Econ 202 Macoeconomics Pretest 1 (Chapters 4, 22-24)

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

____ 1. 1.The demand curve for a typical good has
a. a negative slope because some consumers switch to other goods as the price of the good
rises.
b. a negative slope because the supply of the good rises as demand rises.
c. a negative slope because the good has less "snob appeal" as its price falls.
d. an inverse slope because as the price goes up, the good has more profitability.
e. a positive slope because price is a clear indicator of need.

Figure 3-2



____ 2. 2.If the government has stated that it will buy any amount of good X offered at $30, which demand curve in
Figure 3-2 is appropriate?
a. 1
b. 2
c. 3
d. 4


____ 3. 3. A demand schedule shows
a. the "market potential" for a product.
b. how much consumers are willing and able to buy at different prices.
c. possible combinations of output under different conditions.
d. how much producers would like to sell at different prices.
e. All of the above are correct.


____ 4. 4.Which of the following would be most likely to cause an outward shift of the demand curve for electricity?
a. a decrease in the price of electricity
b. an increase in the price of air conditioners
c. an increase in the price of heating oil
d. a decrease in the price of natural gas


____ 5. 5. An increase in the price of gasoline shifts the demand for tires to the
a. left, because gasoline and tires are substitutes.
b. left, because gasoline and tires are normally used together.
c. right, because gasoline and tires are substitutes.
d. right, because gasoline and tires are normally used together.


____ 6. 6. Last year, 1,000 cases of elixir were sold at $10; this year, 1,200 cases were sold at $12. The most probable
interpretation of these data is that the
a. supply and demand curves are shifting to the right.
b. supply and demand curves are shifting to the left.
c. supply curve has shifted to the left, with no change in demand.
d. demand curve has shifted to the right, with no change in supply.


____ 7. 7. The removal in 1966 of the requirement that Catholics eat fish on Fridays was followed by a 12.5 percent
fall in prices of fresh fish. From this it can be deduced that the
a. demand curve for fish shifted to the left.
b. demand curve shifted to the right.
c. supply curve shifted to the left.
d. supply curve shifted to the right.


____ 8. 8. How will an increase in price tend to affect demand?
a. Demand will increase.
b. Demand will decrease.
c. Demand will not change.
d. Uncertain.

____ 9. 9. An increase in supply will have what effect on equilibrium price and quantity?
a. Price will increase; quantity will decrease.
b. Price will decrease; quantity will increase.
c. Both price and quantity will increase.
d. Both price and quantity will decrease.

____ 10. 10. At an equilibrium price, quantity demanded
a. exceeds quantity supplied.
b. equals quantity supplied.
c. is less than quantity supplied.
d. Any of the above is possible.

Figure 3-21



____ 11. 11. Which price in Figure 3-21 is equilibrium?
a. P
1

b. P
2

c. P
3



____ 12. 12. The major drawback of a price ceiling is
a. it causes a surplus.
b. government regulations of this kind are difficult to enforce.
c. it causes a shortage.
d. There is no drawback.


____ 13. 13. Why do price ceilings tend to cause persistent imbalances in the market?
a. Quantity demanded exceeds quantity supplied but price cannot rise to remove the
shortage.
b. Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus.
c. Quantity supplied exceeds quantity demanded but price cannot rise to remove the
shortage.
d. Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus.


____ 14. 14. To be effective, a price floor must be
a. above the equilibrium price.
b. at the equilibrium price.
c. below the equilibrium price.
d. anywhere on the graph.


____ 15. 15. In economics, aggregation refers to
a. collecting sample specimens for reclassification.
b. using small stones to pave an artistic walkway.
c. combining many markets into one overall economy.
d. using large computers to solve economic problems.

____ 16. 16. The horizontal axis on the aggregate demand-aggregate supply model measures
a. the price of the specific product produced.
b. the level of total output.
c. the price level.
d. the level of employment.


____ 17. 17. Nominal GDP is
a. also called real GDP.
b. a more accurate measure than real GDP.
c. real GDP adjusted for changes in the price level.
d. GDP measured in current prices.


____ 18. 18. In 2009, you buy a beautiful vintage 1965 Thunderbird convertible. This purchase would
a. be included in the GDP for 2009.
b. not be included in the GDP for 2009.
c. be included in both the GDP for 1965 and 2009.
d. be in the GDP for 2009 at a depreciated value.


