Objectives Economics

8/13/2019 Objectives Economics

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UTM Microeconomics Final Exam Review Sheet Fall 2009

1. For economists, the word "utility" means:A. purposefulness.B. pleasure and satisfaction.C. versatility and flexibility.. rationality.

!. oe sold #old coins for $1%%% that he bou#ht a year a#o for $1%%%. &e says, "At least ' didn(t lose any money on my financialinvestment." &is economist friend points out that in effect he did lose money, because he could have received a ) percent return on the$1%%% if he had bou#ht a ban* certificate of deposit instead of the coins. +he economist(s analysis in this case incorporates the idea of:A. opportunity costs.B. normative economics.C. imperfect information.. mar#inal benefits that exceed mar#inal costs.

). A person should consume more of somethin# when its mar#inal:A. cost euals its mar#inal benefit.B. benefit exceeds its mar#inal cost.

C. benefit is still positive.. cost exceeds its mar#inal benefit.

-. hich one of the followin# expressions best states the idea of opportunity cost/A. "All that #litters is not #old."B. "+here is no such thin# as a free lunch."C. "&e who hesitates is lost.". "A penny saved is a penny earned."

0. Alex sees that his nei#hbors( lawns all need mowin#. &e offers to provide the service in exchan#e for a wa#e of $!% per hour. omenei#hbors accept Alex(s offer and others refuse. 2conomists would describe Alex(s behavior as:A. irrational, because some nei#hbors refused his offer.B. rational self3interest, because he attemptin# to increase his own income by identifyin# and satisfyin# someone else(s wants.

C. selfish, because he is as*in# for a wa#e that is hi#her than others mi#ht char#e.. #reedy, because he is as*in# for a hi#h wa#e.

4. +he term "ceteris paribus" means:A. prosperity inevitably follows recession.B. that economics deals with facts, not values.C. that if event A precedes event B, A has caused B.. other thin#s eual.

5. 6acroeconomics approaches the study of economics from the viewpoint of:A. the entire economy.B. the operation of specific product and resource mar*ets.

C. #overnmental units.. individual firms.

7. 6icroeconomics:A. is concerned with individual economic units and specific mar*ets.B. is the basis for the "after this, therefore because of this" fallacy.C. describes the a##re#ate flows of output and income.. is not concerned with details, but only with the overall bi# picture of the economy.


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8. hich of the followin# is a microeconomic statement/A. +he real domestic output increased by !.0 percent last year.B. +he price of personal computers declined last year.C. +he #eneral price level increased by - percent last year.. 9nemployment was 4.7 percent of the labor force last year.

1%. A normative statement is one that:A. is based on the law of avera#es.B. applies only to microeconomics.

C. applies only to macroeconomics.. is based on value ud#ments.

11. A positive statement is one which is:A. derived by induction.B. subective and is based on a value ud#ment.C. obective and is based on facts.. derived by deduction.

1!. +he economi;in# problem is one of decidin# how to ma*e the best use of:A. limited resources to satisfy virtually unlimited wants.B. unlimited resources to satisfy limited wants.C. virtually unlimited resources to satisfy virtually unlimited wants.. limited resources to satisfy limited wants.

1). hich of the followin# is a labor resource/A. a computer pro#rammerB. silicon


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17. +he two #eneral types of economic systems that exist today are:A. mar*et systems and command systems.B. socialism and central plannin#.C. laisse; faire systems and pure command systems.. mar*et systems and capitalism.

18. +he term laisse;3faire su##ests that:A. land and other natural resources should be privately owned, but capital should be publicly owned.B. land and other natural resources should be publicly owned, but capital euipment should be privately owned.

C. #overnment action is necessary if the economy is to achieve full employment and full production.. #overnment should not interfere with the operation of the economy.

!%. Command systems are also *nown as:A. mar*et systems.B. communism.C. laisse;3faire capitalism.. pure capitalism.

!1. hich of the followin# is nota characteristic of the mar*et system/A. freedom of enterprise.B. #overnment ownership of the maor industries.C. competition in product and resource mar*ets.. private property.

