the wage in the unionized sector thus creating an increase in the quantity supplied in the non-unionized sector. increasing the wage in the unionized sector thus creating a decrease in the quantity supplied in the non-unionized sector. (2) QID: 13438 If labor unions manage to hold the wage above the competitive equilibrium wage, labor unions may strike until the wage falls back to equilibrium. the quantity of labor supplied will exceed the quantity of labor demanded and there will be unemployment. the quantity of labor demanded will exceed the quantity of labor supplied and there will be unemployment. the quality of labor will fall due to adverse selection in the labor market. (3) QID: 13440 The actions of labor unions tend to raise the wages of insiders and lower the wages of outsiders. True False (4) QID: 13441 Unions may increase efficiency in some circumstances because they decrease the cost of bargaining between labor management. True False (5) QID: 13442 Which of the following is most likely to use collective bargaining? A group of employers bargaining with an individual employee The Bureau of Labor Statistics gathering data from households An individual union member bargaining with a group of employers Unions negotiating with individual employers to achieve higher wages and benefits (6) QID: 13444 Effective collective bargaining will raise the wage of union workers. provide better working conditions. increase the benefits of union workers. all of the above. (7) QID: 13446 The role of the National Labor Relations Board (NLRB) is to enforce right-to-work laws. calculate the unemployment rate. enforce antitrust laws against unions. enforce workers rights to unionize. (8) QID: 13447 The purpose of right-to-work laws is to require union membership as a condition of employment. to give workers in a unionized firm the right to choose whether or not to join the union. to prevent employers from hiring permanent replacements when union members strike. to guarantee employment for everyone in the economy. (9) QID: 13450 Unions increase the level of employment in unionized firms. raise wages above the competitive equilibrium level. decrease the level of employment in non-unionized firms. are economically destructive. (10) QID: 14158 In the graph shown, the equilibrium market wage is __________, and the equilibrium quantity of labor demanded is __________. w0, L0 w1, L2 w1, L1 w1, L0 (11) QID: 14164 The green bar on the graph represents the unemployment that is created when labor unions demand a wage higher than the market equilibrium. True False CBAAD DDBBA A 3.7.4 (1) QID: 13452 If an employer pays an efficiency wage, worker turnover will increase. worker health may be adversely affected. worker quality may be adversely affected. unemployment may increase. (2) QID: 13453 An efficiency wage is similar to a minimum wage in that state legislation requires employers to pay it. True False (3) QID: 13455 One reason that employers may pay efficiency wages is to increase the workers' ability to buy health insurance. to create some unemployment. their opposition of labor unions. to adversely select employees. (4) QID: 13457 Labor unions may increase efficiency in labor markets in cases where they lower the wage of union outsiders. offset the power of a large employer in a company town. threaten to strike. raise insiders' wages above equilibrium. (5) QID: 13458 Which of the following statements about efficiency wages is correct? Firms must pay efficiency wages because they are mandated by law. Firms pay the lowest possible wage because low wages promote efficiency. Firms may pay above equilibrium wages to promote worker efficiency. If firms pay efficiency wages, workers may shirk their duties. (6) QID: 13459 Which of the following kinds of unemployment is not based on a wage above equilibrium? Unemployment caused by minimum wages Unemployment from union activity Unemployment due to efficiency wages Job search unemployment (7) QID: 13461 The efficiency wage is the lowest wage an employer can pay. is the wage above equilibrium that firms are mandated to pay. is the wage above equilibrium that firms voluntarily pay to increase productivity and profits. reduces the natural rate of unemployment. (8) QID: 13464 Which of the following statements supports the theory of efficiency wages? Firms may find that paying the competitive equilibrium wage is inefficient. Workers are more efficient if they work hard for their wages. Unions will strike if they are not paid higher wages. All of these statements support the theory of efficiency wages. (9) QID: 13466 Gary decides to expand his bakery, so he hires six additional bakers. The market wage for bakers is $12 per hour. According to the efficiency wage theory, Gary should offer his bakers the market wage of $12 per hour. offer a wage high enough to attract the necessary number of bakers he needs. offer some of his bakers $12 per hour and some of his bakers who will work for less $10 per hour. offer a wage greater than $12 per hour to attract the best, most productive bakers. (10) QID: 13468 Employees are better able to assess their own skills than are potential employers. This is known as moral hazard. adverse selection. the theory of efficiency wages. opportunity cost. (11) QID: 13470 The efficiency wage influences the quality of labor by motivating workers. increasing worker morale and productivity. attracting skilled workers. all of the above. DBABC DCADB D 3.7.5 (1) QID: 13485 Unemployment insurance tends to decrease the unemployment rate because those individuals receiving unemployment insurance are not counted in the labor force. True False (2) QID: 13486 The purpose of unemployment insurance is to reduce income uncertainty associated with periods of unemployment. to provide a welfare program for unemployed people. to decrease the search costs of unemployment. to provide an incentive for unemployed workers to turn down unattractive jobs. (3) QID: 13487 Most economic studies have shown that unemployment insurance reduces the duration of most spells of unemployment. True False (4) QID: 13489 If unemployment insurance paid over 90% of laid-off workers' salaries, the unemployment rate would probably understate true unemployment. the unemployment rate would probably overstate true unemployment. there would be no impact on the unemployment rate. the natural rate of unemployment would decrease. (5) QID: 13491 All of the following are examples of moral hazard except the person who buys renters insurance and leaves his apartment door unlocked. the family who buys flood insurance for their house that lies on a flood plain. the teenager who buys auto insurance and drives carelessly. the individual who is actively seeking work and collecting unemployment insurance. (6) QID: 13492 Which of the following is true about unemployment insurance? Unemployment insurance can increase unemployment. Unemployment insurance decreases the natural rate of unemployment. Unemployment insurance reduces the amount of time people spend in between jobs. All of these statements are true. (7) QID: 13493 Most people who are unemployed are entitled to collect up to ________ of their previous salary for up to ________. 50%, 52 weeks 50%, 26 weeks 25%, 52 weeks 40%, 26 weeks (8) QID: 13495 Empirical evidence suggests that receiving unemployment insurance induces people to actively search for work. has no effect on people who are unemployed. discourages people from actively searching for work. is the only factor that influences how quickly people find work after being unemployed. (9) QID: 14198 Which of the following groups would benefit the most from a long-term unemployment insurance program? The frictionally unemployed The structurally unemployed Individuals who are not in the labor force The seasonally unemployed (10) QID: 14253 If Jim suddenly loses his job and collects unemployment insurance, Jim is most likely to spend all of his time and resources actively searching for work. receive 25% of his previous salary for 50 weeks. turn down unattractive job offers and look for employment that best suits him. get a part-time job. (11) QID: 14277 Unemployment insurance provides incentives for recipients to quickly find employment. True False BABBD ABCBC B 3.8.1 (1) QID: 13497 Inflation is a period of rising income in the economy. an increase in real GDP in an economy. an increase in the overall price level in the economy. a period of rising wages in the economy. (2) QID: 13498 If prices increase by 10,000% in year, the economy is said to have an inflationary spiral. a recessionary spiral. inflation. hyperinflation. (3) QID: 13500 Stagflation is characterized by __________________ prices and ________________ unemployment. increasing, low increasing, high decreasing, low decreasing, high (4) QID: 13503 Stagflation describes a period in which both prices and unemployment are increasing. True False (5) QID: 13507 Which of the following is not associated with hyperinflation? High shoeleather costs Increasing real GDP The hoarding of goods War or a post-war economy (6) QID: 13508 Economists use the term inflation to describe a situation in which incomes in the economy are increasing. stock market prices are rising. the overall level of prices in the economy is increasing. the economy is growing rapidly. (7) QID: 13509 Which of the following measures tells a person how fast the purchasing power of a savings account grows over time? The nominal interest rate The real interest rate Both the real and nominal interest rates The interest rate published by the financial institution (8) QID: 13511 Which of the following statements regarding inflation is incorrect? Inflation is a general increase in all prices across an economy. Inflation decreases the value of money. Inflation is a period of rising real GDP. Most countries experience a slow increase in the overall price level. (9) QID: 13514 Stagflation is a combination of rising prices and output. falling prices and output. falling prices and rising output. rising prices and falling output. (10) QID: 14289 Bolivia's 38,000% price increase in six months in 1985 is an example of inflation. hyperinflation. stagflation. deflation. (11) QID: 14295 In 1974 U.S. prices rose at a rate of 11%, while output fell by 0.6%. This is an example of inflation. hyperinflation. stagflation. deflation. CDBAB CBCDB C 3.8.2 (1) QID: 13516 Policymakers usually want to keep inflation low because inflation creates unemployment. inflation imposes costs on consumers and businesses. inflation harms everyone. inflation destroys the value of money. (2) QID: 13517 If the price level doubles, the quantity of money supplied doubles. the value of the nominal money has decreased by one-half. the value of the nominal money supply has remained unchanged. nominal real GDP has doubled. (3) QID: 13518 A decrease in the price level is the same as an increase in the value of money. True False (4) QID: 13520 Over time, inflation increases the purchasing power of money. reduces the purchasing power of money. does not affect the purchasing power of money. is not related to the purchasing power of money. (5) QID: 13522 If P is the price level, 1/P measures the number of dollars needed to buy a basket of goods and services. P measures the quantity of goods and services that can be bought with $1. 1/P is the price of goods and services measured in terms of actual dollar figures. 1/P is the value of money measured in terms of goods and services. (6) QID: 13524 The value of money is directly related to the price level. is inversely related to the price level. is determined by the real interest rate. is determined by the nominal interest rate. (7) QID: 13525 The combination of cash and interest-bearing assets that consumers decide to hold depends primarily on their individual levels of wealth. the general price level. their use of credit cards. the prime rate. (8) QID: 13528 If P represents the price of goods and services measured in money, then 1/P is the value of money measured in terms of goods and services. Hence, when the overall price level rises, the value of money falls. True False (9) QID: 14209 Suppose 1990 is the base year, and the price level for that year is 100. If the price level is 107 in 1999, what conclusion can we make? Purchasing power has increased by 7%. Purchasing power has increased by 107%. Purchasing power has decreased by 7%. Purchasing power has decreased by 107%. BBABD BBAC 3.8.3 (1) QID: 13529 Which of the following is a contributor to cost-push inflation? An increase in output and employment An increase in natural resource prices An increase in average costs An increase in employment (2) QID: 13531 The main cause of demand-pull inflation is an increase in the cost of natural resources. an increase in the money supply. an increase in consumer demand caused by full employment. an increase in the cost of labor. (3) QID: 13533 An increase in spending when there is a moderate amount of unemployment may increase output. True False (4) QID: 14009 During a recession the inflation rate usually falls. the inflation rate increases. the inflation rate is unaffected by a recession. the behavior of the inflation rate cannot be determined. (5) QID: 14171 Demand-pull inflation occurs when decreasing demand for goods and services causes real GDP to decrease while prices increase. decreasing demand for goods and services causes increasing real GDP and prices. increasing demand for goods and services causes increasing real GDP and prices. increasing demand for goods and services causes real GDP to decrease while prices increase. (6) QID: 14182 Cost-push inflation is often indicative of stagflation. True False (7) QID: 14237 If everyone expects inflation, they take action to protect themselves from losses in purchasing power. The actions that people take would trigger cost-push inflation. True False (8) QID: 14239 Which of the following factors would not cause demand-pull inflation? Excessive government spending A decrease in consumers' saving rate An international oil embargo from oil-producing countries An economy operating at or near its capacity (9) QID: 14249 Which of the following is not a cause of cost-push inflation? An increase in wages beyond any gain in productivity An increase in natural resource prices An increase in government spending A decrease in labor productivity BCAAC AACC 3.8.4 (1) QID: 13536 In the quantity theory of money, velocity means the rate of the change in GDP. the rate at which business inventories turn over. the rate at which the money supply turns over. the rate at which the Fed increases the money supply. (2) QID: 13538 Which of the following correctly expresses the quantity theory of money? money x the price level = velocity x real output money x velocity = price level x real output velocity x real output = price level x money price level x velocity = real output (3) QID: 13540 If the money supply increases by 10% and real GDP increases by 3%, prices will increase by more than 10%. 10%. 13%. less than 10%. (4) QID: 13542 In the real business cycle theory, if long-run aggregate supply increases, then long-run aggregate demand increases by an equal amount, so that real output increases and the price level remains unchanged. less than the amount of increase in aggregate supply, so that real output increases and the price level decreases. more than the amount of increase in aggregate supply, so that real output increases and the price level increases. an equal amount, so that both real output and the price level increase. (5) QID: 13546 The widely held belief that when the central bank creates money, prices rise is called NAIRU, or the natural rate of unemployment. Okuns law. the Friedman dilemma. the quantity theory of money. (6) QID: 13547 The quantity theory of money can explain hyperinflation, but not moderate inflation. moderate inflation, but not hyperinflation. moderate inflation and hyperinflation, but not deflation. moderate inflation, hyperinflation, and deflation. (7) QID: 13548 The velocity of money is defined as the rate at which the Fed increases the money supply. the rate at which money is being spent. the average number of times per year a dollar changes hands. the average number of times per year a dollar is spent on a consumer good. (8) QID: 13550 The quantity equation is written as M x Y = V x P. True False (9) QID: 14304 Suppose the U.S. economy is experiencing a recession. Increasing the money supply will provoke an expansion. True False (10) QID: 14311 Increasing the money supply in an expanding economy will most likely cause an increase in equilibrium GDP. an increase in the price level. a decrease in the unemployment rate. further economic expansion. (11) QID: 14318 Assume the velocity of money is held constant. According to the classical view of money, changes in the money supply will affect either price or output. output is fixed in the long run, so changes in the money supply will only affect the price level. changes in the money supply will only affect output. changes in nominal variables will only affect real variables. CBDAD DCBAB B 3.8.5 (1) QID: 13552 Suppose that Bolivia is experiencing hyperinflation and people go to the bank every day to get cash and then buy their daily needs immediately. This would be an example of menu costs. shoeleather costs. confusion costs. redistribution of wealth. (2) QID: 13553 Suppose you have a business selling wholesale auto parts to dealers and car repair shops. Because of inflation you must print and mail out new price lists every month. The costs would be an example of menu costs. shoeleather costs. confusion. redistribution of wealth. (3) QID: 13554 If the nominal interest rate is 6% and the inflation rate is 3%, the real interest rate is 3%. 6%. 9%. 10%. (4) QID: 13558 An inflation tax is a tax on people who hold money. a tax charged to businesses based on the increase in their prices. used by governments when they have a surplus. a tax on people who hold certificates of deposit. (5) QID: 13560 Which of the following individuals would be harmed the most by an unanticipated change in the rate of inflation? People who have cost-of-living adjustments built into their incomes. Bankers who lend money at fixed interest rates. People who borrowed money at lower interest rates. People whose nominal incomes are rising faster than inflation. (6) QID: 13563 Printing money to finance a government program imposes a tax on everyone who holds money. reduces the opportunity cost of the program. is exactly like imposing an income tax to pay for the project. all of the above. (7) QID: 13565 To avoid the inflation tax, people hold all of their wealth in the form of cash. do not hold money. do not file an income tax return. do nothing because the inflation tax is unavoidable. (8) QID: 13569 Shoeleather costs of inflation refer to the decline in real income associated with inflation. the decline in purchasing power associated with inflation. the waste of resources as people attempt to minimize their holdings of money. the fact that inflation increases the prices of goods, including shoeleather. (9) QID: 13570 Which of the following costs of inflation shrink consumer wealth? Shoeleather costs Menu costs Misallocation of resources All of the above shrinks consumer wealth. (10) QID: 13571 The idea that inflation results in businesses having to change price tags and listings often is called the ______________ of inflation. menu cost shoeleather cost relative-price variability cost inflation-induced tax distortion (11) QID: 13573 When the government raises revenue by printing money, it is said to have imposed an inflation tax. True False BAAAB DBCDA A 4.1.1 (1) QID: 13559 An economy that does not have enough money in circulation might experience ____________, and too much money in an economy might cause ___________. inflation; a recession a boom; inflation a recession; inflation inflation; a boom (2) QID: 13586 Which of the following regarding money is not true? Money is an asset. Money is backed by gold. Money is a form of wealth. Money is not an equivalent to income. (3) QID: 13587 If Emily writes a check for her groceries, she is using money as a medium of exchange. store of value. unit of account. means of liquidity. (4) QID: 13588 If Jim puts $1.00 into his piggy bank every day, he is using money as a medium of exchange. store of value. unit of account. means of liquidity. (5) QID: 13591 Which of the following serves as a store of value? A dollar bill A Treasury bond Microsoft stock All of the above serve as a store of value. (6) QID: 13592 Which of the following statements about commodity money is true? Commodity money is backed by gold. More people prefer commodity money instead of fiat money. Commodity money has intrinsic value. All of these statements about commodity money are true. (7) QID: 13593 M1 includes cash. coins. travelers checks. all of the above. (8) QID: 13594 M2 includes coins. small time deposits. money market mutual funds. all of the above. (9) QID: 13595 Which of the following is not included in M3? Currency Small time deposits Repurchase agreements All of the above are included in M3. (10) QID: 13596 Characteristics of money include durability. ability to be standardized. divisibility. all of the above. CBABD CDDDD 4.1.3 (1) QID: 13598 According to the transaction motive, individuals will hold more money if their real incomes increase. individuals will hold more money if the price level increases. individuals will hold more money if interest rates are low. all of the above statements are true. (2) QID: 13599 According to the precautionary motive, people will choose to hold money instead of interest-bearing assets to protect their financial security. True False (3) QID: 13602 Which of the following is not a motive for holding money? The transaction motive The depository motive The precautionary motive The speculative motive (4) QID: 13603 A change in the interest rate will shift the money demand curve. cause a movement along the money demand curve. shift the money supply curve. not affect either curve. (5) QID: 13613 According to the graph, the movement from i0 to i1 represents an increase in the money supply as a result of falling interest rates. an increase in the quantity of money demanded as a result of falling interest rates. an increase in the quantity of money demanded as a result of rising interest rates. an increase in the money supply as a result of a larger quantity of money demanded. (6) QID: 13648 According to the graph, the movement from D to D' represents an increase in the quantity of money demanded as a result of increasing interest rates. an increase in the money supply as a result of an increase in the quantity of money demanded. a change in a factor other than the interest rate that increased the demand for money at every interest rate. an increase in the interest rate. (7) QID: 13691 When real income increases, people will demand more money to do more shopping. people will demand less money and save more. people will invest more in interest-bearing assets. the demand for money is unaffected. (8) QID: 13703 If interest rates are expected to rise, people will demand more money. True False (9) QID: 13708 To protect financial security, people may choose to hold money instead of interest-bearing assets. True False DABBB CABA 4.1.4 (1) QID: 13608 An interest rate above the market equilibrium indicates an excess supply of money. an excess demand for money. a shortage of bank deposits. higher future interest rates. (2) QID: 13609 Which of the following statements is true? Excess demand is the result of an interest rate above equilibrium. If the Fed increases the money supply, the equilibrium interest rate rises. As the price of a bond increases, the interest rate increases. If the price level or real GDP changes, the money demand curve will shift. (3) QID: 16420 Which of the following is most likely to result from an increase in the money supply? The money demand curve will shift inward. Interest rates will rise. The prices of bonds will increase. People will demand more money at every interest rate. (4) QID: 1862 The free interaction of borrowers and lenders as well as the forces of supply and demand are two determinants of the interest rate for loanable funds. True False (5) QID: 1863 Which of the following ideas can we infer about the market for loanable funds as depicted in the graph below? Banks experience a shortage of deposits. The price of the bond will be bid upward. People will begin selling bonds to increase their holdings of cash. As the interest rate falls, the demand for money will increase. (6) QID: 1874 An increase in the price level will raise the demand for money and shift the demand curve for money outward. True False (7) QID: 2120 Study the graph below. Supposing the aggregate price level has increased, we can predict a movement from point A to point B. point D to point A. point A to point C. point A to point D. ADCAB AC 4.2.1 (1) QID: 13604 In the financial market, a bond is a riskless, short-term government security. represents partial ownership in a firm and provides the investor with a portion of the firms profits. is a debt contract that promises lenders a fixed interest payment in the future. a capital investment. (2) QID: 16424 Stocks are assets on a mutual fund's balance sheet, while the fund itself is the liability. True False (3) QID: 16428 Banks, mutual funds, insurance companies, and pension funds collectively make up the consumer lending system. investment system. financial system. saving system. (4) QID: 1877 Large corporations, the federal government, or state and local governments usually issue __________ in order to finance their purchases. mutual funds stocks bonds insurance policies (5) QID: 2142 Lenders with relatively small amounts of money and the desire to invest in a diverse portfolio of stocks and bonds should invest in commercial paper. a mutual fund. certificates of deposit. Treasury bills. (6) QID: 2145 Financial intermediaries are financial institutions through which lenders can indirectly provide funds to borrowers. markets that facilitate stock and bond transactions. financial institutions through which lenders can directly provide funds to borrowers. identical to financial markets. (7) QID: 2160 There is an inverse relationship between a country's standard of living and its rate of savings and investment. True False CACCB AB 4.2.3 (1) QID: 13615 The profits received from selling stock for more than the purchase price are called dividends. capital gains. shares. none of the above. (2) QID: 13616 Which of the following statements is true? Lenders directly provide funds to borrowers through financial intermediaries. The financial system is synonymous with the Federal Reserve System. Equity holders have the first claim to the returns on investments. Bonds are debt instruments, while stocks are equity instruments. (3) QID: 13617 _____________ are entitled to the first claim to returns on investments. Bondholders Stockholders Creditors Tax collectors (4) QID: 13619 Newly issued securities are sold on the equity market. primary market. black market. secondary market. (5) QID: 13620 Which of the following statements regarding municipal bonds is true? Municipal bondholders are required to pay taxes only on the principal amount of the bond. Because municipal bonds have a tax advantage, they have a relatively shorter term than other bonds. Municipal bonds pay lower interest rates because of their tax advantages. Municipal bondholders must pay taxes on interest earned. (6) QID: 13621 An investor receives _____________ when a stock is sold for more than the purchase price. a capital gain retained earnings a capital loss dividends (7) QID: 13622 Which of the following is an example of equity finance? Buying Treasury bills Buying corporate bonds Buying municipal bonds Buying stock (8) QID: 13624 Compared to equity finance, debt finance offers more risk than equity. ownership in a firm and a portion of the profits. returns that are limited to the stated interest rate. all of the above. (9) QID: 13625 From an investors viewpoint, the most important characteristic of a stock is its price. volume traded. price/earnings ratio. dividend yield. BDABC ADCA 4.2.4 (1) QID: 13628 Which three factors define a bond? Rate of return, present value, maturity date Coupon rate, maturity date, rate of return Face value, coupon rate, maturity date Market interest rate, maturity date, coupon rate (2) QID: 13629 Calculate the present value of $10,000 invested at 12% for 10 years. $3,219.73 $6,635.99 $8,928.57 $9,254.67 (3) QID: 13630 If the face value of a bond is $1,000 and the coupon rate is 8%, the annual interest payment is ______. $8 $80 $800 There is not enough information to calculate the annual interest payment. (4) QID: 13631 When the market interest rate is less than a bonds coupon rate, the bond is trading at a premium. investors can purchase the bond for a discount. the bond will mature at an earlier date. the bonds face value is greater than the principal. (5) QID: 13632 If Andy receives $150 in annual interest payments on a bond with a $1,000 face value, we know that the coupon rate on his bond is ______. 5% 15% 50% There is not enough information to calculate the coupon rate. (6) QID: 1885 If Val invested $2,500 in the year 2000 at an interest rate of 11% annually, how much will she have in the year 2035? $94,562.79 $96,437.13 $97,675.88 $99,111.57 (7) QID: 1888 Suppose Bond A has a face value of $1,000, carries a coupon rate of 8%, and matures in one year. If the rate of return on Bond A is 10%, this bond is trading at a premium. True False CABAB BB 4.3.1 (1) QID: 13633 Which of the following is not a role of the Federal Reserve Bank? To lend money to banks To regulate the money supply To oversee banking operations To insure depository institutions (2) QID: 13636 How many Federal Reserve districts are there in the U.S.? 8 10 12 14 (3) QID: 13638 Which of the following groups makes up the Federal Open Market Committee (FOMC)? The seven-member Board of Governors plus seven presidents of the twelve district banks Five members of the Board of Governors plus five presidents of the twelve district banks Five members of the Board of Governors plus the twelve presidents of the district banks The seven-member Board of Governors plus five presidents of the twelve district banks (4) QID: 13640 On the Feds balance sheet Treasury securities appear as assets, and U.S. dollars appear as liabilities. Foreign accounts appear as assets, and foreign currency appears as a liability. U.S. dollars appear as assets, and gold appears as a liability. None of the above appear on a Feds balance sheet. (5) QID: 13641 The primary role of the Fed is to control inflation through monetary policy set by the Federal Open Market Committee (FOMC). True False (6) QID: 13642 Which of the following is an additional role of the Fed? Maintaining the Fed wire Clearing checks Providing emergency loans All of the above are additional roles of the Fed. (7) QID: 13644 The Federal Reserve Bank is a type of commercial bank. True False DCDAA DB 4.3.3 (1) QID: 13647 Which of the following is not a monetary policy tool of the Fed? The required reserve ratio The prime rate The discount rate Open market operations (2) QID: 13649 The Fed's most commonly used tool of monetary policy is Changing the required reserve ratio Changing the discount rate Open market operations Printing currency (3) QID: 13651 The purchase of Treasury securities by the Fed will increase the money supply. True False (4) QID: 13652 The supply curve of money ______________, while the demand curve for money ___________. slopes upward; slopes downward is a vertical line; slopes upward is a vertical line; slopes downward slopes downward; slopes upward (5) QID: 13653 Because changing the required reserve ratio can have drastic effects on the economy, the Fed rarely exercises this tool of monetary policy. True False (6) QID: 13655 Lowering the discount will increase the money supply. True False (7) QID: 13658 The Fed can increase the money supply by decreasing the prime rate. decreasing the required reserve ratio. selling government securities. increasing the discount rate. BCACA AB 4.4.1 (1) QID: 13660 The practice of fractional reserve banking requires banks to hold a fraction of their liabilities in reserves. requires banks to hold a fraction of their assets in reserves. allows banks to create money by holding reserves. allows banks to lend all of their deposits. (2) QID: 13663 The Federal Reserve Bank guarantees the value of a dollar bill. True False (3) QID: 13664 Households can choose to trade currency for gold. True False (4) QID: 2028 Which of the following features does NOT make gold a good medium of exchange? It is nonperishable. It is indivisible. It is portable. It is recognizable. (5) QID: 2029 Which of the following represents a form of commodity money? Gold coins I.O.U.s Deposit slips for gold deposits with a goldsmith Pennies (6) QID: 2030 Which of the following describes how goldsmiths create money? The goldsmith allows customers to keep their gold in his vault. The goldsmith keeps some of the gold deposits that people give him for safekeeping. The goldsmith melts down jewelry that has gone out of style, thereby creating money. The goldsmith issues deposit slips for the gold he holds for other people, which begin to be accepted as a medium of exchange. (7) QID: 2031 A goldsmith need not keep all of the gold deposits people leave with him on hand in his vault, because all depositors are not likely to demand their gold at once. some depositors are likely to forget that the goldsmith is keeping their gold for them. deposits always equal withdrawals. none of the above. (8) QID: 2032 Which of the following could cause a run on a goldsmith? Depositors suspect that the goldsmith may have issued deposit slips for gold that he may not actually have. Depositors suspect that the goldsmith may be stealing their money. Depositors lose confidence in gold. All of the above ABBBA DAD 4.4.3 (1) QID: 13668 Suppose that the Fed sets the required reserve ratio at 12%. First Bank has $1,000,000 in deposits. How much is First Bank able to lend to its customers? $120,000 $880,000 $1,000,000 $500,000 (2) QID: 13670 If the required reserve ratio is 10%, the increase in the money supply that results from $500,000 of new deposits equals $5,000. $50,000. $500,000. $5,000,000. (3) QID: 13672 The money multiplier is the reciprocal of the required reserve ratio. is used to calculate the net change in the money supply. is one of the Feds monetary policy tools. Only A and B are correct. (4) QID: 13674 If First Bank has $1,000,000 in deposits and is able to lend up to $860,000, what is the required reserve ratio? .86% 8.6% 1.4% 14% (5) QID: 13675 If the Fed decides to increase the required reserve ratio, the effect on the money supply will be minimal. the money supply will decrease. the money supply will increase. the money supply will not be affected. (6) QID: 2033 If the required reserve ratio is 10%, how much can a bank lend out if its deposits total $2 million? $2 million $1.8 million $200,000 The answer depends on where the bank keeps its reserves. (7) QID: 2034 What is the total change in the money supply if the reserve requirement is 10% and deposits rise by $5,000? $500 $4,500 $45,000 $50,000 (8) QID: 2036 By how much does the money supply increase if the Federal Reserve injects $5 million into the system and the required reserve ratio is .2? $250,000 $3.6 million $23 million $25 million (9) QID: 2037 What happens to the money supply if the Federal Reserve reduces the required reserve ratio? The money supply increases. The money supply decreases. The answer depends on what happens to interest rates. None of the above (10) QID: 2038 Which of the following statements describes what happens to a banks balance sheet when a customer opens up a checking account? The checking account appears as a liability, which is balanced on the asset side by the required reserves and the loan made with the depositors funds. The checking account appears as an asset, which is balanced on the liability side by the required reserves and the loan made with the depositors funds. The checking account does not appear on the balance sheet until the owner of the account begins to write checks. The checking account does not appear on the balance sheet until the bank lends the deposits, creating money. BDDDB BDDAA (1) QID: 13679 If the Federal Reserve purchases government bonds, all of the following will occur except commercial bank reserves will increase. the discount rate will be forced up. the money supply will increase. there will be a multiple expansion of banking deposits. (2) QID: 13681 The Fed can directly control the money supply. True False (3) QID: 16829 "Near money" is commodity money. can reduce the money multiplier effect. can be directly controlled by the reserve requirement ratio. none of the above. (4) QID: 2334 Which of the following is not a tool used by the Federal Reserve to increase or decrease the money supply? The required reserve ratio The discount rate The prime rate Open market operations (5) QID: 2335 In practice, which tool does the Federal Reserve use most often to increase or decrease the money supply? The required reserve ratio The discount rate The prime rate Open market operations (6) QID: 2336 The required reserve ratio covers which of the following types of deposits? Savings accounts only Checking accounts only Checking accounts and savings accounts Checking accounts, savings accounts, and other bank instruments, such as repurchase agreements (7) QID: 2337 Which of the following would increase the money supply? An increase in the required reserve ratio An increase in the discount rate The purchase of government securities by the Federal Reserve A decrease in the money multiplier (8) QID: 2338 Which of the following best explains why the Federal Reserve reduced the required reserve ratio in the 1990s? It wanted to stimulate the economy, which was in a recession. It wanted to reduce aggregate demand, in order to rein in inflation. It wanted to lower prices and increase output. It wanted to raise prices and reduce output. BBBCD BCA 4.5.1 (1) QID: 14684 Which of the following correctly expresses the Fisher equation? inflation rate = nominal interest rate + real interest rate real interest rate = inflation rate - nominal interest rate nominal interest rate = real interest rate - inflation rate real interest rate = nominal interest rate - inflation rate (2) QID: 14689 Suppose you invest $1,000 at 12%, and the rate of inflation is 4% annually. Based on the Fisher equation, what is the increase or decrease in your real purchasing power? 12% increase 8% increase 8% decrease 4% decrease (3) QID: 14697 Which of the following will not cause a shift in the investment demand curve? A tax cut An increase in real GDP An increase in the interest rate Optimistic expectations (4) QID: 1896 The best measure of your increase or decrease in purchasing power as a result of an investment is the nominal interest rate. True False (5) QID: 1899 The determination of investment in an economy comes from the equality of consumer spending and foreign spending. aggregate expenditures and consumer savings. consumption and income. the three uses of income and aggregate expenditures. (6) QID: 1900 According to the Fisher equation, when we hold inflation constant, the real and nominal interest rates move one for one. True False (7) QID: 1901 The demand curve for loanable funds represents the behavior of households. foreigners. the government. businesses. DBCBD AD 4.5.2 (1) QID: 16833 The supply curve for loanable funds slopes upward because as the interest rate increases, the quantity of loanable funds supplied decreases. people will forego consumption at higher interest rates and save. as the interest rate increases, the supply of loanable funds increases. all of the above. (2) QID: 16834 Which of the following will increase the supply of loanable funds in the U.S.? Expected low interest rates Depreciation of the U.S. dollar Decrease in taxes Reduction in government spending (3) QID: 16836 In the macroeconomy, savings comes from more money in circulation, a budget surplus, and a trade surplus. the savings of households, a budget surplus, and a trade deficit. more money in circulation, a budget surplus, and a trade deficit. the savings of households, a budget deficit, and a trade surplus. (4) QID: 1236 Which of the following is affected by the rate of interest? The supply of loanable funds The demand for loanable funds The supply of and demand for loanable funds Neither the supply of nor the demand for loanable funds, which are affected by exogenous factors (5) QID: 1237 Which of the following will occur when the real interest rate rises? People are more willing to forgo spending in order to save. People are less willing to forgo spending in order to save. Households are more likely to increase spending. Businesses are more likely to increase spending. (6) QID: 1238 Which of the following would cause an inward shift in the supply of loanable funds? Tax incentives for saving Fears about the future An increase in the budget surplus A decline in the trade deficit (7) QID: 2164 When the government runs a budget deficit, investment increases. interest rates are lower than otherwise. the standard of living increases. the supply curve for loanable funds shifts inward. BDBCA DD 4.5.3 (1) QID: 16837 An interest rate below the market equilibrium will trigger competition for loanable funds. deter savers. increase the quantity of loanable funds demanded. cause downward pressure on the interest rate. (2) QID: 1252 What happens when interest rates are set higher than the equilibrium rate? The demand for loanable funds exceeds the supply, and some borrowers are unable to obtain loans. Because the supply of loanable funds exceeds demand, banks are unable to lend as much money as they would like. Some businesses are unable to borrow money. Households are unwilling to save. (3) QID: 1254 Under the Reagan Administration, businesses received tax incentives for investing. What effect did this policy have on the demand and supply of loanable funds? Demand for loanable funds shifted to the right, and interest rates increased. Demand for loanable funds shifted to the left, and interest rates decreased. The supply of loanable funds shifted to the right, and interest rates increased. The supply of loanable funds shifted to the left, and interest rates decreased. (4) QID: 1256 Which of the following factors would be likely to increase households' supply of loanable funds at every interest rate? A tax credit on savings A tax on savings An increase in consumer spending An increase in interest rates (5) QID: 1258 What would be the effect of an increase in the demand for loanable funds at every interest rate? Interest rates would rise. Interest rates would fall. There would be no effect on interest rates, because the supply of loanable funds would increase by the same amount. None of the above (6) QID: 1264 What is likely to be the effect of a government-imposed ceiling on interest rates below equilibrium? The supply of loanable funds will exceed demand, and banks will have to scramble to find customers. Demand for loanable funds will exceed supply, and some businesses will be unable to borrow. The ceiling will have no effect, as long as the government-imposed ceiling is below the equilibrium rate. None of the above (7) QID: 2165 Excess supply of loanable funds causes an upward adjustment of the interest rate. True False ABAAA BB 5.1.1 (1) QID: 13682 Which of the following equations accurately represents the macroeconomic equilibrium in an open economy? Y = C + I + G Y = C + I + G ? T Y = a + C + I + G Y = C + I + G + NX (2) QID: 13684 Which of the following is a component of GDP? Consumption Investment Government spending All of the above are components of GDP. (3) QID: 13685 Which of the following statements regarding the aggregate demand (AD) curve is correct? The AD curve illustrates the quantity of goods and services that households want to buy at every price. The AD curve shows the direct relationship between the demand of households and the aggregate price level. The AD curve has a positive slope. The AD curve represents the inverse relationship between the expenditures of households, businesses, government, and foreigners and the aggregate price level. (4) QID: 14896 An increasing price level will cause a shift in the aggregate demand curve. a reduction in the overall quantity of goods and services demanded. the purchasing power of households to increase. the cost of borrowing money to decrease. (5) QID: 14899 Keyness circular flow model illustrates the flow real variables while holding nominal variables constant. True False (6) QID: 1908 The aggregate demand (AD) curve graphically illustrates the inverse relationship between government spending and the tax rate. aggregate expenditures and the price level. investment spending and the interest rate. real GDP and income. (7) QID: 1915 Businesses cut back spending when the price level rises, because the resulting increased demand for money drives the interest rate upward. True False DDDBA BA 5.1.2 (1) QID: 13690 The microeconomic demand curve shows how the substitution effect causes a decrease in quantity demanded as a result of increasing prices. shows how the income effect causes a decrease in quantity demanded as a result of increasing prices. measures the effect of nominal variables on other nominal variables. All of the above are correct. (2) QID: 14900 When the U.S. price level rises, we expect foreigners to buy more U.S. goods and services. buy less U.S. goods and services. buy the same amount of U.S. goods and services. buy no U.S. goods and services. (3) QID: 14901 When prices rise, real GDP increases. foreign demand increases. the demand for money increases. investment spending increases. (4) QID: 14902 From the microeconomic perspective, the income effect occurs when tax cuts provide more disposable income. tax increases provide less disposable income. rising prices decrease consumer wealth and demand. increased production leads to an increase in an economys level of income. (5) QID: 14904 The aggregate demand curve slopes downward because a decrease in the aggregate price level reduces the quantity of goods and services demanded. an increase in the aggregate price level reduces the quantity of goods and services demanded. a decrease in the aggregate price level does not affect the quantity of goods and services demanded. an increase in the aggregate price level increases the quantity of goods and services demanded. (6) QID: 1919 The aggregate demand curve measures the real value of nominal variables. aggregate expenditures as a function of the price level. the aggregate price level across the economy and real GDP, or income. all of the above. (7) QID: 1927 An increase in the price level will increase the demand for money. True False DBCCB DA 5.1.3 (1) QID: 14907 Government policy can shift the aggregate demand curve either inward or outward. True False (2) QID: 14909 In the graph shown, an increase in government spending will cause the equilibrium to move from point A to point C. point A to point B. point B to point A. point C to point A. (3) QID: 14910 In the graph shown, an increase in the money supply will cause the equilibrium to move from point A to point C. point B to point A. point A to point B. point C to point A. (4) QID: 14914 A tax cut would cause the equilibrium to move from point B to point A. point A to point C. point C to point A. point A to point B. (5) QID: 14916 Which of the following would not shift the aggregate demand curve? Changes in monetary policy Changes in fiscal policy Changes in the price level Changes in the spending plans of households (6) QID: 1930 Changes in the price level affect consumption, investment, and government spending. consumption and investment. consumption, investment, and foreign spending. investment, government spending, and foreign spending. (7) QID: 1932 Government spending depends on the price level. income. policymakers. all of the above. ABCDC CC 5.2.1 (1) QID: 14918 There are no profit opportunities in the long run. True False (2) QID: 14920 The short-run aggregate supply curve slopes upward because of confusion, labor unions, and sticky prices. sticky wages, sticky prices, and labor unions. confusion, sticky wages, and sticky prices. sticky wages and sticky prices. (3) QID: 16451 When prices increase in the short run, total revenue decreases. aggregate demand will increase. firms will increase production. profit opportunities are lost. (4) QID: 1934 The short-run aggregate supply (SRAS) curve is based on the premise that because all prices will change at the same rate, businesses can alter their production to take advantage of profit opportunities. True False (5) QID: 1936 Suppose that, as a producer, your production costs have increased at the same rate as your revenue. You can conclude that your profit will increase. your profit will decrease. your profit will remain unchanged. predicting the effects on your profit is impossible. (6) QID: 1941 When a factor, other than the price level, that affects the aggregate quantity supplied changes, we would expect the short-run aggregate supply curve to shift inward or outward. become vertical. become horizontal. be unaffected. (7) QID: 2166 In the short run, there is a positive relationship between the aggregate price level and the quantity of goods and services supplied. True False ACCBC AA 5.2.2 (1) QID: 14937 According to Keynes, sticky wages cause the short-run aggregate supply curve to be downward sloping. vertical. upward sloping. horizontal. (2) QID: 14938 Keyness sticky wage theory holds that wages will not immediately adjust to lower levels, and firms are able to profit from increased production. wages will immediately adjust to lower levels, and firms do not adjust their output levels. wages will immediately adjust to higher levels, and firms decrease their production and profits. wages will not immediately adjust to higher levels, and firms are able to profit from increased production. (3) QID: 1944 Which of the following is not a reason why wages might be sticky? Collective bargaining locks in a wage less than inflation. Employees work more when wages rise. The government pays a minimum wage. Employers pay efficiency wages. (4) QID: 1978 The classical view of economics states that because all prices adjust immediately, firms can increase production and profit in the short run. True False (5) QID: 2009 The short-run aggregate supply (SRAS) curve slopes upward, because there is an inverse relationship between prices and output. firms cut back on production in the short run when prices increase. when prices rise, the quantity demanded decreases. confusion, sticky wages, and sticky prices provide businesses with profit opportunities in the short run. (6) QID: 2022 The belief that the economy adjusts immediately to its long-run equilibrium is consistent with the Keynesian view. classical view. Marxist view. monetarist view. (7) QID: 2026 The minimum wage law can prevent immediate wage increases and allows firms to profit from lower labor costs and high revenue. True False CDBBD BA 5.2.3 (1) QID: 14802 Which of the following statements regarding output in the long run is correct? Output depends on the money supply. Output is determined by the quantity and productivity of resources. Output is determined by the level of interest rates. Output depends on the price level. (2) QID: 14941 In the long run, the aggregate supply curve slopes upward, but in the short run the aggregate supply curve is vertical. True False (3) QID: 14942 Increasing prices will cause the short-run aggregate supply curve and the long-run aggregate supply curve will shift to the left. True False (4) QID: 14943 Unemployment _______________ when real GDP declines. rises falls is unaffected may either rise or fall (5) QID: 14944 The vertical long-run aggregate supply curve indicates that when prices rise overall output rises. when prices fall overall output falls. when prices rise overall output falls. prices do not affect overall output. (6) QID: 14946 Which of the following will occur if the natural rate of unemployment falls? The long-run aggregate supply curve becomes horizontal. The long-run aggregate supply curve shifts to the right. The long-run aggregate supply curve is not affected by changes in the natural rate of unemployment. The long-run aggregate supply curve shifts to the left. (7) QID: 14947 Suppose an economy experiences a surge in immigration. Which of the following is the most likely result? The long-run aggregate supply curve will shift to the left. The long-run aggregate supply curve and the short-run aggregate supply curve will shift to the left. The long-run aggregate supply curve will shift to the right. The long-run aggregate supply curve and the short-run aggregate supply curve will shift to the right. BBBAD BD 5.3.1 (1) QID: 18397 The classical view of economics describes how increases in the wage rate cause unemployment. sticky prices create profit opportunities for firms in the short run. prices and wages adjust immediately to clear markets. changes in technology or resource endowments can shift the economys level of full employment. (2) QID: 18401 Which of the following will shift the classical aggregate supply curve outward? An increase in the money supply A depletion of natural resources A decrease in the aggregate price level Improvements in technology (3) QID: 18404 Classical economists argue that inflationary and recessionary gaps are alleviated by policy intervention such as changes in the money supply. are essential to sustained economic growth. never occur. are eliminated by automatic adjustments of internal mechanisms in the economy. (4) QID: 18408 In the classical view, the outward shift of the demand curve for labor as illustrated in the graph below causes the supply curve for labor to shift and the wage rate to remain at w*. the equilibrium wage rate to adjust to w*'. unemployment in the economy. a downward adjustment of the wage rate. (5) QID: 20527 The graph below shows an increase in aggregate demand. Classical economists would agree that the new equilibrium price level is at point ____. A B C D (6) QID: 20649 Improvements in technology or resource endowments will shift the classical supply curve outward. True False (7) QID: 20653 When the wage rate falls below equilibrium, excess demand for labor is alleviated through which of the following processes according to the classical theory? (8) QID: 20669 When the labor demand curve shifts outward, which of the following graphs accurately depicts the adjustment process according to the classical view of economics? CDDBC AAD 5.3.2 (1) QID: 14949 Which of the following events will most likely cause an inward shift of the short-run aggregate supply curve? Government increases spending. The economy experiences a supply shock. The Fed tightens the money supply. Government increases taxes. (2) QID: 14952 Which of the following events most likely caused the aggregate demand curve to shift inward? The government increased spending. Consumers demanded more goods and services at every price level. The price of inputs increased. A tax increase reduced consumers disposable income. (3) QID: 14954 Which of the following events will most likely cause an outward shift in the aggregate demand curve? The Fed tightens the money supply. Disposable income decreases. The government increases spending. The price of inputs increases. (4) QID: 14956 What is the most likely short-run result of an inward shift of the aggregate demand curve? A lower level of full employment A lower equilibrium price and output A higher equilibrium price and output A higher level of full employment (5) QID: 14958 Rising production costs will shift the short-run aggregate supply curve inward. True False (6) QID: 2039 When the price level is above the equilibrium price, there is short-run excess demand. consumers, businesses, and foreigners increase their quantity demanded. businesses recognize increasing profits. all of the above. BDCBA C 5.3.3 (1) QID: 16864 When an economy is operating above full employment, we expect prices to adjust upwards. True False (2) QID: 16874 Adaptive expectations will speed up the adjustment process that takes place when an economy operates above or below full employment. True False (3) QID: 16888 Which of the following will occur when the economy operates below full employment? Consumers' quantity demanded will decrease. The short-run aggregate supply curve will shift inward. Prices will adjust upward. None of the above will occur. (4) QID: 1268 What happens when the economy is operating beyond the full-employment level of output? Prices and wages begin to fall, causing firms to increase production until the full-employment level of output is reached. Prices and wages begin to rise, causing firms to cut back on production until the full-employment level of output is reached. Prices and wages begin to fall, causing firms to cut back on production until the full-employment level of output is reached. Prices and wages begin to rise, causing firms to increase production until the full-employment level of output is reached. (5) QID: 1278 In the long run, what happens to the levels of prices and output as a result of an outward shift in the short-run aggregate supply curve? Prices rise, and output returns to the full-employment level. Prices rise, and output rises to the full-employment level. Prices fall, and output falls below the full-employment level. Prices fall, and output returns to the full-employment level. (6) QID: 1286 A kink in the short-run aggregate supply curve reflects the fact that wages tend not to rise rapidly, because employers are reluctant to increase their workers' wages. some companies tend not to raise their prices, even when they see other companies doing so. businesses hire more workers when the economy is growing. wages rise when the economy operates beyond full employment but tend not to fall when the economy's resources are underemployed. (7) QID: 1298 Adaptive expectation formation means that people base their expectations of the future on what has occurred in the past. people base their expectations of the future on new information. people base their expectations of the future on prices. people base their expectations of the future on output. ABDBA DA 5.3.4 (1) QID: 16915 According to the graph below, a change in the spending plans of consumers, businesses, government, or foreigners is illustrated by the movement from point ______ to point ______. A; B C; A C; B B; C (2) QID: 16922 An increase in an economy's resource pool will shift the short-run aggregate supply curve inward. cause a movement along the long-run aggregate supply curve. will shift both the long-run and short-run aggregate supply curves outward. will shift the long-run aggregate supply curve inward. (3) QID: 16936 Suppose a supply shock causes an inward shift of the short-run aggregate supply curve. In the short run, prices and output fall. prices rise, and output falls. prices fall, and output rises. prices and output rise. (4) QID: 1516 In the short run, what is the effect of an outward shift in the aggregate demand curve? Prices and output rise. Prices rise, but output remains constant. Prices and output fall. Prices fall, but output increases. (5) QID: 1517 What happens in the short run to prices and output if the price of oil rises temporarily? Both prices and employment rise. Both prices and employment fall. Prices rise, and output falls below the short-run equilibrium level. Prices fall, and output falls below the short-run equilibrium level. (6) QID: 1520 What is the effect of technological progress on prices and output? The long-run aggregate supply curve shifts outward, but the short-run aggregate supply curve remains unchanged. The short-run aggregate supply curve shifts outward, but the long-run aggregate supply curve remains unchanged. Both the long-run and the short-run aggregate supply curves shift outward. There is no effect. (7) QID: 1522 Over time, the long-run aggregate supply curve can shift outward as a result of increases in productivity. decreases in productivity. increases in output. decreases in output. (8) QID: 1524 Which of the following could cause aggregate demand to decrease? The government reduces taxes. Foreigners decide they want to buy more domestic goods at every price. Consumers decide to increase their savings. The Federal Reserve increases the money supply. ACBAC CAC 5.4.1 (1) QID: 16938 Fiscal and monetary policies are often useful in pulling an economy out of a recession. True False (2) QID: 16939 Which of the following policies should be used to stimulate the economy? Raising the required reserve ratio Raising the discount rate Reducing government spending Buying government securities (3) QID: 16940 An example of fiscal policy is buying securities. raising taxes. raising the discount rate. lowering the required reserve ratio. (4) QID: 2339 Which of the following factors would cause aggregate demand to fall? A decrease in consumer confidence A decrease in investor confidence A decrease in demand by foreigners All of the above (5) QID: 2340 Bad deflation refers to the process in which prices and output fall. prices fall and output increases. prices fall too rapidly. none of the above. (6) QID: 2341 According to classical economists, what happens to prices and output in the long run if there is an autonomous decline in aggregate demand? Prices fall, and output increases. Prices rise, and output increases. Prices fall, and output returns to the full-employment level of output. The full-employment level of output shifts to the left. (7) QID: 2342 Which policy tools could be used to deal with an autonomous decrease in aggregate demand? The Federal Reserve could decrease the money supply. The government could offset the drop in consumer spending with spending of its own. The government could raise taxes. All of the above are correct. (8) QID: 2343 According to supporters of rational expectations, which of the following explains why increases in government spending do not cause output to rise? The increase in interest rates caused by the increase in government spending crowds out private investment. The decrease in interest rates caused by the increase in government spending crowds out private investment. Consumers recognize that government spending today will have to be paid for by an increase in taxes tomorrow. Consumers believe that the increase in government spending will not affect output. ADBDA CBC 5.4.2 (1) QID: 17029 A supply shock will shift the short-run aggregate supply curve __________ and create __________. inward; excess supply outward; excess supply inward; excess demand outward; excess demand (2) QID: 17052 Which of the following statements regarding the long-run aggregate supply (LRAS) curve is true? An inward shift of the LRAS curve will improve an economy's standard of living. Increased immigration can shift the LRAS curve outward. Bad weather can shift the LRAS curve outward. All of the above are true. (3) QID: 17063 Demand-driven deflation is often referred to as bad deflation. True False (4) QID: 2344 What was the effect on prices and output when oil prices rose in the 1970s? The short-run aggregate supply curve shifted to the right, output declined, and prices fell. The short-run aggregate supply curve shifted to the left, output declined, and prices rose. The short-run aggregate supply curve remained unchanged, causing prices and output to fall. The short-run aggregate supply curve remained unchanged, causing prices to rise and output to remain at the full-employment level. (5) QID: 2346 What would happen if the government cut taxes to stimulate aggregate demand during a period of stagflation? Prices, output, and employment would all rise. Prices, output, and employment would all fall. Prices would fall, but output and employment would rise. Prices would rise, but output and employment would fall. (6) QID: 2347 Which of the following factors would not cause the equilibrium level of output to increase? Technological developments Immigration Capital accumulation Increases in the money supply (7) QID: 2348 In the short run, what happens to the level of output and the level of prices as a result of a technological improvement? Prices fall, and output rises. Prices and output rise. Prices fall, and output falls. None of the above (8) QID: 2345 What would happen if the government decided to reduce inflation by cutting government spending during a period of stagflation? Unemployment and prices would fall, and the level of output would rise. Unemployment and prices would rise, and the level of output would fall. Unemployment would rise while output and prices would fall. Unemployment and output would fall, and prices would rise. CBABA DAC 5.5.1 (1) QID: 17067 According to the crowding-out effect, an increase in government spending will decrease employment. increase investment spending. decrease the demand for money. increase interest rates. (2) QID: 17181 Increasing government spending is an example of expansionary monetary policy. contractionary monetary policy. expansionary fiscal policy. contractionary fiscal policy. (3) QID: 17200 The phenomenon of crowding out occurs when sticky wages, sticky prices, and confusion crowd out competition. increases in government spending raise the interest rate and crowd out investment spending. increases in taxes crowd out consumption. downward pressure on prices crowds out aggregate demand. (4) QID: 1302 What would be the effect of an increase in government spending of $50 million? GDP would increase by $50 million. GDP would increase by less than $50 million. GDP would increase by more than $50 million. GDP would decrease by $50 million. (5) QID: 1304 What effect does expansionary fiscal policy have on aggregate demand? It shifts the aggregate demand curve outward. It causes an upward movement along the aggregate demand curve. It shifts the aggregate demand curve inward. It causes a downward movement along the aggregate demand curve. (6) QID: 1305 Which of the following does not represent a form of expansionary fiscal policy? Increasing government spending Reducing taxes Increasing the money supply Providing incentives to businesses and households to spend more (7) QID: 1363 Which of the following is not a tool of fiscal policy? Government spending Taxes Tax incentives Private investment DCBCA CD 5.5.2 (1) QID: 17217 Which of the following statements is true? The government runs a budget deficit when its tax revenue exceeds its spending. The sum of each year's budget deficit equals the national debt. The government finances its debt by issuing Treasury bills. The sum of each year's issuance of Treasury bills equals the government debt. (2) QID: 17234 Which of the following forms of savings can mitigate the effects of crowding out? Household savings A government deficit A trade surplus All of the above (3) QID: 890 The government can buy back Treasury bills and increase the supply of loanable funds when tax revenue exceeds government spending. True False (4) QID: 1365 If government spending exceeds government revenues, the government runs a deficit, which it can pay for by reducing spending. increasing taxes. issuing Treasury bills. raising interest rates. (5) QID: 1367 The federal budget deficit increased substantially under which of the following administrations? The Kennedy Administration The Reagan Administration The Ford Administration The Clinton Administration (6) QID: 1370 How is investment spending affected by an increase in the budget deficit? Investment spending increases to finance the deficit. Investment spending increases as a result of the increase in government spending. Investment spending is crowded out by the increase in the budget deficit. Investment spending is unaffected by the increase in the budget deficit which affects only government spending. (7) QID: 1380 In the early 1990s, the budget deficit was high, but interest rates were lower than in the 1980s. Which of the following best explains the reason this occurred? Foreign savings increased, offsetting the effects of the budget deficit. Government spending decreased, reducing the demand for loanable funds. Household savings increased. The government sold Treasury bills. (8) QID: 1386 Which of the following will occur if the U.S. government purchases Treasury bills? The national debt increases. The national debt declines. The federal budget deficit increases. The federal budget deficit decreases. CAACB CAB 5.5.3 (1) QID: 17249 The time between the realization of economic conditions and the implementation of fiscal policy is called the _____________ lag. operational recognition political administration (2) QID: 17271 The theory of implementing fiscal policy always works in practice. True False (3) QID: 17292 The implementation of fiscal policy might be delayed because of constituent-supported programs that are difficult to retract. True False (4) QID: 1394 Which of the following will not occur during a recession? Output declines. Prices rise. Unemployment rises. Consumption spending falls. (5) QID: 1401 The "recognition lag" refers to the fact that it takes a while before policymakers recognize that aggregate demand has shifted inward. politicians are often unwilling to recognize the fact that a decline in aggregate demand hurts people, especially the poor. government statistics may be inaccurate. all of the above. (6) QID: 1425 The fact that it may take months to actually distribute government spending once that spending has been approved is known as the administration lag. operational lag. recognition lag. bureaucratic lag. (7) QID: 1431 Which of the following is one of the factors that makes the use of fiscal policy difficult? Once programs have been established, it is difficult to cut spending. Increases in government spending often have no effect on aggregate demand. Government programs tend to be less efficient than private sector programs. All of the above. BBABA BA 5.5.4 (1) QID: 17305 Automatic stabilizers control the supply of money in an economy. the fluctuations of the business cycle. the volatility of changing interest rates. the volume of imports. (2) QID: 1435 Which of the following represents an automatic stabilizer? Medicare Unemployment insurance Social Security All of the above (3) QID: 1436 How does the tax system act as an automatic stabilizer? When income rises, people move into higher tax brackets, reducing somewhat the amount of money available for consumption. People in higher tax brackets tend not to pay taxes, which gives them more money to spend on consumption. Taxes are automatically withdrawn from most people's paychecks, giving the government an immediate source of income. When income rises, people increase their spending dramatically in order to avoid taxation, increasing the effect of a boom. (4) QID: 1479 Which of the following does not occur as a result of automatic stabilizers? Recessions are milder than they would otherwise be. Output grows by less than it otherwise would during economic booms. The business cycle varies less than it would in the absence of automatic stabilizers. Increases in income cause greater increases in consumer spending than they otherwise would. (5) QID: 1486 What effect would a decrease in aggregate demand have on output, given the presence of automatic stabilizers? Output would fall but by less than it would without stabilizers. Output would fall, but prices would rise. Output would remain constant despite the drop in aggregate demand. Output would rise but by less than it would without stabilizers. (6) QID: 1531 Which of the following represents an aim of automatic stabilizers? To increase consumer spending in a boom and stimulate the economy To reduce consumer spending in a recession and stimulate the economy To reduce consumer spending in a boom in order to avoid overheating the economy To reduce government spending in a recession in order to avoid overheating the economy (7) QID: 2242 The volatile fluctuations of the business cycle occur because of the multiplier effect. True False BBADA CA 5.6.1 (1) QID: 835 In the quantity theory of money, velocity means the rate of the change in GDP. the rate at which business inventories turn over. the rate at which the money supply turns over. the rate at which the Fed increases the money supply. (2) QID: 838 Which of the following correctly expresses the quantity theory of money? money x the price level = velocity x real output money x velocity = price level x real output velocity x real output = price level x money price level x velocity = real output (3) QID: 839 If the money supply increases by 10% and real GDP increases by 3%, prices will increase by more than 10% 10%. 13% less than 10%. (4) QID: 845 In the real business cycle theory, if long-run aggregate supply increases, then long-run aggregate demand increases by an equal amount, so that real output increases and the price level remains unchanged. less than the amount of increase in aggregate supply, so that real output increases and the price level decreases. more than the amount of increase in aggregate supply, so that real output increases and the price level increases. an equal amount, so that both real output and the price level increase. (5) QID: 856 The widely held belief that when the central bank creates money, prices rise is called NAIRU, or the natural rate of unemployment. Okuns law. the Fisher effect. the quantity theory of money. (6) QID: 863 The quantity theory of money can explain hyperinflation, but not moderate inflation. moderate inflation, but not hyperinflation. moderate inflation and hyperinflation, but not deflation. moderate inflation, hyperinflation, and deflation. (7) QID: 867 Suppose the U.S. economy is experiencing a recession. Increasing the money supply will provoke an expansion. True False (8) QID: 869 Increasing the money supply in an expanding economy will most likely cause an increase in equilibrium GDP. an increase in the price level. a decrease in the unemployment rate. further economic expansion. (9) QID: 871 Assume the velocity of money is held constant. According to the classical view of money, changes in the money supply will affect either price or output. changes in the money supply will only affect prices. changes in the money supply will only affect output. changes in nominal variables will only affect real variables. (10) QID: 1530 Which of the following statements must be true if the gross national product is greater than the money supply? Prices are likely to increase. Prices are likely to decrease. The velocity of money is greater than one. The velocity of money is less than one. (11) QID: 1536 What do most economists believe is the short-run effect on the real economy when the money supply increases? Output increases, because interest rates fall. Output increases, because interest rates rise. Output falls, because interest rates rise. Output falls, because interest rates fall. (12) QID: 1538 What is the long-run effect on the real economy of an increase in the money supply? Prices fall, and the level of output returns to its equilibrium level. Prices rise, and the level of output returns to its equilibrium level. Prices fall, and the level of output falls. Prices rise, and the level of output rises. CBDAD DABBC AB 5.6.2 (1) QID: 788 Suppose that the Fed lowers the required reserve ratio. Which of the following events will most likely occur? The short-run equilibrium will be below the economy's level of full employment. Prices will begin to adjust downward. The short-run aggregate supply curve will begin to shift outward. The new long-run equilibrium at full employment will be at a higher aggregate price level. (2) QID: 805 Contractionary monetary policy will cause prices and output to decrease in the short-run. True False (3) QID: 1543 In the short run, what is the effect on prices and output when the money supply increases? Aggregate demand rises, pushing up prices and output. Aggregate demand rises, pushing down prices and output. Aggregate demand falls, pushing up prices and output. Aggregate demand falls, pushing down prices and output. (4) QID: 1546 What is the effect on interest rates and the money supply when the Fed lowers the reserve requirement? Interest rates rise, and the money supply increases. Interest rates rise, and the money supply decreases. Interest rates fall, and the money supply increases. Interest rates fall, and the money supply decreases. (5) QID: 1549 Which of the following tools can the Federal Reserve use to lower interest rates? Increasing the discount rate Raising the reserve requirement Buying Treasury bills Selling Treasury bills (6) QID: 1552 What is the long-run effect on the short-run aggregate supply (SRAS) curve when the money supply increases? The SRAS curve shifts outward in response to the increase in aggregate demand. The SRAS curve shifts inward in response to the increase in aggregate demand. The SRAS curve shifts outward as expectations catch up with actual movements in the price level. The SRAS curve shifts inward as expectations catch up with actual movements in the price level. (7) QID: 1558 Which of the following statements about the long-run effect of an increase in the money supply is true? As a result of lower interest rates, businesses may invest more, but the increase in the price level may reduce spending by foreigners and consumers. As a result of changes in the price level, exports may increase and imports decline. As a result of the increase in output, real wages may be higher than they were before the increase in the money supply. As a result of higher interest rates, business may cut back on investment spending and consumers may cut back on consumption. DAACC DA 5.6.3 (1) QID: 808 Based on the graph below, which of the following monetary policies should the Fed implement to restore long-run equilibrium? Raise the required reserve ratio Buy Treasury securities Increase taxes Raise the discount rate (2) QID: 810 Based on the graph below, which of the following can we conclude about the economy? The economy is experiencing hyperinflation. If the Fed intervenes with expansionary monetary policy, the economy will return to its original equilibrium level. A supply shock has probably occurred. The economy's labor pool has increased. (3) QID: 811 The graph below shows an example of "bad deflation." True False (4) QID: 1563 What is the short-term effect of expanding the money supply? The aggregate demand curve shifts inward. The aggregate demand curve shifts outward. It has no effect on the demand curve, which captures fiscal policy only. It leads to a decline in employment. (5) QID: 1565 Which of the following factors can cause a decline in aggregate demand? An increase in government spending A decrease in consumer spending An increase in imports A decrease in household saving (6) QID: 1568 Which of the following represents a way in which the Fed can expand the money supply? Raising the required reserve ratio Selling Treasury securities Lowering the discount rate All of the above (7) QID: 1570 What is meant by the expression "In the long run, we're all dead"? Long-run equilibrium is always reestablished. Deviations from long-run equilibrium can have significant consequences on people's lives. Prices adjust to changes in aggregate demand and short-run aggregate supply. The economy cannot produce at a level of output that exceeds the full-employment level. (8) QID: 1575 Which of the following best describes stagflation? Prices fall and output increases. Prices fall and output decreases. Prices rise and output increases. Prices rise and output decreases. BCBBB CBD 5.6.4 (1) QID: 826 The use of monetary policy as a means to prevent the crowding out that might occur from expansionary policy is a short-run strategy. True False (2) QID: 874 The long-run effect of increasing the money supply is an increase in the aggregate price level with no change in real output. an increase in both the aggregate price level and real output. an increase in real output with no change in the aggregate price level. no change in either the aggregate price level or real output. (3) QID: 1578 In the short run, when the government increases its spending, the demand for money rises, because private investment is crowded out by the increase in government spending. rises, because income rises as a result of the increase in aggregate demand. falls, because taxes rise. falls, because taxes increase. (4) QID: 1583 In the long run, what is the effect of an increase in the money supply? Inflation Crowding out of private investment An increase in aggregate demand Stagflation (5) QID: 1585 Which of the following chains of events explains how government spending crowds out investment spending? Government spending increases, lowering prices, lowering the demand for money, forcing businesses to compete for a fixed supply of funds and lowering investment. Government spending increases, reducing consumption, lowering output, raising prices, raising the demand for money, raising interest rates, lowering investment. Government spending increases, raising output, raising prices, raising the demand for money, raising interest rates, lowering investment. Government spending increases, lowering tax revenues, increasing prices, raising the demand for money, raising interest rates, lowering investment. (6) QID: 1587 Which of following policy measures could prevent "crowding out" in the short run? An increase in the money supply by the Federal Reserve A decrease in the money supply by the Federal Reserve An increase in private consumption by the government A decrease in private consumption by the government (7) QID: 1588 What is the long-run effect of monetary policy accommodation by the Federal Reserve? Stagflation Recession Inflation No effect AABAC AC View Results Quiz 1.1 User ID: skim7 Attempt: 6 / Unlimited Out of: 25 Started: October 29, 2004 7:18am Finished: October 29, 2004 7:20am Time spent: 1 min. 42 sec. Question 1 (1 point) Economic rationality involves: Student response: Percent Value Student Response Answer Choices a. the philosophical aspects of economics. 100.0% b. individuals making decisions that make themselves better off. c. individuals making decisions that make themselves worse off. d. none of the above. Score: 1 / 1 Question 2 (1 point) The ultimate purpose of economics is to Student response: Percent Value Student Response Answer Choices a. help someone make money. b. help someone know how best to invest money. c. explain how wealth is created. 100.0% d. explain choices. Score: 1 / 1 Question 3 (1 point) Which of the following situations is the best example of scarcity? Student response: Percent Value Student Response Answer Choices a. People in Haiti have fewer goods and services than people in the U.S. b. Chinese incomes are rising, enabling consumers to buy more goods. c. Ugandans find that their incomes are decreasing and cannot buy as much as they had in the past. 100.0% d. Bolivian farmers wish to build more homes, sheds and barns but do not have enough lumber to construct all of these buildings. e. All of the above are situations that exhibit scarcity. Score: 1 / 1 Question 4 (1 point) Suppose you are studying economics. If you weren't studying economics, you would be studying literature, raising your grade in that class by a letter grade. If you weren't studying literature, you would be working, making $500. If you weren't working, you would be playing cards with friends. If you weren't playing cards with friends, you would be sleeping, which would improve your quiz score at your early-morning accounting class in the morning by 3 points. The opportunity cost of studying economics is Student response: Percent Value Student Response Answer Choices a. 3 points on the accounting quiz. b. the enjoyment of playing cards with friends. c. $500. 100.0% d. a letter grade in literature. e. all of the other possible activities listed. Score: 1 / 1 Question 5 (1 point) Because of scarcity, every economic decision involves Student response: Percent Value Student Response Answer Choices 100.0% a. a trade-off. b. a free good. c. a trade-in. d. an increasing cost. Score: 1 / 1 Question 6 (1 point) Economics is primarily the study of Student response: Percent Value Student Response Answer Choices a. how to make money in the stock market. b. how to operate a business successfully. 100.0% c. how society manages its scarce resources. d. the methods that governments might use to transform a scarce resource into an economic good. Score: 1 / 1 Question 7 (1 point) Which of the following is not an example of self-interested (rational) behavior? Student response: Percent Value Student Response Answer Choices a. A mother quits a job she likes to take care of her new baby. b. Albert Schweitzer gave up both an academic career and a musical career to be a missionary in Africa. c. A man lights up a cigarette. 100.0% d. All are examples of self-interested behavior as used by economists. Score: 1 / 1 Question 8 (1 point) Extremely cold winter weather destroys oranges on the trees in Florida. The freeze caused Student response: Percent Value Student Response Answer Choices a. scarcity because there are less oranges now than people want. 100.0% b. shortages because the number of oranges are less than people had expected. c. scarcity because people have to switch to other types of citrus fruits. d. shortages because the orange growers will have less money. Score: 1 / 1 Question 9 (1 point) Economics is a social science rather than a "hard" science like physics because Student response: Percent Value Student Response Answer Choices a. economists abstract from reality in creating their theories. b. economics is easier to study than physics. c. economists must explain their theories to policy makers who lack formal mathematical training. 100.0% d. economists study human behavior, which is affected by an unpredictable and vast range of influences. Score: 1 / 1 Question 10 (1 point) An economist studying macroeconomics compared data on unemployment, inflation and economic growth from past years to the current year, and used the comparison to predict future unemployment. This is an example of Student response: Percent Value Student Response Answer Choices a. developing economic theories. 100.0% b. building economic models. c. making economic policy. d. normative economics. Score: 1 / 1 Question 11 (1 point) Economists make assumptions because Student response: Percent Value Student Response Answer Choices a. they need to incorporate value judgments into their models. 100.0% b. analysis without assumptions would be impossibly complex. c. they always have perfect information about the assumptions. d. assumptions are the final product of careful economic analysis. Score: 1 / 1 Question 12 (1 point) Economic models: Student response: Percent Value Student Response Answer Choices a. are developed in order to explain an individual's thinking. 100.0% b. should be judged by how well they predict real-world phenomena. c. should be rejected if they are not completely realistic. d. are developed in order to explain what an individual might say. Score: 1 / 1 Question 13 (1 point) Your friend wonders why traffic during her evening commute is always worse on Fridays. She is not considering: Student response: Percent Value Student Response Answer Choices 100.0% a. the Ceteris Paribus assumption. b. the incentives assumption. c. the rationality assumption. d. none of the above. Score: 1 / 1 Question 14 (1 point) Which of the following is a normative statement? Student response: Percent Value Student Response Answer Choices a. Inflation in 1963 was 2.9% for the year. b. Unemployment will increase in the coming year. c. Increased sales taxes will shrink employment. 100.0% d. Taxes should be raised to finance street repairs. Score: 1 / 1 Question 15 (1 point) Which of the following is a positive economic statement? Student response: Percent Value Student Response Answer Choices 100.0% a. An increase in the price of coffee leads to less coffee being purchased. b. People should avoid drinking caffienated coffee. c. Coffee always makes people jittery and less productive. d. Coffee drinkers are drug addicts since they need caffeine. Score: 1 / 1 Question 16 (1 point) Which of the following is a true statement? Student response: Percent Value Student Response Answer Choices 100.0% a. It is difficult to avoid normative analysis in economics because we are dealing with the behavior of people. b. It is difficult to make positive statements in economics because human behavior is complex and we can never be certain that we are correct. c. It is difficult to distinguish between positive and normative statements because both can be refuted by appealing to empirical evidence. d. Positive statements are better than normative statements. Score: 1 / 1 Question 17 (1 point) The impact of the national debt on the economy's unemployment is an example of: Student response: Percent Value Student Response Answer Choices a. microeconomics. 100.0% b. macroeconomics. c. irrational economics. d. either microeconomics or macroeconomics. Score: 1 / 1 Question 18 (1 point) Microeconomics approaches the study of economics from the viewpoint of Student response: Percent Value Student Response Answer Choices 100.0% a. small economic units, such as consumers, firms, and units of government. b. foreign governments. c. inflation, unemployment, and economic growth. d. all of the above are correct. Score: 1 / 1 Question 19 (1 point) Which of the following is true about the importance of money in economics? Student response: Percent Value Student Response Answer Choices 100.0% a. Money is very important in both macroeconomics and microeconomics. b. Money is more important in microeconomics than it is in macroeconomics. c. Money is not very important in either micro or macroeconomics. d. Money is more important in macroeconomics than it is in microeconomics. Score: 1 / 1 Question 20 (1 point) Questions of what to produce, how to produce, and who will get the output must be faced by Student response: Percent Value Student Response Answer Choices a. only developed economies. b. centrally planned economies. c. the economies of underdeveloped countries. 100.0% d. all economies. Score: 1 / 1 Question 21 (1 point) If the government takes a laissez-faire approach to the economy, its most likely response to entering a recession will be to Student response: Percent Value Student Response Answer Choices a. increase government spending. b. increase the money supply. 100.0% c. do nothing. Score: 1 / 1 Question 22 (1 point) The nation listed below whose economy comes closest to a centrally planned economy is Student response: Percent Value Student Response Answer Choices 100.0% a. People's Republic of China. b. Japan. c. United Kingdom. d. United States. Score: 1 / 1 Question 23 (1 point) In a market economy, goods are allocated to Student response: Percent Value Student Response Answer Choices a. all potential uses. b. all citizens on an equal basis. c. citizens with political power. 100.0% d. citizens with both the desire and the willingness to pay for the goods. Score: 1 / 1 Question 24 (1 point) The father of modern economics is Student response: Percent Value Student Response Answer Choices a. Thomas Hobbes. 100.0% b. Adam Smith c. John Maynard Keynes. d. Alan Greenspan. Score: 1 / 1 Question 25 (1 point) Adam Smith believed that Student response: Percent Value Student Response Answer Choices a. people were hard-wired to be selfish. b. the government should manage most aspects of the economy. 100.0% c. allowing individuals to pursue their own self-interest is the most effective way to make a country wealthy. d. the division of labor should be managed by the government. Score: 1 / 1 Total score: 25 / 25 = 100.0% View Results Quiz 1.2 User ID: skim7 Attempt: 2 / 3 Out of: 25 Started: October 29, 2004 6:59am Finished: October 29, 2004 2:04pm Time spent: 7 hr, 4 min., 33 sec. Question 1 (1 point) X Y 2 8 4 2 6 0 8 2 10 8 Given the data above, if you were to plot the points you would see a(n): Student response: Percent Value Student Response Answer Choices a. downward sloping straight line b. upward sloping straight line c. upward sloping non-linear curve d. downward sloping non-linear curve 100.0% e. non-linear curve that switches from an inverse to a direct relationship Score: 1 / 1 Question 2 (1 point) Which of the following pair of variables is most likely to exhibit a direct relationship? Student response: Percent Value Student Response Answer Choices 100.0% a. the amount of sales (in $) and the number of hours that a business is open b. the amount of cloud cover and the amount of sunshine c. the price of bananas and the number of bananas purchased d. the number of acres of soybeans planted and the number of acres of potatoes planted on a single farm Score: 1 / 1 Question 3 (1 point) The slope of the line in the graph is equal to: Student response: Percent Value Student Response Answer Choices 100.0% a. ?3/4 b. ?4/3 c. 3/4 d. 5/6 e. 1 Score: 1 / 1 Question 4 (1 point) In the following figure, Student response: Percent Value Student Response Answer Choices 100.0% a. at all points, the slope of S1 > the slope of S2. b. at all points, the slope of S1 < the slope of S2. c. at points to the left of A, the slope of S1 > the slope of S2; at points to the right of A, the slope of S1 < the slope of S2. d. at points to the left of A, the slope of S1 < the slope of S2; at points to the right of A, the slope of S1 > the slope of S2. Score: 1 / 1 Question 5 (1 point) Why is the choice of units important in constructing a graph? Student response: Percent Value Student Response Answer Choices a. It affects whether a variable rises or falls. 100.0% b. It affects the apparent rate of change of one variable relative to the other. c. It affects which time periods can be considered. d. All of the above. Score: 1 / 1 Question 6 (1 point) The lower left-hand corner of a graph where the two axes meet is called the graph's origin. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 7 (1 point) The data used to construct a graph can show a steep line or a flat line depending on how the axes are measured. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 8 (1 point) Graphs are useful because of the way they Student response: Percent Value Student Response Answer Choices a. facilitate interpretation and analysis of data. b. convey an idea that might otherwise take many words. c. permit a person to easily see relationships. 100.0% d. All of the above are correct. Score: 1 / 1 Question 9 (1 point) A straight line through the origin always has a slope of one. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 10 (1 point) The tangent at point A on a curve has a positive slope. Therefore, Student response: Percent Value Student Response Answer Choices a. the curve has a positive slope at all points. 100.0% b. the curve has a positive slope at point A. c. the curve has a negative slope at all points. d. the curve has a negative slope at point A. Score: 1 / 1 Question 11 (1 point) When variable A rises by 10 units, variable B rises by 15 units. The slope of the line describing this relationship is Student response: Percent Value Student Response Answer Choices a. always 2/3. 100.0% b. either 2/3 or 1.5, depending on which variable goes on which axis of the graph. c. either 1.5 or -1.5, depending on which variable goes on which axis of the graph. d. always -1.5. Score: 1 / 1 Question 12 (1 point) The slope of a curved line differs from that of a straight line in that Student response: Percent Value Student Response Answer Choices a. the numerical value of the slope of a straight line is different at every point, but is the same at every point for a curved line. b. the numerical value of the slope of a straight line is always higher than the numerical value of the slope of a curved line. 100.0% c. the numerical value of the slope of a curved line is different at every point, but is the same at every point for a straight line. d. straight lines are more realistic, but curved lines are not descriptively accurate for the real world. Score: 1 / 1 Question 13 (1 point) A downward-sloping, straight line has a decreasing slope. Student response: Percent Value Student Response Answer Choices a. True. 100.0% b. False. Score: 1 / 1 Question 14 (1 point) The slope of a horizontal line is zero. Student response: Percent Value Student Response Answer Choices 100.0% a. True. b. False. Score: 1 / 1 Question 15 (1 point) The relationship between two variables is given by the equation Y = 5 + 2X. The relationship can be drawn as a line on a graph with Y on the vertical axis and X on the horizontal axis. Which of the following statements is true? Student response: Percent Value Student Response Answer Choices a. When X exactly doubles, Y exactly doubles. b. Multiplying both sides of the equation by 2 doubles the slope of the line. 100.0% c. Subtracting 2 from the right side of the equation shifts the line down by 2 units at every level of X. d. The line is twice as steep as the line given by the equation Y = 2.5 + 2X. Score: 1 / 1 Question 16 (1 point) Suppose a curve has a slope equal to zero at some point A. To the right of A, the curve may Student response: Percent Value Student Response Answer Choices a. have a positive slope. b. have a negative slope. c. be a straight line. 100.0% d. All of the above are correct. Score: 1 / 1 Question 17 (1 point) The following table gives data relating a variable X (measured on the horizontal axis) to a variable Y (vertical axis). The slope of the line described by this relationship is X 1 3 5 Y 6 14 22 Student response: Percent Value Student Response Answer Choices a. two. 100.0% b. four. c. eight. d. different at different points along the line. Score: 1 / 1 Question 18 (1 point) A straight line tangent to a curved line at a point Student response: Percent Value Student Response Answer Choices a. crosses the curved line at that point. b. crosses the curved line at many points. 100.0% c. has the same slope as the curved line at that point. d. has the same slope as the curved line at all points. Score: 1 / 1 Question 19 (1 point) A nonlinear function exhibits a relationship between two variables that Student response: Percent Value Student Response Answer Choices a. is constant over its entire range. 100.0% b. changes over the entire range. c. is random. d. is negative. Score: 1 / 1 Question 20 (1 point) The algebraic formula for a straight line is Student response: Percent Value Student Response Answer Choices a. a = y + bx 100.0% b. y = a + bx c. b = a + yx d. x = a + by Score: 1 / 1 Question 21 (1 point) Graphically, how would an increase in income affect the demand for hamburgers? Student response: Percent Value Student Response Answer Choices a. The slope of the demand curve would increase. b. The slope of the demand curve would decrease. 100.0% c. The demand curve would shift outward, parallel to the original demand curve. d. The demand curve would shift inward, parallel to the original demand curve. Score: 1 / 1 Question 22 (1 point) Given the equation P = $6.00 - $.40Q, where P is the price of the good and Q is the quantity of the good demanded, how many units will this consumer demand if the price is $3.60? Student response: Percent Value Student Response Answer Choices a. 1.44 units b. 3 units c. 3.6 units 100.0% d. 6 units Score: 1 / 1 Question 23 (1 point) Suppse Val increases her consumption of candy bars by 3 bars for every $.60 decrease in the price. The slope of Val's demand curve is Student response: Percent Value Student Response Answer Choices a. -$5.00. b. -$1.80. 100.0% c. -$.20. d. unable to be determined. Score: 1 / 1 Question 24 (1 point) Suppose the equation for Ted's demand curve is P = $2.00 - $.50Q. If Ted's income increased by $100 every week, how might we rewrite the equation? Student response: Percent Value Student Response Answer Choices 100.0% a. P = $3.00 - $.50Q b. P = $2.00 - $1.50Q c. P = $1.00 - $.50Q d. P = $2.00 - $.25Q Score: 1 / 1 Question 25 (1 point) To find the slope of a nonlinear function between any two points, you must use the "rise over run" formula that you use for a linear function. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Total score: 25 / 25 = 100.0% View Results Quiz 1.4 User ID: skim7 Attempt: 3 / 3 Out of: 20 Started: November 3, 2004 12:23pm Finished: November 3, 2004 12:25pm Time spent: 1 min. 54 sec. Question 1 (1 point) The graphical device which illustrates the concept of scarce resources being efficiently utilized in the economy is Student response: Percent Value Student Response Answer Choices a. a budget line. b. a time-series graph. 100.0% c. a production possibilities frontier. d. a consumption possibilities line. Score: 1 / 1 Question 2 (1 point) Which of the points in the graph are efficient? Student response: Percent Value Student Response Answer Choices a. C and F only b. C, D and F only c. A, C, D, F, and G only 100.0% d. A, C, F, and G only Score: 1 / 1 Question 3 (1 point) The opportunity cost of more capital goods today is Student response: Percent Value Student Response Answer Choices a. fewer capital goods in the future. b. fewer consumer goods in the future. 100.0% c. fewer consumer goods today. d. more unemployed resources in the future. Score: 1 / 1 Question 4 (1 point) Which of the following would NOT allow society to move to point h in the figure? Student response: Percent Value Student Response Answer Choices a. an improvement in technology 100.0% b. more efficient use of current resources c. an increase in quantity of labor d. an increase in quantity of capital Score: 1 / 1 Question 5 (1 point) If all resources are equally productive in producing all goods, the production possibilities curve will be Student response: Percent Value Student Response Answer Choices a. convex to the origin. b. concave to the origin. 100.0% c. linear. d. expanding over time. Score: 1 / 1 Question 6 (1 point) The shape of the production possibilities curve in the figure indicates that Student response: Percent Value Student Response Answer Choices a. production of corn is characterized by increasing costs while the production of cloth is characterized by decreasing costs. b. production of both corn and cloth is characterized by increasing costs. 100.0% c. production of both corn and cloth is characterized by constant costs. d. production of corn is characterized by constant costs and the production of cloth is characterized by increasing costs. Score: 1 / 1 Question 7 (1 point) Suppose an acre of land yields 100 bushels of corn and that one bushel of corn provides enough seed for one-quarter of an acre of land. The opportunity cost of consuming another bushel of corn today is Student response: Percent Value Student Response Answer Choices a. 100 bushels of corn next year. 100.0% b. 25 bushels of corn next year. c. 10 bushels of corn next year. d. 2.5 bushels of corn next year. Score: 1 / 1 Question 8 (1 point) If a country's production possibilities curve gets more bowed out over time, it is an indication that Student response: Percent Value Student Response Answer Choices a. technological change has taken place. b. society is learning to use its resources more efficiently. c. the quantity of labor and capital have increased. 100.0% d. resources have become more highly specialized. Score: 1 / 1 Question 9 (1 point) In the figure, how many units of corn are produced at point a? Student response: Percent Value Student Response Answer Choices a. 2000 100.0% b. 2500 c. 3000 d. We can't tell without more information. Score: 1 / 1 Question 10 (1 point) The production possibilities frontier illustrates Student response: Percent Value Student Response Answer Choices a. the fundamental concept of scarcity. b. the opportunity cost of acquiring more of one good. c. an economy's maximum output utilizing all resources efficiently. 100.0% d. All of the above are correct. Score: 1 / 1 Question 11 (1 point) Any point outside the boundary of a production possibilities frontier is Student response: Percent Value Student Response Answer Choices a. efficient. b. inefficient. 100.0% c. unattainable. d. attainable. Score: 1 / 1 Question 12 (1 point) Which of the following statements is FALSE? Student response: Percent Value Student Response Answer Choices 100.0% a. As society increases its wealth, the problem of scarcity disappears. b. The factors of production are used to produce outputs that help society satisfy its wants. c. Even though a society faces the problem of scarcity, it does not necessarily suffer from poverty. d. Land and labor are both factors of production. Score: 1 / 1 Question 13 (1 point) The law of increasing costs is due to Student response: Percent Value Student Response Answer Choices a. taxes. b. scarcity. c. the fact that it is more difficult to use resources efficiently the more society produces. 100.0% d. the fact that resources are not perfectly adaptable for alternative uses. Score: 1 / 1 Question 14 (1 point) Resources are also known as Student response: Percent Value Student Response Answer Choices a. factories. b. minerals. c. stocks, bonds, and other financial instruments. 