course material

1. Economics 100 mcqs test bank
1. In the United States and in most European countries, aging populations and declining
birthrates threaten public finances. As the population ages, there are fewer workers paying
taxes relative to the number of retired people receiving government benefits. Which of the
following government policies would NOT help reduce the pressure on public finances?
(Points : 1) offer financial incentives to increase the birthrate reduce taxes paid by current
workers so that they an save for their future reduce retiree benefit payments raise the
retirement age2. In the first six months of 2003, branches of Commerce Bank in New York
City were robbed 14 times. The New York City Police recommended steps the bank could
take to deter robberies, including the installation of plastic barriers called “bandit barriers.”
The police were surprised the bank did not take their advice. According to a deputy
commissioner of police, “Commerce does very little of what we recommend. They’ve told
our detectives they have no interest in ever putting in the barriers.”It would seem that
Commerce bank would have a strong incentive to install “bandit barriers” to deter
robberies. Why wouldn’t they do it? (Points : 1) The banks would rather delay installation of
any theft deterring equipment in anticipation of new lower cost innovations in the security
devices market. The banks must have weighed the cost of installing bandit barriers against
the benefits and decided that they have “no interest in ever putting in the barriers”. The
banks are concerned that “bandit barriers” would send the wrong message to customers —
that the bank is unsafe. The banks probably resent any interference from the police
department.3. Cassie’s Quilts alters, reconstructs and restores heirloom quilts. Cassie has
just spent $800 purchasing, cleaning and reconstructing an antique quilt which she expects
to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she
would need some special period fabric that would cost her $200 in material and time in
order to complete the task. Alternatively, she can sell the quilt “as is” now for $900. What is
the marginal cost of completing the task? (Points : 1) $200 $500 $1,000 $1,000 plus the
value of her time4. The term “market” in economics refers to (Points : 1) a place where
money changes hands. a legal institution where exchange can take place. a group of buyers
and sellers of a product and the arrangement by which they come together to trade. an
organization which sells goods and services.5. The revenue received from the sale of an
additional unit of a product (Points : 1) is a marginal benefit to the firm. is called profit. is
called gross sales. is called a net gain.6.Table 2-3 Table 2-3 shows the number of labor hours
required to produce a digital camera and a pound of wheat in China and South Korea.Refer
to Table 2-3. China has a comparative advantage in (Points : 1) both products. wheat

2. production. digital camera production. neither product.7. The production possibilities
frontier model shows that (Points : 1) if consumers decide to buy more of a product its price
will increase. a market economy is more efficient in producing goods and services than is a
centrally planned economy. economic growth can only be achieved by free market
economies. if all resources are fully and efficiently utilized, more of one good can be
produced only by producing less of another good.8. Which of the following countries does
not come close to the free market benchmark? (Points : 1) The United
States Japan Cuba France9. In 2002, BMW made a tactical decision to use a robot to attach
the gearbox to the engines of its vehicles instead of using two workers as it had done
previously. The robot method had a higher cost but installed the gearbox in exactly the right
position. In making this decision, BMW (Points : 1) faced no tradeoffs because the robot
method increased efficiency. faced a tradeoff between higher cost and lower precision (in
installing the gearbox in exactly the right position). adopted a negative technological change
because it replaced workers with robots. eroded some of its competitiveness in the luxury
car market because of its increased cost of production.10. A successful market economy
requires well defined property rights and (Points : 1) balanced supplies of all factors of
production. an independent court system to adjudicate disputes based on the law. detailed
government regulations. a safety net to ensure that those who cannot participate in the
market economy can earn an income.11. A major factor contributing to the slow growth rate
of less developed economies is (Points : 1) the lack of well-defined and enforceable property
rights. the lack of natural resources. the lack of workers. the high rate of illiteracy.12. Which
of the following would cause both the equilibrium price and equilibrium quantity of barley
(assume that barley is an inferior good) to increase? (Points : 1) An increase in consumer
income. A drought that sharply reduces barley output. A decrease in consumer
income. Unusually good weather that results in a bumper crop of barley.13.Table 3-1 Refer
to Table 3-1. The table above shows the demand schedules for loose-leaf tee of two
individuals (Sunil and Mia) and the rest of the market. If the price of loose-tea raises from
$3 to $4 the market quantity demanded would (Points : 1) decrease by 32 pounds. increase
by 64 pounds. increase by 32 pounds. decrease by 64 pounds.14. If the quantity demanded
for a product exceeds the quantity supplied the market price will rise until (Points : 1) the
quantity demanded equals the quantity supplied. The product will then no longer be
scarce. quantity demanded equals quantity supplied. The equilibrium price will then be
greater than the market price. only wealthy consumers will be able to afford the
product. quantity demanded equals quantity supplied. The market price will then equal the
equilibrium price.15. What is the difference between an “increase in supply” and an
“increase in quantity supplied”? (Points : 1) There is no difference between the two terms;
they both refer to a shift of the supply curve. There is no difference between the two terms;
they both refer to a movement along a given supply curve An “increase in supply” means the
supply curve has shifted to the right while an “increase in quantity supplied” means at any
given price supply has increased. An “increase in supply” means the supply curve has
shifted to the right while an “increase in quantity supplied” refers to a movement along a
given supply curve in response to an increase in price.16. Figure 3-4 Refer to Figure 3-4.