!!. +he pursuit of self3interest:A. is hi#hly detrimental to the mar*et system.B. #ives direction to the mar*et system.C. means the same as "selfishness.". is reflected in the behavior of firms, but not in the behavior of consumers.

!). +he re#ulatory mechanism of the mar*et system is:A. private property.B. competition.C. speciali;ation.. self3interest.

!-. +he mar*et system(s answer to the fundamental uestion "&ow will the #oods and services be produced/" is essentially:A. "9sin# the least3cost production techniues."B. "ith as much machinery as possible."C. "By exploitin# labor.". "9sin# the latest technolo#y."

!0. hich of the followin# is notone of the five fundamental uestions/A. ho will #et the #oods and services/B. hat prices will be char#ed for #oods and services/C. hat #oods and services will be produced/. &ow will the system promote pro#ress/

!4. +wo maor virtues of the mar*et system are that it:A. eliminates discrimination and minimi;es environmental pollution.B. allocates resources efficiently and allows economic freedom.C. results in price level stability and a fair personal distribution of income.. results in an euitable personal distribution of income and always maintains full employment.


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!5. +he two basic mar*ets shown by the simple circular flow model are:A. household and business.B. free and controlled.C. capital #oods and consumer #oods.. product and resource.

!7. >efer to the above dia#ram. Flow efer to the above dia#ram. Flow

)%. >efer to the above dia#ram. Flow


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)-. An economist for a bicycle company predicts that, other thin#s eual, a rise in consumer incomes will increase the demand forbicycles. +his prediction is based on the assumption that:A. there are many #oods that are complementary to bicycles.B. there are few #oods that are substitutes for bicycles.C. bicycles are normal #oods.. there are many #oods that are substitutes for bicycles.

)0. 'f two #oods are complements:A. an increase in the price of one will increase the demand for the other.

B. they are necessarily inferior #oods.C. a decrease in the price of one will increase the demand for the other.. they are consumed independently.

)4. +he law of supply indicates that:A. the product supply curve is downslopin#.B. producers will offer more of a product at hi#h prices than they will at low prices.C. producers will offer more of a product at low prices than they will at hi#h prices.. consumers will purchase less of a #ood at hi#h prices than they will at low prices.

)5. A #overnment subsidy to the producers of a product:A. increases product supply.B. reduces product demand.C. reduces product supply.. increases product demand.

'n the followin# uestionAnswer the next uestionefer to the above information. +he euilibrium uantity is:A. 10.B. )%.C. !%.. 1%.


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-%. >efer to the above dia#ram. A #overnment3set price ceilin# is best illustrated by:A. price A.B. price C.C. price B.. uantity 2.

-1. +he price elasticity of demand coefficient measures:A. how far business executives can stretch their fixed costs.B. the extent to which a demand curve shifts as incomes chan#e.C. the slope of the demand curve.. buyer responsiveness to price chan#es.

-!. +he basic formula for the price elasticity of demand coefficient is:A. percenta#e chan#e in priceDpercenta#e chan#e in uantity demanded.B. absolute decline in priceDabsolute increase in uantity demanded.C. absolute decline in uantity demandedDabsolute increase in price.. percenta#e chan#e in uantity demandedDpercenta#e chan#e in price.

-). +he price elasticity of demand:A. tends to be inelastic in hi#h3price ran#es and elastic in low3price ran#es.B. is the same at each price3uantity combination on a stable demand curve.C. is infinitely lar#e for a perfectly inelastic demand curve.. tends to be elastic in hi#h3price ran#es and inelastic in low3price ran#es.

--. 'f a demand for a product is elastic, the value of the price elasticity coefficient is:A. #reater than one.B. eual to one.C. less than one.. ;ero.

-0. 'f the demand for a product is elastic, then total revenue will:A. increase whether price increases or decreases.B. fall as price falls.C. be constant in response to a price chan#e.. rise as price falls.


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-4. +he political techniue called lo#rollin#:A. is an example of the paradox of votin#.B. always decreases economic efficiency.C. involves tradin# votes to secure favorable outcomes that otherwise would be reected.. always increases economic efficiency.

-5. A situation in which society may not be able to ran* its preferences consistently throu#h paired3choice maority votin# refers to:A. the paradox of votin#.B. lo#rollin#.

