Question 1.1.(TCO 1) As a consequence of the problem of scarcity (Points : 4)
there is never enough of anything.
individuals have to make choices from among alternatives.
production has to be planned by government.
things which are plentiful have relatively high prices.
Question 2.2.(TCO1) Which is not a factor of production? (Points : 4)
Question 3.3.(TCO1) A point inside the production possibilities curve is (Points : 4)
attainable and the economy is efficient.
attainable, but the economy is inefficient.
unattainable, but the economy is inefficient.
unattainable and the economy is efficient.
Question 4.4.(TCO1) Which would not be characteristic of a capitalist economy? (Points : 4)
Government ownership of most factors of production
Competition and unrestricted markets
Reliance on the market system
Freedom of enterprise and choice
Question 5.5.(TCO 2) The rationale for the law of demand can best be understood on the basis of (Points : 4)
diminishing marginal utility.
the invisible hand.
the rationing function of price.
Question 6.6.(TCO 2) What combination of changes would most likely decrease the equilibrium price? (Points : 4)
When supply decreases and demand increases
When demand increases and supply increases
When demand decreases and supply decreases
When supply increases and demand decreases
Question 7.7.(TCO 2) When the price of movie tickets in a certain town was reduced, the movie theaters’ revenues did not change. This suggests that the demand for movie tickets in that town has a price-elasticity coefficient of (Points : 4)
greater than 1.
Question 8.8.(TCO 2) Which of the following factors will make the demand for a product relatively elastic? (Points : 4)
There are few substitutes.
The time interval considered is long.
The good is considered a necessity.
Purchases of the good require a small portion of consumers’ budgets.
Question 9.9.(TCO 2) Which is true for a purely competitive firm in short-run equilibrium? (Points : 4)
The firm is making only normal profits.
The firm’s marginal cost is greater than its marginal revenue.
The firm’s marginal revenue is equal to its marginal cost.
A decrease in output would lead to a rise in profits.
Question 10.10.(TCO 2) Consumers who clip and redeem discount coupons (Points : 4)
exhibit the same price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
exhibit more price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
exhibit less price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
cause total revenue to decrease for firms that issue coupons for their products.
Question 11.11.(TCO 3) A cartel is (Points : 4)
a form of covert collusion.
legal in the United States.
always successful in raising profits.
a formal agreement among firms to collude.
Question 12.12.(TCO 3) In the short run (Points : 4)
a firm cannot vary its output level.
all factors of production can be varied.
a firm can change its fixed inputs.
output is raised or reduced by changing the levels of variable inputs.
(TCO 4) Refer to the diagram. The phases of the business cycle from points A to D are, respectively:
(Points : 4)
Peak, recession, expansion, trough
Trough, recovery, expansion, peak
Expansion, recession, trough, peak
Peak, recession, trough, expansion
Question 14.14.(TCO 4) In calculating the unemployment rate, part-time workers are (Points : 4)
counted as unemployed because they are not working full-time.
counted as employed because they are receiving payment for work.
used to determine the size of the labor force, but not the unemployment rate.
treated the same as “discouraged” workers who are not actively seeking employment.
Question 15.15.(TCO 4) Adding the market value of all intermediate goods and services to those of final goods and services in an economy in a given year would result in (Points : 4)
the calculation of GDP for that year.
the calculation of NDP for that year.
an amount less than GDP for that year.
an amount greater than GDP for that year.
Question 16.16.(TCO 4) GDP tends to overstate economic well-being because it takes into account (Points : 4)
improvements in product quality over time.
expenditures undertaken to correct pollution.
illegal activities of individuals and businesses.
nonmarket activities, such as the productive work of homemakers.
Question 17.17.(TCO 6) When the federal government uses taxation and spending actions to stimulate the economy it is conducting (Points : 4)
Question 18.18.(TCO 6) Refer to the graph. What combination would most likely cause a shift from AD1 to AD3?
Graph Description (Points : 4)
Increases in taxes and government spending
Decrease in taxes and increase in government spending
Increase in taxes and decrease in government spending
Decreases in taxes and government spending
Question 19.19.(TCO 6) The American Recovery and Reinvestment Act of 2009 included mostly (Points : 4)
increases in taxes and government spending.
decreases in taxes and government spending.
increases in government spending and decreases in taxes.
decreases in government spending and increases in taxes.
Question 20.20.(TCO 6) The time which elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n) (Points : 4)
Question 1.1.(TCO 5) An increase in aggregate demand is most likely to be caused by a decrease in (Points : 4)
the wealth of consumers.
consumer and business confidence.
expected returns on investment.
the tax rates on household income.
Question 2.2.(TCO 5) The short-run aggregate supply curve (Points : 4)
becomes flatter at output levels above the full-employment output.
becomes vertical at output levels above the full-employment output.
is upward-sloping with a constant slope.
Question 3.3.(TCO 5) If the price of crude oil decreases, then this event would most likely (Points : 4)
decrease aggregate supply in the U.S.
increase aggregate supply in the U.S.
increase aggregate demand in the U.S.
decrease aggregate demand in the U.S.
Question 4.4.(TCO 5) Disinflation refers to a situation where (Points : 4)
price level falls, but the rate of inflation does not.