100.0% d. factors of production. Score: 1 / 1 Question 15 (1 point) The opportunity cost for this economy to move from point B to point A is Student response: Percent Value Student Response Answer Choices a. 15 bushels of wheat. b. 90 bushels of wheat. c. 75 pounds of beef. 100.0% d. 25 pounds of beef. Score: 1 / 1 Question 16 (1 point) In one day, Joe can produce 24 bushels of wheat (W) or 8 pounds of rice (R). Joe's opportunity cost of 1 bushel of wheat is Student response: Percent Value Student Response Answer Choices 100.0% a. 1/3 pound of rice. b. 3 pounds of rice. c. 1/8 pound of rice. d. 8 pounds of rice. Score: 1 / 1 Question 17 (1 point) Moving from one point to another along a given production possibilities frontier, producing more of one good requires that Student response: Percent Value Student Response Answer Choices 100.0% a. less of the other good be produced. b. the production of the other good be held constant. c. more of the other good be produced. d. a better technology be employed. Score: 1 / 1 Question 18 (1 point) In the figure below, which of the points are efficient allocations of resources? Student response: Percent Value Student Response Answer Choices 100.0% a. A, B, and C b. B and C only c. C and B and D d. B only Score: 1 / 1 Question 19 (1 point) The point at which a PPF intersects the X axis is Student response: Percent Value Student Response Answer Choices a. unattainable. b. attainable but inefficient. 100.0% c. attainable and efficient. d. unattainable and inefficient. Score: 1 / 1 Question 20 (1 point) Assume this economy produces wheat in the fertile middle of the country and produces rice in the southern wetlands. What could explain th eshcnge in the country's PPF from PPF1 to PPF2? Student response: Percent Value Student Response Answer Choices a. a drought in the southern wetlands 100.0% b. a drought in the middle part of the country c. development of improved varieties of rice d. development of improved varieties of wheat Score: 1 / 1 Total score: 20 / 20 = 100.0% View Results Quiz 1.5 User ID: skim7 Attempt: 2 / 3 Out of: 25 Started: November 3, 2004 12:38pm Finished: November 3, 2004 12:40pm Time spent: 2 min. 31 sec. Question 1 (1 point) The person who can perform a task in the fewest hours Student response: Percent Value Student Response Answer Choices 100.0% a. has an absolute advantage in performing the task. b. has a comparative advantage in performing the task. c. has both an absolute advantage and a comparative advantage in performing the task. d. has an absolute advantage in performing the task but a comparative disadvantage in performing the task. Score: 1 / 1 Question 2 (1 point) Fred has an absolute advantage in painting and Barney has an absolute advantage in washing down walls. Assuming that the population consists only of Fred and Barney, we know that Student response: Percent Value Student Response Answer Choices a. neither has a comparative advantage in either task. 100.0% b. Fred has a comparative advantage in painting and Barney has a comparative advantage in washing down walls. c. Fred has a comparative advantage in washing down walls and Barney has a comparative advantage in painting. d. we can't tell who has a comparative advantage in painting or in washing down walls. Score: 1 / 1 Question 3 (1 point) Assume that Economy A and Economy B have the same resources, but that individuals in Economy A have specialized whereas individuals in Economy B have not. Given this information, you can determine that Student response: Percent Value Student Response Answer Choices 100.0% a. Economy A will have a higher output than Economy B. b. Economy A will have a lower output than Economy B. c. Economy A and Economy B will have identical outputs. d. Individuals in Economy A will have lower incomes than individuals in Economy B. Score: 1 / 1 Question 4 (1 point) When nations specialize in their areas of comparative advantage and then trade with the rest of the world, the result is that Student response: Percent Value Student Response Answer Choices a. the average standard of living in the world will go down. 100.0% b. the average standard of living in the world will go up. c. the world will move from a point on the production possibilities curve to a point inside the curve. d. worldwide economic efficiency will decrease. Score: 1 / 1 Question 5 (1 point) Comparative advantage is always a(n) ______ concept. Student response: Percent Value Student Response Answer Choices a. absolute b. efficiency 100.0% c. relative d. monetary Score: 1 / 1 Question 6 (1 point) Division of labor increases the output of society by Student response: Percent Value Student Response Answer Choices a. eliminating scarcity. b. reducing the choices people have to make to a more manageable number. c. ensuring that people are happier in performing their work. 100.0% d. allowing resources to specialize in the tasks for which they have a comparative advantage. Score: 1 / 1 Question 7 (1 point) Division of labor refers to Student response: Percent Value Student Response Answer Choices a. dividing tasks up into several subtasks and having one person perform these subtasks in a certain order. b. the separation of hourly workers from salaried workers. 100.0% c. assigning different workers to different tasks. d. separating union workers from nonunion workers. Score: 1 / 1 Question 8 (1 point) Which of the following statements is FALSE? Student response: Percent Value Student Response Answer Choices 100.0% a. As society increases its wealth, the problem of scarcity disappears. b. The factors of production are used to produce outputs that help society satisfy its wants. c. Even though a society faces the problem of scarcity, it does not necessarily suffer from poverty. d. Land and labor are both factors of production. Score: 1 / 1 Question 9 (1 point) Look at the following production possibilities table for drill presses and corn. The table shows the maximum combination of drills and bushels of corn that can be produced when all resources are fully employed. Drill Presses 10 20 30 40 50 Corn (bushels) 150 140 120 90 500 Based on the above information, Student response: Percent Value Student Response Answer Choices a. there is a constant trade-off between corn and drill presses. b. the opportunity cost of producing 30 drill presses instead of 20 drills is 120 bushels of corn. 100.0% c. the opportunity cost of producing 40 drill presses instead of 30 drills is 30 bushels of corn. d. the production possibilities curve for drill presses and corn will be a straight line. Score: 1 / 1 Question 10 (1 point) The following table illustrates the production possibilities for John and Mary if they spend all of their time producing bread and cheese. Bread Cheese John 4 8 Mary 8 14 Which of the following is true for John and Mary? Student response: Percent Value Student Response Answer Choices a. Mary has an absolute advantage in producing cheese. b. John has a comparative advantage in producing cheese. c. Mary has a comparative advantage in producing bread. 100.0% d. All of the above are true. Score: 1 / 1 Question 11 (1 point) Assuming that only two goods are produced in the world, which of the following is true? Student response: Percent Value Student Response Answer Choices a. It is impossible for a country to have an absolute advantage in producing both goods. b. It is possible for a country to have a comparative advantage in producing both goods. c. If trade exists and a country has an absolute advantage in producing one of the goods, that country will specialize in producing that good. 100.0% d. If trade exists, and a country has a comparative advantage in producing one of the goods, that country will specialize in producing that good. Score: 1 / 1 Question 12 (1 point) The average worker in the United States can produce 20 tons of coal or 10 tons of iron per hour. The average worker in Canada can produce 10 tons of coal or 10 tons of iron per hour. The United States has a comparative advantage in the production of Student response: Percent Value Student Response Answer Choices a. iron. 100.0% b. coal. c. both iron and coal. d. neither iron nor coal. Score: 1 / 1 Question 13 (1 point) In the following figure, the opportunity cost of a unit of wheat in terms of cotton is Student response: Percent Value Student Response Answer Choices 100.0% a. 1 for the U.S. and 5 for Egypt. b. 20 for the U.S. and 2 for Egypt. c. 1 for the U.S. and 2 for Egypt. d. 20 for the U.S. and 10 for Egypt. Score: 1 / 1 Question 14 (1 point) Trade between two countries Student response: Percent Value Student Response Answer Choices a. makes both countries worse off. b. can benefit one country but not both. 100.0% c. enables a country to move beyond (to a point outside) its production possibilities frontier. d. can only occur if one country is larger. Score: 1 / 1 Question 15 (1 point) Jim, Billy, and Bob are washing cars and cutting lawns for Ray's Neighborhood Services, Inc. In one day, Jim can wash four cars or cut two lawns; Billy can wash three cars or cut one lawn; Bob can wash one car or cut one lawn. Who has the comparative advantage in washing cars? Student response: Percent Value Student Response Answer Choices a. Jim 100.0% b. Billy c. Bob d. Billy and Bob have an equal comparative advantage. Score: 1 / 1 Question 16 (1 point) John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct? Student response: Percent Value Student Response Answer Choices 100.0% a. Harry has a comparative advantage in ironing. b. Harry has a comparative advantage in typing. c. Harry has an absolute advantage in typing. d. Harry has an absolute advantage in ironing. e. Neither can gain from specialization and trade. Score: 1 / 1 Question 17 (1 point) If Taiwanese workers can produce everything more cheaply than American workers, then Student response: Percent Value Student Response Answer Choices 100.0% a. Americans can still gain by trading with Taiwan. b. Americans can only lose if they import from Taiwan. c. Taiwan can only lose if it trades with America. d. There are no gains from trade that are possible in this case. Score: 1 / 1 Question 18 (1 point) Is it possible for a country to have an absolute disadvantage and a comparative advantage? Student response: Percent Value Student Response Answer Choices a. No, these are incompatible on theoretical grounds. b. No, theory prevents it, but some economists claim it could occur. 100.0% c. Yes, this situation can occur. d. Yes, in theory, although not in reality. Score: 1 / 1 Question 19 (1 point) The following graphs show the potential production for coats and books in Utopia and Transylvania. Both countries have equal amounts of resources available for production of coats or books. Which country has the comparative advantage in producing coats and books? Student response: Percent Value Student Response Answer Choices a. Utopia has the comparative advantage in producing both goods. 100.0% b. Utopia has the comparative advantage in producing coats; Transylvania has the comparative advantage in producing books. c. Utopia has the comparative advantage in producing books; Transylvania has the comparative advantage in producing coats. d. Neither country has a comparative advantage with either good because opportunity costs are equal. Score: 1 / 1 Question 20 (1 point) Trade between nations means that Student response: Percent Value Student Response Answer Choices a. one country is richer than the other. b. one country becomes richer while the other becomes poorer. 100.0% c. both trading nations show some gains. d. both trading nations will gain equally from the trade. Score: 1 / 1 Question 21 (1 point) The following graphs show the potential production for coats and books in Utopia and Transylvania. Both countries have equal amounts of resources available for production of coats or books. Which country has the absolute advantage in producing coats and books? Student response: Percent Value Student Response Answer Choices 100.0% a. Utopia has the absolute advantage in producing both goods. b. Utopia has the absolute advantage in producing coats; Transylvania has the absolute advantage in producing books. c. Utopia has the absolute advantage in producing books; Transylvania has the absolute advantage in producing coats. d. Transylvania can produce fewer goods with the same resources; therefore it has the absolute as well as comparative advantage. Score: 1 / 1 Question 22 (1 point) Using graphs to illustrate the concepts, Student response: Percent Value Student Response Answer Choices a. absolute advantage is shown with differences in the slope of the production possibilities frontiers, and comparative advantage is shown with a lower curve. 100.0% b. absolute advantage is shown with a higher production possibilities frontier, and comparative advantage is shown with differences in the slope of the frontiers. c. absolute advantage in one good requires that the slope of the production possibilities frontier be steeper for that good. d. absolute advantage cannot be shown with a graph, but comparative advantage can be shown with the position of the curve. Score: 1 / 1 Question 23 (1 point) In the U.S., it requires 20 labor hours to produce one bushel of wheat and 80 labor hours to produce one computer. In France, it requires 25 labor hours to produce one bushel of wheat and 75 labor hours to produce one computer. The opportunity cost of one bushel of wheat in France is Student response: Percent Value Student Response Answer Choices a. 4 computers. b. 25 labor hours. c. 3 computers. 100.0% d. 1/3 computer. Score: 1 / 1 Question 24 (1 point) In the U.S., it requires 20 labor hours to produce one bushel of wheat and 80 labor hours to produce one computer. In France, it requires 25 labor hours to produce one bushel of wheat and 75 labor hours to produce one computer. The U.S. and France could benefit from trade if the U.S. specializes in _____________ and France specializes in ______________. Student response: Percent Value Student Response Answer Choices a. computers; computers. b. computers; wheat. 100.0% c. wheat; computers. d. wheat; wheat. Score: 1 / 1 Question 25 (1 point) In the U.S., it requires 20 labor hours to produce one bushel of wheat and 80 labor hours to produce one computer. In France, it requires 25 labor hours to produce one bushel of wheat and 75 labor hours to produce one computer. If the U.S. and France trade based on their comparative advantages, the U.S. will import ______ and France will import ________. Student response: Percent Value Student Response Answer Choices a. wheat; wheat. b. computers; computers. c. wheat; computers. 100.0% d. computers; wheat. Score: 1 / 1 Total score: 25 / 25 = 100.0% View Results TEST 1 User ID: skim7 Attempt: 1 / 1 Out of: 100 Started: October 20, 2004 12:47pm Finished: October 29, 2004 8:12am Time spent: 211 hr, 24 min., 48 sec. Student exceeded allotted time of 180 min. by 208 hr, 24 min., 48 sec.. Question 1 (2 points) Explaining economic growth is: Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. considered part of macroeconomics. 0.0% b. considered part of microeconomics. 0.0% c. more political than economic. 0.0% d. none of the above. Score: 2 / 2 Question 2 (2 points) Economic theory simplifies relationships to explain how the relationships interact. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 3 (2 points) Economics is: Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the study of how limited resources are allocated to satisfy unlimited wants. 0.0% b. the study of how unlimited resources are allocated to satisfy limited wants. 0.0% c. how to make money in the stock market. 0.0% d. none of the above. Score: 2 / 2 Question 4 (2 points) The ceteris paribus assumption is used in economics because Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. it is too difficult to account for everything that might have an effect on behavior. 0.0% b. it makes it easier to track the thought processes of people, which is necessary to develop good theories. 0.0% c. people are self-interested and rational. 0.0% d. the more complex a model is, the better it is. Score: 2 / 2 Question 5 (2 points) An example of a normative macroeconomic question is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. does government spending increase unemployment? 0.0% b. does government spending increase inflation? 0.0% c. do government actions increase growth in the economy? 100.0% d. does government spending increase economic well-being? Score: 0 / 2 Question 6 (2 points) An increase in the price of gasoline will reduce the amount of gasoline purchased. This is: Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a normative economic statement. 100.0% b. a positive economic statement. 0.0% c. neither a normative nor a positive statement. 0.0% d. none of the above. Score: 2 / 2 Question 7 (2 points) Economics: Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. assumes individuals are rational and respond to different incentives. 0.0% b. assumes government involvement in the economy is always beneficial. 0.0% c. assumes individuals really have no choices other than what society imposes on them. 0.0% d. assumes irrationality if people are paid enough. Score: 2 / 2 Question 8 (2 points) Scarcity exists because Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. human wants are greater than what can be produced with the limited resources available. 0.0% b. not enough new technology is being used to eliminate scarcity. 0.0% c. the world is too small. 0.0% d. people are too greedy and refuse to share what they have with others. Score: 2 / 2 Question 9 (2 points) The additional opportunity cost of one more hour of sleep in the morning is Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. measured in terms of the most valuable activity forgone during that hour of additional sleep. 0.0% b. one less hour of sleep at some other time of the day. 0.0% c. not measurable. 0.0% d. not meaninful in terms of economics unless it can be measured in monetary terms. Score: 2 / 2 Question 10 (2 points) The government plays almost no role in the U.S. economy. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 11 (2 points) The government has a dominant role in a market economy such as the U.S. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 12 (2 points) The nation listed below whose economy comes closest to a centrally planned economy is Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. People's Republic of China. 0.0% b. Japan. 0.0% c. United Kingdom. 0.0% d. United States. Score: 2 / 2 Question 13 (2 points) Questions of what to produce, how to produce, and who will get the output must be faced by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. only developed economies. 0.0% b. centrally planned economies. 0.0% c. the economies of underdeveloped countries. 100.0% d. all economies. Score: 2 / 2 Question 14 (2 points) Economic value is created when Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the benefits of a trade exceed the costs of the trade. 0.0% b. a customer gets a product for less than the cost of producing it. 0.0% c. a store can sell an inferior product for full price. 0.0% d. the costs of a trade are exactly equal to the benefits of the trade. Score: 2 / 2 Question 15 (2 points) To decide how to allocate scarce resources, a laissez-faire economic system relies on Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. central planning. 100.0% b. prices. 0.0% c. barter. 0.0% d. a mix of planning and markets. Score: 0 / 2 Question 16 (2 points) If a curve has a negative slope, then Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. one variable falls as the other rises. 0.0% b. one variable does not change. 0.0% c. one variable has a smaller value than another. 0.0% d. one variable changes after another variable. Score: 2 / 2 Question 17 (2 points) The slope of a straight line Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. is the rise over the run. 0.0% b. is constant along the whole curve. 0.0% c. will be negative if there is an inverse relationship between the variables. 100.0% d. All of the above are true. Score: 0 / 2 Question 18 (2 points) A direct relationship between two variables indicates that Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. they are positively related. 0.0% b. a change in one will not affect the other. 0.0% c. the slope is negative. 0.0% d. an increase in one will cause a decrease in the other. Score: 2 / 2 Question 19 (2 points) The origin of a graph is the point at which Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a demand curve starts. 0.0% b. both variables have positive values. 100.0% c. both variables have values equal to zero. 0.0% d. any two curves on the graph intersect. Score: 2 / 2 Question 20 (2 points) Graphs are valuable because they facilitate interpretation of data. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 21 (2 points) A tangent is: Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. A straight line that shares a single point with another curve 0.0% b. A straight line that bisects a non-linear curve 0.0% c. The slope of the line segment between 2 points of a non-linear curve 0.0% d. A non-linear curve that gets close to, but never touches, the X or Y axis Score: 2 / 2 Question 22 (2 points) The tangent at point A on a curve has a positive slope. Therefore, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the curve has a positive slope at all points. 100.0% b. the curve has a positive slope at point A. 0.0% c. the curve has a negative slope at all points. 0.0% d. the curve has a negative slope at point A. Score: 2 / 2 Question 23 (2 points) Given the equation P = $6.00 - $.40Q, where P is the price of the good and Q is the quantity of the good demanded, how many units will this consumer demand if the price is $3.60? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 1.44 units 0.0% b. 3 units 0.0% c. 3.6 units 100.0% d. 6 units Score: 2 / 2 Question 24 (2 points) If two variables, consumption and income, are directly related, we can say that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a change in consumption will change income, but not vice versa. 100.0% b. if income increases, then consumption increases. 0.0% c. if income increases, then consumption will change, but it is impossible to say in which direction it will change. 0.0% d. if income increases, then consumption will decrease. Score: 2 / 2 Question 25 (2 points) Which statement about slopes is accurate? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. A horizontal line has a slope of 2, and a vertical line has a slope of -2. 0.0% b. A horizontal line has an infinite slope, and a vertical line has a slope of zero. 100.0% c. A horizontal line has a zero slope, and a vertical line has an infinite slope. 0.0% d. The slopes for horizontal and vertical lines cannot be calculated. Score: 2 / 2 Question 26 (2 points) Whenever a society forgoes current consumption to invest in capital goods, the Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. less the society can consume next year. 0.0% b. easier it will be for the society to consume less in the future because people will become accustomed to less. 100.0% c. more the society can produce and consume in the future. 0.0% d. less capital the society can produce in the future. Score: 2 / 2 Question 27 (2 points) When shifting from point A to point B, the opportunity cost of 1,000 additional tractors is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. one tractor. 0.0% b. 75 tons of butter. 100.0% c. 0.75 million tons of butter. 0.0% d. 4.75 million tons of butter. Score: 2 / 2 Question 28 (2 points) In the figure below, assume this economy is currently operating at point D. What is the opportunity cost of moving to B? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 200 bushels of wheat. 0.0% b. 200 bushels of soybeans. 0.0% c. infinite; B cannot be produced at any cost. 100.0% d. zero. Score: 2 / 2 Question 29 (2 points) In the following figure, a point such as E Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. is not obtainable. 0.0% b. is an efficient use of resources. 100.0% c. is an inefficient use of resources. 0.0% d. indicates that the society is a capitalist society. Score: 2 / 2 Question 30 (2 points) A PPF will be bowed outward if Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. there is scarcity. 0.0% b. increased production of one good means less production of the other good. 0.0% c. the supply of resources is fixed. 100.0% d. resources are not equally well-suited to the production of both goods. Score: 2 / 2 Question 31 (2 points) An efficient allocation of resources exists if Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. one group of people can get more of the things they want without someone else having to give up anything. 100.0% b. no one can get more of the things he wants without someone else having to give up something. 0.0% c. the economy operates at any point under the production possibilities frontier. 0.0% d. the economy is operating at any point above the production possibilities frontier. Score: 0 / 2 Question 32 (2 points) A point outside a production possibilities curve indicates Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. that resources are not being used efficiently. 100.0% b. an output combination that society cannot attain given its current level of resources and technology. 0.0% c. that resources are being used very efficiently. 0.0% d. that both goods are characterized by increasing costs. Score: 2 / 2 Question 33 (2 points) Any point inside the production possibilities frontier is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. efficient. 100.0% b. inefficient. 0.0% c. unattainable. 0.0% d. irrelevant. Score: 2 / 2 Question 34 (2 points) If an employee in a fast-food restaurant can produce 10 hamburgers per hour or 20 orders of French fries per hour, the cost of one bag of French fries is two hamburgers. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 0 / 2 Question 35 (2 points) The reason that most PPFs are bowed outward (concave) rather than a straight line is that most resources used in production are Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. equally suited for the production of all goods. 100.0% b. better suited for some goods than others. 0.0% c. used efficiently in production. 0.0% d. relatively more expensive at low levels of production. Score: 2 / 2 Question 36 (2 points) The production possibilities frontier represents Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the maximum amount of capital and labor available to society. 0.0% b. combinations of goods and services consumers can afford. 100.0% c. the maximum combinations of two goods that an economy can produce given its resources and technology. 0.0% d. the maximum rate of growth of capital and labor in a country. Score: 2 / 2 Question 37 (2 points) Between points b and c in the above figure, the opportunity cost of another bushel of corn is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 1 yard of cloth. 100.0% b. 1.25 yards of cloth. 100.0% c. 0.8yards of cloth. 0.0% d. 2.5 yards of cloth. Score: 2 / 2 Question 38 (2 points) In a farming economy that produces barley and flax, a new fertilizer is invented. The fertilizer works only on barley. The production possibilities frontier will Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. shift outward only from the barley axis. 0.0% b. shift inward only from the barley axis. 0.0% c. shift outward from both axes. 0.0% d. shift inward from both axes. Score: 2 / 2 Question 39 (2 points) In the U.S., it requires 20 labor hours to produce one bushel of wheat and 80 labor hours to produce one computer. In France, it requires 25 labor hours to produce one bushel of wheat and 75 labor hours to produce one computer. If the U.S. and France trade based on their comparative advantages, the U.S. will export ______ and France will export ________. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. wheat; wheat. 0.0% b. computers; computers. 100.0% c. wheat; computers. 0.0% d. computers; wheat. Score: 2 / 2 Question 40 (2 points) A person has a comparative advantage in an activity whenever she Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. has an absolute advantage in the activity. 100.0% b. can perform the activity at a lower opportunity cost than can another person. 0.0% c. can do the activity in less time than anyone else. 0.0% d. can do everything better than anyone else. Score: 2 / 2 Question 41 (2 points) The ability to produce a particular good using fewer resources than a second country is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. comparative advantage. 100.0% b. absolute advantage. 0.0% c. an unfair advantage. 0.0% d. a means of securing higher terms of trade. Score: 0 / 2 Question 42 (2 points) Which good a country specializes in is determined by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. unemployment in the country relative to other countries. 0.0% b. inflation in the country relative to other countries. 0.0% c. absolute advantage. 100.0% d. comparative advantage. Score: 2 / 2 Question 43 (2 points) Specialization of labor and trade yield greater economic efficiency when applied to interstate trade, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. but do not yield greater economic efficiency when applied to international trade. 0.0% b. but have no effect on efficiency when applied to international trade. 100.0% c. and when applied to international trade. 0.0% d. but only when specialization is based on absolute advantage. Score: 2 / 2 Question 44 (2 points) If one person has an absolute advantage in the production of both goods, then Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. that person must also have the comparative advantage in both goods. 0.0% b. that person cannot benefit from trade. 100.0% c. that person will have the comparative advantage in only one good. 0.0% d. it is in that person's interest to specialize in the production of both goods. Score: 0 / 2 Question 45 (2 points) The average worker in the United States can produce 20 tons of coal or 10 tons of iron per hour. The average worker in Canada can produce 10 tons of coal or 10 tons of iron per hour. Which conclusion is correct? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. The United States has an absolute advantage in the production of iron. 0.0% b. Canada has an absolute advantage in the production of iron. 0.0% c. Canada has an absolute advantage in the production of coal. 100.0% d. The United States has an absolute advantage in the production of coal. Score: 2 / 2 Question 46 (2 points) In Japan the opportunity cost of producing 1 VCR is 1 computer. In the United States the opportunity cost of producing 1 VCR is 2 computers. Japan has a comparative advantage in producing Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. VCRs. 0.0% b. computers. 0.0% c. both goods. 0.0% d. neither good. Score: 2 / 2 Question 47 (2 points) Using graphs to illustrate the concepts, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. absolute advantage is shown with differences in the slope of the production possibilities frontiers, and comparative advantage is shown with a lower curve. 100.0% b. absolute advantage is shown with a higher production possibilities frontier, and comparative advantage is shown with differences in the slope of the frontiers. 0.0% c. absolute advantage in one good requires that the slope of the production possibilities frontier be steeper for that good. 0.0% d. absolute advantage cannot be shown with a graph, but comparative advantage can be shown with the position of the curve. Score: 2 / 2 Question 48 (2 points) The person who can perform a task in the fewest hours Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. has an absolute advantage in performing the task. 0.0% b. has a comparative advantage in performing the task. 0.0% c. has both an absolute advantage and a comparative advantage in performing the task. 0.0% d. has an absolute advantage in performing the task but a comparative disadvantage in performing the task. Score: 2 / 2 Question 49 (2 points) The term "comparative disadvantage" means one party in a trade Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. has a lower opportunity cost than its trading partner. 100.0% b. has a higher opportunity cost than its trading partner. 0.0% c. has an absolute advantage in the goods that it is trading. 0.0% d. has no basis for trade with a trading partner. Score: 2 / 2 Question 50 (2 points) If there is an agricultural economy in which land can be used either as pasture for cattle or as crop land for wheat, the opportunity cost of converting one acre from pasture to wheat production is the Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. profits from the extra wheat production. 100.0% b. pounds of beef that are lost. 0.0% c. number of bushels of wheat produced on an acre. 0.0% d. total number of pounds of beef produced. Score: 0 / 2 Total score: 84 / 100 = 84.0% View Results Quiz 2.1 User ID: skim7 Attempt: 3 / 3 Out of: 25 Started: November 8, 2004 12:31pm Finished: November 8, 2004 12:36pm Time spent: 5 min. 6 sec. Question 1 (1 point) The demand curve for a good Student response: Percent Value Student Response Answer Choices a. connects points describing how much consumers actually bought at different prices during a particular period. b. connects points describing how much consumers actually bought at different prices in different periods. 100.0% c. connects points describing how much consumers would have been willing and able to buy at different prices during a particular period. d. connects points describing how much consumers would have been willing and able to buy at different prices in different periods. Score: 1 / 1 Question 2 (1 point) In an attempt to forecast enrollment, a major university hired an economist to give a "head count." One variable which she would probably emphasize more than any other in trying to forecast is Student response: Percent Value Student Response Answer Choices 100.0% a. tuition (the price of attending). b. the employment opportunities that college opens up. c. survey results on public interest in education. d. her instinct about what the public wants. Score: 1 / 1 Question 3 (1 point) The price of labor is the wage rate. What happens to the quantity of labor demanded if wages increase? Student response: Percent Value Student Response Answer Choices a. It increases. 100.0% b. It decreases. c. It does not change. d. Uncertain. Economic theory has no answer to this question. Score: 1 / 1 Question 4 (1 point) Demand and quantity demanded are the same thing. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 5 (1 point) The demand curve depicts information about the quantities demanded as prices have changed over several time periods. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 6 (1 point) Which of the following would cause an upward movement (to the left) along the demand curve for European autos in the United States? Student response: Percent Value Student Response Answer Choices a. an increase in the price of American autos b. a decrease in the price of American autos c. an increase in income in the United States 100.0% d. an increase in the price of European autos Score: 1 / 1 Question 7 (1 point) The demand curve for a typical good has Student response: Percent Value Student Response Answer Choices 100.0% a. a negative slope because some consumers switch to other goods as the price of the good rises. b. a negative slope because consumer incomes fall as the price of the good rises. c. a negative slope because the good has less "snob appeal" as its price falls. d. None of the above is correct. Score: 1 / 1 Question 8 (1 point) The law of demand states that Student response: Percent Value Student Response Answer Choices a. an increase in price will diminish the quantity demanded only if income falls as well. 100.0% b. an increase in price will diminish the quantity demanded if income remains constant. c. an increase in price can lead to an increase in the quantity demanded only if income goes up. d. the effect of an increase in price depends on how income changes. Score: 1 / 1 Question 9 (1 point) Assume the demand curve for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen (be careful of terminology!), Student response: Percent Value Student Response Answer Choices a. the demand for cookies will fall. b. the demand for cookies will rise. 100.0% c. a larger quantity of cookies will be demanded. d. a smaller quantity of cookies will be demanded. Score: 1 / 1 Question 10 (1 point) A decrease in price Student response: Percent Value Student Response Answer Choices 100.0% a. causes a downward movement (to the right) along the same demand curve. b. causes an upward movement (to the left) along the same demand curve. c. changes the demand curve. d. causes a downward movement (to the right) along the same demand curve if income decreases. Score: 1 / 1 Question 11 (1 point) A demand schedule shows Student response: Percent Value Student Response Answer Choices a. the "market potential" for a product. 100.0% b. how much consumers are willing and able to buy at different prices. c. possible combinations of output under different conditions. d. how much producers would like to sell at different prices. Score: 1 / 1 Question 12 (1 point) A demand curve can be thought of as Student response: Percent Value Student Response Answer Choices a. a graphical display of "market potential." 100.0% b. a graphical representation of the information in a demand schedule. c. showing how much people want to buy. d. a forecasting tool. Score: 1 / 1 Question 13 (1 point) Firms often seek to borrow money to expand their capital stock, and the price they pay for the money is the interest rate. What happens to quantity of money demanded if the interest rate increases? Student response: Percent Value Student Response Answer Choices a. It increases. 100.0% b. It decreases. c. It does not change. d. Uncertain. Economic theory has no answer to this question. Score: 1 / 1 Question 14 (1 point) If the government has stated that it will buy any amount of good X offered at $30, then which demand curve below is appropriate? Student response: Percent Value Student Response Answer Choices 100.0% a. b. c. d. Score: 1 / 1 Question 15 (1 point) A 1985 Harvard study showed that the price of cigarettes does not affect how much an individual smokes but whether he smokes. If this is correct, which of the below graphs shows the typical individual's demand curve for cigarettes? (This is a tough one!) Student response: Percent Value Student Response Answer Choices a. b. 100.0% c. d. Score: 1 / 1 Question 16 (1 point) If the government has stated that it will pay whatever it must to obtain 1,000 units of good X, then which demand curve in the figure below is appropriate? Student response: Percent Value Student Response Answer Choices a. 100.0% b. c. d. Score: 1 / 1 Question 17 (1 point) Which of the following would cause a decrease in the demand for Pepsi (i.e., a leftward shift of the Pepsi demand curve)? Student response: Percent Value Student Response Answer Choices a. An increase in the price of Coke. 100.0% b. A decrease in the price of Coke. c. An increase in the price of Pepsi. d. A decrease in the price of Pepsi. Score: 1 / 1 Question 18 (1 point) The Wall Street Journal reports that "hard times aid poultry companies as people eat cheaper fowl." In the language of economists, this means Student response: Percent Value Student Response Answer Choices 100.0% a. chicken is an inferior good. b. chicken is a normal good. c. demand for chicken does not obey the law of demand. d. people's tastes change during recessions. Score: 1 / 1 Question 19 (1 point) If VCRs and rental videos are complementary goods, then a decrease in the price of VCRs would increase the Student response: Percent Value Student Response Answer Choices a. demand for rental videos. b. quantity of VCRs demanded. c. quantity of rental videos demanded. 100.0% d. both demand for rental videos and quantity of VCRs demanded. Score: 1 / 1 Question 20 (1 point) If price rises, what happens to demand for a product? Student response: Percent Value Student Response Answer Choices a. It increases. b. It decreases. c. It does not change. 0.0% d. Uncertain. Economic theory has no answer to this question. Score: 0 / 1 Question 21 (1 point) Which of the following will shift the demand curve for good X? Student response: Percent Value Student Response Answer Choices 100.0% a. a change in the income of buyers of good X b. a change in the price of good X c. a change in the supply of good X d. All of the above are correct. Score: 1 / 1 Question 22 (1 point) Market demand curves are found by Student response: Percent Value Student Response Answer Choices a. vertically summing individual demand curves. 100.0% b. horizontally summing individual demand curves. c. summing individual demand curves in a parallel fashion. d. adding the slopes of individual demand curves. Score: 1 / 1 Question 23 (1 point) In the figure below, an increase in population (which will increase the number of buyers of the good) will change demand from Student response: Percent Value Student Response Answer Choices 100.0% a. D1 to D2 b. D2 to D1 c. D3 to D2 d. D3 to D1 Score: 1 / 1 Question 24 (1 point) Assume that the figure below shows demand for orange juice. An increase in the price of soda (a substitute for orange juice) will change demand from Student response: Percent Value Student Response Answer Choices 100.0% a. D1 to D2 b. D2 to D1 c. D3 to D2 d. D3 to D1 Score: 1 / 1 Question 25 (1 point) Assume that the figure below shows demand for new houses, a normal good. A decrease in the income of buyers will change demand from Student response: Percent Value Student Response Answer Choices a. D1 to D2 100.0% b. D2 to D1 c. D2 to D3 d. D1 to D3 Score: 1 / 1 Total score: 24 / 25 = 96.0% View Results TEST 2 User ID: skim7 Attempt: 1 / 1 Out of: 100 Started: November 11, 2004 2:17pm Finished: November 11, 2004 4:05pm Time spent: 1 hr, 48 min., 14 sec. Student finished 2 hr, 11 min., 46 sec. ahead of the 240 min. time limit. Question 1 (2 points) The slope of a demand curve is almost always Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. positive, because when people buy more of a good, the cost of producing it will rise. 0.0% b. positive, because the more money a person has, the more of a particular good will be bought. 0.0% c. negative, because when people buy more of a good, the cost of producing it will fall. 100.0% d. negative, because with everything else equal, people will buy more of a good when its price is lower. Score: 2 / 2 Question 2 (2 points) A demand curve for a normal good Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. slopes upward and to the right. 0.0% b. is constructed based on the assumption that income is rising. 0.0% c. is constructed based on the assumption that an inverse relationship exists between price and income. 100.0% d. shows the inverse relationship between price and quantity demanded. Score: 2 / 2 Question 3 (2 points) All of the following will affect the position of the demand curve EXCEPT Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. prices of the resources used to produce the product. 0.0% b. income. 0.0% c. consumer tastes and preferences. 0.0% d. buyers' expectations about future prices. Score: 2 / 2 Question 4 (2 points) If more buyers came into the market for a good, we would expect to see the market demand curve Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. shift inward. 0.0% b. remain unchanged since none of the determinants of individual demand changed. 100.0% c. shift outward. 0.0% d. reflect a positive relationship between price and quantity demanded. Score: 2 / 2 Question 5 (2 points) A demand curve can shift due to anything that affects consumers' willingness and ability to purchase the good EXCEPT changing price. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 6 (2 points) A demand schedule relates prices of a particular good to quantities demanded. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 7 (2 points) An increase in demand is shown graphically by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a shift of the demand curve to the left. 0.0% b. a movement to the right along the existing demand curve. 100.0% c. a shift of the whole demand curve to the right. 0.0% d. a movement up and to the left along the existing demand curve. Score: 2 / 2 Question 8 (2 points) An increase in the price of a good Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. will cause an increase in demand, because the good is now more valuable. 0.0% b. will cause a decrease in demand. 0.0% c. will cause an increase in the quantity demanded, because the good is now more valuable. 100.0% d. will cause a decrease in the quantity demanded. Score: 0 / 2 Question 9 (2 points) If incomes rise, most consumers will increase the quantity demanded of an inferior good. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 10 (2 points) Assume that orange juice and grapefruit juice are substitute goods. If orange juice prices double in 1997, there will be a Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. rightward shift in the demand for grapefruit juice. 0.0% b. rightward shift in the supply of grapefruit juice. 0.0% c. leftward shift in the supply of grapefruit juice. 0.0% d. leftward shift in the demand for grapefruit juice. Score: 2 / 2 Question 11 (2 points) After the price of milk increases, David buys more juice and less cereal. For David, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. milk, juice, and cereal are all substitutes. 0.0% b. milk and juice are complements, and milk and cereal are substitutes. 0.0% c. milk, juice, and cereal are all complements. 100.0% d. milk and juice are substitutes, and milk and cereal are complements. Score: 2 / 2 Question 12 (2 points) Assume that the figure below shows demand for cameras. An increase in the price of photographic film (a complement to cameras) changes demand from Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. D1 to D2 100.0% b. D2 to D1 0.0% c. D2 to D3 0.0% d. D1 to D3 Score: 2 / 2 Question 13 (2 points) An increase in the price of gasoline shifts the demand for tires to the Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. left, because gasoline and tires are substitutes. 100.0% b. left, because gasoline and tires are normally used together. 0.0% c. right, because gasoline and tires are substitutes. 0.0% d. right, because gasoline and tires are normally used together. Score: 2 / 2 Question 14 (2 points) Assume the demand curve for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen (be careful of terminology!), Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the demand for cookies will fall. 0.0% b. the demand for cookies will rise. 100.0% c. a larger quantity of cookies will be demanded. 0.0% d. a smaller quantity of cookies will be demanded. Score: 2 / 2 Question 15 (2 points) Which of the following would cause a decrease in the demand for Pepsi (i.e., a leftward shift of the Pepsi demand curve)? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. An increase in the price of Coke. 100.0% b. A decrease in the price of Coke. 0.0% c. An increase in the price of Pepsi. 0.0% d. A decrease in the price of Pepsi. Score: 2 / 2 Question 16 (2 points) To derive a market demand curve, add the quantity demanded by each individual in the market at each price and construct a new demand schedule. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 17 (2 points) A change in the price of a particular good will cause all of the following EXCEPT Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a movement along the same demand curve. 0.0% b. a change in the quantity demanded. 100.0% c. a shift in the demand curve. Score: 2 / 2 Question 18 (2 points) The quantity supplied of a particular good is the amount of the good that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. households are willing to consume at each particular price. 0.0% b. firms will actually end up buying at a particular price during a given time period. 100.0% c. firms are willing to sell at each price during a particular time period. 0.0% d. households want firms to sell at each price during a particular time period. Score: 2 / 2 Question 19 (2 points) An increase in the price of coffee will Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. decrease the demand for coffee. 0.0% b. increase the demand for coffee. 100.0% c. increase the quantity supplied of coffee. 0.0% d. increase the supply of coffee. Score: 2 / 2 Question 20 (2 points) All of the following will cause the supply curve of good A to shift rightward EXCEPT Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a reduction in the prices of inputs used to produce good A. 0.0% b. an increase in the number of firms in the industry producing good A. 0.0% c. an improvement in the technology used to produce good A. 100.0% d. an increase in the market price of good A. Score: 2 / 2 Question 21 (2 points) Which of the following will NOT affect the market supply curve for a good? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. There is a new technology in producing the good. 100.0% b. The price of the good increases. 0.0% c. The number of sellers in the market increases. 0.0% d. There is an increase in the prices of the inputs used in production. Score: 2 / 2 Question 22 (2 points) Which of the following will shift the supply curve to the right? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. input prices rise 0.0% b. a new excise tax 0.0% c. prices are expected to be higher in the future 100.0% d. prices are expected to be lower in the future Score: 2 / 2 Question 23 (2 points) The supply of a good can be changed by: Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Costs of inputs. 0.0% b. Number of firms in the industry. 0.0% c. Technology. 100.0% d. All of the above. Score: 2 / 2 Question 24 (2 points) All of the following will decrease the supply of airline flights EXCEPT Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. A rise in the price of jet fuel (an input). 0.0% b. A reduction in the number of airline companies offering service. 100.0% c. A technological change that makes airplanes safer and more fuel-efficient. 0.0% d. An increase in the salaries of pilots (an input). Score: 2 / 2 Question 25 (2 points) A decrease in the market price of a product, ceteris paribus, results in Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. a movement down (to the left) along a given supply curve, decreasing quantity supplied. 0.0% b. a movement up (to the right) along a given supply curve, increasing quantity supplied. 0.0% c. an inward shift of the supply curve. 0.0% d. an outward shift of the supply curve. Score: 2 / 2 Question 26 (2 points) Assume that the figure below shows the supply of soda. An increase in the price of syrup used in the production of soda will shift supply from Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. S1 to S2 100.0% b. S2 to S1 0.0% c. S2 to S3 0.0% d. S1 to S3 Score: 2 / 2 Question 27 (2 points) If a pretzel firm expects the price of pretzels to rise next week, it will Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. sell fewer pretzels this week and save the supply for when the price increases. 0.0% b. sell more pretzels this week. 0.0% c. sell no pretzels next week. 0.0% d. do nothing. Score: 2 / 2 Question 28 (2 points) A supply curve is a collection of points on a graph illustrating th erelationshipo between the quantity supplied for a particular product and Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the quantity demanded. 100.0% b. the product's price. 0.0% c. the price of the product's inputs. 0.0% d. the firm's expectations about future prices. Score: 2 / 2 Question 29 (2 points) Equilibrium in a market occurs when Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the market price leads to a decrease in quantity demanded. 100.0% b. quantity supplied and quantity demanded are equal at the market price. 0.0% c. demand and supply indicate a small surplus of a good. 0.0% d. price is at its minimum. Score: 2 / 2 Question 30 (2 points) An increase in demand will have what effect on equilibrium price and quantity? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Price will increase, quantity will decrease. 0.0% b. Price will decrease, quantity will increase. 100.0% c. Both price and quantity will increase. 0.0% d. Both price and quantity will decrease. Score: 2 / 2 Question 31 (2 points) Other things remaining equal, if the demand for beef increases, Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. The equilibrium price and quantity of beef will rise. 0.0% b. The equilibrium price and quantity of beef will fall. 0.0% c. The equilibrium price of beef will fall and the equilibrium quantity will rise. 0.0% d. The equilibrium price of beef will rise and the equilibrium quantity will fall. Score: 2 / 2 Question 32 (2 points) If the price of a good decreases, which of the following will occur? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. The demand will increase. 100.0% b. The quantity demanded will increase. 0.0% c. The supply will decrease. 0.0% d. The quantity supplied will increase. Score: 2 / 2 Question 33 (2 points) Which of the following will shift the demand curve for milk to the right? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. A decrease in the price of Nestle's Quick chocolate mix (a complement. 0.0% b. A decrease in the price of orange juice (a substitute). 0.0% c. A decrease in the price of milk. 0.0% d. A decrease in the price of cattle feed (an input). Score: 2 / 2 Question 34 (2 points) The Red Jacket Mountain View Inn in New Hampshire charges $99 per room in the winter ski season and $94 during the summer months. The number of rooms and operating costs are constant year 'round. These prices indicate Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a rightward shift in the demand curve in the summer. 100.0% b. a rightward shift in the demand curve in the winter. 0.0% c. a leftward shift in the supply curve in the summer. 0.0% d. a leftward shift in the demand curve in the winter. Score: 0 / 2 Question 35 (2 points) This is a hard test, huh. (I think supply and demand, particularly the specific terminology, is the toughest thing we do all semester.) Therefore, just pick the answer below that you think I'm looking for! (Hint: Put option 1. And if you miss it, I'll never let you forget it!) Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Economics is a wonderful subject that everyone finds interesting. 0.0% b. Illinois highways are always well maintained. In fact, they're among the best in the country! 0.0% c. Spring break should be cancelled because students miss being in the classroom. Score: 2 / 2 Question 36 (2 points) Price per Quantity Demanded Quantity Supplied Constant- of Constant-Quality of Constant-Quality Quality Unit Units per Year Units per Year ----------------------------------------------------- $1.00 1,000 200 2.00 800 400 3.00 600 600 4.00 400 800 5.00 200 1,000 According the table, at a price of $2 per unit, which of the following would exist? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a shortage (excess demand) of 800 units 0.0% b. a surplus (excess supply) of 800 units 0.0% c. a shortage (excess demand) of 200 units 100.0% d. a shortage (excess demand) of 400 units Score: 2 / 2 Question 37 (2 points) A surplus will tend to occur at which price in the following figure? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. P1 0.0% b. P2 0.0% c. P3 0.0% d. None of the above. Score: 2 / 2 Question 38 (2 points) If there are empty seats at the university basketball game when the price per ticket is P*, then this situation can best be represented by which graph below? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 100.0% b. 0.0% c. 0.0% d. Score: 2 / 2 Question 39 (2 points) The demand and supply curves for video rentals are given below. All of the following are true EXCEPT: Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. At P = $5, quantity supplied exceeds quantity demanded. 0.0% b. At P = $4, there is no excess supply nor excess demand. 0.0% c. The equilibrium price is $4 and the equilibrium quantity is 8. 100.0% d. At P = $5, quantity demanded exceeds quantity supplied. Score: 2 / 2 Question 40 (2 points) In free markets, the result of a shortage is to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. reduce demand for the good. 0.0% b. increase demand for the good. 100.0% c. increase the price. 0.0% d. decrease the price. Score: 2 / 2 Question 41 (2 points) In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart. In February, 3,000 quarts are sold at $2.50 a quart. This change in quantity sold and price may have been caused by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a reduction in wages in the Boston area. 0.0% b. the introduction of labor-saving automated ice cream-packing machinery. 100.0% c. the release of a medical study showing that ice cream consumption improves mental health. 0.0% d. the decision by Boston ice cream sellers to eliminate discount coupons. Score: 2 / 2 Question 42 (2 points) When there is excess demand for sugar in the market, the bidding mechanism will Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. push down the price of sugar. 0.0% b. result in no change in the reservation prices of consumers. 0.0% c. have no effect on the price of sugar. 100.0% d. push up the price of sugar. Score: 2 / 2 Question 43 (2 points) An increase in the demand for chocolate bars results in Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. a price increase and a quantity increase. 0.0% b. a price decrease and a quantity decrease. 0.0% c. a price increase and a quantity decrease. 0.0% d. a price decrease and a quantity increase. Score: 2 / 2 Question 44 (2 points) Examine the graph. If the government imposes a rent control on this market and sets the maximum apartment rental at $1000 per month, the market will Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. have a shortage of 400 apartments. 0.0% b. have a surplus of 400 apartments. 0.0% c. a shortage of 200 apartments. 100.0% d. be in equilibrium. Score: 2 / 2 Question 45 (2 points) An effective, well-intentioned minimum wage law can be expected to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. clear the market for unskilled workers. 0.0% b. increase employment for those covered under the law. 0.0% c. lower costs of production for firms who pay workers the minimum wage. 100.0% d. reduce the hours worked for some unskilled workers. Score: 0 / 2 Question 46 (2 points) If rent controls for apartments were established below the market rental rates, we would expect Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. a shortage of apartments to develop. 0.0% b. a surplus of apartments to develop. 0.0% c. equilibrium rents to fall below the rates set by rent control. 0.0% d. a building boom in apartments. Score: 2 / 2 Question 47 (2 points) If some transactions are blocked in a rent-controlled apartment market, potential buyers may try to rent the scarce apartments Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. by attempting to get more suppliers into the market. 100.0% b. by bribing landlords. 0.0% c. by building their own apartments. 0.0% d. by getting the landlords to raise the rents. Score: 2 / 2 Question 48 (2 points) If the government decides to increase the minimum wage rate paid to unskilled workers, which of the following would most likely occur? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Unemployment among unskilled workers would decrease. 100.0% b. Unemployment among unskilled workers would increase. 0.0% c. There would be a shortage of unskilled labor. 0.0% d. Workers and their employers would ignore the minimum wage. Score: 2 / 2 Question 49 (2 points) The tax wedge can be identified as Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the consumer's demand price and the seller's price. 0.0% b. the difference between the equilibrium price and the costs of producer inputs. 0.0% c. the difference between total surplus and consumer surplus. 0.0% d. graphically the area beneath the demand curve and above the equilibrium price. Score: 0 / 2 Question 50 (2 points) If an excise tax is imposed on buyers, the market demand curve will shift inward. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Total score: 92 / 100 = 92.0% View Results Quiz 3.5 User ID: skim7 Attempt: 1 / 3 Out of: 20 Started: November 17, 2004 12:54pm Finished: November 23, 2004 6:09pm Time spent: 149 hr, 14 min., 28 sec. Question 1 (1 point) The unemployment rate is defined as Student response: Percent Value Student Response Answer Choices a. the reciprocal of the labor force participation rate. b. the raw number of workers who want a job but do not have one. c. the number of unemployed workers divided by the total adult population. 100.0% d. the percentage of the labor force that is not employed. Score: 1 / 1 Question 2 (1 point) If the total population in the U.S. is 275 million, the adult population is 215 million, the number employed is 140 million, and the number of unemployed is 10 million, then the labor force participation rate is ________. Student response: Percent Value Student Response Answer Choices 100.0% a. 69.7% b. 54.5% c. 65.1% d. 50.9% Score: 1 / 1 Question 3 (1 point) Critics argue that the Bureau of Labor Statistics' measurement of the unemployment rate understates the actual amount of unemployment because it Student response: Percent Value Student Response Answer Choices a. does not include children under 18. 100.0% b. does not factor in part-time employees who would rather have full-time employment. c. unfairly includes employees who may have been laid off only days prior to the survey. d. calculates the rate in a way that exaggerates the effect of discouraged workers. Score: 1 / 1 Question 4 (1 point) Which of the following cases is an example of structural unemployment? Student response: Percent Value Student Response Answer Choices a. An accountant quits her job to become an investment banker. b. An auto worker is fired for poor job performance. 100.0% c. A wheat farmer, whose income has plummeted because of a new trade agreement, quits farming and starts looking for a new job. d. A consultant is laid off becuase poor economic conditions have depressed the market for consultants. Score: 1 / 1 Question 5 (1 point) The government is most likely to intervene when ________ unemployment rises sharply. Student response: Percent Value Student Response Answer Choices a. structural b. frictional c. seasonal 100.0% d. cyclical Score: 1 / 1 Question 6 (1 point) The lowest rate of unemployment that does not create inflationary pressure is called the Student response: Percent Value Student Response Answer Choices a. NERU: Non-Expansionary Rate of Unemployment. b. MUR: Minimal Unemployment Rate. 100.0% c. NAIRU: Non-Accelerating Inflation Rate of Unemployment. d. NRU: Natural Rate of Unemployment Score: 1 / 1 Question 7 (1 point) The natural rate of unemployment is the sum of __________ unemployment and ___________ unemployment. Student response: Percent Value Student Response Answer Choices 100.0% a. frictional; structural b. cyclical; structural c. frictional; cyclical d. seasonal; cyclical Score: 1 / 1 Question 8 (1 point) Which of the following factors best supports the relationship illustrated by the Phillips curve? Student response: Percent Value Student Response Answer Choices 100.0% a. When unemployment falls, competition for workers causes wages to rise, and the higher wages are passed along to consumers in the form of higher prices. b. When the economy stays at the NAIRU, inflationary pressures are minimal, leading to a stable inflation rate. c. When unemployment rises, the overall economy can contract, which in turn can lead to a rising inflation rate. d. Lower unemployment leads to increased total income, which increass both consumer spending and GDP. Score: 1 / 1 Question 9 (1 point) Welfare reform in the late 1990s required that recipients seek jobs. Most states implemented training programs for the individuals who entered the labor force off of the welfare roles. This policy is useful for combating _____________ unemployment. Student response: Percent Value Student Response Answer Choices a. frictional 100.0% b. structural c. cyclical d. all three types of Score: 1 / 1 Question 10 (1 point) When there is full employment (or when the economy is at the natural rate of unemployment), Student response: Percent Value Student Response Answer Choices a. unemployment is zero. b. frictional unemployment still exists, but there is no structural or cyclical unemployment. 100.0% c. unemployment is still positive. d. inflation is zero. Score: 1 / 1 Question 11 (1 point) When the unemployment rate is above the natural rate of unemployment, the government response is likely to be to Student response: Percent Value Student Response Answer Choices a. increase job training programs to retrain unemployed workers. 100.0% b. implement policies, like tax cuts, to stimulate the economy. c. increase job placement activities. d. any of the above. Score: 1 / 1 Question 12 (1 point) In 1993 the adult population in the United States was about 195 million people. Of these, approximately 121 million were employed and 9 million were unemployed. Thus, the labor force was ______ million people and the unemployment rate was about ______ percent. Student response: Percent Value Student Response Answer Choices a. 195, 4.6 b. 121, 7.4 100.0% c. 130, 6.9 d. 204, 4.4 Score: 1 / 1 Question 13 (1 point) Which of the following does NOT cause unemployment to increase during a recession? Student response: Percent Value Student Response Answer Choices 100.0% a. The labor force shrinks. b. Firms hire fewer workers. c. The duration of unemployment increases. Score: 1 / 1 Question 14 (1 point) Which government agency is responsible for measuring unemployment? Student response: Percent Value Student Response Answer Choices a. The Bureau of the Census. 100.0% b. The Bureau of Labor Statistics. c. The Council of Economic Advisors. d. all of the above. Score: 1 / 1 Question 15 (1 point) When output _________, unemployment is expected to ________. Student response: Percent Value Student Response Answer Choices a. rises; rise. 100.0% b. rises; fall. c. falls; remain constant. d. remains constant; fall. Score: 1 / 1 Question 16 (1 point) The total labor force is comprised of Student response: Percent Value Student Response Answer Choices 100.0% a. the unemployed and the employed. b. only the employed. c. all individuals age 16 or over. d. only full-time employed individuals between the ages of 18 and 55. Score: 1 / 1 Question 17 (1 point) As the baby boom generation entered the labor force, the natural rate of unemployment increased, probably because Student response: Percent Value Student Response Answer Choices a. the labor force was larger. 100.0% b. frictional unemployment increased. c. structural unemployment increased. d. cyclical unemployment increased. Score: 1 / 1 Question 18 (1 point) If we compare the unemployment rates across age, race and gender, we find that Student response: Percent Value Student Response Answer Choices a. females have higher unemployment rates than males. b. the rate of white unemployment is lower than that for blacks. c. adult workers have lower unemployment rates than teenagers. 100.0% d. all of the above. Score: 1 / 1 Question 19 (1 point) Newer automobiles use many computerized components. "Old style" auto mechanics who lose their jobs because they do not know how to fix the computerized components are an example of Student response: Percent Value Student Response Answer Choices a. frictional unemployment. 100.0% b. structural unemployment. c. cyclical unemployment. d. normal unemployment. Score: 1 / 1 Question 20 (1 point) Which of the following people should be included in the labor force? Student response: Percent Value Student Response Answer Choices a. someone who doesn't have a job and isn't looking for one 100.0% b. someone who is unemployed c. someone who is 15 years old d. none of the above Score: 1 / 1 Total score: 20 / 20 = 100.0% View Results Quiz 3.7 User ID: skim7 Attempt: 2 / 3 Out of: 15 Started: December 7, 2004 6:19am Finished: December 7, 2004 6:20am Time spent: 1 min. 31 sec. Question 1 (1 point) A rise in the minimum wage will tend to _________ the quantity demanded of labor and __________ the quantity supplied of labor. Student response: Percent Value Student Response Answer Choices 100.0% a. decrease; increase b. increase; decrease c. decrease; decrease d. increase; increase Score: 1 / 1 Question 2 (1 point) Which of the following statements is NOT a valid argument that critics might use against the minimum wage? Student response: Percent Value Student Response Answer Choices a. A minimum wage will result in increased unemployment. b. Small business owners will be hurt by the additional labor cost imposed by the minimum wage. c. Unskilled workers will end up suffering more than skilled workers if a minimum wage is enacted. 100.0% d. Because the minimum wage prevents businesses from substituting capital for labor, total output will fall. Score: 1 / 1 Question 3 (1 point) According to Steven Tomlinson, which group of people is most likely to lose jobs when a minimum wage law is passed? Student response: Percent Value Student Response Answer Choices a. poor minorities b. upper middle-class whites who own businesses 100.0% c. middle-class teenagers d. primarily union workers Score: 1 / 1 Question 4 (1 point) Which of the following statements about unions is NOT true? Student response: Percent Value Student Response Answer Choices a. Unions have a right to form by law. b. The National Labor Relations board oversees the activities of unions. 100.0% c. Unions have fought successfully in many states for right-to-work laws. d. Unions typically demand higher wages and better working conditions for their members Score: 1 / 1 Question 5 (1 point) Negotiations between labor union representatives and the management of a firm are called Student response: Percent Value Student Response Answer Choices a. strikes. 100.0% b. collective bargaining. c. legally binding arbitration. d. feather bedding. Score: 1 / 1 Question 6 (1 point) Right-to-work laws Student response: Percent Value Student Response Answer Choices a. shift power away from firms by permitting the formation of unions. b. permit unions to bargain for no-loss negotiations, i.e., contracts in which the firms agree not to fire any union members without cause. c. give employers the right to disband labor unions. 100.0% d. make it illegal for an employer to require union membership as a condition of employment. Score: 1 / 1 Question 7 (1 point) Imagine that a firm employs 100 people, all union members, at a salary of $10 per hour. If the union bargains the wage up to $12 per hour and forces the firm to keep all 100 employees, how would we depict this even in a supply-and-demand graph? Student response: Percent Value Student Response Answer Choices a. Shift the labor supply curve outward to reflect the higher wage. 100.0% b. Shif the firm's demand curve for labor outward. c. Move upward along the same demand curve for labor to a new equilibrium point. d. The firm's demand curve for labor will shift inward to reflect its disincentive to hire workers at the higher wage. Score: 1 / 1 Question 8 (1 point) In general, a firm that pays the efficiency wage will demand __________ workers. Student response: Percent Value Student Response Answer Choices a. more, better-qualified 100.0% b. fewer, better-qualified c. more, lesser-qualified d. fewer, lesser-qualified Score: 1 / 1 Question 9 (1 point) Margaret owns a small accounting firm, and she needs to hire some additional help. The market wage for accountants is $20 per hour. According to the efficiency wage theory, Margaret should Student response: Percent Value Student Response Answer Choices a. pay new accountants $20 per hour in order to maximize economic efficiency. b. pay less than $20 per hour to her new accountants, so that she can avoid a situation of adverse selection. 100.0% c. pay more than $20 per hour in order to attract more highly-skilled accountants. d. hire accountants to the point where marginal social benefit equals marginal social cost. Score: 1 / 1 Question 10 (1 point) A factory employs a team of 10 workers. Each of the 10 workers knows how much she can produce, but the factory has no way to measure the output of any individual worker, only the team as a whole. This is a situation involving Student response: Percent Value Student Response Answer Choices a. adverse selection. 100.0% b. assymetric information. c. moral hazard. d. non-price selection. Score: 1 / 1 Question 11 (1 point) Economists would expect that unemployment insurance would increase the unemployment rate. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 12 (1 point) Mike buys homeowner's insurance, which protects him from the financial risk of having his possessions stolen. If, as a result of having this insurance, Mike becomes less diligent about locking doors and closing windows, economists would say this is a situation involving Student response: Percent Value Student Response Answer Choices a. adverse selection. b. counter-insurance behavior. c. asymmetric information. 100.0% d. moral hazard. Score: 1 / 1 Question 13 (1 point) If unemployment insurance were restricted to two weeks of benefits, workers who lost their jobs due to __________ unemployment would be liekly to suffer the most. Student response: Percent Value Student Response Answer Choices 100.0% a. structural b. frictional c. voluntary d. contractionary Score: 1 / 1 Question 14 (1 point) According to the figure, the market clearing wage rate is Student response: Percent Value Student Response Answer Choices 100.0% a. We. b. Wm. c. We - Wm. d. Wm + We. Score: 1 / 1 Question 15 (1 point) According to the figure, if the government imposes a minimum wage equal to Wm, the effect will be Student response: Percent Value Student Response Answer Choices 100.0% a. unemployment shown by the line segment AC. b. an decrease in unemployment Qe to Qd. c. a decrease in labor supplied, from C to E. d. an increase in labor supplied, from A to E. Score: 1 / 1 Total score: 15 / 15 = 100.0% View Results Quiz 3.8 User ID: skim7 Attempt: 1 / 3 Out of: 15 Started: November 23, 2004 6:10pm Finished: November 23, 2004 6:12pm Time spent: 2 min. 24 sec. Question 1 (1 point) The United States experienced a period of stagflation during the 1970s that was attributable to Student response: Percent Value Student Response Answer Choices a. post-Watergate malaise. b. rising deficits due to the Vietnam War. 100.0% c. sharp increases in oil prices. d. the 1973 Treasury Department decision to print a substantial amount of additional money. Score: 1 / 1 Question 2 (1 point) People are most likely to revert to barter in periods of Student response: Percent Value Student Response Answer Choices a. stagflation. b. deflation. 100.0% c. hyperinflation. d. recession. Score: 1 / 1 Question 3 (1 point) In the 1970s, the U.S. experienced a period of inflation due to sudden increases in oil prices. This is an example of Student response: Percent Value Student Response Answer Choices a. demand-pull inflation. b. the wage-price spiral. c. price destruction. 100.0% d. cost-push inflation. Score: 1 / 1 Question 4 (1 point) Which of the following is an accurate explanation of the wage-price spiral? Student response: Percent Value Student Response Answer Choices a. When labor costs rise, it causes a self-perpetuating form of cost-push inflation. 100.0% b. Higher prices cause workers to demand higher wages. The higher wages raise production costs, which must be passed along to the consumer in the form of further price increases. c. When one firm pays the efficiency wage, it raises the opportunity cost for all other workers in the industry, necessitating raises. d. Workers in periods of hyperinflation demand to be paid in the form of goods, rather than cash, which further devalues the currency. Score: 1 / 1 Question 5 (1 point) Increased production costs are associated with Student response: Percent Value Student Response Answer Choices a. demand-pull inflation only. b. cost-push inflation only. c. neither demand-pull inflation nor cost-push inflation. 100.0% d. both demand-pull inflation and cost-push inflation. Score: 1 / 1 Question 6 (1 point) Which of the following factors would be most likely to determine whether consumer spending increases or decreases during a period of inflation? Student response: Percent Value Student Response Answer Choices a. the unemployment rate 100.0% b. consumers' expectations of the future rate of inflation c. the rate of inflation's impact on consumers' purchasing power d. the source of the inflation (cost-push or demand-pull) Score: 1 / 1 Question 7 (1 point) Which of the following forms of payment would be included in the calculation of the money supply? Student response: Percent Value Student Response Answer Choices a. credit cards 100.0% b. checks c. durable goods d. stocks and bonds Score: 1 / 1 Question 8 (1 point) Imagine that the money supply's velocity is 8. Which of the following is an accurate statment? Student response: Percent Value Student Response Answer Choices a. Any given dollar could not have been passed around more than 8 times during the year. b. One-eighth of the money supply changed hands during the year. c. Prices could not have risen by more than 800% during the year. 100.0% d. Currency changed hands an average of 8 times during the year. Score: 1 / 1 Question 9 (1 point) Assume that the velocity of the money supply is held constant. In the classical view of money, which of the following statements is true? Student response: Percent Value Student Response Answer Choices 100.0% a. Changes in the money supply affect only prices. b. Changing the money supply influences both the price level and the quantity of output. c. The money supply must remain fixed. d. A change in the price level must be matched with a reciprocal change in the money supply. Score: 1 / 1 Question 10 (1 point) Imagine that the money supply doubles in an economy that produces only vacuum cleaners, and assume that the velocity of the money supply is fixed. Before the money supply was expanded, the level of output was 20 vacuum cleaners and the price was $100 per vacuum. According to the classical view of money, what will be the level of output and price after the money supply doubles? Student response: Percent Value Student Response Answer Choices a. 40 vacuum cleaners; $100 b. 40 vacuum cleaners; $200 100.0% c. 20 vacuum cleaners; $200 d. 20 vacuum cleaners; $50 Score: 1 / 1 Question 11 (1 point) In a period of inflation, since paychecks inflate at the same rate as prices, economists would not expect a negative impact on the consumer. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 12 (1 point) Inflation tends to redistribute wealth from Student response: Percent Value Student Response Answer Choices a. borrowers to lenders. 100.0% b. lenders to borrowers. c. the government to consumers. d. consumers to the government. Score: 1 / 1 Question 13 (1 point) Which of the following is NOT a cost that can be attributed to inflation? Student response: Percent Value Student Response Answer Choices a. higher interest rates b. confusion (and resulting inefficiency) about the relative value of investments 100.0% c. increased government debts d. wasted time because of consumers' decisions to hold less cash Score: 1 / 1 Question 14 (1 point) Suppose the GDP deflator rose from 1.00 to 1.06 from 1995 to 2000. Which of the following statements is true? Student response: Percent Value Student Response Answer Choices a. Prices decreased 6% in 5 years. 100.0% b. Purchasing power decreased 6% in 5 years. c. Prices increased 60% in 5 years. d. Purchasing power decreased 60% in 5 years. Score: 1 / 1 Question 15 (1 point) Suppose Val could earn 5.25% interest on her savings account, while inflation grew steadily at 3%. She is most likely to Student response: Percent Value Student Response Answer Choices 100.0% a. put her money in the bank. b. spend her money quickly. c. withdraw her money from the bank. Score: 1 / 1 Total score: 15 / 15 = 100.0% View Results Quiz 4.1 User ID: skim7 Attempt: 1 / 3 Out of: 25 Started: November 23, 2004 9:05pm Finished: November 23, 2004 9:07pm Time spent: 1 min. 24 sec. Question 1 (1 point) Which of the following is not a form of money? Student response: Percent Value Student Response Answer Choices a. commodities b. travelers checks 100.0% c. credit cards d. checking accounts Score: 1 / 1 Question 2 (1 point) Which of the following is not a use of money? Student response: Percent Value Student Response Answer Choices a. store of value 100.0% b. measure of inflation c. unit of account d. medium of exchange Score: 1 / 1 Question 3 (1 point) When a consumer uses a $10 bill to pay for $10 worth of groceries, the $10 bill is serving which of the functions of money? Student response: Percent Value Student Response Answer Choices a. medium of exchange b. unit of account c. store of value 100.0% d. all of the above Score: 1 / 1 Question 4 (1 point) Fiat money is used for all of the following purposes except Student response: Percent Value Student Response Answer Choices a. as a medium of exchange. b. as a store of value. 100.0% c. consumption for its intrinsic value. d. as a unit of account. Score: 1 / 1 Question 5 (1 point) The most narrowly defined measure of money is Student response: Percent Value Student Response Answer Choices a. checking accounts. b. M3. 100.0% c. items used as a medium of exchange. d. fiat money. Score: 1 / 1 Question 6 (1 point) Checking accounts are part of Student response: Percent Value Student Response Answer Choices a. M1. b. M2. c. M3. 100.0% d. all of the above. Score: 1 / 1 Question 7 (1 point) Increases in the price level will cause the money demand curve to shift _____, and increases in income will cause it to shift _____. Student response: Percent Value Student Response Answer Choices a. in, in b. in, out c. out, in 100.0% d. out, out Score: 1 / 1 Question 8 (1 point) The opportunity cost(s) of money include Student response: Percent Value Student Response Answer Choices 100.0% a. the income earned if the money had been used to purchase a financial asset that earns interest. b. the goods that could have been bought. c. the equivalent value in gold. d. all of the above. Score: 1 / 1 Question 9 (1 point) The money demand curve assumes which of the following is NOT constant? Student response: Percent Value Student Response Answer Choices a. income b. prices 100.0% c. interest rate d. none of the above; they are all assumed constant. Score: 1 / 1 Question 10 (1 point) The money supply curve Student response: Percent Value Student Response Answer Choices 100.0% a. is vertical because the Fed controls the money supply. b. is horizontal because the price of money is always the interest rate. c. slopes upward because supply curves always slope upward, no matter what the commodity. d. slopes downward because people put less money in interest-bearing accounts at lower interest rates. Score: 1 / 1 Question 11 (1 point) Suppose the money demand curve shifts to the left. This could have been caused by Student response: Percent Value Student Response Answer Choices a. an increase in the interest rate. b. a decrease in the interest rate. c. an increase in the price level. 100.0% d. a decrease in the price level. Score: 1 / 1 Question 12 (1 point) If the interest rate is below its equilibrium value, Student response: Percent Value Student Response Answer Choices a. people buy bonds to increase the interest rate. 100.0% b. issuers of bonds offer higher interest rates to induce people to hold bonds instead of money. c. both a and b. d. neither a nor b. Score: 1 / 1 Question 13 (1 point) Two individuals hold cash. The first holds $500, while the second holds $1000. If the interest rate is 10%, the opportunity cost of holding money is Student response: Percent Value Student Response Answer Choices a. $50 for the first person and $100 for the second. b. 10 percent for each. 100.0% c. both a and b. d. neither a nor b. Score: 1 / 1 Question 14 (1 point) Suppose there is an increase in income. Then we should expect Student response: Percent Value Student Response Answer Choices a. the interest rate to fall as people want to spend more money. 100.0% b. the interest rate to rise as the demand for money shifts to the right. c. the money supply curve to shift to the right as people spend more money. d. none of the above. Score: 1 / 1 Question 15 (1 point) Suppose the economy is in equilibrium. If the Fed decreases the money supply, the equilibrium interest rate will Student response: Percent Value Student Response Answer Choices 100.0% a. increase. b. decrease. c. stay the same. Score: 1 / 1 Question 16 (1 point) Which of the following will cause the money demand curve to shift to the left? Student response: Percent Value Student Response Answer Choices 100.0% a. income decreases b. interest rates rise c. prices rise d. the Fed sells bonds Score: 1 / 1 Question 17 (1 point) Assuming the money market is in equilibrium, a decrease in the price level will cause Student response: Percent Value Student Response Answer Choices a. money supply to shift left. b. money supply to shift right. c. money demand to shift right. 100.0% d. the equilibrium interest rate to fall. Score: 1 / 1 Question 18 (1 point) The money demand curve is Student response: Percent Value Student Response Answer Choices a. downward sloping because as the real interest rate rises, people wish to hold more cash. 100.0% b. downward sloping because as the real interest rate rises, people wish to hold less cash. c. a vertical line. Score: 1 / 1 Question 19 (1 point) Suppose the interest rate is at R1 in the graph below. Then Student response: Percent Value Student Response Answer Choices a. the money supply curve will shift to the left until the money market is in equilibrium. b. the money demand curve will shift to the right until the money market is in equilibrium. 100.0% c. the interest rate will fall until the money market is in equilibrium. d. any of the above can happen. Score: 1 / 1 Question 20 (1 point) If Marty puts some cash under the mattress for spending later in the decade, he is benefiting from the money's function as a(n) ___________. Student response: Percent Value Student Response Answer Choices a. unit of account 100.0% b. store of value c. intrinsic-value good d. medium of exchange Score: 1 / 1 Question 21 (1 point) The fundamental value of money is that it Student response: Percent Value Student Response Answer Choices a. minimizes the risk of inflation from non-standard currency. b. does not degrade rapidly. c. can be divided up into smaller parts for exchange. 100.0% d. lowers the cost of making trades in an economy. Score: 1 / 1 Question 22 (1 point) The interest rate does not affect the demand for assets because assets are not liquid. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 23 (1 point) Over the past few decades, it has become easier to convert assets to cash. For this reason, the __________________ for holding money has grown less important. Student response: Percent Value Student Response Answer Choices a. transaction motive b. speculative motive c. accumulation motive 100.0% d. precautionary motive Score: 1 / 1 Question 24 (1 point) The graph below shows the demand for money. The initial interest rate is io. Which graph correctly depicts the effect of an increase in prices? Student response: Percent Value Student Response Answer Choices a. b. 100.0% c. d. Score: 1 / 1 Question 25 (1 point) A bond is a Student response: Percent Value Student Response Answer Choices a. riskless, short-term government debt instrument. b. claim to partial ownership in a firm. 100.0% c. debt contract promising lenders a fixed interest payment in the future. d. type of financial intermediary. Score: 1 / 1 Total score: 25 / 25 = 100.0% View Results Quiz 4.2 User ID: yyoo Attempt: 3 / 3 Out of: 25 Started: July 20, 2005 9:27pm Finished: July 20, 2005 9:29pm Time spent: 2 min. 17 sec. Question 1 (1 point) On a bank's balance sheet, ______________ are listed as assets, while ______________ are listed as liabilities. Student response: Percent Value Student Response Answer Choices 100.0% a. loans and T-bills; checking and savings accounts b. checking and savings accounts; loans and T-bills c. loans and checking accounts; T-bills and savings accounts d. deposits; loans Score: 1 / 1 Question 2 (1 point) If a pension fund owns stock in a corporation, the stock would be listed as an asset on its balance sheet. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 3 (1 point) Which of the following formulas expresses the true relationship between savings and investment? Student response: Percent Value Student Response Answer Choices a. I+(T-G)-NX = S b. I+G-NX=S c. S+T-NX=I 100.0% d. S+(T-G)-NX=I Score: 1 / 1 Question 4 (1 point) If you buy 100 shares of Exxon stock online, you are trading on the primary market. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 5 (1 point) Imagine that an entrepreneur has raised $10 million to pursue a business opportunity. $5 million was raised in debt financing with 8% fixed annual interest, and $5 million was raised in equity financing. (The entrepreneur is paid a salary but has no equity stake.) After one year, the entrepreneur shuts down the venture, having earned $13 million. How much did the equity holders make? Student response: Percent Value Student Response Answer Choices a. $6.5 million 100.0% b. $7.6 million c. $5 million d. $6.96 million Score: 1 / 1 Question 6 (1 point) If a bond's coupon rate is 5% and the bondholder receives a $500 interest payment annually, the face value of the bond must be ________. Student response: Percent Value Student Response Answer Choices 100.0% a. $10,000 b. $25 c. $1,000 d. $100,000 Score: 1 / 1 Question 7 (1 point) A bond is defined by its Student response: Percent Value Student Response Answer Choices a. rate of return, face value, and coupon rate. b. market interest rate, rate of return, and coupon rate. 100.0% c. face value, coupon rate, and maturity date. d. inception date, face value, and maturity date. Score: 1 / 1 Question 8 (1 point) If the market interest rate is greater than a bond's coupon rate, then the price of the bond will be less than its face value. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 9 (1 point) If there is a bond with a face value of $500 that pays $50 in interest annually, which of the following statements must be true? Student response: Percent Value Student Response Answer Choices a. The rate of return is equal to 10%. b. The market interest rate must be less than 10%. c. The market interest rate must be more than 10%. 100.0% d. The coupon rate is equal to 10%. Score: 1 / 1 Question 10 (1 point) You have won a $1 million prize in the lottery, but for bureaucratic rasons, you can't claim the $1 million winnings for two years. If the market interest rate is 12%, what is the present value of your lottery windfall? Student response: Percent Value Student Response Answer Choices a. $1,254,400 b. $760,000 c. $1,240,000 100.0% d. $797,194 Score: 1 / 1 Question 11 (1 point) Which of the following is NOT a role played by financial intermediaries? Student response: Percent Value Student Response Answer Choices a. diversifying risk b. lowering transactions costs 100.0% c. printing money d. guaranteeing the safety of deposits Score: 1 / 1 Question 12 (1 point) Liabilities of financial intermediaries include all of the following except Student response: Percent Value Student Response Answer Choices 100.0% a. home mortgage loans. b. checking account deposits in a bank. c. savings account deposits in a bank. Score: 1 / 1 Question 13 (1 point) The process by which funds are channeled from savers to investors is known as Student response: Percent Value Student Response Answer Choices a. Financial creation. 100.0% b. Financial intermediation. c. Financial expediation. d. Financial expropriation. Score: 1 / 1 Question 14 (1 point) All of the following are examples of financial intermediaries except Student response: Percent Value Student Response Answer Choices a. insurance companies. b. credit unions. 100.0% c. stock exchanges. d. retirement funds. Score: 1 / 1 Question 15 (1 point) Suppose a new customer opens a checking account and a savings account in a commercial bank, placing $100,000 in each. Later, the bank loans the customer $100,000. For this bank, Student response: Percent Value Student Response Answer Choices a. assets increased by $200,000 and liabilities increased by $100,000. b. liabilities increased by $200,000 since the checking account and the savings account are liabilities while it generated no new assets. 100.0% c. assets increased by $100,000 because the loan is an asset and liabilities increased by $200,000 because both the checking deposit and the savings deposit are liabilities to the bank. d. assets increased by $100,000 because the loan is an asset and liabilities increased by $100,000 because the checking deposit is a liability. The savings deposit is neither an asset nor a liability. Score: 1 / 1 Question 16 (1 point) The financial institutions in our banking system are all in the business of transferring funds from savers to investors. This process is known as Student response: Percent Value Student Response Answer Choices a. lobbying. b. parachuting. c. money laundering. 100.0% d. financial intermediation. Score: 1 / 1 Question 17 (1 point) A firm can obtain funds for investing by Student response: Percent Value Student Response Answer Choices a. selling stock. b. selling bonds. c. reinvesting profits. 100.0% d. all of the above. Score: 1 / 1 Question 18 (1 point) A difference between a share of stock in a corporation and a corporate bond is that Student response: Percent Value Student Response Answer Choices a. the share of stock is a legal claim while the bond is not. b. the bond owner has voting rights within the corporation whereas the stockholder does not. 100.0% c. the bond owner is entitled to receive a fixed annual coupon payment plus a lump-sum payment at the bond's maturity date, whereas the stockholder is entitled to a share of future profits. d. stocks are issued in return for funds that are lent to the corporation. Score: 1 / 1 Question 19 (1 point) Suppose a firm wanted to go out of business. The firm sells all its assets and pays off everything it owes to creditors. The stockholders would receive Student response: Percent Value Student Response Answer Choices 100.0% a. the rest of the money, after everyone who has a claim against the firm is paid. b. nothing. c. one half of the money; the other half of the money goes to bondholders. d. their annual dividend payment. Score: 1 / 1 Question 20 (1 point) In which of the following ways can a corporation raise new funds for investment? I. issuing new shares of stock II. having existing stock resold between two owners Student response: Percent Value Student Response Answer Choices 100.0% a. I only b. II only c. both I and II d. neither I nor II Score: 1 / 1 Question 21 (1 point) The person most likely to receive a payment from a corporation in a year of losses is the Student response: Percent Value Student Response Answer Choices 100.0% a. bondholder. b. investment banker. c. stockholder. Score: 1 / 1 Question 22 (1 point) Moral hazard exists when Student response: Percent Value Student Response Answer Choices 100.0% a. one has different incentives after a transaction than before the transaction. b. people have an incentive to hide certain facts when they try to borrow money. c. we are forced to transact with someone we think is not honest. d. there is a positive probability that something can go wrong. Score: 1 / 1 Question 23 (1 point) Suppose that you decide to buy 100 shares of Pepsi stock (not a new issue), and you call a stock broker and ask her to make the transaction for you. You will be purchasing the stock in the market known as Student response: Percent Value Student Response Answer Choices a. the primary market. b. the insider market. 100.0% c. the secondary market. d. the collateral market. Score: 1 / 1 Question 24 (1 point) Under what circumstances would a person would prefer a promise of $100,000 now over a promise of $500,000 in ten years? (Calculate the future value of the $100,000 at the different interest rates and compare that number to $500,000. Alternatively, you could calculate the present value of the $500,000 and compare it to $100,000.) Student response: Percent Value Student Response Answer Choices a. the interest was 5%. b. the interest rate was 8%. c. the interest rate was 10%. 100.0% d. the interest rate was 20%. Score: 1 / 1 Question 25 (1 point) If a sports star signs a contract for 50 million dollars to be paid at 10 million dollars a year over five years, the contract does not cost the team owner $50 million dollars in today's dollars since: Student response: Percent Value Student Response Answer Choices a. $10 million five years from now is worth less than $10 million today. b. Less than $50 million can be invested in today's dollars and compound into $50 million over 5 years. c. The present value of $50 million over 5 years is less than $50 million today. 100.0% d. All of the above. Score: 1 / 1 Total score: 25 / 25 = 100.0% Quiz 4.3 User ID: skim7 Attempt: 1 / 3 Out of: 15 Started: November 23, 2004 9:09pm Finished: November 23, 2004 9:10pm Time spent: 0 min. 47 sec. Question 1 (1 point) Monetary policy is set by Student response: Percent Value Student Response Answer Choices a. a consortium of depository institutions. b. the Federal Reserve Board of Governors. 100.0% c. the Federal Open Market Committee. d. the Federal Reserve Board Chairman. Score: 1 / 1 Question 2 (1 point) On the Fed's balance sheet, you would find _____________ listed as assets and _____________ listed as liabilities. Student response: Percent Value Student Response Answer Choices 100.0% a. T-bills; U.S. dollars b. U.S. dollars; foreign currency c. U.S. dollars; reserve deposits d. T-bills; coins Score: 1 / 1 Question 3 (1 point) The chairman of the Federal Reserve Board of Governors is Student response: Percent Value Student Response Answer Choices a. George W. Bush. b. the Secretary of the Treasury. 100.0% c. Alan Greenspan. d. elected by the people of the United States. Score: 1 / 1 Question 4 (1 point) Which of the following Federal Reserve actions would NOT result in a decrease in the money supply? Student response: Percent Value Student Response Answer Choices a. selling T-bills 100.0% b. lowering the reserve requirement c. increasing the discount rate Score: 1 / 1 Question 5 (1 point) Which of the following Federal Reserve actions could explain the shift depicted in the graph? Student response: Percent Value Student Response Answer Choices 100.0% a. buying T-bills b. raising the reserve requirement c. increasing the discount rate d. destroying aged currency Score: 1 / 1 Question 6 (1 point) U.S. dollars can be exchanged for an amount of gold that varies, depending on the market price for gold. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 7 (1 point) Which of the following would make a "run on a bank" more likely? Student response: Percent Value Student Response Answer Choices a. hihger interest rates for savings accounts b. a public announcement of increased reserve requirements 100.0% c. a suspicion that a bank is lending out too much money d. a decrease in the market price of gold Score: 1 / 1 Question 8 (1 point) The Fed's influence is primarily through actions that directly affect which part of the economy? Student response: Percent Value Student Response Answer Choices a. the factors market b. the goods market 100.0% c. the financial sector d. the government sector Score: 1 / 1 Question 9 (1 point) Which of the following is NOT a function of the Federal Reserve System? Student response: Percent Value Student Response Answer Choices a. To issue currency. b. To regulate financial institutions. c. To provide banking services for the federal government. 100.0% d. To regulate the stock markets. Score: 1 / 1 Question 10 (1 point) The Fed's most important function is to Student response: Percent Value Student Response Answer Choices 100.0% a. implement monetary policy. b. regulate the banking industry. c. print money. d. implement fiscal policy. Score: 1 / 1 Question 11 (1 point) When we say the Fed is the "lender of last resort," we mean Student response: Percent Value Student Response Answer Choices a. if the government cannot borrow money anywhere else, it goes to the Fed for funds. b. it provides short-term financial help to businesses and individuals who cannot get loans elsewhere. 100.0% c. it extends credit to financial institutions experiencing temporary difficulties, but financial institutions prefer not to borrow from the Fed. d. it lends money to the U.S. Treasury to help fund new currency. Score: 1 / 1 Question 12 (1 point) If the Fed ______ government securities, the money supply ______, and the interest rate will _____. Student response: Percent Value Student Response Answer Choices 100.0% a. buys, increases, fall b. sells, increases, fall c. buys, increases, rise d. sells, decreases, fall Score: 1 / 1 Question 13 (1 point) Suppose the money market is in equilibrium. If the Fed sells government bonds, then the equilibrium interest rate will _____ and the equilibrium quantity of money will _____. Student response: Percent Value Student Response Answer Choices a. increase, increase 100.0% b. increase, decrease c. decrease, increase d. decrease, decrease Score: 1 / 1 Question 14 (1 point) Which of the following statements is FALSE? Student response: Percent Value Student Response Answer Choices a. The United States has 12 Federal Reserve districts. b. The Federal Open Market Committee oversees sales and purchases of government securities by the Fed. c. The members of the Board of Governors of the Fed are appointed by the President. 100.0% d. Congress must approve any major changes in the Fed's monetary policy. Score: 1 / 1 Question 15 (1 point) Which group has primary responsibility for the Federal Reserve System? Student response: Percent Value Student Response Answer Choices a. the Congress of the United States 100.0% b. the Board of Governors of the Fed c. the twelve regional Federal Reserve banks d. the chairman of the Federal Reserve Score: 1 / 1 Total score: 15 / 15 = 100.0% View Results Quiz 4.4 User ID: yyoo Attempt: 3 / 3 Out of: 20 Started: July 20, 2005 9:34pm Finished: July 20, 2005 9:38pm Time spent: 4 min. 34 sec. Question 1 (1 point) Which of the following will happen if a customer puts more money into a checking account at her bank? Student response: Percent Value Student Response Answer Choices 100.0% a. The bank's liabilities increase by the amount of the deposit. b. The bank will be able to turn around and loan out an amount of money equal to the deposit. c. The bank will ship the money to the Federal REserve Bank so that it is insured in full. d. The bank's total required reserves will increase by the same amount as the deposit. Score: 1 / 1 Question 2 (1 point) If the reserve requirement is 12%, the increase in the money supply that results from $880,000 in new deposits equals __________. Student response: Percent Value Student Response Answer Choices 100.0% a. $7,333,333 b. $1,000,000 c. $105,600 d. $774,400 Score: 1 / 1 Question 3 (1 point) Which of these is NOT a factor that tends to reduce the influence of the Fed over the money supply? Student response: Percent Value Student Response Answer Choices a. near money b. excess reserves held by banks 100.0% c. the small required reserve ratio d. currency kept at home by consumers Score: 1 / 1 Question 4 (1 point) If a bank currently has $1000 in deposits and the required reserve ratio is 20%, then that single bank can make loans of Student response: Percent Value Student Response Answer Choices a. $200. 100.0% b. $800. c. $5,000. d. $20,000. Score: 1 / 1 Question 5 (1 point) When the Fed wants to change interest rates, it does so by Student response: Percent Value Student Response Answer Choices a. mandating a new federal funds rate. b. directly changing the amount of loans in the banking system. 100.0% c. buying and selling government securities. d. issuing new currency. Score: 1 / 1 Question 6 (1 point) Which of the following statements is not true? Student response: Percent Value Student Response Answer Choices a. Banks are legally required to hold a certain percentage of the deposits they have as reserves. b. Bank reserves do not earn interest. c. Banks borrow and lend reserves to each other in the federal funds market. 100.0% d. all are true. Score: 1 / 1 Question 7 (1 point) Suppose the reserve requirement is 10 percent. If the Fed buys $1000 in bonds from bank A, then the Fed credits the reserves at bank A with a(n) Student response: Percent Value Student Response Answer Choices a. increase of $100. 100.0% b. increase of $1000. c. decrease of $100. d. decrease of $1000. Score: 1 / 1 Question 8 (1 point) The primary influence of a change in the discount rate is Student response: Percent Value Student Response Answer Choices 100.0% a. it signals a change in monetary policy. b. it competes directly with the federal funds rate, thus influencing the borrowing and lending between banks. c. through the borrowing from the Fed that member banks engage in. d. all of the above. Score: 1 / 1 Question 9 (1 point) If the Fed decreases the discount rate, which of the following will occur? Student response: Percent Value Student Response Answer Choices a. The money supply curve will shift left. 100.0% b. The interest rate will decrease. c. The money demand curve will shift right. d. The money demand curve will shift left. Score: 1 / 1 Question 10 (1 point) In the year 2000, the Fed increased the discount rate and increased its target for the federal funds rate five times. The most likely explanation for this is that Student response: Percent Value Student Response Answer Choices a. the unemployment rate was rising. 