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Because people’s wants are unlimited but resources are scarce,

ECO105 Macroeconomics

Module 2 Quiz  

Question 1Because people’s wants are unlimited but resources are scarce,

  there will be more services produced than goods

 

  choices must be made

 

  poor people never get anything they want

 

  only the rich get everything they want

 

 Question 2The problem of scarce resources

 

  is that there are not enough resources to satisfy people’s unlimited wants

 

  means that in some cities there are not enough jobs

 

  is that resources are used inefficiently

 

  could be solved if the unemployment rate fell

 

 Question 3Economics is best defined as the study of how

 

  individuals decide to use scarce resources in an attempt to satisfy their unlimited wants

 

  to make money

 

  to eliminate the problem of scarce resources

 

  the government should deal with unemployment and inflation

 

 Question 4In economics, capital is defined as

 

  natural resources, such as water, oil, and iron ore

 

  the natural, unskilled abilities of people

 

  money and other financial assets

 

  human creations used in the production process

 

 Question 5Economists classify all of the following as capital, except one. Which one is not capital?

 

  a plumber’s wrench

 

  a railroad car

 

  a $20 bill in a firm’s petty cash drawer

 

  the building where our economics class meets

 

 Question 6If a business produces and sells only one unit of a good, its profit would be the

 

  price received for the good

 

  wages paid for the labor used to produce the product minus the price

 

  price of the product minus the cost of the resources used to produce the product

 

  return paid to the firm’s bank on its outstanding loans

 

 Question 7The difference between a good and a service is that

 

  a services is available in unlimited quantities; a good is not

 

  a service helps satisfy unlimited wants; a good does not

 

  a good is tangible; a service is not

 

  a good helps satisfy unlimited wants; a service does not

 

 Question 8Which of the four types of decision makers in the U.S. economyplays the largest role?

 

  U.S. firms and government because they produce the products that households consume

 

  U.S. households, as buyers in product markets and sellers in resource markets

 

  U.S. firms and government because they create employment for domestic households and produce goods and services

 

  U.S. households because they supply goods to the product markets and are demanders in resource markets

 

 Question 9A market

 

  facilitates exchanges between buyers and sellers

 

  typically involves monetary transactions

 

  is often a physical place

 

  all of the above

 

 Question 10In economics, the term “marginal” usually refers to

 

  an all-or-nothing economic decision

 

  a low-quality product or resource

 

  a small change in an economic variable

 

  an unimportant and irrelevant economic variable

 

 

 

 

 

ECO105 Macroeconomics

 

Module 3 Quiz  

 

Question 1Which of the four types of economic decision makers is most important?

 

  households, because they demand goods and services and supply resources

 

  government, because it ultimately sets and enforces the “rules of the game”

 

  firms, because they produce all goods and services in the economy

 

  the rest of the world, because there are over 150 countries

 

 Question 2Harold, a delivery man, washes and irons his own shirts. Sarah,his boss, sends her clothes to a laundry. Which is the most plausible economic explanation for this difference?

 

  Harold must be better at ironing than Sarah is.

 

  Sarah has a higher opportunity cost of laundering her clothes than Harold does.

 

  The opportunity cost of ironing is greater for Harold.

 

  Harold must enjoy ironing more than Sarah does.

 

 Question 3The objective of the household is to

 

  maximize household wealth

 

  acquire as many goods as possible

 

  own as much land as possible

 

  maximize utility

 

 Question 4Rationality in the household decision-making process means that

 

  everyone in the household agrees on all decisions

 

  households act in their own best interests

 

  all households make the same decisions

 

  households want to earn as much income as possible

 

Question 5Which resource generates the largest share of the income in the United States?

 

  entrepreneurial ability

 

  labor

 

  capital

 

  land

 

 Question 6Which of the following is an example of an in-kind transfer?

 

  food stamps

 

  welfare payments

 

  unemployment compensation payments

 

  charitable contributions

 

 Question 7Which of the following represents the largest source of income for U.S. households?

