Mr



Mr. Ryan's Macro Final

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

____ 1. Economists study all of the following EXCEPT

|a. |how people make decisions. |

|b. |how people interact with one another. |

|c. |the forces and trends that affect the economy as a whole. |

|d. |how societies change over time. |

____ 2. If an externality is present in a market, economic efficiency may be enhanced by

|a. |government intervention. |

|b. |increased competition. |

|c. |better informed market participants. |

|d. |more defined property rights. |

____ 3. The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in

|a. |evaluating an economic experiment. |

|b. |devising an economic experiment. |

|c. |actually performing an experiment in an economic system. |

|d. |All of the above are correct. |

____ 4. Another term for factors of production is

|a. |inputs. |

|b. |output. |

|c. |goods. |

|d. |services. |

____ 5. The 2 basic reasons why economists often appear to give conflicting advice to policymakers are differences in

|a. |opinions and education. |

|b. |scientific judgments and values. |

|c. |scientific judgments and education. |

|d. |opinions and values. |

____ 6. Graphs such as bar graphs are limited in that they

|a. |can only show variables that are positively related. |

|b. |are extremely difficult to understand. |

|c. |provide information for only a single variable. |

|d. |provide information on no more than 2 variables. |

____ 7. Using all available resources, if a farmer can produce either 85 cantaloupes or 70 watermelons, then the opportunity cost of 1 cantaloupe to the farmer would be

|a. |.82 watermelons. |

|b. |1.21 watermelons. |

|c. |15 watermelons. |

|d. |There is not enough information given to answer this question. |

____ 8. Who is it that ultimately determines the demand for a product or service?

|a. |those who buy the product or service |

|b. |the government |

|c. |the producers who create the product or service |

|d. |those who supply the raw materials used in the production of the good or service |

____ 9. For a competitive market, which of the following is true?

|a. |A seller who charges more than the going price can increase her profit. |

|b. |If a seller charges more than the going price, buyers will go elsewhere. |

|c. |A seller often charges less than the going price to increase sales and profit. |

|d. |A buyer can influence the price of the product, but only when purchasing from several sellers. |

____ 10. A market with only a few sellers would be

|a. |a monopoly. |

|b. |an oligopoly. |

|c. |a competitive market. |

|d. |a monopolistically competitive market. |

Table 4-2

|PRICE |QUANTITY DEMANDED |QUANTITY SUPPLIED |

|$10 |10 |60 |

|$ 8 |20 |45 |

|$ 6 |30 |30 |

|$ 4 |40 |15 |

|$ 2 |50 | 0 |

____ 11. Refer to Table 4-2. If the price were $8, a

|a. |surplus of 50 units would exist and price would tend to fall. |

|b. |surplus of 10 units would exist and price would tend to fall. |

|c. |surplus of 25 units would exist and price would tend to fall. |

|d. |shortage of 25 units would exist and price would tend to rise. |

____ 12. Which of the following is NOT one of the steps in analyzing how some event affects a market?

|a. |Determine the number of market participants. |

|b. |Decide whether the curve shifts to the right or to the left. |

|c. |Determine whether the event shifts the supply, the demand, or both curves. |

|d. |Use a supply-demand diagram to examine how the shift(s) affect the equilibrium. |

____ 13. Consider the market for new DVDs. If DVD players became cheaper, buyers expected DVD prices to fall next year, used DVDs became more expensive, and DVD production technology improved, then we could safely conclude that the equilibrium price of a new DVD would

|a. |rise. |

|b. |fall. |

|c. |stay the same. |

|d. |We couldn't be sure what it might do. |

____ 14. The discovery of a new hybrid wheat would tend to increase the supply of wheat. Under what conditions would wheat farmers realize an increase in revenue?

