Devry Eco312 final exam (decemeber 2014)

Question 1. 1. (TCO 1) When a state government chooses to
build more roads, the required resources are no longer available for spending
on public education. This dilemma
illustrates the concept of (Points : 4)
production
expenses.
unemployment
issues.
unintended
consequences.
opportunity cost.

Question 2. 2. (TCO1) Which is not a factor of production?
(Points : 4)
Money
Land
Labor
Capital

Question 3. 3. (TCO1) A point on the production possibilities
curve is (Points : 4)
attainable and resources are
fully employed.
attainable, but
resources are unemployed.
unattainable,
but resources are unemployed.
unattainable
and resources are fully employed.

Question 4. 4. (TCO1) A basic characteristic of a command
system is that (Points : 4)
wages paid to
labor are higher.
government owns most economic
resources.
free markets
are never permitted in a command economy.
government
planners play a limited role in deciding what goods will be produced.

Question 5. 5. (TCO 2) The demand curve is a representation
of the relationship between the quantity of a product demanded and (Points : 4)
supply.
wealth.
price.
income.

Question 6. 6. (TCO 2) A decrease in supply and a decrease
in demand will (Points : 4)
increase price and affect the
equilibrium quantity in an indeterminate way.
decrease the
equilibrium quantity and decrease price.
increase the
equilibrium quantity and affect price in an indeterminate way.
decrease the
equilibrium quantity and affect price in an indeterminate way.

Question 7. 7. (TCO 2) You are the sales manager for a
software company and have been informed that the price elasticity of demand for
your most popular software is less than one.
To increase total revenues, you should (Points : 4)
increase the price of the
software.
decrease the
price of the software.
hold the price
of the software constant.
increase the supply of the software.

Question 8. 8. (TCO 2) The price elasticity of demand
increases with the length of the period considered because (Points : 4)
consumers’
incomes will increase over time.
the demand
curve will shift outward as time passes.
all prices will
increase over time.
consumers will be better able to
find substitutes.

Question 9. 9. (TCO 2) A profit-maximizing firm in the short
run will expand output (Points : 4)
until marginal
cost begins to rise.
until total
revenue equals total cost.
until marginal
cost equals average variable cost.
as long as
marginal revenue is greater than marginal cost.

Question 10. 10. (TCO 2) Which case below best represents a
case of price discrimination? (Points : 4)
An insurance
company offers discounts to safe drivers.
A major airline sells tickets to
senior citizens at lower prices than to other passengers.
A professional
baseball team pays two players with identical batting averages different
salaries.
A utility
company charges less for electricity used during “off-peak” hours,
when it does not have to operate its less-efficient generating plants.

Question 11. 11. (TCO 3) In the kinked demand model of
oligopoly, if one firm increases its price, the most likely reaction of the
other firms will be to (Points : 4)
decrease their
prices.
increase their
prices.
not change their prices.
reduce their
quantity.

Question 12. 12. (TCO 3) The main difference between the
short run and the long run is that (Points : 4)
firms earn zero
profits in the long run.
the long run
always refers to a time period of one year or longer.
in the short run, some inputs
are fixed.
in the long
run, all inputs are fixed.

Question 13. 13.

(TCO 4) Refer to the diagram. The phases of the business cycle from points
A to D are, respectively:

Graph Description
(Points : 4)
Peak,
recession, expansion, trough
Trough,
recovery, expansion, peak
Expansion,
recession, trough, peak
Peak, recession, trough,
expansion

Question 14. 14. (TCO 4) Official unemployment rate
statistics may (Points : 4)
overstate the amount of unemployment by
including part-time workers in the calculations.
understate the
amount of unemployment by excluding part-time workers in the calculations.
overstate the
amount of unemployment because of the presence of “discouraged”
workers who are not actively seeking employment.
understate the amount of
unemployment because of the presence of “discouraged” workers who are
not actively seeking employment.