____ 19. 19. Phoebe and Rachel quit running in Central Park and join a health club to run on treadmills. This decision
a. has no effect on GDP.
b. increases GDP.
c. decreases GDP.
d. increases nominal but not real GDP.


____ 20. 20. Large sport utility vehicles (SUVs) add significantly to air pollution because they do not have to meet
passenger auto emission standards. The purchase of an SUV
a. adds less to GDP since the pollution costs are subtracted from GDP.
b. adds to nominal but not real GDP because of the pollution costs.
c. is a net loss to GDP because the pollution costs are so large.
d. increases GDP.


____ 21. 21. Before the Great Depression of the 1930s, most economists believed that
a. only active government policy could prevent recessions or inflation.
b. a capitalist economy had a natural tendency to cure recessions or inflation.
c. a capitalist economy had a natural tendency to inflation.
d. recessions and depressions were inevitable until the economy broke down completely.


____ 22. 22. If the government uses stabilization policies to reduce inflation, the economy may have to suffer
a. higher rates of real GDP growth.
b. higher rates of unemployment.
c. lower rates of unemployment.
d. higher rates of price level growth.


____ 23. 23. The amount of goods and services the economy could produce if the labor force is fully employed is
called
a. nominal GDP.
b. real GDP.
c. actual GDP.
d. potential GDP.


____ 24. 24. The growth rates of actual and potential GDP
a. are similar in both the short and long run.
b. are similar in the short run but not the long run.
c. are similar in the long run but not the short run.
d. are different in both the short and long run.


____ 25. 25. If the population increase in India is smaller than the increase in Indian real GDP, then GDP per capita
will
a. decrease.
b. increase.
c. remain constant.
d. increase more slowly than real GDP.


____ 26. 26. A dencrease in the capital stock would be expected to
a. decrease the labor force.
b. increase the level of output.
c. decrease real GDP per capita.
d. increase real GDP per capita.


____ 27. 27. The shortfall between actual real GDP and potential GDP
a. decreases as the unemployment rate rises.
b. increases as the unemployment rate rises.
c. increases as the employment rate rises.
d. decreases as the labor force increases.


____ 28. 28. The use of automated teller machines (ATMs) has caused some bank tellers to lose their jobs. This is an
example of
a. cyclical unemployment.
b. seasonal unemployment.
c. frictional unemployment.
d. structural unemployment.


____ 29. 29. If the price of pizzas has risen from $4 to $5 at the same time that the price of an hour of spinning class
has risen from $20 to $30, then
a. pizzas have become relatively more expensive.
b. aerobics' classes have become relatively more expensive.
c. the relative prices of pizzas and aerobics classes have remained constant.
d. workers' real income must have decreased.


____ 30. 30. The definition of human capital refers to
a. worker education and workers' equipment.
b. worker education and workers' physical capital.
c. workers' equipment and workers' physical capital.
d. worker education and worker training.


____ 31. 31 In general, as productivity levels increase, the potential for productivity growth
a. decreases.
b. increases.
c. remains the same.
d. increases if GDP increases.


____ 32. 32 Property rights uncertainty will usually cause
a. lower levels of investment spending.
b. lower levels of real interest rates.
c. higher levels of investment spending.
d. higher levels of real interest rates.


____ 33. 33.More education and training usually lead to higher levels of
a. productivity.
b. population.
c. pollution.
d. import protectionism.


____ 34. 34. The wage premium in the United States represents a
a. cost of higher education.
b. decreasing return to higher education.
c. higher return to college education.
d. result of declining college attendance since 1973.


____ 35. 35. Which period of recent U.S. history shows the lowest rates of productivity growth?
a. 1948-1973
b. 1973-1995
c. 1995-2007
d. All periods had similar growth rates.

