Question 1

When quantities of two goods belong to the same indifference curve, which of the following is true ?

Accepted Answer

A)  The combinations of the two goods along the indifference curve yield the same total utility. 
B)  Prices of the two goods are equal. 
C)  Marginal utilities of both goods are equal. 
D)  The total utility of all combinations above the curve equal zero. 
A)  The combinations of the two goods along the indifference curve yield the same total utility. 
B)  Prices of the two goods are equal. 
C)  Marginal utilities of both goods are equal. 
D)  The total utility of all combinations above the curve equal zero.

Question 2

The marginal rate of substitution ____ as one moves downward along the indifference curve.

Accepted Answer

A)  increase 
B)  remains constant 
C)  decreases 
D)  increases and then decreases 
A)  increase 
B)  remains constant 
C)  decreases 
D)  increases and then decreases

Question 3

​ An aggregate supply curve with a positive slope is associated with an economy in which:

Accepted Answer

A)  ​input prices and final goods prices always change by the same amount. 
B)  ​firms expect output prices to be unaffected by changes in input prices. 
C)  ​nominal wages and salaries do not change much in the short run. 
D)  ​ firms expect consumer demand to be unaffected by changes in prices of final goods. 
A)  ​input prices and final goods prices always change by the same amount. 
B)  ​firms expect output prices to be unaffected by changes in input prices. 
C)  ​nominal wages and salaries do not change much in the short run. 
D)  ​ firms expect consumer demand to be unaffected by changes in prices of final goods.

Question 4

Suppose a consumer is willing to pay $20 for one unit of good X, $10 for a second, and $5 for a third, and the market price is $4. The consumer surplus is:

Accepted Answer

A)  $16. 
B)  $6. 
C)  $1. 
D)  $23. 
A)  $16. 
B)  $6. 
C)  $1. 
D)  $23.

Question 5

A rightward shift in potential real GDP is not likely to result from which of the following?

Accepted Answer

A)  a discovery of new oil reserves 
B)  workers' acquisition of new skills 
C)  retirement of a large and aging segment of the workforce 
D)  an improvement in technology 
A)  a discovery of new oil reserves 
B)  workers' acquisition of new skills 
C)  retirement of a large and aging segment of the workforce 
D)  an improvement in technology

Question 6

​ ​ Exhibit 16A-2 Macro AD/AS Models
​
 
​ In Panel (a) of Exhibit 16A-2, the economy is initially in short-run equilibrium at real GDP level Y1 and price level P2. If the federal government or Fed decides to intervene, it would most likely:

Accepted Answer

A)  ​increase taxes. 
B)  ​decrease the money supply. 
C)  ​increase the level of government spending for goods and services. 
D)  ​decrease the level of government spending for goods and services. 
A)  ​increase taxes. 
B)  ​decrease the money supply. 
C)  ​increase the level of government spending for goods and services. 
D)  ​decrease the level of government spending for goods and services.

Question 7

​ Exhibit 16-4 Macro AD/AS Model
 
As shown in Exhibit 16A-4, assume the marginal propensity to consume equals 0.80.  Using discretionary fiscal policy, federal government spending should be _________  in order to restore the economy from E  1  to full employment.

Accepted Answer

A)  increased by $1.6 trillion 
B)  decreased by $1.6 trillion 
C)  increased by $.20 trillion 
D)  decreased by $.20 trillion 
A)  increased by $1.6 trillion 
B)  decreased by $1.6 trillion 
C)  increased by $.20 trillion 
D)  decreased by $.20 trillion

Question 8

Exhibit 6A-4 Consumer equilibrium
​
 
Given the budget line and indifference curves shown in Exhibit 6A-4, point E is:

Accepted Answer

A)  inferior to point X. 
B)  lowest attainable level of total utility. 
C)  consumer equilibrium. 
D)  unobtainable. 
A)  inferior to point X. 
B)  lowest attainable level of total utility. 
C)  consumer equilibrium. 
D)  unobtainable.

Question 9

​ Classical theory advocates _____________ policy and Keynesian theory advocates ______________ policy.