100.0% b. the economy had been growing quickly, and inflation had become a concern. c. they were trying to increase aggregate demand. d. they were trying to increase the money supply. Score: 1 / 1 Question 11 (1 point) If the required reserve ratio decreases, Student response: Percent Value Student Response Answer Choices 100.0% a. the deposit multiplier increases. b. banks make fewer loans. c. deposits in other banks will decrease. d. all of the above. Score: 1 / 1 Question 12 (1 point) Suppose the economy is growing rapidly and inflation is a concern. Which of the following would the Fed be most likely to do? Student response: Percent Value Student Response Answer Choices 100.0% a. Sell bonds. b. Lower the discount rate. c. Try to increase the money supply. d. Raise reserve requirements. Score: 1 / 1 Question 13 (1 point) If a bank has deposits of $5000 and is loaned up when making loans of $4250, then the required reserve ratio is Student response: Percent Value Student Response Answer Choices a. 0.176. b. 0.85. c. 0.425. 100.0% d. 0.15. Score: 1 / 1 Question 14 (1 point) Most of the money in the economy is a result of Student response: Percent Value Student Response Answer Choices a. the government printing currency. 100.0% b. banks holding part of their deposits as reserves, and making loans with the rest of the deposits. c. banks taking deposits. d. banks holding currency in their vaults. Score: 1 / 1 Question 15 (1 point) If a bank has $3,000 in reserves, and the reserve requirement is 15%, how many checking deposits can the bank support? Student response: Percent Value Student Response Answer Choices a. $2,550 b. $3,000 c. $4,500 100.0% d. $20,000 Score: 1 / 1 Question 16 (1 point) Which of the following is the most powerful tool the Fed can use in controlling the money supply? Student response: Percent Value Student Response Answer Choices 100.0% a. altering the required reserve ratio b. changing the discount rate c. buying or selling securities on the open market d. lowering bank taxes Score: 1 / 1 Question 17 (1 point) Suppose the reserve requirement is 10 percent. If the Fed sells $1000 in bonds to bank A, then the money supply will Student response: Percent Value Student Response Answer Choices a. increase by $1000. b. decrease by $1000. c. increase by $10,000. 100.0% d. decrease by $10,000. Score: 1 / 1 Question 18 (1 point) Use this information to answer the next three questions. Suppose someone sells $5000 worth of government securities and deposits the money from the Fed into their checking account so that the bank's reserves and deposits increase by $5000. If the legal reserve requirement is 20% (0.20), how much is this bank required to hold on reserve? Student response: Percent Value Student Response Answer Choices a. $5000 100.0% b. $1000 c. $2000 d. none of the above Score: 1 / 1 Question 19 (1 point) What is the deposit multiplier? Student response: Percent Value Student Response Answer Choices a. 20 b. 0.20 100.0% c. 5 d. none of the above Score: 1 / 1 Question 20 (1 point) What is the total amount by which the money supply can increase as a result of the initial $5000 deposit? Student response: Percent Value Student Response Answer Choices 100.0% a. $25,000 b. $5000 c. $100,000 d. none of the above Score: 1 / 1 Total score: 20 / 20 = 100.0% Quiz 4.5 User ID: skim7 Attempt: 1 / 3 Out of: 15 Started: November 23, 2004 9:15pm Finished: November 23, 2004 9:18pm Time spent: 2 min. 19 sec. Question 1 (1 point) Funds borrowed and saved are brought into equilibrium through adjustments in ______________. Student response: Percent Value Student Response Answer Choices a. inflation b. the money supply c. deposits 100.0% d. interest rates Score: 1 / 1 Question 2 (1 point) John takes out a loan that increases his purchasing power by 8% over one year. If inflation is 5%, what is the nominal interest rate? Student response: Percent Value Student Response Answer Choices 100.0% a. 13% b. 3% c. 8% d. -3% Score: 1 / 1 Question 3 (1 point) John takes out a loan that increases his purchasing power by 5% over one year. If inflation is 2%, what is the real interest rate? Student response: Percent Value Student Response Answer Choices a. 7% b. 3% 100.0% c. 5% d. -3% Score: 1 / 1 Question 4 (1 point) When interest rates rise, households tend to consume _______ and save _______. Student response: Percent Value Student Response Answer Choices a. more; more b. more; less 100.0% c. less; more d. less; less Score: 1 / 1 Question 5 (1 point) What might cause a household to save less in response to an increase in the nominal interest rate? Student response: Percent Value Student Response Answer Choices 100.0% a. A rise in inflation greater than the rise in the nominal interest rate b. An increase in the real interest rate equal to the rise in the nominal interest rate c. a decrease in inflation equal to the increase in the nominal interest rate d. an offsetting decrease in the discount rate Score: 1 / 1 Question 6 (1 point) In the macroeconomy, savings comes from Student response: Percent Value Student Response Answer Choices a. the savings of households, a government budget surplus, and a trade surplus. 100.0% b. the savings of households, a government budget surplus, and a trade deficit. c. the savings of households, a government budget deficit, and a trade surplus. d. the consumption of households, a government budgets surplus, and a trade surplus. Score: 1 / 1 Question 7 (1 point) When there is excess demand for loanable funds, interest rates will rise in response. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 8 (1 point) Which of the following graphs correctly depicts the change in equilibrium in the market for loanable funds that would result from a government policy that gave tax credits for business investment? Student response: Percent Value Student Response Answer Choices 100.0% a. b. c. d. Score: 1 / 1 Question 9 (1 point) Which of the following graphs correctly depicts the change in equilibrium in the market for loanable funds that would result from the government running a larger budget surplus? Student response: Percent Value Student Response Answer Choices a. b. 100.0% c. d. Score: 1 / 1 Question 10 (1 point) If our trade deficit increases significantly, how will that affect the money market? Student response: Percent Value Student Response Answer Choices a. The equilibrium interest rate will rise. 100.0% b. The equilibrium interest rate will fall. c. The equilibrium interest rate is unaffected by the trade deficit. d. The equilibrium interest rate could rise or fall, depending on how the trade deficit is paid down. Score: 1 / 1 Question 11 (1 point) A firm determines that an investment is not worthwhile at the current rate of interest of 8 percent. If the interest rate changes to Student response: Percent Value Student Response Answer Choices a. 10 percent, the investment will be worth making. b. 15 percent, the investment will be worth making. c. 6 percent, the investment will be worth making. 100.0% d. 6 percent, the investment may be worth making, but we need more information to be sure. Score: 1 / 1 Question 12 (1 point) The supply curve of loanable funds slopes up because Student response: Percent Value Student Response Answer Choices 100.0% a. people will give up more current consumption and increase savings only if they are rewarded even more in the future. b. of the law of diminishing marginal returns. c. of the income effect of interest rates. d. saving increases with income. Score: 1 / 1 Question 13 (1 point) The nominal rate of interest Student response: Percent Value Student Response Answer Choices a. Is adjusted for inflation. 100.0% b. Is the stated rate of interest. c. Is expressed as an after-tax percentage. d. All of the above. Score: 1 / 1 Question 14 (1 point) Businesses demand loanable funds because they Student response: Percent Value Student Response Answer Choices a. have deficits to cover. b. prefer to purchase capital goods in the current year. 100.0% c. make investments that they believe will increase productivity and profitability. d. prefer earlier consumption to later consumption. Score: 1 / 1 Question 15 (1 point) The demand curve for loanable funds by businesses is Student response: Percent Value Student Response Answer Choices 100.0% a. downward sloping because more investment projects are profitable the lower the interest rate. b. downward sloping because of the law of diminishing marginal utility. c. horizontal because they can borrow as much as they want at the current interest rate. d. of an indeterminate slope because business investment decisions tend to be related more to "animal spirits" than to rational decision making. Score: 1 / 1 Total score: 15 / 15 = 100.0% View Results TEST 4 User ID: skim7 Attempt: 1 / 1 Out of: 100 Started: November 23, 2004 9:56pm Finished: November 23, 2004 11:39pm Time spent: 1 hr, 43 min., 16 sec. Student finished 1 hr, 16 min., 44 sec. ahead of the 180 min. time limit. Question 1 (2 points) If we were to rank the three types of money from the largest measure to the smallest, we would have the ordering Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. M1, M2, M3. 100.0% b. M3, M2, M1. 0.0% c. All are equal. 0.0% d. They cannot be ranked, because they measure different things. Score: 2 / 2 Question 2 (2 points) One common problem with commodity money is that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. it has little intrinsic value. 0.0% b. it is not useful as a unit of account. 100.0% c. it may not be divisible. 0.0% d. gold is in short supply. Score: 2 / 2 Question 3 (2 points) From the definitions of M1 and M2, we know that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. M1 is always larger than M2. 100.0% b. M2 is always larger than M1. 0.0% c. M1 and M2 are always equal. 0.0% d. M1 is sometimes larger than M2, and sometimes smaller than M2. Score: 2 / 2 Question 4 (2 points) The definition of M2 includes which of the following types of money? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Travelers' checks 0.0% b. Eurodollar deposits 0.0% c. Stocks 0.0% d. Repurchase agreements Score: 2 / 2 Question 5 (2 points) When the demand for money exceeds the supply, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. more money will be printed to meet the demand. 100.0% b. the interest rate will rise. 0.0% c. the interest rate will fall. 0.0% d. inflation will decrease. Score: 0 / 2 Question 6 (2 points) If income decreases, which of the following will occur? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Money supply will shift left. 100.0% b. Money demand will shift left. 0.0% c. The interest rate will increase. Score: 0 / 2 Question 7 (2 points) If the money supply increases, then interest rates will rise. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 8 (2 points) The graph below shows the demand for money. The initial interest rate is io. Which graph correctly depicts a rise in interest rates above the initial level io? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 100.0% b. 0.0% c. 0.0% d. Score: 2 / 2 Question 9 (2 points) The graph below shows the demand for money. If the Federal Reserve has the power to set the money supply at a fixed level, we depict the money supply curve as a(n) Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. upward-sloping line that intersects the demand curve. 0.0% b. downward sloping line parallel to the demand curve. 0.0% c. horizontal line. 100.0% d. vertical line. Score: 2 / 2 Question 10 (2 points) If the interest rate is below its equilibrium value, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. people buy bonds to increase the interest rate. 100.0% b. issuers of bonds offer higher interest rates to induce people to hold bonds instead of money. 0.0% c. both a and b. 0.0% d. neither a nor b. Score: 2 / 2 Question 11 (2 points) The money demand curve is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. downward sloping because as the real interest rate rises, people wish to hold more cash. 100.0% b. downward sloping because as the real interest rate rises, people wish to hold less cash. 0.0% c. a vertical line. Score: 2 / 2 Question 12 (2 points) If Emily writes a check for her groceries, she is using money as a Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. medium of exchange. 0.0% b. store of value. 0.0% c. unit of account. 0.0% d. means of liquidity. Score: 2 / 2 Question 13 (2 points) The Dow Jones Industrial Average is an index used to track the average price of all stocks on the New York Stock Exchange. How many corporate stocks are included in the DOW? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 500 100.0% b. 30 0.0% c. 250 0.0% d. 90 Score: 2 / 2 Question 14 (2 points) A person who is willing to bear more risk will buy Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. bonds. 0.0% b. government bonds. 100.0% c. stock. Score: 2 / 2 Question 15 (2 points) The value of a future amount expressed in today's dollars is known as Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Present value. 0.0% b. Allocative efficiency. 0.0% c. The real rate of interest. 0.0% d. The nominal rate of interest. Score: 2 / 2 Question 16 (2 points) Exchanges of stocks take place in Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. centralized physical locations known as stock exchanges and online through internet brokers. 0.0% b. New York City only. 0.0% c. the principal financial city of each country, such as New York City for the United States and London for England. 0.0% d. a decentralized fashion around the world. Score: 2 / 2 Question 17 (2 points) Capital gains are Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the profit received by investors when stocks are sold for more than their purchase price. 0.0% b. the interest earned on a bond. 0.0% c. the dividend payments issued to equity holders. 0.0% d. government payments to holders of T-bills. Score: 2 / 2 Question 18 (2 points) _______________ are entitled to the first claim on the returns from an investment. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Stockholders 100.0% b. Bondholders 0.0% c. Laborers 0.0% d. Financial intermediaries Score: 2 / 2 Question 19 (2 points) Financial intermediaries are institutions that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. set interest rates. 100.0% b. transfer funds in the form of loans from savers to investors. 0.0% c. create money. 0.0% d. provide checking accounts. Score: 0 / 2 Question 20 (2 points) If you invest $10,000 today and can be assured of 8% annual returns, what will be the value of your investment in 5 years? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. $54,000 100.0% b. $14,693 0.0% c. $6,806 0.0% d. $14,000 Score: 2 / 2 Question 21 (2 points) If a pension fund owns stock in a corporation, the stock would be listed as an asset on its balance sheet. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 22 (2 points) Suppose that you decide to buy 100 shares of Pepsi stock (not a new issue), and you call a stock broker and ask her to make the transaction for you. You will be purchasing the stock in the market known as Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the primary market. 0.0% b. the insider market. 100.0% c. the secondary market. 0.0% d. the collateral market. Score: 2 / 2 Question 23 (2 points) There is an inverse relationship between a country's standard of living and its rate of savings and investment. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 24 (2 points) The Fed can affect interest rates by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. changing the reserve requirements. 0.0% b. changing the discount rate. 0.0% c. open market operations. 100.0% d. all of the above. Score: 2 / 2 Question 25 (2 points) The Federal Reserve is involved in clearing individuals' checks and wiring money between financial institutions. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 26 (2 points) When the Fed purchases government bonds, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the money supply curve shifts to the left. 100.0% b. the money supply curve shifts to the right. 0.0% c. the money demand curve shifts to the left. 0.0% d. the money demand curve shifts to the right. Score: 2 / 2 Question 27 (2 points) Which of the following actions by the Fed would cause an increase in the money supply? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Decrease the discount rate. 0.0% b. Increase the reserve requirement. 0.0% c. Sell securities (bonds). Score: 2 / 2 Question 28 (2 points) If the Fed wants to increase the money supply, it can Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. buy Treasury securities. 0.0% b. lower the interest rate on Treasury securities. 0.0% c. increase the discount rate. 0.0% d. require banks to hold more reserves. Score: 2 / 2 Question 29 (2 points) Fractional reserve banking means that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the federal banking system is decentralized, operating through 12 districts rather than one central bank. 100.0% b. banks are required to hold a fraction of their liabilities in the form of cash in their vaults or as deposits with the Fed. 0.0% c. banks must "synchronize" their customers' withdrawals and deposits so that there is a rough balance in liquidity at any given time. 0.0% d. banks are legally permitted to give loans only up to the fractional rate, as determined by the Fed. Score: 2 / 2 Question 30 (2 points) The Fed's influence is primarily through actions that directly affect which part of the economy? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the factors market 0.0% b. the goods market 100.0% c. the financial sector 0.0% d. the government sector Score: 2 / 2 Question 31 (2 points) Suppose the money market is in equilibrium. If the Fed sells government bonds, then the equilibrium interest rate will _____ and the equilibrium quantity of money will _____. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. increase, increase 100.0% b. increase, decrease 0.0% c. decrease, increase 0.0% d. decrease, decrease Score: 2 / 2 Question 32 (2 points) How many Federal Reserve districts are there in the U.S.? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 8 0.0% b. 10 100.0% c. 12 0.0% d. 14 Score: 2 / 2 Question 33 (2 points) Banks could not create money if the reserve requirement were 100%. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 34 (2 points) Which of the Fed's tools has become largely symbolic? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. altering the required reserve ratio 100.0% b. changing the discount rate 0.0% c. buying or selling securities on the open market 0.0% d. lowering bank taxes Score: 2 / 2 Question 35 (2 points) Suppose the required reserve ratio is 15 percent. An increase of $900 in new deposits at a commercial bank will Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. increase total deposits in the banking system by $15. 0.0% b. increase total deposits in the banking system by $135. 0.0% c. increase total deposits in the banking system by $900. 100.0% d. increase total deposits by in the banking system $6000. Score: 2 / 2 Question 36 (2 points) If the Fed buys $1000 in bonds from bank A, then Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. bank A will increase its loans. 0.0% b. bank A will decrease its loans. 0.0% c. bank A will decrease its deposits. Score: 2 / 2 Question 37 (2 points) Use this information to answer the next three questions. Suppose someone deposits $500 cash in her checking account after selling a government bond, so that the bank's reserves and deposits increase by $500. If the legal reserve requirement is 5% (0.05), how much is this bank required to hold on reserve? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. $25 0.0% b. $250 0.0% c. $475 0.0% d. $500 0.0% e. none of the above Score: 2 / 2 Question 38 (2 points) What is the deposit multiplier? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 5 0.0% b. 50 100.0% c. 20 0.0% d. 0.05 0.0% e. none of the above Score: 2 / 2 Question 39 (2 points) What is the total amount by which the money supply can increase as a result of the initial $500 deposit? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. $10,000 0.0% b. $500 0.0% c. $2500 0.0% d. none of the above. Score: 2 / 2 Question 40 (2 points) If the required reserve ratio decreases, Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the deposit multiplier increases. 0.0% b. banks make fewer loans. 0.0% c. deposits in other banks will decrease. 0.0% d. all of the above. Score: 2 / 2 Question 41 (2 points) Which of these is NOT a factor that tends to reduce the influence of the Fed over the money supply? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. near money 0.0% b. excess reserves held by banks 100.0% c. the small required reserve ratio 0.0% d. currency kept at home by consumers Score: 2 / 2 Question 42 (2 points) The Federal Reserve Bank guarantees the value of a dollar bill. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 43 (2 points) The real rate of interest Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Equals the nominal rate of interest plus the rate of inflation. 100.0% b. Equals the nominal rate of interest minus the rate of inflation. 0.0% c. Equals the nominal rate of interest when there is deflation. 0.0% d. None of the above. Score: 2 / 2 Question 44 (2 points) The real rate of interest is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. found by taking the nominal rate of interest and dividing it by the actual rate of inflation. 100.0% b. equal to the nominal rate of interest less the rate of inflation. 0.0% c. equal to the nominal rate of interest plus the rate of inflation. Score: 2 / 2 Question 45 (2 points) The supply curve of loanable funds is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. horizontal. 0.0% b. vertical. 100.0% c. upward sloping. 0.0% d. downward sloping. Score: 2 / 2 Question 46 (2 points) At higher interest rates, businesses Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. demand for loanable funds increases. 0.0% b. supply of loanable funds falls. 100.0% c. want to borrow less money. 0.0% d. want to borrow more money. Score: 2 / 2 Question 47 (2 points) When there is excess supply of loanable funds, interest rates will rise in response. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 48 (2 points) In the macroeconomy, savings comes from Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the savings of households, a government budget surplus, and a trade surplus. 100.0% b. the savings of households, a government budget surplus, and a trade deficit. 0.0% c. the savings of households, a government budget deficit, and a trade surplus. 0.0% d. the consumption of households, a government budgets surplus, and a trade surplus. Score: 2 / 2 Question 49 (2 points) John takes out a loan that increases his purchasing power by 8% over one year. If inflation is 5%, what is the nominal interest rate? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. 13% 0.0% b. 3% 0.0% c. 8% 0.0% d. -3% Score: 2 / 2 Question 50 (2 points) The best measure of your increase or decrease in purchasing power as a result of an investment is the nominal interest rate. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Total score: 94 / 100 = 94.0% View Results TEST 4 User ID: yyoo Attempt: 1 / 1 Out of: 150 Started: July 20, 2005 9:44pm Finished: July 20, 2005 10:39pm Time spent: 55 min. 53 sec. Student finished 2 hr, 4 min., 7 sec. ahead of the 180 min. time limit. Question 1 (3 points) The U.S. dollar is considered money because Student response: Percent Value Student Response Answer Choices a. it is convertible to gold or silver. b. it is easily portable. 100.0% c. it has been decreed by the U.S. government as legal tender. d. all of the above. Score: 3 / 3 Question 2 (3 points) The opportunity cost of money is Student response: Percent Value Student Response Answer Choices 100.0% a. the interest rate. b. the price of stocks. c. the price level. d. real GDP. Score: 3 / 3 Question 3 (3 points) One common problem with commodity money is that Student response: Percent Value Student Response Answer Choices a. it has little intrinsic value. b. it is not useful as a unit of account. 100.0% c. it may not be divisible. d. gold is in short supply. Score: 3 / 3 Question 4 (3 points) Which of the following is a false statement about paper money? Student response: Percent Value Student Response Answer Choices 0.0% a. Paper money is a form of fiat money. b. Paper money has no intrinsic value. c. Most major currencies today are paper money. d. All of these statements are true. Score: 0 / 3 Question 5 (3 points) Which of the following actions would most effectively reduce the demand for money? Student response: Percent Value Student Response Answer Choices 0.0% a. cutting taxes b. sending tax rebate checks to all American households c. mandating price increases on key consumer goods d. none of the above Score: 0 / 3 Question 6 (3 points) If income decreases, which of the following will occur? Student response: Percent Value Student Response Answer Choices a. Money supply will shift left. b. Money demand will shift left. 0.0% c. The interest rate will increase. Score: 0 / 3 Question 7 (3 points) If the money supply increases, then interest rates will rise. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 3 / 3 Question 8 (3 points) Look at the graph below. If the interest rate is R1, then Student response: Percent Value Student Response Answer Choices a. the money supply curve will shift to the left until the money market is in equilibrium. b. the money demand curve will shift to the right until the money market is in equilibrium. 100.0% c. the interest rate will fall until the money market is in equilibrium. d. any of the above can happen. Score: 3 / 3 Question 9 (3 points) Look at the graph below. If the interest rate is R1, people use the excess supply of money to buy bonds. This means that Student response: Percent Value Student Response Answer Choices a. the MD curve will shift to the right. b. the MS curve will shift to the left. 100.0% c. issuers of bonds can lower the interest rate. d. issuers of bonds can raise the interest rate. Score: 3 / 3 Question 10 (3 points) If the interest rate is below its equilibrium value, Student response: Percent Value Student Response Answer Choices a. people buy bonds to increase the interest rate. 100.0% b. issuers of bonds offer higher interest rates to induce people to hold bonds instead of money. c. both a and b. d. neither a nor b. Score: 3 / 3 Question 11 (3 points) Which of the following will cause the money demand curve to shift to the left? Student response: Percent Value Student Response Answer Choices 100.0% a. income decreases b. interest rates rise c. prices rise d. the Fed sells bonds Score: 3 / 3 Question 12 (3 points) If Emily writes a check for her groceries, she is using money as a Student response: Percent Value Student Response Answer Choices 100.0% a. medium of exchange. b. store of value. c. unit of account. d. means of liquidity. Score: 3 / 3 Question 13 (3 points) Exchanges of stocks take place in Student response: Percent Value Student Response Answer Choices 100.0% a. centralized physical locations known as stock exchanges and online through internet brokers. b. New York City only. c. the principal financial city of each country, such as New York City for the United States and London for England. d. a decentralized fashion around the world. Score: 3 / 3 Question 14 (3 points) A share of stock in a corporation is a Student response: Percent Value Student Response Answer Choices a. guarantee to a fixed amount of income from the corporation. b. legal claim to a lump-sum payment at a specified point of time in the future. c. legal claim to a dividend, regardless of the corporation's ability to pay its interest payments. 100.0% d. legal claim to a share of the company's future profits. Score: 3 / 3 Question 15 (3 points) Owning the bond of a company Student response: Percent Value Student Response Answer Choices a. is equivalent to owning stock in the company. b. means that you profit if the company loses money. 100.0% c. means that the company owes you money. d. means that you owe the company money. Score: 3 / 3 Question 16 (3 points) A legal claim against a firm that usually entitles the owner of the claim to receive a fixed annual coupon payment, plus a lump-sum payment at some future date, is known as Student response: Percent Value Student Response Answer Choices 100.0% a. a bond. b. a share of stock. c. a dividend payment. d. a reinvestment coupon. Score: 3 / 3 Question 17 (3 points) If profits are reinvested in the corporation, then Student response: Percent Value Student Response Answer Choices a. payments made to bondholders will be less. b. there is less available to distribute to stockholders. c. the company will sell more bonds in order to pay dividends to stockholders. 0.0% d. the high profits indicate that common stockholders will get larger dividends than normal. Score: 0 / 3 Question 18 (3 points) The person least likely to receive a payment from a corporation in a year of losses is the Student response: Percent Value Student Response Answer Choices a. bank that loaned money to the corporation. 0.0% b. bondholder. c. stockholder. Score: 0 / 3 Question 19 (3 points) Financial intermediation is best defined as the process by which Student response: Percent Value Student Response Answer Choices a. inflation is controlled. b. corporations issue new stock. c. liabilities are liquidated. 100.0% d. financial institutions accept savings from savers and make loans to investors. Score: 3 / 3 Question 20 (3 points) Suppose you will receive an inheritance in 20 years worth $5 million. If the interest rate is 8 percent, the present value of the inheritance is Student response: Percent Value Student Response Answer Choices 100.0% a. $1.075 million. b. $2 million. c. $5 million. d. $40 million. Score: 3 / 3 Question 21 (3 points) Which of the following formulas expresses the true relationship between savings and investment? Student response: Percent Value Student Response Answer Choices a. I+(T-G)-NX = S b. I+G-NX=S c. S+T-NX=I 100.0% d. S+(T-G)-NX=I Score: 3 / 3 Question 22 (3 points) Imagine that an entrepreneur has raised $10 million to pursue a business opportunity. $5 million was raised in debt financing with 8% fixed annual interest, and $5 million was raised in equity financing. (The entrepreneur is paid a salary but has no equity stake.) After one year, the entrepreneur shuts down the venture, having earned $13 million. How much did the equity holders make? Student response: Percent Value Student Response Answer Choices a. $6.5 million 100.0% b. $7.6 million c. $5 million d. $6.96 million Score: 3 / 3 Question 23 (3 points) There is an inverse relationship between a country's standard of living and its rate of savings and investment. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 3 / 3 Question 24 (3 points) Open market operations refer to Student response: Percent Value Student Response Answer Choices a. Fed policies designed to open foreign markets to domestically produced goods and services. 100.0% b. the Fed buying and selling government securities to influence key interest rates. c. Fed policies designed to stimulate the banking system. d. none of the above. Score: 3 / 3 Question 25 (3 points) The Fed can affect interest rates by Student response: Percent Value Student Response Answer Choices a. changing the reserve requirements. b. changing the discount rate. c. open market operations. 100.0% d. all of the above. Score: 3 / 3 Question 26 (3 points) When the Fed increases the discount rate, Student response: Percent Value Student Response Answer Choices 100.0% a. the money supply curve shifts to the left. b. the money supply curve shifts to the right. c. the money demand curve shifts to the left. d. the money demand curve shifts to the right. Score: 3 / 3 Question 27 (3 points) Which of the following is NOT a tool of monetary policy used by the Fed? Student response: Percent Value Student Response Answer Choices a. determining the discount rate b. setting the reserve requirement 100.0% c. adjusting the market interest rate d. conducting open market operations Score: 3 / 3 Question 28 (3 points) When the Fed purchases government bonds, Student response: Percent Value Student Response Answer Choices a. the money supply curve shifts to the left. 100.0% b. the money supply curve shifts to the right. c. the money demand curve shifts to the left. d. the money demand curve shifts to the right. Score: 3 / 3 Question 29 (3 points) If the Fed decreases reserve requirements, which of the following is true? Student response: Percent Value Student Response Answer Choices a. This is called a tightening of the money supply. 0.0% b. Money supply will shift left. c. The equilibrium interest rate will increase. d. None of the above are true. Score: 0 / 3 Question 30 (3 points) Which of the following is NOT a function of the Federal Reserve System? Student response: Percent Value Student Response Answer Choices a. To issue currency. b. To regulate financial institutions. c. To provide banking services for the federal government. 100.0% d. To regulate the stock markets. Score: 3 / 3 Question 31 (3 points) When we say the Fed is the "lender of last resort," we mean Student response: Percent Value Student Response Answer Choices a. if the government cannot borrow money anywhere else, it goes to the Fed for funds. b. it provides short-term financial help to businesses and individuals who cannot get loans elsewhere. 100.0% c. it extends credit to financial institutions experiencing temporary difficulties, but financial institutions prefer not to borrow from the Fed. d. it lends money to the U.S. Treasury to help fund new currency. Score: 3 / 3 Question 32 (3 points) Which of the following is NOT a monetary policy tool of the Fed? Student response: Percent Value Student Response Answer Choices a. the required reserve ratio 100.0% b. the prime rate c. the discount rate d. open market operations Score: 3 / 3 Question 33 (3 points) When Bank A makes loans, and the money is deposited into a different bank, Bank B, Student response: Percent Value Student Response Answer Choices 0.0% a. the total amount of deposits at Bank A decreases. b. the total amount of deposits at Bank B increases. c. the total amount of loans at Bank A decreases. d. none of the above. Score: 0 / 3 Question 34 (3 points) If the Fed buys $1000 in bonds from bank A, then Student response: Percent Value Student Response Answer Choices 100.0% a. bank A will increase its loans. b. bank A will decrease its loans. c. bank A will decrease its deposits. Score: 3 / 3 Question 35 (3 points) Banks could not create money if the reserve requirement were 100%. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 3 / 3 Question 36 (3 points) Which of the Fed's tools has become largely symbolic? Student response: Percent Value Student Response Answer Choices a. altering the required reserve ratio 100.0% b. changing the discount rate c. buying or selling securities on the open market d. lowering bank taxes Score: 3 / 3 Question 37 (3 points) Use this information to answer the next three questions. Suppose someone deposits $500 cash in her checking account after selling a government bond, so that the bank's reserves and deposits increase by $500. If the legal reserve requirement is 5% (0.05), how much is this bank required to hold on reserve? Student response: Percent Value Student Response Answer Choices 100.0% a. $25 b. $250 c. $475 d. $500 e. none of the above Score: 3 / 3 Question 38 (3 points) What is the deposit multiplier? Student response: Percent Value Student Response Answer Choices a. 5 b. 50 100.0% c. 20 d. 0.05 e. none of the above Score: 3 / 3 Question 39 (3 points) What is the total amount by which the money supply can increase as a result of the initial $500 deposit? Student response: Percent Value Student Response Answer Choices 100.0% a. $10,000 b. $500 c. $2500 d. none of the above. Score: 3 / 3 Question 40 (3 points) Suppose the reserve requirement is 10 percent. If the Fed sells $1000 in bonds to bank A, then the money supply will Student response: Percent Value Student Response Answer Choices a. increase by $1000. b. decrease by $1000. c. increase by $10,000. 100.0% d. decrease by $10,000. Score: 3 / 3 Question 41 (3 points) Suppose the reserve requirement is 10 percent. If the Fed buys $1000 in bonds from bank A, then the Fed credits the reserves at bank A with a(n) Student response: Percent Value Student Response Answer Choices a. increase of $100. 100.0% b. increase of $1000. c. decrease of $100. d. decrease of $1000. Score: 3 / 3 Question 42 (3 points) In practice, which tool does the Fed use most often to increase or decrease the money supply? Student response: Percent Value Student Response Answer Choices 0.0% a. required reserve ratio b. discount rate c. prime rate d. open market operations Score: 0 / 3 Question 43 (3 points) The nominal rate of interest Student response: Percent Value Student Response Answer Choices a. Rises when the inflation rate rises. b. Rises when the inflation rate falls. c. Equals the real rate of interest minus the rate of inflation. 0.0% d. All of the above. Score: 0 / 3 Question 44 (3 points) Which of the following formulas is correct? Student response: Percent Value Student Response Answer Choices 0.0% a. nominal interest rate = price + % change in real interest rate b. nominal interest rate = real interest rate + % change in prices c. real interest rate = price + % change in nominal interest rate d. real interest rate = price + nominal interest rate Score: 0 / 3 Question 45 (3 points) The real rate of interest Student response: Percent Value Student Response Answer Choices a. Equals the nominal rate of interest plus the rate of inflation. 100.0% b. Equals the nominal rate of interest minus the rate of inflation. c. Equals the nominal rate of interest when there is deflation. d. None of the above. Score: 3 / 3 Question 46 (3 points) At higher interest rates, businesses Student response: Percent Value Student Response Answer Choices a. demand for loanable funds increases. b. supply of loanable funds falls. 100.0% c. want to borrow less money. d. want to borrow more money. Score: 3 / 3 Question 47 (3 points) The demand curve for loanable funds is Student response: Percent Value Student Response Answer Choices a. horizontal. b. vertical. c. upward sloping. 100.0% d. downward sloping. Score: 3 / 3 Question 48 (3 points) The demand curve for loanable funds by businesses is Student response: Percent Value Student Response Answer Choices 100.0% a. downward sloping because more investment projects are profitable the lower the interest rate. b. downward sloping because of the law of diminishing marginal utility. c. horizontal because they can borrow as much as they want at the current interest rate. d. of an indeterminate slope because business investment decisions tend to be related more to "animal spirits" than to rational decision making. Score: 3 / 3 Question 49 (3 points) Which of the following graphs correctly depicts the change in equilibrium in the market for loanable funds that would result from the government running a larger budget surplus? Student response: Percent Value Student Response Answer Choices a. 0.0% b. c. d. Score: 0 / 3 Question 50 (3 points) Excess supply of loanable funds causes an upward adjustment of the interest rate. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 3 / 3 Quiz 5.1 User ID: skim7 Attempt: 1 / 3 Out of: 10 Started: December 7, 2004 5:33am Finished: December 7, 2004 5:34am Time spent: 0 min. 56 sec. Question 1 (1 point) Which of the following statements about the relationship between aggregate spending and aggregate income is true? Student response: Percent Value Student Response Answer Choices a. Aggregate income must exceed aggregate spending, or the economy will be in debt. b. Aggregate spending must exceed aggregate income, or the economy will be in debt. 100.0% c. Aggregate income always equals aggregate spending. d. The relationship between aggregate spending and aggregate income depends on how high the tax rate is. Score: 1 / 1 Question 2 (1 point) How would an increase in consumer income affect total output? Student response: Percent Value Student Response Answer Choices a. Output would fall, because the aggregate demand curve would shift inward. b. Output would fall, because the economy would move up the aggregate demand curve. 100.0% c. Output would rise, because the aggregate demand curve would shift outward. d. Output would rise, because the economy would move down the aggregate demand curve. Score: 1 / 1 Question 3 (1 point) When prices rise, overall consumer spending Student response: Percent Value Student Response Answer Choices 100.0% a. declines. b. rises. c. is unaffected as long as income remains high. d. remains unchanged, because consumer spending is measured in real, not nominal, terms. Score: 1 / 1 Question 4 (1 point) Which of the following statements accurately describes the effect of a price decrease on investment spending? Student response: Percent Value Student Response Answer Choices a. Investment spending falls, because interest rates rise. 100.0% b. Investment spending rises, because interest rates fall. c. Investment spending rises, because business can now charge more for the goods they sell. d. Investment spending remains unchanged, because it is measured in real, not nominal, terms. Score: 1 / 1 Question 5 (1 point) How does an decrease in the money supply affect total output? Student response: Percent Value Student Response Answer Choices a. Output increases, because interest rates rise. 100.0% b. Interest rates will rise, which causes output to fall. c. Aggregate demand increases, but total output falls. d. Aggregate demand falls, but total output rises. Score: 1 / 1 Question 6 (1 point) Which policy variables can affect aggregate demand? Student response: Percent Value Student Response Answer Choices 100.0% a. Government spending, taxes, and the money supply b. Consumer spending, business spending, and net exports c. Consumer savings, business spending, and net exports d. Consumer confidence, business confidence, and foreign confidence in the domestic economy Score: 1 / 1 Question 7 (1 point) Why does an increase in the price level cause interest rates to rise? Student response: Percent Value Student Response Answer Choices 100.0% a. The demand for money increases. b. Businesses cut back on spending. c. Consumers and businesses cut back on spending. d. The government tends to raise interest rates to reduce the risk of inflation. Score: 1 / 1 Question 8 (1 point) If the government wants to decrease aggregate demand, it could Student response: Percent Value Student Response Answer Choices a. cut taxes. 100.0% b. cut government spending. c. encourage the Fed to increase the money supply. d. do any of the above. Score: 1 / 1 Question 9 (1 point) The demand curve for an individual product is downward sloping for the same reasons that the aggregate demand curve is downward sloping. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 10 (1 point) An increase in the aggregate price level causes the aggregate demand curve to shift to the left. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Total score: 10 / 10 = 100.0% View Results Quiz 5.2 User ID: skim7 Attempt: 1 / 3 Out of: 10 Started: December 7, 2004 5:34am Finished: December 7, 2004 5:56am Time spent: 21 min. 20 sec. Question 1 (1 point) In the short run, why does aggregate supply increase when the price level changes? Student response: Percent Value Student Response Answer Choices a. Higher prices mean lower profits. b. Higher prices mean higher profits. 100.0% c. Prices adjust at different rates. d. Prices adjust simultaneoulsy. Score: 1 / 1 Question 2 (1 point) In the short rum, producers____________ when the prices of their goods increase. Student response: Percent Value Student Response Answer Choices a. reduce output 100.0% b. increase output c. raise prices d. lower prices Score: 1 / 1 Question 3 (1 point) When prices rise, but wages remain fixed in the short run Student response: Percent Value Student Response Answer Choices 100.0% a. firms face profit opportunities, because real wages fall. b. firms reduce output, because the cost of their inputs increase. c. firms' profits decline, because they are unable to attract workers at the old wage. d. firms' profits remain unchanged, because in the long run wages will rise to catch up with the increase in prices. Score: 1 / 1 Question 4 (1 point) Real wages decline when Student response: Percent Value Student Response Answer Choices a. workers are paid less than they are worth. b. firms cut back on production in response to a decline in aggregate demand. 100.0% c. the price level rises faster than the level of wages. d. the level of wages rises faster than the level of prices. Score: 1 / 1 Question 5 (1 point) What is the relationship between the price level and the level of output in the long run? Student response: Percent Value Student Response Answer Choices a. When the price level rises, output increases. b. When the price level rises, output decreases. c. The relationship depends on how quickly producers respond to changes in prices. 100.0% d. There is no relationship between the price level and the level of output. Score: 1 / 1 Question 6 (1 point) When producers expect prices to fall, the short run aggregate supply curve Student response: Percent Value Student Response Answer Choices 100.0% a. shifts downward. b. shifts upward. c. pivots upward. d. pivots downward. Score: 1 / 1 Question 7 (1 point) What is the main reason why wages might be fixed in the short run? Student response: Percent Value Student Response Answer Choices a. Workers are afraid they may be fired if they ask for raises. 100.0% b. Unions are not constantly renegotiating their wage contracts. c. Unions are constantly renegotiating their wage contracts. d. Workers fail to recognize that prices have risen. Score: 1 / 1 Question 8 (1 point) The full-employment level of output is the level of output an economy can produce when Student response: Percent Value Student Response Answer Choices a. everyone is employed full time. b. all economic activities are included in GDP. c. excess capacity is minimized. 100.0% d. all resources are fully and efficiently employed. Score: 1 / 1 Question 9 (1 point) Suppose there is a decrease in the size of the labor force. Which of the following statements is true? Student response: Percent Value Student Response Answer Choices a. The short-run aggregate supply (SRAS) curve will shift inward, but the long-run aggregate supply (LRAS) curve will not move. b. The LRAS will shift inward, but the SRAS will not move. c. Neither SRAS nor the LRAS will shift when the size of the labor force changes. 100.0% d. Both the SRAS and LRAS will shift inward. Score: 1 / 1 Question 10 (1 point) Suppose producers in the economy expect prices to increase in the future. The short-run aggregate supply will _________, while the long-run aggregate supply will ___________. Student response: Percent Value Student Response Answer Choices 100.0% a. shift upward; not shift b. shift upward; shift left c. shift downward; not shift d. shift downward; shift right Score: 1 / 1 Total score: 10 / 10 = 100.0% View Results Quiz 5.3 User ID: skim7 Attempt: 1 / 3 Out of: 10 Started: December 7, 2004 5:58am Finished: December 7, 2004 5:59am Time spent: 1 min. 51 sec. Question 1 (1 point) Why do prices rise if the economy tries to produce beyond the full-employment level of output? Student response: Percent Value Student Response Answer Choices a. Unemployment starts to rise. 100.0% b. Firms have to offer higher and higher prices to attract workers to obtain inputs. c. The Federal Reserve eventually raises interest rates, increasing the prices of inputs. d. It is pysically impossible to produce beyond the full-employment level of output. Score: 1 / 1 Question 2 (1 point) In the short run, what happens to the level of output when the government increases its spending? Student response: Percent Value Student Response Answer Choices a. Aggregate demand shifts outward, decreasing the equilibrium level of output. b. Aggregate demand shifts inward, decreasing the equilibrium level of out put. 100.0% c. Aggregate demand shifts outward, increasing the equilibrium level of output. d. Aggregate demand shifts inward, increasing the equilibrium level of output. Score: 1 / 1 Question 3 (1 point) In the short run, a supply shock will _________ the equilibrium level of prices and ___________ the equilibrium level output. Student response: Percent Value Student Response Answer Choices a. reduce;raise b. raise;raise c. reduce;reduce 100.0% d. raise;reduce Score: 1 / 1 Question 4 (1 point) Which of the following events would shift the short-run aggregate supply curve? Student response: Percent Value Student Response Answer Choices a. A change in output b. A change in aggregate demand 100.0% c. A change in technology d. A change in the price level Score: 1 / 1 Question 5 (1 point) What is the long run effect of increasing output beyond the full-employment level? Student response: Percent Value Student Response Answer Choices a. Prices and wages rise, and the level of output falls. 100.0% b. Prices and wages rise, and the level of output remains unchanged. c. Prices, wages, and the level of output increase. d. Prices, wages, and the level of output decrease. Score: 1 / 1 Question 6 (1 point) The graph below depicts an economy's short run equilibrium. Which of the following events would bring the economy back closer to full employment? Student response: Percent Value Student Response Answer Choices a. An outward shift short run aggregate supply b. A decrease in long run aggregate supply 100.0% c. A decrease in aggregate demand d. Both an outward shift of short run aggregate supply and aggregate demand Score: 1 / 1 Question 7 (1 point) Examine the graph below. Increasing government spending will bring this economy back to full employment. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 8 (1 point) Examine the graph below. What would be the natural process by which this economy would move back to a long-run equilibrium? Student response: Percent Value Student Response Answer Choices 100.0% a. Since output is beyond Yf, suppliers will expect higher future prices and will have to pay more for resources, which will cause SRAS to shift upward. b. Since output is beyond Yf, suppliers will expect higher future prices and will have to pay more for resources, which will cause SRAS to shift downward. c. Since output is beyond Yf, suppliers will expect lower future prices and will have to pay less for resources, which will cause SRAS to shift downward. d. Since unemployment is high, consumers will demand fewer goods and services, so AD will shift inward. Score: 1 / 1 Question 9 (1 point) Suppose the economy is in long-run equilibrium, but a war causes the supply of resources to decrease. What impact will this have on the economy? Student response: Percent Value Student Response Answer Choices a. The LRAS and SRAS curves will shift outward, causing prices to fall and output to increase. 100.0% b. The LRAS and SRAS curves will shift inward, causing prices to increase and output to fall. c. Only the SRAS curve will shift inward, causing prices to increase and output to fall. d. The LRAS, SRAS, and AD curves will shift inward, so only output will fall. Score: 1 / 1 Question 10 (1 point) Suppose the macroeconomy is not at a long-run equilibrium position. How long will it take for the economy to adjust back to the full-employment level of output? Student response: Percent Value Student Response Answer Choices a. Probably just a few weeks. b. If people in the economy make decisions based on rational expectations, it may take a very long time. 100.0% c. If people in the economy make decisions based on adaptive expectations, it may take a very long time. d. The economy will usually adjust quickly, regardless of the way people in the economy make decisions. Score: 1 / 1 Total score: 10 / 10 = 100.0% View Results Quiz 5.4 User ID: skim7 Attempt: 1 / 3 Out of: 10 Started: December 7, 2004 6:00am Finished: December 7, 2004 6:01am Time spent: 1 min. 19 sec. Question 1 (1 point) Which of the following statements helps to explain why the economy can be slow to recover from a recession? Student response: Percent Value Student Response Answer Choices a. Workers are less motivated because of reduced expectations, which reduces total output. b. There is not as much money in circulation to fuel new investment. 100.0% c. Wages do not fall quickly, which delays an adjustment to a higher output level. d. Aggregate supply shifts inward proportionately, which leads to a "vicious cycle." Score: 1 / 1 Question 2 (1 point) According to classical economists, if the economy is in a recession, what must the government do to increase output to the full-employment level? Student response: Percent Value Student Response Answer Choices 100.0% a. Nothing b. Reduce interest rates c. Increase governmet spending d. Provide a credit for household savings Score: 1 / 1 Question 3 (1 point) Imagine that the economy is in a recession. Which one of the following tactics is a way to increase output by shifting aggregate demand outward? Student response: Percent Value Student Response Answer Choices a. Raising taxes to increase the government surplus 100.0% b. Increasing government spending c. Increase the required reserve ratio d. Imposing tariffs on foreign goods Score: 1 / 1 Question 4 (1 point) Proponents of rational expectations believe that an increase in government spending during a time of recession will lead to Student response: Percent Value Student Response Answer Choices a. an inward shift of the aggregate demand curve. b. a deeper recession due to "crowding out." c. a paradoxical increase in the budget surplus. 100.0% d. an offsetting reduction in spending by households and businesses. Score: 1 / 1 Question 5 (1 point) If the government cuts spending during a supply shock, the effect of the policy will likely be to __________ prices and __________ unemployment. Student response: Percent Value Student Response Answer Choices a. increase;increase b. increase;decrease 100.0% c. decrease;increase d. decrease;decrease Score: 1 / 1 Question 6 (1 point) If the fed increases the money supply during a supply shock, the effect of the policy will likely be to __________ prices and __________ investment spending. Student response: Percent Value Student Response Answer Choices 100.0% a. increase;increase b. increase;decrease c. decrease;increase d. decrease;decrease Score: 1 / 1 Question 7 (1 point) Good deflation is characterized by Student response: Percent Value Student Response Answer Choices 100.0% a. an increase in supply at every price. b. a decrease in supply at every price. c. an increase in demand at every price. d. a decrease in demand at every price. Score: 1 / 1 Question 8 (1 point) Increasing the money supply is an example of fiscal policy that can help stimulate demand. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 9 (1 point) The amount by which annual government spending exceeds annual government tax revenue is called Student response: Percent Value Student Response Answer Choices 100.0% a. the deficit b. the debt c. the dividend d. M1 Score: 1 / 1 Question 10 (1 point) Both monetary policy and fiscal policy can be effective in pulling an economy out of a recession. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Total score: 10 / 10 = 100.0% View Results Quiz 5.5 User ID: skim7 Attempt: 1 / 3 Out of: 10 Started: December 7, 2004 6:02am Finished: December 7, 2004 6:03am Time spent: 0 min. 51 sec. Question 1 (1 point) Which of the following is an example of an unintended effect of fiscal policy? Student response: Percent Value Student Response Answer Choices 100.0% a. The crowding-out effect b. Increased aggregate demand c. Unemployment insurance d. Reductions in international trade Score: 1 / 1 Question 2 (1 point) Assume that the government increases its spending by $100 million to stimulate demand. In the long run, the effect of this spending is to Student response: Percent Value Student Response Answer Choices a. increase output by more than $100 million. b. increase output by $100 million. 100.0% c. raise prices. d. increase unemployment. Score: 1 / 1 Question 3 (1 point) When the government increases its spending, a likely long run outcome is a reduction in investment spending. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 4 (1 point) Which of the following explanations best summarizes the "crowding-out effect"? Student response: Percent Value Student Response Answer Choices a. Increased government spending raises hte interest rate, which leads to greater household savings. This, in turn, increases the supply of loanable funds, increasing investment spending. 100.0% b. Increased government spending raises the interest rate, which leads to reduced investment spending. c. Increased government spending lowers the interest rate, leading to reduced household savings. d. Increased government spending lowers the interest rate, which discourages savings and leads to a shrinking total pool of loanable funds from which businesses can draw. Score: 1 / 1 Question 5 (1 point) If the government begins to buy back Treasury bills, which of the following can you infer? Student response: Percent Value Student Response Answer Choices a. G>T b. G=T 100.0% c. T>G d. NX>0 Score: 1 / 1 Question 6 (1 point) Which of the following is an automatic stabilizer? Student response: Percent Value Student Response Answer Choices a. Free-floating exchanges rates b. The price system 100.0% c. Unemployment insurance d. Government spending Score: 1 / 1 Question 7 (1 point) A flat-payment tax system, e.g., all taxpayers owe the government a flat fee of $5000 regardless of income, would be an example of an automatic stabilizer. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 8 (1 point) The goal of Keynesian fiscal policy during a recession is to Student response: Percent Value Student Response Answer Choices a. do nothing - let the economy recover on its own. 100.0% b. move the economic equilibrium back to the full-employment level by increasing aggregate demand. c. move the economic equilibrium back to the full-employment level by decreasing aggregate supply. d. reduce long run aggregate supply so that the economy can reach full employment without a long period of adjustment. Score: 1 / 1 Question 9 (1 point) Imagine that our representatives in Congress have concluded that the economy needs the stimulus of additional government spending, but they have spent several months haggling over what type of spending will be authorized. This is an example of a(n) Student response: Percent Value Student Response Answer Choices a. recognition lag b. political lag 100.0% c. administration lag d. operational lag Score: 1 / 1 Question 10 (1 point) Which of the following statements is true? Student response: Percent Value Student Response Answer Choices a. The multiplier effects tends to minimize the effects of the business cycle. 100.0% b. Automatic stabilizers can partially counteract the multiplier effect. c. Automatic stabilizers exaggerate the multiplier effect. d. Automatic stabilizers eliminate the business cycle. Score: 1 / 1 Total score: 10 / 10 = 100.0% View Results Quiz 5.6 User ID: skim7 Attempt: 1 / 3 Out of: 10 Started: December 7, 2004 6:03am Finished: December 7, 2004 6:06am Time spent: 2 min. 39 sec. Question 1 (1 point) Classical economists predict that if the money supply is expanded by 25%, prices will rise by Student response: Percent Value Student Response Answer Choices a. less than 25%. 100.0% b. exactly 25%. c. more than 25% but less than 50%. d. more than 50%. Score: 1 / 1 Question 2 (1 point) If GDP is $4 trillion and the money supply is $1 trillion, what can be concluded? Student response: Percent Value Student Response Answer Choices 100.0% a. velocity = 4 b. velocity = 1/4 c. prices = 4 d. prices = 1/4 Score: 1 / 1 Question 3 (1 point) Classical economists and non-classical economists disagree about whether changes in the money supply can change output over the long term. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 4 (1 point) Which of the following Fed actions could explain the change shown in the graph? Student response: Percent Value Student Response Answer Choices a. The Fed raised the required reserve ratio. 100.0% b. The Fed bought Treasury securities. c. The Fed raised the discount rate. d. No Fed action could have caused this shift to take place. Score: 1 / 1 Question 5 (1 point) In the short run, contractionary monetary policy causes output to ___________ and prices to ______________. Student response: Percent Value Student Response Answer Choices a. rise; rise b. rise; fall c. fall; rise 100.0% d. fall; fall Score: 1 / 1 Question 6 (1 point) In the long run, expansionary monetary policy causes output to __________ and prices to ____________. Student response: Percent Value Student Response Answer Choices a. rise; rise b. rise; stay the same 100.0% c. stay the same; rise d. stay the same; stay the same Score: 1 / 1 Question 7 (1 point) The success or failure of monetary policy depends on the speed at which prices adjust. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 8 (1 point) Refer to the graph below. If the Fed wants to bring the economy back to the full-employment level of output, it can intervene with _______ monetary policy, which will _________ prices in the long run. Student response: Percent Value Student Response Answer Choices a. contractionary; decrease b. contractionary; increase c. expansionary; decrease 100.0% d. expansionary; increase Score: 1 / 1 Question 9 (1 point) As the graph illustrates, consumers are worried about the future and have begun saving more money. If the Fed does not intervene in this situation, what will happen to the price level in the long run? Student response: Percent Value Student Response Answer Choices a. Prices will increase. b. Prices will stay the same. 100.0% c. Prices will decrease. d. There is insufficient information to answer the question. Score: 1 / 1 Question 10 (1 point) Accommodating monetary policy is intended to Student response: Percent Value Student Response Answer Choices a. accelerate the crowding-out effect. 100.0% b. reduce the crowding-out effect. c. accommodate supply shocks. d. decrease the effects of supply shocks. Score: 1 / 1 Total score: 10 / 10 = 100.0% TEST 1 User ID: xefri Attempt: 1 / 1 Out of: 100 Started: Sep 14, 2003 21:07 Finished: Sep 14, 2003 22:20 Time spent: 1 hr., 12 min., 48 sec. Student finished 1 hr., 47 min., 12 sec. ahead of the 180 min. time limit. Return to Scores -------------------------------------------------------------------------------- Question 1 (2 points) Macroeconomics is concerned primarily with 0.0% 1. the way things are produced. 0.0% 2. the prices of particular goods and services. 0.0% 3. the behavior of consumers. 100.0% 4. the performance of the aggregate economy. Score 2 / 2 -------------------------------------------------------------------------------- Question 2 (2 points) Models are used to describe cause and effect relationships. 100.0% 1. True 0.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 3 (2 points) Economics is generally concerned with 0.0% 1. the operation of banks in the stock market. 0.0% 2. business management. 100.0% 3. how resources are allocated among alternative goals. 0.0% 4. the right time to start a business. Score 2 / 2 -------------------------------------------------------------------------------- Question 4 (2 points) The ceteris paribus assumption is used in economics because 100.0% 1. it is too difficult to account for everything that might have an effect on behavior. 0.0% 2. it makes it easier to track the thought processes of people, which is necessary to develop good theories. 0.0% 3. people are self-interested and rational. 0.0% 4. the more complex a model is, the better it is. Score 2 / 2 -------------------------------------------------------------------------------- Question 5 (2 points) Normative economics 100.0% 1. is the study of what ought to be and involves value judgments. 0.0% 2. is synonymous with objective economics. 0.0% 3. is limited to making statements about facts and the actual relationships among variables. 0.0% 4. is concerned with statements that analyze actual situations in the economy. Score 2 / 2 -------------------------------------------------------------------------------- Question 6 (2 points) An increase in the price of gasoline will reduce the amount of gasoline purchased. This is: 0.0% 1. a normative economic statement. 100.0% 2. a positive economic statement. 0.0% 3. neither a normative nor a positive statement. 0.0% 4. none of the above. Score 0 / 2 -------------------------------------------------------------------------------- Question 7 (2 points) Which would be least consistent with the kind of rational decision-making assumed in economics? 0.0% 1. Alfred chooses love over money. 0.0% 2. Bernice acts on the basis of faulty information and, as a result, makes a mistake. 100.0% 3. Carlisle chooses the more costly of two ways to achieve a given end because he does not care about costs. 0.0% 4. Daphne contributes some of her income to charity. Score 2 / 2 -------------------------------------------------------------------------------- Question 8 (2 points) Scarcity exists because of 100.0% 1. unlimited wants and limited resources. 0.0% 2. the market mechanism. 0.0% 3. specialization and the division of labor. 0.0% 4. the allocation of goods by prices. Score 2 / 2 -------------------------------------------------------------------------------- Question 9 (2 points) The opportunity cost of going to college might best be described as 0.0% 1. the money that must be paid in order to attend college. 0.0% 2. the lowest-valued alternative use of the student's time. 100.0% 3. the highest-valued alternative use of the student's time. 0.0% 4. the value that the student attaches to not working. Score 0 / 2 -------------------------------------------------------------------------------- Question 10 (2 points) Central planners in planned economies 100.0% 1. generally set production targets for firms. 0.0% 2. always consult consumers on the output of goods they want to consume. 0.0% 3. allow prices to organize the economy's production. 0.0% 4. depend upon the invisible hand to coordinate economic activities. Score 0 / 2 -------------------------------------------------------------------------------- Question 11 (2 points) The government plays almost no role in the U.S. economy. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 12 (2 points) Value judgments are based on people's tastes, preferences, and ethical opinions. 100.0% 1. True 0.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 13 (2 points) Adam Smith believed that 0.0% 1. people were hard-wired to be selfish. 0.0% 2. the government should manage most aspects of the economy. 100.0% 3. allowing individuals to pursue their own self-interest is the most effective way to make a country wealthy. 0.0% 4. the division of labor should be managed by the government. Score 2 / 2 -------------------------------------------------------------------------------- Question 14 (2 points) Consumers generally express their self-interest by 100.0% 1. attempting to find the lowest price for a product. 0.0% 2. maximizing profits. 0.0% 3. finding jobs with the highest wages. 0.0% 4. minimizing their economic losses. Score 2 / 2 -------------------------------------------------------------------------------- Question 15 (2 points) Scarcity 0.0% 1. is a problem only during a recession or depression. 0.0% 2. is a problem only in developing countries. 0.0% 3. is a problem only among poor people. 100.0% 4. requires people to make choices. Score 2 / 2 -------------------------------------------------------------------------------- Question 16 (2 points) If a curve has a negative slope, then 100.0% 1. one variable falls as the other rises. 0.0% 2. one variable does not change. 0.0% 3. one variable has a smaller value than another. 0.0% 4. one variable changes after another variable. Score 2 / 2 -------------------------------------------------------------------------------- Question 17 (2 points) "The hotter it gets, the more water people drink." This statement implies that the relationship between temperature and water consumption must have 0.0% 1. a negative slope. 100.0% 2. a positive slope. 0.0% 3. a slope always equal to one. 0.0% 4. a slope always equal to 45 degrees. Score 2 / 2 -------------------------------------------------------------------------------- Question 18 (2 points) X Y 2 8 4 12 6 16 8 20 10 24 Given the above data, X and Y exhibit: 100.0% 1. A direct relationship 0.0% 2. An inverse relationship 0.0% 3. No mathematical relationship Score 2 / 2 -------------------------------------------------------------------------------- Question 19 (2 points) A graph's origin is the point of intersection of all lines or curves in the graph. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 20 (2 points) Graphs are valuable because they facilitate interpretation of data. 100.0% 1. True 0.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 21 (2 points) A line that is tangent to a curve 100.0% 1. shares one point with the curve. 0.0% 2. shares two points with the curve. 0.0% 3. shares no points with the curve. 0.0% 4. All of the above are correct. Score 2 / 2 -------------------------------------------------------------------------------- Question 22 (2 points) Why is the choice of units important in constructing a graph? 0.0% 1. It affects whether a variable rises or falls. 100.0% 2. It affects the apparent rate of change of one variable relative to the other. 0.0% 3. It affects which time periods can be considered. 0.0% 4. All of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 23 (2 points) In the following figure, 100.0% 1. at all points, the slope of S1 > the slope of S2. 0.0% 2. at all points, the slope of S1 < the slope of S2. 0.0% 3. at points to the left of A, the slope of S1 > the slope of S2; at points to the right of A, the slope of S1 < the slope of S2. 0.0% 4. at points to the left of A, the slope of S1 < the slope of S2; at points to the right of A, the slope of S1 > the slope of S2. Score 2 / 2 -------------------------------------------------------------------------------- Question 24 (2 points) A relatively flat demand curve indicates that the demand for a product is very sensitive to a change in price. 100.0% 1. True 0.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 25 (2 points) Given the equation for a linear function, y = 20 + 0.67x, what is the value of y when x is zero? 100.0% 1. 20 0.0% 2. 0.67 0.0% 3. 13.4 0.0% 4. zero Score 2 / 2 -------------------------------------------------------------------------------- Question 26 (2 points) Whenever a society forgoes current consumption to invest in capital goods, the 0.0% 1. less the society can consume next year. 0.0% 2. easier it will be for the society to consume less in the future because people will become accustomed to less. 100.0% 3. more the society can produce and consume in the future. 0.0% 4. less capital the society can produce in the future. Score 2 / 2 -------------------------------------------------------------------------------- Question 27 (2 points) Which of the points in the graph are efficient? 0.0% 1. C and F only 0.0% 2. C, D and F only 0.0% 3. A, C, D, F, and G only 100.0% 4. A, C, F, and G only Score 2 / 2 -------------------------------------------------------------------------------- Question 28 (2 points) In the figure below, assume this economy is currently operating at point D. What is the opportunity cost of moving to B? 0.0% 1. 200 bushels of wheat. 0.0% 2. 200 bushels of soybeans. 0.0% 3. infinite; B cannot be produced at any cost. 100.0% 4. zero. Score 2 / 2 -------------------------------------------------------------------------------- Question 29 (2 points) When shifting from point A to point B, the opportunity cost of 1,000 additional tractors is 0.0% 1. one tractor. 0.0% 2. 75 tons of butter. 100.0% 3. 0.75 million tons of butter. 0.0% 4. 4.75 million tons of butter. Score 2 / 2 -------------------------------------------------------------------------------- Question 30 (2 points) A point outside a production possibilities curve indicates 0.0% 1. that resources are not being used efficiently. 100.0% 2. an output combination that society cannot attain given its current level of resources and technology. 0.0% 3. that resources are being used very efficiently. 0.0% 4. that both goods are characterized by increasing costs. Score 2 / 2 -------------------------------------------------------------------------------- Question 31 (2 points) A PPF will be bowed outward if 0.0% 1. there is scarcity. 0.0% 2. increased production of one good means less production of the other good. 0.0% 3. the supply of resources is fixed. 100.0% 4. resources are not equally well-suited to the production of both goods. Score 2 / 2 -------------------------------------------------------------------------------- Question 32 (2 points) An efficient allocation of resources is demonstrated by a point 0.0% 1. above the production possibilities frontier. 0.0% 2. below the production possibilities frontier. 100.0% 3. on the production possibilities frontier. 0.0% 4. near the middle of the production possibilities frontier. Score 2 / 2 -------------------------------------------------------------------------------- Question 33 (2 points) The opportunity cost of food in terms of cars is 100.0% 1. constant. 0.0% 2. increasing as more food is produced. 0.0% 3. decreasing as more food is produced. 0.0% 4. indeterminate. Score 2 / 2 -------------------------------------------------------------------------------- Question 34 (2 points) In one day, Joe can produce 24 bushels of wheat (W) or 8 pounds of rice (R). Joe's opportunity cost of 1 pound of rice is 0.0% 1. 3 pounds of rice. 100.0% 2. 3 bushels of wheat. 0.0% 3. 1/3 bushel of wheat. 0.0% 4. 1/8 bushel of wheat. Score 2 / 2 -------------------------------------------------------------------------------- Question 35 (2 points) If an employee in a fast-food restaurant can produce 10 hamburgers per hour or 20 orders of French fries per hour, the cost of one bag of French fries is two hamburgers. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 36 (2 points) The opportunity cost of more capital goods today is 0.0% 1. fewer capital goods in the future. 0.0% 2. fewer consumer goods in the future. 100.0% 3. fewer consumer goods today. 0.0% 4. more unemployed resources in the future. Score 2 / 2 -------------------------------------------------------------------------------- Question 37 (2 points) The opportunity cost to the society of moving from point E to point A is 100.0% 1. zero. 0.0% 2. 50 pounds of beef. 0.0% 3. 50 bushels of wheat. 0.0% 4. both C and D. Score 2 / 2 -------------------------------------------------------------------------------- Question 38 (2 points) Suppse a PPF has capital goods on the vertical axis and consumption goods on the horizontal axis. The PPF has a constant slope with a vertical intercept of 80 and a horizontal intercept of 160. Last year, 160 units of consumption goods were produced, so the economy produced ________ units of capital goods. 100.0% 1. zero 0.0% 2. 80 0.0% 3. 160 0.0% 4. 240 Score 2 / 2 -------------------------------------------------------------------------------- Question 39 (2 points) In the U.S., it requires 20 labor hours to produce one bushel of wheat and 80 labor hours to produce one computer. In France, it requires 25 labor hours to produce one bushel of wheat and 75 labor hours to produce one computer. If the U.S. and France trade based on their comparative advantages, the U.S. will export ______ and France will export ________. 0.0% 1. wheat; wheat. 0.0% 2. computers; computers. 100.0% 3. wheat; computers. 0.0% 4. computers; wheat. Score 2 / 2 -------------------------------------------------------------------------------- Question 40 (2 points) The ability to produce a particular good using fewer resources than a second country is 0.0% 1. comparative advantage. 100.0% 2. absolute advantage. 0.0% 3. an unfair advantage. 0.0% 4. a means of securing higher terms of trade. Score 2 / 2 -------------------------------------------------------------------------------- Question 41 (2 points) A person has a comparative advantage in an activity whenever she 0.0% 1. has an absolute advantage in the activity. 100.0% 2. can perform the activity at a lower opportunity cost than can another person. 0.0% 3. can do the activity in less time than anyone else. 0.0% 4. can do everything better than anyone else. Score 2 / 2 -------------------------------------------------------------------------------- Question 42 (2 points) Absolute advantage states that a country has an advantage over another if it can produce the good with fewer resources. 100.0% 1. True 0.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 43 (2 points) In order to maximize society's well being, a country should specialize in producing a good if it 0.0% 1. can produce the good with fewer resources than other countries. 100.0% 2. has the lowest opportunity cost of producing the good. 0.0% 3. has the highest opportunity cost of producing the good. Score 2 / 2 -------------------------------------------------------------------------------- Question 44 (2 points) If one person has an absolute advantage in the production of both goods, then 0.0% 1. that person must also have the comparative advantage in both goods. 0.0% 2. that person cannot benefit from trade. 100.0% 3. that person will have the comparative advantage in only one good. 0.0% 4. it is in that person's interest to specialize in the production of both goods. Score 2 / 2 -------------------------------------------------------------------------------- Question 45 (2 points) The average worker in the United States can produce 20 tons of coal or 10 tons of iron per hour. The average worker in Canada can produce 10 tons of coal or 10 tons of iron per hour. Which conclusion is correct? 0.0% 1. The United States has an absolute advantage in the production of iron. 0.0% 2. Canada has an absolute advantage in the production of iron. 0.0% 3. Canada has an absolute advantage in the production of coal. 100.0% 4. The United States has an absolute advantage in the production of coal. Score 2 / 2 -------------------------------------------------------------------------------- Question 46 (2 points) Countries A and B produce pickles and ice cream in the following quantities when all of their resources are used. Pickles Ice Cream A 10 10 B 5 20 Which of the following is true? 0.0% 1. The opportunity cost of a pickle in country B is four ice cream cones. 0.0% 2. The opportunity cost of an ice cream cone in country B is one-fourth of a pickle. 0.0% 3. The opportunity cost cannot be determined in country A. 100.0% 4. Both a and b are true. Score 2 / 2 -------------------------------------------------------------------------------- Question 47 (2 points) In the U.S., it requires 20 labor hours to produce one bushel of wheat and 80 labor hours to produce one computer. In France, it requires 25 labor hours to produce one bushel of wheat and 75 labor hours to produce one computer. The U.S. and France could benefit from trade if the U.S. specializes in _____________ and France specializes in ______________. 0.0% 1. computers; computers. 0.0% 2. computers; wheat. 100.0% 3. wheat; computers. 0.0% 4. wheat; wheat. Score 2 / 2 -------------------------------------------------------------------------------- Question 48 (2 points) The following graphs show the potential production for coats and books in Utopia and Transylvania. Both countries have equal amounts of resources available for production of coats or books. Which country has the absolute advantage in producing coats and books? 100.0% 1. Utopia has the absolute advantage in producing both goods. 0.0% 2. Utopia has the absolute advantage in producing coats; Transylvania has the absolute advantage in producing books. 0.0% 3. Utopia has the absolute advantage in producing books; Transylvania has the absolute advantage in producing coats. 0.0% 4. Transylvania can produce fewer goods with the same resources; therefore it has the absolute as well as comparative advantage. Score 2 / 2 -------------------------------------------------------------------------------- Question 49 (2 points) The term "comparative disadvantage" means one party in a trade 0.0% 1. has a lower opportunity cost than its trading partner. 100.0% 2. has a higher opportunity cost than its trading partner. 0.0% 3. has an absolute advantage in the goods that it is trading. 0.0% 4. has no basis for trade with a trading partner. Score 0 / 2 -------------------------------------------------------------------------------- Question 50 (2 points) If there is an agricultural economy in which land can be used either as pasture for cattle or as crop land for wheat, the opportunity cost of converting one acre from pasture to wheat production is the 0.0% 1. profits from the extra wheat production. 100.0% 2. pounds of beef that are lost. 0.0% 3. number of bushels of wheat produced on an acre. 0.0% 4. total number of pounds of beef produced. Score 0 / 2 -------------------------------------------------------------------------------- Total score 86 / 100 = 86.0% -------------------------------------------------------------------------------- TEST 2 User ID: xefri Attempt: 1 / 1 Out of: 100 Started: Sep 30, 2003 13:36 Finished: Sep 30, 2003 14:50 Time spent: 1 hr., 13 min., 57 sec. Student finished 2 hrs., 46 min., 3 sec. ahead of the 240 min. time limit. Return to Scores -------------------------------------------------------------------------------- Question 1 (2 points) When a demand schedule is drawn on a graph, 0.0% 1. price is measured on the vertical axis. 0.0% 2. income is held constant. 0.0% 3. the resulting curve has a negative slope. 100.0% 4. All of the above are correct. Score 2 / 2 -------------------------------------------------------------------------------- Question 2 (2 points) Which of the following is a determinant of demand? 0.0% 1. cost of production 100.0% 2. income 0.0% 3. number of suppliers 0.0% 4. technology Score 0 / 2 -------------------------------------------------------------------------------- Question 3 (2 points) The produce manager at IGA has noticed that when they raise the price of rutabaga, the number of rutabaga sold decreases. This decrease in rutabaga sales should be called a decrease in 0.0% 1. demand. 0.0% 2. supply. 100.0% 3. quantity demanded. 0.0% 4. quantity supplied. Score 2 / 2 -------------------------------------------------------------------------------- Question 4 (2 points) A market demand curve is found by 0.0% 1. taking the demand curve of the "representative" consumer. 0.0% 2. adding the prices and the quantities demanded by a consumer. 100.0% 3. adding the quantities demanded for each individual consumer at each price. 0.0% 4. adding the prices each consumer would pay for each quantity. Score 2 / 2 -------------------------------------------------------------------------------- Question 5 (2 points) The law of demand loosely states that a lower price increases the amount of a commodity that people are willing to buy. 100.0% 1. True 0.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 6 (2 points) "Demand" is a series of quantities demanded, one for each person in the market. 0.0% 1. True 100.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 7 (2 points) A shift in the demand curve occurs when 0.0% 1. suppliers place more goods on the market. 0.0% 2. the price of a good rises. 100.0% 3. consumers want to buy more than before at a given price. 0.0% 4. the price of the good falls. Score 2 / 2 -------------------------------------------------------------------------------- Question 8 (2 points) An increase in the price of a good (watch terminology!) 0.0% 1. will cause an increase in demand, since the good is now more valuable. 0.0% 2. will cause a decrease in demand. 0.0% 3. will cause an increase in the quantity demanded, since the good is now more valuable. 100.0% 4. will cause a decrease in the quantity demanded. 0.0% 5. will cause a decrease in both demand and the quantity demanded Score 2 / 2 -------------------------------------------------------------------------------- Question 9 (2 points) If incomes rise, most consumers will increase the quantity demanded of an inferior good. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 10 (2 points) Which of the following would be most likely to cause an outward shift of the demand curve for electricity? 0.0% 1. a decrease in the price of electricity 0.0% 2. an increase in the price of air conditioners 100.0% 3. an increase in the price of heating oil 0.0% 4. a decrease in the price of natural gas Score 2 / 2 -------------------------------------------------------------------------------- Question 11 (2 points) A study of recent data indicates that higher-income women are more likely to have an abortion. This suggests (i) abortion is an inferior good and (ii) the possibility that the demand curve for abortion has a positive slope. 0.0% 1. i and ii 0.0% 2. i but not ii 0.0% 3. ii but not i 100.0% 4. neither i nor ii Score 0 / 2 -------------------------------------------------------------------------------- Question 12 (2 points) Assume that the figure below shows demand for steak, a normal good. An increase in income of buyers will change demand from 100.0% 1. D1 to D2 0.0% 2. D2 to D1 0.0% 3. D3 to D2 0.0% 4. D3 to D1 Score 2 / 2 -------------------------------------------------------------------------------- Question 13 (2 points) An increase in the price of gasoline shifts the demand for tires to the 0.0% 1. left, because gasoline and tires are substitutes. 100.0% 2. left, because gasoline and tires are normally used together. 0.0% 3. right, because gasoline and tires are substitutes. 0.0% 4. right, because gasoline and tires are normally used together. Score 2 / 2 -------------------------------------------------------------------------------- Question 14 (2 points) If the government has stated that it will pay whatever it must to obtain 1,000 units of good X, then which demand curve in the figure below is appropriate? 0.0% 1. 100.0% 2. 0.0% 3. 0.0% 4. Score 2 / 2 -------------------------------------------------------------------------------- Question 15 (2 points) In the figure below, an increase in population (which will increase the number of buyers of the good) will change demand from 100.0% 1. D1 to D2 0.0% 2. D2 to D1 0.0% 3. D3 to D2 0.0% 4. D3 to D1 Score 2 / 2 -------------------------------------------------------------------------------- Question 16 (2 points) Which of the following would NOT change the demand for a good? 0.0% 1. A change in income 0.0% 2. A change in the price of a substitute good 0.0% 3. A change in the expected future price of the good. 100.0% 4. A change in the number of sellers. Score 2 / 2 -------------------------------------------------------------------------------- Question 17 (2 points) Assuming that hamburgers and mustard are complements, a decrease in the price of hamburgers would increase the demand for mustard. 100.0% 1. True 0.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 18 (2 points) An increase in the price of coffee will 0.0% 1. decrease the demand for coffee. 0.0% 2. increase the demand for coffee. 100.0% 3. increase the quantity supplied of coffee. 0.0% 4. increase the supply of coffee. Score 2 / 2 -------------------------------------------------------------------------------- Question 19 (2 points) A supply schedule shows 0.0% 1. the "market potential" for a product. 100.0% 2. how much producers are willing and able to sell at different prices. 0.0% 3. possible combinations of output under different conditions. 0.0% 4. how much consumers would like to buy at different prices. Score 2 / 2 -------------------------------------------------------------------------------- Question 20 (2 points) The one thing that does NOT lead to a shift in the supply or demand curves of a good is: 0.0% 1. A change in population. 0.0% 2. A change in tastes and preferences. 0.0% 3. A change in technology. 100.0% 4. A change in the price of that good. Score 2 / 2 -------------------------------------------------------------------------------- Question 21 (2 points) Which of the following is a determinant of supply? 0.0% 1. tastes and preferences 100.0% 2. technology 0.0% 3. consumer Income 0.0% 4. number of consumers Score 2 / 2 -------------------------------------------------------------------------------- Question 22 (2 points) The market supply curve is found by 100.0% 1. summing the supply curves of individual firms. 0.0% 2. plotting the supply curves of individual firms. 0.0% 3. taking the supply curve of the representative firm. 0.0% 4. plotting the supply curves of individual consumers. Score 2 / 2 -------------------------------------------------------------------------------- Question 23 (2 points) The supply of a good can be changed by: 0.0% 1. Costs of inputs. 0.0% 2. Number of firms in the industry. 0.0% 3. Technology. 100.0% 4. All of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 24 (2 points) Which of the following events would increase the supply of hot dogs? 100.0% 1. the price of the ingredients used to produce hot dogs decreases 0.0% 2. an increase in the price of a hot dog 0.0% 3. an increase in the number of consumers of hot dogs 0.0% 4. today consumers prefer hot dogs more than in the past Score 2 / 2 -------------------------------------------------------------------------------- Question 25 (2 points) The supply of newspapers will decline if 100.0% 1. newsprint (an input) becomes more expensive. 0.0% 2. the printers' union makes wage concessions. 0.0% 3. prices are reduced. 0.0% 4. magazine prices rise (assuming magazines are a substitute for newspapers). Score 2 / 2 -------------------------------------------------------------------------------- Question 26 (2 points) Assume that the figure below shows the supply of new houses. An improvement in the technology for building houses will shift supply from 100.0% 1. S1 to S2 0.0% 2. S2 to S1 0.0% 3. S3 to S2 0.0% 4. S3 to S1 Score 2 / 2 -------------------------------------------------------------------------------- Question 27 (2 points) A change in supply is the same as a change in quantity supplied. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 28 (2 points) As the price of apples increases, apple growers will 0.0% 1. decrease the supply of apples. 0.0% 2. increase the supply of apples. 0.0% 3. switch to less expensive methods of growing apples. 100.0% 4. increase the quantity supplied of apples. Score 2 / 2 -------------------------------------------------------------------------------- Question 29 (2 points) Equilibrium in a market occurs when 0.0% 1. the market price leads to a decrease in quantity demanded. 100.0% 2. quantity supplied and quantity demanded are equal at the market price. 0.0% 3. demand and supply indicate a small surplus of a good. 0.0% 4. price is at its minimum. Score 2 / 2 -------------------------------------------------------------------------------- Question 30 (2 points) Suppose the supply of a good decreases. Which of the following will occur? 0.0% 1. price increase, quantity increase 0.0% 2. price decrease, quantity decrease 100.0% 3. price increase, quantity decrease 0.0% 4. price decrease, quantity increase Score 2 / 2 -------------------------------------------------------------------------------- Question 31 (2 points) An increase in supply will have what effect on equilibrium price and quantity? 0.0% 1. Price will increase, quantity will decrease. 100.0% 2. Price will decrease, quantity will increase. 0.0% 3. Both price and quantity will increase. 0.0% 4. Both price and quantity will decrease. Score 2 / 2 -------------------------------------------------------------------------------- Question 32 (2 points) The price of coal fell and the equilibrium quantity traded also fell. This could have been caused by 100.0% 1. the price of oil falling. 0.0% 2. coal miners receiving large wage increases. 0.0% 3. more efficient mining equipment being installed. 0.0% 4. consumer incomes rising. Score 2 / 2 -------------------------------------------------------------------------------- Question 33 (2 points) The removal in 1966 of the requirement that Catholics eat fish on Fridays was followed by a 12.5 percent fall in prices of fresh fish. From this can be deduced that the 100.0% 1. demand curve for fish shifted to the left. 0.0% 2. demand curve for fish shifted to the right. 0.0% 3. supply curve for fish shifted to the left. 0.0% 4. supply curve for fish shifted to the right. Score 2 / 2 -------------------------------------------------------------------------------- Question 34 (2 points) A shift in the demand curve for sailboats resulting from an increase in incomes will lead to 100.0% 1. higher prices of sailboats. 0.0% 2. lower prices of sailboats. 0.0% 3. a shift in the supply curve for sailboats. 0.0% 4. lower output of sailboats. Score 2 / 2 -------------------------------------------------------------------------------- Question 35 (2 points) This is a hard test, huh. (I think supply and demand, particularly the specific terminology, is the toughest thing we do all semester.) Therefore, just pick the answer below that you think I'm looking for! (Hint: Put option 1. And if you miss it, I'll never let you forget it!) 100.0% 1. Economics is a wonderful subject that everyone finds interesting. 0.0% 2. Illinois highways are always well maintained. In fact, they're among the best in the country! 0.0% 3. Spring break should be cancelled because students miss being in the classroom. Score 2 / 2 -------------------------------------------------------------------------------- Question 36 (2 points) Price per Quantity Demanded Quantity Supplied Constant- of Constant-Quality of Constant-Quality Quality Unit Units per Year Units per Year ----------------------------------------------------- $1.00 1,000 200 2.00 800 400 3.00 600 600 4.00 400 800 5.00 200 1,000 In a free market economy, the equilibrium price in the table would adjust to 0.0% 1. $1. 0.0% 2. $5. 0.0% 3. $4. 100.0% 4. $3. Score 2 / 2 -------------------------------------------------------------------------------- Question 37 (2 points) In the figure below, the equilibrium price and quantity is 0.0% 1. P = 30, Q = 1,000. 100.0% 2. P = 20, Q = 2,000. 0.0% 3. P = 10, Q = 1,000. 0.0% 4. P = 30, Q = 3,000. Score 2 / 2 -------------------------------------------------------------------------------- Question 38 (2 points) A surplus will tend to occur at which price in the following figure? 100.0% 1. P1 0.0% 2. P2 0.0% 3. P3 0.0% 4. None of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 39 (2 points) At price P3 in the following figure, what will tend to happen? 0.0% 1. There will be a shortage, and the price will fall. 100.0% 2. There will be a shortage and the price will rise. 0.0% 3. There will be a surplus, and the price will rise. 0.0% 4. There will be a surplus, and the price will fall. Score 2 / 2 -------------------------------------------------------------------------------- Question 40 (2 points) Suppose the price of corn was above its equilibrium price. You would expect to see 0.0% 1. a shortage on the market that caused prices to increase further. 100.0% 2. sellers begin to lower their price because of the surplus of corn. 0.0% 3. an increase in the quantity supplied as the price falls toward equilibrium. 0.0% 4. a decrease in demand as the price falls toward equilibrium. Score 0 / 2 -------------------------------------------------------------------------------- Question 41 (2 points) In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart. In February, 3,000 quarts are sold at $2.50 a quart. This change in quantity sold and price may have been caused by 0.0% 1. a reduction in wages in the Boston area. 0.0% 2. the introduction of labor-saving automated ice cream-packing machinery. 100.0% 3. the release of a medical study showing that ice cream consumption improves mental health. 0.0% 4. the decision by Boston ice cream sellers to eliminate discount coupons. Score 2 / 2 -------------------------------------------------------------------------------- Question 42 (2 points) If cheese is a main ingredient of pizza, what happens to the price of pizza when the price of cheese increases? 100.0% 1. Pizza prices rise. 0.0% 2. Pizza prices fall. 0.0% 3. There is no change in pizza prices because demand didn't shift. 0.0% 4. None of the above are true. Score 2 / 2 -------------------------------------------------------------------------------- Question 43 (2 points) The competitive equilibrium point occurs when 0.0% 1. there is no tendency to change. 0.0% 2. there is no excess demand. 0.0% 3. there is no excess supply. 100.0% 4. all of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 44 (2 points) Examine the graph. If the government imposes a rent control on this market and sets the maximum apartment rental at $600 per month, the market will 100.0% 1. have a shortage of 400 apartments. 0.0% 2. have a surplus of 400 apartments. 0.0% 3. a shortage of 200 apartments. 0.0% 4. be in equilibrium. Score 2 / 2 -------------------------------------------------------------------------------- Question 45 (2 points) If rent controls for apartments were established above the market rental rates, we would expect 0.0% 1. a shortage of apartments to develop 0.0% 2. a surplus of apartments to develop 100.0% 3. the quantity demanded to equal the quantity supplied. 0.0% 4. a building boom in new apartments to start. Score 2 / 2 -------------------------------------------------------------------------------- Question 46 (2 points) A law requiring sellers to pay the government a tax on cigarettes has the effect of 0.0% 1. shifting the supply curve to the right. 0.0% 2. changing the slope of the supply curve. 100.0% 3. shifting the supply curve to the left. 0.0% 4. changing the slope of the demand curve. Score 2 / 2 -------------------------------------------------------------------------------- Question 47 (2 points) Examine the graph. The equilibrium price and quantity for apartments in this housing market are 0.0% 1. $1000 and 700 apartments rented. 0.0% 2. $600 and 900 apartments rented. 0.0% 3. $600 and 500 apartments rented. 100.0% 4. $800 and 700 apartments rented. Score 2 / 2 -------------------------------------------------------------------------------- Question 48 (2 points) The effect of an excise tax imposed on a SELLER of a good is to 0.0% 1. shift the demand curve to the left. 100.0% 2. shift the supply curve to the left. 0.0% 3. shift the demand curve to the right. 0.0% 4. shift the supply curve to the right. Score 2 / 2 -------------------------------------------------------------------------------- Question 49 (2 points) Minimum wage laws specify the highest wage that employers may pay workers. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 50 (2 points) In a free market, what processes would eliminate the excess demand in a rental housing market? 0.0% 1. Rent-seeking activities 100.0% 2. The market bidding mechanism 0.0% 3. Government regulations 0.0% 4. The black market Score 0 / 2 -------------------------------------------------------------------------------- Total score 88 / 100 = 88.0% -------------------------------------------------------------------------------- TEST 3 User ID: xefri Attempt: 1 / 1 Out of: 120 Started: Oct 26, 2003 20:31 Finished: Oct 26, 2003 22:26 Time spent: 1 hr., 54 min., 38 sec. Student finished 2 hrs., 5 min., 22 sec. ahead of the 240 min. time limit. Return to Scores -------------------------------------------------------------------------------- Question 1 (2 points) Which of the points in the graph are efficient? 0.0% 1. C and F only 0.0% 2. C, D and F only 0.0% 3. A, C, D, F, and G only 100.0% 4. A, C, F, and G only Score 2 / 2 -------------------------------------------------------------------------------- Question 2 (2 points) The production possibilities frontier illustrates 0.0% 1. the fundamental concept of scarcity. 0.0% 2. the opportunity cost of acquiring more of one good. 0.0% 3. an economy's maximum output utilizing all resources efficiently. 100.0% 4. All of the above are correct. Score 2 / 2 -------------------------------------------------------------------------------- Question 3 (2 points) Resources are also known as 0.0% 1. factories. 0.0% 2. minerals. 0.0% 3. stocks, bonds, and other financial instruments. 100.0% 4. factors of production. Score 2 / 2 -------------------------------------------------------------------------------- Question 4 (2 points) The circular flow of income shows the dollar value of output is 0.0% 1. more or less than the total income, depending on whether profits are positive or negative. 100.0% 2. exactly equal to the total income. 0.0% 3. more than the total income because of the existence of profits. 0.0% 4. less than the total income. Score 2 / 2 -------------------------------------------------------------------------------- Question 5 (2 points) A circular flow model shows 100.0% 1. flows of resources, products, and payments in the economy. 0.0% 2. changes in national income over time. 0.0% 3. amounts of income different population groups receive in the economy over time. Score 2 / 2 -------------------------------------------------------------------------------- Question 6 (2 points) Gross domestic product is the market value of manufacturing production in a year. 0.0% 1. True 100.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 7 (2 points) Real GDP 0.0% 1. includes all foreign and domestic transactions. 0.0% 2. includes the dollar value of domestic transactions only. 100.0% 3. tries to isolate the effect of changing output, holding prices constant. 0.0% 4. measures GDP in terms of prices of goods and services produced. Score 0 / 2 -------------------------------------------------------------------------------- Question 8 (2 points) To determine how well an economy is doing, it is better to use 0.0% 1. nominal GDP figures. 100.0% 2. real GDP figures. 0.0% 3. GDP figures measured by the expenditure approach. 0.0% 4. GDP figures measured by the income approach. Score 0 / 2 -------------------------------------------------------------------------------- Question 9 (2 points) Nominal GDP measures output in terms of current prices. Therefore, part of an increase in nominal GDP can be attributed to inflation. 100.0% 1. True. 0.0% 2. False. Score 2 / 2 -------------------------------------------------------------------------------- Question 10 (2 points) There are many difficulties with using GDP as an indicator of social well-being. Which of the following is NOT one of the difficulties? 0.0% 1. Household labor is not included in GDP 0.0% 2. GDP cannot take account of changes in leisure time 0.0% 3. GDP fails to account for changes in air pollution or crime 100.0% 4. Intermediate products are not included in GDP Score 0 / 2 -------------------------------------------------------------------------------- Question 11 (2 points) Which of the following is NOT a consumption good? 0.0% 1. a hamburger 100.0% 2. a fork lift 0.0% 3. a blouse 0.0% 4. health care Score 0 / 2 -------------------------------------------------------------------------------- Question 12 (2 points) Which of the following may cause GDP to underestimate the well-being of society? 0.0% 1. An increase in pollution. 0.0% 2. A decrease in leisure as people work more. 0.0% 3. An increase in the gap between rich and poor. 100.0% 4. An increase in underground transactions. Score 0 / 2 -------------------------------------------------------------------------------- Question 13 (2 points) In a circular flow diagram, households and firms interact 0.0% 1. in financial markets. 0.0% 2. only in the market for goods and services. 100.0% 3. in both the market for goods and services and the market for factors of production. 0.0% 4. in only the market for factors of production. Score 2 / 2 -------------------------------------------------------------------------------- Question 14 (2 points) Which of the following is NOT included in Investment (when calculating GDP using the expenditures method)? 0.0% 1. firms' purchases of new capital equipment 100.0% 2. purchases of common stock in a corporation 0.0% 3. changes in the level of firms' inventories 0.0% 4. firms' expenditures on construction Score 0 / 2 -------------------------------------------------------------------------------- Question 15 (2 points) Which of the following would be included in the GDP of the United States? 0.0% 1. the value of leisure time 100.0% 2. the value of a car produced in the United States by a Japanese-owned company 0.0% 3. the value of Eli Lilly stock purchased by a U.S. citizen 0.0% 4. the value of housework done in one's own home Score 2 / 2 -------------------------------------------------------------------------------- Question 16 (2 points) Anticipating more sales during the upcoming football season, a manufacturer of sports memorabilia increases his production in July. This is an example of 0.0% 1. savings. 100.0% 2. inventory investment. 0.0% 3. business investment. 0.0% 4. consumption, because the goods will be sold during the football season. Score 0 / 2 -------------------------------------------------------------------------------- Question 17 (2 points) Disposable income is after-tax income that is available for the consumer to spend. 100.0% 1. True 0.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 18 (2 points) Wheat used for producing bread is 0.0% 1. a final good. 0.0% 2. not going to generate any employment. 