Karl Marx believed central planning was necessary to keep workers from being exploited by landowners.
true
when economists talk about a tradeoff between "guns and butter," they mean:
the production of more military goods may require fewer consumer goods.
government failure occurs when government intervention fails to improve econmic outcomes.
true
all of the points on the production possibilities curve:
represents use of all available resourse.
which of the following are available in limited quantity and contribute to the problem of scarcity?
land, labor, capital, and entrepreneurship.
microeconomics focuses on:
the behavior of individuals, firms, and government agencies.
entreprenuership refers to:
people who are creators.
the study of econmics focuses on:
how best to allocate scarce resources.
in econmics, capital refers to:
goods that can be used to produce other goods.
if resources were unlimited, opportunity costs woulc not exist.
true
given that resources are scarce:
opportunity costs are experienced whenever choices are made.
economic growth always involves:
an expansion of production possibilities.
the slope of a curve is given by the formula:
the change in y coordinates between two points divided by the change in x coordinates.
karl marx encouraged a policy of laissez faire because he believed that the market mechanism provided society with the best answers to the WHAT, HOW, and FOR WHOM questions.
False
a market economy uses price signals to indicate to producers which goods to produce.
true
according to the latin phrase ceteris paribus:
nothing else changes.
when society struggles with how to divide up the "econmic pie," it is responding to the:
FOR WHOM" question.
the market mechanism will aways produce the best possible mix of output.
false
which of the following is an example of government failure?
an increase in bureaucracy and red tape that fails to improve econmic outcomes.
the market mechanism:
uses prices as a means of communication between consumers and producers.
the economy of the U.S. is best characterized as:
a mixed economy.
the first economic goal of any society is to:
produce the optimal mix of output.
if resources were unlimited, opportunity costs would not exist.
true
Laissez faire refers to:
a belief of nonintervention by government in the market mechanism.
if one variable increases when the other variable decreases, then the curve is drawn as:
a downward-sloping line.
one HEADLINE article in the text suggests that 30percent of Americans trust the federal government to do the right thing. if government intervention makes the economy worse off, this is referred to as:
government failure
which of the following is likely to cause an outward shift of the production possibilities curve?
investment in telecommunication networks.
Limited resources:
all of the above
if government intervention fails to improve economic outcomes, the result is known as:
government failure
countries such as North Korea and Cuba rely on central planning to allocate resources.
true
which of the following is not an assumption under which the production possibilities curve is drawn?
the price level is stable.
which of the following groups of words best represents macroeconmic goals?
full employment, price stability, economic growth.
macroeconomics focuses on:
the economy as a whole
with respect to factors of production, which of the following statements is not true?
only those resources that are privately owned are counted as factors of production.
a linear curve that slopes downward from left to right has a:
negative slope.
the factors of production include land, labor, and money used to produce goods and services.
false
when the relationship between two variables changes:
the entire curve shifts.
in a market economy, if a factory pollutes the air, the situation is referred to as government failure.
false
which of the following explains why economic choices must be made?
the factors of production are scarce
an externality is:
a cost or benefit of a market activity that impacts a third party.
to experience future economic growth, an economy must allocate some of its scarce resources to investment.
true
which of the following best describes the "invisible hand?
price signals drive the market mechanism
opportunity costs only occur if the choices we make damage the environment.
false
the central problem of economics is the:
scarcity of resources relative to human wants.
the production possibilities curve shifts outward in response to:
improved technology or more resources or both
the opportunity cost of a good is the sacrifice of the next-best alternative goods that are forgone.
true
the essential feature of the market mechanism is:
the price signal for both consumers and producers.
when society is on the production possibilities curve, it is using available resources efficietly in producing goods and services.
true
when economists talk about a tradeoff between "guns and butter," they mean:
the production of more military goods may require fewer consumer goods.
which of the following is a basic economic question?
