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Economics B Midterm
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A recent high school graduate has never searched for a job before. He does not know what he is qualified to do. He turns down a job at a factory, hoping for better-paying work. What kind of unemployment is he experiencing?
When the income in households increases, what is the likely result?
The supply curve will shift to the left.
The supply curve becomes vertical.
The demand curve shifts to the right
The demand curve shifts to the left.
Gross Domestic Product is a method for calculating how much a country produces by adding which four spending categories?
Consumption, Investment, Government, Business expenditures
Wages, Rent, Interest, Dividends
Consumption, Interest Rates, Goverment, Net Exports
Consumption, Investment, Government, Net Exports
The town of Smithville recently closed the blacksmith factory and now all of the blacksmiths are out of work. This type of unemployment is known as
Which explains why a supply line is upward sloping?
the Law of Demand shows a positive relationship between two goods, creating the slope
the Law of Demand states there is an indirect relationship between price and quantity
the Law of Supply compares marginal costs and marginal benefits in a constant rate
the Law of Supply states there is a direct relationship between price and quantity
Why is stagflation problematic to correct?
It is hard to correct because it cannot be appropriately diagnosed.
Solutions that address inflation tend to make existing unemployment worse and vice versa.
The economy is facing declining inflation and businesses do not like to increase prices.
There are no real corrections for sluggish economies.
When governments break up monopolies and try to address shortages or surpluses, they are serving the role of
resolving market failures.
providing public goods
protecting property rights.
Government agencies inspect restaurants on a regular basis to insure the restaurants are obeying health and food safety regulations. What economic effect does this have on the restaurants?
Restaurants make more profits because the government takes fewer taxes when they meet regulations.
The price of food is typically lower because the regulations force restaurants to use cheaper ingredients.
They charge higher prices to cover the costs of the time and resources used in meeting the regulations.
More food is produced because the regulations make the restaurant more productive and efficient.
Who is hurt MOST by unanticipated inflation?
workers with a union cost-of-living adjustment in their contracts
borrowers at a fixed rate of interest
speculators in gold and other precious metals
savers at a fixed rate of interest
In October, Bill is laid off from his job as a Halloween costume maker solely because of a slow Halloween season. Which statement is true?
Bill is frictionally unemployed.
Bill is cyclically unemployed.
Bill is naturally unemployed.
Bill is structurally unemployed.
Net productivity is measured by
Subtracting inputs from outputs
Adding up inputs
Multiplying inputs by outputs
Dividing outputs by inputs
Bob would like to increase his earnings. The option MOST LIKELY to increase his earnings potential in the long-term is to
take a similar position with a different company
spend money to renew current training
laterally transfer to a different job within his company
spend money for additional training and education
In market capitalism, which of the following concepts creates the incentive to produce?
equal distribution of resources
When there is inflation in an economy which is ALWAYS true?
unemployment will automatically decrease.
the purchasing power of the dollar increases.
the consumer price index has increased.
exports to other countries increases.
A market basket is generally used to
put things in while you walk around the store.
compare prices of goods between years to calculate the consumer price index.
advertise new products for companies.
determine the total amount of real gross domestic product.
Reducing laws and rules businesses have to follow is an example of
Which person below would be considered frictionally unemployed?
Jake, who has recently entered the labor force.
Jennifer, whose skills are no longer needed.
Jill, who quit her job to become a full time student.
Jimmy, whose parents shut down the family farm.
When two people engage in trade, both sides will benefit if the trade meets which two requirements?
voluntary and non-fraudulent
non-voluntary and fraudulent
free and international
rational and marginal
Which BEST describes an economy that is in a trough of the business cycle?
unemployment is high, real GDP is low, and inflation is low
unemployment is low, real GDP is high, and inflation is high
unemployment is low, real GDP is high, and inflation is low
unemployment is high, real GDP is high, and inflation is low
Comparing real GDP between two consecutive years is MOST useful in determining which economic measurement?