The figure above represents the market for canvas tote bags. Compare the conditions in the

3. market when the price is $50 and when the price is $35. Which of the following describes
how the market differs at these prices? (Points : 1) At each price there is a surplus; the
surplus is greater at $35 than at $50. The difference between quantity supplied and quantity
demanded is greater at $50 than at $35. At each price there is a surplus; firms will lower the
equilibrium price in order to eliminate the surplus. At each price the supply of tote bags
exceeds that demand for tote bags.17. Brett buys a new cell phone for $100. He receives
consumer surplus of $80 from the purchase. How much does Brett value his cell phone?
(Points : 1) $180 $100 $80 $2018. The difference between the highest price a consumer is
willing to pay for a good and the price the consumer actually pays is called (Points :
1) producer surplus. the substitution effect. the income effect. consumer surplus.19.Figure
4-5 Refer to Figure 4-5. The figure above represents the market for iced tea. Assume that
this is a competitive market. If 20,000 units of iced tea are sold (Points : 1) the deadweight
loss is equal to economic surplus. producer surplus equals consumer surplus. the marginal
benefit of each of the 20,000 units of iced tea equals $3. marginal benefit is equal to
marginal cost.20. Economic surplus (Points : 1) does not exist when a competitive market is
in equilibrium. is equal to the sum of consumer surplus and producer surplus. is the
difference between quantity demanded and quantity supplied when the market price for a
product is greater than the equilibrium price. is equal to the difference between consumer
surplus and producer surplus.21.Figure 4-9 Figure 4-9 shows the market for cigarettes. The
government plans to impose a unit tax in this market.Refer to Figure 4-9. What is the size of
the unit tax? (Points : 1) $8 $5 $3 Cannot be determined from the figure.22. Suppose the
demand curve for a product is downward sloping and the supply curve is upward sloping. If
a unit tax is imposed in the market for this product, (Points : 1) sellers bear the entire
burden of the tax. the tax burden will be shared among the government, buyers and
sellers. buyers bear the entire burden of the tax. the tax burden will be shared by buyers
and sellers.23. Which of the following would result in a lower absolute value of the price
elasticity of demand for a product? (Points : 1) wide variety of substitutes available for the
good short time period considered the good is a luxury item the expenditure on the good
large relative to one’s budget24. If the percentage change in price is 20 percent and the
value of the price elasticity of demand is -5, then quantity demanded (Points : 1) will
increase by 100 percent. will increase by 5 percent. will decrease by 100
percent. impossible to determine without additional information.25. When demand is unit
price elastic, a change in price causes total revenue to stay the same because (Points : 1) the
percentage change in quantity demanded exactly offsets the percentage change in
price. buyers are buying the same quantity. total revenue never changes with price
changes. the change in profit is offset by the change in production cost.26. Which of the
following statements about the price elasticity of demand is correct? (Points : 1) The
elasticity of demand for a good in general is equal to the elasticity of demand for a specific
brand of the good. The absolute value of the elasticity of demand ranges from zero to
one. Demand is more elastic in the long run than it is in the short run. Demand is more
elastic the smaller percentage of the consumer’s budget the item takes up.27. The price
elasticity of the supply of teenage labor services is approximately 1.36. Suppose the
minimum wage rises from $6.60 per hour to $7.00. Using the midpoint formula, calculate

4. the approximately change in the will the quantity supplied of teenage labor. (Points : 1) 5.9
percent 13.6 percent 8 percent There is insufficient information to answer the question.28.