How is output distributed across society?
the direct exchange of one good for another is known as:
barter
the complete opportunity cost of a particular good is:
the most desired goods that are given up in order to obtain the particular good.
a market surplus is:
caused by a price floor.
which of the following will cause a leftward shift of the supply curve for houses?
an increase in the cost of contruction materials.
ceteris paribus, the quantity demanded of a good will increase in response to:
a lower price for the good.
according to the law of demand:
price and quantity demanded are inversely related.
a market is said to be in equilibrium when:
the quantity demanded equals the quantity supplied.
in order to demand a product, from an economic standpoint, a consumer must:
be both willing and able to purchase the product.
if a market shortage exists:
consumers will compete for the product buy offering to pay more.
when rent controls are imposed, the quantity supplied of apartments will be:
less than the equilibrium quantity and rents will be less than the equilibrium rents.
any place where finished goods are bought and sold is a:
product market.
which of the following will not shift the demand curve for natural gas?
a change in the technology used to produce natural gas.
ceteris paribus means:
holding everything else constant.
which of the following is a constraint that motivates economic interactions?
the limited resources that individuals have.
which of the following will cause a leftward shift of the supply curve for houses?
an incease in the cost of construction materials.
when there is a surplus in a market, prices are likely to fall b/c:
buyers do not wish to buy as much as sellers want to sell
which of the following provides the best example of the law of supple?
an increase in price entices suppliers to produce more.
the opportunity cost of hiring a tutor is:
all the other goods and services that are given up to pay for the tutor.
consumers _______ finished goods
buy; product.
the market demand for a particular good indicates:
the tota quantities that buyers are willing and able to purchase at alternative prices in a given period of time, ceteris paribus.
which of the folllowing events would cause a rightward shift in the supple curve for automobiles?
an improvement in the technology used to prodice automobiles.
a market:
is any place where goods are brought and sold.
labor is exchanged in the:
factor market.
if demand is constant, a leftward shift in the supply curve will result in:
a decrease in equilibrium quantity and a higher equilibrium price.
which of the following will not cause a shift in the demand curve for a good?
the price of the good itself.
which of the following would not cause the martket supply of cell phones to change?
a reduction in the demand for cell phones causes price to fall.
ceteris paribus, which of the following is most likely to cause a decrease in the supply of skateboards?
higher labor costs for skateboard production
if supply is unchanged, a leftward shift in the demand curve will result in:
a decrease in equilibrium quantity and a lower equilibrium price.
if the price of a good is currently about the equilibrium price, the price will decrease over time b/c:
a surplus exist at the old price.
ceteris paribus, which of the followiing will cause the demand for pizza to increase in a college town?
an incrase in the number of students.
the quantity of a good that suppliers are willing and able to supply at a given price in a given time perios depends on:
the costs of producing the good.
the quantity of a good demanded in a given time perios increases as the price falls, which is known as:
the law of demand
ceteris paribus, which of the following will cause the supply of hamburgers to increase?
the number of hamburger resaurants increases.
ceteris paribus, which of the following will cause the supply of milk shakes to increase?
the cost of milk, a key ingredient, decreases.
the goals of the principal participants in a market economy are to maximize:
satisfaction, profits, and public welfare given their limited resources.
which of the following will cause a leftward shift of supply curve for electricity?
an increase in the taxes on electricity production.
The unemployment rate is calculated by dividing:
The number of unemployed by the labor force and multiplying by 100.
Nominal GDP is defined as the:
Value of output in current dollars.
Business cycles in the United States:
Vary greatly in length, frequency, and magnitude.
A decrease in the average level of prices of goods and services is known as:
Deflation.
Which of the following combinations of indicators would be most consistent with a booming economy that is approaching full employment?
High consumer confidence, low unemployment, rising rates of inflation.
If the CPI is 137 in Year Y, then it costs _______ in Year Y to buy the same market basket that cost _______ in the base period.
$137; $100.
Which of the following is not one of the three basic measures of macroeconomic performance?
Growth in population.
Which of the following as an example of seasonal unemployment?
Walter cannot find landscape work because it is winter and the ground is frozen.
Full employment" in the U.S. economy means:
Cyclical and structural unemployment have been minimized.
If a market basket of goods cost $100 in the base year and $143 in a later year, then average prices have increased by:
43 percent
When calculating nominal GDP, the volume of output is measured using:
The market value
According to macroeconomists, a goal for the economy is a:
Low unemployment rate.
Immediately following the years 1929-1933, the U.S. economy:
Suffered sporadic decreases in the growth rate of GDP, which led to lower GDP per capita.
