1. Which of the following is not one of the three core economic issues that must be resolved?
A. How to produce the goods and services we select.
B. What to produce with unlimited resources.
C. Who should get the goods and services we produce.
D. What to produce with limited resources.
2. The fundamental problem of economics is
A. The law of increasing opportunity costs.
B. The scarcity of resources relative to human wants.
C. How to get government to operate efficiently.
D. How to create employment for everyone.
3. In economics, scarcity means that
A. A shortage of a particular good will cause the price to fall.
B. A production possibilities curve cannot accurately represent the trade-off between two goods.
C. Society’s desires exceed resources available.
D. The market mechanism has failed.
4. Given that resources are scarce,
A. A “free lunch” is possible, but only for a limited number of people.
B. Opportunity costs are experienced whenever choices are made.
C. Poor countries must make choices, but rich countries with abundant resources do not have to make choices.
D. Some choices involve opportunity costs while other choices do not.
5. A consequence of the economic problem of scarcity is that
A. Choices have to be made about how resources are used.
B. There is never too much of any good or service produced.
C. The production of goods and services must be controlled by the government.
D. The production possibilities curve is bowed outward.
6. The basic factors of production include
A. Land, labor, money, and capital.
B. Land, labor, money, and inputs.
C. Labor and money.
D. Land, labor, capital, and entrepreneurship.
7. Factors of production are
A. Scarce in every society.
B. Scarce only in advanced countries.
C. Scarce only in the poorest countries of the world.
D. Unlimited in quantity.
8. Which of the following is not a factor of production?
A. A psychiatrist.
B.The $100,000 cash.
C. A bulldozer.
D. Six thousand acres of farmland.
9. With respect to factors of production, which of the following statements is not true?
A. Factors of production are also known as resources.
B. In order to produce any good or service, it is necessary to have factors of production.
C. Factors of production include land, labor, capital, and entrepreneurship.
D. Only those resources that are privately owned are counted as factors of production.
10. Which of the following is the best example of land?
A. The ethanol refined from corn.
B. A factory that produces new goods and services.
C. The water used to make a soft drink.
D. A barber’s chair.
1. Approximately how much of the world’s output does the United States produce?
A. 5 percent.
C. 30 percent. D. 12 percent.
2. The United States has roughly how much of the world’s population?
A. 5 percent.
B. 10 percent.
C. 15 percent.
D. 20 percent.
3. The United States has roughly how much of the world’s arable land?
A. 14 percent.
B. 12 percent.
C. 10 percent.
D. 8 percent.
4. The best definition of GDP is
A. The sum of the physical amounts of goods and services in the economy.
B. A dollar measure of final output produced during a given time period within a nation’s borders.
C. A measure of the per capita economic growth rate of the economy.
D. A physical measure of the capital stock of the economy.
5. The measure of final goods and services produced in the United States is the
A. GDP of the United States.
B. Percentage change in the GDP of the United States.
C. Per capita GDP in the United States.
D. Total sales of all goods during the year.
6. Approximately how much of the world’s output does China produce?
A. 13 percent.
B. 0 percent.
C. 9 percent.
D. 1.5 percent.
7. China has roughly how much of the world’s population?
A. 10 percent.
B. 20 percent.
C. 30 percent.
D. 40 percent.
8. Which of the following countries (or regions) produces the most output annually?
B. United States.
9. Which of the following statements is true about the U.S. economy?
A. The United States produces nearly one-fifth of the world’s production.
B. The United States has the world’s third largest economy.
C. The United States produces less than half as much as China does.
D. The United States produces less than one-third as much as Japan does.
9. Per capita GDP is
A. The sum of consumer goods, investment goods, government services, and net exports.
B. A dollar measure of the economic growth rate of a country.
C. The value of the factors of production used to produce output in a country.
D. The dollar value of GDP divided by total population.
1. Who participates in markets? A. Business firms.
B. Business firms and consumers.
C. Consumers and government agencies. D. All of the choices are correct.
2. The goal of the consumer in a market economy is to use his or her limited income to buy A. The greatest number of goods and services possible.