Accepted Answer

A)  ​nonintervention; intervention 
B)  ​active; nonstabilization 
C)  ​stabilization; fixed wage 
D)  ​fixed rule; passive 
A)  ​nonintervention; intervention 
B)  ​active; nonstabilization 
C)  ​stabilization; fixed wage 
D)  ​fixed rule; passive

Question 10

At the equilibrium price, deadweight loss is:

Accepted Answer

A)  minimized. 
B)  zero. 
C)  maximized. 
D)  equal to the equilibrium price multiplied by the quantity exchanged. 
A)  minimized. 
B)  zero. 
C)  maximized. 
D)  equal to the equilibrium price multiplied by the quantity exchanged.

Question 11

Economic growth is measured by the percentage change in:

Accepted Answer

A)  ​potential nominal GDP. 
B)  ​structural unemployment. 
C)  ​the rule of 72. 
D)  ​ potential real GDP (LRAS).​ 
A)  ​potential nominal GDP. 
B)  ​structural unemployment. 
C)  ​the rule of 72. 
D)  ​ potential real GDP (LRAS).​

Question 12

Measured between two points on a curve, the ratio of the change in the variable on the vertical axis to the change in the variable on the horizontal axis is the:

Accepted Answer

A)  axis. 
B)  slope. 
C)  dependent curve. 
D)  independent curve. 
A)  axis. 
B)  slope. 
C)  dependent curve. 
D)  independent curve.

Question 13

A direct relationship is expressed graphically as a:

Accepted Answer

A)  positively sloped line or curve. 
B)  negatively sloped line or curve. 
C)  horizontal line. 
D)  vertical line. 
A)  positively sloped line or curve. 
B)  negatively sloped line or curve. 
C)  horizontal line. 
D)  vertical line.

Question 14

The slope of an indifference curve is equal to the ratio of the ____ of the good on the horizontal axis to the ____ of the good on the vertical axis.

Accepted Answer

A)  marginal product; marginal product 
B)  marginal utility; marginal utility 
C)  price; price 
D)  total utility; price 
A)  marginal product; marginal product 
B)  marginal utility; marginal utility 
C)  price; price 
D)  total utility; price

Question 15

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss
 
As shown in Exhibit 3A-2, if the market price falls from P1 to P2, then:

Accepted Answer

A)  total surplus increases. 
B)  deadweight loss increases. 
C)  overproduction increases. 
D)  underproduction decreases. 
A)  total surplus increases. 
B)  deadweight loss increases. 
C)  overproduction increases. 
D)  underproduction decreases.

Question 16

Beginning from a position of long-run equilibrium at the full-employment level of real GDP, the economy's short-run response to an increase in the aggregate demand curve would be:

Accepted Answer

A)  a movement upward along the short-run aggregate supply curve. 
B)  a movement upward along the long-run aggregate supply curve. 
C)  a downward shift in the short-run aggregate supply curve. 
D)  a shift in both the aggregate demand curve and the short-run aggregate supply c urve with a movement along the long-run aggregate supply curve. 
A)  a movement upward along the short-run aggregate supply curve. 
B)  a movement upward along the long-run aggregate supply curve. 
C)  a downward shift in the short-run aggregate supply curve. 
D)  a shift in both the aggregate demand curve and the short-run aggregate supply c urve with a movement along the long-run aggregate supply curve.

Question 17

Suppose Jones sells a good for $100 at a yard sale. If the producer surplus from the sale is $75, Jones's cost of the good must have been:

Accepted Answer

A)  $100. 
B)  $175. 
C)  $25. 
D)  equal to the deadweight loss. 
A)  $100. 
B)  $175. 
C)  $25. 
D)  equal to the deadweight loss.

Question 18

The vertical and horizontal axes intercepts of the budget line represent the:

Accepted Answer

A)  quantity of goods that will be purchase if only that good is purchased. 
B)  preference of one good compared to another good. 
C)  quantity of each good that is outside the consumer's income. 
D)  only two choices that will spend the entire budget. 
A)  quantity of goods that will be purchase if only that good is purchased. 
B)  preference of one good compared to another good. 
C)  quantity of each good that is outside the consumer's income. 
D)  only two choices that will spend the entire budget.