The Great Depression in the United States:
Caused real GDP to fall dramatically between 1929 and 1933.
Samantha quit her job in the city to look for a job in the country. While she is looking, Samantha experiences _______ unemployment.
Frictional
When clerks in costume shops seek work after Halloween is over, the unemployment rate goes up. This is an example of:
Seasonal unemployment
Which of the following government programs is most likely to reduce cyclical unemployment?
Greater government expenditures to increase GDP.
Unemployment that occurs when there are not enough jobs for the number of people in the labor force is referred to as:
Cyclical unemployment.
Which of the following is likely to reduce the level of structural unemployment?
Federally funded job-training programs.
The CPI tends to overestimate the rate of inflation because:
Some price increases are an indication of higher quality products.
The long-term average growth rate for real GDP in the U.S. has been approximately:
3 percent per year.
Nominal income:
Is the amount of money income, measured in current dollars.
If the prices of some goods rise and other goods fall, but prices on average do not change then:
Relative prices have changed.
For the United States, the relationship between the unemployment rate and the percentage change in the real GDP is best characterized as:
An inverse relationship.
After quitting one job, some people find that it takes several months to find a new job. This is an example of which type of unemployment?
Frictional unemployment
If the Consumer Price Index (CPI) had a value of 132 in 2005, this means that during the period between the base year and 2005:
Prices of goods and services that the typical consumer buys increased by an average of 32 percent.
Real GDP is defined as the:
Value of output measured in constant prices.
Generally speaking, which of the following groups would tend to gain real income from the wealth effects of inflation?
People who own assets that are appreciating faster than the inflation rate.
Suppose that at the start of this year you got a salary increase of 10 percent from your employer. If the prices of the goods and services you typically purchase increase 10 percent during the year, you would find for the year that you have experienced on
No change in real income.
The CPI tends to overestimate the rate of inflation because:
Some price increases are an indication of higher quality products.
The study of aggregate economic behavior is referred to as:
Macroeconomics.
During a period of inflation:
Average prices are rising, but it is not certain what is happening to relative prices.
The alternative combinations of goods and services that can be produced in a given time period with available resources and technology is referred to as:
The production possibilities.
A decrease in the average level of prices of goods and services is known as:
Deflation.
On average from 1929 to today, the U.S. economy has grown at a rate of ____ percent per year.
Three.
As the economy falls from the peak to the trough of the business cycle:
Cyclical unemployment should increase and real GDP should decline.
Which of the following are policy levers?
Government regulation, tax policy, and the availability of money
If the stock market plunged over the next week, consumers would:
Demand fewer goods and services.
Monetary policy involves:
The use of money and interest rate controls to influence the macroeconomy.
When the U.S. price level increases relative to the price level in foreign economies, U.S. consumers tend to buy:
More imported goods and fewer domestically produced goods, ceteris paribus.
If the aggregate supply curve is vertical, this:
Means that aggregate demand shifts have no impact on output.
Which of the following is an example of the interest-rate effect, assuming the U.S. price level decreases?
The demand for loans decreases so interest rates decline and loan-financed purchases increase.
The Classical approach dominated economic policy during:
The period before the Great Depression.
Which of the following is likely to cause a leftward shift in the aggregate supply curve, ceteris paribus?
An increase in the cost of natural gas.
Which of the following characterizes the Classical view of the economy?
Flexible prices and wages will allow the economy to self-adjust to full employment.
Self-adjustment of markets is assumed in:
Classical economic theory.
Which of the following economic policy options focus on aggregate demand to explain changes in unemployment and inflation?
Keynesian and monetarist.
Ceteris paribus, a rightward shift of the aggregate demand curve will cause the equilibrium price level to _______ and equilibrium real output to _______.
Increase; increase.
A supply-side policy approach to achieving both lower prices and full employment would be to:
Decrease marginal tax rates and reduce government regulation.
The difference between market demand and aggregate demand is that:
Aggregate demand applies to all goods in an economy and market demand applies to a specific good.
Say's Law states that:
Supply creates its own demand.
If an economy is experiencing a recession, the Keynesian approach to achieving full employment is to:
Employ expansionary fiscal policy including tax cuts and/or more government spending.
If the average price level falls, then ceteris paribus:
The real balances effect will result in an increase in the purchases of goods and services.