C. the special3interest effect.. the median3voter model.

-7. A special3interest issue is one whose passa#e yields:A. small economic losses to a small number of people and lar#e economic losses to a lar#e number of people.B. lar#e economic #ains to a small number of people and small economic losses to a lar#e number of people.C. lar#e private benefits compared to external benefits.. lar#e external benefits compared to private benefits.

-8. hich of the followin# taxes reflects the benefits3received principle of taxation/A. sales taxesB. Federal personal income taxesC. ci#arette taxes. #asoline taxes

0%. 9sin# income as the tax base, which of the followin# best illustrates a re#ressive tax/A. the corporate income taxB. the Federal inheritance taxC. a 5 percent #eneral sales tax. the personal income tax

01. Eational income accountants can avoid multiple countin# by:A. includin# transfers in their calculations.B. only countin# final #oods.C. countin# both intermediate and final #oods.. only countin# intermediate #oods.

0!. +he #overnment a#ency responsible for collectin# and reportin# unemployment data is the:A. Bureau of abor tatistics.B. Bureau of 9nemployment.C. Bureau of 2conomic Analysis.. Bureau of 2conomic >esearch.

0). A colle#e #raduate usin# the summer followin# #raduation to search for a ob would best be classified as:A. not officially a member of the labor force.B. a part of structural unemployment.

C. a part of cyclical unemployment.. a part of frictional unemployment.

0-. 'f the rate of inflation is 1! percent per year, the price level will double in about:A. - years.B. 4 years.C. 1% years.. 1! years.


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00. 9nemployment involvin# a mismatch of the s*ills of unemployed wor*ers and the s*ills reuired for available obs is called:A. frictional unemployment.B. structural unemployment.C. cyclical unemployment.. compositional unemployment.

04. >eal GH refers to:A. the value of the domestic output after adustments have been made for environmental pollution and chan#es in the distribution ofincome.

B. GH data that embody chan#es in the price level, but not chan#es in physical output.C. GH data that reflect chan#es in both physical output and the price level.. GH data that have been adusted for chan#es in the price level.

05. hich of the followin# would most li*ely occur durin# the expansionary phase of the business cycle/A. emand3pull inflationB. Cost3push inflationC. tructural inflation. Frictional inflation

07. +o be officially unemployed a person must:A. be in the labor force.

B. be !1 years of a#e or older.C. have ust lost a ob.. be waitin# to be called bac* from a layoff.

08. +he unemployment rate is the:A. ratio of unemployed to employed wor*ers.B. number of employed wor*ers minusthe number of wor*ers who are not in the labor force.C. percenta#e of the labor force that is unemployed.. percenta#e of the total population that is unemployed.

4%. +o achieve its full production potential, an economy must reach full employment.+rue False

41. 'n which phase of the business cycle will the economy most li*ely experience risin# real output and fallin# unemployment rates/A. expansionB. recessionC. pea*. trou#h

4!. +he a##re#ate demand curve:A. is upslopin# because a hi#her price level is necessary to ma*e production profitable as production costs rise.B. is downslopin# because production costs decline as real output increases.C. shows the amount of expenditures reuired to induce the production of each possible level of real output.. shows the amount of real output that will be purchased at each possible price level.

4). 'n national income accountin#, Gstands for:A. #overnment purchases.B. #ross investment.C. #overnment transfer payments.. #ross savin#.

4-. hich of the followin# is an intermediate #ood/A. the purchase of #asoline for a s*i trip to Colorado.B. the purchase of baseball uniforms by a professional baseball team.C. the purchase of a pi;;a by a colle#e student.. the purchase of o##in# shoes by a professor


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40. emand3pull inflation:A. occurs when prices of resources rise, pushin# up costs and the price level.B. occurs when total spendin# exceeds the economy(s ability to provide output at the existin# price level.C. occurs only when the economy has reached its absolute production capacity.. is also called cost3push inflation.

44. A nation(s #ross domestic product


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51. >eal GH measures:A. current output at current prices.B. current output at base year prices.C. base year output at current prices.. base year output at current exchan#e rates.

