Econ: Multiple Choice I

Front 1

1. Macroeconomics deals with:
A) bits and pieces of the economy.
B) the question of how a business unit should operate profitably.
C) the working of the entire economy or large sectors of it.
D) how individuals make decisions.

Back 1

C) the working of the entire economy or large sectors of it.

Front 2

2. The primary emphasis in macroeconomics is on:
A) how firms set prices.
B) the national economy.
C) marginal analysis.
D) bits and pieces of the economy.

Back 2

B) the national economy.

Front 3

3. The problem of scarcity is confronted by:
A) industrialized societies only.
B) preindustrialized societies only.
C) societies governed by communist philosophies only.
D) all societies.

Back 3

D) all societies.

Front 4

4. A key theme fundamental to all of economics is:
A) There are limited wants.
B) We are a rich country but are simply not aware of it.
C) People have unlimited wants facing limited means to satisfy them.
D) There are unlimited resources.

Back 4

C) People have unlimited wants facing limited means to satisfy them.

Front 5

5. Scarcity exists when:
A) making choices among two or more alternatives is not necessary.
B) individuals can have more of any good.
C) individuals can have more of one good but only at the expense of another.
D) resources are unlimited.

Back 5

C) individuals can have more of one good but only at the expense of another.

Front 6

6. Scarcity in economics means:
A) We do not have sufficient resources to produce all of the goods and services we
want.
B) The wants of people are limited.
C) There must be poor people in rich countries.
D) Economists are clearly not doing their jobs.

Back 6

A) We do not have sufficient resources to produce all of the goods and services we
want.

Front 7

7. Opportunity cost is:
A) about half of the monetary cost of a product.
B) the dollar payment for a product.
C) the benefit derived from a product.
D) the value of the best alternative forgone in making any choice.

Back 7

D) the value of the best alternative forgone in making any choice.

Front 8

8. The opportunity cost of something is:
A) greater during periods of rising prices.
B) equal to the money cost.
C) less during periods of falling prices.
D) what is given up to acquire it.

Back 8

D) what is given up to acquire it.

Front 9

9. Which of the following demonstrates how people respond to incentives to make themselves better off?
A) More students major in economics when they hear that salaries for economists are
rising.
B) Students are assigned dorm rooms through a lottery system.
C) Students are encouraged to donate blood because it is the “right thing to do.”
D) Students and faculty are encouraged to wear college apparel to support the college
athletic teams.

Back 9

A) More students major in economics when they hear that salaries for economists are
rising.

Front 10

10. Which of the following policies is most likely to reduce traffic congestion in a large metropolitan area?
A) a limited number of free “early bird” parking passes given only to those who arrive
prior to 6 A.M.
B) a toll road that requires each car to pay a fee to enter the city center
C) an increase in the price of subway and bus fare to and from the city
D) asking citizens to carpool

Back 10

B) a toll road that requires each car to pay a fee to enter the city center

Front 11

11. A simplified representation that is used to study a real situation is called:
A) a model.
B) a production possibility frontier.
C) an assumption.
D) a trade-off.

Back 11

A) a model.

Front 12

12. Economic models are:
A) created and used to duplicate reality.
B) useless if they are simple.
C) made generally of wood, plastic, and/or metal.
D) often useful in forming economic policy.

Back 12

D) often useful in forming economic policy.

Front 13

15. All points inside the production possibility frontier represent:
A) efficient production points.
B) inefficient production points.
C) infeasible production points.
D) economic growth.

Back 13

B) inefficient production points.

Front 14

16. All points on the production possibility frontier are: A) efficient production points.
B) inefficient production points.
C) infeasible production points.
D) economic growth.

Back 14

A) efficient production points.

Front 15

17. As long as people have different ________, everyone has a comparative advantage in something.
A) direct costs
B) benefits
C) utility
D) opportunity costs

Back 15

D) opportunity costs

Front 16

18. An economy is said to have a comparative advantage if it:
A) can produce more of all goods than another economy.
B) can produce less of all goods than another economy.
C) has the highest cost for producing a particular good.
D) has the lowest cost for producing a particular good.

Back 16

D) has the lowest cost for producing a particular good.

Front 17

19. Which of the following is a normative statement?
A) Women's labor force participation rate has increased during the past 100 years.
B) The federal minimum wage is higher today than it was in 1990.
C) Children in the United States are required to go to school until they reach a certain
age.
D) The best way to encourage growth in the economy is through government
spending.

Back 17

D) The best way to encourage growth in the economy is through government
spending.

Front 18

20. Which of the following is a normative statement?
A) International trade leads to expanded consumption opportunities.
B) Higher expenditures on health care will reduce infant mortality rates.
C) We would all be better off if we could reduce our dependence on oil imports.
D) Increased defense spending will lead to higher budget deficits.

Back 18

C) We would all be better off if we could reduce our dependence on oil imports.

Front 19

21. An example of a positive statement is:
A) the rate of unemployment is 4%.
B) a high rate of economic growth is good for the country.
C) everyone in the country should be covered by national health insurance.
D) baseball players should not be paid higher salaries than the president of the United
States.

Back 19

A) the rate of unemployment is 4%.

Front 20

22. An example of a positive statement is:
A) the rate of unemployment should be 4%.
B) a high rate of economic growth is good for the country.
C) the federal government spends half of its budget on national defense.
D) everyone in the country should be covered by national health insurance.

Back 20

C) the federal government spends half of its budget on national defense.

Front 21

29. A negative relationship between the quantity demanded and price is called the law of:
A) demand.
B) increasing returns.
C) market clearing.
D) supply.

Back 21

A) demand.

Front 22

30. A negative relationship between the quantity demanded and price is called the law of ________.
A) demand
B) marginality C) efficiency D) supply

Back 22

A) demand

Front 23

31. A shift of the demand curve for thin-crust pizza would not be caused by a change in:
A) buyers' incomes.
B) the price of thin-crust pizza.
C) the price of thick-crust pizza.
D) the popularity of thin-crust pizza.

Back 23

B) the price of thin-crust pizza.

Front 24

32. Which of the following statements is correct?
A) A change in demand is a movement along the demand curve, and a change in
quantity demanded is a shift of the demand curve.
B) Both a change in quantity demanded and a change in demand are movements along
the demand curve, only in different directions.
C) Both a change in quantity demanded and a change in demand are shifts of the
demand curve, only in different directions.
D) A change in quantity demanded is a movement along the demand curve, and a
change in demand is a shift of the demand curve.

Back 24

D) A change in quantity demanded is a movement along the demand curve, and a
change in demand is a shift of the demand curve.

Front 25

33. If the demand for tires goes down when the price of gas goes up, then tires and gas are:
A) substitutes.
B) complements.
C) both expensive.
D) both inexpensive.

Back 25

B) complements.

Front 26

34. If people demand more of product A when the price of B falls, then A and B are:
A) not related.
B) substitutes.
C) complements.
D) inferior goods.

Back 26

C) complements.

Front 27

35. If chicken and beef are substitutes, then a fall in the price of chicken will bring about:
A) an increase in the demand for beef.
B) a decrease in the demand for beef.
C) a decrease in the quantity demanded of beef.
D) no change in the demand for beef.

Back 27

B) a decrease in the demand for beef.

Front 28

36. An increase in the price of hamburger would probably result in ________ in the demand for hamburger buns.
A) a decrease
B) an increase
C) no change
D) random fluctuations

Back 28

A) a decrease

Front 29

37. Which of the following would shift the demand curve for new textbooks to the right?
A) a decrease in the price of paper
B) a fall in the price of used textbooks
C) an increase in college enrollment
D) a fall in the price of new textbooks

Back 29

C) an increase in college enrollment

Front 30

38. Which of the following is likely to cause a rightward shift in the demand for home-delivered pizza?
A) a lower price of pizza
B) a lower price of fast-food hamburgers
C) a higher price of pepperoni
D) a larger population

Back 30

D) a larger population

Front 31

39. The demand curve for running shoes has shifted to the right. What could have caused it?
A) a fall in the price of running shoes
B) an increase in the price of running shoes
C) an increase in the supply of running shoes
D) an increase in the income of buyers of running shoes

Back 31

D) an increase in the income of buyers of running shoes

Front 32

40. The typical supply curve illustrates that:
A) other things equal, the quantity supplied for a good is inversely related to the price
of a good.
B) other things equal, the supply of the good creates its own demand for the good.
C) other things equal, the quantity supplied for a good is positively related to the price
of a good.
D) price and quantity supplied are unrelated.

Back 32

C) other things equal, the quantity supplied for a good is positively related to the price
of a good.

Front 33

41. The primary difference between a change in supply and a change in the quantity supplied is that:
A) a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve.
B) both a change in quantity supplied and a change in supply are movements along the supply curve, only in different directions.
C) a change in supply is related to the supply curve, while a change in quantity supplied is related to shifts in the demand curve that elicit a change in supply.
D) a change in supply is a movement along the supply curve, while a change in quantity supplied is a shift in the supply curve.

Back 33

A) a change in quantity supplied is a movement along the supply curve, while a change in supply is a shift in the supply curve.

Front 34

42. Market equilibrium occurs when:
A) there is no incentive for prices to change in the market.
B) quantity demanded equals quantity supplied.
C) the market clears.
D) there is no incentive for prices to change in the market, quantity demanded equals
quantity supplied, and the market clears.

Back 34

D) there is no incentive for prices to change in the market, quantity demanded equals
quantity supplied, and the market clears.

Front 35

43. The market equilibrium is found at the:
A) price where quantity demanded exceeds quantity supplied.
B) price where quantity demanded equals quantity supplied.
C) price where quantity supplied exceeds quantity demanded.
D) highest price the market will bear.

Back 35

B) price where quantity demanded equals quantity supplied.

Front 36

44. If the quantity supplied in a market exceeds the quantity demanded in a market, we would expect prices to:
A) stay the same.
B) rise.
C) fall.
D) rise in order to clear the market.

Back 36

C) fall.

Front 37

45. Excess supply occurs when:
A) the price is above the equilibrium price.
B) the quantity demanded exceeds the quantity supplied.
C) the price is below the equilibrium price.
D) the quantity demanded exceeds the quantity supplied and when the price is below
the equilibrium price.

Back 37

A) the price is above the equilibrium price.

Front 38

48. A shift of a demand curve to the right, all other things unchanged, will:
A) increase equilibrium price and quantity.
B) decrease equilibrium price and quantity.
C) decrease equilibrium quantity and increase equilibrium price.
D) increase equilibrium quantity and decrease equilibrium price.

Back 38

A) increase equilibrium price and quantity.

Front 39

49. Which of the following always results in an increase in price and quantity?
A) an increase in supply and a decrease in demand
B) an increase in demand with no change in supply
C) an increase in supply with no change in demand
D) a decrease in demand and supply

Back 39

B) an increase in demand with no change in supply

Front 40

50. A new wonder diet that results in a dramatic weight loss sweeps through America. The key to the diet is to eat unlimited amounts of red meat (beef) but no poultry or carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect:
A) an increase in the demand for beef, leading to a shift to the right in the demand curve for beef and higher beef prices.
B) an increase in the demand for beef, leading to a shift to the right in the demand curve for beef and lower beef prices.
C) a decrease in the supply of beef, leading to a shift to the left in the supply curve for beef and higher beef prices.
D) a decrease in the demand for beef, leading to a shift to the left in the demand curve for beef and higher beef prices.

Back 40

A) an increase in the demand for beef, leading to a shift to the right in the demand curve for beef and higher beef prices.

Front 41

51. A new wonder diet that results in a dramatic weight loss sweeps through America. The key to the diet is to eat unlimited amounts of red meat (beef) but no poultry or carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect:
A) a decrease in the supply of poultry, leading to a shift to the left in the supply curve for poultry and higher poultry prices.
B) an increase in the supply of poultry, leading to a shift to the right in the supply curve for poultry and higher poultry prices.
C) a decrease in the demand for poultry, leading to a shift to the right in the demand curve for poultry and lower beef prices.
D) a decrease in the demand for poultry, leading to a shift to the left in the demand curve for poultry and lower poultry prices.

Back 41

D) a decrease in the demand for poultry, leading to a shift to the left in the demand curve for poultry and lower poultry prices.

Front 42

52. Suppose that supply increases and demand decreases. What is the most likely effect on price and quantity?
A) The price will increase, but quantity may increase, decrease, or stay the same.
B) The price will decrease, but quantity may increase, decrease, or stay the same.
C) The price will decrease and quantity will decrease.
D) The price will increase and quantity will increase.

Back 42

B) The price will decrease, but quantity may increase, decrease, or stay the same.

Front 43

53. An ambiguous change in price and a decrease in quantity are most likely caused by:
A) no shift in supply and a shift to the left in demand.
B) a shift to the left in supply and a shift to the left in demand.
C) a shift to the right in supply and a shift to the left in demand.
D) a shift to the left in supply and a shift to the right in demand.

Back 43

B) a shift to the left in supply and a shift to the left in demand.

Front 44

56. Good X and good Y are related goods. If the price of good X increases and the demand for good Y shifts left, these goods are:
A) complements.
B) substitutes.
C) inferior. D) normal.

Back 44

A) complements.

Front 45

57. Good X and good Y are related goods. Holding everything else constant, if the price of X decreases and the demand for Y increases, then this most likely means that X and Y are:
A) complements.
B) substitutes. C) inferior. D) normal.

Back 45

A) complements.

Front 46

59. The horizontal summation of individual demand curves for a particular product, holding the quantity demanded constant, is referred to as:
A) market demand.
B) market supply.
C) complements in production.
D) substitutes in production.

Back 46

A) market demand.

Front 47

60. Milk is an important ingredient in the production of ice cream. If the price of milk increases, then one would expect, holding all other things constant:
A) the supply curve for ice cream to shift left.
B) the supply curve for ice cream to shift right.
C) no change in the supply curve for ice cream.
D) a movement along the supply curve for ice cream curve, resulting in more ice
cream supplied.

Back 47

A) the supply curve for ice cream to shift left.

Front 48

61. High-fructose corn syrup, which is derived from corn, is an important ingredient in the production of many soft drinks. If the price of corn increases, one would expect:
A) the supply curve for soft drinks to shift left.
B) the quantity supplied of soft drinks to increase.
C) the demand for soft drinks to increase.
D) the supply curve for soft drinks to shift right.

Back 48

A) the supply curve for soft drinks to shift left.

Front 49

62. When a market is in equilibrium, one will find that the:
A) quantity demanded is equal to zero.
B) quantity demanded is equal to quantity supplied.
C) quantity demanded is greater than quantity supplied.
D) quantity supplied is zero.

Back 49

B) quantity demanded is equal to quantity supplied.

Front 50

65. An increase in the price of sugar (an ingredient for soft drinks) and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following in the soft drink market?
A) There will be an increase in both the equilibrium price and quantity.
B) Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.
C) There will be a decrease in both equilibrium price and quantity.
D) Equilibrium quantity will increase, but equilibrium price may decrease, increase, or
stay the same.

Back 50

B) Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.

Front 51

66. An increase in the price of wheat, an important ingredient in the production of bread, combined with an increase in the number of people consuming bread, will result in which of the following changes in the bread market?
A) Both the equilibrium price and quantity will increase.
B) Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.
C) Both the equilibrium price and quantity will decrease.
D) Equilibrium price will increase, but equilibrium quantity may decrease, increase, or
stay the same.

Back 51

D) Equilibrium price will increase, but equilibrium quantity may decrease, increase, or
stay the same.

Front 52

67. The topics studied in macroeconomics include:
A) inflation.
B) unemployment.
C) economic growth.
D) inflation, unemployment, and economic growth.

Back 52

D) inflation, unemployment, and economic growth.

Front 53

68. Macroeconomics involves the study of the:
A) overall behavior of the economy.
B) individual decision makers in the economy.
C) different market structures that exist in the economy.
D) cost and production decisions made by firms.