A firm has successfully adopted a positive technological change when (Points : 1) it can
produce more output using the same inputs. it produces less pollution in its production
process. can pay its workers less yet increase its output. it sees an increase in worker
productivity.29. Refer to Figure 10-5. Identify the minimum efficient scale of production.
(Points : 1) Qa Qb Qc Qd30.Figure 10-7 Refer to Figure 10-7. The lines shown in the diagram
are isocost lines. Which of the following shows an increase in the firm’s total cost budget
while the price of labor and capital remain unchanged? (Points : 1) the movement from CE
to BF the movement from CE to AF the movement from BD to AF the movement from BD to
CE31.Table 10-2 Table 10-2 shows cost data for Lotus Lanterns, a producer of whimsical
night lights.Refer to Table 10-2. What is the average variable cost per unit of production
when the firm produces 90 lanterns? (Points : 1) $490 $33.67 $7.67 $5.40[AVC =ATC-AFC =
7.67 – (200/90)]32. What is the difference between “diminishing marginal returns” and
“diseconomies of scale”? (Points : 1) Both concepts explain why marginal cost increases
after some point but diminishing marginal returns applies only in the short run when there
is at least one fixed factor, while diseconomies of scale applies in the long run when all
factors are variable. Both concepts explain why average total cost increases after some
point but diminishing marginal returns applies only in the short run when there is at least
one fixed factor, while diseconomies of scale applies in the long run when all factors are
variable. Diminishing marginal returns which applies only in the short run, when at least
one factor is fixed, explains why marginal cost increases, while diseconomies of scale which
applies in the long run, when all factors are variable, explains why average cost
increases. Diminishing marginal returns which applies only in the short run, when at least
one factor is fixed, explains why average variable cost increases, while diseconomies of
scale which applies in the long run, when all factors are variable, explains why average total
cost increases.33. The president of Toyota’s Georgetown plant was quoted as saying,
“Demand for high volumes saps your energy. Over a period of time, it eroded our focus
[and] thinned out the expertise and knowledge we painstakingly built up over the years.”
This quote suggests that (Points : 1) Toyota was experiencing an excess demand for its
automobiles which it had difficulty keeping up with. as Toyota expanded its capacity, it
experienced diseconomies of scale. Toyota was focused on “churning” out cars that it did
not invest sufficiently in training its workers. high demand for Toyota’s cars prevented the
company from focusing on its strength: auto design.34.Figure 11-1 Refer to Figure 11-1. If
the firm is producing 200 units, (Points : 1) it breaks even. it is making a loss. it should cut
back its output to maximize profit. it should increase its output to maximize profit.35. The
demand for each seller’s product in perfect competition is horizontal at the market price
because (Points : 1) each seller is too small to affect market price. the price is set by the
government. all the sellers get together and set the price. all the demanders get together and
set the price.36. Market supply is found by (Points : 1) vertically summing the relevant part
of each individual producer’s marginal cost curve. horizontally summing the relevant part of
each individual producer’s marginal cost curve. vertically summing each individual
producer’s average total cost curve. horizontally summing each individual producer’s

5. average total cost curve.37. Which of the following describes a situation in which a good or
service is produced at the lowest possible cost? (Points : 1) productive efficiency allocative
efficiency marginal efficiency profit maximization38.Figure 11-5 Figure 11-5 shows cost
and demand curves facing a typical firm in a constant-cost perfectly competitive
industry.Refer to Figure 11-5. What is the minimum price the firm requires to produce
output? (Points : 1) $20 $14 $5[The minimum of the AVC curve] It cannot be determined39.