100.0% 3. an intermediate good. 0.0% 4. a durable good. Score 2 / 2 -------------------------------------------------------------------------------- Question 19 (2 points) If IBM finds that it has produced 100,000 more computers in a year than it sells in that year, the value of those computers 0.0% 1. will be accounted for as a loss because they cannot be counted as part of GDP. 0.0% 2. will be included in GDP in the year in which they are sold. 0.0% 3. will be counted in the current year's GDP as consumption. 100.0% 4. will be counted in current GDP as inventory investment. Score 2 / 2 -------------------------------------------------------------------------------- Question 20 (2 points) Suppose in 1987 the CPI = 100.00, in 1988 the CPI = 110.00, and in 1989 the CPI = 120.78. Then the inflation rate 0.0% 1. was the same in 1989 as it was in 1988. 100.0% 2. was lower in 1989 than it was in 1988. 0.0% 3. was greater in 1989 than it was in 1988. 0.0% 4. is impossible to determine from the CPI. Score 2 / 2 -------------------------------------------------------------------------------- Question 21 (2 points) Suppose the nominal interest rate on some asset is 5% and the inflation rate is 5%. Which of the following statements is true? 0.0% 1. The real interest rate is 5%. 0.0% 2. The owner of this asset will gain purchasing power. 0.0% 3. The real interest rate is 10%. 100.0% 4. The real interest rate is 0%. Score 2 / 2 -------------------------------------------------------------------------------- Question 22 (2 points) Given the following information, calculate the CPI for year 1. Base year CPI = 100 Total cost of goods in base year = $625, Total cost of goods in year 1 = $750 0.0% 1. 112.5 100.0% 2. 120 0.0% 3. 125 0.0% 4. 83 Score 2 / 2 -------------------------------------------------------------------------------- Question 23 (2 points) Suppose a typical consumer buys 50 units of food and 40 units of clothes in the year 2101, when the price per unit of food is $20 and the price per unit of clothes is $25. In 2102, when the typical consumer buys 60 units of food and 60 units of clothes, the price of food is $24 and the price per unit of clothes remains at $25. If the base year is 2101, the inflation rate for 2102 would be 0.0% 1. 22 percent. 100.0% 2. 10 percent. 0.0% 3. 8.9 percent. 0.0% 4. 20 percent. Score 2 / 2 -------------------------------------------------------------------------------- Question 24 (2 points) Deflation refers to the situation when 0.0% 1. the inflation rate is decreasing. 0.0% 2. there is a recession with high inflation. 100.0% 3. the price index is falling. 0.0% 4. prices are not changing. Score 0 / 2 -------------------------------------------------------------------------------- Question 25 (2 points) The consumer price index, or CPI, 0.0% 1. is a measure of the average price level of all goods and services produced in the economy in a given year relative to the average price level of all goods and services produced in the economy in a base year. 0.0% 2. is a measure of the average price level of all goods and services produced in the economy in a base year relative to the average price level of all goods and services produced in the economy in a given year. 100.0% 3. is a measure of the average price level of the goods and services bought by a typical consumer in a given year relative to the average price level of the goods and services bought by a typical consumer in a base year. 0.0% 4. is a measure of the average price level of the goods and services bought by a typical consumer in a base year relative to the average price level of the goods and services bought by a typical consumer in a given year. Score 0 / 2 -------------------------------------------------------------------------------- Question 26 (2 points) The base year CPI is always _______. 0.0% 1. 0 0.0% 2. 1 0.0% 3. 10 100.0% 4. 100 Score 2 / 2 -------------------------------------------------------------------------------- Question 27 (2 points) Suppose you sign a contract stipulating a 5-percent increase in wages. That year inflation runs about 10 percent. Which of the following is true? 100.0% 1. Your real wage fell. 0.0% 2. Your nominal wage fell. 0.0% 3. Although your nominal wage fell, your real wage increased. 0.0% 4. Both your nominal and real wages increased. Score 2 / 2 -------------------------------------------------------------------------------- Question 28 (2 points) Mary's nominal income is $4000. If the value of the consumer price index (CPI) is 200, what is Mary's real income? 0.0% 1. $8000 0.0% 2. $4000 100.0% 3. $2000 0.0% 4. $20 Score 2 / 2 -------------------------------------------------------------------------------- Question 29 (2 points) The largest category of consumer spending in the U.s. is 100.0% 1. housing. 0.0% 2. food and beverages. 0.0% 3. transportation. 0.0% 4. medical care. Score 2 / 2 -------------------------------------------------------------------------------- Question 30 (2 points) The four phases of business fluctuations are (in order) 100.0% 1. Expansion, peak, recession, trough 0.0% 2. Expansion, plateau, recession, plateau 0.0% 3. Expansion, trough, recession, peak 0.0% 4. Plateau, expansion, plateau, recession Score 2 / 2 -------------------------------------------------------------------------------- Question 31 (2 points) In an expansion, 0.0% 1. real GDP is decreasing. 0.0% 2. inflation rates usually fall. 100.0% 3. the unemployment rate will decrease. Score 2 / 2 -------------------------------------------------------------------------------- Question 32 (2 points) If hovercrafts replaced automobiles as a form of individual transportation, and this transition caused significant fluctuations in the economy, this would be evidence for which economist's theory of the business cycle? 0.0% 1. John Maynard Keynes 0.0% 2. Karl Marx 100.0% 3. Joseph Schumpeter 0.0% 4. Adam Smith Score 2 / 2 -------------------------------------------------------------------------------- Question 33 (2 points) An extremely severe recession is known as a 0.0% 1. trough. 0.0% 2. peak. 0.0% 3. contraction. 100.0% 4. depression. Score 2 / 2 -------------------------------------------------------------------------------- Question 34 (2 points) Which of the following could be expected if the economy is in a recession? 0.0% 1. The unemployment rate will fall. 100.0% 2. The inflation rate will fall. 0.0% 3. Real GDP will increase. Score 2 / 2 -------------------------------------------------------------------------------- Question 35 (2 points) Who believed that fluctuations in the business cycle were the result of class conflicts between labor and capital? 0.0% 1. Schumpeter 100.0% 2. Marx 0.0% 3. Rousseau 0.0% 4. Keynes Score 2 / 2 -------------------------------------------------------------------------------- Question 36 (2 points) During a recession, one would expect the price level to ________ and unemployment to _______. 0.0% 1. increase; increase 100.0% 2. decrease; increase 0.0% 3. increase; decrease 0.0% 4. decrease; decrease Score 2 / 2 -------------------------------------------------------------------------------- Question 37 (2 points) High cyclical unemployment is associated with 100.0% 1. economic downturns. 0.0% 2. new tariffs or trade agreements. 0.0% 3. transitional periods in which employees find better jobs. 0.0% 4. times of prosperity and growth in real GDP. Score 0 / 2 -------------------------------------------------------------------------------- Question 38 (2 points) During a recession, the unemployment rate increases because 0.0% 1. there are more discouraged workers. 0.0% 2. the labor force grows. 100.0% 3. firms hire fewer workers. 0.0% 4. all of the above. Score 0 / 2 -------------------------------------------------------------------------------- Question 39 (2 points) If an auto worker gets laid off because a recession causes the demand for autos to decrease, what type of unemployment is it? 0.0% 1. frictional 0.0% 2. structural 100.0% 3. cyclical Score 2 / 2 -------------------------------------------------------------------------------- Question 40 (2 points) 1989 1999 Adult Population Over 16 200 million 220 million Employed 120 million 132 million Looking for Work 8 million 10 million Not Looking for Work 72 million 78 million The unemployment rate and the labor force participation rate for 1999 respectively were 100.0% 1. 7.04% and 64.55%. 0.0% 2. 4.55% and 93.96%. 0.0% 3. 7.04% and 93.96%. 0.0% 4. 12.82% and 60%. Score 2 / 2 -------------------------------------------------------------------------------- Question 41 (2 points) The Phillips curve predicts that when unemploymen trises, inflation will 0.0% 1. rise. 0.0% 2. stay constant. 0.0% 3. exceed the NAIRU in the same proportion as unemployment rose. 100.0% 4. fall. Score 2 / 2 -------------------------------------------------------------------------------- Question 42 (2 points) People who have dropped out of the labor force and who are no longer looking for a job because they believe the job market has little to offer them are classified by the Labor Department as 0.0% 1. unemployed. 0.0% 2. nonparticipants. 100.0% 3. discouraged workers. 0.0% 4. wage rate busters. Score 0 / 2 -------------------------------------------------------------------------------- Question 43 (2 points) The full employment rate of unemployment (or the natural rate of unemployment) is 0.0% 1. zero. 0.0% 2. always 4%. 0.0% 3. always 6.5%. 100.0% 4. variable over time. Score 2 / 2 -------------------------------------------------------------------------------- Question 44 (2 points) The lowest rate of unemployment that does not create inflationary pressure is called the 0.0% 1. NERU: Non-Expansionary Rate of Unemployment. 0.0% 2. MUR: Minimal Unemployment Rate. 100.0% 3. NAIRU: Non-Accelerating Inflation Rate of Unemployment. 0.0% 4. NRU: Natural Rate of Unemployment Score 2 / 2 -------------------------------------------------------------------------------- Question 45 (2 points) According to the Bureau of Labor Statistics, a househusband who chooses to stay at home to take care of children is 0.0% 1. underemployed. 100.0% 2. not in the labor force. 0.0% 3. unemployed. 0.0% 4. a discouraged worker. Score 2 / 2 -------------------------------------------------------------------------------- Question 46 (2 points) Firms that pay an efficiency wage are likely to increase unemployment. 100.0% 1. True 0.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 47 (2 points) If a union succeeds in raising the wages of its members above the equilibrium wage, what is a likely outcome? 100.0% 1. unemployment 0.0% 2. deflation 0.0% 3. increased number of discouraged workers 0.0% 4. an inward shift of the labor supply curve Score 2 / 2 -------------------------------------------------------------------------------- Question 48 (2 points) Which of the following proposals, if feasible, would provide unemployment insurance with the least risk of moral hazard? 100.0% 1. providing unemployment insurance only to workers actively looking for jobs 0.0% 2. providing unemployment insurance for only a restricted period of time, such a 3 months 0.0% 3. having unemployment benefits decrease steadily over time until they reach zero 0.0% 4. adding free job training to the standard unemployment insurance benefits Score 2 / 2 -------------------------------------------------------------------------------- Question 49 (2 points) Which of the following is NOT a likely outcome of unemployment insurance? 0.0% 1. a reduction in the financial suffering of unemployed workers. 0.0% 2. an increase in overall unemployment 100.0% 3. a reduction in frictional unemployment 0.0% 4. an increase in the average amount of time workers spend between jobs Score 2 / 2 -------------------------------------------------------------------------------- Question 50 (2 points) Unemployment insurance allows unemployed workers to collect 0.0% 1. an amount equal to their former wage for a period of 3 months. 100.0% 2. up to half of their former wage for 26 weeks. 0.0% 3. up to a quarter of their former wage for 52 weeks. 0.0% 4. $100 per week (in 1997 real dollars). Score 2 / 2 -------------------------------------------------------------------------------- Question 51 (2 points) A rise in the minimum wage will tend to _________ the quantity demanded of labor and __________ the quantity supplied of labor. 100.0% 1. decrease; increase 0.0% 2. increase; decrease 0.0% 3. decrease; decrease 0.0% 4. increase; increase Score 2 / 2 -------------------------------------------------------------------------------- Question 52 (2 points) The legislative intent of minimum wage laws is to ensure 0.0% 1. a middle-class standard of living for all workers. 0.0% 2. employment for all who want it. 0.0% 3. unemployment compensation. 100.0% 4. a minimally adequate standard of living. Score 2 / 2 -------------------------------------------------------------------------------- Question 53 (2 points) Assume that the velocity of the money supply is held constant. In the classical view of money, which of the following statements is true? 100.0% 1. Changes in the money supply affect only prices. 0.0% 2. Changing the money supply influences both the price level and the quantity of output. 0.0% 3. The money supply must remain fixed. 0.0% 4. A change in the price level must be matched with a reciprocal change in the money supply. Score 2 / 2 -------------------------------------------------------------------------------- Question 54 (2 points) Which of the following is NOT a cost that can be attributed to inflation? 0.0% 1. higher interest rates 0.0% 2. confusion (and resulting inefficiency) about the relative value of investments 100.0% 3. increased government debts 0.0% 4. wasted time because of consumers' decisions to hold less cash Score 2 / 2 -------------------------------------------------------------------------------- Question 55 (2 points) Suppose the GDP deflator rose from 1.00 to 1.06 from 1995 to 2000. Which of the following statements is true? 0.0% 1. Prices decreased 6% in 5 years. 100.0% 2. Purchasing power decreased 6% in 5 years. 0.0% 3. Prices increased 60% in 5 years. 0.0% 4. Purchasing power decreased 60% in 5 years. Score 2 / 2 -------------------------------------------------------------------------------- Question 56 (2 points) People are most likely to revert to barter in periods of 0.0% 1. stagflation. 0.0% 2. deflation. 100.0% 3. hyperinflation. 0.0% 4. recession. Score 2 / 2 -------------------------------------------------------------------------------- Question 57 (2 points) Suppose Val could earn 5.25% interest on her savings account, while inflation grew steadily at 3%. She is most likely to 100.0% 1. put her money in the bank. 0.0% 2. spend her money quickly. 0.0% 3. withdraw her money from the bank. Score 2 / 2 -------------------------------------------------------------------------------- Question 58 (2 points) Imagine that the money supply's velocity is 8. Which of the following is an accurate statment? 0.0% 1. Any given dollar could not have been passed around more than 8 times during the year. 0.0% 2. One-eighth of the money supply changed hands during the year. 0.0% 3. Prices could not have risen by more than 800% during the year. 100.0% 4. Currency changed hands an average of 8 times during the year. Score 2 / 2 -------------------------------------------------------------------------------- Question 59 (2 points) Which of the following pairs fo economic concepts are usually associated with each other? 100.0% 1. stagflation and cost-push inflation 0.0% 2. stagflation and demand-pull inflation 0.0% 3. economic expansion and cost-push inflation 0.0% 4. economic recession and demand-pull inflation Score 2 / 2 -------------------------------------------------------------------------------- Question 60 (2 points) The value of money 0.0% 1. is directly related to the price level. 100.0% 2. is inversely related to the price level. 0.0% 3. is determined by the real interest rate. 0.0% 4. is determined by the nominal interest rate. Score 2 / 2 -------------------------------------------------------------------------------- Total score 94 / 120 = 78.3% -------------------------------------------------------------------------------- TEST 4 User ID: xefri Attempt: 1 / 1 Out of: 100 Started: Nov 30, 2003 18:07 Finished: Nov 30, 2003 20:21 Time spent: 2 hrs., 13 min., 15 sec. Student finished 46 min., 45 sec. ahead of the 180 min. time limit. Return to Scores -------------------------------------------------------------------------------- Question 1 (2 points) A dollar bill is an example of commodity money. 0.0% 1. True 100.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 2 (2 points) From the definitions of M1 and M2, we know that 0.0% 1. M1 is always larger than M2. 100.0% 2. M2 is always larger than M1. 0.0% 3. M1 and M2 are always equal. 0.0% 4. M1 is sometimes larger than M2, and sometimes smaller than M2. Score 2 / 2 -------------------------------------------------------------------------------- Question 3 (2 points) The U.S. dollar is considered money because 0.0% 1. it is convertible to gold or silver. 0.0% 2. it is easily portable. 100.0% 3. it has been decreed by the U.S. government as legal tender. 0.0% 4. all of the above. Score 0 / 2 -------------------------------------------------------------------------------- Question 4 (2 points) The opportunity cost of money is 100.0% 1. the interest rate. 0.0% 2. the price of stocks. 0.0% 3. the price level. 0.0% 4. real GDP. Score 0 / 2 -------------------------------------------------------------------------------- Question 5 (2 points) If the interest rate rises, consumers will tend to hold more cash. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 6 (2 points) If income decreases, which of the following will occur? 0.0% 1. Money supply will shift right. 0.0% 2. Money demand will shift right. 100.0% 3. The interest rate will decrease. Score 0 / 2 -------------------------------------------------------------------------------- Question 7 (2 points) Given that the money market is in equilibrium, a decrease in the money supply will result in 100.0% 1. an increase in the equilibrium interest rate. 0.0% 2. a decrease in the equilibrium interest rate. 0.0% 3. no change in the equilibrium interest rate. Score 2 / 2 -------------------------------------------------------------------------------- Question 8 (2 points) The graph below shows the demand for money. If the Federal Reserve has the power to set the money supply at a fixed level, we depict the money supply curve as a(n) 0.0% 1. upward-sloping line that intersects the demand curve. 0.0% 2. downward sloping line parallel to the demand curve. 0.0% 3. horizontal line. 100.0% 4. vertical line. Score 2 / 2 -------------------------------------------------------------------------------- Question 9 (2 points) Look at the graph below. If the interest rate is R1, then 0.0% 1. the money supply curve will shift to the left until the money market is in equilibrium. 0.0% 2. the money demand curve will shift to the right until the money market is in equilibrium. 100.0% 3. the interest rate will fall until the money market is in equilibrium. 0.0% 4. any of the above can happen. Score 2 / 2 -------------------------------------------------------------------------------- Question 10 (2 points) Assuming the money market is in equilibrium, a decrease in the price level will cause 0.0% 1. money supply to shift left. 0.0% 2. money supply to shift right. 0.0% 3. money demand to shift right. 100.0% 4. the equilibrium interest rate to fall. Score 0 / 2 -------------------------------------------------------------------------------- Question 11 (2 points) Suppose the money demand curve shifts to the left. This could have been caused by 0.0% 1. an increase in the interest rate. 0.0% 2. a decrease in the interest rate. 0.0% 3. an increase in the price level. 100.0% 4. a decrease in the price level. Score 0 / 2 -------------------------------------------------------------------------------- Question 12 (2 points) Which of the following is NOT a motive for holding money? 0.0% 1. the transaction motive 100.0% 2. the depository motive 0.0% 3. the precautionary motive 0.0% 4. the speculative motive Score 2 / 2 -------------------------------------------------------------------------------- Question 13 (2 points) A bond is a 0.0% 1. legal claim to a part of a corporation's future profits that doe not include voting rights. 100.0% 2. legal claim against a firm, providing a fixed annual coupon payment and a lump- sum payment at maturity. 0.0% 3. legal claim to a part of a corporation's future profits that includes voting rights. 0.0% 4. nonlegal promise to provide an annual payment to the holder when the corporation makes profits. Score 0 / 2 -------------------------------------------------------------------------------- Question 14 (2 points) Which type of bond would usually pay the highest interest rate? 0.0% 1. U.S. government bonds 100.0% 2. junk bonds 0.0% 3. corporate bonds 0.0% 4. municipal bonds Score 2 / 2 -------------------------------------------------------------------------------- Question 15 (2 points) A person who is willing to bear more risk will buy 0.0% 1. bonds. 0.0% 2. government bonds. 100.0% 3. stock. Score 2 / 2 -------------------------------------------------------------------------------- Question 16 (2 points) When a person deposits a check into her checking account, 0.0% 1. she owes the bank money. 0.0% 2. no one owes anybody anything. The deposit is an asset to the person, but is neither an asset nor a liability to the bank. 0.0% 3. no one owes anybody anything. The deposit is an asset to both the bank and the person. 100.0% 4. the bank owes her money. Score 2 / 2 -------------------------------------------------------------------------------- Question 17 (2 points) The value of a future amount expressed in today's dollars is known as 100.0% 1. Present value. 0.0% 2. Allocative efficiency. 0.0% 3. The real rate of interest. 0.0% 4. The nominal rate of interest. Score 2 / 2 -------------------------------------------------------------------------------- Question 18 (2 points) _______________ are entitled to the first claim on the returns from an investment. 0.0% 1. Stockholders 100.0% 2. Bondholders 0.0% 3. Laborers 0.0% 4. Financial intermediaries Score 2 / 2 -------------------------------------------------------------------------------- Question 19 (2 points) Which of the following is an example of a financial intermediary? 0.0% 1. a T-bill 0.0% 2. a brokerage 100.0% 3. a bank 0.0% 4. an income-earning consumer Score 0 / 2 -------------------------------------------------------------------------------- Question 20 (2 points) Suppose you will receive an inheritance in 20 years worth $5 million. If the interest rate is 8 percent, the present value of the inheritance is 100.0% 1. $1.075 million. 0.0% 2. $2 million. 0.0% 3. $5 million. 0.0% 4. $40 million. Score 2 / 2 -------------------------------------------------------------------------------- Question 21 (2 points) Which of the following formulas expresses the true relationship between savings and investment? 0.0% 1. I+(T-G)-NX = S 0.0% 2. I+G-NX=S 0.0% 3. S+T-NX=I 100.0% 4. S+(T-G)-NX=I Score 2 / 2 -------------------------------------------------------------------------------- Question 22 (2 points) If a pension fund owns stock in a corporation, the stock would be listed as an asset on its balance sheet. 100.0% 1. True 0.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 23 (2 points) The profits received from selling stock for more than the purchase price are called 0.0% 1. dividends. 100.0% 2. capitals gains. 0.0% 3. shares. 0.0% 4. none of the above. Score 0 / 2 -------------------------------------------------------------------------------- Question 24 (2 points) The rate of interest that the Fed charges on loans to banks is called the 100.0% 1. discount rate. 0.0% 2. federal funds rate. 0.0% 3. prime rate. 0.0% 4. mortgage rate. Score 0 / 2 -------------------------------------------------------------------------------- Question 25 (2 points) Which of the following actions by the Fed would cause an increase in the money supply? 100.0% 1. Decrease the discount rate. 0.0% 2. Increase the reserve requirement. 0.0% 3. Sell securities (bonds). Score 2 / 2 -------------------------------------------------------------------------------- Question 26 (2 points) Suppose the Fed wants to decrease the money supply. Then it should 0.0% 1. sell stocks. 0.0% 2. buy stocks. 100.0% 3. sell government bonds. 0.0% 4. buy government bonds. Score 2 / 2 -------------------------------------------------------------------------------- Question 27 (2 points) If the Fed decides to buy bonds on the open market, which of the following is true? 0.0% 1. This is an easing of the money supply. 0.0% 2. The money supply will shift right. 0.0% 3. The equilibrium interest rate will decrease. 100.0% 4. All of the above are true. Score 2 / 2 -------------------------------------------------------------------------------- Question 28 (2 points) The Fed can affect interest rates by 0.0% 1. changing the reserve requirements. 0.0% 2. changing the discount rate. 0.0% 3. open market operations. 100.0% 4. all of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 29 (2 points) The Federal Reserve is involved in clearing individuals' checks and wiring money between financial institutions. 100.0% 1. True 0.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 30 (2 points) Which of the following statements is FALSE? 0.0% 1. The United States has 12 Federal Reserve districts. 0.0% 2. The Federal Open Market Committee oversees sales and purchases of government securities by the Fed. 0.0% 3. The members of the Board of Governors of the Fed are appointed by the President. 100.0% 4. Congress must approve any major changes in the Fed's monetary policy. Score 2 / 2 -------------------------------------------------------------------------------- Question 31 (2 points) The Fed's influence is primarily through actions that directly affect which part of the economy? 0.0% 1. the factors market 0.0% 2. the goods market 100.0% 3. the financial sector 0.0% 4. the government sector Score 2 / 2 -------------------------------------------------------------------------------- Question 32 (2 points) Which of the following is an additional role of the Fed? 0.0% 1. maintaining the Fed wire 0.0% 2. clearing checks 0.0% 3. providing emergency loans 100.0% 4. All of the above are additional roles of the Fed. Score 2 / 2 -------------------------------------------------------------------------------- Question 33 (2 points) Money is created by 0.0% 1. only commercial banks. 0.0% 2. only commercial banks and savings and loan associations. 0.0% 3. only commercial banks and credit unions. 100.0% 4. all financial intermediaries. Score 2 / 2 -------------------------------------------------------------------------------- Question 34 (2 points) Monetary policy is the action of the central bank that 0.0% 1. influences the issuing of coins and currency. 100.0% 2. determines the availability and cost of money and credit. 0.0% 3. sets the inflation rate. 0.0% 4. all of the above. Score 0 / 2 -------------------------------------------------------------------------------- Question 35 (2 points) Which of the following equations is correct? 0.0% 1. required reserve ratio = (reserves - deposits) x 100 0.0% 2. Reserves = deposits / (required reserve ratio) 100.0% 3. Deposits = reserves x deposit multiplier 100.0% 4. Deposit multiplier = 1 / (required reserve ratio) Score 2 / 2 -------------------------------------------------------------------------------- Question 36 (2 points) If the Fed buys $1000 in bonds from bank A, then 100.0% 1. bank A will increase its loans. 0.0% 2. bank A will decrease its loans. 0.0% 3. bank A will decrease its deposits. Score 2 / 2 -------------------------------------------------------------------------------- Question 37 (2 points) Use this information to answer the next three questions. Suppose someone deposits $500 cash in her checking account after selling a government bond, so that the bank's reserves and deposits increase by $500. If the legal reserve requirement is 5% (0.05), how much is this bank required to hold on reserve? 100.0% 1. $25 0.0% 2. $250 0.0% 3. $475 0.0% 4. $500 0.0% 5. none of the above Score 2 / 2 -------------------------------------------------------------------------------- Question 38 (2 points) What is the deposit multiplier? 0.0% 1. 5 0.0% 2. 50 100.0% 3. 20 0.0% 4. 0.05 0.0% 5. none of the above Score 2 / 2 -------------------------------------------------------------------------------- Question 39 (2 points) What is the total amount by which the money supply can increase as a result of the initial $500 deposit? 100.0% 1. $10,000 0.0% 2. $500 0.0% 3. $2500 0.0% 4. none of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 40 (2 points) When the Fed wants to change interest rates, it does so by 0.0% 1. mandating a new federal funds rate. 0.0% 2. directly changing the amount of loans in the banking system. 100.0% 3. buying and selling government securities. 0.0% 4. issuing new currency. Score 2 / 2 -------------------------------------------------------------------------------- Question 41 (2 points) If a bank currently has $1000 in deposits and the required reserve ratio is 20%, then that single bank can make loans of 0.0% 1. $200. 100.0% 2. $800. 0.0% 3. $5,000. 0.0% 4. $20,000. Score 0 / 2 -------------------------------------------------------------------------------- Question 42 (2 points) The Federal Reserve Bank guarantees the value of a dollar bill. 0.0% 1. True 100.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 43 (2 points) Which of the following could have caused the change in demand for loanable funds depicted in the graph? 0.0% 1. tax increases 100.0% 2. an increase in real GDP 0.0% 3. an increase in the discount rate 0.0% 4. an increase in inflation Score 2 / 2 -------------------------------------------------------------------------------- Question 44 (2 points) When there is excess supply of loanable funds, interest rates will rise in response. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 45 (2 points) The equilibrium rate of interest is 0.0% 1. determined primarily by business demand for loanable funds since the supply curve of loanable funds is horizontal. 0.0% 2. determined primarily by the rate at which households must be compensated to get them to save since the market demand curve for loanable funds is nearly horizontal. 0.0% 3. determined by the federal government. 100.0% 4. found by the intersection of the downward-sloping demand curve for loanable funds and the upward-sloping supply curve for loanable funds. Score 2 / 2 -------------------------------------------------------------------------------- Question 46 (2 points) The equilibrium rate of interest is determined by 100.0% 1. The demand and supply of loanable funds. 0.0% 2. The Federal Reserve. 0.0% 3. Government regulation. 0.0% 4. The foreign supply of loanable funds. Score 2 / 2 -------------------------------------------------------------------------------- Question 47 (2 points) Which of the following graphs correctly depicts the change in equilibrium in the market for loanable funds that would result from increased taxes on businesses? 0.0% 1. 100.0% 2. 0.0% 3. 0.0% 4. Score 2 / 2 -------------------------------------------------------------------------------- Question 48 (2 points) The nominal rate of interest 0.0% 1. Is adjusted for inflation. 100.0% 2. Is the stated rate of interest. 0.0% 3. Is expressed as an after-tax percentage. 0.0% 4. All of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 49 (2 points) Which of the following graphs correctly depicts the change in equilibrium in the market for loanable funds that would result from the government running a larger budget surplus? 0.0% 1. 0.0% 2. 100.0% 3. 0.0% 4. Score 2 / 2 -------------------------------------------------------------------------------- Question 50 (2 points) The best measure of your increase or decrease in purchasing power as a result of an investment is the nominal interest rate. 0.0% 1. True 100.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Total score 72 / 100 = 72.0% -------------------------------------------------------------------------------- TEST 5 User ID: xefri Attempt: 1 / 1 Out of: 100 Started: Dec 11, 2003 21:32 Finished: Dec 11, 2003 23:36 Time spent: 2 hrs., 3 min., 53 sec. Student finished 1 hr., 56 min., 7 sec. ahead of the 240 min. time limit. Return to Scores -------------------------------------------------------------------------------- Question 1 (2 points) When the government raises taxes, total output 100.0% 1. falls, because consumers and businesses reduce their spending. 0.0% 2. rises, because consumers and businesses reduce their spending. 0.0% 3. rises, because the government is able to reduce its deficit. 0.0% 4. rises, because the government has more money to spend. Score 2 / 2 -------------------------------------------------------------------------------- Question 2 (2 points) When domestic prices rise, exports 0.0% 1. rise, becaue exporters earn more for the goods they sell. 0.0% 2. fall, because exporters earn less for the goods they sell. 0.0% 3. rise, because foreign countries purchase more domestic goods. 100.0% 4. fall, because foreign countries purchase fewer domestic goods. Score 2 / 2 -------------------------------------------------------------------------------- Question 3 (2 points) How does an increase in the money supply affect total output? 100.0% 1. Output increases, because interest rates fall. 0.0% 2. Output increases, because interest rates rise. 0.0% 3. Aggregate demand increases, but total output falls. 0.0% 4. Aggregate demand falls, but total output rises. Score 2 / 2 -------------------------------------------------------------------------------- Question 4 (2 points) The aggregate demand curve is a graphical representation of 0.0% 1. aggregate spending as a function of income. 100.0% 2. aggregate spending as a function of the price level. 0.0% 3. government spending as a function of total demand. 0.0% 4. aggregate income as a function of the price level. Score 2 / 2 -------------------------------------------------------------------------------- Question 5 (2 points) Suppose consumers and businesses are feeling insecure about the future of the economy, and people are afraid the economy is entering a recession. How would this affect the aggregate demand curve? 100.0% 1. Aggregate demand would shift inward because autonomous consumption and investment would probably fall. 0.0% 2. This would cause a movement to the left along the same aggregate demand curve. 0.0% 3. Aggregate demand would increase as consumers and businesses increase their expenditures. 0.0% 4. Savings would fall as a result of the insecurity, so aggregate demand would increase. Score 2 / 2 -------------------------------------------------------------------------------- Question 6 (2 points) Which of the following statements accurately describes the effect of a price increase on investment spending? 100.0% 1. Investment spending falls, because interest rates rise. 0.0% 2. Investment spending rises, because interest rates fall. 0.0% 3. Investment spending rises, because business can now charge more for the goods they sell. 0.0% 4. Investment spending remains unchanged, because it is measured in real, not nominal, terms. Score 0 / 2 -------------------------------------------------------------------------------- Question 7 (2 points) If the government wants to decrease aggregate demand, it could 0.0% 1. cut taxes. 100.0% 2. cut government spending. 0.0% 3. encourage the Fed to increase the money supply. 0.0% 4. do any of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 8 (2 points) Which of the following statements about the relationship between aggregate spending and aggregate income is true? 0.0% 1. Aggregate income must exceed aggregate spending, or the economy will be in debt. 0.0% 2. Aggregate spending must exceed aggregate income, or the economy will be in debt. 100.0% 3. Aggregate income always equals aggregate spending. 0.0% 4. The relationship between aggregate spending and aggregate income depends on how high the tax rate is. Score 2 / 2 -------------------------------------------------------------------------------- Question 9 (2 points) Which of the following is a componeint of GDP? 0.0% 1. Consumption 0.0% 2. Investment 0.0% 3. Government spending 100.0% 4. All of the above are components of GDP Score 0 / 2 -------------------------------------------------------------------------------- Question 10 (2 points) When prices rise, 0.0% 1. real GDP increases. 0.0% 2. foreign demand increases. 100.0% 3. the demand for money increases. 0.0% 4. investment spending increases. Score 2 / 2 -------------------------------------------------------------------------------- Question 11 (2 points) The short-run aggregate supply curve illustrates 100.0% 1. how output responds to changes in prices before all prices have adjusted. 0.0% 2. how output responds to changes in prices after all prices have adjusted. 0.0% 3. how producers raise prices in response to increases in their costs. 0.0% 4. how consumers reduce spending in response to increases in prices. Score 2 / 2 -------------------------------------------------------------------------------- Question 12 (2 points) An improvement in techonolgy will 0.0% 1. shift the long-run aggregate supply curve to the left. 100.0% 2. shift the long-run aggregate supply curve to the right. 0.0% 3. increase the slope of the long-run aggregate curve. 0.0% 4. decrease the slope of the long-run aggregate supply curve. Score 2 / 2 -------------------------------------------------------------------------------- Question 13 (2 points) When producers expect prices to fall, the short run aggregate supply curve 100.0% 1. shifts downward. 0.0% 2. shifts upward. 0.0% 3. pivots upward. 0.0% 4. pivots downward. Score 2 / 2 -------------------------------------------------------------------------------- Question 14 (2 points) Real wages decline when 0.0% 1. workers are paid less than they are worth. 0.0% 2. firms cut back on production in response to a decline in aggregate demand. 100.0% 3. the price level rises faster than the level of wages. 0.0% 4. the level of wages rises faster than the level of prices. Score 0 / 2 -------------------------------------------------------------------------------- Question 15 (2 points) Suppose producers in the economy expect prices to increase in the future. The short-run aggregate supply will _________, while the long-run aggregate supply will ___________. 100.0% 1. shift upward; not shift 0.0% 2. shift upward; shift left 0.0% 3. shift downward; not shift 0.0% 4. shift downward; shift right Score 2 / 2 -------------------------------------------------------------------------------- Question 16 (2 points) Which of the following statements regarding output in the long run is correct? 0.0% 1. output depends on the money supply. 100.0% 2. Output is determined by the quantity and productivity of resources. 0.0% 3. Output is determined by the level of interest rates. 0.0% 4. Output depends on the price level. Score 2 / 2 -------------------------------------------------------------------------------- Question 17 (2 points) The short run aggregate supply (SRAS) curve slopes upward, because 0.0% 1. there is an inverse relationship between prices and output. 0.0% 2. firms cut back on production in the short run when prices increase. 0.0% 3. when prices rise, the quantity demanded decreases. 100.0% 4. confusion, sticky wages, and sticky prices provide business with profit opportunities in the short run. Score 2 / 2 -------------------------------------------------------------------------------- Question 18 (2 points) A supply shock causes excess demand in the short run. 100.0% 1. True 0.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 19 (2 points) What is the relationship between aggregate output demanded and the price level? 0.0% 1. Aggregate output rises when the price level rises. 100.0% 2. Aggregate output falls when the price level rises. 0.0% 3. Aggregate output is unaffected by the price level. 0.0% 4. Aggregate output rises in the short run when the price level rises, but falls in the long run. Score 2 / 2 -------------------------------------------------------------------------------- Question 20 (2 points) When people in the economy make decisions about the future based on what has happened in the past, we say they are using 0.0% 1. rational expectations. 0.0% 2. Keynesian analysis. 100.0% 3. adaptive expectations. 0.0% 4. the best possible method of decision-making. Score 2 / 2 -------------------------------------------------------------------------------- Question 21 (2 points) In the short run, supply shocks cause prices to __________ and the output to __________. 0.0% 1. increase;increase 100.0% 2. increase;decrease 0.0% 3. decrease;increase 0.0% 4. decrease;decrease Score 2 / 2 -------------------------------------------------------------------------------- Question 22 (2 points) In the graph below, Yf represents the __________, and P1 represents the __________. 100.0% 1. long run equilibrium level of output; short run level of prices 0.0% 2. short run equilibrium level of output; long run level of prices 0.0% 3. long run equilibrium level of output; long run level of prices 0.0% 4. short run equilibrium level of output; long run level of prices Score 2 / 2 -------------------------------------------------------------------------------- Question 23 (2 points) Suppose the economy is in long-run equilibrium, but a war causes the supply of resources to decrease. What impact will this have on the economy? 0.0% 1. The LRAS and SRAS curves will shift outward, causing prices to fall and output to increase. 100.0% 2. The LRAS and SRAS curves will shift inward, causing prices to increase and output to fall. 0.0% 3. Only the SRAS curve will shift inward, causing prices to increase and output to fall. 0.0% 4. The LRAS, SRAS, and AD curves will shift inward, so only output will fall. Score 2 / 2 -------------------------------------------------------------------------------- Question 24 (2 points) What is the long run effect of increasing output beyond the full-employment level? 0.0% 1. Prices and wages rise, and the level of output falls. 100.0% 2. Prices and wages rise, and the level of output remains unchanged. 0.0% 3. Prices, wages, and the level of output increase. 0.0% 4. Prices, wages, and the level of output decrease. Score 2 / 2 -------------------------------------------------------------------------------- Question 25 (2 points) Examine the graph below. What would be the natural process by which this economy would move back to a long-run equilibrium? 100.0% 1. Since output is beyond Yf, suppliers will expect higher future prices and will have to pay more for resources, which will cause SRAS to shift upward. 0.0% 2. Since output is beyond Yf, suppliers will expect higher future prices and will have to pay more for resources, which will cause SRAS to shift downward. 0.0% 3. Since output is beyond Yf, suppliers will expect lower future prices and will have to pay less for resources, which will cause SRAS to shift downward. 0.0% 4. Since unemployment is high, consumers will demand fewer goods and services, so AD will shift inward. Score 2 / 2 -------------------------------------------------------------------------------- Question 26 (2 points) Adaptive expectations will speed up the adjustment process that takes place when an economy operates above or below full employment. 0.0% 1. True 100.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 27 (2 points) Adaptive expectation formation means that 100.0% 1. people base their expectations of the future on what has occurred in the past. 0.0% 2. people base their expectations of the future on new information. 0.0% 3. people base their expectations of the future on prices. 0.0% 4. people base their expectations of the future on output. Score 2 / 2 -------------------------------------------------------------------------------- Question 28 (2 points) Which of the following statements helps to explain why the economy can be slow to recover from a recession? 0.0% 1. Workers are less motivated because of reduced expectations, which reduces total output. 0.0% 2. There is not as much money in circulation to fuel new investment. 100.0% 3. Wages do not fall quickly, which delays an adjustment to a higher output level. 0.0% 4. Aggregate supply shifts inward proportionately, which leads to a "vicious cycle." Score 2 / 2 -------------------------------------------------------------------------------- Question 29 (2 points) Proponents of rational expectations believe that an increase in government spending during a time of recession will lead to 0.0% 1. an inward shift of the aggregate demand curve. 0.0% 2. a deeper recession due to "crowding out." 0.0% 3. a paradoxical increase in the budget surplus. 100.0% 4. an offsetting reduction in spending by households and businesses. Score 2 / 2 -------------------------------------------------------------------------------- Question 30 (2 points) According to classical economists, if the economy is in a recession, what must the government do to increase output to the full-employment level? 100.0% 1. Nothing 0.0% 2. Reduce interest rates 0.0% 3. Increase governmet spending 0.0% 4. Provide a credit for household savings Score 2 / 2 -------------------------------------------------------------------------------- Question 31 (2 points) Supply-driven deflation is often referred to as bad deflation. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 32 (2 points) Fiscal and monetary policies are often useful in pulling an economy out of a recession. 100.0% 1. True 0.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 33 (2 points) In the short run, what happens to the level of output and the level of prices as a result of a technological improvement? 100.0% 1. Prices fall and output rises. 0.0% 2. Prices and output rise. 0.0% 3. Prices and output fall. 0.0% 4. None of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 34 (2 points) Which of the following is NOT a type of lag that can delay the desired effects of fiscal policy? 0.0% 1. Recognition lag 100.0% 2. Political lag 0.0% 3. Administration lag 0.0% 4. Operational lag Score 2 / 2 -------------------------------------------------------------------------------- Question 35 (2 points) Suppose a law was passed to authorize more spending on roads, but several months later the first dollar had not been spent. This delay is an example of a(n) 0.0% 1. recognition lag 0.0% 2. political lag 0.0% 3. administration lag 100.0% 4. operational lag Score 2 / 2 -------------------------------------------------------------------------------- Question 36 (2 points) During the mid 1980s, the budget deficit __________ and the interest rate __________. 100.0% 1. increased;increased 0.0% 2. increased;decreased 0.0% 3. decreased;increased 0.0% 4. decreased;decreased Score 2 / 2 -------------------------------------------------------------------------------- Question 37 (2 points) The goal of Keynesian fiscal policy during a recession is to 0.0% 1. do nothing - let the economy recover on its own. 100.0% 2. move the economic equilibrium back to the full-employment level by increasing aggregate demand. 0.0% 3. move the economic equilibrium back to the full-employment level by decreasing aggregate supply. 0.0% 4. reduce long run aggregate supply so that the economy can reach full employment without a long period of adjustment. Score 2 / 2 -------------------------------------------------------------------------------- Question 38 (2 points) If the government begins to buy back Treasury bills, which of the following can you infer? 0.0% 1. G>T 0.0% 2. G=T 100.0% 3. T>G 0.0% 4. NX>0 Score 2 / 2 -------------------------------------------------------------------------------- Question 39 (2 points) When the government increases its spending, a likely long run outcome is a reduction in investment spending. 100.0% 1. True 0.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 40 (2 points) If government spending exceeds government revenues, the government runs a budget deficit, which it can pay for by 0.0% 1. reducing spending. 0.0% 2. increasing taxes. 100.0% 3. issuing Treasury bills. 0.0% 4. raising interest rates. Score 0 / 2 -------------------------------------------------------------------------------- Question 41 (2 points) The phenomenon of crowding out occurs when 0.0% 1. sticky wages, sticky prices, and confusion crowd out competition. 100.0% 2. increases in government spending raise the interest rate and crowd out investment by firms. 0.0% 3. increases in taxes crowd out consumption. 0.0% 4. downward pressure on prices crowds out aggregate demand. Score 2 / 2 -------------------------------------------------------------------------------- Question 42 (2 points) Which of the following is an example of monetary policy that accommodates expansionary fiscal policy? 100.0% 1. lowering the discount rate 0.0% 2. raising the required reserve ratio 0.0% 3. setting price controls on key inputs in the economy 0.0% 4. lowering taxes to increase the flow of consumer funds Score 0 / 2 -------------------------------------------------------------------------------- Question 43 (2 points) Which of the following situations would be most likely to yield "good deflation"? 100.0% 1. Technological change improves workers' productivity. 0.0% 2. There is a supply shock in the energy industry. 0.0% 3. Consumers, feeling good about the future, start spending more money. 0.0% 4. The government runs a surplus, reducing the crowding-out effect. Score 2 / 2 -------------------------------------------------------------------------------- Question 44 (2 points) The school of rational expectations holds that if consumers and businesses can adjust their behavior quickly in response to monetary policy, the policy becomes more effective. 0.0% 1. True 100.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 45 (2 points) Suppose the economy has experienced a supply shock and is currently at P1 on the graph below. If the Fed does nothing, 0.0% 1. aggregate demand will eventually increase, bringing the economy back to full employment. 100.0% 2. excess supply will cause prices and wages to fall, and SRAS will move downward toward the full-employment level of output. 0.0% 3. excess demand will cause further increases in prices and wages, causing SRAS to shift upward. Score 0 / 2 -------------------------------------------------------------------------------- Question 46 (2 points) The belief that money is neutral is most likely to be endorsed by 0.0% 1. Keynesian economists. 0.0% 2. monetarists. 100.0% 3. classical economists. Score 2 / 2 -------------------------------------------------------------------------------- Question 47 (2 points) In the short run, contractionary monetary policy causes output to ___________ and prices to ______________. 0.0% 1. rise; rise 0.0% 2. rise; fall 0.0% 3. fall; rise 100.0% 4. fall; fall Score 2 / 2 -------------------------------------------------------------------------------- Question 48 (2 points) Classical economists and non-classical economists disagree about whether changes in the money supply can change output over the long term. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 49 (2 points) In the quantity theory of money, velocity means 0.0% 1. the rate of the change in GDP. 0.0% 2. the rate at which business inventories turn over in a year. 100.0% 3. the rate at which the money supply turns over in a year. 0.0% 4. the rate at which the Fed incrases the money supply. Score 2 / 2 -------------------------------------------------------------------------------- Question 50 (2 points) Contractionary monetary policy will cause prices and output to decrease in the short run. 100.0% 1. True 0.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Total score 80 / 100 = 80.0% -------------------------------------------------------------------------------- FINAL EXAM - fall semester User ID: xefri Attempt: 1 / 1 Out of: 100 Started: Dec 18, 2003 09:25 Finished: Dec 18, 2003 11:06 Time spent: 1 hr., 40 min., 31 sec. Student finished 1 hr., 19 min., 29 sec. ahead of the 180 min. time limit. Return to Scores -------------------------------------------------------------------------------- Question 1 (2 points) Which of the following is a characteristic of money? 0.0% 1. indivisible 0.0% 2. perishable 100.0% 3. portable 0.0% 4. all of the above Score 2 / 2 -------------------------------------------------------------------------------- Question 2 (2 points) From the definitions of M1 and M2, we know that 0.0% 1. M1 is always larger than M2. 100.0% 2. M2 is always larger than M1. 0.0% 3. M1 and M2 are always equal. 0.0% 4. M1 is sometimes larger than M2, and sometimes smaller than M2. Score 2 / 2 -------------------------------------------------------------------------------- Question 3 (2 points) One common problem with commodity money is that 0.0% 1. it has little intrinsic value. 0.0% 2. it is not useful as a unit of account. 100.0% 3. it may not be divisible. 0.0% 4. gold is in short supply. Score 2 / 2 -------------------------------------------------------------------------------- Question 4 (2 points) If the money supply increases, then interest rates will rise. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 5 (2 points) Suppose you will receive an inheritance in 20 years worth $5 million. If the interest rate is 8 percent, the present value of the inheritance is 100.0% 1. $1.075 million. 0.0% 2. $2 million. 0.0% 3. $5 million. 0.0% 4. $40 million. Score 2 / 2 -------------------------------------------------------------------------------- Question 6 (2 points) The graph below shows the demand for money. The initial interest rate is io. Which graph correctly depicts a rise in interest rates above the initial level io? 0.0% 1. 100.0% 2. 0.0% 3. 0.0% 4. Score 0 / 2 -------------------------------------------------------------------------------- Question 7 (2 points) Suppose there is an increase in income. Then we should expect 0.0% 1. the interest rate to fall as people want to spend more money. 100.0% 2. the interest rate to rise as the demand for money shifts to the right. 0.0% 3. the money supply curve to shift to the right as people spend more money. 0.0% 4. none of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 8 (2 points) Financial intermediaries are institutions that 0.0% 1. set interest rates. 100.0% 2. transfer funds in the form of loans from savers to investors. 0.0% 3. create money. 0.0% 4. provide checking accounts. Score 2 / 2 -------------------------------------------------------------------------------- Question 9 (2 points) The Dow Jones Industrial Average is an index used to track the average price of all stocks on the New York Stock Exchange. How many corporate stocks are included in the DOW? 0.0% 1. 500 100.0% 2. 30 0.0% 3. 250 0.0% 4. 90 Score 0 / 2 -------------------------------------------------------------------------------- Question 10 (2 points) Owning the bond of a company 0.0% 1. is equivalent to owning stock in the company. 0.0% 2. means that you profit if the company loses money. 100.0% 3. means that the company owes you money. 0.0% 4. means that you owe the company money. Score 0 / 2 -------------------------------------------------------------------------------- Question 11 (2 points) If a bond's coupon rate is 5% and the bondholder receives a $500 interest payment annually, the face value of the bond must be ________. 100.0% 1. $10,000 0.0% 2. $25 0.0% 3. $1,000 0.0% 4. $100,000 Score 0 / 2 -------------------------------------------------------------------------------- Question 12 (2 points) If the Fed decides to buy bonds on the open market, which of the following is true? 0.0% 1. This is an easing of the money supply. 0.0% 2. The money supply will shift right. 0.0% 3. The equilibrium interest rate will decrease. 100.0% 4. All of the above are true. Score 0 / 2 -------------------------------------------------------------------------------- Question 13 (2 points) Open market operations refer to 0.0% 1. Fed policies designed to open foreign markets to domestically produced goods and services. 100.0% 2. the Fed buying and selling government securities to influence key interest rates. 0.0% 3. Fed policies designed to stimulate the banking system. 0.0% 4. none of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 14 (2 points) When the Fed purchases government bonds, 0.0% 1. the money supply curve shifts to the left. 100.0% 2. the money supply curve shifts to the right. 0.0% 3. the money demand curve shifts to the left. 0.0% 4. the money demand curve shifts to the right. Score 2 / 2 -------------------------------------------------------------------------------- Question 15 (2 points) Fractional reserve banking means that 0.0% 1. the federal banking system is decentralized, operating through 12 districts rather than one central bank. 100.0% 2. banks are required to hold a fraction of their liabilities in the form of cash in their vaults or as deposits with the Fed. 0.0% 3. banks must "synchronize" their customers' withdrawals and deposits so that there is a rough balance in liquidity at any given time. 0.0% 4. banks are legally permitted to give loans only up to the fractional rate, as determined by the Fed. Score 0 / 2 -------------------------------------------------------------------------------- Question 16 (2 points) Which of the following Federal Reserve actions would NOT result in a decrease in the money supply? 0.0% 1. selling T-bills 100.0% 2. lowering the reserve requirement 0.0% 3. increasing the discount rate Score 2 / 2 -------------------------------------------------------------------------------- Question 17 (2 points) Large corporations, the federal government, or state and local governments usually issue _________ in order to finance their purchases. 0.0% 1. mutual funds 0.0% 2. stocks 100.0% 3. bonds 0.0% 4. insurance policies Score 2 / 2 -------------------------------------------------------------------------------- Question 18 (2 points) An increase in the price level will raise the demand for money and shift the demand curve for money outward. 100.0% 1. True 0.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 19 (2 points) Which of the Fed's tools has become largely symbolic? 0.0% 1. altering the required reserve ratio 100.0% 2. changing the discount rate 0.0% 3. buying or selling securities on the open market 0.0% 4. lowering bank taxes Score 0 / 2 -------------------------------------------------------------------------------- Question 20 (2 points) Which of the following is an example of "near money"? 0.0% 1. checking accounts 0.0% 2. cash 100.0% 3. savings accounts 0.0% 4. bank's reserves Score 0 / 2 -------------------------------------------------------------------------------- Question 21 (2 points) Suppose the required reserve ratio is 15 percent. An increase of $900 in new deposits at a commercial bank will 0.0% 1. increase total deposits in the banking system by $15. 0.0% 2. increase total deposits in the banking system by $135. 0.0% 3. increase total deposits in the banking system by $900. 100.0% 4. increase total deposits by in the banking system $6000. Score 2 / 2 -------------------------------------------------------------------------------- Question 22 (2 points) If the required reserve ratio decreases, 100.0% 1. the deposit multiplier increases. 0.0% 2. banks make fewer loans. 0.0% 3. deposits in other banks will decrease. 0.0% 4. all of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 23 (2 points) If the government runs a bigger deficit, the supply curve for loanable funds will shift outward. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 24 (2 points) Which of the following graphs correctly depicts the change in equilibrium in the market for loanable funds that would result from increased taxes on businesses? 0.0% 1. 100.0% 2. 0.0% 3. 0.0% 4. Score 2 / 2 -------------------------------------------------------------------------------- Question 25 (2 points) The equilibrium rate of interest is 0.0% 1. determined primarily by business demand for loanable funds since the supply curve of loanable funds is horizontal. 0.0% 2. determined primarily by the rate at which households must be compensated to get them to save since the market demand curve for loanable funds is nearly horizontal. 0.0% 3. determined by the federal government. 100.0% 4. found by the intersection of the downward-sloping demand curve for loanable funds and the upward-sloping supply curve for loanable funds. Score 2 / 2 -------------------------------------------------------------------------------- Question 26 (2 points) If our trade deficit increases significantly, how will that affect the money market? 0.0% 1. The equilibrium interest rate will rise. 100.0% 2. The equilibrium interest rate will fall. 0.0% 3. The equilibrium interest rate is unaffected by the trade deficit. 0.0% 4. The equilibrium interest rate could rise or fall, depending on how the trade deficit is paid down. Score 0 / 2 -------------------------------------------------------------------------------- Question 27 (2 points) Which of the following will NOT cause a shift in the investment demand curve? 0.0% 1. a tax cut 0.0% 2. an increase in real GDP 100.0% 3. an increase in the interest rate 0.0% 4. optimistic expectations Score 0 / 2 -------------------------------------------------------------------------------- Question 28 (2 points) When the government raises taxes, total output 100.0% 1. falls, because consumers and businesses reduce their spending. 0.0% 2. rises, because consumers and businesses reduce their spending. 0.0% 3. rises, because the government is able to reduce its deficit. 0.0% 4. rises, because the government has more money to spend. Score 2 / 2 -------------------------------------------------------------------------------- Question 29 (2 points) How would an decrease in consumer income affect total output? 100.0% 1. Output would fall, because the aggregate demand curve would shift inward. 0.0% 2. Output would fall, because the economy would move up and to the left along the same aggregate demand curve. 0.0% 3. Output would rise, because the aggregate demand curve would shift outward. 0.0% 4. Output would rise, because the economy would move down the aggregate demand curve. Score 2 / 2 -------------------------------------------------------------------------------- Question 30 (2 points) Which of the following statements accurately describes the effect of a price increase on investment spending? 100.0% 1. Investment spending falls, because interest rates rise. 0.0% 2. Investment spending rises, because interest rates fall. 0.0% 3. Investment spending rises, because business can now charge more for the goods they sell. 0.0% 4. Investment spending remains unchanged, because it is measured in real, not nominal, terms. Score 2 / 2 -------------------------------------------------------------------------------- Question 31 (2 points) An increase in the aggregate price level causes the aggregate demand curve to shift to the left. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 32 (2 points) An improvement in techonolgy will 0.0% 1. shift the long-run aggregate supply curve to the left. 100.0% 2. shift the long-run aggregate supply curve to the right. 0.0% 3. increase the slope of the long-run aggregate curve. 0.0% 4. decrease the slope of the long-run aggregate supply curve. Score 2 / 2 -------------------------------------------------------------------------------- Question 33 (2 points) What is the relationship between the price level and the level of output in the long run? 0.0% 1. When the price level rises, output increases. 0.0% 2. When the price level rises, output decreases. 0.0% 3. The relationship depends on how quickly producers respond to changes in prices. 100.0% 4. There is no relationship between the price level and the level of output. Score 2 / 2 -------------------------------------------------------------------------------- Question 34 (2 points) In the graph below, Yf represents the __________, and P1 represents the __________. 100.0% 1. long run equilibrium level of output; short run level of prices 0.0% 2. short run equilibrium level of output; long run level of prices 0.0% 3. long run equilibrium level of output; long run level of prices 0.0% 4. short run equilibrium level of output; long run level of prices Score 2 / 2 -------------------------------------------------------------------------------- Question 35 (2 points) When people in the economy make decisions about the future based on what has happened in the past, we say they are using 0.0% 1. rational expectations. 0.0% 2. Keynesian analysis. 100.0% 3. adaptive expectations. 0.0% 4. the best possible method of decision-making. Score 2 / 2 -------------------------------------------------------------------------------- Question 36 (2 points) A supply shock causes excess demand in the short run. 100.0% 1. True 0.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 37 (2 points) Examine the graph below. Increasing government spending will bring this economy back to full employment. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 38 (2 points) In the short run, there is a positive relationship between the aggregate price level and the quantity of goods and services supplied. 100.0% 1. True 0.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 39 (2 points) Adaptive expectation formation means that 100.0% 1. people base their expectations of the future on what has occurred in the past. 0.0% 2. people base their expectations of the future on new information. 0.0% 3. people base their expectations of the future on prices. 0.0% 4. people base their expectations of the future on output. Score 2 / 2 -------------------------------------------------------------------------------- Question 40 (2 points) Good deflation is characterized by 100.0% 1. an increase in supply at every price. 0.0% 2. a decrease in supply at every price. 0.0% 3. an increase in demand at every price. 0.0% 4. a decrease in demand at every price. Score 2 / 2 -------------------------------------------------------------------------------- Question 41 (2 points) Imagine that the economy is in a recession. Which one of the following tactics is a way to increase output by shifting aggregate demand outward? 0.0% 1. Raising taxes to increase the government surplus 100.0% 2. Increasing government spending 0.0% 3. Increase the required reserve ratio 0.0% 4. Imposing tariffs on foreign goods Score 2 / 2 -------------------------------------------------------------------------------- Question 42 (2 points) Increasing the money supply is an example of fiscal policy that can help stimulate demand. 0.0% 1. True 100.0% 2. False Score 0 / 2 -------------------------------------------------------------------------------- Question 43 (2 points) During the mid 1980s, the budget deficit __________ and the interest rate __________. 100.0% 1. increased;increased 0.0% 2. increased;decreased 0.0% 3. decreased;increased 0.0% 4. decreased;decreased Score 2 / 2 -------------------------------------------------------------------------------- Question 44 (2 points) A flat-payment tax system, e.g., all taxpayers owe the government a flat fee of $5000 regardless of income, would be an example of an automatic stabilizer. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 45 (2 points) Suppose the economy has experienced a supply shock and is currently at P1 on the graph below. If the Fed does nothing, 0.0% 1. aggregate demand will eventually increase, bringing the economy back to full employment. 100.0% 2. excess supply will cause prices and wages to fall, and SRAS will move downward toward the full-employment level of output. 0.0% 3. excess demand will cause further increases in prices and wages, causing SRAS to shift upward. Score 0 / 2 -------------------------------------------------------------------------------- Question 46 (2 points) The belief that money is neutral is most likely to be endorsed by 0.0% 1. Keynesian economists. 0.0% 2. monetarists. 100.0% 3. classical economists. Score 2 / 2 -------------------------------------------------------------------------------- Question 47 (2 points) The school of rational expectations holds that if consumers and businesses can adjust their behavior quickly in response to monetary policy, the policy becomes more effective. 0.0% 1. True 100.0% 2. False Score 2 / 2 -------------------------------------------------------------------------------- Question 48 (2 points) Accommodating monetary policy is intended to 0.0% 1. accelerate the crowding-out effect. 100.0% 2. reduce the crowding-out effect. 0.0% 3. accommodate supply shocks. 0.0% 4. decrease the effects of supply shocks. Score 2 / 2 -------------------------------------------------------------------------------- Question 49 (2 points) In the short run, what happens to the level of output and the level of prices as a result of a technological improvement? 100.0% 1. Prices fall and output rises. 0.0% 2. Prices and output rise. 0.0% 3. Prices and output fall. 0.0% 4. None of the above. Score 2 / 2 -------------------------------------------------------------------------------- Question 50 (2 points) Which of the following represents an automatic stabilizer? 0.0% 1. Medicare 100.0% 2. Unemployment insurance 0.0% 3. Social Security 0.0% 4. All of the above. Score 2 / 2 -------------------------------------------------------------------------------- Total score 72 / 100 = 72.0% -------------------------------------------------------------------------------- Quiz 3.1 User ID: xefri Attempt: 3 / 3 Out of: 20 Started: Oct 12, 2003 15:36 Finished: Oct 12, 2003 15:37 Time spent: 1 min., 10 sec. Return to Scores -------------------------------------------------------------------------------- Question 1 (1 point) In the following figure, a point such as A 1. is preferable over B. 100.0% 2. is an efficient use of resources. 3. is a misallocation of resources. 4. is not obtainable. Score 1 / 1 -------------------------------------------------------------------------------- Question 2 (1 point) In the following figure, a point such as E 1. is not obtainable. 2. is an efficient use of resources. 100.0% 3. is an inefficient use of resources. 4. indicates that the society is a capitalist society. Score 1 / 1 -------------------------------------------------------------------------------- Question 3 (1 point) The production possibilities frontier shows 1. all combinations of prices and quantities for all goods and services produced in the economy. 2. all combinations of prices and quantities for all goods and services demanded by consumers. 100.0% 3. the maximum combinations of goods and services that an economy is able to produce given a fixed supply of resources and technology. Score 1 / 1 -------------------------------------------------------------------------------- Question 4 (1 point) An improvement in technology causes 100.0% 1. the production possibilities frontier to shift outward. 2. the production possibilities frontier to shift inward. 3. a movement from one point to another along the same production possibilities frontier. The curve won't shift. Score 1 / 1 -------------------------------------------------------------------------------- Question 5 (1 point) Investment goods are 100.0% 1. goods that are used to produce other goods. 2. goods that yield a high rate of return. 3. goods that last for more than a short period of time. 4. financial instruments. Score 1 / 1 -------------------------------------------------------------------------------- Question 6 (1 point) One purpose of financial markets is to 100.0% 1. turn a household's savings into a firm's investment. 2. increase the availability of espresso in coffee houses. 3. act as an accountant for the government. 4. implement tax policy. Score 1 / 1 -------------------------------------------------------------------------------- Question 7 (1 point) The two principal components A and B of the circular flow model illustrated in the figure below are the 1. government and foreign trade. 2. net national product and personal income. 100.0% 3. firms and households. 4. households and government. Score 1 / 1 -------------------------------------------------------------------------------- Question 8 (1 point) In the circular flow of income there are households and firms, and households 1. buy goods and services and firms supply goods. Resources are supplied by other firms. 2. demand goods and services which are supplied by firms, and the firms demand resources that are supplied by intermediate firms. 100.0% 3. demand goods and services which are supplied by firms, while supplying resources that are demanded by firms. 4. buy goods and services while firms sell goods and services. Firms obtain labor from households, capital from government, and raw materials from firms. Score 1 / 1 -------------------------------------------------------------------------------- Question 9 (1 point) Which of the following is NOT shown by the circular flow model? 1. The flow of resources in one direction and money in the other. 2. The equality of aggregate spending and aggregate income. 3. The interaction of households, firms, and the government. 100.0% 4. The total amount of goods and services the economy is capable of producing Score 1 / 1 -------------------------------------------------------------------------------- Question 10 (1 point) Which of the following may cause GDP to underestimate the well-being of society? 1. An increase in pollution. 2. A decrease in leisure as people work more. 3. An increase in the gap between rich and poor. 100.0% 4. An increase in underground transactions. Score 1 / 1 -------------------------------------------------------------------------------- Question 11 (1 point) If 1 million CDs are produced yearly in the U.S., and they sell for $15 each, then 1. the contribution of CDs to U.S. GDP is $15. 2. the value of the CDs in U.S. GDP is $1 million. 100.0% 3. the value of the CDs in U.S. GDP is $15 million. 4. we cannot tell how much CDs contribute to U.S. GDP because some CDs may be exported. Score 1 / 1 -------------------------------------------------------------------------------- Question 12 (1 point) Toyota owns several manufacturing and assembly plants in the U.S. Cars sold as final output from those plants 1. are part of Japanese GDP because they are owned by a Japanese company. 2. are part of Japanese GDP because the workers are employed by a Japanese company. 3. are part of U.S. GDP because the workers are American citizens. 100.0% 4. are part of U.S. GDP because the cars are produced in the U.S. Score 1 / 1 -------------------------------------------------------------------------------- Question 13 (1 point) A country's gross domestic product, or GDP, 1. is usually measured monthly. 2. is only measured monthly. 100.0% 3. is usually measured quarterly or annually. 4. is only measured quarterly or annually. Score 1 / 1 -------------------------------------------------------------------------------- Question 14 (1 point) If nominal GDP increased from $5 trillion to $9 trillion while prices increased from $10 to $20, then real GDP 1. increased. 100.0% 2. decreased. 3. stayed the same. 4. we cannot tell. Score 1 / 1 -------------------------------------------------------------------------------- Question 15 (1 point) Real GDP is calculated by 1. holding quantity and prices constant. 2. letting both prices and quantities change. 3. holding quantities constant and letting prices change. 100.0% 4. holding prices constant and letting quantities change. Score 1 / 1 -------------------------------------------------------------------------------- Question 16 (1 point) Given the information in the table below, if 1999 is the base year, real GDP in 2000 equals Food Clothes Year Quantity Price Quantity Price 1999 10 1 5 2 2000 11 1 4 3 1. 25. 2. 23. 100.0% 3. 19. 4. 18. Score 1 / 1 -------------------------------------------------------------------------------- Question 17 (1 point) Real GDP is nominal GDP adjusted for 1. the change in the mix of goods produced. 100.0% 2. inflation. 3. both a and b. 4. neither a nor b. Score 1 / 1 -------------------------------------------------------------------------------- Question 18 (1 point) In the circular flow model, who supplies land, labor, and capital to firms? 1. other firms 2. the government 100.0% 3. households 4. financial institutions Score 1 / 1 -------------------------------------------------------------------------------- Question 19 (1 point) Per capita real GDP equals 1. real GDP/investment capital. 2. real GDP/human capital. 3. real GDP in the nation's capital, Washington D.C. 100.0% 4. real GDP/population. Score 1 / 1 -------------------------------------------------------------------------------- Question 20 (1 point) When economists talk about economic growth, they are usually referring to 1. the percentage change in nominal GDP. 2. the percentage change in real GDP. 3. the percentage change in nominal investment. 4. the percentage change in real investment. Score 0 / 1 (Question not answered.) -------------------------------------------------------------------------------- Total score 19 / 20 = 95.0% -------------------------------------------------------------------------------- Quiz 3.2 User ID: xefri Attempt: 3 / 3 Out of: 15 Started: Oct 12, 2003 17:15 Finished: Oct 12, 2003 17:16 Time spent: 59 sec. Return to Scores -------------------------------------------------------------------------------- Question 1 (1 point) Which of the following would be added to this year's GDP? 1. one hundred shares of IBM stock that Tony bought in February 2. the used car Tracy sold to Justin 3. George's purchase of a fishing rod and reel at a garage sale 100.0% 4. the Big Mac Extra Value Meal that Amy bought for lunch Score 1 / 1 -------------------------------------------------------------------------------- Question 2 (1 point) Which of the following would NOT be included in an economist's definition of investment spending? 1. the purchase of robots by Motor Magic Manufacturing 2. the construction of a new office building by the Mountain City Real Estate Company 100.0% 3. the purchase of General Motors stock by David Rockefeller 4. a decrease in the inventory levels at ABC Refrigerator Sales. Score 1 / 1 -------------------------------------------------------------------------------- Question 3 (1 point) Which of the following is NOT considered a component of government spending in calculating GDP? 1. the cost of the federal prison system 2. the cost of building a new road 3. payments to plow public roads after a snowstorm 100.0% 4. unemployment compensation payments Score 1 / 1 -------------------------------------------------------------------------------- Question 4 (1 point) Net exports are part of GDP because 1. we consume the goods produced by other countries. 100.0% 2. exports are produced within the country and therefore should be included in GDP, but imports are produced abroad and need to be subtracted from GDP. 3. the amount of goods consumed in one country always adds to its well-being, wherever the goods are produced. 4. if we add exports and imports it would be double counting. Score 1 / 1 -------------------------------------------------------------------------------- Question 5 (1 point) GDP measured by the income approach is ____ GDP measured by the expenditure approach. 1. less than 100.0% 2. equal to 3. greater than 4. not the same thing as Score 1 / 1 -------------------------------------------------------------------------------- Question 6 (1 point) Wheat used for producing bread is 1. a final good. 2. not going to generate any employment. 100.0% 3. an intermediate good. 4. a durable good. Score 1 / 1 -------------------------------------------------------------------------------- Question 7 (1 point) Residential housing is part of the _____ component of GDP. 1. consumption 2. investment 0.0% 3. savings 4. none of the above. Score 0 / 1 -------------------------------------------------------------------------------- Question 8 (1 point) The value of net exports is a positive number in the national income accounts when 1. depreciation exceeds investment. 100.0% 2. exports exceed imports. 3. imports exceed exports. 4. GDP exceeds disposable income. Score 1 / 1 -------------------------------------------------------------------------------- Question 9 (1 point) Social Security payments by the government are not counted as part of GDP because 1. the government runs a deficit, and Social Security taxes are used to help cover the deficit. 2. Social Security is just part of savings, and people get it back when they retire. 100.0% 3. Social Security is a transfer payment, and involves no production. 4. Actually, Social Security payments are considered part of GDP. Score 1 / 1 -------------------------------------------------------------------------------- Question 10 (1 point) Which of the following is NOT a component of national income? 100.0% 1. excise taxes 2. rent for land 3. employee compensation 4. proprietors' income Score 1 / 1 -------------------------------------------------------------------------------- Question 11 (1 point) Disposable income is calculated by subtracting _________ from personal income. 1. transfer payments 100.0% 2. personal income taxes 3. excise taxes 4. Social Security contributions Score 1 / 1 -------------------------------------------------------------------------------- Question 12 (1 point) National income equals 1. net domestic product minus indirect business taxes. 2. foreign factors minus indirect business taxes. 100.0% 3. net domestic product minus foreign factors minus indirect business taxes. 4. indirect business taxes minus foreign factors minus net domestic product. Score 1 / 1 -------------------------------------------------------------------------------- Question 13 (1 point) Net domestic product equals 100.0% 1. aggregate income minus depreciated capital. 2. national income minus personal income taxes minus corporate taxes. 3. undistributed corporate profits minus foreign factors. 4. aggregate income minus aggregate spending. Score 1 / 1 -------------------------------------------------------------------------------- Question 14 (1 point) National income is derived by subtracting from net domestic product those factors that do not contribute value to national income. 100.0% 1. True 2. False Score 1 / 1 -------------------------------------------------------------------------------- Question 15 (1 point) Net investment (gross investment minus depreciation) measures the rate at which an economy's capital stock is changing. 100.0% 1. True 2. False Score 1 / 1 -------------------------------------------------------------------------------- Total score 14 / 15 = 93.3% -------------------------------------------------------------------------------- Quiz 3.3 User ID: xefri Attempt: 2 / 3 Out of: 20 Started: Oct 17, 2003 22:01 Finished: Oct 17, 2003 22:03 Time spent: 1 min., 24 sec. Return to Scores -------------------------------------------------------------------------------- Question 1 (1 point) Mary's nominal income is $4000. If the value of the consumer price index (CPI) is 200, what is Mary's real income? 1. $8000 2. $4000 100.0% 3. $2000 4. $20 Score 1 / 1 -------------------------------------------------------------------------------- Question 2 (1 point) If the inflation rate is 7% and the nominal rate of interest is 4%, what is the real rate of interest? 1. 3% 100.0% 2. -3% 3. 11% 4. 1.75% Score 1 / 1 -------------------------------------------------------------------------------- Question 3 (1 point) If the CPI increases from 150 to 165, what is the rate of inflation? 1. 6% 2. 5.5% 100.0% 3. 10% 4. 15% Score 1 / 1 -------------------------------------------------------------------------------- Question 4 (1 point) Which of the following statements is correct? 1. Because higher quality goods cost more, the CPI adjusts for quality changes when it takes into account the higher prices of goods. 2. Because we consume less energy as goods become more energy efficient, the CPI accounts for improved energy efficiency by counting energy use less. 3. The CPI compares spending in different years. Because spending depends on the goods consumed, the CPI accounts for changing consumption patterns. 100.0% 4. None of the above. Score 1 / 1 -------------------------------------------------------------------------------- Question 5 (1 point) Over the last 60 years the prices of most goods have increased dramatically. For example, from 1930 to 1990 the average price for a loaf of bread rose 60 cents. This means 1. consumers are worse off now because they must spend more on goods. 100.0% 2. that we need to measure the real prices of goods, adjusting for inflation, before we can tell if consumers are better off or worse off. 3. real output has increased, because higher prices mean goods are worth more. 4. the real cost of producing bread has increased. Score 1 / 1 -------------------------------------------------------------------------------- Question 6 (1 point) Nominal GDP is $5000 and the price index is 250. What is real GDP? 1. $20 2. $5250 100.0% 3. $2000 4. $2500 5. none of the above Score 1 / 1 -------------------------------------------------------------------------------- Question 7 (1 point) In order to know whether consumers are better off today than in the past, economists 1. compare nominal output today to nominal output in the past. 2. compute the inflation rate, and see if it has increased. 100.0% 3. adjust nominal output for inflation, and compare real output now to real output in the past. 4. all of the above. Score 1 / 1 -------------------------------------------------------------------------------- Question 8 (1 point) A decrease in the general level of prices is known as 1. inflation. 2. reflation. 100.0% 3. deflation. 4. disinflation. Score 1 / 1 -------------------------------------------------------------------------------- Question 9 (1 point) If the consumer price index uses 1992 as its base year, then 1. the inflation rate in 1992 will always be measured as zero. 100.0% 2. the CPI for 1992 will equal 100. 3. when we measure the CPI for any year after 1992 it will always exceed 100. 4. all of the above. Score 1 / 1 -------------------------------------------------------------------------------- Question 10 (1 point) Suppose a typical consumer bought 20 units of food and 15 units of clothes in the year 2307, when the price per unit of food was 100 and the price per unit of clothes was 200. In 2308, when the typical consumer bought 20 units of food and 20 units of clothes, the price of food had increased to 110, while the price per unit of clothes remained at 200. If the base year is 2307, what is the CPI for 2308? NOTE: Be careful to use the correct quantities. This is the tricky part! 1. 110 2. 103.33 100.0% 3. 104 4. 124 Score 1 / 1 -------------------------------------------------------------------------------- Question 11 (1 point) Suppose the critics of the CPI are correct, and it overstates the effect of price changes. Because the CPI uses a fixed market basket of goods, it should be too high every year. Thus, 100.0% 1. the CPI overstates inflation as well. 2. inflation, which is the change in the CPI, will still be measured correctly. 3. the CPI will understate inflation. 4. the CPI will understate inflation some years, and overstate it others, depending on how prices change. Score 1 / 1 -------------------------------------------------------------------------------- Question 12 (1 point) If the real rate of interest on an asset is negative, this means that 1. the nominal interest rate is greater than the inflation rate. 100.0% 2. the asset holder is losing purchasing power. 3. the economy is in a recession. 4. all of the above. Score 1 / 1 -------------------------------------------------------------------------------- Question 13 (1 point) Mary receives a pension of $4000 a year. Suppose that when she first began receiving the $4000 pension ten years ago, prices were half what they are today. Mary's nominal income has _______ while her real income has _______. 1. increased; stayed the same. 100.0% 2. stayed the same, decreased. 3. decreased; stayed the same. 4. decreased; decreased. 5. none of the above. Score 1 / 1 -------------------------------------------------------------------------------- Question 14 (1 point) Why is the measurement of the CPI so important? 1. People need to know how much it costs to support themselves each month. 100.0% 2. Some wage contracts and Social Security payments are adjusted based on changes in the CPI. 3. Real interest rates rise and fall based on the CPI. 4. Unemployment rises and falls based on the CPI. Score 1 / 1 -------------------------------------------------------------------------------- Question 15 (1 point) The index of leading indicators 1. predicts how the economy will perform two to three years into the future. 2. predicts recessions, but not economic expansions. 3. has a poor record of accurately predicting the future of the economy. 100.0% 4. includes various measures that "lead" the economy, meaning that changes in these measures occur before the economy as a whole is affected. Score 1 / 1 -------------------------------------------------------------------------------- Question 16 (1 point) Use this information to answer the next four questions. Assume that an economy produces only three goods: marshmallow bunnies, eggs, and Easter baskets. In 1998, 200 packages of bunnies were sold at a price of $1 each, 500 dozen eggs were sold at $0.80 per dozen, and 90 Easter baskets were sold at $10 each. Find the total expenditures on these goods in 1998. 100.0% 1. $1,500 2. $11.80 3. 790 4. none of the above Score 1 / 1 -------------------------------------------------------------------------------- Question 17 (1 point) Find total expenditures on these goods in 1999 (using 1998 as the base year) if the 1999 price of bunnies is $1.10 per package, the 1999 price of eggs is $1, and the 1999 price of Easter baskets is $12. 100.0% 1. $1800 2. $14.20 3. 790 4. none of the above Score 1 / 1 -------------------------------------------------------------------------------- Question 18 (1 point) What is the value of the price index in 1999 (using 1998 as the base year)? 1. 83.3 100.0% 2. 120 3. 119.49 4. 1.2 5. none of the above Score 1 / 1 -------------------------------------------------------------------------------- Question 19 (1 point) What is the inflation rate in 1999? 100.0% 1. 20% 2. -20% 3. can't be determined from the information given Score 1 / 1 -------------------------------------------------------------------------------- Question 20 (1 point) What is the main reason why the CPI and the GDP deflator yield different rates of inflation? 100.0% 1. The CPI calculates how much it costs to purchase last year's basket of goods at this year's prices, while the GDP deflator calculates how much it costs to produce this year's level of production at last year's prices. 2. The GDP deflator calculates how much it costs to purchase last year's basket of goods at this year's prices, while the CPI calculates how much it costs to produce this year's level of production at last year's prices. 3. The two indexes measure different types of prices. 4. Different indexes never yield exactly the same results. Score 1 / 1 -------------------------------------------------------------------------------- Total score 20 / 20 = 100.0% -------------------------------------------------------------------------------- Quiz 3.4 User ID: xefri Attempt: 3 / 3 Out of: 15 Started: Oct 24, 2003 23:18 Finished: Oct 24, 2003 23:20 Time spent: 1 min., 28 sec. Return to Scores -------------------------------------------------------------------------------- Question 1 (1 point) Which of the following statements is most correct? 100.0% 1. During a recession, lower demand for goods and services causes less inflation. 2. During a recession, higher demand for goods and services causes higher inflation. 3. During a recession, deflation causes lower demand for goods and services. 4. During a recession, lower demand for goods and services causes higher inflation. Score 1 / 1 -------------------------------------------------------------------------------- Question 2 (1 point) Most experts agree that business cycles ended after World War II. 1. True 100.0% 2. False Score 1 / 1 -------------------------------------------------------------------------------- Question 3 (1 point) One historical example of a trough in the business cycle came during 100.0% 1. the Panic of 1893. 2. World War I. 3. World War II. 4. the 1990s. Score 1 / 1 -------------------------------------------------------------------------------- Question 4 (1 point) If teh unemployment rate is decreasing and prices are rising, the economy is likely in what stage of the business cycle? 1. recession 2. depression 3. trough 100.0% 4. expansion Score 1 / 1 -------------------------------------------------------------------------------- Question 5 (1 point) If inflation is falling and trade balances are improving, then the economy is probably in a recession. 100.0% 1. True 2. False Score 1 / 1 -------------------------------------------------------------------------------- Question 6 (1 point) Imagine that in the first quarter of this year, the number of jobs swelled, and both interest rates and prices increased. In the second quarter of this year, the number of jobs decreased slightly, while both interest rates and prices fell sharply. Between the first and second quarters, we may have experienced a(n) _________ in the business cycle. 100.0% 1. peak 2. expansion 3. trough 4. equilibrium point Score 1 / 1 -------------------------------------------------------------------------------- Question 7 (1 point) Who believed that fluctuations in the business cycle were the result of class conflicts between labor and capital? 1. Schumpeter 100.0% 2. Marx 3. Rousseau 4. Keynes Score 1 / 1 -------------------------------------------------------------------------------- Question 8 (1 point) Advocates of the real business cycle theory would be most likely to believe that which of the following factors could influence the business cycle? 1. A change in interest rates by the Federal REserve board 2. A dropoff in consumer spending 100.0% 3. a sharp rise in oil prices 4. Tensions between union leaders and top-level management Score 1 / 1 -------------------------------------------------------------------------------- Question 9 (1 point) Which of the following phrases best summarizes the attitude of new classical economists toward managing business cycles? 1. Manage the money supply carefully. 2. If consumers stop spending, the government should start. 3. Subsidize creative destruction. 100.0% 4. Keep your hands off. Score 1 / 1 -------------------------------------------------------------------------------- Question 10 (1 point) John Maynard Keynes believed that a decrease in consumer spending could lead to an economic contraction. To correct this problem, he proposed that governments should spend money on public goods such as roads and schools. 100.0% 1. True 2. False Score 1 / 1 -------------------------------------------------------------------------------- Question 11 (1 point) The long-run trend in real GDP is 1. constant. 2. downward. 100.0% 3. upward. 4. such that it cannot be described as a trend. Score 1 / 1 -------------------------------------------------------------------------------- Question 12 (1 point) When, over a sustained period of time, the growth of real GDP falls below what is considered the normal growth rate, the economy experiences 1. inflation. 2. deflation. 3. expansion. 100.0% 4. recession. Score 1 / 1 -------------------------------------------------------------------------------- Question 13 (1 point) When economy-wide business fluctuations are positive, they are referred to as 1. contractions. 100.0% 2. expansions. 3. anti-cycles. 4. corrections. Score 1 / 1 -------------------------------------------------------------------------------- Question 14 (1 point) During a recession, 1. incomes rise and employment decreases. 100.0% 2. incomes fall and unemployment increases. 3. incomes fall and unemployment falls. 4. incomes rise and unemployment increases. Score 1 / 1 -------------------------------------------------------------------------------- Question 15 (1 point) A period when real GDP is increasing is known as a(n) 1. peak. 100.0% 2. expansion. 3. incline. 4. recession. Score 1 / 1 -------------------------------------------------------------------------------- Total score 15 / 15 = 100.0% -------------------------------------------------------------------------------- View Results Quiz 3.5 User ID: skim7 Attempt: 1 / 3 Out of: 20 Started: November 17, 2004 12:54pm Finished: November 23, 2004 6:09pm Time spent: 149 hr, 14 min., 28 sec. Question 1 (1 point) The unemployment rate is defined as Student response: Percent Value Student Response Answer Choices a. the reciprocal of the labor force participation rate. b. the raw number of workers who want a job but do not have one. c. the number of unemployed workers divided by the total adult population. 100.0% d. the percentage of the labor force that is not employed. Score: 1 / 1 Question 2 (1 point) If the total population in the U.S. is 275 million, the adult population is 215 million, the number employed is 140 million, and the number of unemployed is 10 million, then the labor force participation rate is ________. Student response: Percent Value Student Response Answer Choices 100.0% a. 69.7% b. 54.5% c. 65.1% d. 50.9% Score: 1 / 1 Question 3 (1 point) Critics argue that the Bureau of Labor Statistics' measurement of the unemployment rate understates the actual amount of unemployment because it Student response: Percent Value Student Response Answer Choices a. does not include children under 18. 100.0% b. does not factor in part-time employees who would rather have full-time employment. c. unfairly includes employees who may have been laid off only days prior to the survey. d. calculates the rate in a way that exaggerates the effect of discouraged workers. Score: 1 / 1 Question 4 (1 point) Which of the following cases is an example of structural unemployment? Student response: Percent Value Student Response Answer Choices a. An accountant quits her job to become an investment banker. b. An auto worker is fired for poor job performance. 100.0% c. A wheat farmer, whose income has plummeted because of a new trade agreement, quits farming and starts looking for a new job. d. A consultant is laid off becuase poor economic conditions have depressed the market for consultants. Score: 1 / 1 Question 5 (1 point) The government is most likely to intervene when ________ unemployment rises sharply. Student response: Percent Value Student Response Answer Choices a. structural b. frictional c. seasonal 100.0% d. cyclical Score: 1 / 1 Question 6 (1 point) The lowest rate of unemployment that does not create inflationary pressure is called the Student response: Percent Value Student Response Answer Choices a. NERU: Non-Expansionary Rate of Unemployment. b. MUR: Minimal Unemployment Rate. 100.0% c. NAIRU: Non-Accelerating Inflation Rate of Unemployment. d. NRU: Natural Rate of Unemployment Score: 1 / 1 Question 7 (1 point) The natural rate of unemployment is the sum of __________ unemployment and ___________ unemployment. Student response: Percent Value Student Response Answer Choices 100.0% a. frictional; structural b. cyclical; structural c. frictional; cyclical d. seasonal; cyclical Score: 1 / 1 Question 8 (1 point) Which of the following factors best supports the relationship illustrated by the Phillips curve? Student response: Percent Value Student Response Answer Choices 100.0% a. When unemployment falls, competition for workers causes wages to rise, and the higher wages are passed along to consumers in the form of higher prices. b. When the economy stays at the NAIRU, inflationary pressures are minimal, leading to a stable inflation rate. c. When unemployment rises, the overall economy can contract, which in turn can lead to a rising inflation rate. d. Lower unemployment leads to increased total income, which increass both consumer spending and GDP. Score: 1 / 1 Question 9 (1 point) Welfare reform in the late 1990s required that recipients seek jobs. Most states implemented training programs for the individuals who entered the labor force off of the welfare roles. This policy is useful for combating _____________ unemployment. Student response: Percent Value Student Response Answer Choices a. frictional 100.0% b. structural c. cyclical d. all three types of Score: 1 / 1 Question 10 (1 point) When there is full employment (or when the economy is at the natural rate of unemployment), Student response: Percent Value Student Response Answer Choices a. unemployment is zero. b. frictional unemployment still exists, but there is no structural or cyclical unemployment. 100.0% c. unemployment is still positive. d. inflation is zero. Score: 1 / 1 Question 11 (1 point) When the unemployment rate is above the natural rate of unemployment, the government response is likely to be to Student response: Percent Value Student Response Answer Choices a. increase job training programs to retrain unemployed workers. 100.0% b. implement policies, like tax cuts, to stimulate the economy. c. increase job placement activities. d. any of the above. Score: 1 / 1 Question 12 (1 point) In 1993 the adult population in the United States was about 195 million people. Of these, approximately 121 million were employed and 9 million were unemployed. Thus, the labor force was ______ million people and the unemployment rate was about ______ percent. Student response: Percent Value Student Response Answer Choices a. 195, 4.6 b. 121, 7.4 100.0% c. 130, 6.9 d. 204, 4.4 Score: 1 / 1 Question 13 (1 point) Which of the following does NOT cause unemployment to increase during a recession? Student response: Percent Value Student Response Answer Choices 100.0% a. The labor force shrinks. b. Firms hire fewer workers. c. The duration of unemployment increases. Score: 1 / 1 Question 14 (1 point) Which government agency is responsible for measuring unemployment? Student response: Percent Value Student Response Answer Choices a. The Bureau of the Census. 100.0% b. The Bureau of Labor Statistics. c. The Council of Economic Advisors. d. all of the above. Score: 1 / 1 Question 15 (1 point) When output _________, unemployment is expected to ________. Student response: Percent Value Student Response Answer Choices a. rises; rise. 100.0% b. rises; fall. c. falls; remain constant. d. remains constant; fall. Score: 1 / 1 Question 16 (1 point) The total labor force is comprised of Student response: Percent Value Student Response Answer Choices 100.0% a. the unemployed and the employed. b. only the employed. c. all individuals age 16 or over. d. only full-time employed individuals between the ages of 18 and 55. Score: 1 / 1 Question 17 (1 point) As the baby boom generation entered the labor force, the natural rate of unemployment increased, probably because Student response: Percent Value Student Response Answer Choices a. the labor force was larger. 100.0% b. frictional unemployment increased. c. structural unemployment increased. d. cyclical unemployment increased. Score: 1 / 1 Question 18 (1 point) If we compare the unemployment rates across age, race and gender, we find that Student response: Percent Value Student Response Answer Choices a. females have higher unemployment rates than males. b. the rate of white unemployment is lower than that for blacks. c. adult workers have lower unemployment rates than teenagers. 100.0% d. all of the above. Score: 1 / 1 Question 19 (1 point) Newer automobiles use many computerized components. "Old style" auto mechanics who lose their jobs because they do not know how to fix the computerized components are an example of Student response: Percent Value Student Response Answer Choices a. frictional unemployment. 100.0% b. structural unemployment. c. cyclical unemployment. d. normal unemployment. Score: 1 / 1 Question 20 (1 point) Which of the following people should be included in the labor force? Student response: Percent Value Student Response Answer Choices a. someone who doesn't have a job and isn't looking for one 100.0% b. someone who is unemployed c. someone who is 15 years old d. none of the above Score: 1 / 1 Total score: 20 / 20 = 100.0% View Results Quiz 3.7 User ID: skim7 Attempt: 2 / 3 Out of: 15 Started: December 7, 2004 6:19am Finished: December 7, 2004 6:20am Time spent: 1 min. 31 sec. Question 1 (1 point) A rise in the minimum wage will tend to _________ the quantity demanded of labor and __________ the quantity supplied of labor. Student response: Percent Value Student Response Answer Choices 100.0% a. decrease; increase b. increase; decrease c. decrease; decrease d. increase; increase Score: 1 / 1 Question 2 (1 point) Which of the following statements is NOT a valid argument that critics might use against the minimum wage? Student response: Percent Value Student Response Answer Choices a. A minimum wage will result in increased unemployment. b. Small business owners will be hurt by the additional labor cost imposed by the minimum wage. c. Unskilled workers will end up suffering more than skilled workers if a minimum wage is enacted. 100.0% d. Because the minimum wage prevents businesses from substituting capital for labor, total output will fall. Score: 1 / 1 Question 3 (1 point) According to Steven Tomlinson, which group of people is most likely to lose jobs when a minimum wage law is passed? Student response: Percent Value Student Response Answer Choices a. poor minorities b. upper middle-class whites who own businesses 100.0% c. middle-class teenagers d. primarily union workers Score: 1 / 1 Question 4 (1 point) Which of the following statements about unions is NOT true? Student response: Percent Value Student Response Answer Choices a. Unions have a right to form by law. b. The National Labor Relations board oversees the activities of unions. 