B. The goods and services that maximize profits for businesses. C. Those goods and services with the lowest prices.
D. The set of goods and services that maximizes the consumer’s total utility.
3. The goal of the business firms in a market economy is to maximize A. Total profits.
B. Total sales. C. Total utility. D. Total welfare.
4. People benefit by participating in the market because A. Resources are no longer limited.
B. There are always participants in the market that are more efficient than you are in production. C. Market participation allows individuals to specialize and, with trade, ultimately consume more. D. Participants in the market do not have to make choices.
5. Which of the following is a market transaction?
A. A stock increases in value over the 30 years that it is owned. B. A college student purchases a laptop computer.
C. Weather destroys a farmer’s crops, leaving the farmer unable to buy groceries. D. A radio station changes its programming from classical to rock.
6. A factor market is any place or process where A. Finished goods are bought and sold.
B. Land, labor, or capital is bought and sold. C. Finished services are bought and sold. D. None of the choices are correct.
7. Which of the following is purchased in a product market? A. Cell phone service.
B. Undeveloped farmland in Texas. C. Crude oil.
D. The skills of an X-ray technician.
8. Which of the following is purchased in a factor market? A. A bag of jellybeans.
B. National defense.
C. The labor of a state university professor.
D. A motorized scooter used for commuting by a student.
9. Business firms supply goods and services to ____ and purchase factors of production in ____. A. factor markets; product markets
B. national markets; factor markets C. product markets; factor markets D. factor markets; national markets
10. Individual consumers supply ____ and purchase ____. A. factors of production; final goods and services
B. intermediate goods; final goods and services C. final goods and services; factors of production
D. national goods and services; factors of production
1. The most desirable combination of output attainable with existing resources, technology, and social values is known as the