The IRS lays off thousands of employees every year after April 15th (the deadline for citizens to file tax returns). This is an example of
Which BEST describes productivity?
the interaction of buyers and sellers
trading based on absolute advantage
the relationship of inputs to outputs
producing at high opportunity costs
Which of the following is true about a shareholder in a corporation?
A shareholder is liable for any debts accumulated by that corporation.
A shareholder may not share in the earnings of that corporation.
A shareholder is part owner of that business.
A shareholder may not transfer his share to another party without permission.
Which headline would MOST LIKELY be found in a country that will experience future economic growth?
“Central bank to raise interest rates.”
“Inflation rate hits new highs.”
“Government to offer new educational opportunities.”
“Country experiences population reduction.”
Which of the following is considered a negative side-effect of a minimum wage?
failure to meet equilibrium production
increased interest rates
The BEST example of structural unemployment in an economy is someone
out of work due to a change in the business cycle
whose job skills do not match the economy’s needs
between jobs or entering the work force
out of work due to a seasonal downturn in business
Economic growth is often tied to investment in machinery, new technology, and education of the population. This is because
all of these items improve capital resources.
the only way to measure economic growth is to observe changes in these factors.
these items lead to a greater productivity of inputs.
investment in these items are the sole determinant of output.
A good example of the effect of learning on income would be that
workers who learn to make high-demand products are better paid than workers making low-demand products.
job applicants with good high school grades are offered better pay than applicants with low high school grades
employees who learn to perform high-risk jobs always get paid more than those with low-risk jobs.
people with college degrees usually earn more than those with less education.
If, in a market, a particular store notices a lot of merchandise piling up on the shelves and in the stock room, how could they encourage existing buyers to buy the goods?
Raise prices to make the goods appear higher in quality.
Begin producing different products.
Produce less to promote scarcity.
Lower prices as an incentive to purchase more.
To calculate the unemployment rate an economist would need the total number of unemployed people and which other number?
the number of people in the labor force
the total number of transactions in the resource market
the total number of discouraged workers
the inflation rate
Whenever a company develops a new product, an equilibrium price and quantity will eventually be determined by
the government in their role as price setter.
the interaction of sellers and producers.
the interaction of buyers and sellers.
how much money is available in the economy.
Mila says “as price increases, demand decreases.” Mila is
incorrect; she means quantity demanded decreases.
correct; that is the law of supply.
incorrect; she means demand increases.
correct; that is the law of demand.
An economist is presented with information about the prices of a selection of goods over several years. This information would be MOST useful for which purpose?
Calculating Gross Domestic Product
Deciding whether or not to buy bonds on the open market
For calculating unemployment
To compile a price index to measure inflation
A budget surplus means that
the Government has taken in more money than it spent.
the Government has spent more money than the Fed.
the Fed has spent more money than the government.
the Government has spent more money than it took in.
When buyers and sellers interact in a market, what is the result?
Equilibrium quantities are determined and then prices are set by the government.
Since buyers and sellers are always changing their preferences, markets become unstable and unreliable.
Usually a market clearing price is determined.
Over time, fewer and fewer goods are produced because buyers have all they want.
Which statement is true about the circular flow diagram?
Business are demanders in the product market and suppliers in the factor market.
Businesses and households are not components of the circular flow diagram.
Households are demanders in the factor market and suppliers in the product market.
Households are demanders in the product market and suppliers in the factor market
Finding the amount of Real Gross Domestic Product produced at all possible price levels will determine
Demand for a product is measured not only by consumer desire for a product, but also by
competition for the consumer.
ability and willingness to buy the product.
demand for all similar products.
Demand for gasoline is said to be fairly inelastic for many people. This is probably because
it has few substitutes and is necessary for most transportation.
it is difficult to make cheaply.
it has few substitutes and is in large supply.
it has many substitutes and is easily attained.
If an economy is currently experiencing a contraction or recession, which stage of the business cycle will they experience next?
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