100.0% c. Unions have fought successfully in many states for right-to-work laws. d. Unions typically demand higher wages and better working conditions for their members Score: 1 / 1 Question 5 (1 point) Negotiations between labor union representatives and the management of a firm are called Student response: Percent Value Student Response Answer Choices a. strikes. 100.0% b. collective bargaining. c. legally binding arbitration. d. feather bedding. Score: 1 / 1 Question 6 (1 point) Right-to-work laws Student response: Percent Value Student Response Answer Choices a. shift power away from firms by permitting the formation of unions. b. permit unions to bargain for no-loss negotiations, i.e., contracts in which the firms agree not to fire any union members without cause. c. give employers the right to disband labor unions. 100.0% d. make it illegal for an employer to require union membership as a condition of employment. Score: 1 / 1 Question 7 (1 point) Imagine that a firm employs 100 people, all union members, at a salary of $10 per hour. If the union bargains the wage up to $12 per hour and forces the firm to keep all 100 employees, how would we depict this even in a supply-and-demand graph? Student response: Percent Value Student Response Answer Choices a. Shift the labor supply curve outward to reflect the higher wage. 100.0% b. Shif the firm's demand curve for labor outward. c. Move upward along the same demand curve for labor to a new equilibrium point. d. The firm's demand curve for labor will shift inward to reflect its disincentive to hire workers at the higher wage. Score: 1 / 1 Question 8 (1 point) In general, a firm that pays the efficiency wage will demand __________ workers. Student response: Percent Value Student Response Answer Choices a. more, better-qualified 100.0% b. fewer, better-qualified c. more, lesser-qualified d. fewer, lesser-qualified Score: 1 / 1 Question 9 (1 point) Margaret owns a small accounting firm, and she needs to hire some additional help. The market wage for accountants is $20 per hour. According to the efficiency wage theory, Margaret should Student response: Percent Value Student Response Answer Choices a. pay new accountants $20 per hour in order to maximize economic efficiency. b. pay less than $20 per hour to her new accountants, so that she can avoid a situation of adverse selection. 100.0% c. pay more than $20 per hour in order to attract more highly-skilled accountants. d. hire accountants to the point where marginal social benefit equals marginal social cost. Score: 1 / 1 Question 10 (1 point) A factory employs a team of 10 workers. Each of the 10 workers knows how much she can produce, but the factory has no way to measure the output of any individual worker, only the team as a whole. This is a situation involving Student response: Percent Value Student Response Answer Choices a. adverse selection. 100.0% b. assymetric information. c. moral hazard. d. non-price selection. Score: 1 / 1 Question 11 (1 point) Economists would expect that unemployment insurance would increase the unemployment rate. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 12 (1 point) Mike buys homeowner's insurance, which protects him from the financial risk of having his possessions stolen. If, as a result of having this insurance, Mike becomes less diligent about locking doors and closing windows, economists would say this is a situation involving Student response: Percent Value Student Response Answer Choices a. adverse selection. b. counter-insurance behavior. c. asymmetric information. 100.0% d. moral hazard. Score: 1 / 1 Question 13 (1 point) If unemployment insurance were restricted to two weeks of benefits, workers who lost their jobs due to __________ unemployment would be liekly to suffer the most. Student response: Percent Value Student Response Answer Choices 100.0% a. structural b. frictional c. voluntary d. contractionary Score: 1 / 1 Question 14 (1 point) According to the figure, the market clearing wage rate is Student response: Percent Value Student Response Answer Choices 100.0% a. We. b. Wm. c. We - Wm. d. Wm + We. Score: 1 / 1 Question 15 (1 point) According to the figure, if the government imposes a minimum wage equal to Wm, the effect will be Student response: Percent Value Student Response Answer Choices 100.0% a. unemployment shown by the line segment AC. b. an decrease in unemployment Qe to Qd. c. a decrease in labor supplied, from C to E. d. an increase in labor supplied, from A to E. Score: 1 / 1 Total score: 15 / 15 = 100.0% View Results Quiz 3.8 User ID: skim7 Attempt: 1 / 3 Out of: 15 Started: November 23, 2004 6:10pm Finished: November 23, 2004 6:12pm Time spent: 2 min. 24 sec. Question 1 (1 point) The United States experienced a period of stagflation during the 1970s that was attributable to Student response: Percent Value Student Response Answer Choices a. post-Watergate malaise. b. rising deficits due to the Vietnam War. 100.0% c. sharp increases in oil prices. d. the 1973 Treasury Department decision to print a substantial amount of additional money. Score: 1 / 1 Question 2 (1 point) People are most likely to revert to barter in periods of Student response: Percent Value Student Response Answer Choices a. stagflation. b. deflation. 100.0% c. hyperinflation. d. recession. Score: 1 / 1 Question 3 (1 point) In the 1970s, the U.S. experienced a period of inflation due to sudden increases in oil prices. This is an example of Student response: Percent Value Student Response Answer Choices a. demand-pull inflation. b. the wage-price spiral. c. price destruction. 100.0% d. cost-push inflation. Score: 1 / 1 Question 4 (1 point) Which of the following is an accurate explanation of the wage-price spiral? Student response: Percent Value Student Response Answer Choices a. When labor costs rise, it causes a self-perpetuating form of cost-push inflation. 100.0% b. Higher prices cause workers to demand higher wages. The higher wages raise production costs, which must be passed along to the consumer in the form of further price increases. c. When one firm pays the efficiency wage, it raises the opportunity cost for all other workers in the industry, necessitating raises. d. Workers in periods of hyperinflation demand to be paid in the form of goods, rather than cash, which further devalues the currency. Score: 1 / 1 Question 5 (1 point) Increased production costs are associated with Student response: Percent Value Student Response Answer Choices a. demand-pull inflation only. b. cost-push inflation only. c. neither demand-pull inflation nor cost-push inflation. 100.0% d. both demand-pull inflation and cost-push inflation. Score: 1 / 1 Question 6 (1 point) Which of the following factors would be most likely to determine whether consumer spending increases or decreases during a period of inflation? Student response: Percent Value Student Response Answer Choices a. the unemployment rate 100.0% b. consumers' expectations of the future rate of inflation c. the rate of inflation's impact on consumers' purchasing power d. the source of the inflation (cost-push or demand-pull) Score: 1 / 1 Question 7 (1 point) Which of the following forms of payment would be included in the calculation of the money supply? Student response: Percent Value Student Response Answer Choices a. credit cards 100.0% b. checks c. durable goods d. stocks and bonds Score: 1 / 1 Question 8 (1 point) Imagine that the money supply's velocity is 8. Which of the following is an accurate statment? Student response: Percent Value Student Response Answer Choices a. Any given dollar could not have been passed around more than 8 times during the year. b. One-eighth of the money supply changed hands during the year. c. Prices could not have risen by more than 800% during the year. 100.0% d. Currency changed hands an average of 8 times during the year. Score: 1 / 1 Question 9 (1 point) Assume that the velocity of the money supply is held constant. In the classical view of money, which of the following statements is true? Student response: Percent Value Student Response Answer Choices 100.0% a. Changes in the money supply affect only prices. b. Changing the money supply influences both the price level and the quantity of output. c. The money supply must remain fixed. d. A change in the price level must be matched with a reciprocal change in the money supply. Score: 1 / 1 Question 10 (1 point) Imagine that the money supply doubles in an economy that produces only vacuum cleaners, and assume that the velocity of the money supply is fixed. Before the money supply was expanded, the level of output was 20 vacuum cleaners and the price was $100 per vacuum. According to the classical view of money, what will be the level of output and price after the money supply doubles? Student response: Percent Value Student Response Answer Choices a. 40 vacuum cleaners; $100 b. 40 vacuum cleaners; $200 100.0% c. 20 vacuum cleaners; $200 d. 20 vacuum cleaners; $50 Score: 1 / 1 Question 11 (1 point) In a period of inflation, since paychecks inflate at the same rate as prices, economists would not expect a negative impact on the consumer. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 12 (1 point) Inflation tends to redistribute wealth from Student response: Percent Value Student Response Answer Choices a. borrowers to lenders. 100.0% b. lenders to borrowers. c. the government to consumers. d. consumers to the government. Score: 1 / 1 Question 13 (1 point) Which of the following is NOT a cost that can be attributed to inflation? Student response: Percent Value Student Response Answer Choices a. higher interest rates b. confusion (and resulting inefficiency) about the relative value of investments 100.0% c. increased government debts d. wasted time because of consumers' decisions to hold less cash Score: 1 / 1 Question 14 (1 point) Suppose the GDP deflator rose from 1.00 to 1.06 from 1995 to 2000. Which of the following statements is true? Student response: Percent Value Student Response Answer Choices a. Prices decreased 6% in 5 years. 100.0% b. Purchasing power decreased 6% in 5 years. c. Prices increased 60% in 5 years. d. Purchasing power decreased 60% in 5 years. Score: 1 / 1 Question 15 (1 point) Suppose Val could earn 5.25% interest on her savings account, while inflation grew steadily at 3%. She is most likely to Student response: Percent Value Student Response Answer Choices 100.0% a. put her money in the bank. b. spend her money quickly. c. withdraw her money from the bank. Score: 1 / 1 Total score: 15 / 15 = 100.0% View Results Quiz 2.1 User ID: skim7 Attempt: 3 / 3 Out of: 25 Started: November 8, 2004 12:31pm Finished: November 8, 2004 12:36pm Time spent: 5 min. 6 sec. Question 1 (1 point) The demand curve for a good Student response: Percent Value Student Response Answer Choices a. connects points describing how much consumers actually bought at different prices during a particular period. b. connects points describing how much consumers actually bought at different prices in different periods. 100.0% c. connects points describing how much consumers would have been willing and able to buy at different prices during a particular period. d. connects points describing how much consumers would have been willing and able to buy at different prices in different periods. Score: 1 / 1 Question 2 (1 point) In an attempt to forecast enrollment, a major university hired an economist to give a "head count." One variable which she would probably emphasize more than any other in trying to forecast is Student response: Percent Value Student Response Answer Choices 100.0% a. tuition (the price of attending). b. the employment opportunities that college opens up. c. survey results on public interest in education. d. her instinct about what the public wants. Score: 1 / 1 Question 3 (1 point) The price of labor is the wage rate. What happens to the quantity of labor demanded if wages increase? Student response: Percent Value Student Response Answer Choices a. It increases. 100.0% b. It decreases. c. It does not change. d. Uncertain. Economic theory has no answer to this question. Score: 1 / 1 Question 4 (1 point) Demand and quantity demanded are the same thing. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 5 (1 point) The demand curve depicts information about the quantities demanded as prices have changed over several time periods. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 6 (1 point) Which of the following would cause an upward movement (to the left) along the demand curve for European autos in the United States? Student response: Percent Value Student Response Answer Choices a. an increase in the price of American autos b. a decrease in the price of American autos c. an increase in income in the United States 100.0% d. an increase in the price of European autos Score: 1 / 1 Question 7 (1 point) The demand curve for a typical good has Student response: Percent Value Student Response Answer Choices 100.0% a. a negative slope because some consumers switch to other goods as the price of the good rises. b. a negative slope because consumer incomes fall as the price of the good rises. c. a negative slope because the good has less "snob appeal" as its price falls. d. None of the above is correct. Score: 1 / 1 Question 8 (1 point) The law of demand states that Student response: Percent Value Student Response Answer Choices a. an increase in price will diminish the quantity demanded only if income falls as well. 100.0% b. an increase in price will diminish the quantity demanded if income remains constant. c. an increase in price can lead to an increase in the quantity demanded only if income goes up. d. the effect of an increase in price depends on how income changes. Score: 1 / 1 Question 9 (1 point) Assume the demand curve for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen (be careful of terminology!), Student response: Percent Value Student Response Answer Choices a. the demand for cookies will fall. b. the demand for cookies will rise. 100.0% c. a larger quantity of cookies will be demanded. d. a smaller quantity of cookies will be demanded. Score: 1 / 1 Question 10 (1 point) A decrease in price Student response: Percent Value Student Response Answer Choices 100.0% a. causes a downward movement (to the right) along the same demand curve. b. causes an upward movement (to the left) along the same demand curve. c. changes the demand curve. d. causes a downward movement (to the right) along the same demand curve if income decreases. Score: 1 / 1 Question 11 (1 point) A demand schedule shows Student response: Percent Value Student Response Answer Choices a. the "market potential" for a product. 100.0% b. how much consumers are willing and able to buy at different prices. c. possible combinations of output under different conditions. d. how much producers would like to sell at different prices. Score: 1 / 1 Question 12 (1 point) A demand curve can be thought of as Student response: Percent Value Student Response Answer Choices a. a graphical display of "market potential." 100.0% b. a graphical representation of the information in a demand schedule. c. showing how much people want to buy. d. a forecasting tool. Score: 1 / 1 Question 13 (1 point) Firms often seek to borrow money to expand their capital stock, and the price they pay for the money is the interest rate. What happens to quantity of money demanded if the interest rate increases? Student response: Percent Value Student Response Answer Choices a. It increases. 100.0% b. It decreases. c. It does not change. d. Uncertain. Economic theory has no answer to this question. Score: 1 / 1 Question 14 (1 point) If the government has stated that it will buy any amount of good X offered at $30, then which demand curve below is appropriate? Student response: Percent Value Student Response Answer Choices 100.0% a. b. c. d. Score: 1 / 1 Question 15 (1 point) A 1985 Harvard study showed that the price of cigarettes does not affect how much an individual smokes but whether he smokes. If this is correct, which of the below graphs shows the typical individual's demand curve for cigarettes? (This is a tough one!) Student response: Percent Value Student Response Answer Choices a. b. 100.0% c. d. Score: 1 / 1 Question 16 (1 point) If the government has stated that it will pay whatever it must to obtain 1,000 units of good X, then which demand curve in the figure below is appropriate? Student response: Percent Value Student Response Answer Choices a. 100.0% b. c. d. Score: 1 / 1 Question 17 (1 point) Which of the following would cause a decrease in the demand for Pepsi (i.e., a leftward shift of the Pepsi demand curve)? Student response: Percent Value Student Response Answer Choices a. An increase in the price of Coke. 100.0% b. A decrease in the price of Coke. c. An increase in the price of Pepsi. d. A decrease in the price of Pepsi. Score: 1 / 1 Question 18 (1 point) The Wall Street Journal reports that "hard times aid poultry companies as people eat cheaper fowl." In the language of economists, this means Student response: Percent Value Student Response Answer Choices 100.0% a. chicken is an inferior good. b. chicken is a normal good. c. demand for chicken does not obey the law of demand. d. people's tastes change during recessions. Score: 1 / 1 Question 19 (1 point) If VCRs and rental videos are complementary goods, then a decrease in the price of VCRs would increase the Student response: Percent Value Student Response Answer Choices a. demand for rental videos. b. quantity of VCRs demanded. c. quantity of rental videos demanded. 100.0% d. both demand for rental videos and quantity of VCRs demanded. Score: 1 / 1 Question 20 (1 point) If price rises, what happens to demand for a product? Student response: Percent Value Student Response Answer Choices a. It increases. b. It decreases. c. It does not change. 0.0% d. Uncertain. Economic theory has no answer to this question. Score: 0 / 1 Question 21 (1 point) Which of the following will shift the demand curve for good X? Student response: Percent Value Student Response Answer Choices 100.0% a. a change in the income of buyers of good X b. a change in the price of good X c. a change in the supply of good X d. All of the above are correct. Score: 1 / 1 Question 22 (1 point) Market demand curves are found by Student response: Percent Value Student Response Answer Choices a. vertically summing individual demand curves. 100.0% b. horizontally summing individual demand curves. c. summing individual demand curves in a parallel fashion. d. adding the slopes of individual demand curves. Score: 1 / 1 Question 23 (1 point) In the figure below, an increase in population (which will increase the number of buyers of the good) will change demand from Student response: Percent Value Student Response Answer Choices 100.0% a. D1 to D2 b. D2 to D1 c. D3 to D2 d. D3 to D1 Score: 1 / 1 Question 24 (1 point) Assume that the figure below shows demand for orange juice. An increase in the price of soda (a substitute for orange juice) will change demand from Student response: Percent Value Student Response Answer Choices 100.0% a. D1 to D2 b. D2 to D1 c. D3 to D2 d. D3 to D1 Score: 1 / 1 Question 25 (1 point) Assume that the figure below shows demand for new houses, a normal good. A decrease in the income of buyers will change demand from Student response: Percent Value Student Response Answer Choices a. D1 to D2 100.0% b. D2 to D1 c. D2 to D3 d. D1 to D3 Score: 1 / 1 Total score: 24 / 25 = 96.0% Quiz 2.2 User ID: xefri Attempt: 2 / 3 Out of: 20 Started: Sep 20, 2003 20:15 Finished: Sep 20, 2003 20:16 Time spent: 1 min., 28 sec. Return to Scores -------------------------------------------------------------------------------- Question 1 (1 point) The price for labor is the wage rate. What happens to the supply of labor if wages increase? (Watch terminology!) 1. It increases. 2. It decreases. 100.0% 3. It does not change. 4. Uncertain. Economic theory has no answer to this question. Score 1 / 1 -------------------------------------------------------------------------------- Question 2 (1 point) A severe freeze has once again damaged the Florida orange crop. (Although this wasn't mentioned specifically in the lesson, weather is an input in the production of many goods.) The impact on the market for oranges will be a leftward shift in 1. the demand curve as consumers try to economize because of the shortage. 2. both the supply and demand curves. 100.0% 3. the supply curve. 4. the supply curve and a rightward shift in the demand curve, which will result in a higher price. Score 1 / 1 -------------------------------------------------------------------------------- Question 3 (1 point) The supply curve may shift if any production-related variable changes EXCEPT a change in the price of the good. 100.0% 1. True 2. False Score 1 / 1 -------------------------------------------------------------------------------- Question 4 (1 point) An increase in consumer income will shift both the supply and demand curves. 1. True 100.0% 2. False Score 1 / 1 -------------------------------------------------------------------------------- Question 5 (1 point) Assume that the figure below shows the supply of soda. An increase in the price of syrup used in the production of soda will shift supply from 1. S1 to S2 100.0% 2. S2 to S1 3. S2 to S3 4. S1 to S3 Score 1 / 1 -------------------------------------------------------------------------------- Question 6 (1 point) In the figure below, an increase in the number of producers will shift market supply from 100.0% 1. S1 to S2 2. S2 to S1 3. S3 to S2 4. S3 to S1 Score 1 / 1 -------------------------------------------------------------------------------- Question 7 (1 point) The supply of newspapers will decline if 100.0% 1. newsprint (an input) becomes more expensive. 2. the printers' union makes wage concessions. 3. prices are reduced. 4. magazine prices rise (assuming magazines are a substitute for newspapers). Score 1 / 1 -------------------------------------------------------------------------------- Question 8 (1 point) Assume that the figure below shows the supply of new houses. An improvement in the technology for building houses will shift supply from 100.0% 1. S1 to S2 2. S2 to S1 3. S3 to S2 4. S3 to S1 Score 1 / 1 -------------------------------------------------------------------------------- Question 9 (1 point) Assume that the figure below shows the supply of orange juice. A decrease in the wage rate paid to orange juice industry workers will shift supply from 100.0% 1. S1 to S2 2. S2 to S1 3. S3 to S2 4. S3 to S1 Score 1 / 1 -------------------------------------------------------------------------------- Question 10 (1 point) Suppose the numbers in parentheses represent two points on a line: (59 billion quarts; $4) and (78 billion quarts; $6). The line is likely a 1. production possibilities frontier for milk. 100.0% 2. supply curve for milk. 3. demand curve for milk. 4. ray through the origin. Score 1 / 1 -------------------------------------------------------------------------------- Question 11 (1 point) Studies at Cornell University revealed that chickens grow 2 percent more weight when a red mitten is placed in their cage and Vivaldi is played in the coop. Resultant feed savings are estimated at $60 million a year. In the chicken market, the 1. demand curve shifts to the right. 100.0% 2. supply curve shifts to the right. 3. price will rise. 4. quantity sold will fall. Score 1 / 1 -------------------------------------------------------------------------------- Question 12 (1 point) The supply curve shows 1. the same basic information as the demand curve. 2. who will have an opportunity to produce or purchase an item. 100.0% 3. the quantity sellers are willing and able to put on the market as a function of price. 4. what quantities have been sold over the past few weeks or months. Score 1 / 1 -------------------------------------------------------------------------------- Question 13 (1 point) If price rises, what happens to supply for the product? (Watch terminology!) 1. It increases. 2. It decreases. 100.0% 3. It does not change. 4. Uncertain. Economic theory has no answer to this question. Score 1 / 1 -------------------------------------------------------------------------------- Question 14 (1 point) Why does quantity supplied increase when price increases? 100.0% 1. Producers find it more profitable to make the item. 2. People "drop out" of the market, so buyers find it more abundant. 3. As demand decreases with a high price, surpluses appear. 4. All of the above. Score 1 / 1 -------------------------------------------------------------------------------- Question 15 (1 point) Along a supply curve, 1. supply changes as price changes. 100.0% 2. quantity supplied changes as price changes. 3. supply changes as technology changes. 4. quantity supplied changes as technology changes. Score 1 / 1 -------------------------------------------------------------------------------- Question 16 (1 point) An important assumption that is made when constructing a supply schedule is 1. only price and quantity matter in determining supply. 2. firms always want to sell a certain amount of a product. 3. supply is too important to be left to the free market. 100.0% 4. all other determinants of supply are held constant. Score 1 / 1 -------------------------------------------------------------------------------- Question 17 (1 point) Assuming that resources are specialized, the opportunity cost of an item increases as production of it rises. Therefore, we expect that firms will produce more if 100.0% 1. the price increases. 2. the price decreases. 3. the opportunity cost is greater than the price. 4. the government asks firms to produce more. Score 1 / 1 -------------------------------------------------------------------------------- Question 18 (1 point) The price for labor is the wage rate. What happens to the quantity of labor supplied if wages increase? 100.0% 1. It increases. 2. It decreases. 3. It does not change. 4. Uncertain. Economic theory has no answer to this question. Score 1 / 1 -------------------------------------------------------------------------------- Question 19 (1 point) Supply curves represent producers' 1. inventories. 2. willingness to buy. 100.0% 3. willingness to sell. 4. total production. Score 1 / 1 -------------------------------------------------------------------------------- Question 20 (1 point) A decrease in the market price of a product, ceteris paribus, results in 100.0% 1. a movement down (to the left) along a given supply curve, decreasing quantity supplied. 2. a movement up (to the right) along a given supply curve, increasing quantity supplied. 3. an inward shift of the supply curve. 4. an outward shift of the supply curve. Score 1 / 1 -------------------------------------------------------------------------------- Total score 20 / 20 = 100.0% -------------------------------------------------------------------------------- Quiz 2.3 User ID: xefri Attempt: 3 / 3 Out of: 20 Started: Sep 21, 2003 19:14 Finished: Sep 21, 2003 19:15 Time spent: 1 min., 24 sec. Return to Scores -------------------------------------------------------------------------------- Question 1 (1 point) A decrease in demand will have what effect on equilibrium price and quantity? 1. Price will increase, quantity will decrease. 2. Price will decrease, quantity will increase. 3. Both price and quantity will increase. 100.0% 4. Both price and quantity will decrease. Score 1 / 1 -------------------------------------------------------------------------------- Question 2 (1 point) Which of the following is the most likely explanation for why airlines tend to lower ticket prices in the winter? 1. Supply is relatively variable, and a drop in demand lowers equilibrium price. 2. Demand is relatively variable, and a drop in supply lowers equilibrium price. 3. Airlines like to surprise passengers with sales on ticket prices. 100.0% 4. Supply is relatively fixed, and a drop in demand lowers equilibrium price. Score 1 / 1 -------------------------------------------------------------------------------- Question 3 (1 point) Last year, 1,000 cases of elixir were sold at $10; this year, 1,200 cases were sold at $12. The most probable interpretation of these data is that the 1. supply and demand curves are shifting to the right. 2. supply and demand curves are shifting to the left. 3. supply curve has shifted to the left, with no change in demand. 100.0% 4. demand curve has shifted to the right, with no change in supply. Score 1 / 1 -------------------------------------------------------------------------------- Question 4 (1 point) Are markets always in equilibrium? 1. Yes, they are always at the equilibrium point, or very close to it. 2. Yes, because so few things tend to alter supply and demand. 100.0% 3. No, but if there is no interference, they tend to move toward equilibrium. 4. No, they never "settle down" into a stable price and quantity. Score 1 / 1 -------------------------------------------------------------------------------- Question 5 (1 point) In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart. In February, 3,000 quarts are sold at $2.50 a quart. This change in quantity sold and price may have been caused by 1. a reduction in wages in the Boston area. 2. the introduction of labor-saving automated ice cream-packing machinery. 100.0% 3. the release of a medical study showing that ice cream consumption improves mental health. 4. the decision by Boston ice cream sellers to eliminate discount coupons. Score 1 / 1 -------------------------------------------------------------------------------- Question 6 (1 point) A decrease in supply will have what effect on equilibrium price and quantity? 100.0% 1. Price will increase, quantity will decrease. 2. Price will decrease, quantity will increase. 3. Both price and quantity will increase. 4. Both price and quantity will decrease. Score 1 / 1 -------------------------------------------------------------------------------- Question 7 (1 point) A decrease in the price of an input going into the production of a product will result in 1. a decrease in equilibrium price and a decrease in equilibrium quantity. 2. an increase in equilibrium price and an increase in equilibrium quantity. 100.0% 3. a decrease in equilibrium price and an increase in equilibrium quantity. 4. an increase in equilibrium price and no change in equilibrium quantity. Score 1 / 1 -------------------------------------------------------------------------------- Question 8 (1 point) The price of gasoline has risen and the quantity sold has fallen. This was likely caused by 100.0% 1. a rise in the price of crude oil. 2. a seasonal rise in the demand for gasoline. 3. use of a new public transit system. 4. a discovery of crude oil in New Jersey. Score 1 / 1 -------------------------------------------------------------------------------- Question 9 (1 point) A study of the demand for fresh fish found that meat and poultry prices had a positive impact on the price of fish. In other words, as the price of meat and poultry rose, so did the price of fish. This indicates that 1. fish is a normal good. 100.0% 2. meat and poultry are substitutes for fish. 3. meat and poultry are complements of fish. 4. fish is an inferior good. Score 1 / 1 -------------------------------------------------------------------------------- Question 10 (1 point) The U.S. government banned cigarette advertising on radio and television after January 1971, but magazine advertisements were still legal. You would expect to find that, after the ban took effect, 1. the price of magazine ads for all goods fell. 2. the price of magazine ads for only cigarettes fell. 100.0% 3. the price of magazine ads for all goods rose. 4. the price of magazine ads for only cigarettes rose. Score 1 / 1 -------------------------------------------------------------------------------- Question 11 (1 point) In high schools, all teachers are paid the same based on years of service and regardless of specialization. Beginning in the 1970s, a shortage of science and math teachers developed as private industry paid more for math and science skills than schools could offer. At the same time, a decline in the number of school-age children tended to reduce the demand for all other teachers, which led to a surplus. The economist's solution to this problem would be 1. merit pay to reward the best teachers. 2. recognition that all teachers do comparable work and should be paid the same. 3. to raise the wages of all teachers. 100.0% 4. to raise the wages of teachers in fields that are in short supply and lower those of others. Score 1 / 1 -------------------------------------------------------------------------------- Question 12 (1 point) Some medical authorities announced in the late 1980s that an acne medicine named Retin-A also had previously unknown wrinkle-reducing properties. (In other words, it made its users look younger!) An economist would expect to find that, after this announcement, the price of Retin-A _____ and the quantity sold _____. 1. rose; fell 100.0% 2. rose; rose 3. fell; fell 4. fell; rose Score 1 / 1 -------------------------------------------------------------------------------- Question 13 (1 point) In the figure below, there would be a surplus of T-shirts if 100.0% 1. the price were $10. 2. the price were $8. 3. the price were below $8. 4. the price were between $8 and $6. Score 1 / 1 -------------------------------------------------------------------------------- Question 14 (1 point) After the strike against the Financial News in London began, the number of copies of the Broad Street Journal sold in England increased dramatically, yet there has been no increase in price. Which supply and demand picture in the figures below represents the situation for the Broad Street Journal before the strike? 1. 100.0% 2. 3. 4. Score 1 / 1 -------------------------------------------------------------------------------- Question 15 (1 point) The presence of scalpers (people selling tickets at a price above the quoted price, P*) at a recent Super Bowl game suggests that the market for stadium seats could be represented by which graph below? 1. 2. 0.0% 3. 4. Score 0 / 1 -------------------------------------------------------------------------------- Question 16 (1 point) A shortage will tend to occur at which price in the following figure? 1. P1 2. P2 100.0% 3. P3 4. None of the above. Score 1 / 1 -------------------------------------------------------------------------------- Question 17 (1 point) At price P1 in the following figure, what will tend to happen? 1. There will be a shortage, and the price will fall. 2. There will be a shortage and the price will rise. 3. There will be a surplus, and the price will rise. 100.0% 4. There will be a surplus, and the price will fall. Score 1 / 1 -------------------------------------------------------------------------------- Question 18 (1 point) If the suppliers of a good will sell any amount at $30 but there are no sales, then the market can best be represented by which graph below? 1. 2. 3. 100.0% 4. Score 1 / 1 -------------------------------------------------------------------------------- Question 19 (1 point) Grapes can be used for wine or for raisins. Which of the following graphs best depicts the effects on the U.S. raisin market of an increase in imports of foreign wines? (This one is really tough. Start by thinking about how the imported wines will affect the domestic wine industry. What effect will this have on the market for raisins, since grapes can be used to produce wine or raisins?) 1. 100.0% 2. 3. 4. Score 1 / 1 -------------------------------------------------------------------------------- Question 20 (1 point) "Moonshine" is illegal home brew made by adding sugar to accelerate corn fermentation. Ten pounds of sugar are necessary to make a gallon of moonshine. In the mid-1970s, the price of sugar tripled and the price of moonshine skyrocketed from $6 to $15 a gallon. Which graph below best illustrates this? 1. 2. 3. 100.0% 4. Score 1 / 1 -------------------------------------------------------------------------------- Total score 19 / 20 = 95.0% -------------------------------------------------------------------------------- Quiz 2.4 User ID: xefri Attempt: 2 / 3 Out of: 10 Started: Sep 26, 2003 12:06 Finished: Sep 26, 2003 12:07 Time spent: 53 sec. Return to Scores -------------------------------------------------------------------------------- Question 1 (1 point) If the government sets a minimum wage above the equilibrium wage, then 1. more people will have jobs than at the equilibrium wage. 2. the same number of people will have jobs as at the equilibrium wage. 3. fewer people will be willing to work than at the equilibrium wage. 100.0% 4. firms will be willing to hire fewer workers than at the equilibrium wage. Score 1 / 1 -------------------------------------------------------------------------------- Question 2 (1 point) If the government decides to increase the minimum wage rate paid to unskilled workers, which of the following would most likely occur? 1. Unemployment among unskilled workers would decrease. 100.0% 2. Unemployment among unskilled workers would increase. 3. There would be a shortage of unskilled labor. 4. Workers and their employers would ignore the minimum wage. Score 1 / 1 -------------------------------------------------------------------------------- Question 3 (1 point) Examine the graph. If the government imposes a minimum wage of $8.00 per hour, 1. there will be a shortage of 20,000 units of labor. 100.0% 2. there will be a surplus of 20,000 units of labor. 3. the labor market will be in equilibrium at a wage of $6.00 per hour and 20,000 units of labor. 4. the minimum wage will not affect the market. Score 1 / 1 -------------------------------------------------------------------------------- Question 4 (1 point) Examine the graph. If the government imposes a minimum wage of $4.00 per hour, 1. there will be a shortage of 20,000 units of labor. 2. there will be a surplus of 20,000 units of labor. 3. the labor market will be in equilibrium at a wage of $6.00 per hour and 20,000 units of labor. 100.0% 4. the minimum wage will not affect the market. Score 1 / 1 -------------------------------------------------------------------------------- Question 5 (1 point) The rising minimum wage allegedly has reduced the quantity demanded of teenage labor. For example, restaurants and hotels automated their dishwashing systems in response to the law. However, demographics (the "baby bust") have reduced the supply of teenage labor. The U.S. Department of Labor reported that teenage unemployment, a problem in 1979, was worse in 1986. Which graph below is consistent with these facts? (This is a HARD one! Remember that the minimum wage may create a surplus of labor. Look at the size of the surplus in each year.) 1. 2. 100.0% 3. 4. Score 1 / 1 -------------------------------------------------------------------------------- Question 6 (1 point) The effect of an excise tax imposed on a SELLER of a good is to 1. shift the demand curve to the left. 100.0% 2. shift the supply curve to the left. 3. shift the demand curve to the right. 4. shift the supply curve to the right. Score 1 / 1 -------------------------------------------------------------------------------- Question 7 (1 point) Examine the graph. If the government imposes an excise tax of $2.00 per unit on a supplier, 100.0% 1. the buyer's price increases to $4.00, the seller's price falls to $2.00, and the quantity traded falls to 100 units. 2. the seller's price increases to $4.00, the buyer's price falls to $2.00, and the quantity traded falls to 100 units. 3. the buyer's price increases to $4.00, the seller's price falls to $2.00, and the quantity traded increases to 200 units. 4. the buyer's and seller's prices remain at $3.00, and the quantity traded falls to 100 units. Score 1 / 1 -------------------------------------------------------------------------------- Question 8 (1 point) Examine the graph. If the government imposes an excise tax of $2.00 per unit, what will be the total tax revenue collected by the government? (The total tax revenue is the number of units sold times the per-unit tax.) 1. $400 100.0% 2. $200 3. $800 4. $600 Score 1 / 1 -------------------------------------------------------------------------------- Question 9 (1 point) To be effective, a price floor such as the minimum wage must be 100.0% 1. above the equilibrium price. 2. at the equilibrium price. 3. below the equilibrium price. 4. anywhere on the graph. Score 1 / 1 -------------------------------------------------------------------------------- Question 10 (1 point) Government intervention in the marketplace 1. always benefits society. 2. always harms society. 100.0% 3. may cause both benefit and harm to society. 4. is rarely influenced by political considerations. Score 1 / 1 -------------------------------------------------------------------------------- Total score 10 / 10 = 100.0% -------------------------------------------------------------------------------- More Practice! User ID: xefri Attempt: 1 / Unlimited Out of: 0 Started: Sep 17, 2003 10:18 Finished: Oct 05, 2003 21:30 Time spent: 443 hrs., 11 min., 37 sec. Return to Scores -------------------------------------------------------------------------------- Question 1 (0 points) Suppose that beer and pretzels are complements and that the price of beer rises sharply. According to the material presented in this unit, what should happen to the equilibrium price and quantity of pretzels? 1. equilibrium price increase, equilibrium quantity increase 100.0% 2. equilibrium price decrease, equilibrium quantity decrease Correct. The increase in the price of beer will cause the demand for pretzels to shift left. This will cause both P and Q for pretzels to fall. 3. equilibrium price increase, equilibrium quantity decrease 4. equilibrium price decrease, equilibrium quantity increase Score 100% -------------------------------------------------------------------------------- Question 2 (0 points) The law of demand states that 1. price and demand are inversely related, ceteris paribus. 100.0% 2. Price and quantity demanded are inversely related, ceteris paribus. Correct. 3. Price and quantity demanded are directly related, ceteris paribus Score 100% -------------------------------------------------------------------------------- Question 3 (0 points) A change in the supply of wheat (shifting the supply curve) will take place 1. when the price of wheat changes. 100.0% 2. when there is a technological improvement in wheat production. Correct. This is one of the other factors that will shift supply. It lowers costs of production, causing supply to shift to the right. 3. when the demand for wheat changes. 4. when any of the above change. Score 100% -------------------------------------------------------------------------------- Question 4 (0 points) A serious frost that damaged the coffee crop in Brazil would probably 1. shift the demand for coffee to the left. 2. shift the supply of coffee to the right. 100.0% 3. cause the equilibrium price of coffee to increase and the equilibrium quantity to decrease. Correct. The frost would shift the coffee supply curve to the left. Draw the initial supply and demand curves and show the equilibrium. Then shift the supply to the left. You should see the equilibrium price go up and quantity go down. 4. cause the both the equilibrium price and quantity of coffee to increase. Score 100% -------------------------------------------------------------------------------- Question 5 (0 points) Several new firms have begun producing personal computers in the last ten years. Based on this information, which of the following statements is true? 1. The market supply of personal computers has decreased. 100.0% 2. The equilibrium price should decrease while the quantity increases. Correct. Increasing the number of sellers shifts market supply to the right. This will cause P to fall and Q to increase. 3. Both the equilibrium price and quantity should increase. Score 100% -------------------------------------------------------------------------------- Question 6 (0 points) If at a given price a market exhibits a shortage, as that market moves toward equilibrium it is expected that 100.0% 1. price will rise and quantity supplied will rise. Correct. 2. price will rise and quantity demanded will rise. 3. supply will increase until equilibrium is reached. 4. demand will decrease until the equilibrium price is reached. Score 100% -------------------------------------------------------------------------------- Question 7 (0 points) Assuming a market is in equilibrium, an increase in the demand (shifting the demand to the right) for the good usually will cause 1. an increase in quantity demanded. 2. an increase in quantity supplied. 3. an increase in supply. 0.0% 4. a higher quantity and a lower price. Incorrect. When demand shifts to the right, both the equilibrium price and quantity will increase. General feedback The best way to answer this question is to draw the graph. Label the axes P and Q, draw the initial supply and demand curves, and indicate the initial equilibrium. Then shift demand to the right, and indicate the new equilibrium. Notice that both P and Q increase, and there was a movement along the supply curve to the right. Score 0% -------------------------------------------------------------------------------- Question 8 (0 points) Given that a market is currently in equilibrium, an increase in supply will cause 1. an increase in demand. 100.0% 2. an increase in quantity demanded. Correct. As the supply shifts right, there will be a movement along the same demand curve. Most of the time we'll just say the equilibrium price and quantity increase, but it can also be called an increase in the quantity demanded since we moved along the same demand curve. 3. an increase in quantity supplied. 4. a higher equilibrium price and a lower equilibrium quantity. General feedback The best way to answer this is to draw the graph. Start with the initial supply and demand curves with the initial equilibrium indicated. Then shift supply to the right. You'll see the equilibrium price decrease and the equilibrium quantity increase. This can also be called an increase in quantity demanded because we moved along the same demand curve as supply shifted. Confusing, huh. Score 100% -------------------------------------------------------------------------------- Question 9 (0 points) Which of the following would decrease the demand for root beer? 0.0% 1. an increase in the price of root beer Incorrect. Increasing price will decrease QUANTITY demanded, but not shift demand. 2. a sale on Pepsi (a substitute for root beer) 3. a decrease in the supply of root beer 4. All of the above. Score 0% -------------------------------------------------------------------------------- Question 10 (0 points) A decrease in the demand for beef could be caused by 0.0% 1. an increase in the price of beef. Incorrect. Increasing the price of beef will decrease the QUANTITY demanded, but not shift the demand. 2. an increase in the price of chicken, a beef substitute. 3. an increase in the price of cattle feed, an input. 4. an increase in the supply of beef. 5. none of the above. General feedback This question is just asking what factors will cause the demand for beef to shift to the right. There is no need to draw a graph. Score 0% -------------------------------------------------------------------------------- Question 11 (0 points) Suppose a surplus (excess supply) exists in the market for paintings of Elvis on black velvet. This situation could be expected to lead to 1. an increase in the price of the paintings. 2. an increase in the demand for the paintings. 100.0% 3. an increase in the quantity demanded of the paintings. Correct. Natural market forces will push the price down, which will lead to an increase in quantity demanded, which is a movement along the same demand curve. (Note - the quantity supplied would decrease as price fell.) 4. a decrease in the supply of the paintings. 5. increased sightings of Elvis at the local Burger King. Score 100% -------------------------------------------------------------------------------- Question 12 (0 points) Assume that generic toilet paper is an inferior good. If income decreases, which of the following is likely to occur in the market for generic toilet paper? 1. The demand will probably decrease. 100.0% 2. The equilibrium price and quantity will increase. Correct. As demand shifts right, both price and quantity will increase. 3. Teh equilibrium price and quantity will decrease. 4. The equilibrium price will increase, but equilibrium quantity will fall. 5. The equilibrium price will decrease, but equilibrium quantity will increase. General feedback Since this question is about equilibrium, start by drawing the initial supply and demand curves and indicating the equilibrium. The "other factor" here is a decrease in income, which will cause the demand for an inferior good to shift right. Draw the shift and show the new equilibrium. Score 100% -------------------------------------------------------------------------------- Question 13 (0 points) Suppose a shortage exists (excess demand) in the market for grapefruit. This situation could be expected to lead to 1. a decrease in the price of grapefruit. 2. a decrease in the demand for grapefruit. 100.0% 3. an increase in the quantity supplied of grapefruit. Correct. A shortage is corrected by raising the price. As price increases, quantity supplied will increase. (At the same time, quantity demanded will fall.) 4. an increase in the supply of grapefruit. Score 100% -------------------------------------------------------------------------------- Question 14 (0 points) Assume that a serious frost in Brazil badly damages the coffee crop. This will cause an increase in the equilibrium price of coffee. Which of the following is also likely to occur? 1. The price of tea, a coffee substitute, will increase. 0.0% 2. The price of coffee filters, a complement to coffee, to increase. Incorrect. As the price of coffee rises, people will buy less coffee, so they will need fewer coffee filters (assuming they're complements). This will shift the demand for coffee filters to the left, causing both P and Q to fall. 3. Even if the price of coffee rises, the quantity demanded probably won't fall. Score 0% -------------------------------------------------------------------------------- Question 15 (0 points) The number of personal computers sold annually in the United States has increased at a rapid rate. At the same time, the price of personal computers has fallen. The rise in sales due to the lower price is called 1. an increase in quantity demanded. 2. an increase in demand. 3. an increase in quantity supplied. 0.0% 4. an increase in supply. In all likelihood, supply probably increased because of the new technologies, but this isn't part of this particular question. (This is a tough one!) This question only talks about the price falling, and a price decrease won't cause the supply curve to shift. Remember that the phrase "an increase in supply" means shifting the whole supply curve to the right. Score 0% -------------------------------------------------------------------------------- Total score 0 / 0 -------------------------------------------------------------------------------- View Results TEST 2 User ID: skim7 Attempt: 1 / 1 Out of: 100 Started: November 11, 2004 2:17pm Finished: November 11, 2004 4:05pm Time spent: 1 hr, 48 min., 14 sec. Student finished 2 hr, 11 min., 46 sec. ahead of the 240 min. time limit. Question 1 (2 points) The slope of a demand curve is almost always Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. positive, because when people buy more of a good, the cost of producing it will rise. 0.0% b. positive, because the more money a person has, the more of a particular good will be bought. 0.0% c. negative, because when people buy more of a good, the cost of producing it will fall. 100.0% d. negative, because with everything else equal, people will buy more of a good when its price is lower. Score: 2 / 2 Question 2 (2 points) A demand curve for a normal good Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. slopes upward and to the right. 0.0% b. is constructed based on the assumption that income is rising. 0.0% c. is constructed based on the assumption that an inverse relationship exists between price and income. 100.0% d. shows the inverse relationship between price and quantity demanded. Score: 2 / 2 Question 3 (2 points) All of the following will affect the position of the demand curve EXCEPT Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. prices of the resources used to produce the product. 0.0% b. income. 0.0% c. consumer tastes and preferences. 0.0% d. buyers' expectations about future prices. Score: 2 / 2 Question 4 (2 points) If more buyers came into the market for a good, we would expect to see the market demand curve Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. shift inward. 0.0% b. remain unchanged since none of the determinants of individual demand changed. 100.0% c. shift outward. 0.0% d. reflect a positive relationship between price and quantity demanded. Score: 2 / 2 Question 5 (2 points) A demand curve can shift due to anything that affects consumers' willingness and ability to purchase the good EXCEPT changing price. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 6 (2 points) A demand schedule relates prices of a particular good to quantities demanded. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 7 (2 points) An increase in demand is shown graphically by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a shift of the demand curve to the left. 0.0% b. a movement to the right along the existing demand curve. 100.0% c. a shift of the whole demand curve to the right. 0.0% d. a movement up and to the left along the existing demand curve. Score: 2 / 2 Question 8 (2 points) An increase in the price of a good Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. will cause an increase in demand, because the good is now more valuable. 0.0% b. will cause a decrease in demand. 0.0% c. will cause an increase in the quantity demanded, because the good is now more valuable. 100.0% d. will cause a decrease in the quantity demanded. Score: 0 / 2 Question 9 (2 points) If incomes rise, most consumers will increase the quantity demanded of an inferior good. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 10 (2 points) Assume that orange juice and grapefruit juice are substitute goods. If orange juice prices double in 1997, there will be a Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. rightward shift in the demand for grapefruit juice. 0.0% b. rightward shift in the supply of grapefruit juice. 0.0% c. leftward shift in the supply of grapefruit juice. 0.0% d. leftward shift in the demand for grapefruit juice. Score: 2 / 2 Question 11 (2 points) After the price of milk increases, David buys more juice and less cereal. For David, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. milk, juice, and cereal are all substitutes. 0.0% b. milk and juice are complements, and milk and cereal are substitutes. 0.0% c. milk, juice, and cereal are all complements. 100.0% d. milk and juice are substitutes, and milk and cereal are complements. Score: 2 / 2 Question 12 (2 points) Assume that the figure below shows demand for cameras. An increase in the price of photographic film (a complement to cameras) changes demand from Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. D1 to D2 100.0% b. D2 to D1 0.0% c. D2 to D3 0.0% d. D1 to D3 Score: 2 / 2 Question 13 (2 points) An increase in the price of gasoline shifts the demand for tires to the Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. left, because gasoline and tires are substitutes. 100.0% b. left, because gasoline and tires are normally used together. 0.0% c. right, because gasoline and tires are substitutes. 0.0% d. right, because gasoline and tires are normally used together. Score: 2 / 2 Question 14 (2 points) Assume the demand curve for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen (be careful of terminology!), Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the demand for cookies will fall. 0.0% b. the demand for cookies will rise. 100.0% c. a larger quantity of cookies will be demanded. 0.0% d. a smaller quantity of cookies will be demanded. Score: 2 / 2 Question 15 (2 points) Which of the following would cause a decrease in the demand for Pepsi (i.e., a leftward shift of the Pepsi demand curve)? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. An increase in the price of Coke. 100.0% b. A decrease in the price of Coke. 0.0% c. An increase in the price of Pepsi. 0.0% d. A decrease in the price of Pepsi. Score: 2 / 2 Question 16 (2 points) To derive a market demand curve, add the quantity demanded by each individual in the market at each price and construct a new demand schedule. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 17 (2 points) A change in the price of a particular good will cause all of the following EXCEPT Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a movement along the same demand curve. 0.0% b. a change in the quantity demanded. 100.0% c. a shift in the demand curve. Score: 2 / 2 Question 18 (2 points) The quantity supplied of a particular good is the amount of the good that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. households are willing to consume at each particular price. 0.0% b. firms will actually end up buying at a particular price during a given time period. 100.0% c. firms are willing to sell at each price during a particular time period. 0.0% d. households want firms to sell at each price during a particular time period. Score: 2 / 2 Question 19 (2 points) An increase in the price of coffee will Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. decrease the demand for coffee. 0.0% b. increase the demand for coffee. 100.0% c. increase the quantity supplied of coffee. 0.0% d. increase the supply of coffee. Score: 2 / 2 Question 20 (2 points) All of the following will cause the supply curve of good A to shift rightward EXCEPT Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a reduction in the prices of inputs used to produce good A. 0.0% b. an increase in the number of firms in the industry producing good A. 0.0% c. an improvement in the technology used to produce good A. 100.0% d. an increase in the market price of good A. Score: 2 / 2 Question 21 (2 points) Which of the following will NOT affect the market supply curve for a good? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. There is a new technology in producing the good. 100.0% b. The price of the good increases. 0.0% c. The number of sellers in the market increases. 0.0% d. There is an increase in the prices of the inputs used in production. Score: 2 / 2 Question 22 (2 points) Which of the following will shift the supply curve to the right? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. input prices rise 0.0% b. a new excise tax 100.0% c. prices are expected to be higher in the future 100.0% d. prices are expected to be lower in the future Score: 2 / 2 Question 23 (2 points) The supply of a good can be changed by: Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Costs of inputs. 0.0% b. Number of firms in the industry. 0.0% c. Technology. 100.0% d. All of the above. Score: 2 / 2 Question 24 (2 points) All of the following will decrease the supply of airline flights EXCEPT Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. A rise in the price of jet fuel (an input). 0.0% b. A reduction in the number of airline companies offering service. 100.0% c. A technological change that makes airplanes safer and more fuel-efficient. 0.0% d. An increase in the salaries of pilots (an input). Score: 2 / 2 Question 25 (2 points) A decrease in the market price of a product, ceteris paribus, results in Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. a movement down (to the left) along a given supply curve, decreasing quantity supplied. 0.0% b. a movement up (to the right) along a given supply curve, increasing quantity supplied. 0.0% c. an inward shift of the supply curve. 0.0% d. an outward shift of the supply curve. Score: 2 / 2 Question 26 (2 points) Assume that the figure below shows the supply of soda. An increase in the price of syrup used in the production of soda will shift supply from Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. S1 to S2 100.0% b. S2 to S1 0.0% c. S2 to S3 0.0% d. S1 to S3 Score: 2 / 2 Question 27 (2 points) If a pretzel firm expects the price of pretzels to rise next week, it will Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. sell fewer pretzels this week and save the supply for when the price increases. 0.0% b. sell more pretzels this week. 0.0% c. sell no pretzels next week. 0.0% d. do nothing. Score: 2 / 2 Question 28 (2 points) A supply curve is a collection of points on a graph illustrating th erelationshipo between the quantity supplied for a particular product and Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the quantity demanded. 100.0% b. the product's price. 0.0% c. the price of the product's inputs. 0.0% d. the firm's expectations about future prices. Score: 2 / 2 Question 29 (2 points) Equilibrium in a market occurs when Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the market price leads to a decrease in quantity demanded. 100.0% b. quantity supplied and quantity demanded are equal at the market price. 0.0% c. demand and supply indicate a small surplus of a good. 0.0% d. price is at its minimum. Score: 2 / 2 Question 30 (2 points) An increase in demand will have what effect on equilibrium price and quantity? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Price will increase, quantity will decrease. 0.0% b. Price will decrease, quantity will increase. 100.0% c. Both price and quantity will increase. 0.0% d. Both price and quantity will decrease. Score: 2 / 2 Question 31 (2 points) Other things remaining equal, if the demand for beef increases, Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. The equilibrium price and quantity of beef will rise. 0.0% b. The equilibrium price and quantity of beef will fall. 0.0% c. The equilibrium price of beef will fall and the equilibrium quantity will rise. 0.0% d. The equilibrium price of beef will rise and the equilibrium quantity will fall. Score: 2 / 2 Question 32 (2 points) If the price of a good decreases, which of the following will occur? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. The demand will increase. 100.0% b. The quantity demanded will increase. 0.0% c. The supply will decrease. 0.0% d. The quantity supplied will increase. Score: 2 / 2 Question 33 (2 points) Which of the following will shift the demand curve for milk to the right? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. A decrease in the price of Nestle's Quick chocolate mix (a complement. 0.0% b. A decrease in the price of orange juice (a substitute). 0.0% c. A decrease in the price of milk. 0.0% d. A decrease in the price of cattle feed (an input). Score: 2 / 2 Question 34 (2 points) The Red Jacket Mountain View Inn in New Hampshire charges $99 per room in the winter ski season and $94 during the summer months. The number of rooms and operating costs are constant year 'round. These prices indicate Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a rightward shift in the demand curve in the summer. 100.0% b. a rightward shift in the demand curve in the winter. 0.0% c. a leftward shift in the supply curve in the summer. 0.0% d. a leftward shift in the demand curve in the winter. Score: 0 / 2 Question 35 (2 points) This is a hard test, huh. (I think supply and demand, particularly the specific terminology, is the toughest thing we do all semester.) Therefore, just pick the answer below that you think I'm looking for! (Hint: Put option 1. And if you miss it, I'll never let you forget it!) Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Economics is a wonderful subject that everyone finds interesting. 0.0% b. Illinois highways are always well maintained. In fact, they're among the best in the country! 0.0% c. Spring break should be cancelled because students miss being in the classroom. Score: 2 / 2 Question 36 (2 points) Price per Quantity Demanded Quantity Supplied Constant- of Constant-Quality of Constant-Quality Quality Unit Units per Year Units per Year ----------------------------------------------------- $1.00 1,000 200 2.00 800 400 3.00 600 600 4.00 400 800 5.00 200 1,000 According the table, at a price of $2 per unit, which of the following would exist? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a shortage (excess demand) of 800 units 0.0% b. a surplus (excess supply) of 800 units 0.0% c. a shortage (excess demand) of 200 units 100.0% d. a shortage (excess demand) of 400 units Score: 2 / 2 Question 37 (2 points) A surplus will tend to occur at which price in the following figure? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. P1 0.0% b. P2 0.0% c. P3 0.0% d. None of the above. Score: 2 / 2 Question 38 (2 points) If there are empty seats at the university basketball game when the price per ticket is P*, then this situation can best be represented by which graph below? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 100.0% b. 0.0% c. 0.0% d. Score: 2 / 2 Question 39 (2 points) The demand and supply curves for video rentals are given below. All of the following are true EXCEPT: Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. At P = $5, quantity supplied exceeds quantity demanded. 0.0% b. At P = $4, there is no excess supply nor excess demand. 0.0% c. The equilibrium price is $4 and the equilibrium quantity is 8. 100.0% d. At P = $5, quantity demanded exceeds quantity supplied. Score: 2 / 2 Question 40 (2 points) In free markets, the result of a shortage is to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. reduce demand for the good. 0.0% b. increase demand for the good. 100.0% c. increase the price. 0.0% d. decrease the price. Score: 2 / 2 Question 41 (2 points) In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart. In February, 3,000 quarts are sold at $2.50 a quart. This change in quantity sold and price may have been caused by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a reduction in wages in the Boston area. 0.0% b. the introduction of labor-saving automated ice cream-packing machinery. 100.0% c. the release of a medical study showing that ice cream consumption improves mental health. 0.0% d. the decision by Boston ice cream sellers to eliminate discount coupons. Score: 2 / 2 Question 42 (2 points) When there is excess demand for sugar in the market, the bidding mechanism will Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. push down the price of sugar. 0.0% b. result in no change in the reservation prices of consumers. 0.0% c. have no effect on the price of sugar. 100.0% d. push up the price of sugar. Score: 2 / 2 Question 43 (2 points) An increase in the demand for chocolate bars results in Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. a price increase and a quantity increase. 0.0% b. a price decrease and a quantity decrease. 0.0% c. a price increase and a quantity decrease. 0.0% d. a price decrease and a quantity increase. Score: 2 / 2 Question 44 (2 points) Examine the graph. If the government imposes a rent control on this market and sets the maximum apartment rental at $1000 per month, the market will Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. have a shortage of 400 apartments. 0.0% b. have a surplus of 400 apartments. 0.0% c. a shortage of 200 apartments. 100.0% d. be in equilibrium. Score: 2 / 2 Question 45 (2 points) An effective, well-intentioned minimum wage law can be expected to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. clear the market for unskilled workers. 0.0% b. increase employment for those covered under the law. 0.0% c. lower costs of production for firms who pay workers the minimum wage. 100.0% d. reduce the hours worked for some unskilled workers. Score: 0 / 2 Question 46 (2 points) If rent controls for apartments were established below the market rental rates, we would expect Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. a shortage of apartments to develop. 0.0% b. a surplus of apartments to develop. 0.0% c. equilibrium rents to fall below the rates set by rent control. 0.0% d. a building boom in apartments. Score: 2 / 2 Question 47 (2 points) If some transactions are blocked in a rent-controlled apartment market, potential buyers may try to rent the scarce apartments Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. by attempting to get more suppliers into the market. 100.0% b. by bribing landlords. 0.0% c. by building their own apartments. 0.0% d. by getting the landlords to raise the rents. Score: 2 / 2 Question 48 (2 points) If the government decides to increase the minimum wage rate paid to unskilled workers, which of the following would most likely occur? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Unemployment among unskilled workers would decrease. 100.0% b. Unemployment among unskilled workers would increase. 0.0% c. There would be a shortage of unskilled labor. 0.0% d. Workers and their employers would ignore the minimum wage. Score: 2 / 2 Question 49 (2 points) The tax wedge can be identified as Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the consumer's demand price and the seller's price. 0.0% b. the difference between the equilibrium price and the costs of producer inputs. 0.0% c. the difference between total surplus and consumer surplus. 0.0% d. graphically the area beneath the demand curve and above the equilibrium price. Score: 0 / 2 Question 50 (2 points) If an excise tax is imposed on buyers, the market demand curve will shift inward. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Total score: 92 / 100 = 92.0% View Results TEST 3 User ID: skim7 Attempt: 1 / 1 Out of: 120 Started: December 8, 2004 4:50pm Finished: December 8, 2004 9:18pm Time spent: 4 hr, 28 min., 46 sec. Student exceeded allotted time of 240 min. by 28 min. 46 sec.. Question 1 (2 points) Which of the following would NOT allow society to move to point h in the figure? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. an improvement in technology 100.0% b. more efficient use of current resources 0.0% c. an increase in quantity of labor 0.0% d. an increase in quantity of capital Score: 2 / 2 Question 2 (2 points) Scarcity is illustrated graphically by a production possibilities frontier. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 3 (2 points) The production possibilities frontier illustrates Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the fundamental concept of scarcity. 0.0% b. the opportunity cost of acquiring more of one good. 0.0% c. an economy's maximum output utilizing all resources efficiently. 100.0% d. All of the above are correct. Score: 2 / 2 Question 4 (2 points) The circular flow of income involves the principle that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. in every economic exchange one party takes advantage of the other party. 0.0% b. the seller of a good receives more than the buyer spends. 100.0% c. the seller of a good receives exactly the same amount as the buyer spends. 0.0% d. the seller of a good receives less than the buyer spends. Score: 2 / 2 Question 5 (2 points) In the simple circular flow model the money received by a car maker when it sells a car goes to Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the owners of all of the resources used to make the car. 0.0% b. only the owners of the car maker. 0.0% c. the workers who helped build the car. 0.0% d. the owners of firms who sold materials to the car maker, and the rest stays with the firm. Score: 0 / 2 Question 6 (2 points) Gross domestic product can be loosely defined as Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the value of output produced by the economy in a given period (usually a year). 0.0% b. the income in the hands of individuals after deducting income taxes. 0.0% c. the value of goods and services purchased by all levels of government - federal, state, and local - in a given period. 0.0% d. the value of manufacturing output in a given period, but does not include the value of services. Score: 2 / 2 Question 7 (2 points) Real GDP is the value of final goods and services produced in an economy, in constant dollars (or adjusted for inflation). Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 8 (2 points) To determine how well an economy is doing, it is better to use Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. nominal GDP figures. 100.0% b. real GDP figures. 0.0% c. GDP figures measured by the expenditure approach. 0.0% d. GDP figures measured by the income approach. Score: 2 / 2 Question 9 (2 points) Nominal GDP measures output in terms of current prices. Therefore, part of an increase in nominal GDP can be attributed to inflation. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True. 0.0% b. False. Score: 2 / 2 Question 10 (2 points) The gross domestic product is a good indication of the standard of living in a country. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 0 / 2 Question 11 (2 points) There are many difficulties with using GDP as an indicator of social well-being. Which of the following is NOT one of the difficulties? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Household labor is not included in GDP 0.0% b. GDP cannot take account of changes in leisure time 0.0% c. GDP fails to account for changes in air pollution or crime 100.0% d. Intermediate products are not included in GDP Score: 2 / 2 Question 12 (2 points) Per capita real GDP equals Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. real GDP/investment capital. 0.0% b. real GDP/human capital. 0.0% c. real GDP in the nation's capital, Washington D.C. 100.0% d. real GDP/population. Score: 2 / 2 Question 13 (2 points) If nominal GDP is $7 million and the GDP deflator is 140, real GDP equals _________. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. $20,000 0.0% b. $50,000 0.0% c. $2,000,000 100.0% d. $5,000,000 Score: 2 / 2 Question 14 (2 points) Investment includes all of the following except Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. stocks 0.0% b. new machinery 0.0% c. new factories 0.0% d. changes in inventory levels Score: 2 / 2 Question 15 (2 points) Which of the following should be included in GDP? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. You spend $5 on lunch at Arby's. 0.0% b. You borrow $20,000 from the bank. 0.0% c. Your Aunt Lucy receives an unemployment compensation check. 0.0% d. You buy a used computer from your friend. Score: 2 / 2 Question 16 (2 points) Which of the following spending components comprises the largest share of aggregate expenditures? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Consumer spending 0.0% b. Investment spending 0.0% c. Government spending 0.0% d. Foreign spending Score: 2 / 2 Question 17 (2 points) Disposable income equals Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. personal income plus transfer payments. 100.0% b. personal income minus personal income taxes. 0.0% c. Social Security contributions minus personal income taxes. 0.0% d. Social Security contributions plus transfer payments minus personal income taxes. Score: 2 / 2 Question 18 (2 points) Which of the following is NOT considered a component of government spending in calculating GDP? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the cost of the federal prison system 0.0% b. the cost of building a new road 0.0% c. payments to plow public roads after a snowstorm 100.0% d. unemployment compensation payments Score: 2 / 2 Question 19 (2 points) If IBM finds that it has produced 100,000 more computers in a year than it sells in that year, the value of those computers Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. will be accounted for as a loss because they cannot be counted as part of GDP. 0.0% b. will be included in GDP in the year in which they are sold. 0.0% c. will be counted in the current year's GDP as consumption. 100.0% d. will be counted in current GDP as inventory investment. Score: 2 / 2 Question 20 (2 points) Suppose in 1987 the CPI = 100.00, in 1988 the CPI = 110.00, and in 1989 the CPI = 120.78. Then the inflation rate Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. was the same in 1989 as it was in 1988. 100.0% b. was lower in 1989 than it was in 1988. 0.0% c. was greater in 1989 than it was in 1988. 0.0% d. is impossible to determine from the CPI. Score: 2 / 2 Question 21 (2 points) Suppose the nominal interest rate on some asset is 5% and the inflation rate is 5%. Which of the following statements is true? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. The real interest rate is 5%. 0.0% b. The owner of this asset will gain purchasing power. 0.0% c. The real interest rate is 10%. 100.0% d. The real interest rate is 0%. Score: 2 / 2 Question 22 (2 points) Given the following information, calculate the CPI for year 1. Base year CPI = 100 Total cost of goods in base year = $625, Total cost of goods in year 1 = $750 Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 112.5 100.0% b. 120 0.0% c. 125 0.0% d. 83 Score: 2 / 2 Question 23 (2 points) Suppose a typical consumer buys 20 units of food and 10 units of clothes in the year 2307, when the price per unit of food is 100 and the price per unit of clothes is 200. In 2308, when the typical consumer buys 20 units of food and 20 units of clothes, the price of food is 110, while the price per unit of clothes remains at 200. If the base year is 2307, the inflation rate for 2308 would be Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 55 percent. 0.0% b. 24 percent. 100.0% c. 5 percent. 0.0% d. 4 percent. Score: 2 / 2 Question 24 (2 points) Inflation refers to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the cost of buying all goods in the economy. 0.0% b. the cost of buying consumer goods in the economy. 0.0% c. the cost of replacing depreciated assets. 100.0% d. the rate at which the average price level in the economy is rising. Score: 2 / 2 Question 25 (2 points) What is the index of leading indicators? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. A composite index based on the CPI, the producer price index, and the GDP deflator. 100.0% b. A composite index based on 10 components, including the average number of hours worked and new orders by manufacturers. 0.0% c. A composite index based on the rate of inflation and the rate of unemployment. 0.0% d. An index based primarily on consumer confidence in the economy. Score: 2 / 2 Question 26 (2 points) Which indexes can be used to measure inflation? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. The CPI, the GDP deflator, and the index of leading indicators 100.0% b. The CPI and the GDP deflator 0.0% c. Only the CPI 0.0% d. Only the GDP deflator Score: 2 / 2 Question 27 (2 points) The producer price index is considered a leading indicator of inflation because Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. it is produced monthly. 0.0% b. it is measured in three categories: finished goods, intermediate goods, and raw materials. 100.0% c. it measures prices at the early stages of production. 0.0% d. all of the above. Score: 0 / 2 Question 28 (2 points) If the CPI increases from 150 to 165, what is the rate of inflation? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 6% 0.0% b. 5.5% 100.0% c. 10% 0.0% d. 15% Score: 2 / 2 Question 29 (2 points) The market baset of goods from which the CPI is derived is composed of Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. natural resources that firms use to produce final goods. 0.0% b. total production in a year. 100.0% c. products that a typical consumer would buy. 0.0% d. household production such as child care and housework. Score: 0 / 2 Question 30 (2 points) A period of time in which real GDP is rising at a rapid rate is known as Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. inflation. 0.0% b. hyperinflation. 100.0% c. an expansion. 0.0% d. a downturn. Score: 2 / 2 Question 31 (2 points) The four phases of business fluctuations are (in order) Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Expansion, peak, recession, trough 0.0% b. Expansion, plateau, recession, plateau 0.0% c. Expansion, trough, recession, peak 0.0% d. Plateau, expansion, plateau, recession Score: 2 / 2 Question 32 (2 points) If hovercrafts replaced automobiles as a form of individual transportation, and this transition caused significant fluctuations in the economy, this would be evidence for which economist's theory of the business cycle? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. John Maynard Keynes 0.0% b. Karl Marx 100.0% c. Joseph Schumpeter 0.0% d. Adam Smith Score: 2 / 2 Question 33 (2 points) The term "business cycles" refers to Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. changes in overall business activity, as evidenced by changes in real GDP, employment, and the price level. 0.0% b. changes in the general price level from inflation to deflation, or vice versa. 0.0% c. changes in the full employment level. 0.0% d. changes in the value of the dollar. Score: 2 / 2 Question 34 (2 points) A recession may be defined as Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. a period during which the rate of growth of real GDP is very low or is negative. 0.0% b. an increase in real GDP from one period to the next. 0.0% c. no change in real GDP over a period of time. 0.0% d. no change in nominal GDP over a period of time. Score: 2 / 2 Question 35 (2 points) Who believed that fluctuations in the business cycle were the result of class conflicts between labor and capital? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Schumpeter 100.0% b. Marx 0.0% c. Rousseau 0.0% d. Keynes Score: 2 / 2 Question 36 (2 points) New classical economists believe that the economy cannot correct itself when it is in a recession and must be corrected with monetary or fiscal posicy or some combination of both. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 37 (2 points) If an auto worker gets laid off because a recession causes the demand for autos to decrease, what type of unemployment is it? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. frictional 0.0% b. structural 100.0% c. cyclical Score: 2 / 2 Question 38 (2 points) The unemployment rate is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the percentage of people in the labor force with jobs. 100.0% b. the percentage of people in the labor force who want to work but who do not have jobs. 0.0% c. the percentage of people in the population who are retired. 0.0% d. the percentage of people in the labor force who are working but actively seeking new jobs. Score: 2 / 2 Question 39 (2 points) During 1990-1991 real GDP fell. The increase in unemployment during that period is best attributed to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. frictional unemployment. 0.0% b. structural unemployment. 100.0% c. cyclical unemployment. 0.0% d. recessionary unemployment. Score: 2 / 2 Question 40 (2 points) The ________ rate of unemployment shifts around the natural rate of unemployment. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. frictional 0.0% b. structural 0.0% c. seasonal 100.0% d. cyclical Score: 0 / 2 Question 41 (2 points) During a recession, the unemployment rate increases because Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. there are more discouraged workers. 0.0% b. the labor force grows. 100.0% c. firms hire fewer workers. 0.0% d. all of the above. Score: 2 / 2 Question 42 (2 points) In 1998, __________________ were over eight times more likely to be unemployed as white adult males. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. black females 100.0% b. black teenagers 0.0% c. white teenagers 0.0% d. female hispanics Score: 2 / 2 Question 43 (2 points) If a worker becomes unemployed because new technology eliminates the need for his or her skills, which type of unemployment would it be called? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. frictional 100.0% b. structural 0.0% c. cyclical Score: 2 / 2 Question 44 (2 points) When output _________, unemployment is expected to ________. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. rises; rise. 100.0% b. rises; fall. 0.0% c. falls; remain constant. 0.0% d. remains constant; fall. Score: 2 / 2 Question 45 (2 points) The Bureau of Economic Analysis (BEA) measures the unemployment rate. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 46 (2 points) Opponents of minimum wage legislation argue that higher minimum wages serve to Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. increase unemployment, particularly among unskilled workers. 0.0% b. increase unemployment, particularly among high-income executives. 0.0% c. increase the quantity of labor demanded. 0.0% d. decrease the quantity of labor supplied. Score: 2 / 2 Question 47 (2 points) In the United States, the wage floor legislated by government below which it is generally illegal to pay workers is known as Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the minimum wage. 0.0% b. the wage ceiling. 0.0% c. the employment gap. 0.0% d. the going wage. Score: 2 / 2 Question 48 (2 points) When minimum wage laws are passed, employers tend to hire more workers. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 49 (2 points) Which of the following proposals, if feasible, would provide unemployment insurance with the least risk of moral hazard? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. providing unemployment insurance only to workers actively looking for jobs 0.0% b. providing unemployment insurance for only a restricted period of time, such a 3 months 0.0% c. having unemployment benefits decrease steadily over time until they reach zero 0.0% d. adding free job training to the standard unemployment insurance benefits Score: 2 / 2 Question 50 (2 points) In figure A, which line in the graph represents a minimum wage above the market wage rate? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. line 1 0.0% b. line 2 0.0% c. line 3 0.0% d. line 4 Score: 0 / 2 Question 51 (2 points) According to the figure, the market clearing wage rate is Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. We. 0.0% b. Wm. 0.0% c. We - Wm. 0.0% d. Wm + We. Score: 2 / 2 Question 52 (2 points) The efficiency wage influences the quality of labor by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. motivating workers. 0.0% b. increasing worker morale and productivity. 0.0% c. attracting skilled workers. 100.0% d. all of the above. Score: 2 / 2 Question 53 (2 points) Which of the following is an accurate explanation of the wage-price spiral? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. When labor costs rise, it causes a self-perpetuating form of cost-push inflation. 100.0% b. Higher prices cause workers to demand higher wages. The higher wages raise production costs, which must be passed along to the consumer in the form of further price increases. 0.0% c. When one firm pays the efficiency wage, it raises the opportunity cost for all other workers in the industry, necessitating raises. 0.0% d. Workers in periods of hyperinflation demand to be paid in the form of goods, rather than cash, which further devalues the currency. Score: 2 / 2 Question 54 (2 points) Which of the following forms of payment would be included in the calculation of the money supply? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. credit cards 100.0% b. checks 0.0% c. durable goods 0.0% d. stocks and bonds Score: 2 / 2 Question 55 (2 points) Increased production costs are associated with Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. demand-pull inflation only. 0.0% b. cost-push inflation only. 0.0% c. neither demand-pull inflation nor cost-push inflation. 100.0% d. both demand-pull inflation and cost-push inflation. Score: 2 / 2 Question 56 (2 points) The United States experienced a period of stagflation during the 1970s that was attributable to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. post-Watergate malaise. 0.0% b. rising deficits due to the Vietnam War. 100.0% c. sharp increases in oil prices. 0.0% d. the 1973 Treasury Department decision to print a substantial amount of additional money. Score: 2 / 2 Question 57 (2 points) Imagine that the money supply doubles in an economy that produces only vacuum cleaners, and assume that the velocity of the money supply is fixed. Before the money supply was expanded, the level of output was 20 vacuum cleaners and the price was $100 per vacuum. According to the classical view of money, what will be the level of output and price after the money supply doubles? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 40 vacuum cleaners; $100 0.0% b. 40 vacuum cleaners; $200 100.0% c. 20 vacuum cleaners; $200 0.0% d. 20 vacuum cleaners; $50 Score: 2 / 2 Question 58 (2 points) Suppose Val could earn 5.25% interest on her savings account, while inflation grew steadily at 3%. She is most likely to Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. put her money in the bank. 0.0% b. spend her money quickly. 0.0% c. withdraw her money from the bank. Score: 2 / 2 Question 59 (2 points) During the Great Depression, prices Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. dropped 32%. 0.0% b. dropped 53%. 0.0% c. rose 21%. 0.0% d. rose 47%. Score: 2 / 2 Question 60 (2 points) When the government raises revenue by printing money, it is said to have imposed an inflation tax. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Total score: 108 / 120 = 90.0% View Results TEST 5 User ID: skim7 Attempt: 1 / 1 Out of: 100 Started: December 10, 2004 3:14pm Finished: December 10, 2004 3:44pm Time spent: 29 min. 36 sec. Student finished 3 hr, 30 min., 24 sec. ahead of the 240 min. time limit. Question 1 (2 points) The aggregate demand curve is a graphical representation of Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. aggregate spending as a function of income. 100.0% b. aggregate spending as a function of the price level. 0.0% c. government spending as a function of total demand. 0.0% d. aggregate income as a function of the price level. Score: 2 / 2 Question 2 (2 points) When the government raises taxes, total output Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. falls, because consumers and businesses reduce their spending. 0.0% b. rises, because consumers and businesses reduce their spending. 0.0% c. rises, because the government is able to reduce its deficit. 0.0% d. rises, because the government has more money to spend. Score: 2 / 2 Question 3 (2 points) If government spending increases, aggregate demand Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. falls. 100.0% b. rises. 0.0% c. remains unchanged. 0.0% d. changes depending on how the money is spent. Score: 2 / 2 Question 4 (2 points) How would an decrease in consumer income affect total output? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Output would fall, because the aggregate demand curve would shift inward. 0.0% b. Output would fall, because the economy would move up and to the left along the same aggregate demand curve. 0.0% c. Output would rise, because the aggregate demand curve would shift outward. 0.0% d. Output would rise, because the economy would move down the aggregate demand curve. Score: 2 / 2 Question 5 (2 points) When domestic prices fall, net exports Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. rise, becaue exporters earn more for the goods they sell. 0.0% b. fall, because exporters earn less for the goods they sell. 100.0% c. rise, because foreign countries purchase more domestic goods. 0.0% d. fall, because foreign countries purchase fewer domestic goods. Score: 0 / 2 Question 6 (2 points) How does an increase in the money supply affect total output? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Output increases, because interest rates fall. 0.0% b. Output increases, because interest rates rise. 0.0% c. Aggregate demand increases, but total output falls. 0.0% d. Aggregate demand falls, but total output rises. Score: 2 / 2 Question 7 (2 points) How would an increase in consumer income affect total output? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Output would fall, because the aggregate demand curve would shift inward. 0.0% b. Output would fall, because the economy would move up the aggregate demand curve. 100.0% c. Output would rise, because the aggregate demand curve would shift outward. 0.0% d. Output would rise, because the economy would move down the aggregate demand curve. Score: 2 / 2 Question 8 (2 points) If the government wants to decrease aggregate demand, it could Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. cut taxes. 100.0% b. cut government spending. 0.0% c. encourage the Fed to increase the money supply. 0.0% d. do any of the above. Score: 2 / 2 Question 9 (2 points) When prices rise, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. real GDP increases. 0.0% b. foreign demand increases. 100.0% c. the demand for money increases. 0.0% d. investment spending increases. Score: 2 / 2 Question 10 (2 points) From the microeconomic perspective, the income effect occurs when Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. tax cuts provide more disposable income. 0.0% b. tax increases provide less disposable income. 100.0% c. rising prices decrease consumer wealth and demand. 0.0% d. increased production leads to an increase in an ecomony's level of income. Score: 2 / 2 Question 11 (2 points) The shape of the long-run aggregate supply curve is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. upward-sloping. 0.0% b. downward-sloping. 100.0% c. vertical. 0.0% d. horizontal. Score: 2 / 2 Question 12 (2 points) An improvement in techonolgy will Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. shift the long-run aggregate supply curve to the left. 100.0% b. shift the long-run aggregate supply curve to the right. 0.0% c. increase the slope of the long-run aggregate curve. 0.0% d. decrease the slope of the long-run aggregate supply curve. Score: 2 / 2 Question 13 (2 points) Real wages decline when Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. workers are paid less than they are worth. 0.0% b. firms cut back on production in response to a decline in aggregate demand. 100.0% c. the price level rises faster than the level of wages. 0.0% d. the level of wages rises faster than the level of prices. Score: 2 / 2 Question 14 (2 points) What is the main reason why wages might be fixed in the short run? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Workers are afraid they may be fired if they ask for raises. 100.0% b. Unions are not constantly renegotiating their wage contracts. 0.0% c. Unions are constantly renegotiating their wage contracts. 0.0% d. Workers fail to recognize that prices have risen. Score: 2 / 2 Question 15 (2 points) The full-employment level of output is the level of output an economy can produce when Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. everyone is employed full time. 0.0% b. all economic activities are included in GDP. 0.0% c. excess capacity is minimized. 100.0% d. all resources are fully and efficiently employed. Score: 2 / 2 Question 16 (2 points) Unemployment __________ when real GDP declines. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. rises 0.0% b. falls 0.0% c. is unaffected 0.0% d. may either rise or fall Score: 2 / 2 Question 17 (2 points) The short run aggregate supply (SRAS) curve slopes upward, because Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. there is an inverse relationship between prices and output. 0.0% b. firms cut back on production in the short run when prices increase. 0.0% c. when prices rise, the quantity demanded decreases. 100.0% d. confusion, sticky wages, and sticky prices provide business with profit opportunities in the short run. Score: 2 / 2 Question 18 (2 points) When people in the economy make decisions about the future based on what has happened in the past, we say they are using Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. rational expectations. 0.0% b. Keynesian analysis. 100.0% c. adaptive expectations. 0.0% d. the best possible method of decision-making. Score: 2 / 2 Question 19 (2 points) A supply shock causes excess demand in the short run. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 20 (2 points) What is the short run effect of a tax increase on the equilibrium level of aggregate output and prices in the economy? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Both the level of output and the price level increase. 100.0% b. Both the level of output and the price level decrease. 0.0% c. The level of output decreases and the price level increases. 0.0% d. The level of output increases and the price level decreases. Score: 2 / 2 Question 21 (2 points) In the graph below, Yf represents the __________, and P1 represents the __________. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. long run equilibrium level of output; short run level of prices 0.0% b. short run equilibrium level of output; long run level of prices 0.0% c. long run equilibrium level of output; long run level of prices 0.0% d. short run equilibrium level of output; long run level of prices Score: 2 / 2 Question 22 (2 points) In the short run, supply shocks cause prices to __________ and the output to __________. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. increase;increase 100.0% b. increase;decrease 0.0% c. decrease;increase 0.0% d. decrease;decrease Score: 2 / 2 Question 23 (2 points) Examine the graph below. Increasing government spending will bring this economy back to full employment. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 24 (2 points) Suppose the macroeconomy is not at a long-run equilibrium position. How long will it take for the economy to adjust back to the full-employment level of output? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Probably just a few weeks. 0.0% b. If people in the economy make decisions based on rational expectations, it may take a very long time. 100.0% c. If people in the economy make decisions based on adaptive expectations, it may take a very long time. 0.0% d. The economy will usually adjust quickly, regardless of the way people in the economy make decisions. Score: 2 / 2 Question 25 (2 points) Which of the following events would shift the short-run aggregate supply curve? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. A change in output 0.0% b. A change in aggregate demand 100.0% c. A change in technology 0.0% d. A change in the price level Score: 2 / 2 Question 26 (2 points) Rising production costs will shift the short-run aggregate supply curve inward. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 27 (2 points) Which of the following events will most likely cause an inward shift of the short-run aggregate supply curve? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Government increases spending. 100.0% b. The economy experiences a supply shock. 0.0% c. The Fed tightens the money supply. 0.0% d. Government increases taxes. Score: 0 / 2 Question 28 (2 points) Imagine that the economy is in a recession. Which one of the following tactics is a way to increase output by shifting aggregate demand outward? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Raising taxes to increase the government surplus 100.0% b. Increasing government spending 0.0% c. Increase the required reserve ratio 0.0% d. Imposing tariffs on foreign goods Score: 2 / 2 Question 29 (2 points) Good deflation is characterized by Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. an increase in supply at every price. 0.0% b. a decrease in supply at every price. 0.0% c. an increase in demand at every price. 0.0% d. a decrease in demand at every price. Score: 2 / 2 Question 30 (2 points) According to classical economists, if the economy is in a recession, what must the government do to increase output to the full-employment level? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Nothing 0.0% b. Reduce interest rates 0.0% c. Increase governmet spending 0.0% d. Provide a credit for household savings Score: 0 / 2 Question 31 (2 points) In the short run, what happens to the level of output and the level of prices as a result of a technological improvement? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Prices fall and output rises. 0.0% b. Prices and output rise. 0.0% c. Prices and output fall. 0.0% d. None of the above. Score: 2 / 2 Question 32 (2 points) An example of fiscal policy is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. buying securities. 100.0% b. raising taxes. 0.0% c. raising the discount rate. 0.0% d. lowering the required reserve ratio. Score: 2 / 2 Question 33 (2 points) "Bad deflation" refers to the process in which Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. prices and output fall. 0.0% b. prices fall and output increases. 0.0% c. prices fall too rapidly. 0.0% d. none of the above. Score: 2 / 2 Question 34 (2 points) What is the goal of automatic stabilizers? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. To reduce the volatility in the currency market 100.0% b. To flatten the peaks and valleys in the business cycle 0.0% c. To enhance the multiplier effect by increasing the effectiveness of fiscal policy 0.0% d. To minimize unemployment Score: 2 / 2 Question 35 (2 points) During the mid 1980s, the budget deficit __________ and the interest rate __________. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. increased;increased 0.0% b. increased;decreased 0.0% c. decreased;increased 0.0% d. decreased;decreased Score: 2 / 2 Question 36 (2 points) Which of the following is NOT a type of lag that can delay the desired effects of fiscal policy? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Recognition lag 100.0% b. Political lag 0.0% c. Administration lag 0.0% d. Operational lag Score: 2 / 2 Question 37 (2 points) If the government begins to buy back Treasury bills, which of the following can you infer? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. G>T 0.0% b. G=T 100.0% c. T>G 0.0% d. NX>0 Score: 2 / 2 Question 38 (2 points) A flat-payment tax system, e.g., all taxpayers owe the government a flat fee of $5000 regardless of income, would be an example of an automatic stabilizer. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 39 (2 points) The goal of Keynesian fiscal policy during a recession is to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. do nothing - let the economy recover on its own. 100.0% b. move the economic equilibrium back to the full-employment level by increasing aggregate demand. 0.0% c. move the economic equilibrium back to the full-employment level by decreasing aggregate supply. 0.0% d. reduce long run aggregate supply so that the economy can reach full employment without a long period of adjustment. Score: 2 / 2 Question 40 (2 points) Which of the following does not represent a form of expansionary fiscal policy? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. increasing government spending 0.0% b. reducing taxes 100.0% c. increasing the money supply 0.0% d. providing incentives to businesses and households to spend more Score: 2 / 2 Question 41 (2 points) The volatile fluctuations of the business cycle occur because of the multiplier effect. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 42 (2 points) This graph depicts a change in the macroeconomy caused by the Federal Reserve lowering the required reserve ratio. After this Fed action, what is the short-run price level? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Po 100.0% b. P1 0.0% c. P2 0.0% d. Yf Score: 2 / 2 Question 43 (2 points) Which of the following is an example of monetary policy that accommodates expansionary fiscal policy? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. lowering the discount rate 0.0% b. raising the required reserve ratio 0.0% c. setting price controls on key inputs in the economy 0.0% d. lowering taxes to increase the flow of consumer funds Score: 2 / 2 Question 44 (2 points) The school of rational expectations holds that if consumers and businesses can adjust their behavior quickly in response to monetary policy, the policy becomes more effective. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 45 (2 points) Suppose the economy has experienced a supply shock and is currently at P1 on the graph below. If the Fed does nothing, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. aggregate demand will eventually increase, bringing the economy back to full employment. 100.0% b. excess supply will cause prices and wages to fall, and SRAS will move downward toward the full-employment level of output. 0.0% c. excess demand will cause further increases in prices and wages, causing SRAS to shift upward. Score: 2 / 2 Question 46 (2 points) Most economists believe that, in the short run, an increase in money supply will Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. raise prices by the same proportional amount. 100.0% b. increase output. 0.0% c. decrease output. 0.0% d. decrease velocity. Score: 2 / 2 Question 47 (2 points) Accommodating monetary policy is intended to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. accelerate the crowding-out effect. 100.0% b. reduce the crowding-out effect. 0.0% c. accommodate supply shocks. 0.0% d. decrease the effects of supply shocks. Score: 2 / 2 Question 48 (2 points) As the graph illustrates, consumers are worried about the future and have begun saving more money. If the Fed does not intervene in this situation, what will happen to the price level in the long run? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Prices will increase. 0.0% b. Prices will stay the same. 100.0% c. Prices will decrease. 0.0% d. There is insufficient information to answer the question. Score: 2 / 2 Question 49 (2 points) In the quantity theory of money, velocity means Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the rate of the change in GDP. 0.0% b. the rate at which business inventories turn over in a year. 100.0% c. the rate at which the money supply turns over in a year. 0.0% d. the rate at which the Fed incrases the money supply. Score: 2 / 2 Question 50 (2 points) Which of the following best describes stagflation? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Prices fall and output increases. 0.0% b. Prices fall and output decreases. 0.0% c. Prices rise and output increases. 100.0% d. Prices rise and output decreases. Score: 2 / 2 Total score: 94 / 100 = 94.0% View Results FINAL EXAM User ID: skim7 Attempt: 1 / 1 Out of: 100 Started: December 14, 2004 8:37pm Finished: December 14, 2004 11:32pm Time spent: 2 hr, 55 min., 15 sec. Student finished 4 min. 45 sec. ahead of the 180 min. time limit. Question 1 (2 points) The U.S. dollar is considered money because Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. it is convertible to gold or silver. 0.0% b. it is easily portable. 100.0% c. it has been decreed by the U.S. government as legal tender. 0.0% d. all of the above. Score: 2 / 2 Question 2 (2 points) The definition of M2 includes which of the following types of money? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Travelers' checks 0.0% b. Eurodollar deposits 0.0% c. Stocks 0.0% d. Repurchase agreements Score: 2 / 2 Question 3 (2 points) Money demand refers to the amount of money Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. individuals would like to have for day-to-day transactions. 0.0% b. individuals need for day-to-day transactions. 100.0% c. people are willing to hold at a given interest rate. 0.0% d. people are willing to hold at a given price level. Score: 0 / 2 Question 4 (2 points) An interest rate below the market equilibrium indicates Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. an excess supply of money. 100.0% b. an excess demand for money. 0.0% c. a decrease in inflation. 0.0% d. an increase in inflation. Score: 2 / 2 Question 5 (2 points) Your friend is planning for retirement. If she invests $500 today at 6% annual interest, what will be the value of her investment in 40 years? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. $5,143 0.0% b. $1,700 0.0% c. $21,200 0.0% d. $49 Score: 2 / 2 Question 6 (2 points) The graph below shows the demand for money. The initial interest rate is io. Which graph correctly depicts a rise in interest rates above the initial level io? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 100.0% b. 0.0% c. 0.0% d. Score: 2 / 2 Question 7 (2 points) The fundamental value of money is that it Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. minimizes the risk of inflation from non-standard currency. 0.0% b. does not degrade rapidly. 0.0% c. can be divided up into smaller parts for exchange. 100.0% d. lowers the cost of making trades in an economy. Score: 2 / 2 Question 8 (2 points) Financial intermediation is best defined as the process by which Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. inflation is controlled. 0.0% b. corporations issue new stock. 0.0% c. liabilities are liquidated. 100.0% d. financial institutions accept savings from savers and make loans to investors. Score: 0 / 2 Question 9 (2 points) Bond coupon payments represent Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. dividends paid to owners. 100.0% b. interest on the amount borrowed. 0.0% c. capital gains for tax purposes. 0.0% d. payments to preferred shareholders. Score: 2 / 2 Question 10 (2 points) Which of the following is NOT an example of a financial intermediary? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. credit union 0.0% b. pension fund 100.0% c. Internal Revenue Service 0.0% d. insurance company Score: 0 / 2 Question 11 (2 points) All of the following are examples of financial intermediaries except Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. insurance companies. 0.0% b. credit unions. 100.0% c. stock exchanges. 0.0% d. retirement funds. Score: 0 / 2 Question 12 (2 points) Fractional reserve banking means that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the federal banking system is decentralized, operating through 12 districts rather than one central bank. 100.0% b. banks are required to hold a fraction of their liabilities in the form of cash in their vaults or as deposits with the Fed. 0.0% c. banks must "synchronize" their customers' withdrawals and deposits so that there is a rough balance in liquidity at any given time. 0.0% d. banks are legally permitted to give loans only up to the fractional rate, as determined by the Fed. Score: 2 / 2 Question 13 (2 points) Which of the following is NOT a tool of monetary policy used by the Fed? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. determining the discount rate 0.0% b. setting the reserve requirement 100.0% c. adjusting the market interest rate 0.0% d. conducting open market operations Score: 2 / 2 Question 14 (2 points) The rate of interest that the Fed charges on loans to banks is called the Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. discount rate. 0.0% b. federal funds rate. 0.0% c. prime rate. 0.0% d. mortgage rate. Score: 2 / 2 Question 15 (2 points) Which of the following actions by the Fed would cause an increase in the money supply? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Decrease the discount rate. 0.0% b. Increase the reserve requirement. 0.0% c. Sell securities (bonds). Score: 2 / 2 Question 16 (2 points) Which group has primary responsibility for the Federal Reserve System? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the Congress of the United States 100.0% b. the Board of Governors of the Fed 0.0% c. the twelve regional Federal Reserve banks 0.0% d. the chairman of the Federal Reserve Score: 2 / 2 Question 17 (2 points) Newly issued securities are sold on the Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. equity market. 100.0% b. primary market. 0.0% c. black market. 0.0% d. secondary market. Score: 2 / 2 Question 18 (2 points) An interest rate above the market equilibrium indicates Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. an excess supply of money. 0.0% b. an excess demand for money. 0.0% c. a shortage of bank deposits. 0.0% d. higher future interest rates. Score: 2 / 2 Question 19 (2 points) Which of the following is an example of "near money"? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. checking accounts 0.0% b. cash 100.0% c. savings accounts 0.0% d. bank's reserves Score: 2 / 2 Question 20 (2 points) Monetary policy is the action of the central bank that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. influences the issuing of coins and currency. 100.0% b. determines the availability and cost of money and credit. 0.0% c. sets the inflation rate. 0.0% d. all of the above. Score: 2 / 2 Question 21 (2 points) Money is created by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. only commercial banks. 0.0% b. only commercial banks and savings and loan associations. 0.0% c. only commercial banks and credit unions. 100.0% d. all financial intermediaries. Score: 2 / 2 Question 22 (2 points) If a bank has deposits of $5000 and is loaned up when making loans of $4250, then the required reserve ratio is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 0.176. 0.0% b. 0.85. 0.0% c. 0.425. 100.0% d. 0.15. Score: 2 / 2 Question 23 (2 points) The supply curve of loanable funds is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. horizontal. 0.0% b. vertical. 100.0% c. upward sloping. 0.0% d. downward sloping. Score: 2 / 2 Question 24 (2 points) When there is excess supply of loanable funds, interest rates will rise in response. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 25 (2 points) Which of the following graphs correctly depicts the change in equilibrium in the market for loanable funds that would result from increased taxes on businesses? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 100.0% b. 0.0% c. 0.0% d. Score: 2 / 2 Question 26 (2 points) John takes out a loan that increases his purchasing power by 5% over one year. If inflation is 2%, what is the real interest rate? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 7% 0.0% b. 3% 100.0% c. 5% 0.0% d. -3% Score: 2 / 2 Question 27 (2 points) Which of the following will NOT cause a shift in the investment demand curve? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a tax cut 0.0% b. an increase in real GDP 100.0% c. an increase in the interest rate 0.0% d. optimistic expectations Score: 2 / 2 Question 28 (2 points) Which of the following statements accurately describes the effect of a price increase on investment spending? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Investment spending falls, because interest rates rise. 0.0% b. Investment spending rises, because interest rates fall. 0.0% c. Investment spending rises, because business can now charge more for the goods they sell. 0.0% d. Investment spending remains unchanged, because it is measured in real, not nominal, terms. Score: 0 / 2 Question 29 (2 points) When domestic prices fall, net exports Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. rise, becaue exporters earn more for the goods they sell. 0.0% b. fall, because exporters earn less for the goods they sell. 100.0% c. rise, because foreign countries purchase more domestic goods. 0.0% d. fall, because foreign countries purchase fewer domestic goods. Score: 2 / 2 Question 30 (2 points) How would an decrease in consumer income affect total output? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Output would fall, because the aggregate demand curve would shift inward. 0.0% b. Output would fall, because the economy would move up and to the left along the same aggregate demand curve. 0.0% c. Output would rise, because the aggregate demand curve would shift outward. 0.0% d. Output would rise, because the economy would move down the aggregate demand curve. Score: 2 / 2 Question 31 (2 points) The demand curve for an individual product is downward sloping for the same reasons that the aggregate demand curve is downward sloping. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 32 (2 points) The shape of the long-run aggregate supply curve is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. upward-sloping. 0.0% b. downward-sloping. 100.0% c. vertical. 0.0% d. horizontal. Score: 2 / 2 Question 33 (2 points) When producers expect prices to fall, the short run aggregate supply curve Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. shifts downward. 0.0% b. shifts upward. 0.0% c. pivots upward. 0.0% d. pivots downward. Score: 2 / 2 Question 34 (2 points) Under what circumstances will the economy move to long-run equilibrium the fastest? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. If people make decisions using rational expectations 0.0% b. If people make decisions using adaptive expectations 0.0% c. The economy moves to equilibrium quickly regardless of the way people make decisions. Score: 2 / 2 Question 35 (2 points) A supply shock causes excess demand in the short run. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 36 (2 points) What is the short run effect of a tax increase on the equilibrium level of aggregate output and prices in the economy? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Both the level of output and the price level increase. 100.0% b. Both the level of output and the price level decrease. 0.0% c. The level of output decreases and the price level increases. 0.0% d. The level of output increases and the price level decreases. Score: 2 / 2 Question 37 (2 points) What is the long run effect of increasing output beyond the full-employment level? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Prices and wages rise, and the level of output falls. 100.0% b. Prices and wages rise, and the level of output remains unchanged. 0.0% c. Prices, wages, and the level of output increase. 0.0% d. Prices, wages, and the level of output decrease. Score: 2 / 2 Question 38 (2 points) Which of the following statements regarding output in the long run is correct? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. output depends on the money supply. 100.0% b. Output is determined by the quantity and productivity of resources. 0.0% c. Output is determined by the level of interest rates. 0.0% d. Output depends on the price level. Score: 2 / 2 Question 39 (2 points) Which of the following events will most likely cause an inward shift of the short-run aggregate supply curve? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Government increases spending. 100.0% b. The economy experiences a supply shock. 0.0% c. The Fed tightens the money supply. 0.0% d. Government increases taxes. Score: 2 / 2 Question 40 (2 points) Imagine that the economy is in a recession. Which one of the following tactics is a way to increase output by shifting aggregate demand outward? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Raising taxes to increase the government surplus 100.0% b. Increasing government spending 0.0% c. Increase the required reserve ratio 0.0% d. Imposing tariffs on foreign goods Score: 2 / 2 Question 41 (2 points) Both monetary policy and fiscal policy can be effective in pulling an economy out of a recession. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 2 / 2 Question 42 (2 points) Increasing the money supply is an example of fiscal policy that can help stimulate demand. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 2 / 2 Question 43 (2 points) During the mid 1980s, the budget deficit __________ and the interest rate __________. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. increased;increased 0.0% b. increased;decreased 0.0% c. decreased;increased 0.0% d. decreased;decreased Score: 2 / 2 Question 44 (2 points) Assume that the government increases its spending by $100 million to stimulate demand. In the long run, the effect of this spending is to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. increase output by more than $100 million. 0.0% b. increase output by $100 million. 100.0% c. raise prices. 0.0% d. increase unemployment. Score: 2 / 2 Question 45 (2 points) Which of the following provides the best explanation for the change depicted in the graph? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Oil prices suddenly increased. 0.0% b. The government started spending significantly more money on highways. 0.0% c. Consumers, worried about the future, began saving more money. 0.0% d. Technological change improved the productivity of workers. Score: 2 / 2 Question 46 (2 points) The belief that money is neutral is most likely to be endorsed by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Keynesian economists. 0.0% b. monetarists. 100.0% c. classical economists. Score: 2 / 2 Question 47 (2 points) The long-run effect of accommodating monetary policy is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. increased output. 0.0% b. lower interest rates. 100.0% c. inflation. 0.0% d. recession. Score: 2 / 2 Question 48 (2 points) Classical economists predict that if the money supply is expanded by 25%, prices will rise by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. less than 25%. 100.0% b. exactly 25%. 0.0% c. more than 25% but less than 50%. 0.0% d. more than 50%. Score: 2 / 2 Question 49 (2 points) Which of the following factors can cause a decline in aggregate demand? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. an increase in government spending 100.0% b. a decrease in consumer spending 0.0% c. an increase in imports 0.0% d. a decrease in household saving Score: 2 / 2 Question 50 (2 points) Which of the following best describes stagflation? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Prices fall and output increases. 0.0% b. Prices fall and output decreases. 0.0% c. Prices rise and output increases. 100.0% d. Prices rise and output decreases. Score: 2 / 2 Total score: 90 / 100 = 90.0% View Results Quiz 1.1 User ID: skim7 Attempt: 4 / Unlimited Out of: 25 Started: February 21, 2005 1:11am Finished: February 21, 2005 1:13am Time spent: 1 min. 24 sec. Question 1 (1 point) A friend recommends a movie and you go see it, expecting that you will like it. However, you think it is the worst movie you have seen in years, and wish you hadn't wasted your money on it. This situation Student response: Percent Value Student Response Answer Choices a. shows the rationality assumption is false because you were worse off for seeing the movie. b. shows that you behaved irrationally because you didn't get enough information about the movie before seeing it. 100.0% c. is consistent with rational behavior because you had thought that you were going to like the movie. Score: 1 / 1 Question 2 (1 point) Economics is the study of Student response: Percent Value Student Response Answer Choices a. why people want certain goods and services rather than other goods and services. b. how people spend their income. 100.0% c. how people allocate their resources to satisfy their wants. d. how to get rich. Score: 1 / 1 Question 3 (1 point) Which of the following situations is the best example of scarcity? Student response: Percent Value Student Response Answer Choices a. People in Haiti have fewer goods and services than people in the U.S. b. Chinese incomes are rising, enabling consumers to buy more goods. c. Ugandans find that their incomes are decreasing and cannot buy as much as they had in the past. 100.0% d. Bolivian farmers wish to build more homes, sheds and barns but do not have enough lumber to construct all of these buildings. e. All of the above are situations that exhibit scarcity. Score: 1 / 1 Question 4 (1 point) Suppose you are studying economics. If you weren't studying economics, you would be studying literature, raising your grade in that class by a letter grade. If you weren't studying literature, you would be working, making $500. If you weren't working, you would be playing cards with friends. If you weren't playing cards with friends, you would be sleeping, which would improve your quiz score at your early-morning accounting class in the morning by 3 points. The opportunity cost of studying economics is Student response: Percent Value Student Response Answer Choices a. 3 points on the accounting quiz. b. the enjoyment of playing cards with friends. c. $500. 100.0% d. a letter grade in literature. e. all of the other possible activities listed. Score: 1 / 1 Question 5 (1 point) Because of scarcity, every economic decision involves Student response: Percent Value Student Response Answer Choices 100.0% a. a trade-off. b. a free good. c. a trade-in. d. an increasing cost. Score: 1 / 1 Question 6 (1 point) The basic task that economists expect the market to resolve is Student response: Percent Value Student Response Answer Choices a. the desire for meaning. 100.0% b. the problem of scarcity. c. the fear of want. d. the tendency of the economy to stagnate. Score: 1 / 1 Question 7 (1 point) If you intentionally did something to make yourself worse off, you would be violating the: Student response: Percent Value Student Response Answer Choices a. Ceteris Paribus assumption. b. time consistency assumption. 100.0% c. rationality assumption. d. the normative assumption. Score: 1 / 1 Question 8 (1 point) There are not enough of four goods to satisfy the wants of people. For good A, this is true when the price is $10. This is true for good B at a price of $1, for good C at a price of 25 cents, and for good D at a price of zero. Which situation reflects scarcity rather than shortage? Student response: Percent Value Student Response Answer Choices a. A b. C 100.0% c. D d. B Score: 1 / 1 Question 9 (1 point) Economics is a social science rather than a "hard" science like physics because Student response: Percent Value Student Response Answer Choices a. economists abstract from reality in creating their theories. b. economics is easier to study than physics. c. economists must explain their theories to policy makers who lack formal mathematical training. 100.0% d. economists study human behavior, which is affected by an unpredictable and vast range of influences. Score: 1 / 1 Question 10 (1 point) An economist studying macroeconomics compared data on unemployment, inflation and economic growth from past years to the current year, and used the comparison to predict future unemployment. This is an example of Student response: Percent Value Student Response Answer Choices a. developing economic theories. 100.0% b. building economic models. c. making economic policy. d. normative economics. Score: 1 / 1 Question 11 (1 point) Economists make assumptions because Student response: Percent Value Student Response Answer Choices a. they need to incorporate value judgments into their models. 100.0% b. analysis without assumptions would be impossibly complex. c. they always have perfect information about the assumptions. d. assumptions are the final product of careful economic analysis. Score: 1 / 1 Question 12 (1 point) Economic models: Student response: Percent Value Student Response Answer Choices a. are developed in order to explain an individual's thinking. 100.0% b. should be judged by how well they predict real-world phenomena. c. should be rejected if they are not completely realistic. d. are developed in order to explain what an individual might say. Score: 1 / 1 Question 13 (1 point) Your friend wonders why traffic during her evening commute is always worse on Fridays. She is not considering: Student response: Percent Value Student Response Answer Choices 100.0% a. the Ceteris Paribus assumption. b. the incentives assumption. c. the rationality assumption. d. none of the above. Score: 1 / 1 Question 14 (1 point) Which of the following is a normative statement? Student response: Percent Value Student Response Answer Choices a. Inflation in 1963 was 2.9% for the year. b. Unemployment will increase in the coming year. c. Increased sales taxes will shrink employment. 100.0% d. Taxes should be raised to finance street repairs. Score: 1 / 1 Question 15 (1 point) Which of the following is a positive statement? Student response: Percent Value Student Response Answer Choices a. Strawberry ice cream is better than chocolate ice cream b. Workers with families should be paid at least the minimum wage. 100.0% c. An increase in the price of gasoline will cause a reduction in the amount purchased. d. Corrupt politicians ought to be voted out of office. Score: 1 / 1 Question 16 (1 point) The statement "Raising the sales tax is the best way to increase state revenue." is Student response: Percent Value Student Response Answer Choices a. a positive statement, because it is in favor of a tax increase. b. a positive statement, because it is either true or false. 100.0% c. a normative statement, because it states an opinion rather than a fact. d. neither positive nor normative. Score: 1 / 1 Question 17 (1 point) The impact of the national debt on the economy's unemployment is an example of: Student response: Percent Value Student Response Answer Choices a. microeconomics. 100.0% b. macroeconomics. c. irrational economics. d. either microeconomics or macroeconomics. Score: 1 / 1 Question 18 (1 point) The impact of a tax increase on household spending patterns is an example of: Student response: Percent Value Student Response Answer Choices 100.0% a. microeconomics. b. macroeconomics. c. irrational economics. d. either microeconomics or macroeconomics. Score: 1 / 1 Question 19 (1 point) Which of the following is true about the importance of money in economics? Student response: Percent Value Student Response Answer Choices 100.0% a. Money is very important in both macroeconomics and microeconomics. b. Money is more important in microeconomics than it is in macroeconomics. c. Money is not very important in either micro or macroeconomics. d. Money is more important in macroeconomics than it is in microeconomics. Score: 1 / 1 Question 20 (1 point) Which of the following statements is correct? Student response: Percent Value Student Response Answer Choices a. China is a pure command economy. b. Singapore is a pure market economy. c. The United States is a pure market economy. 100.0% d. All economies in the world are a mixture of command and market elements. Score: 1 / 1 Question 21 (1 point) If the government takes a laissez-faire approach to the economy, its most likely response to entering a recession will be to Student response: Percent Value Student Response Answer Choices a. increase government spending. b. increase the money supply. 100.0% c. do nothing. Score: 1 / 1 Question 22 (1 point) The nation listed below whose economy comes closest to a centrally planned economy is Student response: Percent Value Student Response Answer Choices 100.0% a. People's Republic of China. b. Japan. c. United Kingdom. d. United States. Score: 1 / 1 Question 23 (1 point) In a market economy, goods are allocated to Student response: Percent Value Student Response Answer Choices a. all potential uses. b. all citizens on an equal basis. c. citizens with political power. 100.0% d. citizens with both the desire and the willingness to pay for the goods. Score: 1 / 1 Question 24 (1 point) The father of modern economics is Student response: Percent Value Student Response Answer Choices a. Thomas Hobbes. 100.0% b. Adam Smith c. John Maynard Keynes. d. Alan Greenspan. Score: 1 / 1 Question 25 (1 point) Adam Smith believed that Student response: Percent Value Student Response Answer Choices a. people were hard-wired to be selfish. b. the government should manage most aspects of the economy. 100.0% c. allowing individuals to pursue their own self-interest is the most effective way to make a country wealthy. d. the division of labor should be managed by the government. Score: 1 / 1 Total score: 25 / 25 = 100.0% View Results Quiz 1.2 User ID: skim7 Attempt: 2 / 3 Out of: 25 Started: February 21, 2005 2:26am Finished: February 21, 2005 2:28am Time spent: 1 min. 51 sec. Question 1 (1 point) A nonlinear function exhibits a relationship between two variables that Student response: Percent Value Student Response Answer Choices a. is constant over its entire range. 100.0% b. changes over the entire range. c. is random. d. is negative. Score: 1 / 1 Question 2 (1 point) The algebraic formula for a straight line is Student response: Percent Value Student Response Answer Choices a. a = y + bx 100.0% b. y = a + bx c. b = a + yx d. x = a + by Score: 1 / 1 Question 3 (1 point) The following table gives data relating a variable X (measured on the horizontal axis) to a variable Y (vertical axis). The slope of the line described by this relationship is X 1 3 5 Y 6 14 22 Student response: Percent Value Student Response Answer Choices a. two. 100.0% b. four. c. eight. d. different at different points along the line. Score: 1 / 1 Question 4 (1 point) Graphs are useful because of the way they Student response: Percent Value Student Response Answer Choices a. facilitate interpretation and analysis of data. b. convey an idea that might otherwise take many words. c. permit a person to easily see relationships. 100.0% d. All of the above are correct. Score: 1 / 1 Question 5 (1 point) A downward-sloping, straight line has a decreasing slope. Student response: Percent Value Student Response Answer Choices a. True. 100.0% b. False. Score: 1 / 1 Question 6 (1 point) The tangent at point A on a curve has a positive slope. Therefore, Student response: Percent Value Student Response Answer Choices a. the curve has a positive slope at all points. 100.0% b. the curve has a positive slope at point A. c. the curve has a negative slope at all points. d. the curve has a negative slope at point A. Score: 1 / 1 Question 7 (1 point) X Y 2 8 4 2 6 0 8 2 10 8 Given the data above, if you were to plot the points you would see a(n): Student response: Percent Value Student Response Answer Choices a. downward sloping straight line b. upward sloping straight line c. upward sloping non-linear curve d. downward sloping non-linear curve 100.0% e. non-linear curve that switches from an inverse to a direct relationship Score: 1 / 1 Question 8 (1 point) The slope of the line in the graph is equal to: Student response: Percent Value Student Response Answer Choices 100.0% a. ?3/4 b. ?4/3 c. 3/4 d. 5/6 e. 1 Score: 1 / 1 Question 9 (1 point) Which of the following pair of variables is most likely to exhibit a direct relationship? Student response: Percent Value Student Response Answer Choices 100.0% a. the amount of sales (in $) and the number of hours that a business is open b. the amount of cloud cover and the amount of sunshine c. the price of bananas and the number of bananas purchased d. the number of acres of soybeans planted and the number of acres of potatoes planted on a single farm Score: 1 / 1 Question 10 (1 point) Why is the choice of units important in constructing a graph? Student response: Percent Value Student Response Answer Choices a. It affects whether a variable rises or falls. 100.0% b. It affects the apparent rate of change of one variable relative to the other. c. It affects which time periods can be considered. d. All of the above. Score: 1 / 1 Question 11 (1 point) When variable A rises by 10 units, variable B rises by 15 units. The slope of the line describing this relationship is Student response: Percent Value Student Response Answer Choices a. always 2/3. 100.0% b. either 2/3 or 1.5, depending on which variable goes on which axis of the graph. c. either 1.5 or -1.5, depending on which variable goes on which axis of the graph. d. always -1.5. Score: 1 / 1 Question 12 (1 point) The lower left-hand corner of a graph where the two axes meet is called the graph's origin. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 13 (1 point) The slope of a horizontal line is zero. Student response: Percent Value Student Response Answer Choices 100.0% a. True. b. False. Score: 1 / 1 Question 14 (1 point) The relationship between two variables is given by the equation Y = 5 + 2X. The relationship can be drawn as a line on a graph with Y on the vertical axis and X on the horizontal axis. Which of the following statements is true? Student response: Percent Value Student Response Answer Choices a. When X exactly doubles, Y exactly doubles. b. Multiplying both sides of the equation by 2 doubles the slope of the line. 100.0% c. Subtracting 2 from the right side of the equation shifts the line down by 2 units at every level of X. d. The line is twice as steep as the line given by the equation Y = 2.5 + 2X. Score: 1 / 1 Question 15 (1 point) A straight line tangent to a curved line at a point Student response: Percent Value Student Response Answer Choices a. crosses the curved line at that point. b. crosses the curved line at many points. 100.0% c. has the same slope as the curved line at that point. d. has the same slope as the curved line at all points. Score: 1 / 1 Question 16 (1 point) The data used to construct a graph can show a steep line or a flat line depending on how the axes are measured. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 17 (1 point) Suppose a curve has a slope equal to zero at some point A. To the right of A, the curve may Student response: Percent Value Student Response Answer Choices a. have a positive slope. b. have a negative slope. c. be a straight line. 100.0% d. All of the above are correct. Score: 1 / 1 Question 18 (1 point) The slope of a curved line differs from that of a straight line in that Student response: Percent Value Student Response Answer Choices a. the numerical value of the slope of a straight line is different at every point, but is the same at every point for a curved line. b. the numerical value of the slope of a straight line is always higher than the numerical value of the slope of a curved line. 100.0% c. the numerical value of the slope of a curved line is different at every point, but is the same at every point for a straight line. d. straight lines are more realistic, but curved lines are not descriptively accurate for the real world. Score: 1 / 1 Question 19 (1 point) A straight line through the origin always has a slope of one. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 20 (1 point) In the following figure, Student response: Percent Value Student Response Answer Choices 100.0% a. at all points, the slope of S1 > the slope of S2. b. at all points, the slope of S1 < the slope of S2. c. at points to the left of A, the slope of S1 > the slope of S2; at points to the right of A, the slope of S1 < the slope of S2. d. at points to the left of A, the slope of S1 < the slope of S2; at points to the right of A, the slope of S1 > the slope of S2. Score: 1 / 1 Question 21 (1 point) Graphically, how would an increase in income affect the demand for hamburgers? Student response: Percent Value Student Response Answer Choices a. The slope of the demand curve would increase. b. The slope of the demand curve would decrease. 100.0% c. The demand curve would shift outward, parallel to the original demand curve. d. The demand curve would shift inward, parallel to the original demand curve. Score: 1 / 1 Question 22 (1 point) Given the equation P = $6.00 - $.40Q, where P is the price of the good and Q is the quantity of the good demanded, how many units will this consumer demand if the price is $3.60? Student response: Percent Value Student Response Answer Choices a. 1.44 units b. 3 units c. 3.6 units 100.0% d. 6 units Score: 1 / 1 Question 23 (1 point) Suppse Val increases her consumption of candy bars by 3 bars for every $.60 decrease in the price. The slope of Val's demand curve is Student response: Percent Value Student Response Answer Choices a. -$5.00. b. -$1.80. 100.0% c. -$.20. d. unable to be determined. Score: 1 / 1 Question 24 (1 point) Suppose the equation for Ted's demand curve is P = $2.00 - $.50Q. If Ted's income increased by $100 every week, how might we rewrite the equation? Student response: Percent Value Student Response Answer Choices 100.0% a. P = $3.00 - $.50Q b. P = $2.00 - $1.50Q c. P = $1.00 - $.50Q d. P = $2.00 - $.25Q Score: 1 / 1 Question 25 (1 point) To find the slope of a nonlinear function between any two points, you must use the "rise over run" formula that you use for a linear function. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Total score: 25 / 25 = 100.0% View Results Quiz 1.4 User ID: skim7 Attempt: 1 / 3 Out of: 20 Started: February 21, 2005 2:29am Finished: February 21, 2005 3:00am Time spent: 30 min. 49 sec. Question 1 (1 point) The graphical device which illustrates the concept of scarce resources being efficiently utilized in the economy is Student response: Percent Value Student Response Answer Choices a. a budget line. b. a time-series graph. 100.0% c. a production possibilities frontier. d. a consumption possibilities line. Score: 1 / 1 Question 2 (1 point) Which of the points in the graph are efficient? Student response: Percent Value Student Response Answer Choices a. C and F only b. C, D and F only c. A, C, D, F, and G only 100.0% d. A, C, F, and G only Score: 1 / 1 Question 3 (1 point) The opportunity cost of more capital goods today is Student response: Percent Value Student Response Answer Choices a. fewer capital goods in the future. b. fewer consumer goods in the future. 100.0% c. fewer consumer goods today. d. more unemployed resources in the future. Score: 1 / 1 Question 4 (1 point) Which of the following would NOT allow society to move to point h in the figure? Student response: Percent Value Student Response Answer Choices a. an improvement in technology 100.0% b. more efficient use of current resources c. an increase in quantity of labor d. an increase in quantity of capital Score: 1 / 1 Question 5 (1 point) If all resources are equally productive in producing all goods, the production possibilities curve will be Student response: Percent Value Student Response Answer Choices a. convex to the origin. b. concave to the origin. 100.0% c. linear. d. expanding over time. Score: 1 / 1 Question 6 (1 point) The shape of the production possibilities curve in the figure indicates that Student response: Percent Value Student Response Answer Choices a. production of corn is characterized by increasing costs while the production of cloth is characterized by decreasing costs. b. production of both corn and cloth is characterized by increasing costs. 100.0% c. production of both corn and cloth is characterized by constant costs. d. production of corn is characterized by constant costs and the production of cloth is characterized by increasing costs. Score: 1 / 1 Question 7 (1 point) Suppose an acre of land yields 100 bushels of corn and that one bushel of corn provides enough seed for one-quarter of an acre of land. The opportunity cost of consuming another bushel of corn today is Student response: Percent Value Student Response Answer Choices a. 100 bushels of corn next year. 100.0% b. 25 bushels of corn next year. c. 10 bushels of corn next year. d. 2.5 bushels of corn next year. Score: 1 / 1 Question 8 (1 point) If a country's production possibilities curve gets more bowed out over time, it is an indication that Student response: Percent Value Student Response Answer Choices a. technological change has taken place. b. society is learning to use its resources more efficiently. c. the quantity of labor and capital have increased. 100.0% d. resources have become more highly specialized. Score: 1 / 1 Question 9 (1 point) In the figure, how many units of corn are produced at point a? Student response: Percent Value Student Response Answer Choices a. 2000 100.0% b. 2500 c. 3000 d. We can't tell without more information. Score: 1 / 1 Question 10 (1 point) The production possibilities frontier illustrates Student response: Percent Value Student Response Answer Choices a. the fundamental concept of scarcity. b. the opportunity cost of acquiring more of one good. c. an economy's maximum output utilizing all resources efficiently. 100.0% d. All of the above are correct. Score: 1 / 1 Question 11 (1 point) Any point outside the boundary of a production possibilities frontier is Student response: Percent Value Student Response Answer Choices a. efficient. b. inefficient. 100.0% c. unattainable. d. attainable. Score: 1 / 1 Question 12 (1 point) Which of the following statements is FALSE? Student response: Percent Value Student Response Answer Choices 100.0% a. As society increases its wealth, the problem of scarcity disappears. b. The factors of production are used to produce outputs that help society satisfy its wants. c. Even though a society faces the problem of scarcity, it does not necessarily suffer from poverty. d. Land and labor are both factors of production. Score: 1 / 1 Question 13 (1 point) The law of increasing costs is due to Student response: Percent Value Student Response Answer Choices a. taxes. b. scarcity. c. the fact that it is more difficult to use resources efficiently the more society produces. 100.0% d. the fact that resources are not perfectly adaptable for alternative uses. Score: 1 / 1 Question 14 (1 point) Resources are also known as Student response: Percent Value Student Response Answer Choices a. factories. b. minerals. c. stocks, bonds, and other financial instruments. 100.0% d. factors of production. Score: 1 / 1 Question 15 (1 point) The opportunity cost for this economy to move from point B to point A is Student response: Percent Value Student Response Answer Choices a. 15 bushels of wheat. b. 90 bushels of wheat. c. 75 pounds of beef. 100.0% d. 25 pounds of beef. Score: 1 / 1 Question 16 (1 point) In one day, Joe can produce 24 bushels of wheat (W) or 8 pounds of rice (R). Joe's opportunity cost of 1 bushel of wheat is Student response: Percent Value Student Response Answer Choices 100.0% a. 1/3 pound of rice. b. 3 pounds of rice. c. 1/8 pound of rice. d. 8 pounds of rice. Score: 1 / 1 Question 17 (1 point) Moving from one point to another along a given production possibilities frontier, producing more of one good requires that Student response: Percent Value Student Response Answer Choices 100.0% a. less of the other good be produced. b. the production of the other good be held constant. c. more of the other good be produced. d. a better technology be employed. Score: 1 / 1 Question 18 (1 point) The economy pictured produces only wheat and beef. If the economy is producing 60 bushels of wheat and 50 pounds of beef, they are producing at a point that is Student response: Percent Value Student Response Answer Choices 100.0% a. attainable, but inefficient. b. unattainable, given its resources. c. producing too much wheat. d. producing too much beef. Score: 1 / 1 Question 19 (1 point) The point at which a PPF intersects the X axis is Student response: Percent Value Student Response Answer Choices a. unattainable. b. attainable but inefficient. 100.0% c. attainable and efficient. d. unattainable and inefficient. Score: 1 / 1 Question 20 (1 point) Assume this economy produces wheat in the fertile middle of the country and produces rice in the southern wetlands. What could explain th eshcnge in the country's PPF from PPF1 to PPF2? Student response: Percent Value Student Response Answer Choices a. a drought in the southern wetlands 100.0% b. a drought in the middle part of the country c. development of improved varieties of rice d. development of improved varieties of wheat Score: 1 / 1 Total score: 20 / 20 = 100.0% View Results Quiz 1.5 User ID: skim7 Attempt: 2 / 3 Out of: 25 Started: February 21, 2005 3:08am Finished: February 21, 2005 3:10am Time spent: 2 min. 34 sec. Question 1 (1 point) Division of labor refers to Student response: Percent Value Student Response Answer Choices a. dividing tasks up into several subtasks and having one person perform these subtasks in a certain order. b. the separation of hourly workers from salaried workers. 100.0% c. assigning different workers to different tasks. d. separating union workers from nonunion workers. Score: 1 / 1 Question 2 (1 point) The following graphs show the potential production for coats and books in Utopia and Transylvania. Both countries have equal amounts of resources available for production of coats or books. Which country has the comparative advantage in producing coats and books? Student response: Percent Value Student Response Answer Choices a. Utopia has the comparative advantage in producing both goods. 100.0% b. Utopia has the comparative advantage in producing coats; Transylvania has the comparative advantage in producing books. c. Utopia has the comparative advantage in producing books; Transylvania has the comparative advantage in producing coats. d. Neither country has a comparative advantage with either good because opportunity costs are equal. Score: 1 / 1 Question 3 (1 point) Trade between nations means that Student response: Percent Value Student Response Answer Choices a. one country is richer than the other. b. one country becomes richer while the other becomes poorer. 100.0% c. both trading nations show some gains. d. both trading nations will gain equally from the trade. Score: 1 / 1 Question 4 (1 point) The following graphs show the potential production for coats and books in Utopia and Transylvania. Both countries have equal amounts of resources available for production of coats or books. Which country has the absolute advantage in producing coats and books? Student response: Percent Value Student Response Answer Choices 100.0% a. Utopia has the absolute advantage in producing both goods. b. Utopia has the absolute advantage in producing coats; Transylvania has the absolute advantage in producing books. c. Utopia has the absolute advantage in producing books; Transylvania has the absolute advantage in producing coats. d. Transylvania can produce fewer goods with the same resources; therefore it has the absolute as well as comparative advantage. Score: 1 / 1 Question 5 (1 point) John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct? Student response: Percent Value Student Response Answer Choices 100.0% a. Harry has a comparative advantage in ironing. b. Harry has a comparative advantage in typing. c. Harry has an absolute advantage in typing. d. Harry has an absolute advantage in ironing. e. Neither can gain from specialization and trade. Score: 1 / 1 Question 6 (1 point) The following table illustrates the production possibilities for John and Mary if they spend all of their time producing bread and cheese. Bread Cheese John 4 8 Mary 8 14 Which of the following is true for John and Mary? Student response: Percent Value Student Response Answer Choices a. Mary has an absolute advantage in producing cheese. b. John has a comparative advantage in producing cheese. c. Mary has a comparative advantage in producing bread. 100.0% d. All of the above are true. Score: 1 / 1 Question 7 (1 point) Using graphs to illustrate the concepts, Student response: Percent Value Student Response Answer Choices a. absolute advantage is shown with differences in the slope of the production possibilities frontiers, and comparative advantage is shown with a lower curve. 100.0% b. absolute advantage is shown with a higher production possibilities frontier, and comparative advantage is shown with differences in the slope of the frontiers. c. absolute advantage in one good requires that the slope of the production possibilities frontier be steeper for that good. d. absolute advantage cannot be shown with a graph, but comparative advantage can be shown with the position of the curve. Score: 1 / 1 Question 8 (1 point) In the U.S., it requires 20 labor hours to produce one bushel of wheat and 80 labor hours to produce one computer. In France, it requires 25 labor hours to produce one bushel of wheat and 75 labor hours to produce one computer. The opportunity cost of one bushel of wheat in France is Student response: Percent Value Student Response Answer Choices a. 4 computers. b. 25 labor hours. c. 3 computers. 100.0% d. 1/3 computer. Score: 1 / 1 Question 9 (1 point) The person who can perform a task in the fewest hours Student response: Percent Value Student Response Answer Choices 100.0% a. has an absolute advantage in performing the task. b. has a comparative advantage in performing the task. c. has both an absolute advantage and a comparative advantage in performing the task. d. has an absolute advantage in performing the task but a comparative disadvantage in performing the task. Score: 1 / 1 Question 10 (1 point) Fred has an absolute advantage in painting and Barney has an absolute advantage in washing down walls. Assuming that the population consists only of Fred and Barney, we know that Student response: Percent Value Student Response Answer Choices a. neither has a comparative advantage in either task. 100.0% b. Fred has a comparative advantage in painting and Barney has a comparative advantage in washing down walls. c. Fred has a comparative advantage in washing down walls and Barney has a comparative advantage in painting. d. we can't tell who has a comparative advantage in painting or in washing down walls. Score: 1 / 1 Question 11 (1 point) Look at the following production possibilities table for drill presses and corn. The table shows the maximum combination of drills and bushels of corn that can be produced when all resources are fully employed. Drill Presses 10 20 30 40 50 Corn (bushels) 150 140 120 90 500 Based on the above information, Student response: Percent Value Student Response Answer Choices a. there is a constant trade-off between corn and drill presses. b. the opportunity cost of producing 30 drill presses instead of 20 drills is 120 bushels of corn. 100.0% c. the opportunity cost of producing 40 drill presses instead of 30 drills is 30 bushels of corn. d. the production possibilities curve for drill presses and corn will be a straight line. Score: 1 / 1 Question 12 (1 point) In the U.S., it requires 20 labor hours to produce one bushel of wheat and 80 labor hours to produce one computer. In France, it requires 25 labor hours to produce one bushel of wheat and 75 labor hours to produce one computer. The U.S. and France could benefit from trade if the U.S. specializes in _____________ and France specializes in ______________. Student response: Percent Value Student Response Answer Choices a. computers; computers. b. computers; wheat. 100.0% c. wheat; computers. d. wheat; wheat. Score: 1 / 1 Question 13 (1 point) In the U.S., it requires 20 labor hours to produce one bushel of wheat and 80 labor hours to produce one computer. In France, it requires 25 labor hours to produce one bushel of wheat and 75 labor hours to produce one computer. If the U.S. and France trade based on their comparative advantages, the U.S. will import ______ and France will import ________. Student response: Percent Value Student Response Answer Choices a. wheat; wheat. b. computers; computers. c. wheat; computers. 100.0% d. computers; wheat. Score: 1 / 1 Question 14 (1 point) Assuming that only two goods are produced in the world, which of the following is true? Student response: Percent Value Student Response Answer Choices a. It is impossible for a country to have an absolute advantage in producing both goods. b. It is possible for a country to have a comparative advantage in producing both goods. c. If trade exists and a country has an absolute advantage in producing one of the goods, that country will specialize in producing that good. 100.0% d. If trade exists, and a country has a comparative advantage in producing one of the goods, that country will specialize in producing that good. Score: 1 / 1 Question 15 (1 point) In the following figure, the opportunity cost of a unit of wheat in terms of cotton is Student response: Percent Value Student Response Answer Choices 100.0% a. 1 for the U.S. and 5 for Egypt. b. 20 for the U.S. and 2 for Egypt. c. 1 for the U.S. and 2 for Egypt. d. 20 for the U.S. and 10 for Egypt. Score: 1 / 1 Question 16 (1 point) The average worker in the United States can produce 20 tons of coal or 10 tons of iron per hour. The average worker in Canada can produce 10 tons of coal or 10 tons of iron per hour. The United States has a comparative advantage in the production of Student response: Percent Value Student Response Answer Choices a. iron. 100.0% b. coal. c. both iron and coal. d. neither iron nor coal. Score: 1 / 1 Question 17 (1 point) If Taiwanese workers can produce everything more cheaply than American workers, then Student response: Percent Value Student Response Answer Choices 100.0% a. Americans can still gain by trading with Taiwan. b. Americans can only lose if they import from Taiwan. c. Taiwan can only lose if it trades with America. d. There are no gains from trade that are possible in this case. Score: 1 / 1 Question 18 (1 point) Trade between two countries Student response: Percent Value Student Response Answer Choices a. makes both countries worse off. b. can benefit one country but not both. 100.0% c. enables a country to move beyond (to a point outside) its production possibilities frontier. d. can only occur if one country is larger. Score: 1 / 1 Question 19 (1 point) Jim, Billy, and Bob are washing cars and cutting lawns for Ray's Neighborhood Services, Inc. In one day, Jim can wash four cars or cut two lawns; Billy can wash three cars or cut one lawn; Bob can wash one car or cut one lawn. Who has the comparative advantage in washing cars? Student response: Percent Value Student Response Answer Choices a. Jim 100.0% b. Billy c. Bob d. Billy and Bob have an equal comparative advantage. Score: 1 / 1 Question 20 (1 point) Is it possible for a country to have an absolute disadvantage and a comparative advantage? Student response: Percent Value Student Response Answer Choices a. No, these are incompatible on theoretical grounds. b. No, theory prevents it, but some economists claim it could occur. 100.0% c. Yes, this situation can occur. d. Yes, in theory, although not in reality. Score: 1 / 1 Question 21 (1 point) Division of labor increases the output of society by Student response: Percent Value Student Response Answer Choices a. eliminating scarcity. b. reducing the choices people have to make to a more manageable number. c. ensuring that people are happier in performing their work. 100.0% d. allowing resources to specialize in the tasks for which they have a comparative advantage. Score: 1 / 1 Question 22 (1 point) Assume that Economy A and Economy B have the same resources, but that individuals in Economy A have specialized whereas individuals in Economy B have not. Given this information, you can determine that Student response: Percent Value Student Response Answer Choices 100.0% a. Economy A will have a higher output than Economy B. b. Economy A will have a lower output than Economy B. c. Economy A and Economy B will have identical outputs. d. Individuals in Economy A will have lower incomes than individuals in Economy B. Score: 1 / 1 Question 23 (1 point) When nations specialize in their areas of comparative advantage and then trade with the rest of the world, the result is that Student response: Percent Value Student Response Answer Choices a. the average standard of living in the world will go down. 100.0% b. the average standard of living in the world will go up. c. the world will move from a point on the production possibilities curve to a point inside the curve. d. worldwide economic efficiency will decrease. Score: 1 / 1 Question 24 (1 point) Which of the following statements is FALSE? Student response: Percent Value Student Response Answer Choices 100.0% a. As society increases its wealth, the problem of scarcity disappears. b. The factors of production are used to produce outputs that help society satisfy its wants. c. Even though a society faces the problem of scarcity, it does not necessarily suffer from poverty. d. Land and labor are both factors of production. Score: 1 / 1 Question 25 (1 point) Comparative advantage is always a(n) ______ concept. Student response: Percent Value Student Response Answer Choices a. absolute b. efficiency 100.0% c. relative d. monetary Score: 1 / 1 Total score: 25 / 25 = 100.0% 1.1.1 (1) QID: 12876 The opportunity cost of any particular choice is the least expensive alternative to the choice. the best alternative to the choice. the price that one pays for the choice. the most expensive alternative to the choice. (2) QID: 12879 If you wait in line one hour to buy a concert ticket for $30, the opportunity cost of that ticket is the best alternative use of the $30. the best alternative to the one hour it took to buy the ticket. the best alternative to both the $30 and the one hour. not measurable because there is no opportunity cost to consumption. (3) QID: 12880 Scarcity is a problem only during a recession or depression. is a problem only in developing countries. is a problem only among poor people. requires people to make choices. (4) QID: 12883 The study of economics is primarily concerned with determining the most equitable distribution of income in the economy. choices which have to be made concerning the use of scarce resources. demonstrating the superior nature of capitalist economies. keeping businesses from losing money. (5) QID: 13997 Which of the following is a correct statement? During a depression or recession, economic principles are not neccessarily valid. Economics laws are important because they allow us to predict and possibly control economic events. Economics laws are as precise as laws in physics or chemistry. Economics laws are concerned with judging outcomes and therefore are not scientific. (6) QID: 15243 The opportunity cost of a college education is the cost of books and tuition. the time you spend studying for tests. the salary that you made at a part-time job last year. the highest salary that you could make if you worked full time instead of going to school. (7) QID: 15244 Which of the following is not a scarce good? Air Space Water Garbage (8) QID: 15245 A good is not scarce if everybody can have all they want of it. if someone can buy all he/she wants of the good. if people who make enough money can buy all they want of the good. if there is a limited amount of it available. (9) QID: 15247 Scarcity is defined as the unlimited availability of goods and services. the imbalance between rational choice and irrational choice. the imbalance between what is wanted and what is freely available. none of the above. (10) QID: 15248 Rational choice requires the undertaking of costs-benefits analysis. is impossible under conditions of scarcity. is defined as self-interested decision-making. both A and C. (11) QID: 15249 Which of the following best illustrates the concept of opportunity costs? The choice of a pizza purchased today versus a hot dog purchased last month The choice of immediately studying an additional two hours or immediately going to sleep Eating both bacon and eggs for breakfast this morning All of the above illustrate the concept of opportunity costs. (12) QID: 15250 If everyone made rational choices, then everyone would make identical choices. there would be no tradeoffs in any choice. resources would exceed material wants. individuals differ in their choices because their information and constraints are different. (13) QID: 15252 The opportunity cost of attending college does not include the income you could have earned while in classes. the travel expenses that you incur while traveling to classes. the money spent on books and tuition. money spent on meals while at school. (14) QID: 15253 Which of the following choices involves giving up something? Buying a new house Studying for a test Watching television All of the above involve giving up something. (15) QID: 15254 A rational person makes a choice if the choice makes money. the benefits outweigh the costs. the costs outweigh the benefits. the choice is ethical. BCDBB DDACD BDDDB 1.1.2 (1) QID: 12884 Economics addresses such issues as how goods will be produced. what goods to produce. who will get the goods that are produced. All the above are correct. (2) QID: 12887 Economists use economic models to maintain real-world complexity. to appear as precise as physical scientists. to understand how the real world works. to include every detail in their analyses. (3) QID: 12888 Economics is the study of how businesses generate profits. how society allocates scarce resources. how to more equitably distribute income. how money is used in our culture. (4) QID: 12890 The main reason that testing theories is more difficult in economics than in the physical sciences is the difficulty in performing an experiment on an economic system. the difficulty in devising an experiment. the difficulty in evaluating the results of an experiment. the difficulty in developing a theory of the economy. (5) QID: 12891 Normative statements make statements about how the world is. make statements about the normal conditions in the economy. make statements about how much production the economy could have. make statements about how the world ought to be. (6) QID: 12892 Which of the following is an example of how economists may differ in their scientific judgments? A disagreement about whether a reduction in inflation is more important than a reduction in unemployment. A disagreement on the effects of a change in tax laws on consumer behavior. A disagreement on the fairness of income distribution. A disagreement on whether the minimum wage should be increased. (7) QID: 12893 In economics the term "ceteris paribus" means central variable hold all other variables constant in the "unlikely event that. . ." none of the above (8) QID: 12895 Positive statements are evaluated on the basis of evidence while normative statements are evaluated on the basis of an individual's judgment. True False (9) QID: 12900 Economic value is created when the benefits of a trade exceed the costs of the trade. a customer gets a product for less than the cost of producing it. a store can sell an inferior product for full price. the costs of a trade are exactly equal to the benefits of the trade. (10) QID: 13995 Economics is mainly concerned with the study of money. scarcity. profits. unemployment. DCBAD BBAAB 1.1.3 (1) QID: 12903 An example of a topic that macroeconomists study is consumer demand for automobiles. the change in the nation's unemployment rate. the market structure of the electric power industry. the shortage of labor in high-tech industries. (2) QID: 12905 An example of a real variable is the change in the number of cars produced from one year to the next. the change in the price of cars from one year to the next. the change in a person's salary from one year to the next. the increase in the minimum wage. (3) QID: 12907 An example of a topic that microeconomists study is Ford Motor Company's market share. the change in the unemployment rate. the change in inflation. the change in real GDP. (4) QID: 12909 Microeconomics is the study of individual firms, households, and markets. True False (5) QID: 12910 Which of the following is not a macroeconomic variable? Real GDP The unemployment rate The rate of inflation The price of pizzas (6) QID: 12913 Macroeconomics approaches the study of economics from the viewpoint of specific product and factor markets. government. consumers. the entire economy. (7) QID: 13726 An economist believes that theory is used to ignore reality. support one's opinions. describe a situation. explain the reasons behind real-world phenomena. (8) QID: 13727 Macroeconomics and microeconomics rely on the same set of tools, which are national legislation and government contracts. antitrust laws. supply and demand analysis. the theories of John Maynard Keynes. (9) QID: 13728 The defining difference between macroeconomics and microeconomics is that macroeconomics focuses on economic aggregates, and microeconomics focuses on individual choices. microeconomics focuses on economic aggregates, and macroeconomics focuses on individual choices. microeconomics uses supply and demand analysis, while macroeconomics is interested in government action. microeconomics is interested in profit analysis, while macroeconomics is interested in developing countries. (10) QID: 13996 Which of the following activities is associated with macroeconomics? An investigation into the relationship between price level and unemployment since World War II An examination of cattle prices over the last decade A study of pricing in the automobile industry An examination of market structure in the software industry BAAAD DDCAA 1.1.4 (1) QID: 12914 Which of the following is not a concern of an economic system? The allocation of scarce resources The distribution of the economy's output The mix of goods and services that an economy produces The fair distribution of income among all citizens (2) QID: 12916 Planned economic systems encourage entrepreneurship and innovation under the direction of a central planning authority. True False (3) QID: 12917 In a market economy, there is no room for individual initiative. a great amount of central planning. a great concentration of economic power in the hands of a few corporations. reliance on the price system to allocate resources. (4) QID: 12921 To decide how to allocate scarce resources, a laissez-faire economic system relies on central planning. prices. barter. a mix of planning and markets. (5) QID: 12923 Which of the following is the least serious problem for laissez-faire economies? Unemployment Consumer sovereignty Providing public goods Income distribution (6) QID: 12924 In a mixed economy, the role of the government is to regulate the balance of laissez-faire and planned economic systems. discourage self-interest. move a laissez-faire economy toward a planned economy. move a planed economy toward a laissez-faire economy. (7) QID: 12926 The American economy is called a mixed system because the answers to economic problems are partially determined by the government and partially determined by private interests. the products of private enterprise are often purchased by government. the capital of most private enterprises comes from government loans. a majority of private enterprises are jointly owned by the government and private enterprise. (8) QID: 12928 One of the main features of a laissez-faire economic system is central economic planning. limits on the right to own property. a limited role for government. extensive government control of the market. (9) QID: 12929 One of the characteristics of a planned economy is the pursuit of self-interest with no central direction. consumer sovereignty. well-developed markets. extensive government control of the market. (10) QID: 12933 In the real world, all economic systems are mixed systems. A mixed system means that governments may be used to improve economic outcomes. extensive consumer choices exist even in an economy that has government regulation. markets exist side-by-side with government-controlled enterprises. All of the above are correct. (11) QID: 12934 Which of the following situations would not demand that governments get involved in the economy? Resource allocation is efficient. Income distribution may be unfair. Market systems may fail to produce some goods that society values. Periods of unemployment and inflation may cause instability in the system. (12) QID: 12936 Many examples of both laissez-faire systems and purely planned systems exist in the world. True False (13) QID: 12937 Consumers generally express their self-interest by attempting to find the lowest price for a product. maximizing profits. finding jobs with the highest wages. minimizing their economic losses. (14) QID: 12939 Both market systems and planned systems must find a method to centralize all decision making in a government agency. promote production efficiency but ignore the distribution of income. promote fairness in income distribution but ignore production efficiency. communicate and coordinate the individual choices of consumers, producers, and resource suppliers. DBDBB AACDD ABAD 1.2.1 (1) QID: 15259 Economists notice specific relationships between data points. True False (2) QID: 15260 Which of the following examples represents a method of presenting data in terms of the relative size of vertical columns? A pie chart A bar graph A scatter plot A line graph (3) QID: 15262 Each point on a two-dimensional graph consists of combinations of four pieces of information. numbers that do not represent information. combinations of variables that represent two pieces of information. no variables. (4) QID: 15264 Each coordinate of a graph is written as the vertical axis y and the horizontal axis x (y,x). the horizontal axis x and the vertical axis y (x,y). a point not representing an axis. the vertical axis x and the horizontal axis y (y,x). (5) QID: 15265 A scatter plot is information arrayed in a two-dimensional space to represent two variables for each data point. a line graph that connects coordinates of a graph. information arrayed in a two-dimensional space to represent three variables for each data point. used when drawing a bar graph. (6) QID: 15266 If two variables, consumption and income, are directly related we can say that a change in consumption will change income but not vice versa. if income increases, then consumption increases. if income increases, then consumption will change but it is impossible to say in which direction it will change. if income increases, then consumption will decrease. BBCBAB 1.2.2 (1) QID: 12972 The slope of a line on a graph is defined as the change in the x-axis variable divided by the change in the y-axis variable. the change in the y-axis variable divided by the change in the x-axis variable. "rise over run." B and C. (2) QID: 12974 Which statement about slopes is accurate? A horizontal line has a slope of 2, and a vertical line has a slope of -2. A horizontal line has an infinite slope, and a vertical line has a slope of zero. A horizontal line has a zero slope, and a vertical line has an infinite slope. The slopes for horizontal and vertical lines cannot be calculated. (3) QID: 12977 If the price of a soft drink changes from $1.00 to $2.00, then the demand curve shifts inward. there is a decrease in the quantity demanded. the demand curve shifts outward. there is an increase in the quantity demanded. (4) QID: 15271 The slope of a demand curve describes consumer behavior by showing that the consumers increase their consumption of a good when price goes down. that suppliers provide more of the good as price goes up. that consumers increase their quantity demanded as price goes up. that consumers do not care about price. (5) QID: 15272 The slope of a demand curve is the change in the x-axis variable divided by the change in the y-axis variable. True False (6) QID: 15273 The slope of the line is defined by the coefficient of Q in the demand formula P = $12 - .50Q. the vertical intercept. the change in y divided by the change in x. A and C. (7) QID: 15275 The vertical intercept in the demand equation is the constant number. True False (8) QID: 15276 Given the demand formula for frisbees of P = $8.30 - 1.23Q, what is the proper interpretation of the value of $8.30? $8.30 represents the highest price the consumer would pay for one frisbee. $8.30 represents the price that would cause the purchases of frisbees to drop to zero. $8.30 represents the slope of the demand formula. Only B and C are correct. (9) QID: 15277 A graph of the demand curve measures the horizontal axis using price and the vertical axis using quantity. the relationship of supply in a market. the inverse relationship between the price of a product and the quantity demanded. the difference between supply and demand. (10) QID: 15278 At what price will eight pizzas be demanded? $12.00 $11.00 $10.00 $8.00 (11) QID: 15279 If the price drops from $12 to $6, how many more pizzas will be demanded? Five Three Eight Six DCBAB DABCD C 1.2.3 (1) QID: 12983 Given the equation for a linear function, y = a + bx, which term represents the intercept? b x bx a (2) QID: 12984 Given the equation for a linear function, y = 20 + .67x, what is the value of y when x is zero? 20 .67 13.4 zero (3) QID: 12988 In the consumption function C = $1000 + .3Y, C is consumption and Y is income. How much is consumption when income is zero? zero $1000 $300 The answer is indeterminate. (4) QID: 12989 If one variable increases when another one increases, then we say that the two variables are inversely related. directly related. nonlinear. negatively related. (5) QID: 15292 A decrease in a consumer's income causes his demand curve to shift outward. shift inward. change slope. remain the same. (6) QID: 15467 When the demand curve shifts, the intercept remains the same. True False (7) QID: 15468 When a demand curve shifts, the slope of the curve remains the same. True False (8) QID: 15469 A shift in the demand curve is caused by a change in price. a change in quantity demanded. an exogenous variable. an endogenous variable. (9) QID: 15470 Exogenous variables on a demand curve are changes in consumer income. changes in the price of other goods. changes in consumer expectations. all of the above. (10) QID: 15472 A shift in the demand curve illustrates a change from one point on the demand curve to another point. can only shift forward. can only shift backward. shifts the whole demand curve inward or outward. (11) QID: 15473 A negative relationship between variables exists when there is no relationship. one variable increases while the other variable decreases. there is a direct relationship. there is a positive relationship. (12) QID: 15476 On a demand curve, an increase in the price of a good will cause a shift in the demand curve. cause an increase in the quantity demanded. cause a decrease in the quantity demanded. cause no change. (13) QID: 15477 Consider the equation of linear function y = -4 + 7x. If it were graphed, the intercept would be 7. 4. -4. -7. DABBB BACDD BCC 1.2.4 (1) QID: 15441 Suppose a line shows that every time a family's income increases by $1.00, the family's spending increases by $.90. If income increases by $300.00, spending must increase by $500.00. $270.00. $333.33. an indeterminate amount. (2) QID: 15442 A relatively flat demand curve indicates that the demand for a product is very sensitive to a change in price. True False (3) QID: 15443 Economists prefer elasticities for all of the following reasons except that they do not depend on units of measurement. they are based on total changes in units. they are based on percentage changes. they depict a relationship independent of how the variables are measured. (4) QID: 15446 The slope of the demand curve is measured by the change in quantity demanded divided by the change in price. the change in the price of one good plus the change in quantity demanded of that good. the change in price divided by the change in the quantity demanded. price divided by quantity. (5) QID: 15447 A steeply-sloping demand curve shows that the change in quantity demanded is very sensitive to a change in price. that the change in one variable is not affected by a change in another variable. that the price and quantity demanded have a direct relationship. that the change in quantity demanded is not very sensitive to a change in price. (6) QID: 15449 The slope of a linear function depends on the units of measurement. True False (7) QID: 15450 Consider the equation of linear function y = -4 + 7x. If it were graphed, the slope would be 7. 4. -4. -7. BABCD AA 1.3.1 (1) QID: 12449 To calculate the slope of the total product curve, take the change in y divided by the change in x. find the slope of a line tangent to the TP curve. subtract the change in y from the change in x. subtract the change in x from the change in y. (2) QID: 12450 All of the following are true of the tangent line except the tangent line just touches total production curve. the slope of the tangent line is equal to the slope of the TP curve at a specific point. the tangent line is used to find the slope of the TP curve. the tangent line cannot be used to find the slope of the TP curve. (3) QID: 12451 The slope of the production function is flatter near the bottom of the curve. True False (4) QID: 12452 On an exponentially increasing curve, the slope is not constant. the slope is constant. there is no slope. the slope equals zero. (5) QID: 12453 The total product curve is the curve of the production function. is not linear. has a varying slope. all of the above. BDAAD 1.4.1 (1) QID: 12227 Which point on the graph is not attainable? A D C All points are attainable. (2) QID: 12228 When increasing opportunity costs exist, resources are not perfectly substitutable for each other. True False (3) QID: 12231 The production possibilities frontier (PPF) represents a collection of points indicating a minimum amount of one good produced for a given quantity of another good produced. all the possibilities of an economy, including ones that are not attainable. a collection of points indicating a maximum amount of one good produced for a given quantity of another good produced. an inefficient use of resources. (4) QID: 12232 The idea of opportunity costs indicates that if the production of one good is increased, the production of another good must decrease. you can produce whatever you have the opportunity to. you can produce anything if you can cover your costs. all of the above. (5) QID: 12233 Any combination of two goods lying outside the production possibilities frontier represents the most efficient use of resources. requires fewer resources than are presently available. represents an unattainable combination of goods. represents an inefficient combination of goods. (6) QID: 12234 The PPF is a tool in economics to illustrate the study of scarcity in situations of rational choice. the study of rational choice in situations of scarcity. the study of supply and demand. none of the above. (7) QID: 13748 Referring to the graph, if this economy moves from point A to point B, it must give up food to get more military equipment. it must give up military equipment to get more food. it has to give up both military equipment and food. it gains both military equipment and food. (8) QID: 13749 In this production possibilities frontier, if the consumer moves from A to B, the consumer is choosing more leisure and less income. the consumer is choosing more income and less leisure. the consumer is choosing more of both leisure and income. the consumer is choosing less of both leisure and income. (9) QID: 13751 In the production possibilities frontier, points A, B, and C represent feasible outcomes for this society. True False (10) QID: 13753 According to the graph, the society has to give up _______ pounds of food to build one car. 10 100 1/10 1000 (11) QID: 13754 According to the graph, the society has to give up _______ cars to produce another pound of food. 1/10 100 10 1000 (12) QID: 13755 Points on the production possibilities frontier are the only efficient production points. True False CACAC BBABC CA 1.4.2 (1) QID: 12238 Mandatory retirement at age 55 will cause an inward shift in the PPF. True False (2) QID: 12239 When a production possibilities frontier shifts outward, society experiences falling production. economic growth. an allocation of resources from rich people to poor people. a change in the income distribution. (3) QID: 12240 An inward shift in the PPF could be caused by the destruction of resources in a war. consumers' preferences to save more than they consume. a decrease in government spending. unemployment. (4) QID: 12241 In a farming economy of wheat and rice, a warming trend occurs. This trend increases the production of both goods. However, the rice production is affected more than the wheat. The production possibilities frontier will shift outward for both goods, but the wheat axis will shift further. shift inward for both goods, but the rice axis will have a greater decrease. shift outward for both goods, but the wheat axis will have a greater decrease. shift outward for both goods, but the rice axis will shift further. (5) QID: 12242 The production possibilities frontier illustrates the supply side of an economy because it makes an engineering statement on efficiency. it tells nothing about consumer preferences. both A and B. none of the above. (6) QID: 12243 An inward shift in the production possibilities frontier (PPF) could be the result of a decline in the general level of education. True False (7) QID: 12244 A shift in the production possibilities frontier curve will occur as a result of all of the following except a change in the endowment of resources. a change in technology. a change in the production of one good relative to another good. a change in land, labor, or capital. (8) QID: 12245 A choice to produce more of one good and less of another results in a movement along the PPF curve. a shift in the PPF curve. expansion of the economy. none of the above. (9) QID: 12246 In a farming economy that produces barley and flax, a new fertilizer is invented. The fertilzer only works on barley. The production possibilities frontier will only shift outward from the barley axis. only shift inward from the barley axis. shift outward from both axes. shift inward from both axes. (10) QID: 15848 A PPF has computers on the horizontal axis and services on the vertical axis. Since 1985, that PPF has become flatter. True False (11) QID: 15849 If a country's PPF shows capital goods on one axis and consumer goods on the other axis, the country's PPF will shift out faster if it spends more on consumer goods in the current time period. True False (12) QID: 15850 Suppose a PPF has capital goods on the vertical axis and consumption goods on the horizontal axis. The PPF has a constant slope with a vertical intercept of 80 and a horizontal intercept of 160. Last year, 160 units of consumption goods were produced, so the economy produced __________ units of capital goods. zero 80 160 240 (13) QID: 15852 In an economy, assume that labor is the only factor of production. One worker can produce either twelve pounds of food a year or six rifles. The slope of the country's PPF is -2 if rifles are on the horizontal axis. True False (14) QID: 18644 Examine the accompanying graph of a society's PPF. The most likely cause of the shift from PPF1 to PPF2 is a decrease in society's preference for food. a decrease in society's preference for the military. destruction of resources because of a war. A and B. (15) QID: 18649 Examine the accompanying graph of a PPF for an agricultural society. The most likely cause of the shift of the PPF is discovery of a new fertilizer that works only on rice. a drought in wheat-producing states. a general decrease in agricultural technology. a shift in society's preference for wheat relative to rice. ABADC ACAAA BAACB 1.4.3 (1) QID: 12247 200 pounds of coffee 40 pounds of coffee 160 pounds of coffee 1 pound of coffee (2) QID: 12249 3 less units of Good A 1 less unit of Good A 2 more units of Good B There are no opportunity costs associated with the increase in production of Good B. (3) QID: 12250 True False (4) QID: 12251 coffee = 90 + 40 (tea) coffee = 200 - 1 (tea) coffee = 160 + 3 -------------------------------------------------------------------------------- 4 (tea) coffee = 160 - 2 -------------------------------------------------------------------------------- 5 (tea) (5) QID: 12252 Bobby can vacuum two rooms in ten minutes or dust two rooms in twenty minutes. The opportunity cost of dusting one more room is vacuuming one room. vacuuming two rooms. that he will not give up vacuuming any rooms. none of the above. (6) QID: 12253 The production possibilities frontier is a straight line when the opportunity cost is zero. the opportunity cost is constant. the opportunity cost is increasing. the opportunity cost is decreasing. (7) QID: 12254 The most output that can be simultaneously produced is nine units of Good A and four units of Good B. The optimal combination is six units of Good A and three units of Good B. If the economy produces eight units of Good A, it can simultaneously produce only two units of Good B. If the production of Good B increases from zero units to two units, the production of Good A falls by three units. (8) QID: 12255 Bobby can vacuum two rooms in ten minutes or dust two rooms in twenty minutes. Using his unit labor requirement, Bobby's potential for vacuuming is twelve rooms per hour or dusting is four rooms per hour. six rooms per hour or dusting is six rooms per hour. twelve rooms per hour or dusting is six rooms per hour. ten rooms per hour or dusting is six rooms per hour. (9) QID: 12256 Bobby can vacuum two rooms in ten minutes or dust two rooms in twenty minutes. Bobby's schedule of possibilities indicates that he can dust two rooms and vacuum six rooms in one hour. he can dust four rooms and vacuum eight rooms in one hour. he can dust three rooms and vacuum six rooms in one hour. all of the above. (10) QID: 12257 Bobby can vacuum two rooms in ten minutes or dust two rooms in twenty minutes. Assuming that dusting is on the vertical axis, the slope of Bobby's production possibilities frontier is 2. - 4. 4. - 1/2. DBBBB BCCCD 1.5.1 (1) QID: 15913 If there is an agricultural economy in which land can be used either as pasture for cattle or as crop land for wheat, the opportunity cost of converting one acre from pasture to wheat production is the profits from the extra wheat production. the pounds of beef that are lost. the number of bushels of wheat produced on an acre. the total number of pounds of beef produced. (2) QID: 15915 For country A to have a comparative advantage in the production of agricultural products means that, relative to country B, with the same resources, country A is better at producing agricultural products than industrial products. country A is better at producing both agricultural products and industrial products. country A can produce fewer industrial products than country B. country A can produce more agricultural products than country B can produce. (3) QID: 16060 Suppose Canada produces only beer and oil. One unit of labor can produce, in a one hour period, either 100 barrels of beer or 10 barrels of oil. Examine the PPF for Canada. What is Canada's opportunity cost for one barrel of oil? 10 barrels of beer 100 barrels of beer 10 hours of labor 1/10 of a barrel of beer (4) QID: 16067 Suppose Canada produces only beer and oil. One unit of labor can produce, in a one hour period, either 100 barrels of beer or 10 barrels of oil. Examine the PPF for Canada. What is Canada's opportunity cost for one barrel of beer? 10 barrels of oil 1/10 of a barrel of oil 1 labor hour 100 barrels of beer BAAB 1.5.2 (1) QID: 15917 The economic term "specialization" refers to the behavior of trading partners when each partner produces goods, the resources for which are scarce. produces only those goods for which it has a comparative advantage produces only those goods for which it has an absolute advantage produces goods, the resources for which are abundant. (2) QID: 15919 The term "comparative disadvantage" means one party in a trade has a lower opportunity cost than its trading partner. has a higher opportunity cost than its trading partner. has an absolute advantage in the goods that it is trading. has no basis for trade with a trading partner. (3) QID: 15921 When each trading partner specializes in the production of a good for which it has a comparative advantage, each partner can gain from trade, but total production remains unchanged. True False (4) QID: 15922 In any trade between two trading partners and two goods, it is possible for one of the partners to have a comparative advantage in both goods. True False (5) QID: 15923 In a two-person, two-good trading model, the individual with a flatter production possibilities frontier has a comparative advantage in neither good. both goods. the good on the horizontal axis. the good on the vertical axis. (6) QID: 15925 Suppose a person can produce either two bushels of wheat per hour or six bushels of corn per hour. This person's opportunity cost of one bushel of corn is three bushels of wheat. one-third of a bushel of wheat. two bushels of wheat. six bushels of wheat. (7) QID: 15926 Suppose a person can produce either two bushels of wheat per hour or six bushels of corn per hour. This person's opportunity cost of one bushel of wheat is three bushels of corn. one-third of a bushel of corn. two bushels of corn. six bushels of corn. (8) QID: 15927 When two people divide their labor according to their comparative advantages, one person will have to work harder than the other person does to complete a given task. more work can be completed in a given period of time. less work can be completed in a given period of time. the same amount of work can be completed as when they divide the labor by absolute advantage. (9) QID: 15928 Two producers can gain from trade if the trade is based on absolute advantage. comparative advantage. the relative resource endowments the two partners have. the relative size of each partner's total output. (10) QID: 15930 From the graphs below, who has a comparative advantage in mopping, Nick or Carl? Carl Nick Cannot be determined from the given information BBBBC BABBA 1.5.3 (1) QID: 12267 A country that has an absolute advantage in a good should restrict imports of that good. can produce the good at a lower opportunity cost than its trading partner. should specialize in the production of that good. can produce the good using fewer resources than its trading partner. (2) QID: 12268 Russia can produce a bushel of corn with four workers and a bushel of rice with three workers. China can produce a bushel of corn with three workers and a bushel of rice with two workers. Which country has a comparative advantage in the production of corn and which has a comparative advantage in rice? Russia has a comparative advantage in the production of corn, and China has a comparative advantage for the production of rice. Russia has a comparative advantage in the production of rice, and China has a comparative advantage for the production of corn. Russia has a comparative advantage in the production of rice. Neither country has a comparative advantage for corn. China has a comparative advantage in the production of rice. Neither country has a comparative advantage for corn. (3) QID: 12274 Russia can produce a bushel of corn with four workers and a bushel of rice with three workers. China can produce a bushel of corn with three workers and a bushel of rice with two workers. Which country has an absolute advantage for either good? Russia has an absolute advantage for both goods. China has an absolute advantage for rice. China has an absolute advantage for both goods. Russia has an absolute advantage for corn. (4) QID: 12271 If trade benefits one country, it will make the other country worse off. True False (5) QID: 12272 Russia can produce a bushel of corn with four workers and a bushel of rice with three workers. China can produce a bushel of corn with three workers and a bushel of rice with two workers. The opportunity cost for Russia to produce one bushel of corn is one bushel of rice. two bushels of rice. one and one-third bushels of rice. four bushels of rice. (6) QID: 12273 Russia can produce a bushel of corn with four workers and a bushel of rice with three workers. China can produce a bushel of corn with three workers and a bushel of rice with two workers. The opportunity cost for China to produce one bushel of corn is one bushel of rice. one and a half bushels of rice. two bushels of rice. three bushels of corn. (7) QID: 12269 Russia can produce a bushel of corn with four workers and a bushel of rice with three workers. China can produce a bushel of corn with three workers and a bushel of rice with two workers. How would these countries specialize? China would produce corn, and Russia would produce rice. China would produce rice, and Russia would produce corn. China would produce all the rice and all the corn because it has an absolute advantage. None of the above DACBC BB View Results TEST 1 User ID: skim7 Attempt: 1 / 1 Out of: 200 Started: February 21, 2005 3:12am Finished: February 21, 2005 4:32am Time spent: 1 hr, 19 min., 25 sec. Student finished 1 hr, 40 min., 35 sec. ahead of the 180 min. time limit. Question 1 (4 points) Macroeconomics looks at Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the behavior of firms. 0.0% b. the behavior of households. 0.0% c. how price and quantity of each good is determined. 100.0% d. none of the above. Score: 0 / 4 Question 2 (4 points) A theory can best be defined as Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. an untested assertion or statement of untested fact. 0.0% b. a testable statement which can be proven to be true or false. 0.0% c. an opinion of a reliable person who studies a subject or discipline. 100.0% d. a deliberate simplification of factual relationships that attempts to explain how those relationships work. Score: 4 / 4 Question 3 (4 points) Economics is generally concerned with Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the operation of banks in the stock market. 0.0% b. business management. 100.0% c. how resources are allocated among alternative goals. 0.0% d. the right time to start a business. Score: 4 / 4 Question 4 (4 points) Eliminating important details in economic analysis is necessary to understand the complexity of the economy. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 4 / 4 Question 5 (4 points) Normative economics: Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. A) deals with "what is." 0.0% b. B) deals with "what ought to be." 0.0% c. C) deals with value judgements. 100.0% d. D) both B and C. Score: 0 / 4 Question 6 (4 points) Positive economics: Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. A) deals with "what is." 0.0% b. B) deals with "what ought to be." 0.0% c. C) deals with value judgements. 0.0% d. D) both B and C. Score: 0 / 4 Question 7 (4 points) Economics: Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. assumes individuals are rational and respond to different incentives. 0.0% b. assumes government involvement in the economy is always beneficial. 0.0% c. assumes individuals really have no choices other than what society imposes on them. 0.0% d. assumes irrationality if people are paid enough. Score: 4 / 4 Question 8 (4 points) The problem of economic scarcity applies Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. only in industrially developed countries because resources are scarce. 0.0% b. only in underdeveloped countries because there are no productive resources. 0.0% c. only in economic systems that are just beginning to develop because specialized resources are scarce. 100.0% d. to all economic systems, regardless of their level of development. Score: 4 / 4 Question 9 (4 points) The real cost of a decision is the opportunity cost measured in the commodities forgone. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 0 / 4 Question 10 (4 points) According to Adam Smith, which of the following statements is true? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. People pursuing their own self-interest can lead to poor outcomes, such as pollution. 0.0% b. Too much monopoly power can become a problem when people are allowed to pursue their own self-interest. 0.0% c. A market system may not do a good job of providing for the poor. 100.0% d. All of the above are true. Score: 4 / 4 Question 11 (4 points) The government has a dominant role in a market economy such as the U.S. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 4 / 4 Question 12 (4 points) An economist might be hired to answer which of the following questions? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. What will the price of oil be next year? 0.0% b. Why is the median income of women about half the median income of men? 0.0% c. How much will interest rates change as the government deficit decreases? 100.0% d. All of the above. Score: 4 / 4 Question 13 (4 points) Which of the following is NOT likely to occur in a planned economy? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. The government decides what goods and services are produced. 100.0% b. Product prices are determined by the interaction of supply and demand. 0.0% c. The government sets production goals. 0.0% d. The government determines how goods and services are allocated among the consumers. Score: 4 / 4 Question 14 (4 points) Consumers generally express their self-interest by Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. attempting to find the lowest price for a product. 0.0% b. maximizing profits. 0.0% c. finding jobs with the highest wages. 0.0% d. minimizing their economic losses. Score: 4 / 4 Question 15 (4 points) An example of a real variable is Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the change in the number of cars produced from one year to the next. 0.0% b. the change in the price of cars from one year to the next. 0.0% c. the change in a person's salary from one year to the next. 0.0% d. the increase in the minimum wage. Score: 4 / 4 Question 16 (4 points) "The hotter it gets, the more water people drink." This statement implies that the relationship between temperature and water consumption must have Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a negative slope. 100.0% b. a positive slope. 0.0% c. a slope always equal to one. 0.0% d. a slope always equal to 45 degrees. Score: 4 / 4 Question 17 (4 points) The slope of a straight line Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. is the rise over the run. 0.0% b. is constant along the whole curve. 0.0% c. will be negative if there is an inverse relationship between the variables. 100.0% d. All of the above are true. Score: 4 / 4 Question 18 (4 points) X Y 2 8 4 12 6 16 8 20 10 24 Given the above data, X and Y exhibit: Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. A direct relationship 0.0% b. An inverse relationship 0.0% c. No mathematical relationship Score: 4 / 4 Question 19 (4 points) The origin of a graph is the point at which Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a demand curve starts. 0.0% b. both variables have positive values. 100.0% c. both variables have values equal to zero. 0.0% d. any two curves on the graph intersect. Score: 4 / 4 Question 20 (4 points) Graphs are valuable because they facilitate interpretation of data. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 4 / 4 Question 21 (4 points) A tangent is: Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. A straight line that shares a single point with another curve 0.0% b. A straight line that bisects a non-linear curve 0.0% c. The slope of the line segment between 2 points of a non-linear curve 0.0% d. A non-linear curve that gets close to, but never touches, the X or Y axis Score: 4 / 4 Question 22 (4 points) The following table gives data relating a variable X (measured on the horizontal axis) to a variable Y (vertical axis). The slope of the line described by this relationship is X 1 3 5 Y 6 14 22 Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. two. 100.0% b. four. 0.0% c. eight. 0.0% d. different at different points along the line. Score: 4 / 4 Question 23 (4 points) X Y 2 8 4 2 6 0 8 2 10 8 Given the data above, if you were to plot the points you would see a(n): Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. downward sloping straight line 0.0% b. upward sloping straight line 0.0% c. upward sloping non-linear curve 0.0% d. downward sloping non-linear curve 100.0% e. non-linear curve that switches from an inverse to a direct relationship Score: 4 / 4 Question 24 (4 points) Which statement about slopes is accurate? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. A horizontal line has a slope of 2, and a vertical line has a slope of -2. 0.0% b. A horizontal line has an infinite slope, and a vertical line has a slope of zero. 100.0% c. A horizontal line has a zero slope, and a vertical line has an infinite slope. 0.0% d. The slopes for horizontal and vertical lines cannot be calculated. Score: 4 / 4 Question 25 (4 points) Suppose a line shows that every time a family's income increases by $1.00, the family's spending increases by $0.90. If income increases by $300.00, spending must increase by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. $500.00. 100.0% b. $270.00. 0.0% c. $333.33. 0.0% d. an indeterminate amount. Score: 4 / 4 Question 26 (4 points) Whenever a society forgoes current consumption to invest in capital goods, the Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. less the society can consume next year. 0.0% b. easier it will be for the society to consume less in the future because people will become accustomed to less. 100.0% c. more the society can produce and consume in the future. 0.0% d. less capital the society can produce in the future. Score: 4 / 4 Question 27 (4 points) The graph shows a production possibilities curve for a student who spends 8 hours a week studying. How could the student get a B in both classes? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. The student could spend 5 hours on economics and 3 on marketing. 0.0% b. The student could spend 5 hours on marketing and 3 on marketing. 100.0% c. The student could increase the total amount of time studying on economics and marketing. 0.0% d. The student cannot get a B in both classes. Score: 4 / 4 Question 28 (4 points) When shifting from point A to point B, the opportunity cost of 1,000 additional tractors is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. one tractor. 0.0% b. 75 tons of butter. 100.0% c. 0.75 million tons of butter. 0.0% d. 4.75 million tons of butter. Score: 4 / 4 Question 29 (4 points) If the farmer is producing 5000 bushels of soybeans at point b in the figure, we know that Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the farmer is not using his resources efficiently. 0.0% b. the farmer is using his land to produce a crop other than soybeans or corn. 0.0% c. the farmer must be using more land than was used in constructing the production possibilities curve. 0.0% d. the farmer is using his resources efficiently. Score: 4 / 4 Question 30 (4 points) A PPF will be bowed outward if Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. there is scarcity. 0.0% b. increased production of one good means less production of the other good. 0.0% c. the supply of resources is fixed. 100.0% d. resources are not equally well-suited to the production of both goods. Score: 4 / 4 Question 31 (4 points) A point outside a production possibilities curve indicates Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. that resources are not being used efficiently. 100.0% b. an output combination that society cannot attain given its current level of resources and technology. 0.0% c. that resources are being used very efficiently. 0.0% d. that both goods are characterized by increasing costs. Score: 4 / 4 Question 32 (4 points) Any point inside the production possibilities frontier is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. efficient. 100.0% b. inefficient. 0.0% c. unattainable. 0.0% d. irrelevant. Score: 4 / 4 Question 33 (4 points) The reason that most PPFs are bowed outward (concave) rather than a straight line is that most resources used in production are Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. equally suited for the production of all goods. 100.0% b. better suited for some goods than others. 0.0% c. used efficiently in production. 0.0% d. relatively more expensive at low levels of production. Score: 4 / 4 Question 34 (4 points) The shape of this PPF indicates that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the opportunity cost of producing beef is the same as the opportunity cost of producing wheat. 100.0% b. as beef production increases, its opportunity cost increases. 0.0% c. as beef production increases, its opportunity cost decreases. 0.0% d. as beef production increases, its opportunity cost is constant. Score: 4 / 4 Question 35 (4 points) Which of the following statements is FALSE? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. As society increases its wealth, the problem of scarcity disappears. 0.0% b. The factors of production are used to produce outputs that help society satisfy its wants. 0.0% c. Even though a society faces the problem of scarcity, it does not necessarily suffer from poverty. 0.0% d. Land and labor are both factors of production. Score: 4 / 4 Question 36 (4 points) In one day, Joe can produce 24 bushels of wheat (W) or 8 pounds of rice (R). Joe's opportunity cost of 1 bushel of wheat is Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. 1/3 pound of rice. 0.0% b. 3 pounds of rice. 0.0% c. 1/8 pound of rice. 0.0% d. 8 pounds of rice. Score: 4 / 4 Question 37 (4 points) Any combination of two goods lying outside the production possibilities frontier Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. represents the most efficient use of resources. 0.0% b. requires fewer resources than are presently available. 100.0% c. represents an unattainable combination of goods. 0.0% d. represents an inefficient combination of goods. Score: 4 / 4 Question 38 (4 points) When the demand curve shifts, the intercept remains the same. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 4 / 4 Question 39 (4 points) In the U.S., it requires 20 labor hours to produce one bushel of wheat and 80 labor hours to produce one computer. In France, it requires 25 labor hours to produce one bushel of wheat and 75 labor hours to produce one computer. The opportunity cost of one bushel of wheat in the U.S. is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 3 computers. 0.0% b. 1/3 computer. 0.0% c. 20 labor hours. 100.0% d. 1/4 computer. Score: 4 / 4 Question 40 (4 points) A person has a comparative advantage in an activity whenever she Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. has an absolute advantage in the activity. 100.0% b. can perform the activity at a lower opportunity cost than can another person. 0.0% c. can do the activity in less time than anyone else. 0.0% d. can do everything better than anyone else. Score: 4 / 4 Question 41 (4 points) A country has a comparative advantage over another in the production of gadgets if Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. it can produce more gadgets than can the other country. 0.0% b. it can produce more gadgets than can any other country. 0.0% c. it can produce gadgets more efficiently than it can produce any other good. 100.0% d. it can produce gadgets at a lower opportunity cost than can the other country. Score: 4 / 4 Question 42 (4 points) The United States produces both automobiles and computers more efficiently than Mexico. Nevertheless, it is possible that both nations would benefit from trade in these items. The reason for this is Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the concept of comparative advantage. 0.0% b. the idea of redistribution of income. 0.0% c. externalities. 0.0% d. the concept of absolute advantage. Score: 4 / 4 Question 43 (4 points) A country has an absolute advantage over another in the production of widgets if Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. it can produce widgets using smaller quantities of resources than can the other country. 0.0% b. it can produce more widgets than can the other country. 0.0% c. it can produce more widgets in a year than can the other country. 0.0% d. it can produce widgets at a lower opportunity cost than can the other country. Score: 4 / 4 Question 44 (4 points) If one person has an absolute advantage in the production of both goods, then Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. that person must also have the comparative advantage in both goods. 0.0% b. that person cannot benefit from trade. 