 

  wages and salaries

 

  transfer payments

 

  personal interest

 

  rental income

 

 Question 8Households supply four basic types of resources. They include allof the following except

 

  labor

 

  final goods and services

 

  capital

 

  natural resources

 

 Question 9Which of the following is an example of a durable good?

 

  food prepared at home

 

  binoculars

 

  motor oil

 

  high-fashion clothing

 

 Question 10A cottage industry is one that

 

  carries out production in workers’ homes

 

  uses highly specialized resources in a complex production process

 

  produces rural housing

 

  produces cottage cheese

 

 

 

 

 

ECO105 Macroeconomics

 

Module 4 Quiz  

 

Question 1The ultimate objective of macroeconomics is to

 

  develop and test theories about how the overall economy works

 

  improve the international competitiveness of the U.S. financial markets

 

  stabilize the economy’s growth rate

 

  reduce the unemployment rate

 

 Question 2Which of the following is a stock variable?

 

  the federal government’s budget deficit

 

  the federal government’s debt

 

  consumer income               

 

  business spending on capital equipment

 

 Question 3Which of the following is a flow variable?

 

  the U.S. population

 

  investment spending

 

  money supply

 

  U.S. plant and equipment

 

 Question 4If business leaders become optimistic about future sales and profits, they will __________ spending on plant and equipment, which __________ employment and income and, therefore, their expectations are __________.

 

  increase; decreases; fulfilled

 

  increase; increases; fulfilled

 

  decrease; decreases; fulfilled

 

  increase; increases; not met

 

 Question 5During the Great Depression, President Hoover

 

  incorrectly called for a decrease in taxes

 

  incorrectly called for an increase in taxes

 

  correctly called for a decrease in government spending

 

  correctly called for an increase in taxes

 

 Question 6A recession is best defined as a period during which

 

  the budget deficit and trade deficit are both growing

 

  more resources are used

 

  he percentage of the population employed is declining

 

  employment, output, and income decline

 

 Question 7A depression can be defined as

 

  a mild reduction in total production coupled with a rising unemployment rate that lasts for several years

 

  a severe reduction in total production coupled with high unemployment that lasts several years

 

  a decline in government spending and taxes that lasts for several months

 

  a decline in total production that lasts less than six months

 

 Question 8When economists refer to the economy’s price level, they mean

 

  the price of goods and services relative to consumers’ incomes

 

  the rate of inflation

 

  a general measure of prices of all goods and services

 

  a period of level, or steady, prices

 

 Question 9If the wealth of consumers increases substantially, this would shift

 

  the aggregate supply curve outward

 

  the aggregate supply curve inward

 

  the aggregate demand curve inward

 

  the aggregate demand curve outward

 

 Question 10Equilibrium of aggregate supply and aggregate demand is best described as a situation in which

 

  the slope of aggregate demand equals the slope of aggregate supply

 

  quantity supplied exceeds quantity demanded at a unique price level

 

  quantity demanded equals quantity supplied at a unique price level

 

  quantity demanded exceeds quantity supplied

 

 

 

 

 

ECO105 Macroeconomics

 

Module 5 Quiz   

 

Question 1A government program that invested in financial institutions and automakers to help stabilize markets during the great recession of 2008 was the _____

 

  Social Security System.

 

  Troubled Asset Relief Program.

 

  Supplemental Security Income Program.

 

  Public Housing Assistance Program.

 

 Question 2The objective of a demand-management policy is to ___

 

  decrease aggregate demand to smooth economic fluctuations.

 

  increase or decrease aggregate demand to smooth economic fluctuations.

 

  increase aggregate demand to smooth economic fluctuations.

 

  increase or decrease aggregate supply to smooth economic fluctuations.

 

 Question 3The chair of the Board of Governors of the Fed serves _____.

 

  a fourteen-year term.

 

  a seven-year term.

 

  a four-year term.

 

  a two-year term that coincides with that of members of Congress.

 

 Question 4If the purchasing power of a dollar measured in terms of the base year was $1, what was the price index?

 

  41

 

  100

 

  244

 

  42

 

 Question 5Which of the following is true of the unit of account function of money?

 

  It makes money durable in nature.

 

  It implies that money can be used to save up purchasing power.

 

  It makes the values of goods and services known.