|a. |if the supply of wheat is elastic |

|b. |if the supply of wheat is inelastic |

|c. |if the demand for wheat is inelastic |

|d. |if the demand for wheat is elastic |

____ 15. The minimum wage is an example of

|a. |a price ceiling. |

|b. |a price floor. |

|c. |a free-market process. |

|d. |an efficient labor allocation mechanism. |

____ 16. Which of the following is the most accurate statement about minimum wage laws?

|a. |All states have legislation that establishes the same minimum wage as the federal law. |

|b. |Some states have legislation that establishes a higher minimum wage than the federal law. |

|c. |Some states have legislation that establishes a lower minimum wage than the federal law. |

|d. |All states have legislation that establishes a higher minimum wage than the federal law. |

____ 17. Which is the most correct statement about the burden of a tax imposed on buyers of sugar?

|a. |Buyers bear the entire burden of the tax. |

|b. |Sellers bear the entire burden of the tax. |

|c. |Buyers and sellers share the burden of the tax. |

|d. |The government bears the entire burden of the tax. |

____ 18. Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist?

|a. |Why do prices in general rise by more in some countries than others? |

|b. |Why do wages differ across industries? |

|c. |Why do production and income increase in some periods and not in others? |

|d. |Why has average income increased over time? |

____ 19. In a simple circular-flow diagram, total income and total expenditures in an economy are

|a. |equal because firms are ultimately owned by households. |

|b. |equal only if there is no saving. |

|c. |equal because every transaction has a buyer and a seller. |

|d. |never equal because some people's income is not for production. |

____ 20. Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP.

|a. |Therefore, GDP is not a useful measure of society's welfare. |

|b. |However, GDP is still a useful measure of society's welfare because providing these other attributes is the |

| |responsibility of government. |

|c. |However, GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the |

| |inputs that can be used to help produce the things that contribute to welfare. |

|d. |However, GDP is still the best measure of society's welfare because these other values cannot actually be measured. |

____ 21. Which change in the price index shows the greatest rate of inflation: 80 to 100, 100 to 120, or 150 to 170?

|a. |80 to 100 |

|b. |100 to 120 |

|c. |150 to 170 |

|d. |All changes show the same rate of inflation. |

____ 22. In the United States, if the price of imported oil rises so that the price of gasoline and heating oil rise the

|a. |GDP deflator rises much more than does the consumer price index. |

|b. |consumer price index rises much more than does the GDP deflator. |

|c. |GDP deflator and the consumer price index rise by about the same amount. |

|d. |consumer price index rises slightly more than does the GDP deflator. |

____ 23. If your firm has constant returns to scale, then if you doubled all your inputs your firm's output would

|a. |not change. |

|b. |increase, but by less than double. |

|c. |double. |

|d. |more than double. |

____ 24. Suppose Japanese-based Sony Corporation builds and operates a new chip factory in the United States. Future production from such an investment would

|a. |increase U.S. GNP more than it would increase U.S. GDP. |

|b. |increase U.S. GDP more than it would increase U.S. GNP. |

|c. |not affect U.S. GNP, but would increase U.S. GDP. |

|d. |have no affect on U.S. GNP or GDP. |

____ 25. The slope of the supply of loanable funds curve represents the

|a. |positive relation between the real interest rate and investment. |

|b. |positive relation between the real interest rate and saving. |

|c. |negative relation between the real interest rate and investment. |

|d. |negative relation between the real interest rate and saving. |

____ 26. If the nominal interest rate is 5 percent and the rate of inflation is 2 percent, then the real interest rate is

|a. |7 percent. |

|b. |3 percent. |

|c. |2.5 percent. |

|d. |2/5 percent. |

____ 27. A college student who is not working or looking for a job is counted as

|a. |neither employed nor part of the labor force. |

|b. |unemployed and in the labor force. |

|c. |unemployed, but not in the labor force. |

|d. |employed and in the labor force. |

____ 28. Open-market purchases by the Fed make the money supply

|a. |and the value of money increase. |

|b. |increase, which makes the value of money decrease. |

|c. |and the value of money decrease. |

|d. |decrease, which makes the value of money increase. |

____ 29. Clear Brook Farms, a U.S. manufacturer of frozen vegetarian entrees, sells cases of their product to stores overseas. Its sales

|a. |decrease U.S. exports but increase U.S. net exports. |

|b. |decrease both U.S. exports and U.S. net exports. |

|c. |increase both U.S. exports and U.S. net exports. |

|d. |increase U.S. exports but decrease U.S. net exports. |

____ 30. Exchange rates are 150 yen per dollar, 0.8 euro per dollar, and 20 pesos per dollar. A bottle of beer in New York costs 6 dollars, 1,200 yen in Tokyo, 7 euro in Munich, and 100 pesos in Cancun. Where is the most expensive and the cheapest beer in that order?

