Question 1

An economy will always operate at some point on its production possibilities curve.

Accepted Answer

A) True 
 B)False

Question 2

Assume that if the interest rate that businesses must pay to borrow funds were 20 percent,it would be unprofitable for businesses to invest in new machinery and equipment so that investment would be zero.But if the interest rate were 16 percent,businesses would find it profitable to invest $10 billion.If the interest rate were 12 percent,$20 billion would be invested.Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate.
-Refer to the above information.Which of the following is the correct graphical presentation of the indicated relationship?

Accepted Answer

A)  line 4 
B)  line 3 
C)  line 2 
D)  line 1 
A)  line 4 
B)  line 3 
C)  line 2 
D)  line 1

Question 3

Purposeful behaviour suggests that:

Accepted Answer

A)  everyone will make identical choices. 
B)  resource availability exceeds material wants. 
C)  individuals make decisions with some desired outcome in mind. 
D)  an individual's economic goals cannot involve tradeoffs. 
A)  everyone will make identical choices. 
B)  resource availability exceeds material wants. 
C)  individuals make decisions with some desired outcome in mind. 
D)  an individual's economic goals cannot involve tradeoffs.

Question 4

Refer to the diagram below,suppose you have a money income of $10 all of which you spend on Coke and boxes of popcorn.The prices of Coke and popcorn respectively are:

Accepted Answer

A)  $.50 and $1.00. 
B)  $1.00 and $.50. 
C)  $1.00 and $2.00. 
D)  $.40 and $.50. 
A)  $.50 and $1.00. 
B)  $1.00 and $.50. 
C)  $1.00 and $2.00. 
D)  $.40 and $.50.

Question 5

-Refer to the above table.What is the total opportunity cost of producing three units of capital goods?

Accepted Answer

A)  6 units of consumer goods 
B)  7 units of consumer goods 
C)  15 units of consumer goods 
D)  22 units of consumer goods 
A)  6 units of consumer goods 
B)  7 units of consumer goods 
C)  15 units of consumer goods 
D)  22 units of consumer goods

Question 6

Concern about the general level of prices in an economy is primarily a concern about the economic goal of:

Accepted Answer

A)  economic efficiency. 
B)  economic security. 
C)  price-level stability. 
D)  equity. 
A)  economic efficiency. 
B)  economic security. 
C)  price-level stability. 
D)  equity.

Question 7

The basic purpose of the "other things equal" assumption is to:

Accepted Answer

A)  allow one to reason about the relationship between variables X and Y without the intrusion of variable Z. 
B)  allow one to focus upon micro variables by ignoring macro variables. 
C)  allow one to focus upon macro variables by ignoring micro variables. 
D)  determine whether X causes Y or vice versa. 
A)  allow one to reason about the relationship between variables X and Y without the intrusion of variable Z. 
B)  allow one to focus upon micro variables by ignoring macro variables. 
C)  allow one to focus upon macro variables by ignoring micro variables. 
D)  determine whether X causes Y or vice versa.

Question 8

-Refer to the above diagram.Curve B is a:

Accepted Answer

A)  production possibilities curve indicating constant opportunity costs. 
B)  production possibilities curve indicating increasing opportunity costs. 
C)  demand curve indicating that the quantity of consumer goods demanded increases as the price of capital falls. 
D)  technology frontier curve. 
A)  production possibilities curve indicating constant opportunity costs. 
B)  production possibilities curve indicating increasing opportunity costs. 
C)  demand curve indicating that the quantity of consumer goods demanded increases as the price of capital falls. 
D)  technology frontier curve.

Question 9

Economics may best be defined as:

Accepted Answer

A)  the interaction between macro and micro considerations. 
B)  the study of the behaviour of people and institutions in the production,distribution,and consumption of scarce goods. 
C)  the empirical testing of value judgments through the use of induction and deduction. 
D)  the use of policy to refute facts and hypotheses. 
A)  the interaction between macro and micro considerations. 
B)  the study of the behaviour of people and institutions in the production,distribution,and consumption of scarce goods. 
C)  the empirical testing of value judgments through the use of induction and deduction. 
D)  the use of policy to refute facts and hypotheses.