 

  It implies that money should be made of something valuable.

 

 Question 6A new tax introduced by the government will _____.

 

  increase disposable income.

 

  lead to a reduction in government spending.

 

  lead to an increase in investment.

 

  decrease disposable income.

 

 Question 7A decrease in net taxes _____.

 

  lowers aggregate expenditure by lowering disposable income, thereby decreasing consumption.

 

  raises aggregate expenditure by raising disposable income, thereby increasing consumption.

 

  raises aggregate expenditure by raising disposable income, thereby decreasing consumption.

 

  lowers aggregate expenditure by lowering disposable income, consumption remaining constant.

 

 Question 8Each member of the Board of Governors of the Fed serves _____.

 

  until a new president is elected.

 

  a four-year term that does not coincide with the term of the current president.

 

  a four-year term that begins at the same time as that of the newly elected president.

 

  a fourteen-year term.

 

 Question 9As a result of the financial crises in 2008, which bank was seized by the FDIC after a 10-day bank run during which depositors withdrew $16 billion, or about 10 percent of all deposits?

 

  JPMorgan Chase

 

  Bank of America

 

  Washington Mutual

 

  Wells Fargo

 

 Question 10In which of the following ways does government affect the consumption component of planned aggregate expenditures?

 

  through net taxes, which change disposable income

 

  by reducing the interest rate to encourage firms to invest

 

  by purchasing goods and services, which increase consumption

 

  by using subsidies to encourage firms to invest

 

 

 

 

 

ECO105 Macroeconomics

 

Module 6 Quiz   

 

Question 1The demand for money is a relationship between _____.

 

   the interest rate and how much money people earn during a certain time period.

 

 the price level and the actual output produced in an economy.

 

 the interest rate and how much money people choose to hold.

 

 the price level and the amount of cyclical unemployment.

 

 Question 2If a bank sells a $1,000 security to the Fed and the required reserve ratio is 10 percent, _____.

 

the bank has $1,000 in additional reserves, of which it can lend $900.

 

 the bank has lost an asset and must reduce its loans.

 

 the bank has lost a liability.

 

the bank has $1,000 in additional reserves, of which it can lend $800.

 

 Question 3If each bank in the United States had to keep 100 percent of checkable deposits as reserves, each $1 the Fed injected into new reserves could increase the money supply by _____.

 

   $100.

 

 $1.

 

 $5.

 

 $2.

 

 Question 4Which of these changes is likely to follow when the Fed sells U.S. government securiti

 

The demand for financial securities will decrease.

 

 Aggregate demand will increase.

 

 Rate of interest will decrease.

 

 Planned investment spending will decrease.

 

 Question 5Identify the correct statement about changes in money supply.

 

   A decrease in money supply causes gross domestic product to increase.

 

  A decrease in money supply causes investment spending to decrease.

 

A decrease in money supply causes investment spending to increase.

 

 A decrease in money supply causes interest rates to fall.

 

 Question 6If the Fed decreases the money supply, gross domestic product _____.

 

increases by the same amount as the increase in the interest rate.

 

decreases by a greater amount than the increase in the interest rate because of the multiplier.

 

 decreases by the same amount as the decrease in investment.

 

 decreases by a greater amount than the decrease in investment because of the multiplier.

 

 Question 7The demand for money will be high in an economy experiencing _____.

 

hyperinflation.

 

 deflation.

 

 a depression.

 

 a recession.

 

 Question 8Which of the following is not money?

 

debit cards

 

 coins

 

 federal reserve notes

 

 credit cards

 

 Question 9If an increase of $5 million in excess reserves increases checkable deposits in the banking system by a maximum of $50 million, the required reserve ratio would be _____.

 

10 percent.

 

 0 percent.

 

 5 percent.

 

 20 percent.

 

 Question 10If the Fed decreases the required reserve ratio at a time when banks are holding no excess reserves, the Fed is _____.

 

making it possible for banks to decrease the money supply but not forcing them to do so.

 

 forcing banks to decrease the money supply.

 

 forcing banks to increase the money supply.

 

 making it possible for banks to increase the money supply but not forcing them to do so.

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