Econ 202 Macoeconomics Pretest 1 (Chapters 4, 22-24)
Answer Section

MULTIPLE CHOICE

1. 1. ANS: A DIF: Medium OBJ: TYPE: R TOP: Demand
and Quantity Demanded

2. 2. ANS: A DIF: Medium OBJ: TYPE: A TOP: Demand
and Quantity Demanded

3. 3. ANS: B DIF: Medium OBJ: TYPE: R TOP: Demand
and Quantity Demanded

4. 4. ANS: C DIF: Medium OBJ: TYPE: A TOP: Demand
and Quantity Demanded

5. 5. ANS: B DIF: Medium OBJ: TYPE: A TOP: Demand
and Quantity Demanded

6. 6. ANS: D DIF: Difficult OBJ: TYPE: A TOP: Demand
and Quantity Demanded

7. 7. ANS: A DIF: Medium OBJ: TYPE: A TOP: Demand
and Quantity Demanded

8. 8. ANS: C DIF: Medium OBJ: TYPE: A TOP: Demand
and Quantity Demanded

9. 9. ANS: B DIF: Medium OBJ: TYPE: A TOP: Supply and
Quantity Supplied

10. 10. ANS: B DIF: Easy OBJ: TYPE: R TOP: Supply and Demand
Equilibrium

11. 11. ANS: B DIF: Easy OBJ: TYPE: A TOP: Supply and Demand
Equilibrium

12. 12. ANS: C DIF: Medium OBJ: TYPE: A TOP: Fighting the
Invisible Hand: The Market Fights Back

13. 13.ANS: A DIF: Medium OBJ: TYPE: A TOP: Fighting the
Invisible Hand: The Market Fights Back

14. 14.ANS: A DIF: Medium OBJ: TYPE: A TOP: Fighting the
Invisible Hand: The Market Fights Back

15. 15. ANS: C DIF: Easy OBJ: TYPE: R TOP: Drawing a Line
Between Macroeconomics and Microeconomics

16. 16 ANS: B DIF: Easy OBJ: TYPE: R TOP: Supply and Demand
Reinterpreted Through A Macroeconomic Lens
17. 17 ANS: D DIF: Moderate OBJ: TYPE: A TOP: Gross
Domestic Product

18. 18. ANS: B DIF: Moderate OBJ: TYPE: A TOP: Gross
Domestic Product

19. 19 ANS: B DIF: Moderate OBJ: TYPE: A TOP: Gross
Domestic Product

20. 20 ANS: D DIF: Difficult OBJ: TYPE: I TOP: Limitations of the
GDP: What GDP Is Not

21. 21 ANS: B DIF: Moderate OBJ: TYPE: R TOP: The
Economy on a Roller Coaster

22. 22. ANS: B DIF: Moderate OBJ: TYPE: I TOP: The
Problem Of Macroeconomic Stabilization: A Sneak Preview

23. 23. ANS: D DIF: Easy OBJ: TYPE: R TOP: The Capacity to
Produce: Potential GDP

24. 24 ANS: C DIF: Moderate OBJ: TYPE: R TOP: The
Capacity to Produce: Potential GDP

25. 25 ANS: B DIF: Moderate OBJ: TYPE: I TOP: Alternative
Measures of Economic Growth

26. 26 ANS: C DIF: Moderate OBJ: TYPE: A TOP: The
Production Function

27. 27 ANS: B DIF: Moderate OBJ: TYPE: A TOP: The Costs
Of Unemployment

28. 28 ANS: D DIF: Moderate OBJ: TYPE: A TOP: Types of
Unemployment

29. 29 ANS: B DIF: Moderate OBJ: TYPE: A TOP: The Costs
of Inflation

30. 30 ANS: D DIF: Easy OBJ: TYPE: R TOP: The Three Pillars
Of Productivity Growth

31. 31 ANS: A DIF: Moderate OBJ: TYPE: A TOP: LEVELS,
GROWTH RATES, AND THE CONVERGENCE HYPOTHESIS
32. 32 ANS: A DIF: Moderate OBJ: TYPE: A TOP: Growth
Policy: Encouraging Capital Formation
33. 33 ANS: A DIF: Easy OBJ: TYPE: R TOP: Growth Policy:
Improving Education And Training

34. 34 ANS: C DIF: Moderate OBJ: TYPE: A TOP: Growth
Policy: Improving Education And Training

35. 35 ANS: B DIF: Easy OBJ: TYPE: R TOP: THE
PRODUCTIVITY SLOWDOWN AND SPEED-UP IN THE UNITED STATES