1. (TCO 1) As a consequence of the problem of scarcity (Points : 4)        there is never enough of anything.        individuals have to make choices from among alternatives.        production has to be planned by government.        things which are plentiful have relatively high prices. 2. (TCO1) Which is not a factor of production? (Points : 4)        Money        Land        Labor        Capital 3. (TCO1) A point outside the production possibilities curve is (Points : 4)        attainable, but there is not full employment.        attainable, but there is not optimal allocation.        unattainable because the economy is inefficient.        unattainable because of limited resources. 4. (TCO1) Which would not be characteristic of a capitalist economy? (Points : 4)        Government ownership of most factors of production        Competition and unrestricted markets        Reliance on the market system        Freedom of enterprise and choice 5. (TCO 2) The rationale for the law of demand can best be understood on the basis of (Points : 4)        diminishing marginal utility.        capitalist markets.        the invisible hand.        the rationing function of price. 6. (TCO 2) A decrease in supply and a decrease in demand will (Points : 4)        increase price and affect the equilibrium quantity in an indeterminate way.        decrease the equilibrium quantity and decrease price.        increase the equilibrium quantity and affect price in an indeterminate way.        decrease the equilibrium quantity and affect price in an indeterminate way. 7. (TCO 2) You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than one.  To increase total revenues, you should (Points : 4)        increase the price of the software.        decrease the price of the software.        hold the price of the software constant.        increase the supply of the software. 8. (TCO 2) Which of the following factors will make the demand for a product relatively elastic? (Points : 4)        There are few substitutes.        The time interval considered is long.        The good is considered a necessity.        Purchases of the good require a small portion of consumers' budgets. 9. (TCO 2) A profit-maximizing firm in the short run will expand output (Points : 4)        until marginal cost begins to rise.        until total revenue equals total cost.        until marginal cost equals average variable cost.        as long as marginal revenue is greater than marginal cost. 10. (TCO 2) Which would definitely not be an example of price discrimination? (Points : 4)        A theater charges children less than adults for a movie.        Universities charge higher tuition for out-of-state residents.        A doctor charges for services according to the income of patients.        An electric power company charges less for electricity used during off-peak hours when p ...

1. 1. (TCO 1) As a consequence of the problem of scarcity (Points
: 4)
there is never enough of anything.
individuals have to make choices from among alternatives.
production has to be planned by government.
things which are plentiful have relatively high prices.
2. (TCO1) Which is not a factor of production? (Points : 4)
Money
Land
Labor
Capital
3. (TCO1) A point outside the production possibilities curve is
(Points : 4)
attainable, but there is not full employment.
attainable, but there is not optimal allocation.
unattainable because the economy is inefficient.
unattainable because of limited resources.
4. (TCO1) Which would not be characteristic of a capitalist
economy? (Points : 4)
Government ownership of most factors of production
Competition and unrestricted markets
Reliance on the market system
Freedom of enterprise and choice
5. (TCO 2) The rationale for the law of demand can best be
understood on the basis of (Points : 4)

2. diminishing marginal utility.
capitalist markets.
the invisible hand.
the rationing function of price.
6. (TCO 2) A decrease in supply and a decrease in demand will
(Points : 4)
increase price and affect the equilibrium quantity in an
indeterminate way.
decrease the equilibrium quantity and decrease price.
increase the equilibrium quantity and affect price in an
indeterminate way.
decrease the equilibrium quantity and affect price in an
indeterminate way.
7. (TCO 2) You are the sales manager for a software company
and have been informed that the price elasticity of demand for
your most popular software is less than one. To increase total
revenues, you should (Points : 4)
increase the price of the software.
decrease the price of the software.
hold the price of the software constant.
increase the supply of the software.
8. (TCO 2) Which of the following factors will make the
demand for a product relatively elastic? (Points : 4)
There are few substitutes.
The time interval considered is long.
The good is considered a necessity.
Purchases of the good require a small portion of consumers'
budgets.

