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69 Cards in this Set

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Which of the following best illustrates fallacy of composition
If Mr. Smith had more money, he would be wealthier; if a nation's money supply were larger, the people of the nation would be wealthier.
A candidate for president made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:
either A or C occurs, but not as a result of B
If the armed forces rely exclusively on volunteers to fill their ranks, it is likely that military personnel will largely be individuals who:
have lower valued opportunities available
Which of the following statements describes a capitalist market-based economy (ie, the United States economy)
I and II only; economic resources are allocated based on prices and profits and private ownership of resources is fundamental to innovation, growth and trade.
Economist believe that people respond to incentives in predictable ways. Therefore, if the government imposed a tax on each child born, one would expect that;
fewer children would be born
"the best way to cure poverty in the US is through an expanded skill training program targeted at inner city unemployment." This statement is an example of
normative economics
The opportunity cost of an action is
the value of the alternatives that must be sacrificed to take the action
when economist assume that people act rationally, it means they:
make decisions based on what they believe is best for themselves using available information
which of the following is most consistent with the rule of rational choice?
"when evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."
Suppose the economy is operating at a point inside its production possibilities curve (PPC) From this information it can be concluded that:
resources are being used inefficiently.
when a person possesses a comparative advantage in the production of one good or service it:
permits gains from trade to be realized due to a more efficient use of resources
specialization and trade are beneficial to two countries:
all of the above
why would the US want to trade with Spain, give that the US is so much larger and more productive?
Comparative advantage
when a country expands its trade with other countries, which of the following is likely to occur?
some job losses will occur in some industries
in general, demand curves slope downward because:
consumers will substitute products fro those products whose prices has risen
The law of supply indicates that
producers will offer more of a product at high prices than they will at low prices
if two goods are complements
all of the above are true
when the price of a product increases, a consumer is able to buy less of the product with a given money income. This describes:
the income effect
students at the University of Missouri Kansas City pay $100 per year for a parking permit. Many students complain, however, that they are unable to find a parking place. This suggests that:
parking permits are underpriced
Assuming that pizza and beer are complements, if the price of pizza decreases, economists would expect:
the demand for beer to increase.
assuming soybeans and tobacco can be grown on the same land, an increase in the price of tobacco, other things being equal, causes a
leftward shift in the supply curve for soybeans
which of the following will NOT impact the demand for orange juice?
agricultural subsidies (government payments) to farmers to grow more oranges
the demand for a good will likely shift outward to the right if:
the price of the good is expected to rise in the future
markets:
bring buyers and sellers together.
Economist believe that individuals act as if they are motivated:
primarily by self-interest
because of scarcity
society must sacrifice valuable alternatives to obtain more goods and services it desires.
"the government should levy higher taxes on the rich and use the additional revenues to provide better housing for the poor." this statement illustrates
a normative economic statement
joe's boss offers him twice his usual wage to work tonight instead of taking his girlfriend to the Bruce Springsteen concert at the Spring Center. This offer will likely:
increase the opportunity cost of going to the concert.
despite the warning on a package of cigarettes about the potential health hazards of smoking, Tom lights up a cigarette. An economist would conclude that:
in Tom's judgement, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.
The following action will NOT shift a production possibility curve (PPC) curve outward:
shifting preferences of consumers to cheaper products
when two countries gain from trade
both countries can move beyond their respective production possibilities curve
If the US Auto Workers Union is able to obtain a substantial wage increase for auto workers, other things being equal, the price of cars will rise. This rise in prices can be attributed to
a decrease in the supply of cars
a new safety report is released that claims that sport utility vehicles are prone to roll over during crashes. The likely effect of this report on the equilibrium price and quantity of sport utility vehicles is:
equilibrium price decrease; equilibrium quantity decrease
what would be the effect on the equilibrium price and equilibrium quantity of new housing if mortgage interest rates rise and the cost of building a house rise simultaneously
the equilibrium price cannot be predicted but the equilibrium quantity will fall.
if both the supply and demand for computer games increases, the the equilibrium price of the games
is indeterminate and the equilibrium quantity rises
suppose the US steps up efforts to combat drug trafficking and, with the aid of the Colobian military, destroys a significant percentage of cocaine crops. Predict the impact of the increased drug interdiction the on the market for cocaine in the US
the supply of cocaine will decrease, causing the price of cocaine to increase
Which of the following is not included in the calculation of GDP
a construction firm's purchase of lumber to build a four bedroom home.