A. Optimal mix of output.
B. Efficient mix of output.
C. Optimal mix of production.
D. Efficient choice of production.
2. The optimal mix of output is the most desirable combination of output attainable with existing
A. Resources and products.
B. Resources, technology, and social values.
C. Resources, government regulations, and technology.
D. Technology and business decisions.
3. In a market economy, producers will produce the goods and services that
A. Producers want to purchase.
B. Consumers demand.
C. Consumers need the most.
D. Optimize producer utility.
4. Resources are directed from one industry to another by
A. Changes in market prices.
B. Market failure.
C. Government failure.
D. None of the choices are correct.
5. If production in the economy is efficient, then changes in market prices
A. Move us along the perimeter of the production possibilities curve.
B. Move us to a point above the production possibilities curve.
C. Move us from a point below the production possibilities curve to a point on the production possibilities curve.
D. Have no effect on our position on the production possibilities curve.
6. The term market mechanism refers to
A. The use of market prices and sales to signal desired output.
B. Resource allocation based on a production possibilities curve.
C. Resource allocation based on consumer needs.
D. Government laws and regulations concerning how the market should operate.
7. The optimal mix of output may not be produced by an economy because of the existence of
C. Public goods.
D. Production possibilities.
8. Market failure implies that the market mechanism
A. Leads the economy to a point outside the production possibilities curve.
B. Leads the economy to the wrong mix of output.
C. Causes shortages or surpluses in the market.
D. Causes government failure.
9. Which of the following is a source of market failure?
A. Private goods.
B. Market power.
C. Government intervention.
D. None of the choices are correct.
10. Market failure leads to
B. An equitable distribution of goods and services.
C. Public goods being underproduced.
D. The absence of externalities.
E. Production possibilities.
1. National income accounting is defined as the
A. Use of economic theory to predict future income.
B. Measurement of aggregate economic activity.
C. Accounting cost associated with economic choices.
D. Assessment of the distribution of output.
2. National income accounts assist
A. Market investors in making more profitable investments.
B. Individuals in maximizing their incomes.
C. Economic policy makers in formulating policies and evaluating performance.
D. Analysts in measuring the performance of the stock market.
3. Prices are used in national income accounting for all of the following reasons except to
A. Add the values of output from different sectors of the economy.
B. Compare the value of output of one period with that of another.
C. Provide an index to measure the rate of inflation.
D. Provide an index to measure unemployment.
4. A nation’s GDP is
A. C + I + G + (X – M).
B. The sum of value added at some stages of the production process.
C. The total market value of all intermediate goods and services.
D. The total amount of money in circulation.
5. GDP can be calculated by all of the following methods except
A. Adding up the spending on goods and services by business, government, households, and foreigners, and subtracting imports.
B. Adding up the “value added” at every stage of production in the economy.
C. Adding up all of the receipts of households, government, and business.
D. Adding up all income and expenses by consumers and businesses.
6. A nation’s GDP can be calculated as
A. The sum of value added and intermediate goods.
B. The total value added at all stages of production.
C. NI plus depreciation.
D. PI plus depreciation.
7. DVD players can be added to bicycles to compute the GDP by
A. Multiplying output by price and adding the resulting dollar values.
B. Dividing output by price and adding the resulting dollar values.
C. Multiplying dollar values of output by price and adding the result.
D. Dividing dollar values of output by price and adding the result.
8. Suppose iPhones cost consumers $200 and USB cables cost consumers $25. What contribution does the production of 2,000 iPhones and 1,200 USB cables make to GDP?
9 Suppose Blu-Ray players cost consumers $300 and Blu-Ray disks cost consumers $30. What contribution does the production of 250 Blu-Ray players and 3,000 Blu-Ray disks make to the GDP?