A possible advantage of a horizontal merger for the economy is that (Points : 1) the merging
firms could avoid losses. the merged firm might reap economies of scale which could
translate into lower prices. the degree of competition in the industry will be intensified. the
government stands to collect more corporate income tax revenue.40. A merger between the
Ford Motor Company and General Motors would be an example of a (Points : 1) vertical
merger. horizontal merger. conglomerate merger. trust.41.Figure 14-8 In 2006 the
California government changed its regulatory policy to allow competition into the cable
television market. Figure 14-8 shows the cable television market in California.Refer to
Figure 14-8. Following the policy change, the subscription price falls from PM to Pc. What is
the increase in consumer surplus as a result of this change? (Points : 1) the area A+B+C the
area B+C the area D+F the area B+C+D42. The Aluminum Company of America (Alcoa) had a
monopoly until the 1940s because (Points : 1) it was a public enterprise. it had a patent on
the manufacture of aluminum. the company had a secret technique for making aluminum
from bauxite. it had control of almost all available supply of bauxite.43. If a theatre company
expects $250,000 in ticket revenue from five performances and 288,000 in ticket revenue if
it adds a sixth performance, the (Points : 1) marginal revenue of the sixth performance is
$48,000. marginal revenue of the sixth performance is $38,000. cost of staging the sixth
performance is probably higher than the cost of staging the previous five. company will be
making a loss on the sixth performance because its ticket sales will be less than average
received from the previous five.44.Figure 14-7 Figure 14-7 shows the cost and demand
curves for the Erickson Power Company.Refer to Figure 14-7. Why won’t regulators require
that Erickson Power produce the economically efficient output level? (Points : 1) because
there is insufficient demand at that output level because at the economically efficient output
level, the marginal cost of producing the last unit sold exceeds the consumers’ marginal
value for that last unit because Erickson Power will earn zero profit because Erickson
Power will sustain persistent losses and will not continue in business in the long run.45. In
the long run, if price is less than average cost, (Points : 1) there is an incentive for firms to
exit the market. there is profit incentive for firms to enter the market. the market must be in
long-run equilibrium. there is no incentive for the number of firms in the market to
change.46.Table 12-
2 Q P TR MR TC MC1 75 75 75 60 602 70 140 65 85 253 65 195 55 105 204 60 240 45 115 1
05 55 275 35 130 156 50 300 25 155 257 45 315 15 190 358 40 320 5 230 409 35 315 -
5 280 50Eco Energy is a monopolistically competitive producer of a sports beverage called
Power On. Table 12-2 shows the firm’s demand and cost schedules.Refer to Table 12-2.
What is the maximum output (Q) that maximizes profit and what is the price (P) charged?
(Points : 1) P=$55; Q=5 cases P=$50; Q=6 cases P=$45; Q=7 cases P=$40; Q=8 cases47. If a
monopolistically competitive firm breaks even, the firm (Points : 1) is earning an accounting

6. profit and will have to pay taxes on that profit. is earning zero accounting and zero
economic profit. should advertise its product to stimulate demand. expand production.48.
Long run equilibrium under monopolistic competition is similar to that under perfect
competition in that (Points : 1) firms produce at the minimum point of their average cost
curves. price equals marginal cost. firms earn normal profits. price equals marginal
revenue.49. You have just opened a new Italian restaurant in your hometown where there
are three other Italian restaurants. Your restaurant is doing a brisk business and you
attribute your success to your distinctive northern Italian cuisine using locally grown
organic produce. What is likely to happen to your business in the long run? (Points : 1) Your
competitors are likely to change their menus to make their products more similar to
yours. Your success will invite others to open competing restaurants and ultimately your
profits will be driven to zero. If your success continues, you will be likely to establish a
franchise and expand your market size. If you continue to maintain consistent quality, you
will be able to earn profits indefinitely.50. OPEC periodically meets to agree to restrict the
cartel’s oil output, and yet almost every member of OPEC produces more than its own
output quota. This suggests that OPEC has a (Points : 1) cooperative
equilibrium. noncooperative equilibrium. new potential entrants. threat of substitute
goods.51. What is a prisoners’ dilemma? (Points : 1) a game that involves no dominant
strategies a game in which prisoners are stumped because they cannot communicate with
each other a game in which players act in rational, self-interested ways that leave everyone
worse off a game in which players collude to outfox authorities52. Consider two
oligopolistic industries selling the same product in different locations. In the first industry,
firms always match price changes by any other firm in the industry. In the second industry,
firms always ignore price changes by any other firm. which of the following statements is
true about these two industries, holding everything else constant? (Points : 1) Market prices
are likely to be higher in the first industry in which firms always match price changes by
rival firms than in the second where firms ignore their rivals’ price changes. Market prices
are likely to be lower in the first industry where firms always match price changes by rival
firms than in the second where firms ignore their rivals’ price changes. Market prices are
likely to be the same in both markets because they are both oligopolistic markets. No
conclusions can be drawn about the pricing behavior under these very different firm
behavior.53. Why does a prisoners’ dilemma lead to a noncooperative equilibrium? (Points :
1) because each player had agreed before the game started to minimize the harm that he
can inflict on the other players because each player is uncertain how other players will play
the game because players must choose from have a limited number of non-dominant
strategies because each rational player has a dominant strategy to play a certain way
regardless of what other players do54. The DeBeers Company of South Africa was able to
block competition through (Points : 1) economies of scale. ownership of an essential
input. government-imposed barriers. differentiating its product.55. Until the late 1990s,
airlines would post proposed changes in ticket prices on computer reservations systems
several days before the new ticket prices went into effect. Then the federal government took
action to end the practice. Now airlines can only post prices on their reservations systems
for tickets that are immediately available for sale.Source: Scott McCartney, “Airfare Wars

7. Show Why Deals Arrive and Depart,” Wall Street Journal, March 19, 2002.Why would the
federal government object to the old system of posting prices before they went into effect?