Question 15. 15. (TCO 4) To avoid multiple counting in
national income accounts (Points : 4)
only final goods and services
should be counted.
intermediate
goods and services should be counted.
both final and
intermediate goods and services should be counted.
primary,
intermediate, and final goods and services should be counted.

Question 16. 16. (TCO 4) The service a homeowner performs
when she mows her yard is not included in GDP because (Points : 4)
this is a nonmarket transaction.
this is a
nonproduction activity.
this is a
noninvestment transaction.
multiple
counting would be involved.

Question 17. 17. (TCO 6) The goal of expansionary fiscal
policy is to increase (Points : 4)
the price
level.
aggregate
supply.
real GDP.
unemployment.

Question 18. 18. (TCO 6) Refer to the graph. What combination would most likely cause a
shift from AD1 to AD2?

Graph Description
(Points : 4)
Increases in
taxes and government spending
Decrease in taxes and increase
in government spending
Increase in
taxes and no change in government spending
Decreases in
taxes and government spending

Question 19. 19. (TCO 6) The American Recovery and
Reinvestment Act of 2009 included mostly (Points : 4)
increases in
taxes and government spending.
decreases in
taxes and government spending.
increases in government spending
and decreases in taxes.
decreases in
government spending and increases in taxes.

Question 20. 20. (TCO 6) If people expected that a tax cut
was temporary, then this fiscal policy’s effect on the economy will tend to be
(Points : 4)
stronger.
weaker.
the exact
opposite of what was intended.
as the multiplier
effect would predict.

Page 2

Question 1. 1. (TCO 5) A decrease in government spending
will cause a(n) (Points : 4)
increase in the
quantity of real domestic output demanded.
decrease in the
quantity of real domestic output demanded.
decrease in aggregate demand.
increase in
aggregate demand.

Question 2. 2. (TCO 5) The long-run aggregate supply curve
is (Points : 4)
upward-sloping
and becomes steeper at output levels above the full-employment output.
upward-sloping
and becomes flatter at output levels above the full-employment output.
horizontal.
vertical.

Question 3. 3. (TCO 5) Which would most likely increase
aggregate supply? (Points : 4)
An increase in
the prices of imported products
An increase in productivity
A decrease in
business subsidies
A decrease in
personal taxes

Question 4. 4. (TCO 5) Deflation refers to a situation where
(Points : 4)
price level
falls.
price level
rises.
the rate of inflation falls.
the rate of
inflation rises.

Question 5. 5. (TCO 6) If a family’s MPC is .7, it means
that the family is (Points : 4)
operating at
the break-even point.
spending seven-tenths of any
additional income.
necessarily
dissaving.
spending 70
percent of its disposable income.

Question 6. 6. (TCO 7) Which definition(s) of the money
supply include(s) only items which are directly and immediately usable as a
medium of exchange? (Points : 4)
M1
M2
Neither M1 nor M2
M1 and M2

Question 7. 7. (TCO 7) Which of the following
“backs” the value of money in the United States? (Points : 4)
Gold stored in
the Federal Reserve Bank of New York
Acceptability of it as a medium
of exchange
Willingness of
foreign government to hold U.S. dollars
Size of the
budget surplus in the U.S. government

Question 8. 8. (TCO 7) The Federal Reserve System of the
U.S. is the country’s (Points : 4)
financial
adviser.
comptroller or
accountant.
central bank.
deposit
insurance provider.

Question 9. 9. (TCO 7) Which group is responsible for the
policy of changing the money supply? (Points : 4)
Federal Open Market Committee
Office of
Management and Budget
Thrift Advisory
Council
Federal
Advisory Council

Question 10. 10. (TCO 7) Money is “created” when
(Points : 4)
a depositor
gets cash from the bank’s ATM.
a bank accepts deposits from its
customers.
people receive
loans from their banks.
people spend
the incomes that they receive.