A HEADLINE article in the text is titled "Consumers are Spending Big Time." Which of the following is most likely to happen as a result of increased consumer spending,ceteris paribus?
All of the above.
Say's Law is consistent with the _______ view of the economy.
Classical.
According to monetary theories, an increase in the money supply shifts the aggregate:
Demand curve to the right.
The total amount of output producers are willing and able to produce at alternative price levels in a given time period is known as:
Aggregate supply.
The short-run aggregate supply curve is:
Upward sloping to the right.
Which of the following are internal market forces?
Innovation, population growth, and spending behavior.
Macro equilibrium always occurs:
When aggregate demand equals aggregate supply at the average price level of the economy.
The determinants of macroeconomic performance include:
Policy levers.
Keynes viewed the economy as inherently unstable and suggested that during a recession policy makers should:
Cut taxes and/or increase government spending.
The aggregate demand curve shows the relationship between the volume of purchases and:
The Great Depression.
If the stock market plunged over the next week, consumers would:
Demand fewer goods and services.
Which of the following is an example of the real-balances effect, assuming the U.S. price level decreases?
The purchasing power of money increases and people buy more goods.
Which of the following is true concerning the banking system?
All of the above.
If excess reserves are $30,000, demand deposits are $500,000, and the minimum reserve requirement is 10 percent, then total reserves are:
$80,000.
Suppose a bank has $2,000,000 million in deposits, a minimum reserve requirement of 10 percent, and bank reserves of $250,000. Then the bank has excess reserves of:
$50,000.
Which of the following is considered to be an essential characteristic of money?
All of the above.
The money multiplier represents:
The number of deposit dollars the banking system can create from $1 of excess reserves.
Suppose a bank has $1,000,000 in deposits, a minimum reserve requirement of 20 percent, and total reserves of $350,000. Then it has excess reserves of:
$150,000.
Suppose a bank has $1,000,000 in deposits, a minimum reserve requirement of 15 percent, and bank reserves of $170,000. Then the bank can make new loans in the amount of:
$20,000.
Suppose a bank has $50,000 in transactions accounts and a minimum reserve requirement of 10 percent. Then required reserves are:
$5,000.
If the required reserve ratio is 5 percent, the money multiplier is:
20.0
Money-market mutual funds are:
Pools of money used to buy interest-bearing securities.
Money creation occurs when:
Banks make loans to borrowers.
If there is no minimum reserve requirement in the banking system, the potential ability of banks to create money is:
Unlimited.
Which of the following is the correct way to calculate excess reserves?
Total reserves minus required reserves.
Suppose First National Bank has zero excess reserves. If the required reserve ratio increases, which of the following will happen immediately?
The bank will not have enough required reserves.
Banks try to keep their holdings of excess reserves low in order to:
Maximize profits.
When the market value of goods and services is expressed in prices, money is functioning as a:
Standard of value.
For a single bank in a large banking system, excess reserves are equal to the:
Amount of loans a bank can make after meeting the reserve requirement.
Which of the following is an essential function performed by banks?
Transferring funds from savers to spenders.
Money is anything that:
Is generally accepted as a medium of exchange.
Initially a bank has a minimum reserve requirement of 15 percent and no excess reserves. If $200,000 is deposited in the bank, then ceteris paribus:
Excess reserves will increase by $170,000.
Money is functioning as a medium of exchange when you:
Buy lunch at a fast food restaurant.
Money creation occurs when:
Banks make loans to borrowers.
One HEADLINE article in the text, titled "Debit Cards Give Plastic Edge Over Paper" points out that a greater percentage of noncash payments were made with debit cards than with checks in 2003. In this case debit cards function as a:
Medium of exchange.
When the market value of goods and services is expressed in prices, money is functioning as a:
Standard of value.
If total reserves for a bank are $10,000, excess reserves are zero, and demand deposits are $100,000, then the money multiplier must be:
10.
As the size of purchases becomes larger, a greater percentage of the purchases are made using:
Credit cards.
Which of the following is an essential function performed by banks?
Transferring funds from savers to spenders.
Initially a bank has a minimum reserve requirement of 10 percent and no excess reserves. If $10,000 is deposited in the bank, then ceteris paribus:
The bank can increase its loans by $9,000.