(Points : 1) because it is a form of price discrimination in that consumers who need to travel
immediately are subject to different fares compared to those who will travel at a later date
when the price changes go into effect because it is essentially a form of price signaling;
airlines try to determine the reaction of competitors before committing to a price
change because it creates chaos in the air travel market: if an airline plans to cut fares, then
consumers are likely to postpone purchases but if an airline plans to increase fares, then a
shortage will result. because it makes it more difficult for airlines to agree on ticket price
changes and likely to spark an airfare war56. Demand in factor markets differs from
demand in product markets in that (Points : 1) the demand for a factor of production is
difficult to determine. the demand for a factor of production is influenced by workers’
productivity and by the producers’ expected sales revenues, not by tastes and preferences
of consumers. demand for a factor of production is based on the tastes and preferences of
firms. demand for a factor of production is based on the tastes and preferences of resource
owners.57. Painters who paint water towers earn higher wages relative to painters who
paint houses because (Points : 1) the demand for tower painters is greater than the demand
for residential painters. painting water towers is more risky than painting houses. the tower
painters’ union is probably more powerful than the wall painters’ union. the supply of water
tower painters exceeds the supply of wall painters.58. According to the signaling
hypothesis, (Points : 1) signaling about job openings occur in help wanted classified ads. a
college diploma signals to employers that a person has certain desirable characteristics. a
slowdown in output signals to companies the need to hire more labor. a high
unemployment rate is a signal to the government to take some policy action.59. Customer
discrimination occurs when (Points : 1) a firm pays workers different wages based on
irrelevant factors. customers refuse to buy products produced by a racially diverse
workforce. customers refuse to buy products they believe to be of poor quality. workers
refuse to serve customers of a different race.60. Suppose a competitive firm is paying a
wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input.
If, hiring another worker would increase output by three units per hour, then to maximize
profits the firm should (Points : 1) not change the number of workers it currently hires. not
hire an additional worker. hire another worker. There is not enough information to answer
the question.61.Table 16-2 Refer to Table 16-2. What is the profit-maximizing quantity of
labor that the firm should hire? (Points :
1)Q Output MPl P W TR MR1 8 8 300 350 2400 24002 15 7 280 350 4200 18003 21 6 260 3
50 5460 12604 26 5 240 350 6240 7805 30 4 220 350 6600 3606 33 3 200 350 6600 07 35
2 180 350 6300 -300 5 units 4 units 3 units 2 units62. A decrease in the wage rate causes
(Points : 1) an increase in the quantity of labor demanded. a rightward shift of the firm’s
labor demand curve. a leftward shift of the firm’s labor demand curve. a decrease in labor’s
productivity.63. Consider this quote from an article in the Wall Street Journal: “The stock of
educated workers isn’t increasing fast enough to keep up with rising demand. …….
Employers are paying the typical four-year college graduate [without graduate school] 75%
more than they pay high-school grads. Twenty-five years ago, they were paying 40% more.