Price level rises, but the rate of inflation does not.
the rate of inflation falls, but the price level does not.
the rate of inflation rises, but the price level does not.
Question 5.5.(TCO 6) If a family’s MPC is .7, it means that the family is (Points : 4)
operating at the break-even point.
spending seven-tenths of any additional income.
spending 70 percent of its disposable income.
Question 6.6.(TCO 7) The M1 money supply is composed of (Points : 4)
all coins and paper money held by the general public and the banks.
bank deposits of households and business firms.
bank deposits and mutual funds.
checkable deposits and currency in circulation.
Question 7.7.(TCO 7) United States currency has value primarily because it (Points : 4)
is legal tender, is generally acceptable in exchange for goods or services, and is backed by the gold and silver of the federal government.
is generally acceptable in exchange for goods or services, is backed by the gold and silver of the federal government, and facilitates trade.
is relatively scarce, is legal tender, and is generally acceptable in exchange for goods and services.
facilitates trade, is legal tender, and permits the use of credit cards and near-monies.
Question 8.8.(TCO 7) The Federal Reserve System of the U.S. is the country’s (Points : 4)
comptroller or accountant.
deposit insurance provider.
Question 9.9.(TCO 7) Which group is responsible for the policy of changing the money supply? (Points : 4)
Federal Open Market Committee
Office of Management and Budget
Thrift Advisory Council
Federal Advisory Council
Question 10.10.(TCO 7) The Federal funds rate is the rate that banks pay for loans from (Points : 4)
the U.S. Treasury.
Question 11.11.(TCO 7) The establishment of a federal deposit insurance program resulted from the (Points : 4)
establishment of the Federal Reserve System in 1913.
speculation during World War I.
stock market crash of 1987.
bank panics of 1930-1933.
Question 12.12.(TCO 7) The purchase and sale of government securities by the Fed is called (Points : 4)
federal funds market.
open market operations.
money market transactions.
term auction facility.
Question 13.13.(TCO 7) The tools of monetary policy for altering the reserves of commercial banks are the (Points : 4)
tax rate, transfer payments, and level of government spending.
consumer price index, inflation, and unemployment rate.
public debt, budget surplus, budget deficit, and interest rates.
discount rate, reserve ratio, open market operations, and term auction facility.
Question 14.14.(TCO 8) Which nation has greatly increased its role in international trade in recent years? (Points : 4)
Question 15.15.(TCO 8) The principal concept behind comparative advantage is that a nation should (Points : 4)
maximize its volume of trade with other nations.
use tariffs and quotas to protect the production of vital products for the nation.
concentrate production on those products for which it has the lowest domestic opportunity cost.
strive to be self-sufficient in the production of essential goods and services.
Question 16.16.(TCO 8) A tariff is a (Points : 4)
Question 17.17.(TCO 8) A key difference between import quotas and voluntary export restraints (VERs) is that the (Points : 4)
domestic government administers the former, whereas the foreign government administers the latter.
foreign government administers the former, whereas the domestic government administers the latter.
one is a tax, whereas the other is a quantity limit.
one raises the price of the imported product involved, whereas the other one does not.
Question 18.18.(TCO 8) Tariffs and import quotas would benefit the following groups, except (Points : 4)
consumers of the product.
domestic producers of the product.
workers in domestic firms producing the product.
the government of the importing country.
Question 19.19.(TCO 8) Which organization meets regularly to establish rules and settle disputes related to international trade? (Points : 4)
The United Nations Commission on Trade Law
The United Nations Conference on Trade and Development
The World Trade Organization
The Federal Reserve Board
Question 20.20.(TCO 9) U.S. imports (Points : 4)
increase the foreign demand for foreign currencies.
increase the domestic demand for foreign currencies.
decrease the foreign supply of foreign currencies.
increase the domestic supply of foreign currencies.
Question 1.1.(TCO 9) Which of the following appears as a positive item on the balance of payments account for the United States? (Points : 4)
U.S. government sending aid to natural disaster victims in Asia
American tourists spending money in the other countries
Buying of U.S. Treasury bonds by a foreign bank
Payment of stock dividends by U.S. firms to foreign shareholders
Question 2.2.(TCO 9) A trade deficit means a net (Points : 4)
inflow of payments for goods and services.
outflow of goods and services.
inflow of goods and services.
excess of exports over imports.
Question 3.3.(TCO 9) If an American can purchase 40,000 British pounds for $90,000, the dollar rate of exchange for the pound is (Points : 4)
Question 4.4.(TCO 9) When the exchange rate between pounds and dollars moves from $2 = 1 pound to $1 = 1 pound, we say that the dollar has (Points : 4)
Question 5.5.(TCO 9) The monetary system for conducting international trade is usually described as a system of (Points : 4)
fixed exchange rates.
freely floating exchange rates.
a managed gold standard.
managed floating exchange rates.
(TCO 8) a) Explain four problems with the argument that trade protection is needed to protect American jobs. b) Describe the economic reasons why businesses use offshoring.
(Points : 40)
(TCO 6) a) Identify the four major tools of monetary policy. b) Describe how changes in the Fed’s major policy tools leads to  expansionary and  restrictive or contractionay monetary policies.
(Points : 40)