100.0% c. that person will have the comparative advantage in only one good. 0.0% d. it is in that person's interest to specialize in the production of both goods. Score: 4 / 4 Question 45 (4 points) In Japan the opportunity cost of producing 1 VCR is 1 computer. In the United States the opportunity cost of producing 1 VCR is 2 computers. Japan has a comparative advantage in producing Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. VCRs. 0.0% b. computers. 0.0% c. both goods. 0.0% d. neither good. Score: 4 / 4 Question 46 (4 points) The following is a schedule comparing output per worker for wheat and oil in Alpha and Omega. Wheat (in bushels) Oil (in barrels) ALPHA 500 40 OMEGA 100 80 Which country has the absolute advantage in wheat production, and which country has the absolute advantage in oil production? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Alpha has the absolute advantage in wheat; Omega has the absolute advantage in oil. 0.0% b. Omega has the absolute advantage in wheat; Alpha has the absolute advantage in oil. 0.0% c. Alpha has the absolute advantage in both goods. 0.0% d. Omega has the absolute advantage in both goods. Score: 4 / 4 Question 47 (4 points) When nations specialize in their areas of comparative advantage and then trade with the rest of the world, the result is that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the average standard of living in the world will go down. 100.0% b. the average standard of living in the world will go up. 0.0% c. the world will move from a point on the production possibilities curve to a point inside the curve. 0.0% d. worldwide economic efficiency will decrease. Score: 4 / 4 Question 48 (4 points) Division of labor refers to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. dividing tasks up into several subtasks and having one person perform these subtasks in a certain order. 0.0% b. the separation of hourly workers from salaried workers. 100.0% c. assigning different workers to different tasks. 0.0% d. separating union workers from nonunion workers. Score: 4 / 4 Question 49 (4 points) The term "comparative disadvantage" means one party in a trade Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. has a lower opportunity cost than its trading partner. 100.0% b. has a higher opportunity cost than its trading partner. 0.0% c. has an absolute advantage in the goods that it is trading. 0.0% d. has no basis for trade with a trading partner. Score: 4 / 4 Question 50 (4 points) In a two-person, two-good trading model, the individual with a flatter production possibilities frontier has a comparative advantage in Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. neither good. 0.0% b. both goods. 100.0% c. the good on the horizontal axis. 0.0% d. the good on the vertical axis. Score: 4 / 4 Total score: 184 / 200 = 92.0% View Results Quiz 2.1 User ID: skim7 Attempt: 3 / 3 Out of: 25 Started: February 27, 2005 10:32am Finished: February 27, 2005 10:33am Time spent: 1 min. 4 sec. Question 1 (1 point) The price of labor is the wage rate. What happens to the quantity of labor demanded if wages increase? Student response: Percent Value Student Response Answer Choices a. It increases. 100.0% b. It decreases. c. It does not change. d. Uncertain. Economic theory has no answer to this question. Score: 1 / 1 Question 2 (1 point) The demand curve for a good Student response: Percent Value Student Response Answer Choices a. connects points describing how much consumers actually bought at different prices during a particular period. b. connects points describing how much consumers actually bought at different prices in different periods. 100.0% c. connects points describing how much consumers would have been willing and able to buy at different prices during a particular period. d. connects points describing how much consumers would have been willing and able to buy at different prices in different periods. Score: 1 / 1 Question 3 (1 point) In an attempt to forecast enrollment, a major university hired an economist to give a "head count." One variable which she would probably emphasize more than any other in trying to forecast is Student response: Percent Value Student Response Answer Choices 100.0% a. tuition (the price of attending). b. the employment opportunities that college opens up. c. survey results on public interest in education. d. her instinct about what the public wants. Score: 1 / 1 Question 4 (1 point) If the government has stated that it will buy any amount of good X offered at $30, then which demand curve below is appropriate? Student response: Percent Value Student Response Answer Choices 100.0% a. b. c. d. Score: 1 / 1 Question 5 (1 point) Demand and quantity demanded are the same thing. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 6 (1 point) A demand schedule shows Student response: Percent Value Student Response Answer Choices a. the "market potential" for a product. 100.0% b. how much consumers are willing and able to buy at different prices. c. possible combinations of output under different conditions. d. how much producers would like to sell at different prices. Score: 1 / 1 Question 7 (1 point) A 1985 Harvard study showed that the price of cigarettes does not affect how much an individual smokes but whether he smokes. If this is correct, which of the below graphs shows the typical individual's demand curve for cigarettes? (This is a tough one!) Student response: Percent Value Student Response Answer Choices a. b. 100.0% c. d. Score: 1 / 1 Question 8 (1 point) The demand curve depicts information about the quantities demanded as prices have changed over several time periods. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 9 (1 point) A demand curve can be thought of as Student response: Percent Value Student Response Answer Choices a. a graphical display of "market potential." 100.0% b. a graphical representation of the information in a demand schedule. c. showing how much people want to buy. d. a forecasting tool. Score: 1 / 1 Question 10 (1 point) Firms often seek to borrow money to expand their capital stock, and the price they pay for the money is the interest rate. What happens to quantity of money demanded if the interest rate increases? Student response: Percent Value Student Response Answer Choices a. It increases. 100.0% b. It decreases. c. It does not change. d. Uncertain. Economic theory has no answer to this question. Score: 1 / 1 Question 11 (1 point) Which of the following would cause an upward movement (to the left) along the demand curve for European autos in the United States? Student response: Percent Value Student Response Answer Choices a. an increase in the price of American autos b. a decrease in the price of American autos c. an increase in income in the United States 100.0% d. an increase in the price of European autos Score: 1 / 1 Question 12 (1 point) The demand curve for a typical good has Student response: Percent Value Student Response Answer Choices 100.0% a. a negative slope because some consumers switch to other goods as the price of the good rises. b. a negative slope because consumer incomes fall as the price of the good rises. c. a negative slope because the good has less "snob appeal" as its price falls. d. None of the above is correct. Score: 1 / 1 Question 13 (1 point) The law of demand states that Student response: Percent Value Student Response Answer Choices a. an increase in price will diminish the quantity demanded only if income falls as well. 100.0% b. an increase in price will diminish the quantity demanded if income remains constant. c. an increase in price can lead to an increase in the quantity demanded only if income goes up. d. the effect of an increase in price depends on how income changes. Score: 1 / 1 Question 14 (1 point) Assume the demand curve for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen (be careful of terminology!), Student response: Percent Value Student Response Answer Choices a. the demand for cookies will fall. b. the demand for cookies will rise. 100.0% c. a larger quantity of cookies will be demanded. d. a smaller quantity of cookies will be demanded. Score: 1 / 1 Question 15 (1 point) A decrease in price Student response: Percent Value Student Response Answer Choices 100.0% a. causes a downward movement (to the right) along the same demand curve. b. causes an upward movement (to the left) along the same demand curve. c. changes the demand curve. d. causes a downward movement (to the right) along the same demand curve if income decreases. Score: 1 / 1 Question 16 (1 point) If the government has stated that it will pay whatever it must to obtain 1,000 units of good X, then which demand curve in the figure below is appropriate? Student response: Percent Value Student Response Answer Choices a. 100.0% b. c. d. Score: 1 / 1 Question 17 (1 point) Assume that the figure below shows demand for new houses, a normal good. A decrease in the income of buyers will change demand from Student response: Percent Value Student Response Answer Choices a. D1 to D2 100.0% b. D2 to D1 c. D2 to D3 d. D1 to D3 Score: 1 / 1 Question 18 (1 point) Market demand curves are found by Student response: Percent Value Student Response Answer Choices a. vertically summing individual demand curves. 100.0% b. horizontally summing individual demand curves. c. summing individual demand curves in a parallel fashion. d. adding the slopes of individual demand curves. Score: 1 / 1 Question 19 (1 point) Which of the following would cause a decrease in the demand for Pepsi (i.e., a leftward shift of the Pepsi demand curve)? Student response: Percent Value Student Response Answer Choices a. An increase in the price of Coke. 100.0% b. A decrease in the price of Coke. c. An increase in the price of Pepsi. d. A decrease in the price of Pepsi. Score: 1 / 1 Question 20 (1 point) The Wall Street Journal reports that "hard times aid poultry companies as people eat cheaper fowl." In the language of economists, this means Student response: Percent Value Student Response Answer Choices 100.0% a. chicken is an inferior good. b. chicken is a normal good. c. demand for chicken does not obey the law of demand. d. people's tastes change during recessions. Score: 1 / 1 Question 21 (1 point) If VCRs and rental videos are complementary goods, then a decrease in the price of VCRs would increase the Student response: Percent Value Student Response Answer Choices a. demand for rental videos. b. quantity of VCRs demanded. c. quantity of rental videos demanded. 100.0% d. both demand for rental videos and quantity of VCRs demanded. Score: 1 / 1 Question 22 (1 point) In the figure below, an increase in population (which will increase the number of buyers of the good) will change demand from Student response: Percent Value Student Response Answer Choices 100.0% a. D1 to D2 b. D2 to D1 c. D3 to D2 d. D3 to D1 Score: 1 / 1 Question 23 (1 point) Assume that the figure below shows demand for orange juice. An increase in the price of soda (a substitute for orange juice) will change demand from Student response: Percent Value Student Response Answer Choices 100.0% a. D1 to D2 b. D2 to D1 c. D3 to D2 d. D3 to D1 Score: 1 / 1 Question 24 (1 point) If price rises, what happens to demand for a product? Student response: Percent Value Student Response Answer Choices a. It increases. b. It decreases. 100.0% c. It does not change. d. Uncertain. Economic theory has no answer to this question. Score: 1 / 1 Question 25 (1 point) Which of the following will shift the demand curve for good X? Student response: Percent Value Student Response Answer Choices 100.0% a. a change in the income of buyers of good X b. a change in the price of good X c. a change in the supply of good X d. All of the above are correct. Score: 1 / 1 Total score: 25 / 25 = 100.0% View Results Quiz 2.2 User ID: skim7 Attempt: 1 / 3 Out of: 20 Started: February 27, 2005 10:35am Finished: February 27, 2005 10:40am Time spent: 4 min. 53 sec. Question 1 (1 point) Suppose the numbers in parentheses represent two points on a line: (59 billion quarts; $4) and (78 billion quarts; $6). The line is likely a Student response: Percent Value Student Response Answer Choices a. production possibilities frontier for milk. 100.0% b. supply curve for milk. c. demand curve for milk. d. ray through the origin. Score: 1 / 1 Question 2 (1 point) Studies at Cornell University revealed that chickens grow 2 percent more weight when a red mitten is placed in their cage and Vivaldi is played in the coop. Resultant feed savings are estimated at $60 million a year. In the chicken market, the Student response: Percent Value Student Response Answer Choices a. demand curve shifts to the right. 100.0% b. supply curve shifts to the right. c. price will rise. d. quantity sold will fall. Score: 1 / 1 Question 3 (1 point) The supply curve shows Student response: Percent Value Student Response Answer Choices a. the same basic information as the demand curve. b. who will have an opportunity to produce or purchase an item. 100.0% c. the quantity sellers are willing and able to put on the market as a function of price. d. what quantities have been sold over the past few weeks or months. Score: 1 / 1 Question 4 (1 point) If price rises, what happens to supply for the product? (Watch terminology!) Student response: Percent Value Student Response Answer Choices a. It increases. b. It decreases. 100.0% c. It does not change. d. Uncertain. Economic theory has no answer to this question. Score: 1 / 1 Question 5 (1 point) The price for labor is the wage rate. What happens to the supply of labor if wages increase? (Watch terminology!) Student response: Percent Value Student Response Answer Choices a. It increases. b. It decreases. 100.0% c. It does not change. d. Uncertain. Economic theory has no answer to this question. Score: 1 / 1 Question 6 (1 point) Why does quantity supplied increase when price increases? Student response: Percent Value Student Response Answer Choices 100.0% a. Producers find it more profitable to make the item. b. People "drop out" of the market, so buyers find it more abundant. c. As demand decreases with a high price, surpluses appear. d. All of the above. Score: 1 / 1 Question 7 (1 point) A severe freeze has once again damaged the Florida orange crop. (Although this wasn't mentioned specifically in the lesson, weather is an input in the production of many goods.) The impact on the market for oranges will be a leftward shift in Student response: Percent Value Student Response Answer Choices a. the demand curve as consumers try to economize because of the shortage. b. both the supply and demand curves. 100.0% c. the supply curve. d. the supply curve and a rightward shift in the demand curve, which will result in a higher price. Score: 1 / 1 Question 8 (1 point) The supply curve may shift if any production-related variable changes EXCEPT a change in the price of the good. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 9 (1 point) The supply of newspapers will decline if Student response: Percent Value Student Response Answer Choices 100.0% a. newsprint (an input) becomes more expensive. b. the printers' union makes wage concessions. c. prices are reduced. d. magazine prices rise (assuming magazines are a substitute for newspapers). Score: 1 / 1 Question 10 (1 point) Along a supply curve, Student response: Percent Value Student Response Answer Choices a. supply changes as price changes. 100.0% b. quantity supplied changes as price changes. c. supply changes as technology changes. d. quantity supplied changes as technology changes. Score: 1 / 1 Question 11 (1 point) An important assumption that is made when constructing a supply schedule is Student response: Percent Value Student Response Answer Choices a. only price and quantity matter in determining supply. b. firms always want to sell a certain amount of a product. c. supply is too important to be left to the free market. 100.0% d. all other determinants of supply are held constant. Score: 1 / 1 Question 12 (1 point) An increase in consumer income will shift both the supply and demand curves. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 13 (1 point) Assume that the figure below shows the supply of soda. An increase in the price of syrup used in the production of soda will shift supply from Student response: Percent Value Student Response Answer Choices a. S1 to S2 100.0% b. S2 to S1 c. S2 to S3 d. S1 to S3 Score: 1 / 1 Question 14 (1 point) Assuming that resources are specialized, the opportunity cost of an item increases as production of it rises. Therefore, we expect that firms will produce more if Student response: Percent Value Student Response Answer Choices 100.0% a. the price increases. b. the price decreases. c. the opportunity cost is greater than the price. d. the government asks firms to produce more. Score: 1 / 1 Question 15 (1 point) The price for labor is the wage rate. What happens to the quantity of labor supplied if wages increase? Student response: Percent Value Student Response Answer Choices 100.0% a. It increases. b. It decreases. c. It does not change. d. Uncertain. Economic theory has no answer to this question. Score: 1 / 1 Question 16 (1 point) In the figure below, an increase in the number of producers will shift market supply from Student response: Percent Value Student Response Answer Choices 100.0% a. S1 to S2 b. S2 to S1 c. S3 to S2 d. S3 to S1 Score: 1 / 1 Question 17 (1 point) Assume that the figure below shows the supply of new houses. An improvement in the technology for building houses will shift supply from Student response: Percent Value Student Response Answer Choices 100.0% a. S1 to S2 b. S2 to S1 c. S3 to S2 d. S3 to S1 Score: 1 / 1 Question 18 (1 point) Supply curves represent producers' Student response: Percent Value Student Response Answer Choices a. inventories. b. willingness to buy. 100.0% c. willingness to sell. d. total production. Score: 1 / 1 Question 19 (1 point) A decrease in the market price of a product, ceteris paribus, results in Student response: Percent Value Student Response Answer Choices 100.0% a. a movement down (to the left) along a given supply curve, decreasing quantity supplied. b. a movement up (to the right) along a given supply curve, increasing quantity supplied. c. an inward shift of the supply curve. d. an outward shift of the supply curve. Score: 1 / 1 Question 20 (1 point) Assume that the figure below shows the supply of orange juice. A decrease in the wage rate paid to orange juice industry workers will shift supply from Student response: Percent Value Student Response Answer Choices 100.0% a. S1 to S2 b. S2 to S1 c. S3 to S2 d. S3 to S1 Score: 1 / 1 Total score: 20 / 20 = 100.0% View Results Quiz 2.3 User ID: skim7 Attempt: 3 / 3 Out of: 20 Started: February 27, 2005 10:56am Finished: February 27, 2005 10:57am Time spent: 0 min. 51 sec. Question 1 (1 point) A decrease in the price of an input going into the production of a product will result in Student response: Percent Value Student Response Answer Choices a. a decrease in equilibrium price and a decrease in equilibrium quantity. b. an increase in equilibrium price and an increase in equilibrium quantity. 100.0% c. a decrease in equilibrium price and an increase in equilibrium quantity. d. an increase in equilibrium price and no change in equilibrium quantity. Score: 1 / 1 Question 2 (1 point) A shortage will tend to occur at which price in the following figure? Student response: Percent Value Student Response Answer Choices a. P1 b. P2 100.0% c. P3 d. None of the above. Score: 1 / 1 Question 3 (1 point) Some medical authorities announced in the late 1980s that an acne medicine named Retin-A also had previously unknown wrinkle-reducing properties. (In other words, it made its users look younger!) An economist would expect to find that, after this announcement, the price of Retin-A _____ and the quantity sold _____. Student response: Percent Value Student Response Answer Choices a. rose; fell 100.0% b. rose; rose c. fell; fell d. fell; rose Score: 1 / 1 Question 4 (1 point) At price P1 in the following figure, what will tend to happen? Student response: Percent Value Student Response Answer Choices a. There will be a shortage, and the price will fall. b. There will be a shortage and the price will rise. c. There will be a surplus, and the price will rise. 100.0% d. There will be a surplus, and the price will fall. Score: 1 / 1 Question 5 (1 point) A decrease in demand will have what effect on equilibrium price and quantity? Student response: Percent Value Student Response Answer Choices a. Price will increase, quantity will decrease. b. Price will decrease, quantity will increase. c. Both price and quantity will increase. 100.0% d. Both price and quantity will decrease. Score: 1 / 1 Question 6 (1 point) Which of the following is the most likely explanation for why airlines tend to lower ticket prices in the winter? Student response: Percent Value Student Response Answer Choices a. Supply is relatively variable, and a drop in demand lowers equilibrium price. b. Demand is relatively variable, and a drop in supply lowers equilibrium price. c. Airlines like to surprise passengers with sales on ticket prices. 100.0% d. Supply is relatively fixed, and a drop in demand lowers equilibrium price. Score: 1 / 1 Question 7 (1 point) The presence of scalpers (people selling tickets at a price above the quoted price, P*) at a recent Super Bowl game suggests that the market for stadium seats could be represented by which graph below? Student response: Percent Value Student Response Answer Choices 100.0% a. b. c. d. Score: 1 / 1 Question 8 (1 point) Last year, 1,000 cases of elixir were sold at $10; this year, 1,200 cases were sold at $12. The most probable interpretation of these data is that the Student response: Percent Value Student Response Answer Choices a. supply and demand curves are shifting to the right. b. supply and demand curves are shifting to the left. c. supply curve has shifted to the left, with no change in demand. 100.0% d. demand curve has shifted to the right, with no change in supply. Score: 1 / 1 Question 9 (1 point) Are markets always in equilibrium? Student response: Percent Value Student Response Answer Choices a. Yes, they are always at the equilibrium point, or very close to it. b. Yes, because so few things tend to alter supply and demand. 100.0% c. No, but if there is no interference, they tend to move toward equilibrium. d. No, they never "settle down" into a stable price and quantity. Score: 1 / 1 Question 10 (1 point) After the strike against the Financial News in London began, the number of copies of the Broad Street Journal sold in England increased dramatically, yet there has been no increase in price. Which supply and demand picture in the figures below represents the situation for the Broad Street Journal before the strike? Student response: Percent Value Student Response Answer Choices a. 100.0% b. c. d. Score: 1 / 1 Question 11 (1 point) In high schools, all teachers are paid the same based on years of service and regardless of specialization. Beginning in the 1970s, a shortage of science and math teachers developed as private industry paid more for math and science skills than schools could offer. At the same time, a decline in the number of school-age children tended to reduce the demand for all other teachers, which led to a surplus. The economist's solution to this problem would be Student response: Percent Value Student Response Answer Choices a. merit pay to reward the best teachers. b. recognition that all teachers do comparable work and should be paid the same. c. to raise the wages of all teachers. 100.0% d. to raise the wages of teachers in fields that are in short supply and lower those of others. Score: 1 / 1 Question 12 (1 point) The U.S. government banned cigarette advertising on radio and television after January 1971, but magazine advertisements were still legal. You would expect to find that, after the ban took effect, Student response: Percent Value Student Response Answer Choices a. the price of magazine ads for all goods fell. b. the price of magazine ads for only cigarettes fell. 100.0% c. the price of magazine ads for all goods rose. d. the price of magazine ads for only cigarettes rose. Score: 1 / 1 Question 13 (1 point) In the figure below, if the price is fixed at 30, there will be a Student response: Percent Value Student Response Answer Choices a. shortage of 2,000. 100.0% b. surplus of 2,000. c. shortage of 1,000. d. surplus of 1,000. Score: 1 / 1 Question 14 (1 point) The price of gasoline has risen and the quantity sold has fallen. This was likely caused by Student response: Percent Value Student Response Answer Choices 100.0% a. a rise in the price of crude oil. b. a seasonal rise in the demand for gasoline. c. use of a new public transit system. d. a discovery of crude oil in New Jersey. Score: 1 / 1 Question 15 (1 point) If the suppliers of a good will sell any amount at $30 but there are no sales, then the market can best be represented by which graph below? Student response: Percent Value Student Response Answer Choices a. b. c. 100.0% d. Score: 1 / 1 Question 16 (1 point) Grapes can be used for wine or for raisins. Which of the following graphs best depicts the effects on the U.S. raisin market of an increase in imports of foreign wines? (This one is really tough. Start by thinking about how the imported wines will affect the domestic wine industry. What effect will this have on the market for raisins, since grapes can be used to produce wine or raisins?) Student response: Percent Value Student Response Answer Choices a. 100.0% b. c. d. Score: 1 / 1 Question 17 (1 point) In January, 2,500 quarts of ice cream are sold in Boston at $2 a quart. In February, 3,000 quarts are sold at $2.50 a quart. This change in quantity sold and price may have been caused by Student response: Percent Value Student Response Answer Choices a. a reduction in wages in the Boston area. b. the introduction of labor-saving automated ice cream-packing machinery. 100.0% c. the release of a medical study showing that ice cream consumption improves mental health. d. the decision by Boston ice cream sellers to eliminate discount coupons. Score: 1 / 1 Question 18 (1 point) A study of the demand for fresh fish found that meat and poultry prices had a positive impact on the price of fish. In other words, as the price of meat and poultry rose, so did the price of fish. This indicates that Student response: Percent Value Student Response Answer Choices a. fish is a normal good. 100.0% b. meat and poultry are substitutes for fish. c. meat and poultry are complements of fish. d. fish is an inferior good. Score: 1 / 1 Question 19 (1 point) A decrease in supply will have what effect on equilibrium price and quantity? Student response: Percent Value Student Response Answer Choices 100.0% a. Price will increase, quantity will decrease. b. Price will decrease, quantity will increase. c. Both price and quantity will increase. d. Both price and quantity will decrease. Score: 1 / 1 Question 20 (1 point) "Moonshine" is illegal home brew made by adding sugar to accelerate corn fermentation. Ten pounds of sugar are necessary to make a gallon of moonshine. In the mid-1970s, the price of sugar tripled and the price of moonshine skyrocketed from $6 to $15 a gallon. Which graph below best illustrates this? Student response: Percent Value Student Response Answer Choices a. b. c. 100.0% d. Score: 1 / 1 Total score: 20 / 20 = 100.0% 2.1.1 (1) QID: 6012 For most goods, if a consumer's income increases, his/her demand for the goods will decrease. increase. remain unchanged. none of the above. (2) QID: 6013 If you expect to get a large salary increase next month, your demand for most goods will decrease. increase. remain the same. none of the above. (3) QID: 6014 Besides the price of substitutes and complements, other determinants of demand are the price of inputs and natural resources. technology and the number of sellers. the price of the product, income, and consumers' tastes. A and C. (4) QID: 6015 To economists, the Latin phrase ceteris paribus means "all other things equal." True False (5) QID: 6017 Demand is defined by the behavior of producers. the behavior of consumers or households. the behavior of producers and consumers or households. none of the above. (6) QID: 6018 When the price of a substitute for good X rises, the demand for good X increases. decreases. stays constant. will increase at first but decreases over time. (7) QID: 6019 When the price of a complement for good X rises, the demand for good X increases. decreases. stays constant. will decrease at first but increases over time. (8) QID: 6021 If a type of clothing suddenly becomes fashionable, there will be a movement down this goods demand curve. movement up this goods demand curve. shift outward in the goods demand curve. shift inward of the good's demand curve. (9) QID: 6022 Which of the following is not a determinant of an individuals demand for a good? Income The price of substitutes and complements The price of the good The number of buyers (10) QID: 6023 The law of demand states, all other things being equal, that goods will be supplied to just equal consumer demand. that consumer demand will determine the level of firm supply. that consumers will buy more of a good if the price rises. that consumers will buy more of a good if the price falls. (11) QID: 6024 An increase in the price of Fords will have what likely effect in the market for Chevrolets? It will have no effect. The demand for Chevrolets will decrease. The demand for Chevrolets will increase. The supply of Chevrolets will increase. (12) QID: 6016 A demand function is a mathematical formula that specifies the relationship between the demand for a good or service and the variables that influence that demand. True False BBCAB ABCDD CA 2.1.2 (1) QID: 12284 A demand schedule shows the relationship between demand and supply. the relationship between the price of a good and the quantity demanded of the good. the amount of a good purchased at different points in time. the change in demand when a consumer's income changes. (2) QID: 12285 When the price of a good rises, consumers will stop buying the more expensive goods and switch to substitutes. This behavior is explained by the income effect. the substitution effect. both the income and substitution effects. none of the above. (3) QID: 12286 The income effect says that when the price of a good increases, consumers buy less of the good because their purchasing power is shrinking in terms of that particular good. True False (4) QID: 12287 Assuming that hamburgers and mustard are complements, a decrease in the price of hamburgers would increase the demand for mustard. True False (5) QID: 12288 The demand curve shows the relationship between the price of a good and the quantity that the consumer is willing and able to purchase in a given period of time, holding all other factors that influence consumer behavior constant. shows the relationship between the price of a good and the quantity that the producer is willing and able to supply in a given period of time, holding all other factors that influence producer behavior constant. shows the relationship between the price of a good and the quantity that the consumer is willing and able to purchase in a given period of time, without holding all other factors that influence consumer behavior constant. none of the above. (6) QID: 12289 A change in price of a particular good indicates all of the following except a change on the demand curve. a change in the quantity demanded. a shift in the demand curve. demand has moved to a new point on the demand curve. (7) QID: 12290 The demand curve is downward-sloping because as the price of the good rises, the quantity demanded falls. the law of demand states that as price increases, consumers are willing and able to purchase less. none of the above. A and B. (8) QID: 13766 On a demand curve, a consumers income and the goods price are held constant. only the price is held constant. all determinants are held constant. all nonprice determinants are held constant. (9) QID: 13768 The law of demand states, all other things equal, that goods will be supplied to just equal consumer demand. that consumers demand will determine the level of firm supply. that consumers will buy more of a good if price rises. that consumers will buy more of a good if price falls. BBAAA CDDD 2.1.3 (1) QID: 12291 If a household's income decreases, the demand for normal goods will decrease, and the demand curve will shift outward. the demand for normal goods will decrease, and the demand curve will shift inward. the supply of normal goods will decrease, and the supply curve will shift inward. the supply of normal goods will decrease, and the supply curve will shift outward. (2) QID: 12293 If the price of bread falls from $3 per loaf to $1.50 per loaf, the demand curve for bread will shift inward. the demand curve for bread will shift outward. the demand curve's slope changes. households will demand a different quantity of bread. (3) QID: 12294 A decrease in income will cause the demand curve for a particular good to shift outward. shift inward. remain constant. none of the above. (4) QID: 12295 A movement along the demand curve for a particular good is a response to the change in price of a particular good. True False (5) QID: 12296 A shift in the demand curve is caused by a change in one of the variables that affects the demand curve and is called a change in the quantity demanded. True False (6) QID: 12297 Households will buy more of a normal good at every price when the household income increases. the household income decreases. the household income stays the same. none of the above. (7) QID: 12298 A decrease in income will cause the quantity demanded for a normal good to increase and the demand curve to shift outward. the quantity demanded for a normal good to decrease and the demand curve to shift inward. an increase in the demand for a normal good at every price. a decrease in the demand for a normal good at every price. (8) QID: 13774 Which of the following would be a determinant of quantity demanded? The price of the good The price of related goods Income Expectations about the future price of the product (9) QID: 13775 What will happen to the current market for bread if there is a severe drought in wheat-producing states? The demand for bread will increase. The demand for bread will not be affected. The supply of bread will increase. The demand for bread will decrease. (10) QID: 13776 Which of the following would not change the demand for a good? A change in income A change in the price of an input good A change in the expected future price of the good A change in the number of sellers BDBAB ADAAD 2.1.4 (1) QID: 12299 Inferior goods are those that most consumers would prefer not to consume but often do because of low income. True False (2) QID: 12300 If you expect the price of ice cream to increase next week, your demand curve for ice cream will shift inward. You will buy next week. shift inward. You decide not to buy ice cream for a long time. shift outward. You will buy at the lower price today. not shift at all. (3) QID: 12301 Factors that shift the demand curve are changes in income. changes in the price of substitutes and complements. changes in the expected future prices. all of the above. (4) QID: 12302 In the demand and supply model, when the price of a good increases, income usually increases. the model shows the change by shifting the demand curve. there is movement along the demand curve but it does not shift. all other determinants of demand can also change. (5) QID: 12304 What happens to the demand curve for hot dogs when the price of hot dog buns decreases? The demand curve for hot dogs will shift outward. The demand curve for hot dogs will shift inward. The demand curve for hot dogs will not shift. The change will occur on the existing demand curve. (6) QID: 12305 When the price of bagels decreases, the demand for English muffins increases. decreases. shifts to a new point of the existing demand curve. none of the above. (7) QID: 12306 When income decreases, the demand for inferior goods decreases. increases. remains constant. none of the above. (8) QID: 13777 An increase in the price of Fords will have what likely effect in the market for Chevrolets? It will have no effect. The demand for Chevrolets will decrease. The demand for Chevrolets will increase. The supply of Chevrolets will increase. (9) QID: 13779 If the demand for steak falls when a consumers income rises, then there is evidence that steak is a normal good. True False (10) QID: 13780 Which of the following items go together? Change in quantity demanded and movement along a demand curve Change in income and movement along a demand curve Change in price and shift of the demand curve Change in quantity demanded and shift in the demand curve ACDCA BBCBA 2.1.5 (1) QID: 12307 To derive a market demand curve, add the quantity demanded by each individual in the market at each price and construct a new demand schedule. True False (2) QID: 12308 Suppose the market for automobiles is a national market. If personal income nationwide increases, the market demand for automobiles is likely to decrease. to increase. to remain constant. to be unrelated to national income. (3) QID: 12309 In order to find the market quantity demanded, subtract each individual's quantity demanded from the total market quantity demanded. add the quantity demanded of the individuals within the market and take the average. add the individual quantities demanded represented in the market. none of the above. (4) QID: 12310 If Sue demands six packs of gum at seventy-five cents each and John demands four packs of gum at seventy-five cents, the market quantity demanded at that price is two. five. three. ten. (5) QID: 12311 Factors that shift the market demand curves are the same as for the individual demand curves. different than the factors for individual demand curves. not relevant in the individual demand. not capable of shifting the market demand curve enough to make a difference. (6) QID: 13783 When an economist analyzes market demand in a particular market, the economist is referring to a particular amount demanded at that point in time. one point on the market demand curve. one entry in a demand schedule. the entire demand curve. (7) QID: 13786 The determinants of market demand include all determinants of individual demand plus the number of buyers in the market. True False (8) QID: 13787 If the population of a market area increases, demand in the market will decrease. supply in the market will increase demand in the market will increase. supply in the market will decrease. (9) QID: 15860 If businesses rapidly expand during a period of time, they would likely want to hire more workers. This increase in demand is shown by a movement down the demand curve. a movement up the demand curve. shifting the demand curve to the right. shifting the demand curve to the left. ABCDA DACC 2.2.1 (1) QID: 12321 Suppose a baker invents a new oven that reduces baking time by one-half. The baker would then produce the same quantity of bread but close the bakery half the time. increase bread production. decrease bread production. produce the same amount of bread using the previous technology. (2) QID: 12322 If sellers expect prices to rise in the future, prices today will rise because sellers might reduce current supply and wait for higher prices. True False (3) QID: 12323 The supply of coal is fixed because there is only a finite amount in the ground that can be mined. True False (4) QID: 12324 All of the following factors influence how much of a product is supplied to a market except the industry's technology. the price of the product. consumers' income. the price of inputs used to manufacture the product. (5) QID: 12327 A supply function is a mathematical representation of the quantity of a good that a firm is willing to supply the market, profitably, as a function of all the variables that influence the firm's decision. True False (6) QID: 12328 If a producer of bread thinks that the price of bread will fall next week, the producer will stop making bread this week. hold some of this week's bread for next week when consumers will want more. sell all the bread this week if possible. be unaffected by the price next week. (7) QID: 12329 The determinants of supply are factors that will only shift the supply curve. factors that will only change the quantity demanded. the same as the determinants of demand. factors that influence the quantity of a product that producers choose to put on the market. (8) QID: 12330 Profit is the difference between marginal costs and total revenue. the difference between the revenue earned and the cost of providing a service. the total amount of revenue a firm earns from selling its product. the total revenue earned plus income from investments. (9) QID: 12331 If the price of inputs for making pizza increases, there will be less pizza supplied because the costs are increasing. there will be more pizza supplied because the costs are increasing. there will be more pizza supplied because the costs are decreasing. there will be less pizza supplied because the costs are decreasing. (10) QID: 13788 The relationship between price and quantity supplied is positive. negative. the same as the relationship between price and quantity demanded. nonexistent. There is no relationship between these two variables. (11) QID: 13791 If a jeweler sees a fall in the price of gold, we would expect the jeweler to be willing and able to produce more jewelry at each possible price. the jeweler to be willing and able to produce less jewelry at each possible price. the demand for jewelry to increase. the demand for jewelry to fall. BABCA CDBAA A 2.2.2 (1) QID: 12332 A supply schedule is a mathematical representation of the quantity of a good that a supplier will put on the market. a table showing the amount of a good consumers are willing to buy at various prices. a graph showing the relationship between the price of a good and the quantity supplied. a table showing the relationship between the price of a good and the quantity supplied. (2) QID: 12333 In analyzing a supply function and then drawing a supply curve from it, you hold the price of a good constant but change the values of the other variables. True False (3) QID: 12334 In a market for a product, why is the price of the product higher at higher output levels? Because production costs are higher at higher levels of output Because producers' opportunity costs are higher at higher output levels Because consumers are willing to pay more at higher output levels Because producers want more money and realize that consumers are willing to pay for it (4) QID: 12335 The supply curve is a collection of points representing the quantity of a particular good that a producer is willing and able to offer for sale in a given period of time as a function of the price of the particular good. True False (5) QID: 12336 The upward-sloping supply curve is representative of the law of supply. shows that as the price of a good or service increases, the quantity offered for sale generally increases. illustrates increasing opportunity costs. all of the above. (6) QID: 12338 The opportunity cost of supplying more of a particular good falls as the quantity supplied increases. rises as the quantity supplied increases. stays the same as quantity supplied increases. is irrelevant to suppliers because they are interested in profits. (7) QID: 12954 Suppose a soybean farmer expects a lower price for soybeans at harvest time than the market price at the time of planting. This farmer is likely to plant fewer acres in soybeans. ignore the future price of soybeans. ignore the prices and plant the same soybeans as the previous year. plant more acres in soybeans. (8) QID: 12956 Suppose a soybean farmer expects a higher price for soybeans at harvest time than the market price at the time of planting. This farmer is likely to plant fewer acres of soybeans. plant the same number of acres in soybeans as the previous year. plant more acres in soybeans to take advantage of the expected higher price. get out of farming. (9) QID: 12996 The reason that producers supply more to a market at higher prices is that as the price increases, the producers' opportunity cost of not producing that good falls. as the price increases, the producers' opportunity cost of not producing that good increases. as the price increases, consumers demand a larger quantity, so producers must supply more. as the price increases, producers' costs decrease, so they produce more at the same cost. (10) QID: 13239 According to the graph if the price of bread is $1.50 per loaf, the producer will supply ________ loaves of bread. nine six two four (11) QID: 13263 According to the supply curve, if the price of bread is $3.00 per loaf, the producer will supply __________ loaves of bread. seven fourteen zero two (12) QID: 13792 The law of supply states that, when the price of a good rises, the quantity supplied of the good falls. True False DBBAD BACBD AB 2.2.3 (1) QID: 12339 Changes in the input prices or technology are represented by a movement along the supply curve and are called changes in quantity supplied. True False (2) QID: 12340 A supply curve is a collection of points on a graph illustrating the relationship between the quantity supplied for a particular product and the quantity demanded. the product's price. the price of the product's inputs. the firm's expectations about future prices. (3) QID: 12341 If the price for a main input for a particular product increases and all other factors are constant, the quantity supplied decreases. there will be a change in demand for the product. the supply curve will shift inward. there will be no change in other variables. (4) QID: 12342 An increase in the market price of a product, all other things equal, results in a change of position along the existing supply curve, decreasing the quantity supplied. a change of position along the existing supply curve, increasing the quantity supplied. a shift of the supply curve inward. a shift of the supply curve outward. (5) QID: 12343 In the hamburger restaurant business, an increase in the price for ground beef represents a change in the market price for hamburgers. a change in the price of inputs. a change in technology. a change in future expectations. (6) QID: 12344 In a hamburger restaurant, an increase in the price of ground beef causes a movement along the existing supply curve, decreasing the quantity supplied. a movement along the existing supply curve, increasing the quantity supplied. an inward shift of the supply curve. an outward shift of the supply curve. (7) QID: 12345 If the market price of hamburgers increases, the supply curve shifts outward. True False (8) QID: 13793 Along a given supply curve for any product, supply increases as price increases. supply increases as technology improves. quantity supplied increases as price increases. quantity supplied increases as input prices fall. (9) QID: 13794 As the price of apples increases, apple growers will decrease the supply of apples. increase the supply of apples. switch to less expensive methods of growing apples. increase the quantity of apples supplied. (10) QID: 15865 Suppose that New York does not recognize the physician licensing laws from other states. This non-recognition shifts New York's demand for medical services to the left. demand for medical services to the right. supply of medical services to the left. supply of medical services to the right. BBCBB CBCDC 2.2.4 (1) QID: 12346 A change in supply is the same as a change in quantity supplied. True False (2) QID: 12347 Factors other than the price of a particular product will shift the supply curve. True False (3) QID: 12349 If the pretzel baker expects that pretzel prices will fall at the end of the month, his firm will save its supply for selling at a future date. increase its supply at the current price. ignore the information and continue as before. wait to supply any pretzels until the market is more stable. (4) QID: 12350 If the cost of flour increases, what will be the effect on a baking firm's supply curve for bread? The supply curve will shift inward due to the change in input prices. The supply curve will shift inward due to the change in future expectations. The supply curve will shift outward due to the change in input prices. The supply curve will shift inward due to the change in technology. (5) QID: 12351 If the cost of flour decreases, the result(s) for a bread baking firm will be a decrease in the cost of production. an increase in the supply of bread. a shift outward in the supply curve for bread. all of the above. (6) QID: 12352 If a bread-baking firm improves its technology by using a new machine that speeds the baking process, the technological improvement will increase the cost of production. shift the supply curve shift inward. increase the supply of bread. increase demand. (7) QID: 12353 A pretzel firm experiences a loss when several of its employees are hurt in an accident and are permanently disabled and can no longer work. This loss means that the cost of production becomes higher and supply falls. the cost of production falls. supply increases. supply remains constant because the firm replaces the employees. (8) QID: 12354 If a pretzel firm expects the price of pretzels to rise next week, it will sell more pretzels this week. sell fewer pretzels this week and save the supply for the price increase. sell no pretzels next week. do nothing. (9) QID: 13796 A decrease in the supply of Ford and Chevrolet cars might be caused by an increase in the price of Japanese cars. an increase in wages of U.S. car workers. an increase in demand for cars. a fall in the price of steel. BABAD CABB 2.2.5 (1) QID: 12355 Assume that all employees in an industry receive a raise based on a new labor contract. How will this raise affect the product market for the product these employees manufacture? Market demand will increase. Output will rise. Market supply will increase. Market supply will decrease. (2) QID: 12356 A technological improvement in agriculture makes it possible to grow three times as much wheat per acre as had been possible in the past. The most likely result will be that farmers would switch from wheat to corn production and use the extra land for wheat. an increase in the demand for wheat because of the decreasing price of wheat. a decrease in the supply of wheat due to the expensive new technology. an increase in the supply of wheat because of the reduced cost of production. (3) QID: 12360 Which of the following will cause an outward shift of the market supply curve? A rise in the price of inputs A change in the price of the good Improvements in technology A decrease in technology (4) QID: 12361 Which of the following would cause a decrease in the market supply for ice cream? An increase in the price of ice cream A decrease in the quantity demanded of ice cream An increase in the price of milk An expectation that the price of ice cream will be lower next week (5) QID: 12362 If technological advances are made in an industry, the market supply curve will shift inward. True False (6) QID: 12363 The total quantities of a product that all sellers, collectively, are willing and able to offer at alternative prices is the demand curve for a firm. the market demand curve. the market supply curve. the supply curve for a firm. (7) QID: 12364 Which of the following would not cause a shift in the market supply for pizza? A change in the price of pepperoni A change in the price of pizza A technological change made on the ovens used to bake pizzas A change in the price of pizza expected to be sold next week (8) QID: 12365 What will cause an increase in the market supply? An increase in the number of producers An increase in the number of consumers A decrease in the number of producers An increase in consumers' income (9) QID: 13801 The market supply curve for wheat depends on each of the following except the price of wheat-producing land. the price of wheat-producing technology. the tastes and preferences of wheat consumers. the number of wheat farmers. (10) QID: 13802 The market supply of a good or service is the sum of all individual supply curves for the good or service. is determined by all the determinants of individual supply and by the number of sellers. reflects a direct relationship between price and quantity supplied. all of the above. DDCCB CBACD 2.3.1 (1) QID: 12369 When excess supply exists in any economic market, the market price will rise until the excess supply is eliminated. True False (2) QID: 12372 When there is excess demand for sugar in the market, the bidding mechanism will push down the price of sugar. result in no change in the reservation prices of consumers. have no effect on the price of sugar. push up the price of sugar. (3) QID: 12374 When the quantity demanded for a particular good exceeds the quantity supplied for that good, the quantity demanded will increase as the price increases. the quantity demanded will decrease as the price increases. the quantity demanded will decrease as the price decreases. the quantity demanded will remain constant. (4) QID: 12375 When there is excess supply in the corn market, the bidding mechanism pushes down the price of corn. All of the following will occur except additional buyers will enter the market. some of the sellers will be pushed out of the market. fewer buyers will enter the market. the supply will be reduced. (5) QID: 12376 The competitive equilibrium point occurs when there is no tendency to change. there is no excess demand. there is no excess supply. all of the above. (6) QID: 13808 Suppose there is a surplus in the bread market. You could predict that price will increase, quantity demanded will fall, and quantity supplied will rise. price will increase, quantity demanded will rise, and quantity supplied will fall. price will decrease, quantity demanded will rise, and quantity supplied will fall. price will decrease, quantity demanded will fall, and quantity supplied will rise. BDBCD C 2.3.2 (1) QID: 12377 The first step in a three-step process for analyzing the market change is to determine how the change will affect the demand curve. True False (2) QID: 12378 Comparative statics is the study of the movement from one equilibrium to another. the change in competitve equilibrium when when one of the supply or demand determinants changes. the adjustment mechanism following a change in some factor affecting demand or supply. all of the above. (3) QID: 12379 Suppose chocolate bars and jelly beans are substitutes for each other. If the price of jelly beans increases, then the new competitive equilibrium for chocolate bars occurs where the original supply curve intercepts a new demand curve. the original demand curve intercepts a new supply curve. the original supply curve intercepts the original demand curve. none of the above. (4) QID: 12380 An increase in the demand for chocolate bars results in a price decrease and a quantity increase. a price increase and a quantity increase. a price decrease and a quantity decrease. a price increase and a quantity decrease. (5) QID: 12382 Assume that jelly beans and candy bars are substitute goods. If the price of jelly beans increases, the demand curve for jelly beans will shift inward. True False (6) QID: 12383 Which of the following is not a step in analyzing how a change in the market affects the supply and demand for a good? Identifying which side of the market is affected Identifying how the change will affect the curve Assuming that both curves will shift Identifying what happens to the equilibrium price and quantity (7) QID: 12385 Excess demand for chocolate bars will cause all of the following except an increase in the price of chocolate bars. some buyers to leave the market. new sellers to enter the market. the bidding mechanism to remain constant. (8) QID: 13810 When there is excess demand in a market, there is upward pressure on the price. there is downward pressure on the price. the market is in equilibrium. there are too many sellers. (9) QID: 13814 When there is excess supply in a market, there is upward pressure on the price. there is downward pressure on the price. the market is in equilibrium. there are too many buyers. BDABB CDAB 2.3.3 (1) QID: 12386 Which of the following events would not cause an outward shift of the demand curve? The price of tea, a coffee substitute, increases. A price war among producers that results in coffee selling for $1 per pound. A new FDA study shows that coffee cures colds. The price of sugar, a complement, decreases. (2) QID: 12387 A drought that destroys half of the corn crops in the Midwest would cause the equilibrium price and quantity of corn to be higher. the equilbrium price of corn to be higher and the equilibrium quantity to be lower. no change in equilibrium because demand and supply will shift equally. a lower equilibrium price and a lower quantity demanded. (3) QID: 12388 The discovery of mad cow disease in the country's cattle herds would likely decrease the demand for beef and increase the demand for chicken. decrease quantity demanded for both beef and chicken. decrease the quantity demanded for beef and increase the demand for chicken. decrease demand for beef and increase quantity demanded for chicken. (4) QID: 12389 If beer and pizza are complements, a decrease in the price of pizza would increase the demand for beer. True False (5) QID: 12390 If cheese is a main ingredient of pizza, what happens to the price of pizza when the price of cheese increases? Pizza prices rise. Pizza prices fall. There is no change in pizza prices. None of the above will occur. (6) QID: 12391 Which of the following would cause a decrease in supply? Improved technology Lower labor productivity Decreased price of substitutes Decreased demand (7) QID: 12393 If equilibrium price and quantity both rise, the cause is an increase in demand and a decrease in supply. an increase in demand without a change in supply. a decrease in both supply and demand. a decrease in demand and an increase in supply. (8) QID: 12394 An increase in the income of a consumer will cause his/her demand for a normal good to increase. How will an increase in income affect the equilibrium price and quantity? Both quantity and price increase. Quantity increases but price decreases. Quantity decreases but price increases. Both quantity and price decrease. (9) QID: 12395 Peanut butter and jelly are used together to make sandwiches. If the price of peanut butter increases, what changes will occur in the market for jelly? The supply curve for jelly shifts inward. The demand curve for jelly shifts outward. The demand curve for jelly shifts inward. The supply curve for jelly shifts outward. (10) QID: 12396 If a product's supply curve shifts outward, the new equilibrium quantity will be __________, and the new equilibrium price will be __________. lower; higher higher; lower higher; higher lower; lower (11) QID: 13818 Assume that in a competitve market, price is initially below the equilibrium level. What economic predictions can we make? Price will decrease, quantity demanded will decrease, and quantity supplied will increase. Price will decrease and both quantity demanded and quantity supplied will decrease. Price will decrease, quantity demanded will increase, and quantity supplied will decrease. Price will increase, quantity demanded will decrease, and quantity supplied will increase. (12) QID: 13821 For most goods or services, quantity demanded increases if supply increases. True False (13) QID: 13918 Suppose that in the market for an agricultural commodity such as corn, there is a large increase in the quantity traded. However, the price remains almost the same. The most likely explanation for this phenomenon is that supply has increased but demand has remained constant. supply has decreased but demand has increased. both supply and demand have increased. supply has increased and demand has decreased. BBAAA BBACB DAC 2.4.1 (1) QID: 12530 A price ceiling below the equilibrium price will cause excess supply. excess demand. a surplus. no change in the market. (2) QID: 12531 Shortages result from price controls above equilibrium. price controls below equilibrium. unlimited wants and limited resources. quantity supplied greater than quantity demanded. (3) QID: 12533 Economists may favor price controls if the controls improve equity. True False (4) QID: 12534 The economic value destroyed by a price control is called positive economic value. deadweight loss. economic value. tax revenue. (5) QID: 12535 A price floor that is less than the equilibrium price causes excess supply. excess demand. non-price competition. no change in the market. (6) QID: 12536 Price controls benefit markets because they help those with low incomes. True False (7) QID: 12537 Suppose the equilibrium price for an apartment in a market is $1,500 a month. The government controls the price by imposing a price ceiling of $750. However, the consumer may still pay $1,500 because tenants may agree to pay an extra $750 "off the books." the landlord may charge the tenant $750 for a key and central air and heat each month. both A and B. neither A nor B. (8) QID: 12538 When consumers and producers follow price controls, their costs can sometimes be as much as the original equilibrium price, if not more, because consumers are forced to pay for their rent-seeking activities and other practices of non-price competition. producers are forced to pay for their rent-seeking activities and other practices of non-price competition. consumers and producers may agree to pay the fines associated with violating the price ceiling. all of the above. (9) QID: 13607 Which of the market outcomes is likely to result from price controls on rental housing? A surplus of housing A decrease in the number of building permits for new rental property A decrease in the quantity of apartments demanded Higher-than-equilibrium rents paid by those who get the rent-controlled apartments (10) QID: 13646 In rental markets where price controls are in place, the law often says that the rent cannot increase as long as the lease is in effect. In these markets, tenants often sublet their apartments for more than the rent they pay. This practice is an example of a black market. overcrowding existing apartment space. a lassez-faire transaction. rent-seeking behavior. (11) QID: 13688 In a free market, what processes would eliminate the excess demand in a rental housing market? Rent-seeking activities The market bidding mechanism Government regulations The black market BBBBD BCDBA B 2.4.2 (1) QID: 12835 The institution of a minimum wage creates a surplus of jobs. a surplus of labor. a shortage of labor. a decrease in deadweight loss. (2) QID: 12837 The income effect of an increase in wages will cause an employee to perform fewer non-market activities, like mowing their own lawn. spend more hours working. spend fewer hours in leisure. spend more hours in leisure. (3) QID: 12838 The substitution effect of an increase in wages may cause a person to buy cheaper goods instead of more expensive goods. buy more leisure time. buy more expensive goods instead of cheaper goods. buy less leisure time. (4) QID: 13371 According to the graph, the market wage rate for this labor market is $6 per hour. $5 per hour. $3 per hour. indeterminate. (5) QID: 13383 According to the graph, if the government imposes a minimum wage of $6 per hour in this labor market, there will be an excess demand of 2,000 units of labor. an excess supply of 2,000 units of labor. no effect on the labor market. equilibrium in this market. (6) QID: 13395 According to the graph, if the government imposes a minimunm wage of $4 per hour in this labor market, there will be excess supply of 2,000 units of labor. excess demand of 2,000 units of labor. no effect on this labor market. an indeterminate effect. (7) QID: 13409 One method that employers could use to pass the costs of a government-imposed minimum wage to their employees would be to reduce employee vacations. make employees pay for their own medical insurance. stop the employer contributions to the employees' retirement systems. all of the above. (8) QID: 13562 Which of the following is not a result of minimum wage laws? An increase in the number of unskilled laborers in the job market An increase in production An increase in teenage unemployment An increase in school dropout rates (9) QID: 13575 Minimum-wage laws specify the highest wage that employers may pay workers. True False (10) QID: 13577 Generally, those people who advocate minimum-wage laws believe there are no negative effects of minimum-wage laws. there are some negative effects of the laws but the benefits outweigh the costs. minimum-wage laws will solve a maldistribution of income. that the market system should be replaced with a planned economy. (11) QID: 13597 The legislative intent of minimum-wage laws is to ensure a middle-class standard of living for all workers. employment for all who want it. unemployment insurance. a minimally adequate standard of living. BDDBB CDBBB D 2.4.3 (1) QID: 12475 In the absence of a tax wedge, the consumer surplus would be smaller. the producer surplus would not change. the consumer surplus and producer surplus would be smaller. the consumer surplus and producer surplus would be larger. (2) QID: 12476 If an excise tax is imposed on a producer, the producer raises the price, and the demand curve shifts inward. the supply curve shifts inward, and a smaller quantity is demanded at the higher price. the seller will try to get the consumer to pay the entire tax. the supply curve shifts outward reflecting the producer's ability to impose the tax on buyers. (3) QID: 12477 If the government imposes a $2 tax on the sellers of a product, the supply curve shifts inward parallel to itself and intersects the demand curve at a lower price and higher quantity. True False (4) QID: 12481 The tax wedge can be identified as the difference between the consumer's demand price and the seller's price. the difference between the equilibrium price and the costs of producer inputs. the difference between total surplus and consumer surplus. graphically the area beneath the demand curve and above the equilibrium price. (5) QID: 12484 If an excise tax is imposed on consumers, the market demand curve will shift inward. True False (6) QID: 12479 A tax-distorted demand curve tells us what the buyer is willing to pay the government. the reservation price for the consumer. the opportunity cost of the seller. the prices that the consumer is willing to pay to the producer. DBBAA D View Results TEST 2 User ID: skim7 Attempt: 1 / 1 Out of: 200 Started: February 27, 2005 11:01am Finished: February 27, 2005 11:39am Time spent: 38 min. 49 sec. Student finished 3 hr, 21 min., 11 sec. ahead of the 240 min. time limit. Question 1 (4 points) The slope of a demand curve is almost always Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. positive, because when people buy more of a good, the cost of producing it will rise. 0.0% b. positive, because the more money a person has, the more of a particular good will be bought. 0.0% c. negative, because when people buy more of a good, the cost of producing it will fall. 100.0% d. negative, because with everything else equal, people will buy more of a good when its price is lower. Score: 4 / 4 Question 2 (4 points) The produce manager at IGA has noticed that when they raise the price of rutabaga, the number of rutabaga sold decreases. This decrease in rutabaga sales should be called a decrease in Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. demand. 0.0% b. supply. 100.0% c. quantity demanded. 0.0% d. quantity supplied. Score: 4 / 4 Question 3 (4 points) A demand curve for a normal good Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. slopes upward and to the right. 0.0% b. is constructed based on the assumption that income is rising. 0.0% c. is constructed based on the assumption that an inverse relationship exists between price and income. 100.0% d. shows the inverse relationship between price and quantity demanded. Score: 4 / 4 Question 4 (4 points) A market demand curve is found by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. taking the demand curve of the "representative" consumer. 0.0% b. adding the prices and the quantities demanded by a consumer. 100.0% c. adding the quantities demanded for each individual consumer at each price. 0.0% d. adding the prices each consumer would pay for each quantity. Score: 4 / 4 Question 5 (4 points) A demand curve can shift due to anything that affects consumers' willingness and ability to purchase the good EXCEPT changing price. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 4 / 4 Question 6 (4 points) The law of demand loosely states that a lower price increases the amount of a commodity that people are willing to buy. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 4 / 4 Question 7 (4 points) An inferior good is one which consumers buy in smaller quantities when incomes rise. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 4 / 4 Question 8 (4 points) Which of the following will shift the demand curve for milk to the right? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. A decrease in the price of Nestle's Quick chocolate mix (a complement. 0.0% b. A decrease in the price of orange juice (a substitute). 0.0% c. A decrease in the price of milk. 0.0% d. A decrease in the price of cattle feed (an input). Score: 4 / 4 Question 9 (4 points) Which of the following would decrease the demand for butter (i.e., shift the demand curve to the left)? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. An increase in the price of margarine (a substitute for butter). 100.0% b. A finding that butter contributes to heart disease. 0.0% c. A decrease in the price of bread (a complement to butter). 0.0% d. An increase in the price of butter. Score: 4 / 4 Question 10 (4 points) Which of the following would be most likely to cause an outward shift of the demand curve for electricity? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a decrease in the price of electricity 0.0% b. an increase in the price of air conditioners 100.0% c. an increase in the price of heating oil 0.0% d. a decrease in the price of natural gas Score: 4 / 4 Question 11 (4 points) Suppose we observe that even though the price of a good rose, consumers still bought more of the good. Which of the following could have caused this? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. The price of a substitute fell. 0.0% b. The price of a complement rose. 100.0% c. Income rose. 0.0% d. The cost of inputs increased. Score: 4 / 4 Question 12 (4 points) Assume that the figure below shows demand for steak, a normal good. An increase in income of buyers will change demand from Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. D1 to D2 0.0% b. D2 to D1 0.0% c. D3 to D2 0.0% d. D3 to D1 Score: 4 / 4 Question 13 (4 points) An increase in the price of gasoline shifts the demand for tires to the Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. left, because gasoline and tires are substitutes. 100.0% b. left, because gasoline and tires are normally used together. 0.0% c. right, because gasoline and tires are substitutes. 0.0% d. right, because gasoline and tires are normally used together. Score: 4 / 4 Question 14 (4 points) Which of the following would cause an upward movement (to the left) along the demand curve for European autos in the United States? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. an increase in the price of American autos 0.0% b. a decrease in the price of American autos 0.0% c. an increase in income in the United States 100.0% d. an increase in the price of European autos Score: 4 / 4 Question 15 (4 points) Market demand curves are found by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. vertically summing individual demand curves. 100.0% b. horizontally summing individual demand curves. 0.0% c. summing individual demand curves in a parallel fashion. 0.0% d. adding the slopes of individual demand curves. Score: 4 / 4 Question 16 (4 points) A decrease in income will cause Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the quantity demanded for a normal good to increase and the demand curve to shift outward. 0.0% b. the quantity demanded for a normal good to decrease and the demand curve to shift inward. 0.0% c. an increase in the demand for a normal good. 100.0% d. a decrease in the demand for a normal good. Score: 4 / 4 Question 17 (4 points) To derive a market demand curve, add the quantity demanded by each individual in the market at each price and construct a new demand schedule. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 4 / 4 Question 18 (4 points) Which of the following statements about a supply curve is FALSE? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. It shows a direct (positive) relationship between price and quantity supplied. 0.0% b. It shows the quantity supplied at each specific price. 100.0% c. It typically slopes downward. 0.0% d. It has a positive slope. Score: 4 / 4 Question 19 (4 points) A supply curve can be thought of as Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a graphical display of "market potential." 100.0% b. a graphical representation of the information in a supply schedule. 0.0% c. showing how much firms want to produce. 0.0% d. a forecasting tool. Score: 4 / 4 Question 20 (4 points) A decrease in the price of a good causes Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. an increase in demand and a decrease in supply. 0.0% b. a decrease in supply. 100.0% c. a decrease in quantity supplied. 0.0% d. an increase in quantity supplied. Score: 4 / 4 Question 21 (4 points) A change in the price of a good: Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. May increase or decrease the demand for that good depending if the price change were up or down. 0.0% b. May increase or decrease the supply for that good depending if the price change were up or down. 0.0% c. May increase or decrease the demand and/or supply for that good depending if the price change were up or down. 100.0% d. Will have no impact on the demand or supply of that good, but will alter the quantity demanded and quantity supplied. Score: 4 / 4 Question 22 (4 points) All of the following will decrease the supply of airline flights EXCEPT Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. A rise in the price of jet fuel (an input). 0.0% b. A reduction in the number of airline companies offering service. 100.0% c. A technological change that makes airplanes safer and more fuel-efficient. 0.0% d. An increase in the salaries of pilots (an input). Score: 4 / 4 Question 23 (4 points) An increase in the price of steel to producers of refrigerators will cause the Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. quantity supplied of refrigerators to increase. 0.0% b. quantity demanded for steel to increase. 100.0% c. supply curve for refrigerators to shift left. 0.0% d. demand for refrigerators to decrease. Score: 4 / 4 Question 24 (4 points) The supply of a good can be changed by: Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Costs of inputs. 0.0% b. Number of firms in the industry. 0.0% c. Technology. 100.0% d. All of the above. Score: 4 / 4 Question 25 (4 points) A decrease in the market price of a product, ceteris paribus, results in Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. a movement down (to the left) along a given supply curve, decreasing quantity supplied. 0.0% b. a movement up (to the right) along a given supply curve, increasing quantity supplied. 0.0% c. an inward shift of the supply curve. 0.0% d. an outward shift of the supply curve. Score: 4 / 4 Question 26 (4 points) Along a supply curve, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. supply changes as price changes. 100.0% b. quantity supplied changes as price changes. 0.0% c. supply changes as technology changes. 0.0% d. quantity supplied changes as technology changes. Score: 4 / 4 Question 27 (4 points) A supply curve is a collection of points on a graph illustrating th erelationshipo between the quantity supplied for a particular product and Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the quantity demanded. 100.0% b. the product's price. 0.0% c. the price of the product's inputs. 0.0% d. the firm's expectations about future prices. Score: 4 / 4 Question 28 (4 points) As the price of apples increases, apple growers will Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. decrease the supply of apples. 0.0% b. increase the supply of apples. 0.0% c. switch to less expensive methods of growing apples. 100.0% d. increase the quantity supplied of apples. Score: 4 / 4 Question 29 (4 points) Any situation where quantity supplied does not equal quantity demanded indicates Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. a shortage. 0.0% b. a surplus. 0.0% c. price control. 100.0% d. a market not in equilibrium. Score: 4 / 4 Question 30 (4 points) An increase in demand will have what effect on equilibrium price and quantity? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Price will increase, quantity will decrease. 0.0% b. Price will decrease, quantity will increase. 100.0% c. Both price and quantity will increase. 0.0% d. Both price and quantity will decrease. Score: 4 / 4 Question 31 (4 points) On a typical supply and demand diagram, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. price is measured along the horizontal axis and quantity along the vertical axis. 100.0% b. price is measured along the vertical axis and quantity along the horizontal axis. 0.0% c. quantity demanded is measured along the horizontal axis, quantity supplied is measured along the vertical axis, and price is indicated on the contour lines. 0.0% d. quantity is measured along both axes and price is indicated on the contour lines. Score: 4 / 4 Question 32 (4 points) Price per Quantity Demanded Quantity Supplied Constant- of Constant-Quality of Constant-Quality Quality Unit Units per Year Units per Year ----------------------------------------------------- $1.00 1,000 200 2.00 800 400 3.00 600 600 4.00 400 800 5.00 200 1,000 In a free market economy, the equilibrium price in the table would adjust to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. $1. 0.0% b. $5. 0.0% c. $4. 100.0% d. $3. Score: 4 / 4 Question 33 (4 points) At price P3 in the following figure, what will tend to happen? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. There will be a shortage, and the price will fall. 100.0% b. There will be a shortage and the price will rise. 0.0% c. There will be a surplus, and the price will rise. 0.0% d. There will be a surplus, and the price will fall. Score: 4 / 4 Question 34 (4 points) A surplus will tend to occur at which price in the following figure? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. P1 0.0% b. P2 0.0% c. P3 0.0% d. None of the above. Score: 4 / 4 Question 35 (4 points) The demand and supply curves for video rentals are given below. All of the following are true EXCEPT: Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. At P = $5, quantity supplied exceeds quantity demanded. 0.0% b. At P = $4, there is no excess supply nor excess demand. 0.0% c. The equilibrium price is $4 and the equilibrium quantity is 8. 100.0% d. At P = $5, quantity demanded exceeds quantity supplied. Score: 4 / 4 Question 36 (4 points) This is a hard test, huh. (I think supply and demand, particularly the specific terminology, is the toughest thing we do all semester.) Therefore, just pick the answer below that you think I'm looking for! (Hint: Put option 1. And if you miss it, I'll never let you forget it!) Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. Economics is a wonderful subject that everyone finds interesting. 0.0% b. Illinois highways are always well maintained. In fact, they're among the best in the country! 0.0% c. Spring break should be cancelled because students miss being in the classroom. Score: 4 / 4 Question 37 (4 points) In free markets, the result of a shortage is to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. reduce demand for the good. 0.0% b. increase demand for the good. 100.0% c. increase the price. 0.0% d. decrease the price. Score: 4 / 4 Question 38 (4 points) Two studies published in the New England Journal of Medicine link the risk of breast cancer to alcohol consumption. Young women who have nine drinks per week were reportedly 150 percent more likely to develop breast cancer. Considering the market for alcohol, an economist would predict a movement Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. up the demand curve as quantity demanded falls. 0.0% b. up the supply curve as the demand curve shifts. 100.0% c. down the supply curve as the demand curve shifts. 0.0% d. down the demand curve as quantity demanded falls. Score: 0 / 4 Question 39 (4 points) The price of coal fell and the equilibrium quantity traded also fell. This could have been caused by Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the price of oil falling. 0.0% b. coal miners receiving large wage increases. 0.0% c. more efficient mining equipment being installed. 0.0% d. consumer incomes rising. Score: 4 / 4 Question 40 (4 points) The removal in 1966 of the requirement that Catholics eat fish on Fridays was followed by a 12.5 percent fall in prices of fresh fish. From this can be deduced that the Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. demand curve for fish shifted to the left. 0.0% b. demand curve for fish shifted to the right. 0.0% c. supply curve for fish shifted to the left. 0.0% d. supply curve for fish shifted to the right. Score: 4 / 4 Question 41 (4 points) Are markets always in equilibrium? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Yes, they are always at the equilibrium point, or very close to it. 0.0% b. Yes, because so few things tend to alter supply and demand. 100.0% c. No, but if there is no interference, they tend to move toward equilibrium. 0.0% d. No, they never "settle down" into a stable price and quantity. Score: 4 / 4 Question 42 (4 points) An increase in the demand for chocolate bars results in Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. a price increase and a quantity increase. 0.0% b. a price decrease and a quantity decrease. 0.0% c. a price increase and a quantity decrease. 0.0% d. a price decrease and a quantity increase. Score: 4 / 4 Question 43 (4 points) When there is excess supply in the corn market, the bidding mechanism pushes down the price of corn. All of the following will occur EXCEPT Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the supply of corn will be reduced. 0.0% b. additional buyers will enter the market. 0.0% c. some of the sellers will be pushed out of the market. 0.0% d. the quantity supplied of corn will decrease. Score: 0 / 4 Question 44 (4 points) If rent controls for apartments were established below the market rental rates, we would expect Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. a shortage of apartments to develop. 0.0% b. a surplus of apartments to develop. 0.0% c. equilibrium rents to fall below the rates set by rent control. 0.0% d. a building boom in apartments. Score: 4 / 4 Question 45 (4 points) An effective, well-intentioned minimum wage law can be expected to Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. clear the market for unskilled workers. 0.0% b. increase employment for those covered under the law. 0.0% c. lower costs of production for firms that pay workers the minimum wage. 100.0% d. reduce the hours worked for some unskilled workers. Score: 4 / 4 Question 46 (4 points) An excise tax is a tax on imported goods. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 4 / 4 Question 47 (4 points) Examine the graph. If the government imposes a rent control on this market and sets the maximum apartment rental at $600 per month, the market will Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. have a shortage of 400 apartments. 0.0% b. have a surplus of 400 apartments. 0.0% c. a shortage of 200 apartments. 0.0% d. be in equilibrium. Score: 0 / 4 Question 48 (4 points) Examine the graph. If the government imposes a minimum wage of $4.00 per hour, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. there will be a shortage of 20,000 units of labor. 0.0% b. there will be a surplus of 20,000 units of labor. 0.0% c. the labor market will be in equilibrium at a wage of $6.00 per hour and 20,000 units of labor. 100.0% d. the minimum wage will not affect the market. Score: 4 / 4 Question 49 (4 points) In a free market, what processes would eliminate the excess demand in a rental housing market? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Rent-seeking activities 100.0% b. The market bidding mechanism 0.0% c. Government regulations 0.0% d. The black market Score: 4 / 4 Question 50 (4 points) The tax wedge can be identified as Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the difference between the consumer's demand price and the seller's price. 0.0% b. the difference between the equilibrium price and the costs of producer inputs. 0.0% c. the difference between total surplus and consumer surplus. 0.0% d. graphically the area beneath the demand curve and above the equilibrium price. Score: 4 / 4 Total score: 188 / 200 = 94.0% (1) QID: 12540 A horizontal demand curve is more elastic than a vertical demand curve. True False (2) QID: 12545 Elasticity is the percentage change in price that results from a percentage change in quantity demanded. True False (3) QID: 12546 Elasticity is also called effectiveness. shortage. surplus. responsiveness. (4) QID: 12547 The price elasticity of demand helps producers because it calculates ___________ response to a change in __________. producers'; price producers'; demand consumers'; price consumers'; demand (5) QID: 12548 Firms use the price elasticity of demand to determine how a change in price will affect prices. revenues. supply. demand. (6) QID: 13711 Economists often use the slope of a demand curve rather than elasticity to measure a consumer's responsiveness to changes in price. True False (7) QID: 12541 Sally has a pizza restaurant and sells 30 pizzas for $5 each. Jim has a pizza restaurant around the corner from Sally, and he sells 30 pizzas for $5 each. If Sally and Jim each lower their price to $3, Sally's customers will buy 60 pizzas, and Jim's customers will buy 40 pizzas. Sally's total revenue __________, while Jim's total revenue __________. increases; increases decreases; decreases increases; decreases decreases; increases (8) QID: 12542 Sally has a pizza restaurant and sells 30 pizzas for $5 each. Jim has a pizza restaurant around the corner from Sally, and he sells 30 pizzas for $5 each. If Sally and Jim both lower their price to $3, Sally's customers will buy 60 pizzas, and Jim's customers will buy 40 pizzas. The demand for Sally's pizzas is more __________ than the demand for Jim's pizzas. inelastic elastic unresponsive downward-sloping ABDCB BCB (1) QID: 12549 A vertical demand curve means that any change in price will produce no change in the quantity demanded. True False (2) QID: 12550 The reason that economists prefer the midpoint method for calculating elasticity is that it is easier to use. uses units of change instead of percentages. eliminates negative numbers. produces the same answer regardless of the direction of the price change. (3) QID: 12551 A baker sells 30 bagels for $2 each. Then, he lowers his price to $1 each and sells 50 bagels. Using the midpoint formula, calculate the baker's price elasticity of demand for bagels. 1.32 .5 .75 -.75 (4) QID: 12553 The midpoint price between $60 and $10 is $35. $25. $50. $70. (5) QID: 12554 The midpoint quantity between 500 units and 200 units is 300. 700. 350. none of the above. (6) QID: 13718 The price elasticity of demand is calculated by multiplying the percentage change in quantity demanded by the percentage change in price. dividing the percentage change in quantity demanded by the percentage change in price. dividing the percentage change in price by the percentage change in quantity demanded. multiplying the percentage change in price by the percentage change in quantity demanded. (7) QID: 13721 If the price elasticity of demand for a good is 1.5, a 10 percent increase in price would result in a 1.5 percent decrease in quantity demanded. 1.5 percent increase in quantity demanded. 15 percent decrease in quantity demanded. 10 percent decrease in quantity demanded. (8) QID: 13729 If prices increase by ten percent causing quantity demanded to decrease by five percent, we would classify the demand as inelastic. elastic. unit elastic. indeterminate. (9) QID: 13829 If prices increase by twenty percent, causing quantity demanded to decrease by forty percent, we would classify the elasticity as elastic. inelastic. unit elastic. indeterminate. (10) QID: 15837 If the price of apples increases from $6 to $6.50 per bushel, and the quantity demanded falls from 13,000 bushels to 12,000 bushels, the elasticity of demand is 0.5 1.0 2.0 10.0 (11) QID: 15838 The price elasticity of demand is dependent upon both the units used to measure the price and the units used to measure the quantity. neither the units used to measure the price nor the units used to measure the quantity. the units used to measure the price but not the units used to measure the quantity. the units used to measure the quantity but not the units used to measure the price. (12) QID: 15841 Suppose the price of oil increases from $10 a barrel to $30 a barrel. The quantity demanded changes from 40 million barrels a day to 23 million barrels a day. What is the elasticity of demand for oil? 1.0 0.75 0.54 2.2 ADCAC BCAAB BC (1) QID: 12556 If the elasticity of demand is .33 and price increases, total revenue decreases. increases. remains unchanged. is indeterminate. (2) QID: 12557 Assume that between two points on a demand curve, the elasticity is 1. A decrease in price from from one point to the other means that total revenue decreases. increases. remains unchanged. is indeterminate. (3) QID: 12558 If the elasticity between two points on a demand curve is 3 and price increases, total revenue decreases. total revenue is unchanged. total revenue increases. total revenue could either increase or decrease, but it is indeterminate. (4) QID: 12559 If the percentage change in quantity demanded is smaller than the percentage change in price, then you can say that demand is inelastic. perfectly elastic. perfectly inelastic. unitary elastic. (5) QID: 12560 When the price for a loaf of bread increases from $1 to $1.80 and the quantity demanded decreases from 120 to 40 units, demand is unit elastic. demand is elastic. supply is elastic. supply is inelastic. (6) QID: 13730 The price of milk increases; total revenue to milk producers remains unchanged. Milk has a(n) _______________ demand. perfectly inelastic perfectly elastic unitary elastic inelastic (7) QID: 13866 If the price elasticity of demand for a good is 1.8 and the price increases by 30%, how much will quantity demanded change? Seventeen percent Fifty-four percent Thirty percent Five percent (8) QID: 13871 Assume the price elasticity of demand for a product is 0.6. When the price is $15, consumers buy 50 units of the good. If the price decreases by twenty percent, how many units will consumers buy? Twelve units Fifty units Forty-four units Fifty-six units BCAAB CBD (1) QID: 12563 The demand for gasoline tends to be inelastic, because there are few substitutes for gasoline in the short run, and it represents a large percentage of a consumer's budget. elastic, because there are few substitutes for gasoline, and it represents a large percentage of a consumer's budget. elastic, because there are many substitutes for gasoline, and it represents a large percentage of a consumer's budget. inelastic, because there are few substitutes for gasoline, and it represents a small percentage of a consumer's budget. (2) QID: 12564 Joe makes $5,000 a month and he wants to buy a car that would cost him $1000 a month. The dealer raises the price so it will cost him $3000 a month. Do you think Joe will buy this car? He would buy the car because his demand for the car is inelastic. He wouldn't buy the car because his demand for the car is inelastic. He would buy the car because his demand for the car is elastic. He wouldn't buy the car because his demand for the car is elastic. (3) QID: 13739 Compared to the price elasticity of demand for gasoline, the demand for Texaco gasoline will be more inelastic than the demand for gasoline in general. be more elastic than the demand for gasoline in general. have the same elasticity as the demand for gasoline in general. have unit elasticity. (4) QID: 13740 Goods tend to have more elastic demand over longer time horizons. True False (5) QID: 13741 Luxuries usually have a more elastic demand than necessities. True False (6) QID: 15842 The demand for Honda Civics is more elastic than the demand for automobiles in general and probably is inelastic. more elastic than the demand for automobiles in general and probably is elastic. less elastic than the demand for automobiles in general and probably inelastic. less elastic than the demand for automobiles in general and probably elastic. (7) QID: 15843 Demand will be more elastic at higher income levels. for very low-priced products. the shorter the time period available to find substitutes. the more substitutes that are available. (8) QID: 15844 If there is a sudden shortage of oil in the United States, the large increase in price would not cause the quantity demanded to fall by a large percentage until a year or more after the shortage. True False (9) QID: 18982 A drug addict's demand curve for cocaine is likely to be very elastic. inelastic. unit elastic. elastic. DDBAA BDAB (1) QID: 12565 A baker sells 30 wedding cakes for the price $200 each. If the baker's price elasticity of demand is greater than 1, the demand for the wedding cakes is said to be __________, and total revenue will___________ with a price increase. elastic; increase inelastic; increase inelastic; decrease elastic; decrease (2) QID: 12567 If a producer lowers a product's price and the quantity demanded is proportionally greater than the price change, the total revenue would increase. decrease. remain the same. none of the above. (3) QID: 12568 A baker sells 30 wedding cakes for $200 each. Suppose the cakes are price elastic and the baker decides to lower her price. What will happen to her total revenue? It will increase. It will decrease. It will remain the same. It will increase at first then decrease over time. (4) QID: 12569 A baker sells 30 wedding cakes for the price $200 each. If the cakes' price elasticity of demand is less than 1, the demand for the wedding cakes is said to be elastic. inelastic. unit elastic. at equilibrium. (5) QID: 13743 If a local restaurant decides to lower the cost of its "lunch special" to increase its total revenue, it must believe that the demand for lunch specials is price elastic. price inelastic. unit elastic. indeterminate without more information. (6) QID: 13744 Total revenue decreases if price __________ and demand is ____________. decreases; inelastic increases; inelastic increases; unitary elastic decreases; elastic (7) QID: 15845 On a supply and demand model, when the supply curve shifts to the left, the revenue that is gained is shown as an area; the revenue loss is also an area. an area; the revenue loss is a distance. a distance; the revenue loss is also a distance. a distance; the revenue loss is an area. (8) QID: 15846 On a demand and supply graph, the sales revenue is shown as the area of a triangle. the area under the demand curve. a horizontal distance. a vertical distance times a horizontal distance. (9) QID: 18985 An excellent harvest of citrus fruit has caused the price of oranges to fall by 10%. Consumers buy 5% more oranges. The price decrease has caused consumers to reduce the quantity of oranges bought and increase total spending. increase the quantity of oranges bought and increase total spending on oranges. spend more on oranges. spend less on oranges. DAABA AADD (1) QID: 6028 In regard to potato chips, marginal utility is the _____________ satisfaction from eating ___________ potato chip(s). additional; one more additional; all the total; one more total; all the (2) QID: 6029 The law of diminishing marginal utility states that at some point, a person's marginal utility from additional consumption increases. decreases at a decreasing rate. decreases. decreases at a constant rate. (3) QID: 6030 Jack likes to play golf. Although he is experiencing diminishing marginal utility, his marginal utility remains positive. We can say that Jack's total utility is increasing at a decreasing rate. increasing at an increasing rate. decreasing at a decreasing rate. decreasing at an increasing rate. (4) QID: 6032 If the total utility of one golf game is 10 utils, and the total utility of two golf games is 24 utils, the marginal utility of the second game is 10 utils. 14 utils. 24 utils. indeterminate until we know the total utility of three golf games. (5) QID: 6034 When marginal utility becomes negative, total utility begins to increase. True False (6) QID: 20944 Assume Joe gets 60 utils from consuming one hamburger and 90 utils from consuming two hamburgers. Joe's marginal utility from consuming the second hamburger is 150 utils. 30 utils. 0 utils. 90 utils. (7) QID: 20945 Suppose you are eating nachos at a bar's happy hour. The total utility after the fourth, fifth, sixth, and seventh nachos are, respectively, 50, 86, 106, and 120. The marginal utility of sixth nacho is 14 utils. 362 utils. 106 utils. 20 utils. (8) QID: 20946 Suppose you are eating nachos at a bar's happy hour. The total utility after the fourth, fifth, sixth, and seventh nachos are, respectively, 50, 86, 106, and 120. This situation demonstrates the law of increasing total utility. law of diminishing marginal utility. the law of demand. the principle of diminishing hunger. ACABB BDB (1) QID: 6100 Suppose Valerie is consuming one novel per week and one movie per week. Further assume that the marginal utility of novels is 40 utils, and the marginal utility of movies is 50 utils. If each novel and each movie costs $4.00, is Valerie attaining consumer equilibrium? Yes. She does not want to change her consumption. No. She needs to buy more novels and see fewer movies. No. She needs to buy fewer novels and see more movies. There is not enough information to answer the question. (2) QID: 6101 If a person is receiving greater utility per dollar from consuming apples than from consuming oranges, then the person is maximizing her total utility. True False (3) QID: 6102 Tom receives 30 utils from one candy bar, 45 utils from two candy bars, and 55 utils from three candy bars. The marginal utility of the third candy bar is ____________, and Tom's _________ utility rises as his ______________ utility declines. 10; total; marginal 130; total; marginal 55; total; marginal 10; marginal; total (4) QID: 6104 Suppose that the marginal utility per dollar of apples is greater than the marginal utility per dollar for candy bars as the result of a fall in the price of apples. To achieve consumer equilibrium the consumer reallocates dollars from candy bars to apples. In the process, he puts downward pressure on the price of candy bars. maximizes total utility. acts according to the law of demand. B and C. (5) QID: 20948 Suppose a person is obtaining greater utility per dollar from consuming one good than from another. This person is maximizing utility. not maximizing utility. maximizing disutility. minimizing costs. (6) QID: 20954 Assume that the price for peanut butter and bread is $1 each. Dan's marginal utility for peanut butter is 10 utils, and his marginal utility for bread is 20 utils. Given this situation, Dan gains more utility per dollar from consuming peanut butter than from consuming bread. Dan gains more utility per dollar from consuming bread than from consuming peanut butter. Dan gains the same amount of utility per dollar from consuming each good. Dan is in consumer equilibrium. (7) QID: 20977 Suppose Val is buying chips and beer in quantities such that she is achieving consumer equilibrium. The price of chips then increases. Which of the following is true? The marginal utility of chips per dollar spent on chips is equal to the marginal utility of beer per dollar spent on beer. The marginal utility of chips per dollar spent on chips is greater than the marginal utility of beer per dollar spent on beer. The marginal utility of chips per dollar spent on chips is less than the marginal utility of beer per dollar spent on beer. The answer is indeterminate. CBADB BC (1) QID: 16233 The slope of a consumer's budget constraint is the opportunity cost of buying one good in terms of how much of the other that he gives up. True False (2) QID: 16236 Examine this budget constraint for a consumer who has an income of $12. The slope of this constraint is 3/2. 2/3. 1. 12/8. (3) QID: 16237 Examine this consumer's budget constraint. If this consumer has a budget of $12, the price of good Y must be $1 each. $8 each. $12 each. $1.50 each. (4) QID: 16238 Examine the budget constraint below. If the consumer has a budget of $12, the price of good X must be $1 each. $8 each. $12 each. $1.50 each. (5) QID: 16240 Examine this consumer's budget constraint. A possible combination of goods X and Y that the consumer could choose is 12 units of X and 0 units of Y. 6 units of X and 4 units of Y. 4 units of X and 4 units of Y. All the above combinations are possible. (6) QID: 17178 If a consumer's income increases, that consumer's budget constraint shifts inward toward the origin. does not change. pivots on the vertical axis. shifts outward away from the origin. (7) QID: 17188 When a consumer's income decreases, the consumer's budget constraint shifts outward. shifts inward. pivots on one of the axes. does not move. (8) QID: 17356 Refer to the graph below. If the price of good Y increases, the budget constraint moves from 1 to 2. 1 to 3. 3 to 1. 