Question 1

The random walk theory of stock prices indicates that

Accepted Answer

A)  if they are willing to do a little research, even beginning investors will be able to pick the stocks that will increase most in price in the future. 
B)  managed mutual funds will persistently earn a higher rate of return than indexed funds. 
C)  current stock prices already reflect information about factors influencing future stock prices that can be forecast with any degree of accuracy. 
D)  stock market investors can expect to earn a steady real rate of return of about 7 percent annually. 
A)  if they are willing to do a little research, even beginning investors will be able to pick the stocks that will increase most in price in the future. 
B)  managed mutual funds will persistently earn a higher rate of return than indexed funds. 
C)  current stock prices already reflect information about factors influencing future stock prices that can be forecast with any degree of accuracy. 
D)  stock market investors can expect to earn a steady real rate of return of about 7 percent annually.

Question 2

A sub-prime loan is a loan extended to borrowers

Accepted Answer

A)  at a subsidized interest rate below the prime rate normally offered to the most creditworthy borrowers. 
B)  with blemished credit or limited documentation of their income, employment history, and other indicators of credit worthiness. 
C)  seeking a 30-year, fixed rate mortgage. 
D)  who have a FICO score above 660. 
A)  at a subsidized interest rate below the prime rate normally offered to the most creditworthy borrowers. 
B)  with blemished credit or limited documentation of their income, employment history, and other indicators of credit worthiness. 
C)  seeking a 30-year, fixed rate mortgage. 
D)  who have a FICO score above 660.

Question 3

Which of the following statements is true about the demand for and/or the supply of natural resources?

Accepted Answer

A)  The supply curve for natural resources is more elastic in the long run than in the short run. 
B)  The elasticity of demand for electricity, natural gas, and gasoline equals approximately 0.1 in both the short run and the long run. 
C)  Natural resources are demanded by consumers and producers in steadily growing amounts, so future shortages are inevitable. 
D)  The supply of many natural resources is finite; thus the long-run elasticity of supply must be zero. 
A)  The supply curve for natural resources is more elastic in the long run than in the short run. 
B)  The elasticity of demand for electricity, natural gas, and gasoline equals approximately 0.1 in both the short run and the long run. 
C)  Natural resources are demanded by consumers and producers in steadily growing amounts, so future shortages are inevitable. 
D)  The supply of many natural resources is finite; thus the long-run elasticity of supply must be zero.

Question 4

If an investor's primary stock holding is currently Exxon Mobil, the purchase of which of the following stocks would provide the investor with the largest reduction in risk?

Accepted Answer

A)  BP / Amoco. 
B)  Shell Oil Corporation. 
C)  General Motors. 
D)  Texaco. 
A)  BP / Amoco. 
B)  Shell Oil Corporation. 
C)  General Motors. 
D)  Texaco.

Question 5

Which of the following is true?

Accepted Answer

A)  The Great Depression re-enforces the view that raising taxes in the midst of a severe recession is a bad idea. 
B)  The Great Depression clearly indicates that a prolonged period of monetary contraction will keep inflation low and promote monetary stability. 
C)  The Great Depression illustrates that trade restrictions will protect domestic industry and save jobs. 
D)  The Great Depression demonstrates that the political incentive structure during a severe downturn will encourage politicians to avoid frequent policy changes. 
A)  The Great Depression re-enforces the view that raising taxes in the midst of a severe recession is a bad idea. 
B)  The Great Depression clearly indicates that a prolonged period of monetary contraction will keep inflation low and promote monetary stability. 
C)  The Great Depression illustrates that trade restrictions will protect domestic industry and save jobs. 
D)  The Great Depression demonstrates that the political incentive structure during a severe downturn will encourage politicians to avoid frequent policy changes.

Question 6

During 1929-1933, monetary policy was

Accepted Answer

A)  highly expansionary and this led to an increase in the general level of prices. 
B)  characterized by steady monetary growth, which resulted in price stability. 
C)  characterized by a sharp reduction in the supply of money, which led to downward pressure on prices and a decline in output. 
D)  highly expansionary and this led to a reduction in the general level of prices. 
A)  highly expansionary and this led to an increase in the general level of prices. 
B)  characterized by steady monetary growth, which resulted in price stability. 
C)  characterized by a sharp reduction in the supply of money, which led to downward pressure on prices and a decline in output. 
D)  highly expansionary and this led to a reduction in the general level of prices.

Question 7

Water, when it is not tradeable among current and potential users, is often kept that way

Accepted Answer

A)  by governments who demand tight controls on who gets the water. 
B)  by nature, as water cannot be easily moved from place to place in large quantities. 
C)  to protect fish and other wildlife, rather than for any other reason. 
D)  by monopoly owners in the private sector. 
A)  by governments who demand tight controls on who gets the water. 
B)  by nature, as water cannot be easily moved from place to place in large quantities. 
C)  to protect fish and other wildlife, rather than for any other reason. 
D)  by monopoly owners in the private sector.