GDP equals $10 trillion. If consumption equals $7 trillion, investment equals $2 trillion, and government spending equals $3 trillion:
imports exceed exports by $2 trillion
In calculating GDP
additions to inventories are added to GDP while decreases in inventories are subtracted from GDP
we would be guilty of double counting if we included in GDP the sales value of
The value of the tires used in the production of a new automobile.
which of the following would count as investment spending in the calculation of GDP?
a rise in the inventories of Dell Computers
Government purchases, under the expenditure approach to calculating GDP, do NOT include:
social security benefit payments to retirees.
Which of the following are most likely classified by economists as consumer durable goods?
Automobiles, furniture, CD players
An item that is included in BOTH US GDP and US GNP is
wages earned by a US citizen employed at an American owned company in Toledo, Ohio.
which of the following factors that affect our well being does GDP fail to adequately account for?
all of the above
which of the following is not part of US GDP?
all of the above ARE included in GDP
Which component of current US GDP under the expenditure approach is the largest?
Consumption
If nominal GDP = $200 billion and the price index =125, Real GDP equals
$160 billion
which of the following activities would the government NOT count as an indication that a person is actively looking for work?
asking friends whether they have heard of any job opportunities.
if the frictional unemployment rate is 4%, the structural unemployment rate is 2%, and the cyclical unemployment rate is 1%
both A and B are correct; the natural rate of unemployment is 6% the overall unemployment rate is 7%
suppose there are 10 million part time workers and 90 million full time in an economy. If five million of the part time workers switch to full time work, we can conclude that
the official unemployment rate will remain unchanged.
economists usually use the term "recession" to refer to
two or more consecutive quarters of declining real GDP
the type of unemployment that occurs because of a recession is called
cyclical unemployment
if there are discouraged workers
the unemployment rate will tend to understate the true level of unemployment
inflation will be LEAST harmful if
it is correctly anticipated and interest rates adjust accordingly
in calculating the CPI, the base year is
both A and C are correct; equal to 100 and the benchmark against which other years are compared
if the consumer price index in 2006 =150 and consumer price index in 2007=188, what is the rate of inflation?
25%
if the real rate of interest is 6.2% and the inflation rate is 4.3%, what is the nominal rate of interest?
10.5%
if the marginal propensity to consume (mpc) is 0.75, then the marginal propensity to save (mps) must be:
0.25
if sam's consumption goes from $8,000 to $12000, what is sam's marginal propensity to consume? (mpc)
0.4
Which of the following will NOT cause the consumption function to shift?
a change in consumer disposable income
a decrease in interest rates is likely to result in
an increase in consumption spending
the equation C=0.75Y + 35, where C is consumption and Y is disposable income, tell us:
households will consume $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive
assume that a new machine tool having a useful life of only one year cost $80,000. Also assume that net of such operating costs as power, taxes, and so forth, the additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is:
20%
If the price level increases in the US relative to foreign countries, then American consumers will purchase more foreign goods and fewer American goods" this statement describes
the foreign purchases effect
a decrease in aggregate demand (AD) would result from:
higher taxes
which of the following is most likely to favor the appreciation of the American dollar:
an American professor on extended vacation in Paris
The discovery of new profitable technological investment opportunities, combined with inventory levels that have risen far above desired levels, would have what effect on aggregate demand (AD)?
AD could either increase or decrease, depending on which change was of a greater magnitude
If the US dollar depreciates relative to foreign currencies,we would expect;
US exports to rise and imports to fall