5!. +he a##re#ate supply curve:A. is explained by the interest rate, real3balances, and forei#n purchases effects.B. #ets steeper as the economy moves from the top of the curve to the bottom of the curve.

C. shows the various amounts of real output that businesses will produce at each price level.. is downslopin# because real purchasin# power increases as the price level falls.

5). Cost3push inflation may be caused by:A. a decline in per unit production costs.B. a decrease in wa#e rates.C. a ne#ative supply shoc*.. an increase in resource availability.

5-. >ecurrin# upswin#s and downswin#s in an economy(s real GH over time are called:A. recessions.B. business cycles.

C. output yo3yos.. total product oscillations.

50. +he natural rate of unemployment is:A. hi#her than the full3employment rate of unemployment.B. lower than the full3employment rate of unemployment.C. that rate of unemployment occurrin# when the economy is at its potential output.. found by dividin# total unemployment by the si;e of the labor force.

54. r. &omer impson, an economics professor, decided to ta*e a year off from teachin# to run a commercial fishin# boat in Alas*a.+hat year, Hrofessor impson would be officially counted as:A. structurally unemployed.

B. frictionally unemployed.C. not in the labor force.. employed.

55. Cost3push inflation:A. reduces real output.B. increases real output.C. reduces the unemployment rate.. raises the natural rate of unemployment.

57. +he phase of the business cycle in which real GH is at a minimum is called:A. the pea*.

B. a recession.C. the trou#h.. the pits.

58. Eominal GH is:A. the sum of all monetary transactions that occur in the economy in a year.B. the sum of all monetary transactions involvin# final #oods and services that occur in the economy in a year.C. the amount of production that occurs when the economy is operatin# at full employment.. money GH adusted for inflation.


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7%. Given the annual rate of inflation, the "rule of 5%" allows one to:A. determine whether the inflation is demand3pull or cost3push.B. calculate the accompanyin# rate of unemployment.C. determine when the value of a real asset will approach ;ero.. calculate the number of years reuired for the price level to double.

71. A recession is a period in which:A. cost3push inflation is present.B. nominal domestic output falls.

C. demand3pull inflation is present.. real domestic output falls.

7!. +he a#ency responsible for compilin# the Eational 'ncome Hroduct Accounts for the 9.. economy is the:A. Council of 2conomic AdvisersB. Bureau of 2conomic AnalysisC. Eational Bureau of 2conomic >esearch. Bureau of abor tatistics

7). +he lar#est component of total expenditures in the 9nited tates is:A. net exports.B. #overnment purchases.

C. consumption.. #ross investment.

7-. Cyclical unemployment results from:A. a deficiency of spendin# on #oods and services.B. the decreasin# relative importance of #oods and the increasin# relative importance of services in the 9.. economy.C. the everyday dynamics of a free labor mar*et.. technolo#ical chan#e.

9se the list below to answer the followin# uestions:1. 'mprovements in technolo#y!. 'ncreases in the supply efer to the above list. As distinct from the supply factors and demand factor of economic #rowth, the efficiency factor ofeconomic #rowth is:A. 1 only.B. - only.C. 1 and ) only.. ) only.

74. >efer to the above list. As distinct from the demand and efficiency factors of economic #rowth, the supply factors of economic#rowth are:A. !, 0, and 4 only.B. !, -, 0, and 4 only.C. 1, !, 0, and 4 only.. 1, ), - only.


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75. GH is eual to:A. CIg GXn.B. CIg G3Xn.C. CIn GXn.. CIn G3Xn.

77. +ransfer payments are:A. excluded when calculatin# GH because they only reflect inflation.B. excluded when calculatin# GH because they do not reflect current production.

C. included when calculatin# GH because they are a cate#ory of investment spendin#.. included when calculatin# GH because they increase the spendin# of recipients.

78. hen the 9.. economy has achieved full employment, the unemployment rate is between:A. 0 and 4 percent.B. - and 0 percent.C. ) and - percent.. ! and ) percent.

8%. +he phase of the business cycle in which real GH declines is called:A. the pea*.B. an expansion.