Back 53

A) overall behavior of the economy.

Front 54

69. If all of the households and businesses in the economy start saving more during economic hard times, then aggregate income will fall, hurting everyone in the economy. This is known as:
A) the quantity theory.
B) the crowding-out theory.
C) the paradox of thrift.
D) the permanent income hypothesis.

Back 54

C) the paradox of thrift.

Front 55

70. A rubbernecking traffic jam is an example of:
A) microeconomics in action.
B) individual behavior that has a large aggregate impact.
C) the paradox of thrift.
D) an outcome smaller than the sum of its parts.

Back 55

B) individual behavior that has a large aggregate impact.

Front 56

71. In the paradox of thrift:
A) firms that are pessimistic about the future lay off the most saving-conscientious
workers.
B) when families and business are feeling pessimistic about the future, they spend
more today.
C) increased saving by individuals increases their chances of becoming unemployed.
D) profligate behavior during economic tough times has large negative consequences
for society.

Back 56

C) increased saving by individuals increases their chances of becoming unemployed.

Front 57

72. Changing the level of government spending is an example of:
A) fiscal policy.
B) interest rate policy.
C) monetary policy.
D) exchange rate policy.

Back 57

A) fiscal policy.

Front 58

73. The modern tools of macroeconomic policy are:
A) tax policy and antitrust policy.
B) fiscal policy and monetary policy.
C) monetary policy and exchange rate policy.
D) capital policy and labor policy.

Back 58

B) fiscal policy and monetary policy.

Front 59

74. Monetary policy involves:
A) changes in government spending.
B) changes in government tax receipts.
C) changes in the quantity of money.
D) changes in tax rates.

Back 59

C) changes in the quantity of money.

Front 60

75. Fiscal policy involves:
A) changes in interest rates.
B) changes in government spending.
C) changes in the quantity of money.
D) changes in the quantity of money and interest rates.

Back 60

B) changes in government spending.

Front 61

76. When the Great Depression reached its trough in 1933, the unemployment rate was approximately:
A) 5%. B) 10%. C) 25%. D) 50%.

Back 61

C) 25%.

Front 62

77. Periods in which output and employment are falling are known as:
A) recessions.
B) booms.
C) expansions. D) deflations.

Back 62

A) recessions.

Front 63

78. An expansion is a period in which:
A) output declines.
B) the price level falls.
C) output rises.
D) unemployment rises.

Back 63

C) output rises.

Front 64

79. Recessions are periods when:
A) output rises.
B) the aggregate price level rises.
C) the unemployment rate is falling.
D) output and employment are falling.

Back 64

D) output and employment are falling.

Front 65

80. The short-run alternation between economic downturns and recessions, then economic upturns and expansions is known as the:
A) business cycle.
B) contractionary cycle.
C) expansionary cycle.
D) disequilibrium cycle.

Back 65

A) business cycle.

Front 66

81. A business cycle is:
A) a very deep and prolonged economic downturn.
B) a period in which output and employment are rising.
C) a period in which output and employment are falling.
D) a short-run alternation between economic upturns and downturns.

Back 66

D) a short-run alternation between economic upturns and downturns.

Front 67

82. An economic expansion in the United States is typically associated with:
A) a falling inflation rate.
B) an increase in the poverty rate.
C) a falling unemployment rate.
D) a decrease in corporate profits.

Back 67

C) a falling unemployment rate.

Front 68

83. Economists have identified several consecutive months of falling employment and forecasts for the next few months suggest more of the same. At what point in the business cycle is the economy?
A) recession
B) expansion
C) business-cycle peak
D) business-cycle trough

Back 68

A) recession

Front 69

84. The sequence of business cycle phases is:
A) business-cycle peak, business-cycle trough, expansion, recession.
B) business-cycle peak, expansion, business-cycle trough, recession.
C) business-cycle peak, recession, business-cycle trough, expansion.
D) business-cycle peak, expansion, recession, business-cycle trough.

Back 69

C) business-cycle peak, recession, business-cycle trough, expansion.