Suppose a bank has $50,000 in transactions accounts and a minimum reserve requirement of 10 percent. Then required reserves are:
$5,000.
If the required reserve ratio is 25 percent, the money multiplier is:
4.0.
Suppose the entire banking system has $10 million in excess reserves and a required reserve ratio of 5 percent. The deposit-creation potential of the banking system is:
$200 million.
Virtual malls will most likely:
All of the above.
Why do credit cards limit the potential of e-commerce?
All of the above.
Deposit creation occurs when a:
Bank makes a loan to a customer.
The rate of interest banks charge each other for lending reserves is the:
Federal funds rate.
The 12 regional Fed banks do all of the following except:
Lend money to individuals.
The Federal Reserve Board of Governors has:
Seven members appointed by the President of the U.S.
Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will increase by:
$20 MILLION
Which of the following lends reserves to private banks?
The Federal Reserve System.
Given an upward-sloping aggregate supply curve, which of the following is most likely to occur if the Fed sells securities in the open market, ceteris paribus?
Lower average prices and more unemployment.
Using the aggregate supply drawn under the Monetarist view, what should happen to the equilibrium price level and quantity of output if the Fed buys securities?
Equilibrium price level should go up and equilibrium quantity should stay constant.
Ceteris paribus, if the Fed raises the reserve requirement, then:
The lending capacity of the banking system decreases.
Ceteris paribus, if the Fed reduces the reserve requirement, then:
The lending capacity of the banking system increases.
Which of the following is often described as the most powerful person in the U.S. economy?
The Chairman of the Federal Reserve.
According to the Keynesian view of aggregate supply, an increase in the money supply will:
Cause inflation if the economy is at full employment.
Members of the Federal Reserve Board of Governors are appointed for one fourteen-year term:
In an effort to isolate the Fed from political pressures.
Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. Ceteris paribus, if the reserve requirement is decreased to 0.07, then excess reserves will increase by:
$3 million.
Which of the following lends reserves to private banks?
The Federal Reserve System.
If the Fed wants to reduce the money supply, it can:
Sell bonds.
One HEADLINE article in the text states: "Federal Reserve officials yesterday cut a key short-term interest rate to its lowest level in more than four decades . . . ". Which of the following is the Fed trying to accomplish as a result of this action?
A rightward shift of aggregate demand.
When the Fed sells bonds in the open market, interest rates _______ and aggregate demand shifts to the _______.
Rise; left.
To increase the money supply the Fed can:
Reduce the reserve requirement, reduce the discount rate, or buy bonds.
Given monetarist assumptions about the shape of the aggregate supply curve, which of the following would most likely result if the Fed pursues restrictive monetary policy?
The equilibrium price level would decrease but output would stay the same.
Which of the following serves as the central banker for private banks in the United States?
The 12 regional Federal Reserve banks.
One HEADLINE article in the text is titled " Fed Raises Rates; Another Hike Possible." Which of the following is the Fed trying to accomplish as a result of this action?
A leftward shift of aggregate demand.
The different shapes of the aggregate supply curve:
Determine the impact of monetary policy on price level and output.
If the Fed wants to increase bank reserves, it can:
Buy bonds.
Assuming the economy is in the upward sloping portion of the eclectic aggregate supply curve, which of the following is most likely to occur if the Fed pursues expansionary monetary policy?
The equilibrium price level and output will both increase.
According to the Monetarist view, the aggregate supply curve is:
Perfectly vertical at the natural rate of unemployment.
If a bank does not have enough reserves, it can:
Borrow reserves from the discount window.
Ceteris paribus, if the Fed raises the discount rate, then:
The incentive to borrow reserves decreases.
Which of the following best describes the eclectic aggregate supply curve?
First horizontal, then upward sloping, and finally vertical.
To increase the money supply the Fed can:
Reduce the reserve requirement, reduce the discount rate, or buy bonds.
An eclectic aggregate supply curve:
Combines elements of both Monetarist and Keynesian assumptions about the shape of the aggregate supply curve.
Which of the following will cause a decrease in aggregate demand?
Restrictive monetary policy.
Members of the Federal Reserve Board of Governors are appointed for one fourteen-year term:
In an effort to isolate the Fed from political pressures.