C. a recession.. the trou#h.

81. hich of the followin# is a final #ood or service/A. a haircutB. fertili;er purchased by a farm supplierC. diesel fuel bou#ht for a delivery truc*. Chevrolet windows purchased by a General 6otors assembly plant

8!. +he full3employment unemployment rate means an unemployment rate of about:A. 10 percent.B. 1% percent.

C. -30 percent.. ! percent.

8). +he factors that affect the amounts that consumers, businesses, #overnment, and forei#ners wish to purchase at each price levelarethe:A. real3balances, interest3rate, and forei#n purchases effects.B. determinants of a##re#ate supply.C. determinants of a##re#ate demand.. sole determinants of the euilibrium price level and the euilibrium real output.

8-. A nation(s #ross domestic product


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84. 'mprovements in technolo#y are considered a demand factor in economic #rowth.+rue False

85. hich of the followin# is nota supply factor in economic #rowth/A. the stoc* of capitalB. technolo#ical advanceC. the si;e and uality of the labor force. a##re#ate expenditures of households, businesses, and #overnment

87. +he natural rate of unemployment is the:A. unemployment rate experienced at the depth of a depression.B. full3employment unemployment rate.C. unemployment rate experienced by the least3s*illed wor*ers in the economy.. unemployment rate experienced by the most3s*illed wor*ers in the economy.

88. ait unemployment and search unemployment are both types of:A. cyclical unemployment.B. hidden unemployment.C. frictional unemployment.

. structural unemployment.

1%%. 'nflation initiated by increases in wa#es or other resource prices is labeled:A. demand3pull inflation.B. demand3push inflation.C. cost3push inflation.. cost3pull inflation.

1%1. +he lar#est component of the money supply eserve ystem/A. +here are 1! re#ional Federal >eserve Ban*s.B. +he head of the 9.. +reasury also chairs the Federal >eserve Board.C. +here are 1- members of the Federal >eserve Board.. +he Ipen 6ar*et Committee is smaller in si;e than the Federal >eserve Board.

1%). +he discount rate is the interest:A. rate at which the central ban*s lend to the 9.. +reasury.B. rate at which the Federal >eserve Ban*s lend to commercial ban*s.C. yield on lon#3term #overnment bonds.

. rate at which commercial ban*s lend to the public.

1%-. +he seven members of the Board of Governors of the Federal >eserve ystem are:A. appointed by the Hresident with the confirmation of the enate.B. elected by Con#ress from a slate of nominees provided by the Hresident.C. appointed by the enate Finance Committee.. appointed by the presidents of the twelve Federal >eserve Ban*s.


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1%0. hich of the followin# is nota tool of monetary policy/A. open mar*et operationsB. chan#es in ban*in# lawsC. chan#es in the amount of reserves available at the term auction facility. chan#es in the reserve ratio

1%4. Chec*able deposits are:A. included inM1.B. not included in eitherMl orM!.

C. considered to be a near money.. also called time deposits.

1%5. 'n the 9nited tates, the money supply eserve Board of Governors.


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1!). +he crowdin#3out effect of expansionary fiscal policy su##ests that:A. #overnment spendin# is increasin# at the expense of private investment.B. imports are replacin# domestic production.C. private investment is increasin# at the expense of #overnment spendin#.. savin# is increasin# at the expense of investment.

1!-. hich of the followin# is a tool of monetary policy/A. open mar*et operationsB. chan#es in ban*in# laws

C. chan#es in tax rates. chan#es in #overnment spendin#

1!0. +he paper money used in the 9nited tates is:A. Eational Ban* Eotes.B. +reasury Eotes.C. 9nited tates Eotes.. Federal >eserve Eotes.

1!4. hich one of the followin# is true about the 9.. Federal >eserve ystem/A. +here are 1% re#ional Federal >eserve Ban*s.B. +he head of the 9.. +reasury also chairs the Federal >eserve Board.C. +here are seven members of the Federal >eserve Board of Governors.. +he Ipen 6ar*et Committee is smaller in si;e than the Federal >eserve Board.

1!5. +he public debt is the amount of money that:A. state and local #overnments owe to the Federal #overnment.B. Americans owe to forei#ners.C. the Federal #overnment owes to holders of 9.. securities.. the Federal #overnment owes to taxpayers.