10 Which of the following is treated differently in computations of GNP as compared with GDP?
A. Sales in the underground economy.
B. Goods produced by U.S. firms located in foreign countries.
C. Intermediate goods.
D. The value of services performed by housewives.
1. Which of the following is included in the labor force?
A. A student who is still in school but not working or looking for work.
B. A part-time store clerk who is looking for another job.
C. A person who voluntarily runs a charity.
D. A person who spends the entire day taking care of his or her own young children at home.
2. Who among the following is included in the labor force?
A. A hardworking homemaker who does not want to be employed outside the home.
B. A man doing 10 years in prison for armed robbery.
C. The president of Microsoft.
D. A retired commander of the armed forces.
3. People are not part of the labor force when they
A. Go on vacation.
B. Are old enough to work but choose not to work.
C. Suffer from a temporary illness that keeps them away from their job.
D. None of the choices are correct.
4. The labor force participation rate is the number
A. Of unemployed divided by the number of employed.
B. Of employed divided by the number in the labor force.
C. Of employed divided by the total population.
D. In the labor force divided by the working-age population.
5. When the labor force participation rate is declining, the
A. Unemployment rate is rising faster than the total population rate.
B. Percentage of the working-age population that is outside the labor force is declining.
C. Percentage of the working-age population that is willing and able to work is declining.
D. Percentage of the total population that is employed is rising.
6. Jack graduated from college last month, but he has not yet started looking for a job. Jack is
A. Frictionally unemployed.
B. Structurally unemployed.
C. A discouraged worker and is part of the unemployment statistic.
D. Not part of the labor force and is not counted in the unemployment rate.
7. Production possibilities are the
A. Alternative combinations of output that can be produced using all available resources and technology.
B. Various production methods that producers can employ.
C. Various types of input that each manufacturing facility can choose to employ.
D. Percentage of output produced by each worker.
8. As of 2010, approximately what percentage of the U.S. population participated in the civilian labor force?
A. 30 percent.
B. 40 percent.
C. 50 percent.
D. 60 percent.
9. For the labor force to definitely increase,
A. There must be an increase in total population.
B. There must be an increase in immigration.
C. People must turn from being discouraged workers into people actively seeking employment.
D. None of the choices are correct.
10. If a nation experiences a year of unusually high immigration that increases the size of the labor force, we can conclude that the
A. Nation will choose a different point on the production possibilities curve.
B. Nation’s production possibilities curve will shift outward.
C. Nation’s production possibilities curve will shift inward.
D. Nation’s capital per worker will rise.
1. Inflation is
A. A rise in the price of every good but not any service.
B. An increase in relative prices of all goods and services.
C. A situation in which purchasing power increases.
D. An increase in the average level of prices of goods and services.
2. Inflation rates above 10 percent occur
A. In most countries today.
B. Rarely in the United States.
C. During wartime periods.
D. None of the other choices.
3. Inflation means
A. Specific prices are rising, and relative prices are falling.
B. Both relative prices and average prices are rising.
C. Relative prices are rising, but it is not certain what is happening to average prices.
D. Average prices are rising, but it is not certain what is happening to relative prices.
4. A decrease in the average level of prices of goods and services is
5. Deflation is a/an ____________ in the average level of prices of goods and services.
D. increase followed by a decrease
6. When there is no deflation or inflation,
A. Prices of all goods change by the same percentage.
B. Relative prices remain unchanged.
C. Average prices do not change.
D. Full employment is achieved.
7. Relative price is
A. The price of one good in comparison with the price of other goods.
B. A decrease in purchasing power because of rising prices.
C. The amount of income a particular good requires.
D. The current price paid for a good or service.
8. Changes in relative prices may occur in a period of
A. Stable prices only.
B. Inflation only.
C. Deflation only.
D. Stable prices, inflation, or deflation.
9. Changes in the relative prices of two goods indicate
B. Nominal price changes adjusted for the inflation in the price of the goods.
C. That average prices for the period must not be stable.
D. Changes in the desired mix of output.
10. Which of the following functions are performed by changes in relative prices but not by changes in average prices?
A. Computing real income from nominal income.
B. Indicating an overheating economy.
C. Signaling changes in the desired mix of output.
D. Measuring the rates of inflation.
1. Which of the following was not characteristic of the U.S. economy during the Great Depression?
A. Families lost their farms.
B. Automobile production fell.
C. The stock market crashed.
D. Unemployment reached 50 percent.
2. The study of aggregate economic activity for the economy as a whole is
A. Opportunity cost.
3. Alternating periods of economic growth and contraction in real GDP define
B. The business cycle.
C. Macro equilibrium.
D. Say’s Law.
4. According to classical theory,
A. Keynes had “neglected to take account of the drag on prosperity which can be exercised by an insufficiency of effective demand.”