Question 8

Sound economic policy is policy that is consistent with

Accepted Answer

A)  good intentions. 
B)  quick action and frequent policy changes until positive results are achieved. 
C)  monetary stability, free trade, and low tax rates. 
D)  saving jobs, protecting domestic industry, and increasing tax revenue. 
A)  good intentions. 
B)  quick action and frequent policy changes until positive results are achieved. 
C)  monetary stability, free trade, and low tax rates. 
D)  saving jobs, protecting domestic industry, and increasing tax revenue.

Question 9

Most studies indicate that during the last two decades, the wages of union members have been approximately

Accepted Answer

A)  5 percent higher than the wages of similar nonunion workers. 
B)  14 to 19 percent higher than the wages of similar nonunion workers. 
C)  34 to 39 percent higher than the wages of similar nonunion workers. 
D)  64 to 69 percent higher than the wages of similar nonunion workers. 
A)  5 percent higher than the wages of similar nonunion workers. 
B)  14 to 19 percent higher than the wages of similar nonunion workers. 
C)  34 to 39 percent higher than the wages of similar nonunion workers. 
D)  64 to 69 percent higher than the wages of similar nonunion workers.

Question 10

Empirical evidence indicates that

Accepted Answer

A)  changes in the earth's cloud cover will clearly enhance the warming effects of carbon dioxide. 
B)  the increase in carbon dioxide, over thousands of years, is clearly the cause of global warming. 
C)  if global warming continues for another century, as most models forecast, the sea levels will clearly rise substantially, imposing costs much larger than the cost of preventing the warming. 
D)  the earth has warmed a little more than one degree Fahrenheit in the past century. 
A)  changes in the earth's cloud cover will clearly enhance the warming effects of carbon dioxide. 
B)  the increase in carbon dioxide, over thousands of years, is clearly the cause of global warming. 
C)  if global warming continues for another century, as most models forecast, the sea levels will clearly rise substantially, imposing costs much larger than the cost of preventing the warming. 
D)  the earth has warmed a little more than one degree Fahrenheit in the past century.

Question 11

Which of the following represents a method for a firm to obtain funds for growth and product development?

Accepted Answer

A)  use of retained earnings 
B)  borrowing money 
C)  selling stock 
D)  all of the above 
A)  use of retained earnings 
B)  borrowing money 
C)  selling stock 
D)  all of the above

Question 12

When housing prices fell during 2007, the mortgage default rate

Accepted Answer

A)  declined as well. 
B)  responded in a similar manner as during other recent recessions. 
C)  increased substantially. 
D)  changed very little. 
A)  declined as well. 
B)  responded in a similar manner as during other recent recessions. 
C)  increased substantially. 
D)  changed very little.

Question 13

Under the current structure of Medicare, the movement of the baby boom generation into the retirement phase of life during the years following 2011 will

Accepted Answer

A)  reduce the overall demand for medical services because the elderly will not have to pay for hospitalization in the future. 
B)  place downward pressure on healthcare prices. 
C)  cause Medicare expenditures to increase and necessitate the need for higher taxes to finance the program. 
D)  do all of the above. 
A)  reduce the overall demand for medical services because the elderly will not have to pay for hospitalization in the future. 
B)  place downward pressure on healthcare prices. 
C)  cause Medicare expenditures to increase and necessitate the need for higher taxes to finance the program. 
D)  do all of the above.

Question 14

The stock price of a firm is primarily a reflection of the

Accepted Answer

A)  firm's current net earnings per share. 
B)  firm's expected future net earnings per share. 
C)  discounted value of the firm's expected future net earnings per share. 
D)  firm's current net earnings per share multiplied by the interest rate. 
E)  book value of the firm. 
A)  firm's current net earnings per share. 
B)  firm's expected future net earnings per share. 
C)  discounted value of the firm's expected future net earnings per share. 
D)  firm's current net earnings per share multiplied by the interest rate. 
E)  book value of the firm.

Question 15

In 1964 civil rights legislation was passed

Accepted Answer

A)  that made it illegal for women to make less than the minimum wage. 
B)  that created the No Woman Left Behind Commission. 
C)  prohibiting employers from discriminating based on race and gender. 
D)  requiring fields traditionally dominated by male workers to hire more female candidates. 
A)  that made it illegal for women to make less than the minimum wage. 
B)  that created the No Woman Left Behind Commission. 
C)  prohibiting employers from discriminating based on race and gender. 
D)  requiring fields traditionally dominated by male workers to hire more female candidates.

Question 16

The achievement scores of American students are ____ than those of students in most developed countries and the achievement scores of American students have ____ since the late 1960s.

