A) the $2.50 Carolyn Spends for the Hamburger

1. Carolyn spends $2.50 for a hamburger at a restaurant. Which of the following would be included in the gross domestic product?

A) The $2.50 Carolyn spends for the hamburger

B) The price the restaurant paid for the meat in the hamburger

C) The price the restaurant paid for the bun

D) all of the above

E) none of the above

2. Most goods and services included in the U.S. gross domestic product are bought by

A) businesses in the United States

B) state, local, and federal governments in the United States

C) people and businesses in other nations

D) consumers in the United states

3. Which of the following makes an adjustment for both inflation and population change?

A) the consumer price index

B) the unemployment rate

C) real GDP per capita

D) final goods and services

E) all of the above

4. A nation’s standard of living will rise if

A) GDP and population increase at the same rate

B) real GDP per capita increases

C) population increases more than GDP

D) production and consumption decrease E) all of the above

5. Productivity is

A) a measure of the total amount of goods manufactured.

B) a measure of how much output is produced per unit of input.

C) an unimportant statistic commonly ignored by economists.

D) an important measure of how the U.S. economy is doing.

E) B and D.

6. A nation’s productivity is directly affected by

A) the education of its labor force.

B) the amount of physical capital used.

C) the level of innovation used.

D) all of the above

7. A farmer produces wheat and sells it for $.50. A miller buys the wheat, grinds it into flour, and sells the flour for $1.00. A baker buys the flour, produces a loaf of bread, and sells it to a consumer for $2.00. The amount added to gross domestic product in this example is

A) 50 cents

B) $1.00

C) $2.00

D) $3.50

8. In the U.S. economy, the total value of goods and services produced per year is measured by

A) the gross domestic product.

B) the consumer price index.

C) the productivity of labor.

D) the Dow Jones Industrial Average. E) none of the above

9. Which of the following best summarizes the key elements used to calculate the gross domestic product (GDP) of the United States using the expenditure approach?

A) business inventories, net imports, balance of payments

B) disposable income, consumer spending, housing starts

C) unemployment, factory wages, personal consumption, personal income

D) consumer spending, business investment, government spending, net exports

10. A recession is said to occur when real gross domestic product (GDP) declines for a period of at least

A) two days

B) two weeks

C) two months

D) two quarters

E) two years

11. The consumer price index (CPI) is used to measure

A) inflation.

B) productivity.

C) gross domestic product.

D) structural unemployment.

E) all of the above

12. Which of the following best describes the difference between GDP and real GDP?

A) unlike GDP, real GDP measures only the values of final goods and services produced

B) there is no difference; they are identical

C) real GDP is adjusted for the size of the population but GDP is not

D) real GDP is adjusted for inflation, GDP is not

E) none of the above 13. Which transaction would be included in the gross domestic product?

A) a delicatessen sells $500 worth of sandwiches

B) a delicatessen buys $100 worth of bread it use in making sandwiches

C) Mary sells her 1986 Nissan for $3,000 to a friend

D) Bill fixes his roof and saves $2,500 by doing the work himself

E) all of the above

14. Most businesses are producing at or near capacity, the unemployment rate is very low, and consumer spending is brisk. Which part of the business cycle best describes these events?

A) peak

B) expansion

C) contraction

D) trough

E) recession

15. A short time ago the economy was booming. Now, unemployment is just beginning to rise together with a leveling off of business spending and production. This is characteristic of a

A) peak.

B) expansion.

C) contraction.

D) trough.

E) recession

16. Real GDP has declined for the last six months and businesses are cutting back their production and laying off workers. Which part of the business cycle best describes these events?

A) peak

B) expansion

C) inflation

D) trough

E) contraction or recession 17. Which would NOT be a characteristic of a period of expansion?

A) rising productivity

B) declining unemployment

C) expanding credit

D) declining investment

E) all of the above would be a characteristic of a period of expansion

18. The term “business cycle” is used to describe

A) the flow of money from businesses to workers and back to businesses.

B) normal fluctuations in the economy.

C) a period of rising prices.

D) a decline in real GDP.

19. How do rising interest rates affect the business cycle?

A) As interest rates rise, lenders make more money, leading to expansion.

B) As interest rates rise, consumer confidence rises, leading to expansion.

C) As interest rates rise, the nation is more subject to external shocks, leading to contraction.

D) As interest rates rise, businesses borrow less, leading to contraction.

E) As interest rates rise, businesses borrow more, leading to expansion.

20. What type of inflation results from higher wages or input expenses?

A) demand-pull inflation

B) cost-push inflation

C) oligopolistic inflation

D) sectoral inflation

E) built-in inflation

21. What type of inflation results from higher incomes and increased spending? A) demand-pull inflation

B) cost-push inflation

C) oligopolistic inflation

D) sectoral inflation

E) built-in inflation

22. Leticia graduated from college with an engineering degree. She has had several job offers but is still searching for the right one. What category of unemployment best describes Leticia’s situation?

A) frictional

B) structural

C) cyclical

D) seasonal

23. Clarissa dropped out of high school. She has few technical skills, and all the good jobs in her community seem to require considerable knowledge and many skills. What category of unemployment best describes Clarissa’s situation?

A) frictional

B) structural

C) cyclical

D) seasonal

24. You deposit your paycheck into your savings account. How does this action contribute directly to economic growth?

A) It promotes capital deepening.

B) It improves your quality of life.

C) It enhances aggregate demand.

D) It increases real GDP.

E) It reduces consumption. 25. A big hurricane hits the United States. The hurricane upsets the economy. Which one of the four economic factors is the hurricane?

A) business investment

B) credit

C) consumer expectations

D) external shock

Use for questions 26-27

Suppose the economy is at the point labeled “a”. Which of the following is most likely to have caused it to reach that point?

A) falling interest rates

B) declining business investment

C) high consumer confidence

D) a positive external shock

E) increased consumer spending

27. At points “b” and “c”, an economy would likely experience

A) decreasing business investment and recession

B) stagflation and high unemployment

C) high consumer confidence and increasing GDP

D) contractions and troughs

E) decreasing interest rates 28. You are searching for a job, but discover that you are not qualified for any of the available jobs. You are suffering from

A) frictional unemployment.

B) seasonal unemployment.

C) structural unemployment.

D) cyclical unemployment.

E) none of the above.

29. What is the main problem for people on a fixed income during a period of inflation?

A) Their income will not increase so their purchasing power falls.

B) They have to ask for an increase in wages to match inflation.

C) Their investments will not pay as much interest.

D) They have to wait for the government to react to the crisis.

E) People on fixed incomes do not have a problem during a period of inflation.

30. Imagine that you are an economist advising the President. The national unemployment rate is 5%. What action would you recommend in response?

A) a national training program to end structural unemployment

B) a large increase in unemployment benefits

C) an emergency program to create more government jobs

D) no action, because the nation is at full employment

E) don’t run for re-election.

31. Why are poverty rates in rural areas higher than the average?

A) People in rural areas do not use money as much.

B) Jobs may be more limited in many rural areas.

C) Schools are not as good in rural areas.

D) Inner cities have the best jobs.

E) Nobody cares about rural areas. 32. Which of the following people would be considered underemployed?

A) Frank is unemployed, but has stopped looking for work.

B) Mary is looking for work in a specialized field.

C) Carlos is not earning as much money as he really needs.

D) Rochelle has a Ph. D but is working in a low-skilled job.

E) Connor has changed jobs three times in the past year.

33. Other things being equal, an improvement in productivity will

A) shift the aggregate demand curve to the left

B) shift the aggregate supply curve to the left

C) shift the aggregate supply curve to the right

D) increase the price level

34. A leftward shift in the aggregate supply curve might best be explained by

A) a decrease in business taxes

B) a decrease in productivity

C) a decrease in nominal wages

D) a decrease in the price of imported resources

35. Which one of the following would not shift the aggregate demand curve?

A) a change in the price level

B) a depreciation of the international value of the dollar

C) a decline in the interest rate at each possible price level

D) an increase in the personal income tax rates

36. The equilibrium price level and level of real national output occur where

A) real national output is at its highest levels

B) exports equal imports

C) the price level is at is lowest level D) the aggregate demand and supply curve intersect

37. An increase in aggregate supply will:

A) reduce the price level and real domestic output

B) reduce the price level and decrease the real domestic output

C) increase the price level and decrease the real domestic output

D) reduce the price level and increase the real domestic output

6. a characteristic may apply to more than one business form.

Management and ownership of business are separate

A) Sole Proprietorship B) Corporation C) Partnership

Most businesses are of this type

Has the ability to raise large sums of money

14. The people who make major policy decisions as to how a corporation will be run are called

A) The board of directors B) Stockholders C) Corporate executives D) Corporate officers

The people who manage a corporation on a daily basis are

A) The board of directors B) Stockholders C) Business leaders D) Corporate officers

With regard to a bond, the amount borrowed is called A) the maturity date B) the interest rate C) the principle D) the cusip number

With regard to a bond, the amount borrowed is paid back on the

A) maturity date B) the interest rate C) the principle D) the cusip number

Costs that change as the quantity a company produces changes are called A) Floating costs B) Fixed costs C) Variable costs D) Total costs

Payments for materials and hourly wages are examples of A) Floating costs B) Fixed costs C) Variable costs D) Total costs 6.

Businesses must decide how much of their product to produce and sell. The level of production they choose is the level at which

A) They will make the greatest profit B) Their company will employ the most people C) They can charge the highest possible price D) Their costs will be the lowest

Economies of scale are achieved by

A) Selling fewer units at a higher price B) Low capital investment C) Capital investments to increase plant size and reduce costs per unit D) All of the above

The marginal product is

A) a product with uncertain durability. B) the extra output or change in total product caused by an additional variable of input. C) The difference between the marginal effects of price variations. D) None of the above.

A profit maximizing business will continue to increase production until

A) the marginal revenue exceeds marginal cost. B) the marginal revenue equals marginal cost. C) The difference between marginal revenue and marginal cost is the greatest D) none of the above. 10.

Diminishing marginal returns implies

A) decreasing average variable costs. B) decreasing marginal costs. C) increasing marginal costs. D) decreasing average fixed costs

Which of the following represents the key difference between the economic short run and the economic long run?

A) In the economic long run the firm is has made commitments to a certain type of production technology (for example, they have signed a lease on a particular production facility), which are represented as fixed costs in the long run. These fixed costs do not exist in the short run. B) In the economic short run the firm is has made commitments to a certain type of production technology (for example, they have signed a lease on a particular production facility), which are represented as fixed costs in the short run. These fixed costs do not exist in the long run. C) The short run corresponds to the anticipated remaining life span of the owner/entrepreneur. D) None of the above.

If total cost is $1,000 when output is zero, and total cost is $1,200 when output is one, and total cost is $1,500 when output is two, then which of the following is true?

A) Total fixed cost is $1,500. B) The marginal cost of producing the first unit of output is $1,500. C) The marginal cost of producing the first unit of output is $1,200. D) The average fixed cost is $750 when two units of output are produced. E) Average total cost is $500 when two units of output are produced.

Use this table for this and the following questions: The average fixed cost of producing 10 units of output is A) $50.00. B) $10.00. C) $2.50. D) $1.00. E) $5.00. 14. The average variable cost of producing 10 units of output is A) $1.00. B) $1.75. C) $2.00. D) $2.25. E) $2.50. 15. The total cost of producing 45 units of output is A) $110. B) $95. C) $105. D) $90. E) $100. 16. The marginal physical product figures in blanks B and C are, respectively, A) 10 and 15. B) 15 and 20. C) 20 and 15. D) 15 and 10. E) 10 and 10. 17. Diminishing marginal returns set in with the addition of the ______unit of the variable input. A) first B) second C) third D) fourth E) fifth 18. What is the average total cost of producing 60 units of output? A) $2.17 B) $1.33 C) $4.17 D) $4.17

A decrease in the supply curve for nurses could be accounted for by all of the following except a(n): A) Increase in the rewards available in other comparable occupations B) Increase in the training required for nurses C) Reduction in the number of nursing schools D) Cut in the wages of nurses

Contract negotiations between union representatives and company management do not lead to an agreement and a third party is brought in to hear both positions and then give a final and binding decision. The process described above is referred to as A) arbitration. B) mediation. C) resolution. D) conciliation.