Front 70

85. Suppose an economy has rising total output accompanied by increasing employment. This is generally known as:
A) stagflation.
B) recession.
C) inflation
D) expansion.

Back 70

D) expansion.

Front 71

86. In many countries, economists adopt the rule that a recession is a period of at least ______ during which aggregate output falls.
A) one quarter
B) two consecutive quarters
C) three consecutive quarters
D) a full year

Back 71

B) two consecutive quarters

Front 72

87. Which of the following measures is typically used as an indicator of the conditions in the labor market?
A) the unemployment rate
B) the population growth rate
C) the inflation rate
D) the trade deficit

Back 72

A) the unemployment rate

Front 73

88. The purpose of macroeconomic policy is to:
A) bring unemployment closer to the natural rate.
B) reduce the severity of recessions.
C) rein in excessively strong expansions.
D) bring unemployment closer to the natural rate, rein in excessively strong
expansions, and reduce the severity of recessions.

Back 73

D) bring unemployment closer to the natural rate, rein in excessively strong
expansions, and reduce the severity of recessions.

Front 74

89. Long-run growth is the sustained upward trend in:
A) aggregate output per person over several decades.
B) nominal GDP over time.
C) interest rates over time.
D) aggregate output per person over the business cycle.

Back 74

A) aggregate output per person over several decades.

Front 75

90. Long-run growth is:
A) the sustained upward trend in aggregate output per person over several decades.
B) the expansion phase of business cycles.
C) the downturn phase of business cycles.
D) the sustained downward trend in the employment rate over several decades.

Back 75

A) the sustained upward trend in aggregate output per person over several decades.

Front 76

91. If the economy grew at a 3% rate this year and average prices increased ______, people would be better off this year than last year.
A) 3%
B) faster than 3%
C) less than 3%
D) faster than 10%

Back 76

C) less than 3%

Front 77

92. If wages grew at a 5% rate last year and average prices grew at a 3% rate, then the average worker is:
A) better off.
B) worse off.
C) no better or worse off.
D) unaffected.

Back 77

A) better off.

Front 78

93. If workers' nominal wages have risen by 50% over a ten-year period and prices have increased by 40% in that same period, then we can safely conclude that the amount of goods and services that workers can buy has
A) fallen.
B) increased.
C) not changed.
D) It is impossible to determine whether the amount of goods and services that
workers can purchase has changed and in what direction.

Back 78

B) increased.

Front 79

94. An increase in the nation's overall price level is:
A) long-term economic growth.
B) unemployment.
C) inflation.
D) deflation.

Back 79

C) inflation.

Front 80

95. With inflation:
A) overall prices are increasing, although some prices may be increasing and some
may be decreasing.
B) all prices must be increasing.
C) the economy must be contracting.
D) the economy must be producing at full employment.

Back 80

A) overall prices are increasing, although some prices may be increasing and some
may be decreasing.

Front 81

96. Inflation:
A) raises the cost of making purchases and sales for which cash is required.
B) can result in a decrease in barter transactions.
C) encourages people to hold cash.
D) is caused by changes in interest rates.

Back 81

A) raises the cost of making purchases and sales for which cash is required.

Front 82

97. Deflation:
A) raises the cost of making purchases and sales for which cash is required.
B) can result in an increase in employment.
C) encourages people to hold cash rather than invest in new factories and productive
assets.
D) is caused by changes in interest rates.

Back 82

C) encourages people to hold cash rather than invest in new factories and productive
assets.

Front 83

98. Which of the following is true about inflation and deflation?
A) Both are good for the economy.
B) Inflation is always good for the economy and deflation is always bad for the
economy.
C) Inflation is always bad for the economy and deflation is always good for the
economy.
D) Both inflation and deflation can pose problems for the economy.

Back 83

D) Both inflation and deflation can pose problems for the economy.

Front 84

99. Price stability occurs when:
A) the overall price level is zero.
B) the economy is at full employment.
C) the overall cost of living is changing very slowly.
D) food prices have remained the same.

Back 84

C) the overall cost of living is changing very slowly.

