A)

funds used by businesses to acquire goods and services.

B)

the process of raising money in the stock market.

C)

actual manufactured products used in the production process.

D)

anything that adds to human capital.

2.

All of the following are considered human capital, EXCEPT:

A)

working in a factory.

B)

obtaining a college education.

C)

receiving training for another area in a current job.

D)

completing a professional development course.

3.

The graphical tool we could use to represent the combinations of two goods that are possible with a given society at full employment is a(n):

A)

efficiency curve.

B)

allocation curve.

C)

production possibilities frontier.

D)

cost graph.

4.

In economics, the payment to capital is called:

A)

factor payment.

B)

interest.

C)

capitalization.

D)

profit.

5.

To gain from trade, a country should:

A)

always try to get a favorable tariff.

B)

specialize in the commodity in which it has a comparative advantage.

C)

always specialize in the commodity in which it has an absolute advantage.

D)

trade only with its political allies.

6.

The key benefit of countries engaging in trade based on comparative advantage is that:

A)

both countries will be able to consume more than with no trade.

B)

it allows countries to produce efficiently inside their individual PPFs.

C)

it allows both countries to maximize their opportunity cost.

D)

None of these is a key benefit.

7.

One of the major limits to trade is:

A)

transaction costs.

B)

comparative advantage.

C)

opportunity cost.

D)

absolute advantage.

8.

“The economic wealth of this country was built primarily by some individuals profiting from a transaction, whereas others were harmed by that transaction.” This statement indicates the author:

A)

fails to understand the fallacy of composition.

B)

fails to understand that all voluntary trades benefit both parties involved.

C)

fails to understand the significance of the PPF.

D)

uses sound economic thinking. The statement is essentially correct.

9.

If the government of Spain decides to spend less on the military and more on health care, the forgone spending on military items represents the:

A)

cost factor of the extra health care.

B)

production efficiency of the extra health care.

C)

opportunity cost of the extra health care.

D)

allocative cost of the extra health care.

10.

Which shaped curve reflects the reality that most goods are better suited for specific sorts of production?

A)

straight line PPF

B)

concave PPF

C)

downward-sloping PPF

D)

convex PPF

11.

Points that are unattainable for an economy are shown as points:

A)

inside the PPF.

B)

on the PPF.

C)

outside the PPF.

D)

of unemployment.

12.

(Figure: Bread and Honey) In the graph, a movement from point f to point g could occur if:

A)

technological improvements occur.

B)

unemployed workers find jobs.

C)

people decide they prefer bread to honey.

D)

people decide they prefer honey to bread.

13.

Capital:

A)

refers to commercial bank lending policies.

B)

is any manufactured product that is used to produce other products.

C)

is a field of corn.

D)

is the only element that is needed to turn resources into products.

United States

Coffee

25

20

15

10

5

0

Tea

0

2

4

6

8

10

Japan

Coffee

58

38

25

15

7

0

Tea

0

3

10

20

35

60

14.

(Table) The table shows coffee and tea units produced for the United States and Japan. If Japan decides to increase production of tea from 20 units to 35 units, the opportunity cost is:

A)

15 units of tea.

B)

10 units of tea.

C)

8 units of coffee.

D)

10 units of coffee.

15.

Which is NOT a criticism of the National Bureau of Economic Research's recession dating?

A)

Dates are announced long after the economy turned.

B)

Deliberations are not made public.

C)

Its use of revised data introduces errors in dating.

D)

There is no single consistent methodology used in dating.

16.

Which organization determines the beginning and end dates of a recession?

A)

the Council of Economic Advisers

B)

the National Bureau of Economic Research

C)

the U.S. Treasury Department

D)

the Federal Reserve Board of Governors

17.

Which of the following events has significantly influenced the development of macroeconomic ideas?

A)

World War II

B)

the development of the modern corporation

C)

the Industrial Revolution

D)

the Great Depression

18.

Which of the following items would be included in the GDP accounts?

A)

personal time spent learning how to use accounting software

B)

personally rotating the tires on your neighbor's car

C)

caring for your aged grandmother at home

D)

$50 consultation on the phone with a psychic adviser

19.

Which of the following activities is an example of a nonmarket transaction?

A)

hiring a maid to clean your home

B)

employing a lawn service worker to trim your bushes

C)

hiring a nanny to take care of your kids

D)

growing your own food in a vegetable garden

20.

A business cycle is:

A)

the periodic fluctuation of economic activity.

B)

the engine of economic growth.

C)

a period lasting about 50 years.

D)

identical to the consumption life cycle.

21.

Which of the following items is NOT included in gross private domestic investment?

A)

residential housing

B)

new equipment purchased by businesses

C)

purchases of common stock

D)

increases in business inventories

22.