1 to either 2 or 3. (9) QID: 17359 Refer to the graph below. A movement from budget constraint 3 to budget constraint 1 is caused by a decrease in the price of good X. an increase in the price of good X. a decrease in the price of good Y. an increase in the price of good Y. (10) QID: 17368 Refer to the graph below. The movement from budget constraint 1 to budget constraint 2 is caused by An increase in the price of good X and a decrease in the price of good Y An increase in the price of good Y and decrease in the price of good X An increase in the consumer's budget A decrease in the consumer's budget ABDAD DBDCA (1) QID: 12570 The budget constraint is not affected when a consumer's budget or the price of either of the goods changes. True False (2) QID: 12571 Suppose Mike has a budget of $6, and he can purchase some combination of tacos or burritos. Tacos are $1.25 each, and burritos are $1.50 each. If Mike's budget increases to $12, his purchasing power for tacos and burritos _________, and his budget constraint shifts __________. doubles; inward doubles; outward triples; inward triples; outward (3) QID: 16239 If the price of good X falls, the consumer's new budget constraint will pivot inward on the y-axis as shown in the constraint below. True False (4) QID: 17380 Refer to the graph below. If the price of good X increases from $1 to $2, the consumer is able to purchase a maximum of 4 units of good X. 2 units of good Y. 3 units of good X. 2 units of good X. (5) QID: 757 Examine the graph below. If the price of good X is $1, and the consumer is using budget constraint 1, the price of good Y must be $2. True False (6) QID: 760 Examine the graph below. The budget for this consumer is $100. $120. $150. not determinable from the information provided. (7) QID: 763 Examine the graph below. If the price of good X is $10, the price of good Y must be $8. $10. $12. $150. BBBDB DA (1) QID: 12572 The economic interpretation of an indifference curve is a map of the consumer's preferences. all combinations of two goods that a consumer can afford. the rate at which the consumer is willing to trade one good for another to remain equally satisfied. the maximum amounts of the two goods that the consumer will accept, given his/her budget. (2) QID: 12573 The slope of an indifference curve is all of the following except decreasing. the marginal rate of substitution. increasing. different as you move along an indifference curve. (3) QID: 12574 Indifference curves are all kinds of shapes as long as they decrease in slope. unable to cross. both A and B. neither A nor B. (4) QID: 12575 An indifference curve is a set of points representing combinations of ________ goods that a consumer finds __________ desirable and satisfying. three; unequally three; equally two; unequally two; equally (5) QID: 12576 Heather's indifference curve for frozen cappuccinos and donuts illustrates that the only way she can remain equally satisfied when you take away a frozen cappuccino is to give her some quantity of donuts instead. This implies that the indifference curve is upward sloping. downward sloping. perfectly horizontal. perfectly vertical. (6) QID: 12578 The marginal rate of substitution is the slope of a consumer's budget constraint. the slope of the consumer's indifference curve. the combinations of goods that give a consumer equal satisfaction. the geometric illustration of "more is better." (7) QID: 13873 Based on the graph shown, the consumer is indifferent to combinations of X and Y at points A and D. points A and B. points B and E. points B and D. (8) QID: 13875 The shape of the indifference curves in this graph show that the marginal rate of substitution is constant for each combination on an indifference curve. is different on each indifference curve. does not reflect relative values of the goods. is different for each bundle. (9) QID: 13876 A linear indifference curve reflects the fact that the two goods are perfect substitutes for each other. True False CCCDB BADA (1) QID: 13879 When a consumer optimizes his/her satisfaction at a point at which an indifference curve is tangent to the budget constraint, the consumer can increase his/her satisfaction only by increasing his/her income. two indifference curves will intersect at the tangency point. the consumer cannot increase his/her income. the consumer is likely to be at a sub-optimal level of consumption. (2) QID: 13880 A rational consumer would be indifferent between point A and B and would choose either one. True False (3) QID: 16241 Examine a consumer's indifference map for goods X and Y. This consumer would select combination A. B. C. D. (4) QID: 16242 Examine the consumer's indifference map and budget constraint. Assume that the consumer is choosing combination C. If the consumer's income falls, she will choose combination A. B. F. E. (5) QID: 790 The marginal rate of substitution is greater than the slope of the budget constraint; that is, the consumer is willing to give up more soda than the market requires at point a. b. c. d. (6) QID: 796 Refer to the graph below. U0, U1, and U2 are indifference curves for a consumer choosing ice cream cones and soda. The equilibrium position for this consumer is any point on the budget constraint. point a. point d. point c. (7) QID: 798 Refer to the graph below. If the consumer is initially at point b, she should try to get to point a by getting a larger income. purchase more ice cream and less soda. remain at that point to maximize her satisfaction. purchase more soda and less ice cream. (8) QID: 806 Refer to the graph below. Which point cannot be reached by the consumer? a b c d (9) QID: 829 The slope of the budget constraint tells us the willingness of the consumer to trade one good for another. the relative prices for each of the two goods. the market's opportunities for trade. both B and C. (10) QID: 830 The consumer trades until he/she reaches the point of maximum attainable satisfaction. This is the point at which the slope of the budget constraint is equal to the marginal rate of substitution. the marginal rate of substitution is highest. the marginal rate of substitution is lowest. the slope of the budget constraint is constant. ABCCC BDDDA (1) QID: 12580 An indifference curve that lies tangent to the budget constraint illustrates the combination of goods X and Y that provides the consumer the least satisfaction. True False (2) QID: 13882 In a two-good model, if the price of good X falls, the budget line changes in exactly the same way as if the consumer had received an income increase. True False (3) QID: 13883 If the consumer moves from point b to point d, the consumer would gain satisfaction by consuming more of good X. lose satisfaction by consuming less of good Y. retain the same level of satisfaction because the consumer is on the same budget constraint. lose satisfaction because the consumer moves to another indifference curve. (4) QID: 13885 At which point does the marginal rate of substitution equal the relative price ratio (MRS = Px/Py)? a b c a and b (5) QID: 832 When the price of good X falls, more of that good will be consumed. To find the highest satisfaction from a combination of goods, the consumer will find any combination of goods that falls on the budget line. find a combination that falls on the new budget line and is tangent to an indifference curve. find a combination of goods that maximizes the consumer's utility within the constraint of his new budget. both B and C. (6) QID: 840 Refer to the graph below. When the price of good X falls, the new point for the most optimal choice of combinations is point a. b. c. d. (7) QID: 857 Refer to the graph below. The marginal rate of substitution at point b is _______________ the marginal rate of substitution at point a. greater than equal to less than not comparable to BBDDD BC (1) QID: 12581 Economists use budget constraints and indifference curves together to find the producer's optimal choice under the constraint of the budget and prices. True False (2) QID: 12582 The demand curve comes from a consumer's making optimal choices subject to his/her constraints. True False (3) QID: 13886 Use the graphs below to analyze goods X and Y. Assume that the price of one of the goods changes. In the lower graph, the price, quantity (P0, Q0) is the equilibrium price/quantity combination for good X. the quantity of X demanded at X's original price. the quantity of Y demanded at Y's original price. the quantity of X demanded at X's lower price. (4) QID: 860 An indifference curve that lies tangent to the budget constraint illustrates the combination of goods X and Y that provide the consumer the least satisfaction. True False (5) QID: 861 What does the demand curve in graph the lower graph represent? All the consumer's optimal choices of good X when the price of good X changes All the consumer's optimal choices of good X at a fixed price The demand curve for good Y The consumer's indifference curve for X and Y (6) QID: 872 The demand curve comes from consumers who have preferences. consumers who have constraints. consumers who do the best with what they have. all of the above. BABBA D View Results Quiz 3.1 User ID: skim7 Attempt: 3 / 3 Out of: 20 Started: March 20, 2005 3:57am Finished: March 20, 2005 4:06am Time spent: 9 min. 21 sec. Question 1 (1 point) Use this information to answer the next three questions. Sam sells shavers and Alvin sells after shave. Suppose Sam discovers a new production technique that lowers his costs of production, shifting the supply curve for shavers to the right. This causes the equilibrium price of shavers to fall from $30 to $22 and the equilibrium quantity to increase from 40 to 50 shavers. What is the coefficient of price elasticity of demand (Ed) for shavers? Student response: Percent Value Student Response Answer Choices a. 1.38 100.0% b. 0.72 c. .94 d. none of the above Score: 1 / 1 Question 2 (1 point) If the coefficient of price elasticity of demand (Ed) is 6, Student response: Percent Value Student Response Answer Choices a. for every 1% change in quantity demanded there will be a 6% change in price. 100.0% b. a 1% price increase will lead to a 6% decrease in quantity demanded. c. a 6% price increase will lead to a 1% decrease in quantity demanded. d. a 1% price increase will lead to a 6% decrease in demand. Score: 1 / 1 Question 3 (1 point) Demand tends to be more elastic Student response: Percent Value Student Response Answer Choices a. in the short run than in the long run. b. for necessities than for luxuries. 100.0% c. for goods with many substitutes than for goods with only a few. d. for goods on which consumers spend a small portion of their budget. Score: 1 / 1 Question 4 (1 point) If the demand for gasoline becomes more elastic over time, Student response: Percent Value Student Response Answer Choices a. the demand curve will shift out. 100.0% b. the demand curve will become flatter. c. other things being equal, the equilibrium price of gasoline must fall. d. other things being equal, the equilibrium quantity of gasoline must fall. Score: 1 / 1 Question 5 (1 point) This is a tough one! When Johanna cut prices in her jewelry store by 20 percent, the dollar value of her sales fell by 20 percent. This indicates that Student response: Percent Value Student Response Answer Choices 0.0% a. demand was elastic. b. demand was inelastic. c. demand was unit elastic. d. the demand curve was vertical. answer:D Score: 0 / 1 Question 6 (1 point) If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent, Student response: Percent Value Student Response Answer Choices 100.0% a. demand is elastic. b. demand is inelastic. c. elasticity of demand is unitary. d. None of the above is correct. Score: 1 / 1 Question 7 (1 point) Elasticity Student response: Percent Value Student Response Answer Choices a. deals with percentage changes in price and quantity demanded. b. deals with percentage changes calculated in terms of the average values of the prices and quantities. c. coefficients are generally stated as absolute values. 100.0% d. All of the answers above are correct. Score: 1 / 1 Question 8 (1 point) Suppose the price of a good falls by 5 percent and the quantity demanded increases by 20 percent. What is the coefficient of price elasticity of demand? Student response: Percent Value Student Response Answer Choices a. 0.25 100.0% b. 4 c. 5 d. none of the above Score: 1 / 1 Question 9 (1 point) When the price of grapefruit falls from $2 to $1 per pound, the quantity demanded increases from 60 to 100 pounds. Using the midpoint formula, calculate the price elasticity of demand. Student response: Percent Value Student Response Answer Choices a. 1 b. 1.33 100.0% c. 0.75 d. 40 e. none of the above Score: 1 / 1 Question 10 (1 point) Elasticity provides a guide to both Student response: Percent Value Student Response Answer Choices a. market stability and the change in revenue as price changes. b. the responsiveness of quantity demanded to a change in price and market stability. 100.0% c. the responsiveness of quantity demanded to a change in price and the change in revenue as price changes. d. technological change and the change in revenue as price changes. Score: 1 / 1 Question 11 (1 point) The reason economists use elasticity instead of slope to measure changes is that Student response: Percent Value Student Response Answer Choices a. elasticity measures absolute changes and slope measures percentage changes. 100.0% b. elasticity measures percentage changes and slope measures absolute changes. c. elasticity measures relative change in price and slope does not. d. slope measures relative change in price and elasticity does not. Score: 1 / 1 Question 12 (1 point) If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack from $1.10 to $1.26 would reduce quantities demanded by about Student response: Percent Value Student Response Answer Choices a. 27 percent. b. 40 percent. 100.0% c. 6 percent. d. 95 percent. Score: 1 / 1 Question 13 (1 point) To avoid an increase in the local property tax, Sullivan County, New York, proposed a 2 percent hotel tax, which presumably would be passed on to tourists. The hotel industry argued that the tax would hurt hotel business. They are really arguing that Student response: Percent Value Student Response Answer Choices a. tourist and convention demand is inelastic, so hotel bookings will decline. 100.0% b. tourist and convention demand is very elastic, so hotel bookings will decline. c. they would prefer a property tax increase instead. d. it is unfair to tax people who do not live in the area. Score: 1 / 1 Question 14 (1 point) The slope of the demand curve is the same as the price elasticity of demand. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 15 (1 point) Suppose that Susan buys one six-pack of beer every week, regardless of price. She drinks one beer per day (except Sundays). Which of the following is correct. Student response: Percent Value Student Response Answer Choices a. Elasticity is greater than 1. b. Elasticity is between 0 and 1. c. Elasticity equals 0. 0.0% d. Elasticity equals 1. -C- Score: 0 / 1 Question 16 (1 point) If the demand is elastic over some range of the curve and the price of the good increases, Student response: Percent Value Student Response Answer Choices a. total revenue increases. 100.0% b. total revenue decreases. c. total revenue remains the same. d. the change in total revenue can't be determined. Score: 1 / 1 Question 17 (1 point) In the figure below, at any price above $6, quantity demanded Student response: Percent Value Student Response Answer Choices 100.0% a. falls to zero. b. becomes infinitely large. c. is equal to price. d. is equal to the elasticity of demand. Score: 1 / 1 Question 18 (1 point) In the figure below, between points A and B on the demand curve, Student response: Percent Value Student Response Answer Choices 100.0% a. demand is elastic. b. demand is inelastic. c. demand is unit-elastic. d. demand is perfectly inelastic. Score: 1 / 1 Question 19 (1 point) In the figure below, Student response: Percent Value Student Response Answer Choices a. D1 is more elastic than D2 below P2 and less elastic above P2. b. D1 is less elastic than D2 at all prices. 100.0% c. D2 is less elastic than D1 at all prices. d. D1 is more elastic than D2 above P2 but less elastic below P2. Score: 1 / 1 Question 20 (1 point) From the figure below, we can infer that demand is ______ between P = 12 and P = 10 and _______ between P = 6 and P = 4. Student response: Percent Value Student Response Answer Choices a. elastic; elastic 100.0% b. elastic; inelastic c. inelastic; elastic d. inelastic; inelastic Score: 1 / 1 Total score: 18 / 20 = 90.0% View Results Quiz 3.2 User ID: skim7 Attempt: 1 / 3 Out of: 15 Started: March 20, 2005 4:11am Finished: April 3, 2005 6:54pm Time spent: 349 hr, 42 min., 32 sec. Question 1 (1 point) William spent $5 to see a movie. We know that Student response: Percent Value Student Response Answer Choices a. the movie was worth 500 utils. b. Bill's total utility from movies was $5. 100.0% c. the movie was worth at least $5 worth of other goods. d. the movie increased marginal utility. Score: 1 / 1 Question 2 (1 point) As a general rule, consumers have Student response: Percent Value Student Response Answer Choices a. limited income. b. unlimited desires for goods. c. many choices of goods facing them. 100.0% d. all of the answers above are correct. e. none of the answers above is correct. Score: 1 / 1 Question 3 (1 point) Total utility can be thought of as the Student response: Percent Value Student Response Answer Choices 100.0% a. total satisfaction derived from a bundle of goods. b. minimum amount of money a consumer is willing to spend on a bundle of goods. c. Both a and b are correct. d. Neither a nor b is correct. Score: 1 / 1 Question 4 (1 point) Suppose a person claims, "I wouldn't eat liver if you paid me!" If this person were persuaded to take a bite of liver, which he truly hated, we would expect that marginal utility would be Student response: Percent Value Student Response Answer Choices a. positive. b. zero. 100.0% c. negative. d. positive, but decreasing. Score: 1 / 1 Question 5 (1 point) The marginal utility per dollar of a good Student response: Percent Value Student Response Answer Choices a. is marginal utility divided by the price of the good. b. is used to determine when a consumer has maximized utility. c. will decrease as more of a good is consumed (assuming price is held constant). 100.0% d. is all of the above. Score: 1 / 1 Question 6 (1 point) Scarcity Student response: Percent Value Student Response Answer Choices a. necessitates choice among consumer goods. b. may involve foregoing the pleasure of one good in order to enjoy another. c. affects all consumer decisions. 100.0% d. all of the above answers are correct. Score: 1 / 1 Question 7 (1 point) The theory of consumer choice is based on the hypothesis that each consumer wants to Student response: Percent Value Student Response Answer Choices 100.0% a. maximize her total utility. b. maximize her marginal utility. c. minimize the rate at which her marginal utility diminishes. d. minimize the percentage of her consumption diverted to inferior goods. Score: 1 / 1 Question 8 (1 point) If you went to McDonald's and ate three hamburgers only to find that the third hamburger didn't add as much to your total satisfaction as the second one did, you are experiencing Student response: Percent Value Student Response Answer Choices a. the law of diminishing returns. b. an inelastic demand for hamburgers. c. the substitution effect. 100.0% d. the law of diminishing marginal utility. Score: 1 / 1 Question 9 (1 point) Suppose you buy pizzas and rent videos each month. Your total utility from pizzas per month is 50 for the first, 90 for the second, 120 for the third, 140 for the fourth, 150 for the fifth, 155 for the sixth, and 155 for the seventh. Your total utility from videos is 30 for the first, 58 for the second, 82 for the third, 102 for the fourth, 118 for the fifth, 130 for the sixth, and 138 for the seventh. If your income is $40 a month, the price of pizza is $5 and the price of a video is $4, how many videos will you rent and how many pizzas will you buy each month? (Start by making a table with total utility for each good; find marginal utility; find marginal utility divided by price; compare the two goods. This is a long problem!) Student response: Percent Value Student Response Answer Choices a. 4 of each b. 4 movies and 5 pizzas 100.0% c. 5 movies and 4 pizzas d. 2.5 movies and 6 pizzas Score: 1 / 1 Question 10 (1 point) In the previous question, how many movies and how many pizzas will you consume if the price of movie rentals increases to $5? Student response: Percent Value Student Response Answer Choices 100.0% a. 4 of each b. 2 movies and 6 pizzas c. 3 movies and 5 pizzas d. 1 movie and 7 pizzas Score: 1 / 1 Question 11 (1 point) A consumer equilibrium requires that Student response: Percent Value Student Response Answer Choices a. a consumer allocates income such that the marginal utility of each good is the same. b. a consumer allocates income such that the total utility of each good is the same. 100.0% c. a consumer allocates income such that the last dollar spent on each good yields the same amount of marginal utility. d. a consumer buys fewer units of goods with higher prices and more units of goods with lower prices. Score: 1 / 1 Question 12 (1 point) Total utility from consuming 2 donuts is 12 and the marginal utility of the third donut is 3, the marginal utility of a fourth donut is 1, a fifth donut is 0 and a sixth donut is -4. The consumer will Student response: Percent Value Student Response Answer Choices 100.0% a. consume the fifth donut if there is no charge for it but not the sixth. b. consume the fifth donut and the sixth donut if there is no charge for them. c. refuse to consume either the fifth or sixth donut even if there is no charge for them. d. behave in an uncertain manner. We need more information. Score: 1 / 1 Question 13 (1 point) Videos Pizzas Compact Discs Quantity TU Quantity TU Quantity TU 1 30 1 100 1 54 2 54 2 170 2 106 3 72 3 220 3 154 4 88 4 260 4 199 5 103 5 292 5 239 6 117 6 316 6 277 7 130 7 338 7 313 8 142 8 356 8 347 9 153 9 368 9 379 10 161 10 372 10 407 11 165 11 372 11 431 12 166 12 364 12 447 If a person's income is $128, the price of a video is $4, the price of a pizza is $8 and the price of a CD is $16, what is the utility maximizing quantity of each good? Student response: Percent Value Student Response Answer Choices a. 1 video; 5 pizzas; 8 CDs b. 4 videos; 5 pizzas; 8 CDs c. 6 videos; 7 pizzas; 3 CDs 100.0% d. 8 videos; 6 pizzas; 3 CDs Score: 1 / 1 Question 14 (1 point) If Jennifer can receive seven utils of satisfaction per dollar spent on pizza and five utils of satisfaction per dollar spent on hamburgers, then: Student response: Percent Value Student Response Answer Choices a. To maximize her satisfaction she should eat more hamburgers and fewer pizza until the marginal utilities per dollar are equal. 100.0% b. To maximize her satisfaction she should eat more pizza and fewer hamburgers until the marginal utilities per dollar are equal. c. The current selection is already at maximum utility. d. None of the above. Score: 1 / 1 Question 15 (1 point) Mary likes pie. The more pie she eats, however, the less she likes each additional pie. As long as Mary's marginal utility remains positive, her total utility is Student response: Percent Value Student Response Answer Choices a. decreasing at an increasing rate. b. increasing at an increasing rate. c. decreasing at a decreasing rate. 100.0% d. increasing at a decreasing rate. Score: 1 / 1 Total score: 15 / 15 = 100.0% View Results Quiz 3.3 User ID: skim7 Attempt: 3 / 3 Out of: 25 Started: April 5, 2005 5:28pm Finished: April 5, 2005 5:32pm Time spent: 3 min. 29 sec. Question 1 (1 point) The budget constraint shows that Student response: Percent Value Student Response Answer Choices 100.0% a. the consumer faces a trade-off in the consumption of goods. b. the consumer can have as many goods as he wants. c. as consumers spend more on one good, they spend more on others. d. total income equals total spending on one good. Score: 1 / 1 Question 2 (1 point) An indifference curve shows the Student response: Percent Value Student Response Answer Choices a. combinations of goods that generate the same ratio of marginal utilities. b. set of consumption alternatives that yield the same amount of marginal utility. c. combinations of goods that a consumer does not like very much. 100.0% d. set of consumption alternatives that yield the same amount of total utility. Score: 1 / 1 Question 3 (1 point) Indifference curves cannot Student response: Percent Value Student Response Answer Choices a. be convex to the origin. b. be downward sloping. c. change. 100.0% d. intersect. Score: 1 / 1 Question 4 (1 point) The slope of the budget constraint line is the Student response: Percent Value Student Response Answer Choices a. income of consumers divided by the price of each good. b. ratio of this year's income to last year's income. 100.0% c. the rate at which a consumer can exchange one good for the other in the market. d. ratio of different levels of income. Score: 1 / 1 Question 5 (1 point) The marginal rate of substitution is Student response: Percent Value Student Response Answer Choices 100.0% a. the change in the quantity of one good that just offsets a one unit change in the consumption of another such that the total satisfaction remains constant. b. the additional satisfaction from consuming an additional unit of a good or service. c. positively related to the level of income. d. the set of goods and services that are available to the consumer given his income. Score: 1 / 1 Question 6 (1 point) A line showing feasible combinations of two goods that a consumer could afford given his money income is the Student response: Percent Value Student Response Answer Choices 100.0% a. budget constraint. b. indifference map. c. demand curve. d. price consumption curve. Score: 1 / 1 Question 7 (1 point) Which of the following is NOT true about indifference curves? Student response: Percent Value Student Response Answer Choices a. Indifference curves slope downward. b. Indifference curves show equally preferred combinations of two goods. c. Indifference curves are not straight lines because the marginal rate of substitution falls. 100.0% d. Indifference curves shift when prices change. Score: 1 / 1 Question 8 (1 point) Assume that good X and good Y each has diminishing marginal utility for a consumer. In this case, Student response: Percent Value Student Response Answer Choices a. an indifference curve linking the two goods will have a constant slope. 100.0% b. an indifference curve will be convex to the origin. c. the demand curves for these goods will be positively sloped. d. the demand curves for these goods will be horizontal. Score: 1 / 1 Question 9 (1 point) An increase in consumer income will Student response: Percent Value Student Response Answer Choices a. shift the budget constraint and increase its slope. b. reduce consumption of all normal goods. c. pivot the budget constraint on the axis with the good that has the higher price. 100.0% d. shift the budget line outward in a parallel fashion. Score: 1 / 1 Question 10 (1 point) Let hamburgers be on the vertical axis and movies on the horizontal axis. If the price of a hamburger is $1.50 and the price of a movie is $6, then the slope of the budget line is (be careful!) Student response: Percent Value Student Response Answer Choices a. 0.25. b. 6. 100.0% c. 4. d. 3. Score: 1 / 1 Question 11 (1 point) A decrease in the price of a good causes Student response: Percent Value Student Response Answer Choices a. the utility of the good to decrease. b. the nominal wealth of a person to increase. 100.0% c. purchasing power of a person's money to increase. d. the marginal utility of the good to decrease. Score: 1 / 1 Question 12 (1 point) If hamburgers are on the horizontal axis and movies are on the vertical axis, an increase in the price of a movie would be shown by Student response: Percent Value Student Response Answer Choices a. shifting the budget constraint in toward the origin in a parallel fashion. b. shifting the budget constraint outward in a parallel fashion. 100.0% c. rotating the budget constraint around the horizontal intercept such that the new vertical intercept is closer to the origin. d. making the budget constraint steeper. Score: 1 / 1 Question 13 (1 point) If an individual consumes only two goods and consumption of one good increases, then in order to keep the consumer on the same indifference curve, consumption of the other good must Student response: Percent Value Student Response Answer Choices a. increase. 100.0% b. decrease. c. increase proportionately. d. become negative. Score: 1 / 1 Question 14 (1 point) To draw a budget constraint, you must know Student response: Percent Value Student Response Answer Choices 100.0% a. the prices of two goods and household income. b. household income and the price of money. c. the price of one good and household income. d. the price of two goods but no information on household income. e. preferences of goods at various prices. Score: 1 / 1 Question 15 (1 point) If the prices of both goods increase by 10 percent, the budget line (think carefully!) Student response: Percent Value Student Response Answer Choices a. shifts outward in a parallel fashion. 100.0% b. shifts inward in a parallel fashion. c. is unaffected since only relative price changes matter. d. pivots on the axis of the more expensive good. Score: 1 / 1 Question 16 (1 point) Suppose a household budgets $70 to be spent on records and compact discs. The price of a record is $7 and the price of a compact disc is $14. If the household buys 4 records, how many compact discs can they afford? Student response: Percent Value Student Response Answer Choices a. 1 b. 2 100.0% c. 3 d. 4 Score: 1 / 1 Question 17 (1 point) Which of the budget constraints below represents a decrease in the consumer's income? Student response: Percent Value Student Response Answer Choices a. A b. B 100.0% c. C d. D Score: 1 / 1 Question 18 (1 point) Which of the budget constraints below represents a decrease in the price of good X? Student response: Percent Value Student Response Answer Choices a. A 100.0% b. B c. C d. D Score: 1 / 1 Question 19 (1 point) Examine the budget constraints below. If this consumer is on budget constraint 2, and the price of shoes is $4, what is the consumer's income? Student response: Percent Value Student Response Answer Choices 100.0% a. $8 b. $4 c. $16 d. It can't be determined. Score: 1 / 1 Question 20 (1 point) Examine the budget constraints below. If this consumer is on budget constraint 2, and the price of shoes is $4, what is the maximum number of pairs of socks he could purchase if he bought no shoes? Student response: Percent Value Student Response Answer Choices 100.0% a. 8 b. 4 c. 2 d. 0 Score: 1 / 1 Question 21 (1 point) Examine a consumer's indifference map. Two points that represent equal levels of consumer satisfaction are Student response: Percent Value Student Response Answer Choices 100.0% a. B and D. b. C and E. c. D and F. d. A and D. Score: 1 / 1 Question 22 (1 point) The figure below shows Adam's budget constraint for bananas and apples when apples cost $5 each and bananas $4 each. The information implies that Adam's income Student response: Percent Value Student Response Answer Choices a. must be $9. 100.0% b. must be $20. c. must be $40. d. Adam's income cannot be determined without further information. Score: 1 / 1 Question 23 (1 point) In the figure below, the consumer can afford any combination of X and Y represented by Student response: Percent Value Student Response Answer Choices a. a point on line AB only. 100.0% b. a point on or below line AB. c. a point on or above line AB. d. a point anywhere on the graph. Score: 1 / 1 Question 24 (1 point) The figure below shows a consumer budget line for records and compact discs. The price of records is $7. Find the price of a compact disc. (This is tough! First, find income using the intercept and quantity of records. Then find the price of a CD.) Student response: Percent Value Student Response Answer Choices a. $7. 100.0% b. $14. c. $5. d. $10. Score: 1 / 1 Question 25 (1 point) The slope of the budget line Student response: Percent Value Student Response Answer Choices a. always equals 1. b. equals income divided by price. 100.0% c. equals the ratio of the prices. d. decreases as we move from left to right. Score: 1 / 1 Total score: 25 / 25 = 100.0% View Results Quiz 3.4 User ID: skim7 Attempt: 3 / 3 Out of: 15 Started: April 5, 2005 9:21pm Finished: April 5, 2005 9:23pm Time spent: 2 min. 20 sec. Question 1 (1 point) The consumer optimum (or consumer optimization) is defined as the set of goods and services Student response: Percent Value Student Response Answer Choices a. that maximizes the total number of utils. 100.0% b. subject to the limited income of the consumer, that maximizes the total utility of the consumer. c. that maximizes the marginal utility of each good consumed. d. such that the marginal utility of each good equals zero. Score: 1 / 1 Question 2 (1 point) Using indifference curve analysis, the consumer optimization point is Student response: Percent Value Student Response Answer Choices a. on the upward-sloping portion of the indifference curve. b. on the midpoint of the budget constraint. 100.0% c. the tangency between an indifference curve and a budget line. d. where the marginal rate of substitution is the greatest. Score: 1 / 1 Question 3 (1 point) A consumer is maximizing utility when Student response: Percent Value Student Response Answer Choices a. the slope of the budget constraint has reached -1. b. diminishing marginal utility has set in. 100.0% c. the slope of the budget constraint equals the MRS. d. the consumer has spent all of his income. Score: 1 / 1 Question 4 (1 point) To derive the law of demand, we assume that Student response: Percent Value Student Response Answer Choices 100.0% a. tastes are constant. b. the price of the good is constant. c. marginal utility is constant. d. the price of a substitute good changes. Score: 1 / 1 Question 5 (1 point) A consumer optimum is characterized by the marginal rate of substitution Student response: Percent Value Student Response Answer Choices a. equal to unity. b. divided by the price ratio of the two goods equal to the income of the consumer. 100.0% c. equal to the ratio of the prices of the two goods. d. of one good divided by its price equal to the marginal rate of substitution of the other good divided by its price. Score: 1 / 1 Question 6 (1 point) If the price of food rises, holding all other prices and money income constant for Mr. Smith, he will adjust his expenditures and Student response: Percent Value Student Response Answer Choices a. reach an equilibrium on a higher indifference curve. 100.0% b. reach an equilibrium on a lower indifference curve. c. reach an equilibrium on the same indifference curve. d. his level of satisfaction may go up or down. Score: 1 / 1 Question 7 (1 point) Examine this consumer's indifference map. The consumer would select combination Student response: Percent Value Student Response Answer Choices a. A. b. B. c. C. 100.0% d. D. Score: 1 / 1 Question 8 (1 point) Examine the indifference map below. If this consumer is consuming combination E, then we can predict the he or she will eventually Student response: Percent Value Student Response Answer Choices a. purchase more of good X and less of good Y. 100.0% b. purchase more of good Y and less of good X. c. remain at this point. d. try to get to point B to maximize satisfaction. Score: 1 / 1 Question 9 (1 point) The consumer is willing to give up more of good Y to get another unit of good X than the market requires at point Student response: Percent Value Student Response Answer Choices a. F. 100.0% b. B. c. D. d. E. Score: 1 / 1 Question 10 (1 point) Examine Christina's indifference map. Assume that the price of squash increases while the price of coconuts remains constant. Christina's equilibrium point changes from Student response: Percent Value Student Response Answer Choices 100.0% a. C to A. b. A to C. c. C to B. d. C to D. Score: 1 / 1 Question 11 (1 point) According to the figure below, if the price of good X falls, a consumer making her optimal decision could Student response: Percent Value Student Response Answer Choices a. move from a point on U1 to a point on U3. 100.0% b. move from a point on U2 to a point on U3. c. move from a point on U1 to a point on U2. d. move from a point on U2 to a point on U1. Score: 1 / 1 Question 12 (1 point) In the figure below, Adam is Student response: Percent Value Student Response Answer Choices a. better off at C than at D and able to afford either C or D. b. better off at D than at C but only able to afford C. c. equally well off at C and D and able to afford either C or D. 100.0% d. equally well off at C and D but only able to afford C. Score: 1 / 1 Question 13 (1 point) In the figure below, point D for the consumer Student response: Percent Value Student Response Answer Choices a. will be chosen because total utility is larger than at point C. b. would not be chosen because it is less desirable than point C. 100.0% c. is unattainable, given the consumer's budget. d. has total utility equal to point C. Score: 1 / 1 Question 14 (1 point) If the budget line is originally line DE and the price of coffee decreases, the consumer will Student response: Percent Value Student Response Answer Choices a. eat more bagels and drink more coffee. 100.0% b. drink more coffee and eat about the same amount of bagels. c. drink more coffee and eat fewer bagels. d. not change the amount of coffee or bagels consumed. Score: 1 / 1 Question 15 (1 point) Point C is Student response: Percent Value Student Response Answer Choices a. preferred to points G, A, and B. 100.0% b. preferred to points A and B. c. less preferred than point G. d. less preferred than point H. Score: 1 / 1 Total score: 15 / 15 = 100.0% View Results TEST 3 User ID: skim7 Attempt: 1 / 1 Out of: 200 Started: April 5, 2005 9:42pm Finished: April 5, 2005 11:18pm Time spent: 1 hr, 36 min., 6 sec. Student finished 2 hr, 23 min., 54 sec. ahead of the 240 min. time limit. Question 1 (4 points) A price cut will decrease the revenue a firm receives if the demand for its product is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. elastic. 100.0% b. inelastic. 0.0% c. unit elastic. Score: 4 / 4 Question 2 (4 points) If the demand for a good is inelastic and the price of the good decreases, Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. total revenue decreases. 0.0% b. total revenue increases. 0.0% c. total revenue is not affected. 0.0% d. the effect on total revenue can't be determined. Score: 4 / 4 Question 3 (4 points) If the percentage change in quantity demanded of a good is equal to the percentage change in price, the demand is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. elastic. 0.0% b. inelastic. 100.0% c. unit elastic. 0.0% d. perfectly elastic. Score: 4 / 4 Question 4 (4 points) In the figure below, total expenditure __________ as price falls from P = 12 to P = 10. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. falls 0.0% b. stays constant. 100.0% c. rises. 0.0% d. rises by more than $12 Score: 4 / 4 Question 5 (4 points) If Wisdom U. increases tuition in order to increase total revenue, Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. it will be successful because demand is downward sloping. 100.0% b. it will be successful if demand is price inelastic. 0.0% c. it will be successful if demand is price elastic. 0.0% d. it will be successful if supply is price inelastic. Score: 4 / 4 Question 6 (4 points) The price elasticity of demand is the ratio of the Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. absolute change in quantity demanded to the absolute change in price. 0.0% b. absolute change in price to the absolute change in quantity demanded. 100.0% c. percentage change in quantity demanded to the percentage change in price. 0.0% d. percentage change in price to the percentage change in quantity demanded. Score: 4 / 4 Question 7 (4 points) The demand for a good tends to be less elastic Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the fewer substitutes there are for the good. 0.0% b. the longer the time period that elapses after a change in price. 0.0% c. the larger the share of the typical person's budget the good absorbs. 0.0% d. the fewer complements there are for the good. Score: 4 / 4 Question 8 (4 points) Demand will tend to be more price elastic for a product that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. is a small portion of the budget. 0.0% b. is a necessity. 100.0% c. has many substitutes. 0.0% d. has few substitutes. Score: 4 / 4 Question 9 (4 points) If elasticity of demand is 0.5, it follows that a _____ percent decrease in price causes a _____ percent increase in quantity demanded. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 50; 100 0.0% b. 100; 200 0.0% c. 100; 100 100.0% d. 200; 100 Score: 4 / 4 Question 10 (4 points) If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is _____, indicating the demand is _____. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. 2, elastic 0.0% b. 2, inelastic 0.0% c. 0.5, elastic 0.0% d. 0.5, inelastic Score: 4 / 4 Question 11 (4 points) Julia knows the price elasticity of demand for video movie rentals is 3. She knows, therefore, that if she raises her price from $2 to $2.50, her rentals will drop by approximately Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 150 percent. 0.0% b. 100 percent. 100.0% c. 66 percent. 0.0% d. 33 percent. Score: 4 / 4 Question 12 (4 points) Assume the price of good X decreases from $4.50 to $3.50 and quantity demanded increases from 15 to 25. What is the coefficient of elasticity of demand? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 0.1 0.0% b. 0.5 100.0% c. 2 0.0% d. 5 Score: 4 / 4 Question 13 (4 points) At $6 per steak, consumers are willing to buy two steaks. At a price of $2, consumers are willing to buy six steaks. The elasticity of the market demand curve between P = $6 and P = $2 is ______. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 0.33 100.0% b. one 0.0% c. two 0.0% d. four Score: 4 / 4 Question 14 (4 points) Elasticity Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. deals with percentage changes in price and quantity demanded. 0.0% b. deals with percentage changes calculated in terms of the average values of the prices and quantities. 0.0% c. coefficients are generally stated as absolute values. 100.0% d. All of the answers above are correct. Score: 4 / 4 Question 15 (4 points) Suppose the price of a good falls by 5 percent and the quantity demanded increases by 20 percent. What is the coefficient of price elasticity of demand? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 0.25 100.0% b. 4 0.0% c. 5 0.0% d. none of the above Score: 4 / 4 Question 16 (4 points) In the figure below, the price elasticity of demand (dropping all minus signs) is __________ between P = 4 and P = 6 than between P = 10 and P = 12 because between the lower set of prices, the percentage change in price is _______. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. smaller; smaller 100.0% b. smaller; greater 0.0% c. greater; smaller 0.0% d. greater; greater Score: 0 / 4 Question 17 (4 points) A vertical demand curve means that any change in price will cause no change in the quantity demanded. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 4 / 4 Question 18 (4 points) Elasticity is also called Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. effectiveness. 0.0% b. shortage. 0.0% c. surplus. 100.0% d. responsiveness. Score: 4 / 4 Question 19 (4 points) As more of a product is consumed, its marginal utility Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. equals total utility. 0.0% b. rises. 0.0% c. stays the same. 100.0% d. falls. Score: 4 / 4 Question 20 (4 points) The law of diminishing marginal utility states that Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. marginal utility decreases with each additional unit consumed. 0.0% b. marginal utility increases with each additional unit consumed. 0.0% c. total utility increases with each unit consumed. 0.0% d. total utility decreases with each additional unit consumed. Score: 4 / 4 Question 21 (4 points) If your friend indicated to you that one more piece of chocolate cake would make her very uncomfortable, she is saying that: Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. A) An additional piece of cake would make her total utility increase more slowly than before. 0.0% b. B) An additional piece of cake would have negative marginal utility. 0.0% c. C) An additional piece of cake would reduce her total utility. 100.0% d. D) Both B and C. 0.0% e. E) None of the above. Score: 4 / 4 Question 22 (4 points) If total utility from consuming 2 donuts is 12 and the marginal utility of the third donut is 3, total utility of consuming 3 donuts is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 5. 0.0% b. 9. 100.0% c. 15. 0.0% d. uncertain without more information. Score: 4 / 4 Question 23 (4 points) If the total utility of one pie is 5 utils, and the total utility of two pies is 4 utils, the marginal utility of teh second pie is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 9 utils. 0.0% b. 1 util. 100.0% c. -1 util. 0.0% d. -9 utils. Score: 4 / 4 Question 24 (4 points) Mary likes pies and cakes, and she consumes several of each per week. (I hope Mary has a fast metabolism.) The marginal utility of the last pie is 6 utils and the marginal utility of the last cake is 12 utils. If each pie and each cake costs $12, is Mary attaining consumer equilibrium? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. Yes. She does not change her consumption to reach consumer equilibrium. 0.0% b. No. She needs to buy more pies to reach consumer equilibrium. 100.0% c. No. She needs to buy more cakes to reach consumer equilibrium. 0.0% d. There is not enough information to answer this question. Score: 4 / 4 Question 25 (4 points) In a two-good model, total utility is maximized when Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the marginal utilities per dollar spent on each good are equal. 0.0% b. the total utilities per dollar spend on each good are equal. 0.0% c. the marginal utilities per dollar spent on each good are maximized. 0.0% d. the total utilities per dollar spent on each good are maximized. Score: 4 / 4 Question 26 (4 points) Videos Pizzas Compact Discs Quantity TU Quantity TU Quantity TU 1 30 1 100 1 54 2 54 2 170 2 106 3 72 3 220 3 154 4 88 4 260 4 199 5 103 5 292 5 239 6 117 6 316 6 277 7 130 7 338 7 313 8 142 8 356 8 347 9 153 9 368 9 379 10 161 10 372 10 407 11 165 11 372 11 431 12 166 12 364 12 447 If a person's income is $128, the price of a video is $4, the price of a pizza is $8 and the price of a CD is $16, what is the utility maximizing quantity of each good? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. 1 video; 5 pizzas; 8 CDs 0.0% b. 4 videos; 5 pizzas; 8 CDs 0.0% c. 6 videos; 7 pizzas; 3 CDs 100.0% d. 8 videos; 6 pizzas; 3 CDs Score: 4 / 4 Question 27 (4 points) The theory of consumer choice is based on the hypothesis that each consumer wants to Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. maximize her total utility. 0.0% b. maximize her marginal utility. 0.0% c. minimize the rate at which her marginal utility diminishes. 0.0% d. minimize the percentage of her consumption diverted to inferior goods. Score: 4 / 4 Question 28 (4 points) When marginal utility becomes negative, total utility begins to increase. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 4 / 4 Question 29 (4 points) The possible combinations of goods that can be purchased with a specific income is called the Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. budget constraint. 0.0% b. indifference map. 0.0% c. marginal rate of substitution. 0.0% d. income-consumption curve. Score: 4 / 4 Question 30 (4 points) An increase in income will Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. shift the budget constraint out in a parallel fashion. 0.0% b. make the budget constraint steeper. 0.0% c. make the budget constraint flatter. 0.0% d. make the budget constraint more bowed. Score: 4 / 4 Question 31 (4 points) A shift in the budget line in the figure below from AB to AC indicates Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the price of wine coolers has risen. 0.0% b. income has increased. 0.0% c. the price of beer has fallen. 100.0% d. the price of wine coolers has fallen. 0.0% e. all of the answers above are correct. Score: 4 / 4 Question 32 (4 points) A change in the price of one good results in a rotation of the budget line, so that the line is steeper or flatter. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 4 / 4 Question 33 (4 points) If the price of good x is $5 and the price of good y is $10 when income is $200 per time period, the slope of the consumer's budget constraint will be (assuming that good X is on the x axis and good Y is on the y axis) Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. 1/2. 0.0% b. 2. 0.0% c. 5. 0.0% d. 10. Score: 4 / 4 Question 34 (4 points) Examine the budget constraint for a consumer who has an income of $4. What is the price of paper? Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. $2 each 100.0% b. $0.50 each 0.0% c. $4 each 0.0% d. $1.50 each Score: 4 / 4 Question 35 (4 points) In the figure below, the line AB is Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. an indifference curve. 100.0% b. a budget line. 0.0% c. a marginal utility curve. 0.0% d. a demand curve. Score: 4 / 4 Question 36 (4 points) In the figure below, the rightward shift in the budget line from the one containing point A to the one containing point B Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. resulted from a decrease in the consumer's income. 100.0% b. resulted from an increase in the consumer's income. 0.0% c. resulted from a decrease in the price of beer. 0.0% d. decrease in the price of wine. Score: 4 / 4 Question 37 (4 points) The marginal rate of substitution is measured along Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the demand curve. 0.0% b. the total utility curve. 100.0% c. a given indifference curve. 0.0% d. a given budget line. Score: 4 / 4 Question 38 (4 points) Indifference curves can never intersect one another. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 4 / 4 Question 39 (4 points) An indifference curve provides the set of consumption alternatives that Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. yield the same total amount of satisfaction. 0.0% b. maximize the utility of the consumer. 0.0% c. can be purchased for the same amount of money. 0.0% d. yield the same marginal utility for the last unit consumed of each good. Score: 4 / 4 Question 40 (4 points) Basket of goods A is on an indifference curve that lies further from the origin than basket B. From this we know that Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the marginal utility from consuming A is more than the marginal utility from consuming B. 100.0% b. the total utility from consuming A is more than the total utility from consuming B. 0.0% c. the prices of the goods in A are more than the prices of the goods in B. 0.0% d. all other consumers would also rank A above B. Score: 4 / 4 Question 41 (4 points) To draw a budget constraint, you must know Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. the prices of two goods and household income. 0.0% b. household income and the price of money. 0.0% c. the price of one good and household income. 0.0% d. the price of two goods but no information on household income. 0.0% e. preferences of goods at various prices. Score: 4 / 4 Question 42 (4 points) Examine the budget constraints below. If this consumer is on budget constraint 2, and the price of shoes is $4, what is the maximum number of pairs of socks he could purchase if he bought no shoes? Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. 8 0.0% b. 4 0.0% c. 2 0.0% d. 0 Score: 4 / 4 Question 43 (4 points) The slope of a consumer's budget constraint is the opportunity cost of buying one good in terms of how much of the other that he gives up. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. True 0.0% b. False Score: 4 / 4 Question 44 (4 points) The budget constraint is not affected when a consumer's budget or the price of either of the goods changes. Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 4 / 4 Question 45 (4 points) Using indifference curve analysis, a consumer optimum is characterized by Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the marginal rate of substitution of one good divided by its price equal to the marginal rate of substitution of the other good divided by its price. 0.0% b. the marginal rate of substitution being equal to one. 0.0% c. the marginal rate of substitution being equal to zero. 100.0% d. the marginal rate of substitution being equal to the ratio of the prices of the two goods. Score: 4 / 4 Question 46 (4 points) Budget line DF would rotate in to the left if Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. the price of bagels increased. 0.0% b. the price of bagels decreased. 100.0% c. the price of coffee increased. 0.0% d. the price of coffee decreased. Score: 4 / 4 Question 47 (4 points) In the figure below, the consumer experiences at point C Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. greater total utility than at point D. 0.0% b. greater total utility than at point E. 100.0% c. less total utility than at point D. 0.0% d. total utility equal to that experienced at point D. Score: 4 / 4 Question 48 (4 points) In the figure below, point D for the consumer Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. will be chosen because total utility is larger than at point C. 0.0% b. would not be chosen because it is less desirable than point C. 100.0% c. is unattainable, given the consumer's budget. 0.0% d. has total utility equal to point C. Score: 4 / 4 Question 49 (4 points) If the budget line is originally line DE and the price of coffee decreases, the consumer will Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. eat more bagels and drink more coffee. 100.0% b. drink more coffee and eat about the same amount of bagels. 0.0% c. drink more coffee and eat fewer bagels. 0.0% d. not change the amount of coffee or bagels consumed. Score: 4 / 4 Question 50 (4 points) In a two-good model, if the price of good X falls, the budget line changes in exactly the same way as if the consumer had received an income increase Student response: Percent Value Correct Response Student Response Answer Choices 0.0% a. True 100.0% b. False Score: 4 / 4 Total score: 196 / 200 = 98.0% View Results Quiz 4.1 User ID: skim7 Attempt: 3 / 3 Out of: 15 Started: April 6, 2005 10:52pm Finished: April 6, 2005 10:57pm Time spent: 4 min. 33 sec. Question 1 (1 point) The short run is usually characterized Student response: Percent Value Student Response Answer Choices a. labor being fixed. b. a period no longer than one year. c. total output being fixed. 100.0% d. capital being fixed. Score: 1 / 1 Question 2 (1 point) Examine the total product curve below. This total product curve exhibits Student response: Percent Value Student Response Answer Choices a. increasing marginal product of capital. b. diminishing marginal returns. 100.0% c. increasing marginal product of labor. d. increasing costs of production. Score: 1 / 1 Question 3 (1 point) Marginal product increases as long as Student response: Percent Value Student Response Answer Choices a. total product is positive. b. the total product curve is concave (decreasing slope). c. total product is increasing. 100.0% d. the total product curve is convex (increasing slope). Score: 1 / 1 Question 4 (1 point) The marginal product and average product curves always intersect at Student response: Percent Value Student Response Answer Choices a. the origin. 100.0% b. the point of maximum average product. c. the point of maximum marginal product. d. the point of maximum total product. Score: 1 / 1 Question 5 (1 point) When average product is increasing, it is necessarily true that marginal product is Student response: Percent Value Student Response Answer Choices a. falling. 100.0% b. greater than average product. c. equal to average product. d. marginal product is increasing. Score: 1 / 1 Question 6 (1 point) Based on the following output schedule, the total product curve is Labor Output 1 5 2 14 3 24 4 31 Student response: Percent Value Student Response Answer Choices a. concave at 2 workers. b. convex at 4 workers. 100.0% c. convex a 1 worker. d. linear at 2 workers. Score: 1 / 1 Question 7 (1 point) Based on the following average product curve, which of the following is true? Student response: Percent Value Student Response Answer Choices 100.0% a. The marginal product of the fifth worker is 12 units. b. The marginal product of the third worker is 8 units. c. The marginal product of the first worker is 3 units. d. The marginal product of the fifth worker is negative. Score: 1 / 1 Question 8 (1 point) When labor productivity is falling, it is true that Student response: Percent Value Student Response Answer Choices 100.0% a. costs are rising. b. costs are falling. c. costs are constant. d. profit is zero. Score: 1 / 1 Question 9 (1 point) According to the following output schedule, this firm's average product curve intersects the marginal product curve Labor Output 1 5 2 14 3 30 4 48 Student response: Percent Value Student Response Answer Choices a. at the fourth worker. b. at the third worker. c. between the third and fourth worker. 100.0% d. at no point in the given range. Score: 1 / 1 Question 10 (1 point) The slope of the total product curve, at any point, equals Student response: Percent Value Student Response Answer Choices a. the average product of labor. b. the marginal product of capital. 100.0% c. the marginal product of labor. d. the average product of capital. Score: 1 / 1 Question 11 (1 point) Examine the following total product curve. The curve indicates that marginal product begins to Student response: Percent Value Student Response Answer Choices a. decrease after the sixth worker. b. increase after the third worker. 100.0% c. decrease after the third worker. d. increase after the sixth worker. Score: 1 / 1 Question 12 (1 point) Table 2202A A firm has the following production relationship between labor output for a fixed capital stock. Labor Output -------------- 0 0 1 5 2 11 3 18 4 23 5 26 According to Table 2202A, what is the average product of labor when three workers are employed? Student response: Percent Value Student Response Answer Choices a. 3 b. 4 c. 5 100.0% d. 6 Score: 1 / 1 Question 13 (1 point) Table 2202A A firm has the following production relationship between labor output for a fixed capital stock. Labor Output -------------- 0 0 1 5 2 11 3 18 4 23 5 26 According to Table 2202A, at what usage of labor does marginal product begin to fall? Student response: Percent Value Student Response Answer Choices a. 1 b. 2 100.0% c. 4 d. 5 Score: 1 / 1 Question 14 (1 point) Table 2202A A firm has the following production relationship between labor output for a fixed capital stock. Labor Output -------------- 0 0 1 5 2 11 3 18 4 23 5 26 According to Table 2202A, what is the marginal product of the 4th unit of labor? Student response: Percent Value Student Response Answer Choices a. 3 100.0% b. 5 c. 6 d. 7 Score: 1 / 1 Question 15 (1 point) In the concave region of the total product curve, Student response: Percent Value Student Response Answer Choices a. teamwork and specialization lead to increased productivity. 100.0% b. congestion of the fixed inputs leads to decreased productivity. c. total product is decreasing. d. marginal product is negative. Score: 1 / 1 Total score: 15 / 15 = 100.0% View Results Quiz 4.2 User ID: skim7 Attempt: 3 / 3 Out of: 10 Started: April 17, 2005 2:56am Finished: April 17, 2005 2:58am Time spent: 1 min. 17 sec. Question 1 (1 point) Variable costs increase when output rises. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 2 (1 point) If one worker can produce one fifth of a unit of output, and the wage rate is $10 per worker, what is the cost of producing one unit of output? Student response: Percent Value Student Response Answer Choices a. $10 100.0% b. $50 c. $2 d. $5 Score: 1 / 1 Question 3 (1 point) Which of the following statments about variable cost is FALSE? Student response: Percent Value Student Response Answer Choices a. Variable costs change with the level of output. 100.0% b. Variable costs exist only in the short run. c. Variable costs measure the cost of the variable input needed to produce a given quantity of output. d. Variable costs are influenced by labor productivity and the wage rate. Score: 1 / 1 Question 4 (1 point) Suppose that the wage is $10 per worker. Which of the following statements is true? Labor Output 1 2 2 8 3 14 4 18 Student response: Percent Value Student Response Answer Choices a. The variable cost of producing 1 unit is $20. b. The variable cost of producing 2 units is $80. 100.0% c. The variable cost of producing 2 units is $10. d. The variable cost of producing 2 units is $40. Score: 1 / 1 Question 5 (1 point) In the vertical portion of the variable cost curve, Student response: Percent Value Student Response Answer Choices a. hiring additional units of labor has no effect on variable cost. b. additional units of labor cannot be hired at the going wage rate. c. additional units of output can be produced with no additional cost. 100.0% d. hiring additional units of labor has no effect on total product. Score: 1 / 1 Question 6 (1 point) The variable cost curve can be derived from the total product curve by Student response: Percent Value Student Response Answer Choices a. multiplying the quantity of labor by the wage rate. 100.0% b. reversing the axes and multiplying the quantity of labor by the wage rate. c. reversing the axes and multiplying the total product by the wage rate. d. multiplying the total product by the wage rate. Score: 1 / 1 Question 7 (1 point) The variable cost bends backward when additional workers Student response: Percent Value Student Response Answer Choices a. are paid higher wages. b. cause total product to rise. 100.0% c. cause total product to fall. d. are paid lower wages. Score: 1 / 1 Question 8 (1 point) A firm produces 60 units of output per week with variable costs of $12,000. Average product is 15 units of output per week. What is the wage? Student response: Percent Value Student Response Answer Choices a. $200 b. $800 c. $4000 100.0% d. $3000 Score: 1 / 1 Question 9 (1 point) Based on the following total product curve, in the region between 10 and 20 units of output, this firm's variable COST curve is (be careful - remember the relationship between product and cost!) Student response: Percent Value Student Response Answer Choices 100.0% a. increasing at a decreasing rate. b. vertical. c. increasing at an increasing rate. d. increasing at a constant rate. Score: 1 / 1 Question 10 (1 point) A firm pays each of its workers $500 in wages. Based on the following variable cost curve, how many workers does this firm need to produce 40 units of output? Student response: Percent Value Student Response Answer Choices a. 4 workers 100.0% b. 8 workers c. 10 workers d. 20 workers Score: 1 / 1 Total score: 10 / 10 = 100.0% View Results Quiz 4.3 User ID: skim7 Attempt: 1 / 3 Out of: 10 Started: April 17, 2005 3:36am Finished: April 17, 2005 3:49am Time spent: 13 min. 27 sec. Question 1 (1 point) Marginal cost Student response: Percent Value Student Response Answer Choices a. equals the slope of the variable cost curve. b. is calculated as the change in variable cost divided by the change in output. c. is the increase in variable cost resulting from a one-unit increase in output. 100.0% d. All of the answers above are correct. Score: 1 / 1 Question 2 (1 point) The formula for marginal cost is the Student response: Percent Value Student Response Answer Choices a. change in variable costs divided by the change in the number of workers. b. change in variable cost divided by total product. 100.0% c. change in variable cost divided by the change in total product. d. change in variable cost divided by the number of workers. Score: 1 / 1 Question 3 (1 point) Marginal cost is constant as long as Student response: Percent Value Student Response Answer Choices a. the wage rate is constant. 100.0% b. the wage rate and marginal product of each worker are constant. c. total product is constant. d. the wage rate and the total product are constant. Score: 1 / 1 Question 4 (1 point) This firm has a wage of $100 per worker. According to the following output schedule, the marginal cost when the firm is producing 15 units of output is Labor Output 1 5 2 15 3 20 4 24 Student response: Percent Value Student Response Answer Choices a. $6.67. b. $100. 100.0% c. $10. d. $20. Score: 1 / 1 Question 5 (1 point) When marginal cost is rising, marginal product is Student response: Percent Value Student Response Answer Choices a. rising. b. unchanged. c. negative. 100.0% d. falling. Score: 1 / 1 Question 6 (1 point) The relationship between marginal cost and marginal product is Student response: Percent Value Student Response Answer Choices a. MC = MP/w b. MC = 1/MP c. MC = (w)(MP) 100.0% d. MC = w/MP Score: 1 / 1 Question 7 (1 point) When there is congestion of the fixed inputs, the marginal cost is Student response: Percent Value Student Response Answer Choices a. unaffected. 100.0% b. increasing. c. decreasing. d. zero. Score: 1 / 1 Question 8 (1 point) Based on the following marginal cost curve, Student response: Percent Value Student Response Answer Choices 100.0% a. teamwork and specialization are maximized at 50 units of output. b. this firm does not experience congestion of teh fixed inputs. c. marginal productivity is minimized at 50 units of output. d. teamwork and specialization begin to take effect after 50 units of output. Score: 1 / 1 Question 9 (1 point) Based on the following variable cost curve, the marginal cost of the fifth unit of output is Student response: Percent Value Student Response Answer Choices a. $40. b. $8. 100.0% c. $5. d. $1. Score: 1 / 1 Question 10 (1 point) When marginal cost is decreasing, variable costs are Student response: Percent Value Student Response Answer Choices a. decreasing. b. decreasing at an increasing rate. c. increasing at an increasing rate. 100.0% d. increasing at a decreasing rate. Score: 1 / 1 Total score: 10 / 10 = 100.0% View Results Quiz 4.4 User ID: skim7 Attempt: 2 / 3 Out of: 10 Started: April 17, 2005 5:19am Finished: April 17, 2005 5:21am Time spent: 1 min. 53 sec. Question 1 (1 point) If the marginal cost of an additional unit of output is greater than the average variable cost, then the average variable cost will rise. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 2 (1 point) If average variable cost is higher than the product price, the firm Student response: Percent Value Student Response Answer Choices a. might make a profit. b. definitely makes a profit. 100.0% c. has a loss. d. breaks even. Score: 1 / 1 Question 3 (1 point) If the wage rate is $10, this firm's average variable cost when it produces 20 units of output is Labor Output 1 5 2 15 3 20 4 24 Student response: Percent Value Student Response Answer Choices a. $30. b. $5. c. $10. 100.0% d. $1.50. Score: 1 / 1 Question 4 (1 point) According to the following average variable cost curve, average product is Student response: Percent Value Student Response Answer Choices a. decreasing between the first and second unit. 100.0% b. increasing between the third and fourth unit. c. increasing between the fifth and sixth unit. d. at a minumum at the fourth unit. Score: 1 / 1 Question 5 (1 point) According to the following average variable cost curve, the marginal cost Student response: Percent Value Student Response Answer Choices a. decreases after the fourth unit. 100.0% b. is greater than the average variable cost after the fourth unit. c. is less than average variable cost at the fourth unit. d. is less than average variable cost at the sixth unit. Score: 1 / 1 Question 6 (1 point) Examine the table below. This firm pays its workers $100 each in wages. If the price of output is $19, this firm could potentially make a profit when it produces Labor Output 1 6 2 12 3 17 4 20 5 21 Student response: Percent Value Student Response Answer Choices a. between 12 and 20 units. b. more than 20 units. 100.0% c. less than 20 units. d. any of these output levels. Score: 1 / 1 Question 7 (1 point) Average variable cost equals __________. Student response: Percent Value Student Response Answer Choices a. w/MC 100.0% b. w/AP c. w/MP d. w/VC Score: 1 / 1 Question 8 (1 point) If the average product of each worker is 20 units, and the wage rate is $100 per employee, what is the average variable cost of producing 100 units? Student response: Percent Value Student Response Answer Choices 100.0% a. $5 b. $500 c. $20 d. $100 Score: 1 / 1 Question 9 (1 point) Examine the graph below. If the average variable cost of producing 30 units is $25, what is the wage rate? Student response: Percent Value Student Response Answer Choices a. $750 b. $6 c. $4.16 100.0% d. $150 e. The wage can't be calculated from this information. Score: 1 / 1 Question 10 (1 point) When marginal product is greater than average product, average variable cost Student response: Percent Value Student Response Answer Choices 100.0% a. is decreasing. b. is increasing. c. is negative. d. is at a maximum. Score: 1 / 1 Total score: 10 / 10 = 100.0% View Results Quiz 4.5 User ID: skim7 Attempt: 2 / 3 Out of: 20 Started: April 17, 2005 5:58am Finished: April 17, 2005 6:04am Time spent: 5 min. 24 sec. Question 1 (1 point) The slope of the total cost curve equals the slope of the Student response: Percent Value Student Response Answer Choices a. marginal cost curve. 100.0% b. variable cost curve. c. fixed cost curve. d. average total cost curve. Score: 1 / 1 Question 2 (1 point) Average fixed cost decreases when output increases because Student response: Percent Value Student Response Answer Choices a. productivity increases. b. average variable cost increases. 100.0% c. cost is spread out over more units. d. marginal cost decreases. Score: 1 / 1 Question 3 (1 point) Average total cost eventually increases as output increases because Student response: Percent Value Student Response Answer Choices a. both average fixed cost and average variable cost increase. b. average fixed cost is constant and average variable cost increases. c. average fixed cost increases and average variable cost is constant. 100.0% d. average fixed cost decreases, but average variable cost increases at a faster rate. Score: 1 / 1 Question 4 (1 point) A firm has $10,000 in fixed costs and an average variable cost of $20 per unit when it produces 1,000 units. What is the firm's average total cost? Student response: Percent Value Student Response Answer Choices 100.0% a. $30 b. $30,000 c. $10 d. $20,000 Score: 1 / 1 Question 5 (1 point) The marginal cost curve passes through the points of Student response: Percent Value Student Response Answer Choices a. minimum average fixed cost and minimum average variable cost. b. minimum total cost and minimum variable cost. 100.0% c. minimum average variable cost and minimum average total cost. d. minimum fixed cost and minimum total cost. Score: 1 / 1 Question 6 (1 point) A firm has total costs of $5000. It has average variable costs of $30 and average fixed costs of $20. How many units of output is this firm producing? Student response: Percent Value Student Response Answer Choices 100.0% a. 100 units b. 250 units c. 500 units d. 50 units Score: 1 / 1 Question 7 (1 point) Examine the graph below. This firm's fixed cost is Student response: Percent Value Student Response Answer Choices a. $500 100.0% b. $1000 c. $1500 d. not possible to determine from this graph. Score: 1 / 1 Question 8 (1 point) Examine the following graph. If this firm produces 100 units of output, its average fixed cost is Student response: Percent Value Student Response Answer Choices a. $300. 100.0% b. $200. c. $500. d. impossible to determine. Score: 1 / 1 Question 9 (1 point) Examine the following graph. If this firm produces 100 units of output, its total cost is Student response: Percent Value Student Response Answer Choices a. $500. b. $800. 100.0% c. $50,000 d. impossible to determine. Score: 1 / 1 Question 10 (1 point) Examine the following graph. If this firm produces 100 units of output, its fixed cost is Student response: Percent Value Student Response Answer Choices a. $500. b. $200. 100.0% c. $20,000 d. $30,000. Score: 1 / 1 Question 11 (1 point) The slope of the fixed cost curve is Student response: Percent Value Student Response Answer Choices a. decreasing. b. negative then positive. 100.0% c. constant at zero. d. increasing. Score: 1 / 1 Question 12 (1 point) On a graph showing average costs, the average total cost curve moves further away from the average variable cost curve as output increases. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 13 (1 point) A firm's fixed cost Student response: Percent Value Student Response Answer Choices 100.0% a. does not vary with output. b. does not change between the short run and the long run. c. is generally a higher percentage of its total cost at high output quantities than at low output quantities. d. All of the above are true. Score: 1 / 1 Question 14 (1 point) A total cost curve shows the largest amount of a product a firm can produce with a minimum cost. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 15 (1 point) The short run is Student response: Percent Value Student Response Answer Choices a. the time period during which all of the firm's costs are sunk. b. the time period before the value of the firm's assets starts to decay. c. the time period during which the firm can adjust all inputs freely. 100.0% d. the time period during which some of the firm's can be changed but other inputs are fixed. Score: 1 / 1 Question 16 (1 point) Which of the graphs below could be a firm's fixed cost curve? Student response: Percent Value Student Response Answer Choices a. b. 100.0% c. d. Score: 1 / 1 Question 17 (1 point) If this firm produces 15 units of output, then its variable cost is Student response: Percent Value Student Response Answer Choices a. $4. b. $15. c. $6. 100.0% d. $90. e. $150. Score: 1 / 1 Question 18 (1 point) If the marginal cost of an additional unit of output is greater than the average total cost, then the average total cost will rise. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 19 (1 point) If marginal cost is rising, then average total cost must be rising. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 20 (1 point) The figure below shows an average cost curve and points on it corresponding to three quantity levels. Which of the following statements must be wrong? Student response: Percent Value Student Response Answer Choices a. The firm's technology may show increasing marginal returns as production increases from A to B. b. The firm may have positive fixed cost. c. As production expands from B to C, congestion causes decreases in productivity. 100.0% d. The firm's average fixed cost may rise as production increases from B to C. Score: 1 / 1 Total score: 20 / 20 = 100.0% View Results Quiz 4.6 User ID: skim7 Attempt: 3 / 3 Out of: 20 Started: April 29, 2005 10:26pm Finished: April 29, 2005 10:29pm Time spent: 2 min. 55 sec. Question 1 (1 point) In the case of constant returns to scale, which of the following remains constant as output increases? Student response: Percent Value Student Response Answer Choices a. the level of output 100.0% b. the average cost of production c. the total cost of production d. profit Score: 1 / 1 Question 2 (1 point) If a firm experiences economies of scale at all levels of output, Student response: Percent Value Student Response Answer Choices a. the slope of its long-run total cost curve is always negative. b. the slopes of its short run average total cost curves are always negative. 100.0% c. the slope of its long-run average cost curve is always negative. d. the slope of its production function is always negative. Score: 1 / 1 Question 3 (1 point) A firm's production process shows constant returns to scale. It can produce 5,000 widgets at a total cost of $2,500 and 10,000 widgets at a total cost of ______. Student response: Percent Value Student Response Answer Choices a. $20,000 b. $2500 c. $10,000 100.0% d. $5000 Score: 1 / 1 Question 4 (1 point) In the long run, Student response: Percent Value Student Response Answer Choices 100.0% a. all of the firm's input quantities are variable. b. the firm can vary the quantities used of some but not all inputs. c. managers become less efficient. d. the total cost of producing any given level of output is greater than or equal to the short-run total cost of producing that level of output. Score: 1 / 1 Question 5 (1 point) Economies of scale Student response: Percent Value Student Response Answer Choices a. require inputs' marginal product to fall as output increases (everything else equal). 100.0% b. pertain to the long run only. c. refer to increased output generated by an increase in the quantity of a single input. d. imply that the average total cost curve will fall continuously as output increases in the short run. Score: 1 / 1 Question 6 (1 point) If significant economies of scale are present, large firms will be much more efficient producers than small firms. Student response: Percent Value Student Response Answer Choices 100.0% a. True b. False Score: 1 / 1 Question 7 (1 point) Specialization causes Student response: Percent Value Student Response Answer Choices a. decreasing marginal product. 100.0% b. economies of scale. c. constant returns to scale. d. diseconomies of scale. Score: 1 / 1 Question 8 (1 point) Average cost is lower in the long run than in the short run because Student response: Percent Value Student Response Answer Choices a. prices often fall, allowing savings on purchases. 100.0% b. inputs can be combined more efficiently in the long run. c. over time the prices of all inputs tend to decrease. d. AFC falls with output over all ranges of output. Score: 1 / 1 Question 9 (1 point) Economies of scale is another term for Student response: Percent Value Student Response Answer Choices 100.0% a. increasing returns to scale. b. constant returns to scale. c. increasing marginal physical productivity. d. decreasing returns to scale. Score: 1 / 1 Question 10 (1 point) Suppose when a firm, in the long run, doubles its output, the total cost of production also doubles. This implies that the firm Student response: Percent Value Student Response Answer Choices a. is producing at minimum efficient scale. 100.0% b. is experiencing constant returns to scale. c. is experiencing economies of scale. d. is experiencing diseconomies of scale. Score: 1 / 1 Question 11 (1 point) In the long run, a firm can produce 200 units of output at a total cost of $400,000 or 300 units at a cost of $800,000. Over this range of output, the firm is experiencing Student response: Percent Value Student Response Answer Choices a. constant returns of scale. b. economies of scale. 100.0% c. diseconomies of scale. d. maximum efficient scale. Score: 1 / 1 Question 12 (1 point) A capital-intensive technology is one that Student response: Percent Value Student Response Answer Choices a. uses only capital. b. employs a fixed amount of capital. c. employs a fixed amount of labor. 100.0% d. employs more capital relative to labor. Score: 1 / 1 Question 13 (1 point) In the long run, a competitive, profit-maximizing firm has to decide all of the following EXCEPT Student response: Percent Value Student Response Answer Choices a. the scale of its operation. b. the profit-maximizing level of output. 100.0% c. the price of its output. d. the combination of capital and labor to employ. Score: 1 / 1 Question 14 (1 point) A firm increases its scale of operation if Student response: Percent Value Student Response Answer Choices a. it increases only the amount of capital it uses. b. it increases only the amount of labor it uses. 100.0% c. it increases labor and capital by the same proportion. d. in increases both labor and capital, but by different proportions. Score: 1 / 1 Question 15 (1 point) A firm producing 30 units of output increases its number of workers from 10 to 15 and increases its other inputs by the same proportion. The firm experiences increasing returns to scale if its new output is Student response: Percent Value Student Response Answer Choices a. 30 units. b. 40 units. c. 45 units. 100.0% d. 50 units. Score: 1 / 1 Question 16 (1 point) The point of efficient scale is the point of Student response: Percent Value Student Response Answer Choices a. minimum average variable cost. b. minimum short-run average total cost. 100.0% c. minimum long-run average cost. d. minimum long-run marginal cost. Score: 1 / 1 Question 17 (1 point) The short-run average total cost curve is tangent to the long-run average cost curve at the point of Student response: Percent Value Student Response Answer Choices a. minimum short-run average total cost. b. minimum long-run average cost. c. minimum average variable cost. 100.0% d. cost-minimizing technique. Score: 1 / 1 Question 18 (1 point) At any given level of output, the firm's short-run average total cost curve lies Student response: Percent Value Student Response Answer Choices a. completely above the long-run average cost curve. b. completely below the long-run average cost curve. 100.0% c. above the long-run average cost curve, except for the one point at which the curves are tangent. d. below the long-run average cost curve, except for the one point at which the curves are tangent. Score: 1 / 1 Question 19 (1 point) The cost-minimizing point for any given level of output always occurs at the minimum of the short-run average total cost curve. Student response: Percent Value Student Response Answer Choices a. True 100.0% b. False Score: 1 / 1 Question 20 (1 point) A change in technology results in Student response: Percent Value Student Response Answer Choices a. the firm moving along its short-run cost curve. b. the firm's short-run cost curves shifting. 100.0% c. the firm's short-run and long-run cost curves shifting. d. the firm moving along its long-run cost curve. Score: 1 / 1 Total score: 20 / 20 = 100.0% (1) QID: 12583 Which of the following is an adjustment that would be made in the short run? Saturn builds a new automobile plant. A major university builds a new school of education because their enrollment increases. Gymnastics Unlimited hires two new workers because the demand for their service has increased. A soap company enters the market with a new product. (2) QID: 13892 All of following are examples of inputs used in a restaurant except the kitchen. the wait staff. the tables. the owner's salary. (3) QID: 16321 The short run is a period of time so short that a firm can vary all its inputs. a firm can vary one of its inputs. a firm cannot vary any inputs. a firm can sell only some of its inventory. (4) QID: 897 Total product is the amount of output that a firm can produce using a given amount of inputs. using a given amount of outputs. by ignoring production costs. by not considering a firms's technology. (5) QID: 911 Which of these statements is false? In the long run, all inputs are variable. In the short run, the firm can change output only by changing its variable inputs. In the short run, all inputs are variable. In the long run, a firm can change any input. (6) QID: 920 Given the firm's technology and the firm's cost to produce output, economists are able to predict a firm's profit. True False (7) QID: 12584 The exhibit shows the total product for VCR's in the short run given amounts of the fixed input of labor, holding other inputs constant. True False (8) QID: 13891 The schedule shown here shows the total product when the factory size is fixed. when the quantity of labor employed is fixed. when all inputs are variable. when all inputs are fixed. (9) QID: 13893 According to the schedule, total product is maximized when the firm hires five employees. True False CDBAC BBAA (1) QID: 12585 When total product increases at an increasing rate, the firm employs team work. specialization. both A and B. neither A nor B. (2) QID: 12586 The output from adding the second unit of labor increases at an increasing rate. increases at a decreasing rate. decreases at an increasing rate. decreases at a decreasing rate. (3) QID: 12587 Decreasing marginal product first appears immediately after the maximum point on marginal product curve. True False (4) QID: 12589 This total product curve illustrates that when the quantity of labor increases from five workers to six, the total product decreases. increases. remains the same. none of the above. (5) QID: 13902 In the concave portion of a total product curve, the marginal product is increasing because the employees are learning teamwork and specialization. True False (6) QID: 19120 On the total product curve, total product is at a maximum when the firm hires five employees. True False (7) QID: 13901 Examine the production schdule shown here. Marginal product begins to diminish at two employees. three employees. six employees. The marginal product is constant throughout. CAAAB AB (1) QID: 12599 When the marginal product curve falls below the horizontal axis, the addition of an extra worker actually ____________ the total production of a firm. increases. decreases. has no affect on. none of the above. (2) QID: 13904 When the total product curve is at its maximum, the slope of the total product curve is increasing. decreasing. zero. horizontal. (3) QID: 13905 Marginal product reaches a maximum in the range where total product is decreasing. total product is increasing at an increasing rate. total product is at its maximum. total product is negative. (4) QID: 13906 When total product is increasing at a decreasing rate, marginal product is increasing. decreasing. negative. constant. (5) QID: 1949 What is marginal product (MP)? Marginal product (MP) is a product of marginal (barely acceptable) quality. Marginal product (MP) is the change in total product made possible by the addition of one (1) more unit of a variable input. Marginal product (MP) is the same as average product. Marginal product (MP) increases when total product decreases. (6) QID: 1950 If marginal product (MP) is negative, which of the following is true? Profit is maximized. Marginal cost is decreasing. Average product is increasing. The slope of the total product curve is negative. (7) QID: 1951 When marginal product (MP) is increasing, which of the following is true for the total product (TP) curve? The total product (TP) curve is convex. The total product (TP) curve is concave. The total product (TP) curve may be either convex or concave. The total product (TP) curve flattens out. (8) QID: 1952 Which of the following statements about marginal product (MP) is true? Marginal product (MP) is usually graphed with total product on the vertical axis and labor on the horizontal axis. Marginal product (MP) is usually graphed with cost on the vertical axis and marginal product on the horizontal axis. Marginal product (MP) is usually graphed with marginal product on the vertical axis and the variable input on the horizontal axis. Marginal product (MP) is usually graphed only when marginal product is increasing. (9) QID: 1953 Which of these statements about the marginal product (MP) curve is true? The marginal product (MP) curve usually starts high and decreases rapidly. The marginal product (MP) curve alternately increases and decreases with each additional unit of input. The marginal product (MP) curve usually is asymptotic with respect to the vertical axis. The marginal product (MP) curve usually starts small, increases to a maximum, and starts to decrease. (10) QID: 1954 If each of 9 workers produces 12 widgets per day and each of 10 workers produces 14 widgets per day, what is the marginal product of the tenth worker? 1 widget 2 widgets 32 widgets 140 widgets (11) QID: 937 Refer to the graph below. Marginal product becomes negative when the firm hires the first worker. the second worker. the fifth worker. the sixth worker. (12) QID: 12596 When the slope of the total product curve is increasing at an increasing rate, the marginal product is __________and ___________. positive; zero. positive;decreasing. negative;decreasing. positive; increasing. BCBBB DACDC DD (1) QID: 12600 Use the graph. When the marginal product of labor is ___________ the average product of labor, the average product curve is ___________. above; equal to the MP. above; falling. below; rising. below; falling. (2) QID: 12601 Examine the graph below. The intersection of the marginal product and average product curves occurs at the average product curve's minimum. maximum. intercept. only a and c. (3) QID: 12602 Using the table, the average product of labor for three workers is 7. 6.75. 7.5 7.33. (4) QID: 12603 Using the table, the average product of labor for six workers is 4.83. 6. -6. -4.83. (5) QID: 12604 Use the graph. When the marginal product of labor curve is above the average product of labor, the average product curve is ____________. rising. falling. constant. none of the above. (6) QID: 13907 At the maximum average product, marginal product is greater than average product. average product is greater than marginal product. average product and marginal product are equal. there is no relationship between average product and marginal product. (7) QID: 962 The average product-marginal product relationship indicates that if the marginal product is less than the average product, the average product is falling. if the marginal product is greater than the average product, the average product is falling. if the marginal product is increasing, the average product is above it. if the marginal product is decreasing, the average product is below it. (8) QID: 980 Assume that there are 10 students in a class. The average grade on a test for the nine of the students is 85. The grade of the tenth student is 90. The average grade for the class will be 85. greater than 85. lower than 85. 90. DBDAA CAB (1) QID: 12605 If the worker has an average product of one-third of a video camera, (1/3), how many workers would it take to produce one whole video camera? 1. 2. 3. 4. (2) QID: 12606 Productivity and costs are directly related. True False (3) QID: 12607 The more productive a firm's workers are, the more workers that firm will need to hire to produce a given amount of product. True False (4) QID: 12608 All of the following about costs and production are true except the cost of production is the relationship between cost and productivity. cost and productivity are inversely related. when the productivity of workers is increasing, the cost of production is decreasing. when the productivity of workers is decreasing, the cost of production is decreasing. (5) QID: 1747 Assume that employees in a factory have an average product of one-third of a video camera. Eventually the workers learn their jobs better and the average product increases to two-thirds of a camera. The firm's costs decrease by one-half. increase by one-half. do not change. are indeterminate. CBBDA (1) QID: 12610 Suppose that a digital camera firm can produce five cameras per worker each week. If the firm hires one worker, it will cost the firm $2,000 a week to pay the worker's salary. To produce 30 digital cameras in one week the firm will hire _________ workers. 5. 3. 6. none of the above. (2) QID: 12611 Suppose that a digital camera firm can produce five cameras per worker each week. If the firm hires one worker, it will cost the firm $2,000 a week to pay the worker's salary. To produce 30 digital cameras, the firm's variable costs for the week will be $2,000. $12,000. $60,000. $30,000. (3) QID: 12612 Variable costs are costs that change in the long run. in the short run. daily. as total product changes. (4) QID: 12613 If labor is a firm's only variable input, its variable cost ultimately depends on the amount of labor the firm needs to produce a given quantity of output. the price a firm must pay to get a unit of labor. both a and b. neither a or b. (5) QID: 12614 Suppose that a digital camera firm can produce five cameras per worker each week. If the firm hires one worker, it will cost the firm $2,000 a week to pay the worker's salary. The firm's variable cost for three workers is $2,000. $3,000. $4,000. $6,000. (6) QID: 982 Costs that do not change with output are called marginal costs. average costs. varible costs. fixed costs. (7) QID: 994 A firm pays salaries to some workers and wages to other workers. Salaries are a fixed amounts of money regardless of the number of hours worked; wages are paid based on hourly rates. Firms usually categorize salaries as fixed costs and wages as variable costs. salaries and wages as fixed costs. salaries and wages as variable costs. salaries as variable costs and wages as fixed costs. (8) QID: 1051 Whether a firm classifies an input as fixed or variable depends on the contribution that input makes to the firm's output. True False CBDCD DAB (1) QID: 12615 Examine the graph below for a particular firm that produces bikes. The point of inefficiency at which the firm cannot increase production by hiring more labor is at point D. C. B. A. (2) QID: 12616 A particular firm produces bikes. This firm has a variable cost of $1,000 per worker. When the variable cost curve becomes vertical, it means that a firm can continue to hire labor but its production increases. decreases. remains the same. none of the above. (3) QID: 12617 The variable cost curve represents the expenditures on ___________ to produce a given quantity of __________. output; output. fixed cost; input. labor; output. labor; input. (4) QID: 12618 Refer to the table below. The firm's variable cost to produce 45 bicycles is $1,000 because one worker can produce 45 bicyles and is paid $1,000 in wages. $5,000 because 1 worker can produce 45 bicyles and is paid $5,000 in wages. $3,000 because 3 workers can produce 45 bicyles and each is paid $1,000 in wages. $5,000 because 5 workers can produce 45 bikes and each is paid $1,000 in wages. (5) QID: 12619 Use the table below. This firm has a variable cost of $1,000 per worker. When the variable cost curve is increasing, a(n) ___________ in labor will ___________ production. decrease; increase increase; increase decrease; decrease increase; decrease (6) QID: 1751 Refer to the graph below. The firm in this example produces bicycles. To produce 45 bicycles, the firm's variable cost is $8000. $5000. $2000. $1000. (7) QID: 1761 Examine the graph below. The maximum efficient output of bicycles for this firm is 47 bicycles. 30 bicycles. 50 bicycles. 10 bicycles. ACCDB BC (1) QID: 12621 The variable cost curve has the same shape as an inverted total product curve. True False (2) QID: 12622 To find the variable costs associated with a given level of output, the firm must determine both ____________ and ____________. the amount of labor; the wage rate the marginal costs of production; the amount of labor the amount of labor; the fixed labor costs the wage rate; the price of capital (3) QID: 12623 The axes of the total product curve and variable cost curve are the same. True False (4) QID: 12624 To derive the variable cost curve from the total product curve, you have to ______________ the axes and ________________ the number of workers (by, to, from) the wage. reverse; divide reverse; multiply. reverse; add. reverse; subtract. AABB (1) QID: 12625 Changes in marginal costs are due to changes in productivity. True False (2) QID: 12626 The marginal cost of production is all of the following except the additional cost incurred when the firm produces changes its fixed costs. the additional cost incurred when the firm produces one more unit. the change in variable cost that results from a one-unit change in output. the change in total cost that results from a one-unit change in production. (3) QID: 12627 When the workforce gets more productive, the cost of producing additional output drops and each additional worker is more productive. teamwork and specialization occur. marginal costs is falling. all of the above. (4) QID: 12628 At low levels of production, marginal costs fall because firms are increasing plant capacity. teamwork and specialization help workers become more productive, thus causing MC to fall. the existing workers are getting in each other's way. none of the above. (5) QID: 1052 When the marginal cost of production is increasing, output is generally __________. decreasing increasing constant negative (6) QID: 1797 Diminishing marginal product of labor is associated with increasing marginal cost. increasing average cost. decreasing marginal cost. decreasing variable cost. (7) QID: 1801 Marginal cost equals the variable cost of the additional unit of production minus the variable cost of the previous unit produced. the change in variable costs divided by the change in output. the change in total cost divided by the change in output. all of the above. (8) QID: 1808 The economic information that marginal cost gives us is the value of all resources used in a production process. the amount by which total cost increases when output increases by one unit. the amount that fixed cost increases when output increases by one unit. the increment to profitability by adding another employee. AADBB ADB (1) QID: 12630 Which of the following represents the relationship between marginal cost and marginal productivity? The two are unrelated. When marginal product increases, marginal costs are negative. When marginal product increases, marginal cost increases. When marginal product increases, marginal cost decreases. (2) QID: 16397 Examine the graphs below. The inflection point of the variable cost curve is associated with the marginal cost curve in what way? Marginal cost is decreasing at the variable cost's inflection point. Marginal cost is increasing at the variable cost's inflection point. The variable cost and marginal cost curves are unrelated. Marginal cost is at a minimum when the variable cost curve reaches its inflection point. (3) QID: 1057 The slope of the variable cost curve at any point is the marginal cost. the fixed cost. average variable cost. total cost. (4) QID: 1063 The marginal product of labor is always increasing. Therefore, marginal costs are constantly decreasing. True False (5) QID: 1814 Examine the graph below. The inflection point on the variable cost curve is at 50 units of output. True False (6) QID: 1826 Examine the graph below. The marginal cost at 30 units of output is $500. $100. $200. equal to variable cost. (7) QID: 1830 If marginal cost is increasing, the slope of the variable cost curve must be decreasing. the slope of the variable cost curve must be increasing. the slope of the variable cost curve cannot give any information on the marginal cost curve. the slope of the variable cost curve is zero. (8) QID: 2040 When marginal productivity is at its maximum, which of the following is true? Profit is at a minimum. The marginal cost (MC) of labor is at a minimum. A firm is profitable. Average cost is maximized. (9) QID: 2043 Which of the following statements about the graphs of marginal cost (MC) and marginal productivity (MP) is true? The graphs of marginal cost (MC) and marginal productivity (MP) are unrelated. The graphs of marginal cost (MC) and marginal productivity (MP) look like inverted images of each other. The graphs of marginal cost (MC) and marginal productivity (MP) are identical. The graphs of marginal cost (MC) and marginal productivity (MP) are both determined by total cost. (10) QID: 2045 What is the meaning of DTP/DL? DTP/DL is the Temporary Production Level of a company. DTP/DL means Total Profit is greater than Total Loss. DTP/DL is the marginal product. DTP/DL is symbolic for Total Product divided by Total Labor. (11) QID: 2047 If a firms variable cost to produce 80 widgets is $1,000 and its variable cost to produce 81 widgets is $1,012, which of the following is true? The firm is operating at maximum efficiency. The marginal cost to produce the 82nd widget will be $1,012. The total variable cost is $2,012. The marginal cost is $12. DDABB BBBBC D (1) QID: 1067 Mathematically, marginal cost equals the change in variable cost divided by the change in total output. the change in total product divided by the change in variable cost. the change in variable cost minus the change in total product. the change in total product minus the change in variable cost. (2) QID: 1071 Marginal cost is equal to the wage divided by the marginal product of labor. True False (3) QID: 1074 When each additional worker produces more output than the previously hired worker, the marginal cost of production is increasing. decreasing. the same as before. the same as the average. (4) QID: 1956 Which of the following is true of marginal cost (MC)? Marginal cost (MC) is the same as marginal product. Marginal cost (MC) is the same as average cost. Marginal cost (MC) of labor is the wage rate divided by the marginal product. Marginal cost (MC) is the same as total cost. (5) QID: 1958 Which of the following statements about the graphs of marginal cost (MC) and marginal productivity (MP) is true? The graphs of marginal cost (MC) and marginal productivity (MP) are unrelated. The graphs of marginal cost (MC) and marginal productivity (MP) look like inverted images of each other. The graphs of marginal cost (MC) and marginal productivity (MP) are identical. The graphs of marginal cost (MC) and marginal productivity (MP) are both determined by total cost. AABCB (1) QID: 1084 Average variable cost is total variable cost divided by total output. total output divided by total variable cost. total variable cost times total output. total cost minus total variable cost. (2) QID: 1087 Average cost indicates to the firm the profit-maximizing output level. True False (3) QID: 1121 Assume that a company has a wage cost of $1000 per worker per week. If three workers can make 15 units of the product in week, the firm's average variable cost is $3000. $1000. $200. $100. (4) QID: 1962 Which of the following statements about average variable cost (AVC) is true? Average variable cost (AVC) is the same as marginal variable cost. Average variable cost (AVC) is unimportant to an entrepreneur. Average variable cost (AVC) increases or decreases whenever fixed costs increase or decrease. Average variable cost (AVC) is the variable cost divided by the number of units produced. (5) QID: 1963 Why does average variable cost (AVC) change as output changes? Average variable cost reflects changes in productivity. Total variable cost decreases with each additional unit that is produced. Total variable cost increases with each additional unit that is produced. It doesnt; average variable cost (AVC) is the same at every level of output. (6) QID: 1964 Why are average variable costs (AVC) a factor in profitability? The company with the lowest average variable cost (AVC) is the most profitable. For a company to be profitable, its average variable cost (AVC) must be lower than the market price of each unit. If two companies produce the same product and have the same fixed costs, the company with the higher average variable cost (AVC) will be more profitable. Decreasing average variable costs mean decreasing productivity. (7) QID: 1965 If a firm used $200 worth of variable inputs to produce 100 units of output, what is the average variable cost of the output? $20,000 per unit $.50 per unit $2.00 per unit $5.00 per unit (8) QID: 1966 On Monday, 5 workers produced 45 widgets; on Tuesday, 6 workers produced 60 widgets; on Wednesday, 7 workers produced 77 widgets; on Thursday, 8 workers produced 96 widgets; and on Friday, 9 workers produced 99 widgets. If workers are paid $100 per day, what is the average variable cost of labor for the week? $9.09 $9.28 $3,500 $1.07 ABCDA BCB (1) QID: 1189 When the average product of labor is _____________, the average variable cost is _______________. increasing; decreasing increasing; increasing decreasing; decreasing decreasing; constant. (2) QID: 1190 Finding W/AP is the same as finding VC/(TP/L), where AP is average product, VC, is variable cost, TP is total product, and L is quantity of labor. True False (3) QID: 1191 Examine the table below. At the maximum average product, the average variable cost is at a minimum. True False (4) QID: 1972 What is the average product of labor? The average product of labor is total wages divided by the number of workers. The average product of labor is the number of workers times their average hourly wage. The average product of labor is the total product divided by the number of workers. The average product of labor is the marginal product divided by the number of workers. (5) QID: 1973 Which of the following statements about the average product of labor is true? When the average product of labor is increasing, the average variable cost is decreasing. When the average product of labor is maximum, average variable cost is maximum. When a workforce becomes more productive, the average product of labor decreases. The average product of labor is unrelated to the average variable cost. (6) QID: 1974 During the first week of October, the workers at Waltons Widget Factory produced the following outputs: on Monday, 10 workers produced 250 widgets; on Tuesday, 11 workers produced 286 widgets; on Wednesday, 13 workers produced 364 widgets; on Thursday, 14 workers produced 396 widgets; and on Friday, 12 workers produced 324 widgets. What is the average product of labor per day? 324 widgets 27 widgets 1,620 widgets The question is not answerable without information about the wage rate. (7) QID: 1975 If 20 workers earn $12 per hour and produce on average 2.5 widgets per hour, what is the average cost of labor? $ 4.80 $ 8.33 $ 240 $ .24 (8) QID: 1976 The average product of labor for 10 workers is 9 widgets per day, and the marginal product of labor of the 11th worker is 20 widgets. If each worker earns $100 per day, what happens to the average cost of labor when the firm adds the 11th worker? The average cost of labor increases from $1,000 to $1,100. The average cost of labor remains constant at $100. The average cost of labor decreases from $11.11 to $10.00. The average cost of labor is $5 per unit. (9) QID: 2048 Which of these statements about the average variable cost (AVC) curve is true? The average variable cost (AVC) curve is identical to the marginal cost (MC) curve. The average variable cost (AVC) curve is similar in shape to the variable cost (VC) curve. The average variable cost (AVC) curve is a mirror image of the average product of labor curve. The average variable cost (AVC) curve always has a positive slope. (10) QID: 2049 Which of the following statements about average variable cost (AVC) is true? Average variable cost (AVC) is the variable cost per unit of total product (TP). A firm with a low average variable cost (AVC) is profitable. Average variable cost (AVC) is the same as marginal variable cost. Average variable cost (AVC) increases whenever marginal product increases. (11) QID: 2050 Which of these statements about the average product of labor curve is true? The average product of labor curve reaches a maximum when total product is maximum. The average product of labor curve is a mirror image of the average variable cost curve. The average product of labor curve always has a positive slope. The average product of labor curve is similar in shape to the total product (TP) curve. (12) QID: 2051 If the average variable cost of widgets is $4.00 and the firms total product last month was 1,200 widgets, what was the firms variable cost last month? $300 $4,800 $1,200 There is not enough information given. AAACA BACCA BB (1) QID: 1192 If marginal cost is less than average variable cost, average variable cost is pulled up. True False (2) QID: 1193 If marginal cost is greater than average variable cost, average variable cost is decreasing. average variable cost is increasing. marginal cost is less than average variable cost. average variable cost is negative. (3) QID: 1194 If the average variable cost curve is decreasing, the marginal cost curve must be below it. the marginal cost is greater than the average variable cost. the marginal cost curve is necessarily falling. the marginal cost curve is necessarily horizontal. (4) QID: 1980 Which of these statements about slope is not true? The slope of a line is the change in the dependent variable divided by the change in the independent variable. The slope of a horizontal line is 0. The marginal cost (MC) curve is the slope of the variable cost curve. The slope of the marginal cost (MC) curve is greatest when the marginal cost is increasing or decreasing most rapidly. (5) QID: 1981 If the marginal variable cost (MC) is lower than the average variable cost (AVC), what is happening to the AVC? The average variable cost (AVC) is decreasing. The average variable cost (AVC) is increasing. This is not possible; the marginal cost (MC) is always greater than the average variable cost (AVC). Nothing is happening to the average variable cost (AVC); the marginal cost (MC) has no effect on the AVC. (6) QID: 1982 What is the relationship between the marginal cost (MC) of labor curve and the marginal product (MP) curve? As the marginal product curve declines, the marginal cost of labor curve declines; and as the m