Front 85

100. If a country sold more goods and services to the rest of the world than it purchased from the other countries, then the country has a:
A) trade deficit.
B) budget deficit.
C) trade surplus.
D) budget surplus.

Back 85

C) trade surplus.

Front 86

101. If a country has a trade deficit, does it indicate that the country has a serious problem?
A) No. Trade deficits occur when a country's investment spending is higher than its
level of saving.
B) Yes. Trade deficits occur when a country has low worker productivity.
C) Yes. Trade deficits occur when a country does not have a comparative advantage in
production.
D) Yes. Trade deficits occur when a country has high budget surplus.

Back 86

A) No. Trade deficits occur when a country's investment spending is higher than its
level of saving.

Front 87

102. When the value of a nation's imports exceeds the value of that nation's exports, the nation is said to have:
A) hyperinflation.
B) a trade deficit.
C) price stability.
D) a trade surplus.

Back 87

B) a trade deficit.

Front 88

103. The trade balance is the difference between the value of the:
A) trade deficit and the budget deficit.
B) goods and services that a country sells to other countries and the value of the goods
and services it buys in return.
C) exchange rates of two countries that are engaged in international trade.
D) national debt and the foreign debt.

Back 88

B) goods and services that a country sells to other countries and the value of the goods
and services it buys in return.

Front 89

104. The paradox of thrift highlights:
A) the role investment plays in the macroeconomy.
B) how individual decisions to save more may worsen a recession.
C) how an increase in spending occurs during recessions.
D) the irrational behavior on the part of households.

Back 89

B) how individual decisions to save more may worsen a recession.

Front 90

105. Fiscal and monetary policies:
A) have no role in macroeconomic policies.
B) have been used by the government for over 250 years.
C) are most effective in microeconomic settings.
D) are used to correct for short-term economic fluctuations.

Back 90

D) are used to correct for short-term economic fluctuations.

Front 91

106. Fiscal policy involves:
A) deliberate changes in the money supply.
B) deliberate changes in taxation and/or government spending.
C) changes in interest rates in specific markets.
D) changes which correct only recessionary problems.

Back 91

B) deliberate changes in taxation and/or government spending.

Front 92

107. During a recession, one will often observe:
A) rising aggregate output.
B) rising unemployment rates and falling aggregate output.
C) rising employment rates.
D) zero unemployment rates.

Back 92

B) rising unemployment rates and falling aggregate output.

Front 93

108. When an economy is operating between the business cycle trough and the business cycle peak, it is called:
A) an expansion.
B) a contraction.
C) a short-run phenomenon.
D) the beginning of a fall in aggregate spending.

Back 93

A) an expansion.

Front 94

109. A contraction in the business cycle is:
A) called the long run.
B) called a recession.
C) accompanied by an increase in employment.
D) viewed as a rarity.

Back 94

B) called a recession.

Front 95

110. When an economy is in an expansion, unemployment:
A) tends to fall, and overall prices tend to rise.
B) and overall prices tend to fall.
C) tends to rise, and overall prices tend to fall.
D) and overall prices tend to rise.

Back 95

A) tends to fall, and overall prices tend to rise.

Front 96

111. An overall decrease in the price level is called.
A) inflation.
B) deflation.
C) long-run growth.
D) the result of an increase in economic production.

Back 96

B) deflation.

Front 97

112. The national accounts keep track of everything except:
A) the spending of consumers and the government.
B) the sales of producers.
C) business investment.
D) exchange rates.

Back 97

D) exchange rates.

Front 98

113. According to the circular-flow diagram, which of the following economic agents engages in consumer spending?
A) firms
B) households
C) factor markets
D) financial markets

Back 98

B) households

Front 99

114. Households derive income from all of the following except:
A) wages or labor income.
B) interest from lending.
C) rent from allowing firms to use their land.
D) imports.

Back 99

D) imports.

Front 100

120. In the circular-flow model, households:
A) receive transfer payments from the government.
B) buy resources in the factor markets.
C) sell products in the market for goods and services.
D) issue stocks and bonds to raise capital.

Back 100

A) receive transfer payments from the government.