The National Activity Index:

A)

is a weighted average of 85 indicators of national economic activity.

B)

is a weighted average of estimates of economic activity by the National Bureau of Economic Research (NBER) and the Bureau of Economic Activity (BEA).

C)

is produced by the NBER.

D)

is a measure of unemployment and participation in the labor force.

23.

Which of the following is NOT a criticism of the dating of business cycles by the National Bureau of Economic Research (NBER)?

A)

Economists use different methodologies to measure business cycles.

B)

NBER dates peaks and troughs only after the fact.

C)

The NBER deliberations are not public.

D)

The NBER is sometimes manipulated by the federal government.

24.

Economists believe that changes in investment spending are important for forecasting the business cycle because:

A)

increases in investment spending raise tax revenues, which allows government to spend more.

B)

investment closely reflects consumer sentiment.

C)

changes in investment show where the economy has been.

D)

investment is a key determinant of economic growth.

25.

We are least likely to be heading into a recession when the National Activity Index equals:

A)

–0.33.

B)

0.55.

C)

–0.98.

D)

0.81.

26.

Which of the following is included in gross private domestic investment?

A)

highway construction by a government contractor

B)

the purchase of a new TV by a household

C)

purchases of common stock by investors

D)

an increase in business inventories

27.

Which of the following is NOT an investment in human capital?

A)

researching automated production techniques

B)

putting more money into the education system

C)

starting a job-training program

D)

launching an employee physical fitness campaign

28.

What component of GDP includes college tuition?

A)

durable goods

B)

nondurable goods

C)

services

D)

private domestic investment

29.

Which of the following is NOT a problem in using GDP to measure standard of living?

A)

failure to include environmental impacts

B)

failure to include the value of nonmarket work

C)

failure to include exports and imports

D)

failure to include the value of investments in human capital

30.

One important reason economists track business investment is that:

A)

it helps them decide which stocks to purchase.

B)

it is a leading indicator of the business cycle.

C)

business investment is an excellent proxy for government investment.

D)

it shows them where the economy has been.

31.

Which of the following is TRUE within the circular flow of economic activity?

A)

Households are buyers of products and sellers of production factors.

B)

Business firms are buyers and sellers of production factors.

C)

Households are sellers of products and buyers of production factors.

D)

Business firms are buyers of products and sellers of production factors.

32.

The U.S. gross domestic product is equal to the total market value of all:

A)

intermediate goods and services produced by resources in the United States.

B)

final goods and services produced by resources in the United States.

C)

final goods and services produced by U.S. citizens in the United States.

D)

intermediate goods and services produced by U.S. citizens in the United States.

Personal consumption expenditures

$900

Personal taxes

$180

Government expenditures

$300

Exports

  $40

Imports

  $75

Interest income

  $60

Depreciation

  $50

Gross private domestic investment

$200

33.

(Table) According to the table, what is this country's GDP?

A)

$1,225

B)

$1,305

C)

$1,365

D)

$1,440

34.

The diagram that illustrates how households and businesses interact through product and resource markets is called the:

A)

product-resource diagram.

B)

economic agents graph.

C)

circular flow diagram.

D)

economic interactivity diagram.

35.

The National Bureau of Economic Research determines that a recession is over:

A)

after one year of economic growth.

B)

when the economy is in a trough.

C)

when the unemployment rate declines below 5%.

D)

when the stock market reaches its prerecession level.

36.

A criticism of the National Bureau of Economic Research's business cycle dating committee is that it:

A)

makes premature judgments as to the turning points of the business cycle.

B)

makes little use of the national income and product accounts.

C)

dates peaks and troughs only after the fact.

D)

does not update or revise data.

37.

A criticism of GDP per capita is that it:

A)

is hard to calculate.

B)

might not fully reflect the standard of living of the typical citizen.

C)

reduces the effect of outliers skewing the averages.

D)

is only a hypothetical concept that cannot be measured.

38.

Whose analysis serves as the foundation of modern macroeconomics?

A)

Milton Friedman

B)

John Maynard Keynes

C)

Adam Smith

D)

Joseph Schumpeter

39.

The economy is probably heading into a recession when the National Activity Index equals:

A)

0.

B)

0.62.

C)

–0.94.

D)

0.79.

40.

Since the invention of automatic teller machines, many bank tellers have lost their job. This is an example of ______ unemployment.

A)

structural

B)

frictional

C)

cyclical

D)

statistical

41.

Robert lost his job and now takes care of the children while his wife works. Robert has decided he likes his daddy duties. Robert would take a job similar to the one he lost if it was offered, but he is not actively seeking work. How is Robert categorized in the unemployment figures?

A)

Robert is unemployed.