3. 9. (TCO 2) A profit-maximizing firm in the short run will
expand output (Points : 4)
until marginal cost begins to rise.
until total revenue equals total cost.
until marginal cost equals average variable cost.
as long as marginal revenue is greater than marginal cost.
10. (TCO 2) Which would definitely not be an example of price
discrimination? (Points : 4)
A theater charges children less than adults for a movie.
Universities charge higher tuition for out-of-state
residents.
A doctor charges for services according to the income of
patients.
An electric power company charges less for electricity used
during off-peak hours when production costs are lower.
11. (TCO 3) A cartel is (Points : 4)
a form of covert collusion.
legal in the United States.
always successful in raising profits.
a formal agreement among firms to collude.
12. (TCO 3) The main difference between the short run and the
long run is that (Points : 4)
firms earn zero profits in the long run.
the long run always refers to a time period of one year or
longer.
in the short run, some inputs are fixed.
in the long run, all inputs are fixed.
13.

4. (TCO 4) Refer to the diagram. The phases of the business cycle
from points A to D are, respectively:
Graph Description
(Points : 4)
Peak, recession, expansion, trough
Trough, recovery, expansion, peak
Expansion, recession, trough, peak
Peak, recession, trough, expansion
14. (TCO 4) Official unemployment rate statistics may (Points :
4)
overstate the amount of unemployment by including part-
time workers in the calculations.
understate the amount of unemployment by excluding part-
time workers in the calculations.
overstate the amount of unemployment because of the
presence of "discouraged" workers who are not actively seeking
employment.
understate the amount of unemployment because of the
presence of "discouraged" workers who are not actively seeking
employment.
15. (TCO 4) GDP is the market value of (Points : 4)
resources (land, labor, capita, and entrepreneurship) in an
economy in a given year.
all final goods and services produced in an economy in a
given year.
consumption and investment spending in an economy in a
given year.
all output produced and accumulated over the years.
16. (TCO 4) The service a homeowner performs when she mows

5. her yard is not included in GDP because (Points : 4)
this is a nonmarket transaction.
this is a nonproduction activity.
this is a noninvestment transaction.
multiple counting would be involved.
17. (TCO 6) Fiscal policy is enacted through changes in (Points
: 4)
interest rates and the price level.
the supply of money and foreign exchange.
unemployment and inflation.
taxation and government spending.
18. (TCO 6) Refer to the figure. The economy is at equilibrium
at Point B. What would expansionary fiscal policy do?
Graph Description
(Points : 4)
Shift aggregate demand from AD2 to AD1
Shift aggregate demand from AD2 to AD3
Move the economy from Point B downward along AD2
Move the economy from Point B upward along AD2
19. (TCO 6) The American Recovery and Reinvestment Act of
2009 included mostly (Points : 4)
increases in taxes and government spending.
decreases in taxes and government spending.
increases in government spending and decreases in taxes.
decreases in government spending and increases in taxes.
20. (TCO 6) The time which elapses between the beginning of a
recession or an inflationary episode and the identification of the

6. macroeconomic problem is referred to as a(n) (Points : 4)
budget lag.
recognition lag.
operational lag.
administrative lag.
1. (TCO 5) An increase in aggregate demand is most likely to be
caused by a decrease in (Points : 4)
the wealth of consumers.
consumer and business confidence.
expected returns on investment.
the tax rates on household income.
2. (TCO 5) The long-run aggregate supply curve is (Points : 4)
upward-sloping and becomes steeper at output levels above
the full-employment output.
upward-sloping and becomes flatter at output levels above
the full-employment output.
horizontal.
vertical.
3. (TCO 5) If the price of crude oil decreases, then this event
would most likely (Points : 4)
decrease aggregate supply in the U.S.
increase aggregate supply in the U.S.
increase aggregate demand in the U.S.
decrease aggregate demand in the U.S.
4. (TCO 5) Disinflation refers to a situation where (Points : 4)
price level falls, but the rate of inflation does not.
Price level rises, but the rate of inflation does not.
the rate of inflation falls, but the price level does not.

