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This pack of XECO 212 Week 7 Discussion Questions consists
of:
DQ 1: How does the federal government implement its fiscal
policies? Given economic conditions today, do you suggest
expansionary fiscal policy or contractionary fiscal policy? How
would your suggestions affect production and employment?
Why?
DQ 2: Assume the government is running a budget deficit.
Should the government raise taxes to balance the budget?
Should the government decrease spending to balance the
budget? What are the pros and cons of each action?
General Questions - General General Questions
ECO 212 final exam version 6
1) Which of the following issues is an application of using
macroeconomics to make a real world decision?
A. Whether a company should increase its worker benefits
B. Whether this year's enrollment will increase for University
of Phoenix.
C. Whether the growth rate of the Chinese economy will
exceed 10% in 2010
D. Whether workers should choose to remain in a factory
2) The forces that make market economies work are

2. A. work and leisure
B. demand and supply
C. regulation and restraint
D. taxes and government spending
3) A market is a
A. group of buyers and sellers of a particular good or service
B. group of people with common economic characteristics
C. place where buyers and sellers come together to engage
in trade
D. place where an auctioneer helps set prices and arrange
sales
4) If a decrease in income increases the demand for a good,
then the good is
A. a substitute good
B. a complement good
C. a normal good
D. an inferior good
5) Two goods are substitutes if a decrease in the price of one
good
A. decreases the demand for the other good
B. decreases the quantity demanded of the other good
C. increases the demand for the other good
D. increases the quantity demanded of the other good
6) A likely example of substitute goods for most people

3. would be
A. peanut butter and jelly
B. tennis balls and tennis rackets
C. televisions and subscriptions to cable television services
D. pencils and pens
7) Another term for equilibrium price is
A. dynamic price
B. market-clearing price
C. quantity-defining price
D. satisfactory price
8) If, at the current price, there is a shortage of a good,
A. sellers are producing more than buyers wish to buy
B. the market must be in equilibrium
C. the price is below the equilibrium price
D. quantity demanded equals quantity supplied
9) If there is suddenly an increase in population in North
Carolina, then the average wage for North Carolina will
A. decrease because the supply of labor increases
B. increase because the supply of labor increases
C. decrease because the demand of labor increases
D. increase because the demand of labor increases
10) The marginal product of labor is equal to the

4. A. incremental cost associated with a one unit increase in
labor
B. incremental profit associated with a one unit increase in
labor
C. increase in labor necessary to generate a one unit
increase in output
D. increase in output obtained from a one unit increase in
labor
11) When we focus on the firm as a supplier of a good or a
service, we assume that the firm is a profit maximizer. When
we focus on the firm as a demander of labor, we assume that
the firm's objective is to
A. minimize wages
B. minimize variable costs
C. maximize the number of workers hired
D. maximize profit
12) What are the two types of imperfectly competitive
markets?
A. Monopoly and monopolistic competition
B. Monopoly and oligopoly
C. Monopolistic competition and oligopoly
D. Monopolistic competition and cartels
13) Monopolistically competitive firms are typically
characterized by
A. many firms selling products that are similar, but not
identical

5. B. many firms selling identical products
C. a few firms selling products that are similar, but not
identical
D. a few firms selling highly different products
14) The commercial jetliner industry, consisting of Boeing
and Airbus, would best be described as a (an)
A. perfectly competitive market
B. monopolistically competitive market
C. oligopoly
D. monopoly
15) Imperfectly competitive firms are characterized by
A. horizontal demand curves
B. standardized products
C. a large number of small firms
D. price making ability
16) Gross domestic product serves as a measure of two
things:
A. the total spending of everyone in the economy and the
total saving of everyone in the economy
B. the total income of everyone in the economy and the total
expenditure on the nation's output of goods and services
C. the value of the nation's output of goods and services for
domestic citizens and the value of the nation's output of
goods and services for the rest of the world
D. the nation's saving and the nation's investment

6. 17) Which of the following newspaper headlines would be
more closely related to what microeconomists study than to
what macroeconomists study?
A. Unemployment rate rises from 5 percent to 5.5 percent.
B. Real GDP grows by 3.1 percent in the third quarter.
C. Retail sales at stores show large gains.
D. The price of oranges rises after an early frost
18) A fiscal policy can be
A. an increase of federal government spending financed by
the treasury
B. a sale of bonds in an open market operation by the
treasury
C. a rise of reserve ratios by the Fed
D. that the Fed prints money
19) Stagflation exists when prices
A. and output rise
B. rise and output falls
C. fall and output rises
D. and output fall
20) An expansionary fiscal policy will
A. reduce unemployment and increase GDP
B. reduce unemployment and decrease GDP
C. increase unemployment and increase GDP

7. D. increase unemployment and decrease GDP
21) If money is used as a mechanism to hold purchasing
power for a period of time, it is functioning as a
A. medium of exchange
B. store of value
C. unit of account
D. standard of value
22) Inflation can be measured by the
A. change in the consumer price index
B. percentage change in the consumer price index
C. percentage change in the price of a specific commodity
D. change in the price of a specific commodity
23) Given the following information about AAA bank:
Bank Deposits $100,000
Loans $50,000
Required Reserves $20,000
Excess Reserves $30,000
What is the reserve ratio set by the Federal Reserve Bank?
A. 10 percent
B. 20 percent
C. 30 percent
D. 50 percent
24) Sally sells 40 bags of lettuce for a total of $80 at the
farmers’ market.

8. A. The $80 is a real variable. The quantity of lettuce is a
nominal variable.
B. The $80 is a nominal variable. The quantity of lettuce is a
real variable. ...
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