B)

Robert is employed because he is providing a useful product.

C)

Robert is not part of the labor force.

D)

Robert is underemployed.

42.

In 2012, the group with the LOWEST unemployment rate in the United States was:

A)

high school graduates.

B)

college graduates and higher.

C)

people with less than a bachelor's degree.

D)

people with less than a high school diploma.

43.

Which of the following statements is NOT correct?

A)

Discouraged workers have stopped actively seeking work.

B)

Discouraged workers are not classified as unemployed.

C)

Discouraged workers are considered underemployed.

D)

Discouraged workers are considered part of the leisure class, not part of the labor force.

44.

_____ is a reduction in the rate of inflation.

A)

Disinflation

B)

Deflation

C)

Hyperinflation

D)

The price level

45.

Nominal GDP in 2006 was $13,458.2 billion. The GDP deflator uses 2000 as the base year. In 2006, the GDP deflator was 116.9. What was the real GDP for 2006?

A)

$15,732.6 billion

B)

$15,746.1 billion

C)

$11,512.6 billion

D)

$11,522.5 billion

46.

_____ is a measure of the change in average prices paid by urban consumers for a typical market basket of goods and services.

A)

The consumer price index

B)

The producer price index

C)

Personal consumption expenditure

D)

The GDP deflator

47.

GDP is $10 trillion in 2001. The GDP deflator is 100 in 2000 and is 110 in 2001. What is real GDP?

A)

$10 trillion

B)

$11.1 trillion

C)

$9.09 trillion

D)

$110 trillion

48.

The unemployment rate is defined as the ________ divided by the ________.

A)

number unemployed; population

B)

number unemployed; number working

C)

number unemployed; number in the labor force

D)

number passively looking for a job; number in the labor force

49.

Wages set high to discourage employee turnover are called ________ wages.

A)

turnover minimization

B)

efficiency

C)

productivity

D)

labor utilization

50.

_____ is a measure of the changes in the average prices received by domestic producers for their output.

A)

The consumer price index

B)

The producer price index

C)

Personal consumption expenditure

D)

The GDP deflator

51.

People are considered employed if they are:

A)

unpaid family workers.

B)

on strike.

C)

on vacation.

D)

All of those listed are considered employed.

52.

Which of the following is included in the consumer price index?

A)

price of bauxite

B)

price of a hotel room in Beirut, Lebanon

C)

price of crude oil

D)

price of gasoline

53.

Which is NOT a criticism of the official unemployment rate?

A)

It excludes marginally attached workers.

B)

It includes the underemployed.

C)

It does not include people who want to work but stopped searching out of frustration.

D)

It is not reported frequently enough to provide a good picture of the state of the economy.

54.

The inflation rate is 4%. Social Security payments automatically rise 4%. This adjustment is authorized by an:

A)

inflation rate.

B)

escalator clause.

C)

elevator clause.

D)

insanity clause.

55.

Other things equal, if a recession gets worse, the number of discouraged workers __________, and the number of those in the labor force _____________.

A)

increases; decreases

B)

decreases; decreases

C)

increases; increases

D)

decreases; increases

56.

All of the following types of wages can cause unemployment EXCEPT:

A)

minimum wages.

B)

union wages.

C)

efficiency wages.

D)

equilibrium wages.

57.

Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living:

A)

rose by about 1%.

B)

rose by about 2%.

C)

fell by about 3%.

D)

fell by about 1%.

58.

If the nominal GDP is $13 trillion for a given year and the GDP deflator for that year is 115, then the real GDP is:

A)

$11.3 trillion.

B)

$14.95 trillion.

C)

$12 trillion.

D)

$13 trillion.

59.

_____ unemployment includes workers who voluntarily quit their jobs to search for better positions.

A)

Structural

B)

Frictional

C)

Seasonal

D)

Cyclical

60.

(Table) According to the table, the number of people in the labor force is:

A)

115.

B)

110.

C)

130.

D)

120.

61.

The GDP deflator for the base year is:

A)

less than 100.

B)

always equal to 100.

C)

greater than 100.

D)

dependent on the quantities of output and the prices at which outputs are sold in the base year.

62.

Which of the following persons is considered to be unemployed?

A)

Ahmed, who is on vacation

B)

Sarah, who is on strike duty

C)

Tiffany, who is going on interviews, hoping to get her first job

D)

Carmen, who works three days a week at her father's business but is not paid

63.

If the rate of inflation decreases from 5% to 3%, the economy is undergoing:

A)

deflation.

B)

hyperinflation.

C)

disinflation.

D)

stagflation.

64.

In the United States, our principal measure of inflation is:

A)

the consumer price index.

B)

gross domestic product.

C)

the producer price index.

D)

the Leading Economic Index.