Question 10

-The production possibilities curve has:

Accepted Answer

A)  a positive slope which increases as we move along it from left to right. 
B)  a negative slope which increases as we move along it from left to right. 
C)  a negative slope which decreases as we move along it from left to right. 
D)  a negative slope which is constant as we move along it from left to right. 
A)  a positive slope which increases as we move along it from left to right. 
B)  a negative slope which increases as we move along it from left to right. 
C)  a negative slope which decreases as we move along it from left to right. 
D)  a negative slope which is constant as we move along it from left to right.

Question 11

Macroeconomics can best be described as the:

Accepted Answer

A)  analysis of how a consumer tries to spend income. 
B)  study of the large aggregates of the economy or the economy as a whole. 
C)  analysis of how firms attempt to maximize their profits. 
D)  study of how supply and demand determine prices in individual markets. 
A)  analysis of how a consumer tries to spend income. 
B)  study of the large aggregates of the economy or the economy as a whole. 
C)  analysis of how firms attempt to maximize their profits. 
D)  study of how supply and demand determine prices in individual markets.

Question 12

Slope of lines are especially important in economics because:

Accepted Answer

A)  they measure marginal changes. 
B)  they always tell us something about profits. 
C)  positive slopes are always preferred to negative slopes. 
D)  they always relate to resource and output scarcity. 
A)  they measure marginal changes. 
B)  they always tell us something about profits. 
C)  positive slopes are always preferred to negative slopes. 
D)  they always relate to resource and output scarcity.

Question 13

-Refer to the above production possibilities curves.Given production possibilities curve (a),point Y indicates that society is failing to use available resources efficiently.

Accepted Answer

A) True 
 B)False

Question 14

A production possibilities curve illustrates:

Accepted Answer

A)  scarcity. 
B)  market prices. 
C)  consumer preferences. 
D)  the distribution of income. 
A)  scarcity. 
B)  market prices. 
C)  consumer preferences. 
D)  the distribution of income.

Question 15

Assume that if the interest rate that businesses must pay to borrow funds were 20 percent,it would be unprofitable for businesses to invest in new machinery and equipment so that investment would be zero.But if the interest rate were 16 percent,businesses would find it profitable to invest $10 billion.If the interest rate were 12 percent,$20 billion would be invested.Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate.
-Refer to the above information.Which of the following is an accurate verbal statement of the described relationship?

Accepted Answer

A)  There is no regular or dependable relationship between business investment and the interest rate. 
B)  The amount of business investment is unaffected by changes in the interest rate. 
C)  Investment spending by businesses varies inversely with the interest rate. 
D)  Investment spending by businesses varies directly with the interest rate. 
A)  There is no regular or dependable relationship between business investment and the interest rate. 
B)  The amount of business investment is unaffected by changes in the interest rate. 
C)  Investment spending by businesses varies inversely with the interest rate. 
D)  Investment spending by businesses varies directly with the interest rate.

Question 16

Which of the following will not require an outward shift of the production possibilities curve?

Accepted Answer

A)  an upgrading of the quality of a nation's human resources 
B)  the reduction of unemployment 
C)  an increase in the quantity of a society's labour force 
D)  the improvement of a society's technological knowledge 
A)  an upgrading of the quality of a nation's human resources 
B)  the reduction of unemployment 
C)  an increase in the quantity of a society's labour force 
D)  the improvement of a society's technological knowledge

Question 17

The individuals and society both face an economic problem.This problem arises from the fact that:

Accepted Answer

A)  wants are limited but the resources are not. 
B)  resources are scarce relative to individual's wants. 
C)  individuals and institutions behave only in their self-interest. 
D)  both wants and resources are unlimited. 
A)  wants are limited but the resources are not. 
B)  resources are scarce relative to individual's wants. 
C)  individuals and institutions behave only in their self-interest. 
D)  both wants and resources are unlimited.

Question 18

-Refer to the above diagram.This production possibilities curve is:

Accepted Answer

A)  convex to the origin because opportunity costs are constant. 
B)  linear because opportunity costs are constant. 
C)  concave to the origin because of increasing opportunity costs. 
D)  convex to the origin because of increasing opportunity costs. 
A)  convex to the origin because opportunity costs are constant. 
B)  linear because opportunity costs are constant. 
C)  concave to the origin because of increasing opportunity costs. 
D)  convex to the origin because of increasing opportunity costs.

Question 19

Normative statements are concerned with:

Accepted Answer

A)  facts and theories. 
B)  what ought to be. 
C)  what is. 
D)  rational choice involving costs and benefits. 
A)  facts and theories. 
B)  what ought to be. 
C)  what is. 
D)  rational choice involving costs and benefits.

Question 20

-Refer to the above production possibilities curve.At the onset of World War II the Soviet Union's economy was already at full employment.Its economic adjustment from peacetime to wartime can best be described by the movement from point:

Accepted Answer

A)  c to point b. 
B)  b to point c. 
C)  a to point b. 
D)  c to point d. 
A)  c to point b. 
B)  b to point c. 
C)  a to point b. 
D)  c to point d.

An economy will always operate at some point on its production possibilities curve.

Purposeful behaviour suggests that:

Refer to the diagram below,suppose you have a money income of $10 all of which you spend on Coke and boxes of popcorn.The prices of Coke and popcorn respectively are:

-Refer to the above table.What is the total opportunity cost of producing three units of capital goods?

Concern about the general level of prices in an economy is primarily a concern about the economic goal of:

The basic purpose of the "other things equal" assumption is to:

-Refer to the above diagram.Curve B is a:

Economics may best be defined as:

-The production possibilities curve has:

Macroeconomics can best be described as the:

Slope of lines are especially important in economics because:

-Refer to the above production possibilities curves.Given production possibilities curve (a),point Y indicates that society is failing to use available resources efficiently.

A production possibilities curve illustrates:

Which of the following will not require an outward shift of the production possibilities curve?

The individuals and society both face an economic problem.This problem arises from the fact that:

-Refer to the above diagram.This production possibilities curve is:

Normative statements are concerned with:

-Refer to the above production possibilities curve.At the onset of World War II the Soviet Union's economy was already at full employment.Its economic adjustment from peacetime to wartime can best be described by the movement from point:

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

Exam 1: Limits, Alternatives, and Choices

An economy will always operate at some point on its production possibilities curve.

Purposeful behaviour suggests that:

Refer to the diagram below,suppose you have a money income of $10 all of which you spend on Coke and boxes of popcorn.The prices of Coke and popcorn respectively are:

-Refer to the above table.What is the total opportunity cost of producing three units of capital goods?

Concern about the general level of prices in an economy is primarily a concern about the economic goal of:

The basic purpose of the "other things equal" assumption is to:

-Refer to the above diagram.Curve B is a:

Economics may best be defined as:

-The production possibilities curve has:

Macroeconomics can best be described as the:

Slope of lines are especially important in economics because:

-Refer to the above production possibilities curves.Given production possibilities curve (a),point Y indicates that society is failing to use available resources efficiently.

A production possibilities curve illustrates:

Which of the following will not require an outward shift of the production possibilities curve?

The individuals and society both face an economic problem.This problem arises from the fact that:

-Refer to the above diagram.This production possibilities curve is:

Normative statements are concerned with:

-Refer to the above production possibilities curve.At the onset of World War II the Soviet Union's economy was already at full employment.Its economic adjustment from peacetime to wartime can best be described by the movement from point:

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters