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ECO 201 Chapters 1,2,3,6,7,8,9,16,20 Exam 320 Questions
with Verified Answers
Macroeconomics primarily examines: Start of Chapter 1 - CORRECT ANSWER broad issues such as national output, employment and inflation. In which of the following countries will the national government have the greatest influence with respect to the nation's economy? - CORRECT ANSWER Cuba The two main tools of macroeconomic policy are monetary policy and fiscal policy. Fiscal policy involves __________ spending. - CORRECT ANSWER government Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization? - CORRECT ANSWER international trade Which of the following is generally accepted as a valid criticism of the production of useful goods and services? - CORRECT ANSWER environmental pollution _____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.
- CORRECT ANSWER Economies of scale In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: - CORRECT ANSWER buyers and sellers. Which of the following statements most likely lies within the realm of macroeconomics? - CORRECT ANSWER Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.
Which of the following best characterizes the circular flow of income? - CORRECT ANSWER Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. - CORRECT ANSWER government Which of the following is most likely a topic of discussion in macroeconomics? - CORRECT ANSWER a decrease in the unemployment rate The basic difference between macroeconomics and microeconomics is: - CORRECT ANSWER microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy. The circular flow diagram of economic activity is a model of the: - CORRECT ANSWER flow of goods, services, and payments between households and firms. Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories. - CORRECT ANSWER circular flow diagram In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. - CORRECT ANSWER market-oriented economy In countries like _____________ the command economy predominates. - CORRECT ANSWER Cuba and North Korea The basic difference between macroeconomics and microeconomics is that: - CORRECT ANSWER microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). In the ____________, households work and receive payment from firms. - CORRECT ANSWER labor market
Scarcity exists because of: - CORRECT ANSWER unlimited wants and limited resources. The law of _______________ explains why people and societies rarely make all- or-nothing choices. - CORRECT ANSWER diminishing marginal utility The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________. - CORRECT ANSWER allocative efficiency Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is: - CORRECT ANSWER All points on the production possibilities frontier are equally efficient. Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: - CORRECT ANSWER C to F The opportunity cost of an action: - CORRECT ANSWER is a subjective valuation that can be determined only by the individual who chooses the action. In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income. - CORRECT ANSWER utility Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: - CORRECT ANSWER the benefit to his grades from studying for an hour The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. - CORRECT ANSWER budget constraint Referring to Table 2-1: A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring
a 94 on the economics exam rather than a 77 is: - CORRECT ANSWER 15 points on the history exam. Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. - CORRECT ANSWER normative statement In many cases, it is reasonable to refer to the ________________ as the price. - CORRECT ANSWER opportunity cost Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is: - CORRECT ANSWER 7 points on the economics exam The opportunity cost of attending university is likely to include all except which of the following? - CORRECT ANSWER the cost of haircuts received during the school term The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible. End of chapter 2 - CORRECT ANSWER budget constraint International trade currently involves about _________________ worth of goods and services thundering around the globe. Start of Chapter 20 - CORRECT ANSWER The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of ____________________________. - CORRECT ANSWER opportunity cost
From the data, the USA: - CORRECT ANSWER has an absolute advantage over India in the production of wheat. Assume that one day's labor in Argentina can produce either 20 units of cloth or 2 units of wine, while in Chile one day's labor can produce either 24 units of cloth or 12 units of wine. If Argentina transfers 2 units of labor from wine to cloth and Chile transfers 1 unit of labor from cloth to wine, the increase in combined output by those two workers will be: - CORRECT ANSWER 8 wine; 16 cloths When one nation can produce a product at lower cost relative to another nation, it is said to have a(n)____________________in producing that product. - CORRECT ANSWER absolute advantage If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if: - CORRECT ANSWER The USA specializes in potatoes because of its comparative advantage in producing potatoes. Colombia produces coffee with less labor and land than any other country; it therefore necessarily has: - CORRECT ANSWER an absolute advantage in coffee production __________________ identifies the area where a producer's absolute advantage is relatively greatest, or where the producer's absolute disadvantage in productivity is relatively least. - CORRECT ANSWER comparative advantage The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower ___________________________. - CORRECT ANSWER opportunity cost Suppose that the USA can make 15,000,000 cars or 20,000,000 bottles of wine with one year's worth of labor. France can make 10,000,000 cars or 18,000, bottles of wine with one year's worth of labor. From these numbers, we can conclude: - CORRECT ANSWER The USA has an absolute advantage in the production of cars.
The concept of ____________________ means that as the measure of output goes up, average costs of production decline—at least up to a point. - CORRECT ANSWER economies of scale Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following statements is true? End of chapater 20 - CORRECT ANSWER If Alpha specializes in growing apples and Beta specializes in growing oranges, they could both gain by specialization and trade. The imposition of a price ceiling on a market often results in: Beginning of chapter 3 - CORRECT ANSWER a shortage A change in price of a good or service typically causes ________________ for that specific good or service. - CORRECT ANSWER a change along the supply curve If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that: - CORRECT ANSWER Goods X and Y are complement goods. But nearly all supply curves share a basic similarity: they slope ________________. - CORRECT ANSWER up from left to right The _______________ is the quantity where quantity demanded and quantity supplied are equal at a certain price. - CORRECT ANSWER equilibrium quantity A demand curve shows the relationship between price and ______________ on a graph. - CORRECT ANSWER quantity demanded Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market." - CORRECT ANSWER The statement is correct.
Refer to Figure 3-1. Using the graph above and beginning on D1, a shift to D would indicate a(n): - CORRECT ANSWER increase in demand. Any given demand or supply curve is based on the ceteris paribus assumption that
- CORRECT ANSWER all else is held equal A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _______________ End of Chapter 4 - CORRECT ANSWER supply curve to the right Which of the following are most likely classified by economists as consumer durable goods? Beginning of chapter 6 - CORRECT ANSWER automobiles, furniture ___________ is about two-thirds of the demand side of GDP, but it moves relatively little over time. - CORRECT ANSWER Consumption GDP does not directly include: - CORRECT ANSWER the value of intermediate goods sold during a period. Which of the following is included in the calculated Gross Domestic Product? - CORRECT ANSWER A local ice cream store sells $17,000 worth of cones and sundaes on July 1. _______________, which can be approximated by the growth of gross domestic product, ultimately determines the prevailing standard of living in a country. - CORRECT ANSWER Economic growth A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are: - CORRECT ANSWER expansion, peak, recession, trough Once every __________, the Census Bureau does a comprehensive survey of housing and residential finance. - CORRECT ANSWER 10 years
Consumption in the United States is about ____________ of GDP, and it moves relatively little over time. - CORRECT ANSWER 68% The difference between nominal GDP and real GDP is: - CORRECT ANSWER real GDP adjusts for inflation Which of the following is included in GDP calculations? - CORRECT ANSWER the university tuition paid to enroll in a course Which of the following is not included in GDP? - CORRECT ANSWER cash income paid to a day laborer that is not reported to the tax authorities GDP is: - CORRECT ANSWER the value of all final goods and services produced domestically. The gap between exports and imports in a nation's economy is called the ___________. - CORRECT ANSWER trade balance GDP in the United States in 2020 was about __________. - CORRECT ANSWER $20.9 trillion Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then: - CORRECT ANSWER exports exceed imports by $50 billion. If imports exceed exports, as in recent years, then __________ exists. - CORRECT ANSWER a trade deficit Middle-income countries, which include much of Latin America, Eastern Europe, and some countries in East Asia, have per capita GDP in the range of ___________. - CORRECT ANSWER $6,000 to $12, On the demand side of GDP, consumption by _____________ is the largest component of GDP, accounting for about two-thirds of the GDP in any year. - CORRECT ANSWER households
If the U.S. dollar weakens, which of the following parties will benefit? - CORRECT ANSWER U.S firms selling in Europe Foreign direct investment is the term used to describe purchases of firms in another country that involve ______________________. - CORRECT ANSWER taking a management responsibility ________________________ equalizes the prices of internationally traded goods across countries. - CORRECT ANSWER Purchasing power parity A stronger British pound is beneficial for: - CORRECT ANSWER exchange students with a British scholarship studying in Canada. When Mataeo buys Euros through _______________, he will use his U.S. dollars to pay for them. - CORRECT ANSWER the foreign exchange market People or firms use one currency to purchase another currency at the _______________________. - CORRECT ANSWER foreign exchange market Which of the following is no longer one of the most commonly traded currencies in foreign exchange markets? - CORRECT ANSWER French franc The most commonly traded currency in foreign exchange markets is the: - CORRECT ANSWER U.S. dollar. In 2010, 100 Japanese yen purchased .88 U.S. dollars and in 2013, it purchased. U.S. dollars. How much was 1 U.S. dollar worth in Japanese yen, in 2010 and 2013? - CORRECT ANSWER 2010: 113.6 yen, 2013: 107.5 yen When a government uses a ______________ exchange rate policy, it usually allows the exchange rate to be set by the market. - CORRECT ANSWER soft peg For firms engaged in international lending and borrowing, ____________________ can have an enormous effect on profits. - CORRECT ANSWER swings in exchange rates
If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchased $1.00 U.S. in 2009, then: - CORRECT ANSWER the dollar depreciated against the yen. In 2010, 1 Swiss franc cost .56 British pounds and in 2012 it cost .51 British pounds. How much would 1 British pound purchase in Swiss francs in 2010 and 2012? - CORRECT ANSWER 2010: 1.79 francs, 2012: 1.96 francs The _______________ is the largest market in the world economy. End of chapter 16 - CORRECT ANSWER foreign exchange market When discussing economic growth, it is often useful to focus on ____________, to avoid studying changes in the size of GDP that represent only having more people in the economy, and focus on those increases in GDP which represent an actual rise in the standard of living on a per person basis. Beginning of chapter 7 - CORRECT ANSWER GDP per capita _____________________ is a term which refers to the widespread use of power- driven machinery and the economic and social changes that resulted in the first half of the 1800s. - CORRECT ANSWER The Industrial Revolution When society has a higher level of capital per person, it is called ______________.
- CORRECT ANSWER capital deepening Country Alpha and Country Beta initially have the same real GDP per capita. Country Alpha experiences no economic growth, while Country Beta grows at a sustained rate of 5 percent. In 14 years, Country Alpha's GDP will be approximately _________ that of Country Beta. - CORRECT ANSWER one-half To achieve a high standard of living, a nation should: - CORRECT ANSWER promote economic growth. In 2016, of the world's population of 7.5 billion people, _________ are scraping by on incomes that average less than $2 per day. - CORRECT ANSWER 1.1 billion
In macroeconomics, the connection from inputs to outputs for the entire economy is called _______________. - CORRECT ANSWER an aggregate production function Which of the government policies below is most unlikely to encourage per capita economic growth? - CORRECT ANSWER high taxes on companies that spend a lot on capital formation Which of the following factors contribute to economic growth? - CORRECT ANSWER an increase in the proportion of the population that is college educated In certain African countries like Niger, Tanzania, Nigeria, and Sudan, for example, GDP per capita at the start of the 2000s was still less than $___________. - CORRECT ANSWER 300 Which of the following is considered a high-income country? End of chapter 7 - CORRECT ANSWER Germany In November 2010, the labor force in Siouxtown was 14,800. There were 14, persons employed. The local unemployment rate: Beginning of chapter 8 - CORRECT ANSWER was 2.1%. Frictional unemployment is: - CORRECT ANSWER unemployment that is due to normal turnover in the labor market. During the Great Depression of the 1930s, the unemployment rate reached more than _________ of the labor force. - CORRECT ANSWER 25% The unemployment rate measures: - CORRECT ANSWER unemployed workers as a percentage of the labor force. If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals: - CORRECT ANSWER 25%.
The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied. - CORRECT ANSWER equilibrium wage Gomer loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be: - CORRECT ANSWER unemployed The unemployment rate may overestimate the true extent of unemployment if: - CORRECT ANSWER either B) or C) occurs. ______________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. - CORRECT ANSWER Efficiency wage theory Insofar as government public policy is concerned, the best way to battle unemployment would be __________________. - CORRECT ANSWER to minimize recessions If the unemployment rate is 8 percent, then this means: - CORRECT ANSWER 8 percent of the labor force is unemployed. Which of the following statements is incorrect? - CORRECT ANSWER Employment insurance compensation increases the opportunity cost of being unemployed. A university student who is enrolled in school fulltime and not seeking employment is considered: - CORRECT ANSWER out of the labor force. The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________. - CORRECT ANSWER business cycle The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with
The effects of inflation are seen in: - CORRECT ANSWER goods, services, wages and income levels Which of the following is the name used to describe the price index that consists of intermediate goods and finished goods? - CORRECT ANSWER Producer Price Index Two factors that complicate the calculation of the inflation rate are: - CORRECT ANSWER substitution and quality/new product bias Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract? - CORRECT ANSWER COLA plus 2.4% While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices. - CORRECT ANSWER ongoing rise An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it? - CORRECT ANSWER GDP Deflator When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be __________. - CORRECT ANSWER indexed If the price index moves from 107 to 110, the rate of inflation is: - CORRECT ANSWER 2.8% What distinguishes the real value of a statistic from the nominal value of a statistic? - CORRECT ANSWER adjusting for inflation In the early 1990's extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________. - CORRECT ANSWER hyperinflation
When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00. He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders' gym membership? - CORRECT ANSWER 16.66% Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest rate in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be? - CORRECT ANSWER $2,449 billion When we want to measure wage inflation in the labor market, we use the: - CORRECT ANSWER Employment Cost Index __________ implies that pressure for price increases reaches across _______________markets, not just one. - CORRECT ANSWER inflation; most The __________________ is the nominal interest rate minus the rate of inflation.
- CORRECT ANSWER real interest rate The GDP deflator is a price index that includes the following components of GDP: - CORRECT ANSWER Consumption, Investment, Government plus Exports minus Imports Inflation, as measured by CPI, can be calculated in terms of how the overall cost of ___________________ changes over time. - CORRECT ANSWER the basket of goods Review the table below. Assume taxes are zero. In this example, the marginal propensity to save (MPS) is - CORRECT ANSWER 0. What is the key idea in the aggregate expenditure-output model? - CORRECT ANSWER in any particular year, the level of GDP is determined by the level of aggregate expenditure The economy as a whole is in macroeconomic equilibrium if - CORRECT ANSWER all of the above