|a. |Cancun, New York |

|b. |New York, Tokyo |

|c. |Tokyo, Munich |

|d. |Munich, Cancun |

Use the (hypothetical) information in the following table to answer the following questions.

Table 31-1

| | |Currency per U.S. |U.S. Price |Country Price |

|Country |Currency |Dollar |Index |Index |

|Brazil |Real | 4.00 |200 | 800 |

|Japan |Yen |125.00 |200 |50,000 |

|Mexico |Peso | 10.00 |200 | 2,000 |

|Sweden |Krona | 9.00 |200 | 2,000 |

|Thailand |Baht | 45.00 |200 | 8,000 |

____ 31. Refer to Table 31-1. In real terms, U.S. goods are more expensive than goods in which country(ies)?

|a. |Brazil and Mexico |

|b. |Japan, Sweden, and Thailand |

|c. |Japan and Sweden |

|d. |Thailand |

____ 32. A fall in the real interest rate encourages investment and so

|a. |increases the quantity of loanable funds demanded. |

|b. |decreases the quantity of loanable funds demanded. |

|c. |increases the quantity of loanable funds supplied. |

|d. |decreases the quantity of loanable funds supplied. |

____ 33. A rise in the economy's overall level of prices tends to

|a. |raise both the quantity demanded and supplied of goods and services. |

|b. |raise the quantity demanded of goods and services, but lower the quantity supplied. |

|c. |lower the quantity demanded of goods and services, but raise the quantity supplied. |

|d. |lower both the quantity demanded and the quantity supplied of goods and services. |

____ 34. When the price level rises,

|a. |interest rates rise, so firms increase investment. |

|b. |interest rates rise, so firms decrease investment. |

|c. |interest rates fall, so firms increase investment. |

|d. |interest rates fall, so firms decrease investment. |

____ 35. Which of the following shifts money demand to the right?

|a. |an increase in the price level |

|b. |a decrease in the price level |

|c. |an increase in the interest rate |

|d. |a decrease in the interest rate |

____ 36. Which of the following shifts aggregate demand right?

|a. |an increase in government expenditures or a decrease in the price level |

|b. |a decrease in government expenditures or an increase in the price level |

|c. |an increase in government expenditures, but not a change in the price level |

|d. |a decrease in the price level, but not an increase in government expenditures |

____ 37. If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,

|a. |unemployment = the natural rate and expected inflation = actual inflation. |

|b. |unemployment is above the natural rate and expected inflation = actual inflation. |

|c. |unemployment = the natural rate and expected inflation is greater than actual inflation. |

|d. |None of the above is necessarily correct. |

____ 38. Which of the following would not be associated with a favorable supply shock?

|a. |The short-run Phillips curve shifts left. |

|b. |Unemployment falls. |

|c. |The price level rises. |

|d. |Output rises. |

____ 39. The Volcker disinflation

|a. |had virtually no impact on output just as the classical dichotomy suggested. |

|b. |was associated with rising output, perhaps due to expansionary fiscal policy. |

|c. |caused output to fall, but by less than the typical estimate of the sacrifice ratio suggested. |

|d. |None of the above is correct. |

____ 40. Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises. If the economy starts from long-run equilibrium and aggregate demand shifts right, the central bank must

|a. |decrease the money supply, which will move output back towards its long-run level. |

|b. |decrease the money supply, which will move output farther from its long-run level. |

|c. |increase the money supply, which will move output back towards its long-run level. |

|d. |increase the money supply, which will move output farther from its long-run level. |

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