8. Employers insist on ever better-educated, skilled workers. “Source: David Wessel, “Lack of
Well-Educated Workers Has Lots of Roots, No Quick Fix”, Wall Street Journal, April 19, 2007,
Page A2.Which of the following best explains the rapid increase in the wage differential
between college graduates and high school graduates? (Points : 1) The demand for college
educated workers shifted to the right while the supply of college educated workers shifted
to the left. The supply of high-school educated workers shifted to the right faster than the
demand for college educated workers shifted to the right. The demand for college educated
workers shifted to the right faster than the supply of college educated workers shifted to
the right. The demand for high-school educated workers shifted to the left faster than the
supply of college educated workers shifted to the right.64. Economic discrimination takes
place when an employer (Points : 1) pays workers the lowest wage possible. pays workers
different wages on the basis of some arbitrary characteristics of workers that are irrelevant
to the job performed. pays lower wages to workers who are not as productive as other
workers. pays workers compensating wage differentials.65. Suppose a competitive firm is
paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the
only input. If the last worker hired increases output by three units per hour, then to
maximize profits the firm should (Points : 1) not change the number of workers it currently
hires. lay off some of its workers. hire additional workers. There is not enough information
to answer the question.66. Scenario: In academia, professors in some disciplines receive
higher salaries than others. For example, professors teaching in business schools receive
higher salaries than professors in the English department. Suppose in Unity College,
assistant professors in the business school earn $Wb while assistant professors in the
English department earn $We < Wb. Now suppose the government passes comparable
worth legislation that requires academic institutions to pay all faculty the same
salaries.Following the passage of comparable worth legislation, Unity College responds by
placing salaries at $Wa between the two existing salaries. Which of the following is the
result of the legislation? (Points : 1) The supply of English professors increase and the
supply of business professors decrease. The demand for English professors decrease and
the demand for business professors increase. There will be a surplus in the market for
English professors and a shortage in the market for business professors. There will be a
surplus in the market for English professors and the market for business professors will not
be affected.67. Gross domestic product understates the total production of final goods and
services because of the omission of (Points : 1) exports. inflation. intermediate
goods. nonmarket household production.68. If prices in the economy rise, then (Points :
1) the purchasing power of a dollar rises. the purchasing power of a dollar stays
constant. the purchasing power of a dollar declines. the purchasing power of a dollar cannot
be determined.69.Table 19-5 Consider the table above showing three stages of production
of an automobile.Refer to Table 19-5. The value added by the automobile dealer equals
(Points : 1) $7,000. $15,000. $18,000. $25,000.70. The output of Mexican citizens who work
in Texas would be included in the (Points : 1) gross domestic product of Mexico. gross
national product of Mexico. gross national product of the United States. net national product
of the United States.71. Disposable personal income equals personal income (Points :
1) minus personal tax payments. plus government transfer payments. minus personal tax

9. payments plus government transfer payments. minus government transfer payments plus
personal tax payments.72. If net taxes fall by $80 billion, we would expect (Points : 1) the
government deficit to fall by $80 billion. household savings to rise by $80 billion. household
savings to rise by less than $80 billion.[ household savings to fall by more than $80
billion.73.Scenario 21-1Consider the following data for a closed economy: Refer to Scenario
21-1. Based on the information above, what is the level of private saving in the economy?
(Points : 1) $3 trillion $4 trillion $5 trillion $8 trillion74. Which of the following explains the
causes of the changes in the unemployment rate at the end of a recession? (Points : 1) Firms
are hesitant to rehire laid off workers as they continue to operate below capacity. Firms
rapidly hire new workers at the first sign of on an increase in demand for their
goods. Discouraged workers return to the labor force and this makes the unemployment
rate fall. Discouraged workers leave the labor force and this makes the unemployment rate
rise.75. If the economy enters into a recession, the equilibrium quantity of loanable funds
should ________ and the real interest rate should ________. (Points : 1) fall; rise fall; fall rise;
fall rise; rise76. Since 1990, real GDP per capita has ________ and this measure ________ the
actual growth in standards of living in the U.S. over this time. (Points : 1) increased;
understates increased; overstates decreased; understates decreased; overstates77.
Purchases of which of the following goods would be dramatically reduced during a
recession? (Points : 1) tomatoes ink pens gasoline refrigerators78. Suppose that
homemakers are included as employed in the labor force statistics, rather than being
counted as out of the labor force. This would (Points : 1) increase the measured
unemployment rate. increase the measured labor force participation rate. decrease the
number of persons in the labor force. decrease the number of persons in the working-age
population.79. Which of the following would decrease the unemployment rate? (Points :
1) an increase in the minimum wage an increase in the efficiency wage an increase in labor
union membership government aid to retrain unemployed workers80. The labor force
equals the number of people (Points : 1) employed. unemployed. employed plus
unemployed. in the working-age population.81. Globalization refers to (Points : 1) the
process of establishing a common world currency. the willingness of individuals within a
given country to share knowledge with one another. the process of countries becoming
more open to foreign trade and investment. the reduction in growth rates of real GDP per
capita as a result of trade with foreign countries.82. The industrialized group of countries
has growth rates that are consistent with the findings of the economic growth model. That
is, Ireland and Japan had ________ incomes in 1960 than the U.S. and Switzerland, and Ireland
and Japan grew ________ than the U.S. and Switzerland between 1960 and 2004. (Points :
1) lower; more rapidly greater; less rapidly lower; less rapidly greater; more rapidly83.