Accepted Answer

A)  higher; fallen 
B)  higher; risen 
C)  lower; risen 
D)  lower; fallen 
A)  higher; fallen 
B)  higher; risen 
C)  lower; risen 
D)  lower; fallen

Question 17

Which of the following is most likely to belong to a union?

Accepted Answer

A)  a government employee 
B)  a salesperson 
C)  a chef at a four-star restaurant 
D)  a taxi driver 
A)  a government employee 
B)  a salesperson 
C)  a chef at a four-star restaurant 
D)  a taxi driver

Question 18

In 2010, spending on four items-income transfers (including Social Security), health care, national defense, and interest on the national debt-accounted for

Accepted Answer

A)  approximately 25 percent of federal spending. 
B)  approximately 40 percent of federal spending. 
C)  slightly more than 50 percent of federal spending. 
D)  approximately 88 percent of federal spending. 
A)  approximately 25 percent of federal spending. 
B)  approximately 40 percent of federal spending. 
C)  slightly more than 50 percent of federal spending. 
D)  approximately 88 percent of federal spending.

Question 19

Voucher programs appear to ____ the achievement scores of African-American students after one to two years in the program and they tend to ____ racial integration in highly segregated communities.

Accepted Answer

A)  decrease; decrease 
B)  decrease; increase 
C)  increase; decrease 
D)  increase; increase 
A)  decrease; decrease 
B)  decrease; increase 
C)  increase; decrease 
D)  increase; increase

Question 20

If the interest rate were 10 percent, how much would people be willing to pay for a stock that was certain to yield a $2 per share stream of net earnings continuously in the future?

Accepted Answer

A)  $2 
B)  $10 
C)  $20 
D)  $100 
A)  $2 
B)  $10 
C)  $20 
D)  $100

The random walk theory of stock prices indicates that

A sub-prime loan is a loan extended to borrowers

Which of the following statements is true about the demand for and/or the supply of natural resources?

If an investor's primary stock holding is currently Exxon Mobil, the purchase of which of the following stocks would provide the investor with the largest reduction in risk?

Which of the following is true?

During 1929-1933, monetary policy was

Water, when it is not tradeable among current and potential users, is often kept that way

Sound economic policy is policy that is consistent with

Most studies indicate that during the last two decades, the wages of union members have been approximately

Empirical evidence indicates that

Which of the following represents a method for a firm to obtain funds for growth and product development?

When housing prices fell during 2007, the mortgage default rate

Under the current structure of Medicare, the movement of the baby boom generation into the retirement phase of life during the years following 2011 will

The stock price of a firm is primarily a reflection of the

In 1964 civil rights legislation was passed

The achievement scores of American students are than those of students in most developed countries and the achievement scores of American students have since the late 1960s.

Which of the following is most likely to belong to a union?

In 2010, spending on four items-income transfers (including Social Security), health care, national defense, and interest on the national debt-accounted for

Voucher programs appear to the achievement scores of African-American students after one to two years in the program and they tend to racial integration in highly segregated communities.

If the interest rate were 10 percent, how much would people be willing to pay for a stock that was certain to yield a $2 per share stream of net earnings continuously in the future?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Filters

Exam 16: Applying the Basics: Special Topics in Economics

The random walk theory of stock prices indicates that

A sub-prime loan is a loan extended to borrowers

Which of the following statements is true about the demand for and/or the supply of natural resources?

If an investor's primary stock holding is currently Exxon Mobil, the purchase of which of the following stocks would provide the investor with the largest reduction in risk?

Which of the following is true?

During 1929-1933, monetary policy was

Water, when it is not tradeable among current and potential users, is often kept that way

Sound economic policy is policy that is consistent with

Most studies indicate that during the last two decades, the wages of union members have been approximately

Empirical evidence indicates that

Which of the following represents a method for a firm to obtain funds for growth and product development?

When housing prices fell during 2007, the mortgage default rate

Under the current structure of Medicare, the movement of the baby boom generation into the retirement phase of life during the years following 2011 will

The stock price of a firm is primarily a reflection of the

In 1964 civil rights legislation was passed

The achievement scores of American students are ____ than those of students in most developed countries and the achievement scores of American students have ____ since the late 1960s.

Which of the following is most likely to belong to a union?

In 2010, spending on four items-income transfers (including Social Security), health care, national defense, and interest on the national debt-accounted for

Voucher programs appear to ____ the achievement scores of African-American students after one to two years in the program and they tend to ____ racial integration in highly segregated communities.

If the interest rate were 10 percent, how much would people be willing to pay for a stock that was certain to yield a $2 per share stream of net earnings continuously in the future?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Filters

The achievement scores of American students are than those of students in most developed countries and the achievement scores of American students have since the late 1960s.

Voucher programs appear to the achievement scores of African-American students after one to two years in the program and they tend to racial integration in highly segregated communities.