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Economists consider full employment to occur when

Select one:
a. everyone who wants a job has a job.
b. frictional unemployment equals zero.

c. the sum of frictional unemployment and structural unemployment equals zero.


d. the unemployment rate consists of only frictional and structural unemployment.

Question 2

Consider the following statements: a) Soda drinkers purchase more soda from a grocery store
that sells soda at a lower price than other rival grocery stores in the area, b) Homeowners do not
take steps to increase security even though they believe it is more costly to allow burglaries than
to install security monitoring equipment, and c) Manufacturers produce less of a particular cell
phone when its selling price rises. Which of the above statements demonstrates that economic
agents respond to incentives?
Select one:

a. a only.
b. b only.
c. c only.
d. a and b.

Question 3

Economics is the study of the ________ people make to attain their goals, given their ________
resources.
Select one:
a. purchases; unlimited

b. choices; scarce
c. income; available
d. decisions; household

Question 4

Fiona shares an office with her ex-husband. Her share of the rent and utilities is $625 per month.
She is considering moving to a home office which she will not have to share with anyone. The
home office will not cost her anything as far as extra rent or utilities. Recently, you ran into
Fiona at the gym and she tells you that she has moved into her home office. Fiona is as rational
as any other person. As an economics major, you rightly conclude that
Select one:
a. Fiona did not have a choice; her ex-husband was a jerk.
b. Fiona figures that the additional benefit of having her own office (as opposed to sharing) is

at least $625.
c. Fiona figures that the benefit of having her own office (as opposed to sharing) is zero,
since she is no longer paying rent and utilities.
d. The cost of having one's own space outweighs the benefits.

Question 5

Gross domestic product is calculated by summing up


Select one:
a. the total quantity of goods and services in the economy.
b. the total quantity of goods and services produced in the economy during a period of time.
c. the total market value of goods and services in the economy.
d. the total market value of final goods and services produced in the economy during a period

of time.

Question 6

If cyclical unemployment is eliminated in the economy, then


Select one:

a. the economy is considered to be at full employment.


b. the unemployment rate is below the natural rate of unemployment.
c. the unemployment rate is above the natural rate of unemployment.
d. the economy is at less than full employment.

Question 7

If your nominal wage rises faster than the price level, we can say your real wage has ________
and the purchasing power of your income has ________.
Select one:
a. fallen; fallen
b. fallen; risen

c. risen; risen
d. risen; fallen
Question 8

Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus
$600 of interest. If the inflation rate was 4%, what was the real interest rate you paid?
Select one:
a. 16 percent
b. 12 percent

c. 8 percent
d. 6 percent

Question 9

In the circular flow model, the value of total production for an economy ________ the value of
total expenditures on final goods and services.
Select one:

a. Equals
b. Is greater than
c. is less than
d. May be greater than or less than

Question 10

Macroeconomics, as opposed to microeconomics, includes the study of what determines the level
of
Select one:
a. employment in a specific industry.

b. employment in the economy.


c. output of a specific firm.
d. output of a specific industry.

Question 11

Real GDP will increase


Select one:
a. only if the price level rises.
b. only if the price level falls.

c. only if the quantity of final goods and services produced rises.


d. if either the price level rises or the quantity of final goods and services produced rises.
Question 12

Suppose that homemakers are included as employed in the labor force statistics, rather than
being counted as out of the labor force. This would
Select one:
a. increase the measured unemployment rate.

b. increase the measured labor force participation rate.


c. decrease the number of persons in the labor force.
d. decrease the number of persons in the working-age population.

Question 13

Suppose the government launches a successful advertising campaign that convinces workers
with high school degrees to quit their jobs and become full time college students. This would
cause
Select one:
a. the unemployment rate to decrease.

b. the labor force participation rate to decrease.


c. the number of discouraged workers to increase.
d. no change in the unemployment rate.

Question 14

Ted quits his $60,000-a-year job to be a stay-at-home dad. What is the opportunity cost of his
decision?
Select one:
a. zero, since he will no longer be earning a salary
b. depends on the "going rate" for stay-at-home dads

c. at least $60,000
d. the value he attributes to the joy of parenting

Question 15
The advice to "keep searching, there are plenty of jobs around here for which you are qualified,"
would be most appropriate for which of the following types of unemployment?
Select one:

a. frictional unemployment
b. structural unemployment
c. cyclical unemployment
Question 16

The factors of production include


Select one:
a. wages.

b. capital.
c. investment.
d. transfers.

Question 17

The labor force equals the number of people


Select one:
a. employed.
b. unemployed.

c. employed plus unemployed.


d. in the working-age population.

Question 18

The nominal interest rate equals the real interest rate ________ the inflation rate.
Select one:
a. times
b. divided by

c. plus
d. minus

Question 19

The purchase of a new automobile is included in


Select one:
a. consumption expenditures on services.
b. consumption expenditures on nondurable goods.

c. consumption expenditures on durable goods.


d. investment expenditures.
Question 20

The stated interest rate on a loan is the


Select one:
a. real interest rate.

b. nominal interest rate.


c. actual inflation rate.
d. expected inflation rate.

Question 21

Correct
The study of economics arises due to
Select one:
a. Money

b. Scarcity
c. Greed
d. Resources

Question 22

The term "market" in economics refers to


Select one:
a. a place where money changes hands.
b. a legal institution where exchange can take place.
c. a group of buyers and sellers of a product and the arrangement by which they come

together to trade.
d. an organization which sells goods and services.

Question 23

To calculate GDP by the expenditure method, one must add


Select one:
a. wages, rents, interest, and profits.

b. consumption spending, investment spending, government spending, and net exports.


c. consumption spending, investment spending, government spending, and exports.
d. labor, natural resources, entrepreneurship, and capital.
Question 24

To examine how the total production of an economy has changed over time, it would be better to
examine
Select one:

a. real GDP.
b. nominal GDP.
c. GDP at current prices.
d. the GDP deflator.

Question 25

Which of the following best describes an assumption economists make about human behavior?
Select one:
a. They assume that individuals act rationally all the time in all circumstances.
b. They assume that rational behavior is useful in explaining choices people make even

though people may not behave rationally all the time.


c. They assume that people take into account the question of fairness in all decisions they
make.
d. They assume that individuals act randomly.

Question 26

Which of the following goods is directly counted in GDP?


Select one:
a. the lettuce that Royal Castle purchases for its sandwiches
b. the bread that Royal Castle purchases for its sandwiches

c. a vegetable Royal Castle sandwich purchased by a student


d. the plastic bags that Royal Castle purchases to wrap its sandwiches

Question 27

Which of the following is not directly counted in GDP?


Select one:
a. investment expenditures
b. government purchases

c. intermediate goods
d. consumer goods
Question 28

Which of the following would be directly counted in GDP in 2016?


Select one:
a. kitchen cabinets purchased from Gafoor in 2016 to be installed in a house built in 1997

b. kitchen cabinets built in 1937, extracted from the 1937 home, and installed in a brand new
home
c. kitchen cabinets built in 1937, extracted from the 1937 home, and installed in a house built
in 1950
d. none of the above.

Question 29

Who receives the goods and services sold in Guyana depends largely on
Select one:

a. how income is distributed.


b. how the goods and services are produced.
c. what goods and services are produced.
d. government redistribution.

Question 30

You earned $30,000 in 2007, and your salary rose to $80,000 in 2016. If the CPI rose from 82 to
202 between 2007 and 2016, which of the following is true?
Select one:
a. There was deflation between 2007 and 2016.
b. The purchasing power of your salary fell between 2007 and 2016.
c. The purchasing power of your salary remained constant between 2007 and 2016.

d. The purchasing power of your salary increased between 2007 and 2016.