Economics B Midterm

1.

1 point

If an economy is currently experiencing a contraction or recession, which stage of the business cycle will they experience next?

cyclical

expansion

trough

peak

2.

1 point

Demand for gasoline is said to be fairly inelastic for many people. This is probably because

it has many substitutes and is easily attained.

it has few substitutes and is in large supply.

it has few substitutes and is necessary for most transportation.

it is difficult to make cheaply.

3.

1 point

Demand for a product is measured not only by consumer desire for a product, but also by

opportunity costs.

demand for all similar products.

competition for the consumer.

ability and willingness to buy the product.

4.

1 point

Finding the amount of Real Gross Domestic Product produced at all possible price levels will determine

aggregate demand

aggregate supply

inflation

growth

5.

1 point

Which statement is true about 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

Business are demanders in the product market and suppliers in the factor market.

Businesses and households are not components of the circular flow diagram.

6.

1 point

When buyers and sellers interact in a market, what is the result?

Over time, fewer and fewer goods are produced because buyers have all they want.

Since buyers and sellers are always changing their preferences, markets become unstable and unreliable.

Equilibrium quantities are determined and then prices are set by the government.

Usually a market clearing price is determined.

7.

1 point

A budget surplus means that

the Government has taken in more money than it spent.

the Government has spent more money than it took in.

the Fed has spent more money than the government.

the Government has spent more money than the Fed.

8.

1 point

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?

For calculating unemployment

Deciding whether or not to buy bonds on the open market

Calculating Gross Domestic Product

To compile a price index to measure inflation

9.

1 point

Mila says “as price increases, demand decreases.” Mila is

correct; that is the law of supply.

correct; that is the law of demand.

incorrect; she means demand increases.

incorrect; she means quantity demanded decreases.

10.

1 point

Whenever a company develops a new product, an equilibrium price and quantity will eventually be determined by

the interaction of sellers and producers.

the interaction of buyers and sellers.

how much money is available in the economy.

the government in their role as price setter.

11.

1 point

To calculate the unemployment rate an economist would need the total number of unemployed people and which other number?

the total number of discouraged workers

the total number of transactions in the resource market

the inflation rate

the number of people in the labor force

12.

1 point

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?

Produce less to promote scarcity.

Lower prices as an incentive to purchase more.

Begin producing different products.

Raise prices to make the goods appear higher in quality.

13.

1 point

A good example of the effect of learning on income would be that

people with college degrees usually earn more than those with less education.

workers who learn to make high-demand products are better paid than workers making low-demand products.

employees who learn to perform high-risk jobs always get paid more than those with low-risk jobs.

job applicants with good high school grades are offered better pay than applicants with low high school grades

14.

1 point

Economic growth is often tied to investment in machinery, new technology, and education of the population. This is because

investment in these items are the sole determinant of output.

these items lead to a greater productivity of inputs.

all of these items improve capital resources.

the only way to measure economic growth is to observe changes in these factors.

15.

1 point

The BEST example of structural unemployment in an economy is someone

out of work due to a change in the business cycle

between jobs or entering the work force

whose job skills do not match the economy’s needs

out of work due to a seasonal downturn in business

16.

1 point

Which of the following is considered a negative side-effect of a minimum wage?

failure to meet equilibrium production

full employment

unemployment

increased interest rates

17.

1 point

Which headline would MOST LIKELY be found in a country that will experience future economic growth?

“Government to offer new educational opportunities.”

“Country experiences population reduction.”

“Inflation rate hits new highs.”

“Central bank to raise interest rates.”

18.

1 point

Which of the following is true about a shareholder in a corporation?

A shareholder is part owner of that business.

A shareholder may not transfer his share to another party without permission.

A shareholder may not share in the earnings of that corporation.

A shareholder is liable for any debts accumulated by that corporation.

19.

1 point

Which BEST describes productivity?

producing at high opportunity costs

trading based on absolute advantage

the interaction of buyers and sellers

the relationship of inputs to outputs

20.

1 point

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

cyclical unemployment.

frictional unemployment.

structural unemployment.

seasonal unemployment.

21.

1 point

Comparing real GDP between two consecutive years is MOST useful in determining which economic measurement?

exchange rates

equity

equilibrium price

economic growth

22.

1 point

Which BEST describes an economy that is in a trough of the business cycle?

unemployment is low, real GDP is high, and inflation is low

unemployment is high, real GDP is high, and inflation is low

unemployment is low, real GDP is high, and inflation is high

unemployment is high, real GDP is low, and inflation is low

23.

1 point

When two people engage in trade, both sides will benefit if the trade meets which two requirements?

free and international

rational and marginal

non-voluntary and fraudulent

voluntary and non-fraudulent

24.

1 point

Which person below would be considered frictionally unemployed?

Jake, who has recently entered the labor force.

Jill, who quit her job to become a full time student.

Jennifer, whose skills are no longer needed.

Jimmy, whose parents shut down the family farm.

25.

1 point

Reducing laws and rules businesses have to follow is an example of

production possibilities

regulation

comparative advantage

deregulation

26.

1 point

A market basket is generally used to

determine the total amount of real gross domestic product.

advertise new products for companies.

put things in while you walk around the store.

compare prices of goods between years to calculate the consumer price index.

27.

1 point

When there is inflation in an economy which is ALWAYS true?

exports to other countries increases.

the purchasing power of the dollar increases.

unemployment will automatically decrease.

the consumer price index has increased.

28.

1 point

In market capitalism, which of the following concepts creates the incentive to produce?

low prices

equal distribution of resources

profits subsidies

charity

29.

1 point

Bob would like to increase his earnings. The option MOST LIKELY to increase his earnings potential in the long-term is to

spend money to renew current training

spend money for additional training and education

laterally transfer to a different job within his company

take a similar position with a different company

30.

1 point

Net productivity is measured by

Adding up inputs

Multiplying inputs by outputs

Dividing outputs by inputs

Subtracting inputs from outputs

31.

1 point

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 naturally unemployed.

Bill is cyclically unemployed.

Bill is structurally unemployed.

Bill is frictionally unemployed.

32.

1 point

Who is hurt MOST by unanticipated inflation?

workers with a union cost-of-living adjustment in their contracts

savers at a fixed rate of interest

speculators in gold and other precious metals

borrowers at a fixed rate of interest

33.

1 point

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?

They charge higher prices to cover the costs of the time and resources used in meeting the regulations.

The price of food is typically lower because the regulations force restaurants to use cheaper ingredients.

Restaurants make more profits because the government takes fewer taxes when they meet regulations.

More food is produced because the regulations make the restaurant more productive and efficient.

34.

1 point

When governments break up monopolies and try to address shortages or surpluses, they are serving the role of

protecting property rights.

resolving market failures.

providing public goods

redistributing income.

35.

1 point

Why is stagflation problematic to correct?

The economy is facing declining inflation and businesses do not like to increase prices.

There are no real corrections for sluggish economies.

It is hard to correct because it cannot be appropriately diagnosed.

Solutions that address inflation tend to make existing unemployment worse and vice versa.

36.

1 point

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 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

the Law of Demand states there is an indirect relationship between price and quantity

37.

1 point

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

cyclical.

structural.

nominal.

frictional.

38.

1 point

Gross Domestic Product is a method for calculating how much a country produces by adding which four spending categories?

Consumption, Investment, Government, Net Exports

Consumption, Interest Rates, Goverment, Net Exports

Consumption, Investment, Government, Business expenditures

Wages, Rent, Interest, Dividends

39.

1 point

When the income in households increases, what is the likely result?

The demand curve shifts to the right

The supply curve becomes vertical.

The supply curve will shift to the left.

The demand curve shifts to the left.

40.

1 point

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?

cyclical

frictional

structural

institutional