Question 11. 11. (TCO 7) During the financial crisis of
2007-2008, the FDIC increased deposit insurance coverage from (Points : 4)
$50,000 to
$100,000 per account.
$100,000 to $250,000 per account.
$200,000 to
$500,000 per account.
$500,000 to
$1,000,000 per account.

Question 12. 12. (TCO 7) Which one of the following is a
tool of monetary policy for altering the reserves of commercial banks? (Points
: 4)
Issuing
currency
Check
collection
Open-market operations
Acting as the
fiscal agent for the federal government

Question 13. 13. (TCO 7) The most frequently used monetary
device for achieving price stability is: (Points : 4)
open market operations.
the discount
rate.
the reserve
ratio.
the prime
interest rate.

Question 14. 14. (TCO 8) Which country is the United States’
largest trading partner in terms of volume of trade? (Points : 4)
Mexico
Japan
China
Canada

Question 15. 15. (TCO 8) Nation X has a comparative
advantage in the production of a product compared to Nation Y when (Points : 4)
it imposes a
tariff on the importation of the product.
its production
possibilities curve expands, allowing it to produce more of the product.
it is achieving
full employment and is producing the maximum amount of the product.
it has the lower domestic
opportunity cost of producing the product.

Question 16. 16. (TCO 8) An excise tax on imported
commodities is known as a(n) (Points : 4)
quota.
tariff.
export
restriction.
price ceiling.

Question 17. 17. (TCO 8) If a nation agrees to set an upper
limit on the total amount of a product that it exports to another nation, then
this situation would be an example of (Points : 4)
an import
quota.
a revenue
tariff.
a protective
tariff.
a voluntary export restriction.

Question 18. 18. (TCO 8) The major beneficiaries of a tariff
on a product are the (Points : 4)
domestic producers of the
product.
domestic
consumers of the product.
workers engaged
in trade, like transportation workers.
foreign
producers of the product.

Question 19. 19. (TCO 8) Which organization meets regularly
to establish rules and settle disputes related to international trade? (Points
: 4)
The United
Nations Commission on Trade Law
The United
Nations Conference on Trade and Development
The World Trade Organization
The Federal
Reserve Board

Question 20. 20. (TCO 9) U.S. businesses are demanders of
foreign currencies because they need them to (Points : 4)
produce goods
and services exported to foreign countries.
pay for goods and services
imported from foreign countries.
receive
interest payments from foreign governments.
receive
interest payments from foreign businesses.
Page 3

Question 1. 1. (TCO 9) In the balance of payments statement,
a current account surplus will be matched by a (Points : 4)
capital and financial accounts
deficit.
capital and
financial accounts surplus.
trade deficit.
trade surplus.

Question 2. 2. (TCO 9) If the United States wants to regain
ownership of domestic assets sold to foreigners, it will have to (Points : 4)
increase
domestic consumption.
increase its
national debt.
export more than it imports.
import more
than it exports.

Question 3. 3. (TCO 9) Foreign exchange rates refer to the
(Points : 4)
price at which
purchases and sales of foreign goods take place.
movement of
goods and services from one nation to another.
price of one nation’s currency
in terms of another nation’s currency.
difference
between exports and imports in a particular nation.

Question 4. 4. (TCO 9) When the exchange rate between pounds
and dollars moves from $2 = 1 pound to $1 = 1 pound, we say that the dollar has
(Points : 4)
depreciated.
appreciated.
inflated.
deflated.

Question 5. 5. (TCO 9) The monetary system for conducting
international trade is usually described as a system of (Points : 4)
fixed exchange
rates.
freely floating
exchange rates.
a managed gold
standard.
managed floating exchange rates.

Question 6. 6. (TCO 8) a) Define the four basic types of
trade barriers. b) Who gains and who
loses from a protective tariff? Explain.
(Points : 40)Question 7. 7.

(TCO 6) a) Identify the four major tools of monetary policy.
b) How can monetary policy address the problem of inflation?
(Points : 40)