7. the rate of inflation rises, but the price level does not.
5. (TCO 6) If a family's MPC is .7, it means that the family is
(Points : 4)
operating at the break-even point.
spending seven-tenths of any additional income.
necessarily dissaving.
spending 70 percent of its disposable income.
6. (TCO 7) Which definition(s) of the money supply include(s)
only items which are directly and immediately usable as a
medium of exchange? (Points : 4)
M1
M2
Neither M1 nor M2
M1 and M2
7. (TCO 7) The basic requirement of money is that it be (Points
: 4)
backed by precious metals--gold or silver.
authorized as legal tender by the central government.
generally accepted as a medium of exchange.
some form of debt or credit.
8. (TCO 7) The Federal Reserve System of the U.S. is the
country's (Points : 4)
financial adviser.
comptroller or accountant.
central bank.
deposit insurance provider.

8. 9. (TCO 7) Which group is responsible for the policy of
changing the money supply? (Points : 4)
Federal Open Market Committee
Office of Management and Budget
Thrift Advisory Council
Federal Advisory Council
10. (TCO 7) Other things being equal, an expansion of
commercial bank lending (Points : 4)
changes the composition, but not the size, of the money
supply.
is desirable during a period of demand-pull inflation.
reduces the money supply.
increases the money supply.
11. (TCO 7) The establishment of a federal deposit insurance
program resulted from the (Points : 4)
establishment of the Federal Reserve System in 1913.
speculation during World War I.
stock market crash of 1987.
bank panics of 1930-1933.
12. (TCO 7) Which one of the following is a tool of monetary
policy for altering the reserves of commercial banks? (Points :
4)
Issuing currency
Check collection
Open-market operations
Acting as the fiscal agent for the federal government
13. (TCO 7) The Federal Reserve could reduce the money
supply by (Points : 4)

9. selling government bonds in the open market.
buying government bonds in the open market.
operating the term auction facility.
reducing the discount rate.
14. (TCO 8) Which country is the United States' largest trading
partner in terms of volume of trade? (Points : 4)
Mexico
Japan
China
Canada
15. (TCO 8) In a two-nation world, comparative advantage
means that one nation can produce (Points : 4)
a product with fewer inputs than the other nation.
a product at lower average cost than the other nation.
a product at a lower domestic opportunity cost than the
other nation.
more of a product than the other nation.
16. (TCO 8) An excise tax on imported commodities is known
as a(n) (Points : 4)
quota.
tariff.
export restriction.
price ceiling.
17. (TCO 8) A key difference between import quotas and
voluntary export restraints (VERs) is that the (Points : 4)
domestic government administers the former, whereas the
foreign government administers the latter.
foreign government administers the former, whereas the

10. domestic government administers the latter.
one is a tax, whereas the other is a quantity limit.
one raises the price of the imported product involved,
whereas the other one does not.
18. (TCO 8) Tariffs and import quotas would benefit the
following groups, except (Points : 4)
consumers of the product.
domestic producers of the product.
workers in domestic firms producing the product.
the government of the importing country.
19. (TCO 8) About how many nations belonged to the World
Trade Organization as of 2010? (Points : 4)
35
72
153
210
20. (TCO 9) U.S. businesses are demanders of foreign
currencies because they need them to (Points : 4)
produce goods and services exported to foreign countries.
pay for goods and services imported from foreign
countries.
receive interest payments from foreign governments.
receive interest payments from foreign businesses.
1. (TCO 9) In the balance of payments statement, a current
account surplus will be matched by a (Points : 4)

11. capital and financial accounts deficit.
capital and financial accounts surplus.
trade deficit.
trade surplus.
2. (TCO 9) Comparing everything that the United States owes to
other nations, and what they owe to the United States, the
United States is currently a(n) (Points : 4)
net creditor.
net debtor.
international banking asset.
international banking liability.
3. (TCO 9) If a Japanese importer could buy $1,000 U.S. for
122,000 yen, the rate of exchange for $1 would be (Points : 4)
8.19 yen.
122 yen.
820 yen.
1,220 yen.
4. (TCO 9) If the exchange rate is $1 = 0.7841 euro, then a
French DVD priced at 20 euros would cost an American buyer
(excluding taxes and other fees) (Points : 4)
$15.68.
$20.78.
$25.51.
$27.84.
5. (TCO 9) The monetary system for conducting international
trade is usually described as a system of (Points : 4)
fixed exchange rates.
freely floating exchange rates.
a managed gold standard.

12. managed floating exchange rates.