1!7. 'n a fractional reserve ban*in# system:A. ban* panics cannot occur.B. the monetary system must be bac*ed by #old.C. ban*s can create money throu#h the lendin# process.. the Federal >eserve has no control over the amount of money in circulation.

1 !8. As it relates to Federal >eserve activities, the acronym FI6C describes the:A. Federal Ipen 6ar*et Committee.B. Federal Iptions 6ar*et Committee.C. Federal Ir#ani;ation for 6onetary Control.. Federal Ir#ani;ation for 6oney Creation.

1)%. Chec*able deposits are also called:A. chec*in# accounts.B. hi#h3powered money.C. savin#s balances.. Federal >eserve Eotes.

1)1. +he amount that a commercial ban* can lend is determined by its:A. reuired reserves.B. excess reserves.C. outstandin# loans.. outstandin# chec*able deposits.


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1)!. 2xpansionary fiscal policy is so named because it:A. involves an expansion of the nation(s money supply.B. necessarily expands the si;e of #overnment.C. is aimed at achievin# #reater price stability.. is desi#ned to expand real GH.

1)). 'f you place a part of your summer earnin#s in a savin#s account, you are usin# money primarily as a:A. medium of exchan#e.B. store of value.

C. unit of account.. standard of value.

1)-. +he money supply is bac*ed:A. by the #overnment(s ability to control the supply of money and therefore to *eep its value relatively stable.B. by #overnment bonds.C. dollar3for3dollar with #old and silver.. dollar3for3dollar with #old bullion.

1)0. Currency elative carcity. All of the above

1)8. hich of the followin# is not a timin# problem in Fiscal Holicy/A. >eco#nition a#B. Administrative a#C. et a#

. Iperational a#

1-%. hich of the followin# is Nota cause of Hublic ebt/A. arsB. 'nternational +rade in Jard ale itemsC. +ax Cuts. ac* of Holitical ill


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1-1. A tariff can best be described as:A. an excise tax on an imported #ood.B. a #overnment payment to domestic producers to enable them to sell competitively in world mar*ets.C. an excise tax on an exported #ood.. a law that sets a limit on the amount of a #ood that can be imported.

1-!. +he number of countries belon#in# to the orld +rade Ir#ani;ation


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10%. +he or#ani;ation created to oversee the provisions of multilateral trade a#reements, resolve disputes under the international traderules, and meet periodically to consider further trade liberali;ation is called the:A. 'nternational 6onetary Fund


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104. ea#an administration.

105. +he above curve is *nown as the:A. +aylor rule.B. I*un Curve.C. affer Curve.. Hhillips Curve.


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9+6 6icroeconomics Final 2xam >eview heet Key

1. B!. A). B

-. B0. B4. 5. A7. A8. B1%. 11. C1!. A1). A1-. 10. B14. 15. 17. A

18. !%. B!1. B!!. B!). B!-. A!0. B

!4. B!5. !7. C!8. A)%. )1. A)!. C


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)). )-. C)0. C)4. B)5. A)7. A

)8. C-%. A-1. -!. -). --. A-0. -4. C-5. A-7. B-8. 0%. C

01. B0!. A

0). 0-. B00. B04. 05. A07. A08. C

4%. +>9241. A4!. 4). A4-. B40. B44. A


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45. B47. C48. 5%. A51. B5!. C

5). C5-. B50. C54. 55. A57. C58. B7%. 71. 7!. B7). C7-. A70. B74. C

75. A77. B78. B8%. C81. A8!. C8). C8-. A

80. C84. FA285. 87. B88. C1%%. C


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1%1. C1%!. A1%). B1%-. A1%0. B

1%4. A1%5. A1%7. 1%8. B11%. C111. 11!. C

11). A11-. C110. B114. C115. C117. 118. 1!%.

1!1. 1!!. A1!). A1!-. A1!0. 1!4. C1!5. C

1!7. C1!8. A1)%. A1)1. B1)!. 1)). B1)-. A


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1)0. B1)4.

1)5. B1)7.

1)8. C

1-%. B

1-1. A1-!. A1-). B1--. C1-0. B1-4. A

1-5. C1-7. A1-8. 10%. B101. 10!. 10). B10-. B100. A104. 105. C

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