Question 19

An indifference curve is:

Accepted Answer

A)  downward sloping and concave to the origin. 
B)  downward sloping and convex to the origin. 
C)  upward sloping and concave to the origin. 
D)  upward sloping and convex to the origin. 
A)  downward sloping and concave to the origin. 
B)  downward sloping and convex to the origin. 
C)  upward sloping and concave to the origin. 
D)  upward sloping and convex to the origin.

Question 20

Assume the economy is operating at a real GDP above full-employment real GDP. Classical economists would prescribe which of the following policies?

Accepted Answer

A)  nonintervention 
B)  active monetary policy 
C)  contractionary 
D)  expansionary 
A)  nonintervention 
B)  active monetary policy 
C)  contractionary 
D)  expansionary

Exam 31: Understanding Direct and Inverse Relationships between Variables

When quantities of two goods belong to the same indifference curve, which of the following is true ?

The marginal rate of substitution ____ as one moves downward along the indifference curve.

​ An aggregate supply curve with a positive slope is associated with an economy in which:

Suppose a consumer is willing to pay $20 for one unit of good X, $10 for a second, and $5 for a third, and the market price is $4. The consumer surplus is:

A rightward shift in potential real GDP is not likely to result from which of the following?

​ ​ Exhibit 16A-2 Macro AD/AS Models ​ ​ In Panel (a) of Exhibit 16A-2, the economy is initially in short-run equilibrium at real GDP level Y1 and price level P2. If the federal government or Fed decides to intervene, it would most likely:

​ Exhibit 16-4 Macro AD/AS Model As shown in Exhibit 16A-4, assume the marginal propensity to consume equals 0.80. Using discretionary fiscal policy, federal government spending should be _________ in order to restore the economy from E 1 to full employment.

Exhibit 6A-4 Consumer equilibrium ​ Given the budget line and indifference curves shown in Exhibit 6A-4, point E is:

​ Classical theory advocates _____________ policy and Keynesian theory advocates ______________ policy.

At the equilibrium price, deadweight loss is:

Economic growth is measured by the percentage change in:

Measured between two points on a curve, the ratio of the change in the variable on the vertical axis to the change in the variable on the horizontal axis is the:

A direct relationship is expressed graphically as a:

The slope of an indifference curve is equal to the ratio of the ____ of the good on the horizontal axis to the ____ of the good on the vertical axis.

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the market price falls from P1 to P2, then:

Beginning from a position of long-run equilibrium at the full-employment level of real GDP, the economy's short-run response to an increase in the aggregate demand curve would be:

Suppose Jones sells a good for $100 at a yard sale. If the producer surplus from the sale is $75, Jones's cost of the good must have been:

The vertical and horizontal axes intercepts of the budget line represent the:

An indifference curve is:

Assume the economy is operating at a real GDP above full-employment real GDP. Classical economists would prescribe which of the following policies?

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Filters

An aggregate supply curve with a positive slope is associated with an economy in which:

Exhibit 16A-2 Macro AD/AS Models In Panel (a) of Exhibit 16A-2, the economy is initially in short-run equilibrium at real GDP level Y₁ and price level P₂. If the federal government or Fed decides to intervene, it would most likely:

Exhibit 16-4 Macro AD/AS Model As shown in Exhibit 16A-4, assume the marginal propensity to consume equals 0.80. Using discretionary fiscal policy, federal government spending should be _________ in order to restore the economy from E ₁ to full employment.

Exhibit 6A-4 Consumer equilibrium Given the budget line and indifference curves shown in Exhibit 6A-4, point E is:

Classical theory advocates _ policy and Keynesian theory advocates __ policy.

The slope of an indifference curve is equal to the ratio of the of the good on the horizontal axis to the of the good on the vertical axis.

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the market price falls from P₁ to P₂, then: