1. An increase in the demand for corn is more than offset by an increase in its supply. As a result the equilibrium price will:Answer
   

   		Increase and the equilibrium quantity will decrease
   		Increase and the equilibrium quantity will increase
   		Decrease and the equilibrium quantity will decrease
   		Decrease and the equilibrium quantity will increase

2.5 points

Question 2

1. Because of the recent rise in the average rate of productivity growth, the business cycle is dead.AnswerTrueFalse

2.5 points

Question 3

1. Refer to the above graph, which shows the market for bicycles.S₁andD₁are the original supply and demand curves.D₂andD₃andS₂andS₃are possible new demand and supply curves. Starting from the initial equilibrium (point 1), what point on the graph is most likely to result from an increase in wages of bicycle workers, and a significant increase in the price of gasoline?Answer
   

   		2
   		3
   		4
   		5

2.5 points

Question 4

1. (Last Word) According to economist Donald Boudreaux:Answer
   

   		private property eliminates the possibility that resource arrangements will be random.
   		the market system threatens to do irreparable harm to the world’s ecosystem.
   		arranging resources under the market system is much like shuffling a deck of cards.
   		the market system works wondrously for advanced industrial nations but not for developing nations.

2.5 points

Question 5

1. Gordon James is a person who sells narcotics “on the street.” This type of illegal activity:Answer
   

   		Would be considered double counting in calculating GDP
   		Is estimated and included in GDP figures
   		Is excluded from GDP figures
   		Causes GDP to be overstated

2.5 points

Question 6

1. The simple circular flow model shows that:Answer
   

   		households are on the buying side of both product and resource markets.
   		businesses are on the selling side of both product and resource markets.
   		households are on the selling side of the resource market and on the buying side of the product market.
   		businesses are on the buying side of the product market and on the selling side of the resource market.

2.5 points

Question 7

1. The purpose of theceterisparibusassumption used in economic analysis is to:Answer
   

   		Avoid making normative statements
   		Avoid theposthoc,ergopropterhocfallacy
   		Make sure that all relevant factors are considered
   		Focus on the effect of a single factor on a certain variable

2.5 points

Question 8

1. “Net foreign factor income” in the national income accounts refers to the difference between:Answer
   

   		The income Americans gain from supplying resources abroad and the income that foreigners gain by supplying resources in the U.S.
   		The value of products sold by Americans to other nations and the value of products bought by Americans from other nations
   		The value of investments that Americans made abroad and the value of investments made by foreigners in the U.S.
   		The income earned by Americans abroad and the income of foreign workers in the U.S.

2.5 points

Question 9

1. Labor productivity = worker-hours/real GDP.AnswerTrueFalse

2.5 points

Question 10

1. Refer to the above data. Net exports are equal to:Answer
   

   		– $155 billion
   		$288 billion
   		– $424 billion
   		$1483 billion

2.5 points

Question 11

1. Use the list below to answer the following questions:1. Improvements in technology2. Increases in the supply (stock) of capital goods3. Purchases of expanding output4. Obtaining the optimal combination of goods, each at least-cost production5. Increases in the quantity and quality of natural resources6. Increases in the quantity and quality of human resourcesWhich set of items in the above list would shift an economy’s production possibilities curve outward?Answer
   

   		2, 5, and 6 only
   		2, 4, 5, and 6 only
   		1, 2, 5, and 6 only
   		1, 3, 4 only

2.5 points

Question 12

1. Refer to the above diagram illustrating the market for corn. If the price in this market is fixed at $2 per bushel, then:Answer
   

   		Sellers will not be able to sell all the corn that they want to sell
   		Sellers will quickly run out of corn that they bring to market
   		Buyers will find too much corn in the market
   		Buyers will be able to get as much corn as they wish to buy

2.5 points

Question 13

1. Consider the following data for a firm over a period of time.The contribution of the firm to domestic output by the value-added method is:Answer
   

   		$5,000
   		$40,000
   		$45,000
   		$50,000

2.5 points

Question 14

1. (Consider This) Rising wages for women in the United States have increased:Answer
   

   		the proportion of women working part time compared to working full time.
   		labor costs and thus shifted the nation’s production possibilities curve inward.
   		average family size in the United States.
   		the percentage of married women in the workforce.

2.5 points

Question 15

1. Refer to the above table. A surplus exists when the price is:Answer
   

   		$15 per unit
   		$20 per unit
   		$25 per unit
   		$30 per unit

2.5 points

Question 16

1. Which of the following is a correct statement?Answer
   

   		Price ceilings increase demand
   		Price ceilings create surpluses
   		Price floors create surpluses
   		Price floors increase supply

2.5 points

Question 17

1. Refer to the above diagram. Flow (4) represents:Answer
   

   		wage, rent, interest, and profit income.
   		land, labor, capital, and entrepreneurial ability.
   		goods and services.
   		consumer expenditures.

2.5 points

Question 18

1. All of the following would cause an increase in the demand for private airplanes at a given price,excepta(n):Answer
   

   		Decrease in interest rates
   		Increase in consumer incomes
   		Increase in plane fares
   		Decrease in the costs of making private airplanes

2.5 points

Question 19

1. GDP accounts for which of the following items?Answer
   

   		Do-it-yourself activities
   		“Psychic income” people derive from their work
   		Household spending for health and home insurance
   		Improvements in product quality

2.5 points

Question 20

1. Command systems are also known as:Answer
   

   		market systems.
   		pure capitalism.
   		laissez-faire capitalism.
   		communism.

2.5 points

Question 21

1. In an economy that is experiencing a shrinking production capacity:Answer
   

   		Gross domestic investment is negative
   		Net private domestic investment is zero
   		Depreciation is negative
   		Depreciation exceeds gross investment

2.5 points

Question 22

1. Real income can be determined by:Answer
   

   		dividing the price level by nominal income.
   		inflating nominal income for inflation.
   		dividing the annual rate of inflation into the number “70.”
   		deflating nominal income for inflation.

2.5 points

Question 23

1. Suppose a family’s consumption exceeds its disposable income. This means that its:Answer
   

   		MPC is greater than 1.
   		MPS is negative.
   		APC is greater than 1.
   		APS is positive.

2.5 points

Question 24

1. Answer the question on the basis of the following information about a hypothetical economy:Refer to the above information. The rate of inflation:Answer
   

   		is 110 percent.
   		is 10 percent.
   		is 0 percent.
   		cannot be determined from the data.

2.5 points

Question 25

” ”
1. The phase of the business cycle in which real GDP declines is called:Answer
   

   		the peak.
   		an expansion.
   		a recession.
   		the trough.

2.5 points

Question 26

1. Answer the question on the basis of the following consumption schedules. DI signifies disposable income andCrepresents consumption expenditures. All figures are in billions of dollars.Refer to the above data. The marginal propensity to consume in economy (1) is:Answer
   

   		.5.
   		.3.
   		.8.
   		.7.

2.5 points

Question 27

1. Data, using year 1 as the base year. All dollars are in billions.Refer to the above data. Real GDP increased from year 3 to year 4 by approximately:Answer
   

   		$68 billion
   		$75 billion
   		$98 billion
   		$215 billion

2.5 points

Question 28

1. A television station reports that the price of orange juice has declined but the quantity traded has increased. This situation could be caused by a(n):Answer
   

   		Increased preference for orange juice among buyers
   		Significant decrease in the harvest of oranges in the nation’s orchards
   		Improvement in the technology of producing orange juice
   		Decrease in income, and orange juice is a normal good

2.5 points

Question 29

1. In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $5,000 billion. In year 2, the total expenditure for the same market basket of goods was $5,500 billion. What was the GDP price index for the economy in year 2?Answer
   

   		100
   		110
   		115
   		120

2.5 points

Question 30

1. The slope of a graph measures the rate of change in one variable as the other variable changes.AnswerTrueFalse

2.5 points

Question 31

1. The market system’s answer to the fundamental question “How will the goods and services be produced?” is essentially:Answer
   

   		“With as much machinery as possible.”
   		“Using the latest technology.”
   		“By exploiting labor.”
   		“Using the least-cost production techniques.”

2.5 points

Question 32

1. The question(s) below are based on the following four sets of data-pairs: (1), (2), (3), and (4). In each set, the independent variable is in the left column and the dependent variable is in the right columnThe vertical intercept is 12 in which of the above data set:Answer
   

   		1
   		2
   		3
   		4

2.5 points

Question 33

1. If economic resources are perfectly interchangeable between the two products shown on a production possibilities graph:Answer
   

   		The economy will always be at full employment
   		More of one product can be produced without producing less of the other product
   		The production possibilities curve would be a straight line
   		The two products are of equal value to the economy

2.5 points

Question 34

1. What is a major opportunity cost of going to college on a full-time basis?Answer
   

   		The cost of transportation to college instead of to a job
   		The cost of living expenses (room and board) to attend college
   		The foregone income that could be earned working full-time job
   		The greater income that will be earned from having a college degree

2.5 points

Question 35

1. Refer to the graph above. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. What happens to the firm’s inventory of computers if there is a negative demand shock and prices are flexible?Answer
   

   		The firm’s inventories will not change
   		The firm’s inventories will increase by 200 computers per week
   		The firm’s inventories will decrease by 150 computers per week
   		The firm’s inventories will increase by 350 computers per week

2.5 points

Question 36

1. Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called:Answer
   

   		frictional unemployment.
   		structural unemployment.
   		cyclical unemployment.
   		compositional unemployment.

2.5 points

Question 37

1. Proponents of economic growth claim that growth leads to greater equality of income in an economy.AnswerTrueFalse

2.5 points

Question 38

1. Most economists agree that the immediate determinant of the volume of output and employment is the:Answer
   

   		composition of consumer spending.
   		ratio of public goods to private goods production.
   		level of total spending.
   		size of the labor force.

2.5 points

Question 39

1. Refer to the above graph. Given this market, if the government pre-sets the price at $60, then this action results in a:Answer
   

   		Shortage of 5,000 units
   		Surplus of 5,000 units
   		Surplus of 50,000 units
   		Shortage of 45,000 units

2.5 points

Question 40

1. If prices are inflexible, then a negative demand shock will lead to:Answer
   

   		A short-run increase in real GDP
   		A short-run decrease in real GDP
   		A short-run decrease in prices
   		No change in real GDP in the short run

2.5 points

Question 41

1. With an MPS of .4, the MPC will be:Answer
   

   		1.0 minus .4.
   		.4 minus 1.0.
   		the reciprocal of the MPS.
   		.4.

2.5 points

Question 42

1. Copyrights and trademarks are examples of:Answer
   

   		capital goods.
   		human capital.
   		property rights.
   		public goods.

2.5 points

Question 43

1. A recession is defined as a period in which:Answer
   

   		cost-push inflation is present.
   		nominal domestic output falls.
   		demand-pull inflation is present.
   		real domestic output falls.

2.5 points

Question 44

1. As it relates to economic growth, the term long-run trend refers to:Answer
   

   		the long-run increase in the relative importance of durable goods in the U.S. economy.
   		the long-term expansion or contraction of business activity that occurs over 50 or 100 years.
   		fluctuations in business activity that average 40 months in duration.
   		fluctuations in business activity that occur around Christmas, Easter, and other major holidays.

2.5 points

Question 45

1. All of the following are economic implications of the recent rise in the average rate of productivity growth except:Answer
   

   		a lower natural rate of unemployment.
   		larger outward shifts of the economy’s production possibilities curve.
   		an end to the business cycle.
   		a greater rate of economic growth.

2.5 points

Question 46

1. Refer to the four graphs above. Select the graph that best shows the changes in demand and supply in the market specified in the following situation: In the market for camera film, if consumers show greater interest in digital cameras that do not use film, and producers of film have a reduction in labor costs.Answer
   

   		Graph A
   		Graph B
   		Graph C
   		Graph D

2.5 points

Question 47

1. The gross domestic product is not a good measure of the standard of living in a nation because it:Answer
   

   		Includes the cost of health insurance
   		Excludes payments for pollution control equipment
   		Does not account for the size of the population
   		Does not account for the cost of police protection

2.5 points

Question 48

1. (Last Word) A burst stock market bubble might adversely affect the economy by:Answer
   

   		causing rapid inflation.
   		greatly reducing net exports.
   		causing a severe negative wealth effect, leading to pessimism about the economy’s future.
   		raising interest rates.

2.5 points

Question 49

1. Rapid and sustained economic growth of nations:Answer
   

   		Started around the time of Jesus
   		Started a few centuries before the time of Jesus
   		Was triggered by the establishment of the Roman Empire in the first millennium
   		Is a modern phenomenon

2.5 points

Question 50

1. (The following national income statistics are in billions of dollars.)Refer to the above data. Gross domestic product is:Answer
   

   		$400 billion
   		$442 billion
   		$483 billion
   		$517 billion

2.5 points

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An increase in the supply of gasoline is more than offset by an increase in its demand. As a result the equilibrium price will:

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