B. Macro equilibrium might start out badly and get worse in the absence of government intervention.
C. Flexible wages and prices allow a laissez faire economy to adjust wages and prices to shifts in aggregate demand.
D. Business cycles are not relevant and do not occur.
5. According to the classical view, if consumer demand slowed down,
A. Prices would decrease, and the economy would return to its long-term growth trend.
B. Prices would increase, and the economy would return to its long-term growth trend.
C. Wages would increase, and the economy would return to its long-term growth trend.
D. Investment and government demand would increase, and the economy would return to its long-term growth trend.
6. Based on the classical view,
A. Unemployment never occurs.
B. Cyclical unemployment might occur temporarily.
C. All goods produced are always purchased at an unchanging price.
D. Persistent unemployment might be a problem.
7. If wages and prices are flexible, then a recession is best eliminated when prices
A. And wages both rise.
B. And wages both fall.
C. Rise and wages drop.
D. Drop and wages rise.
8. According to classical economists, market-driven economies
A. Are typically self-adjusting.
B. Are inherently unstable.
C. Require government intervention.
D. Are always in long-run equilibrium.
9. Say’s Law states that
A. Supply creates its own demand.
B. Shifts of either supply or demand can achieve a given market equilibrium.
C. Wages and prices are inflexible, which prevents the achievement of market equilibrium.
D. Increased prices lead to increased supply.
10. In the early 1900s, which of the following was not true?
A. Falling price levels appeared to limit an increase in unemployment.
B. Periods of high unemployment tended to be brief.
C. Say’s Law seemed to work.
D. Government intervention was commonly used to stimulate the economy.
1. Aggregate demand is the total quantity of output
A. Demanded if the economy is in equilibrium.
B. Demanded at alternative price levels in a given time period.
C. Producers are willing and able to supply at alternative price levels.
D. Consumers actually buy.
2. The combination of price level and real output that is compatible with both aggregate demand and aggregate supply is the definition of
A. Full-employment GDP.
B. Disposable income.
C. Macro equilibrium.
D. Real expenditures.
3. According to Keynesian theory, which of the following is not true not true at all short-term macro equilibria?
A. The economy may or may not be at full employment.
B. The aggregate demand curve intersects the aggregate supply curve.
C. All macroeconomic goals are achieved.
D. Producers are selling everything they currently produce.
4. The components of aggregate demand are
A. Consumption, government spending, net exports, and investment.
B. Consumption, exports, imports, and disposable income.
C. Consumption, inventory, government spending, and disposable income.
D. Exports, imports, investment, and disposable income.
5. Consumption expenditures
A. Account for over two-thirds of total spending.
B. Include purchases of new and used goods by consumers.
C. Are equal to disposable personal income plus personal saving.
D. Are equal to consumer spending plus transfer payments.
6. Which of the following forces did Keynes assert had the strongest influence on consumption decisions?
C. Interest rates.
D. Disposable income.
7. If consumption is $340 and saving is $20, then disposable income
A. Is $340.
B. Is $360.
C. Is $320.
D. Cannot be determined from the information given.
8. Given that C = $1,000 + 0.60YD, if the level of disposable income is $1,000, the level of saving is
9. Given that C = $500 + 0.8Y
D, if the level of disposable income is $1,000, the level of saving is
10. When consumer spending exceeds disposable income, all of the following are true except
A. The APS is negative.
B. The APC is greater than 1.
C. Households are dissaving.
D. The MPS is negative.
1. The output level at which the aggregate demand curve intersects the aggregate supply is always the level at which
A. Saving is zero.
B. Macro equilibrium is achieved.
C. Full employment is sustainable by the economy.
D. Micro equilibrium is achieved.
2. John Maynard Keynes argued that
A. Macro failure is likely to occur, and it isn’t likely to go away.
B. Macro failure is unlikely to occur.
C. Macro failure is likely to occur but will go away quickly.
D. None of the choices are correct.
3. According to the Keynesian view of the macro economy, which of the following is always true at equilibrium?
A. Aggregate supply equals aggregate demand.
B. The economy is at full employment.
C. The price level is stable.
D. The price level is too low.
4. When the economy is at equilibrium,
A. Leakages equal injections.
B. Inventories must equal zero.
C. Leakages equal aggregate demand.
D. There are no leakages.
5. A leakage is
A. An export from the economy.
B. A decline in the capacity of the economy to produce goods.
C. A diversion of income from spending on domestic output.
D. A decrease in aggregate supply.
6. Income not spent directly on domestic output is
A. A leakage.
B. An injection.
C. A circular.
7. Leakages include
A. Business saving.
C. Government spending.
8. Which of the following is a leakage?
C. Government spending.
D. Aggregate demand.
9. The disposable income consumers receive is equal to about what percentage of total income?
A. 30 percent. B. 50 percent. C. 70 percent. D. 95 percent
10. Disposable income is less than GDP due to
A. Taxes by governments along with exports.
B. Income held by businesses.
C. Taxes by governments and income held back as saving by businesses.
D. Taxes by governments along with imports.
AND MUCH MORE