Productivity gains in the United States since 1995 have been ________ productivity gains in
other leading industrial nations. (Points : 1) the same as lower than higher than more
variable than84. Significant economic growth did not begin in the world until (Points :
1) 1000 A.D. 1750 A.D. 1820 A.D. the 20th century A.D.85. Consumption spending will
________ when disposable income ________. (Points : 1) increase; increases increase;
decreases decrease; increases change unpredictably; decreases86. Macroeconomic
equilibrium occurs when (Points : 1) aggregate expenditure = GDP. aggregate expenditure =

10. C+ I + G + net transfers. aggregate income = planned inventories. aggregate income =
planned inventories.87. An example of assets that are included in household wealth would
be (Points : 1) stocks, bonds, and savings accounts. stocks, loans owed, and savings
accounts. stocks, bonds, and mortgages. stocks, credit cards, and savings accounts.88. If the
consumption function is defined as C = 5,500 + .9Y, what is the marginal propensity to
consume? (Points : 1) 0.1 0.9 6.1 5.589. The seven members of the Board of Governors of
the Federal Reserve are appointed by (Points : 1) the Congress. the President. the Governors
of the States. leaders in the banking industry. the Treasury Department.90. The sale of
Treasury securities by the Federal Reserve will, in general, (Points : 1) not change the
money supply. not change the quantity of reserves held by banks. increase the quantity of
reserves held by banks. decrease the quantity of reserves held by banks.91. Suppose a bank
has $100 million in checking account deposits with no excess reserves and the required
reserve ratio is 20 percent. If the Federal Reserve reduces the required reserve ratio to 15
percent, then the bank will now have excess reserves of (Points : 1) $0. $5 million. $15
million. $20 million.92. Which of the following functions of money would be most violated if
inflation were high? (Points : 1) unit of account store of value certificate of gold medium of
exchange93. Which of the following describes a similarity between the current European
residential housing and mortgage market and the U.S. residential housing and mortgage
market? (Points : 1) The housing markets in both geographic areas are slowing down after a
long period of growth and rapidly rising prices. Both have central banks that have raised the
lending rate by a factor of 2 since a few years ago. The majority of new mortgages issued in
both markets are the long-term, fixed rate variety. Most banks in both geographic regions
do not offer home-equity withdrawals.94. If the probability of losing your job remains
________, a recession would be a good time to purchase a home because the Fed usually
________ interest rates during this time. (Points : 1) low; lowers low; raises high; lowers high;
raises low; does not change95. Since 2000, the Fed uses ________ to measure inflation. (Points
: 1) the index of leading economic indicators the personal consumption expenditures
index the consumer price index the GDP deflator the producer price index96. An increase in
the interest rate (Points : 1) decreases the opportunity cost of holding money. increases the
opportunity cost of holding money. decreases the percentage yield of holding
money. increases the percentage yield of holding money.97. From an initial long-run
equilibrium, if aggregate demand grows more slowly than long-run and short-run aggregate
supply, then the president and the Congress would most likely (Points : 1) increase the
required reserve ratio and decrease government spending. decrease government
spending. decrease oil prices. decrease taxes. lower interest rates.98. Which of the following
would be most likely to induce the president and the Congress to conduct contractionary
fiscal policy? A significant (Points : 1) decrease in oil prices. decrease in real GDP. increase
in inflation. increase in labor productivity.99.Figure 27-2 Refer to Figure 27-2. In the
dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is
expected to go to point B in year 2, the Congress and the president would most likely
(Points : 1) decrease government spending. increase government spending. increase oil
prices. increase taxes. lower interest rates.100. Which of the following would be classified
as fiscal policy? (Points : 1) The federal government passes tax cuts to encourage firms to

11. reduce air pollution. The Federal Reserve cuts interest rates to stimulate the economy. A
state government cuts taxes to help the economy of the state. The federal government cuts
taxes to stimulate the economy. States increase taxes to fund education