Economics Trivia Questions for Students — page 2

An Italian company opens a shoe factory in the U.S. The production from this shoe company is included in

• Aboth the Italian and U.S. GDP split 50/50.
• Bboth the Italian and U.S. GDP
• Cthe Italian GDP.
• Dthe U.S. GDP.

Stagflation most likely results from

• Adecreasing SRAS with constant AD.
• Bincreasing AD with constant SRAS.
• Cdecreasing AD with constant SRAS.
• Da decrease in both AD and SRAS.

In the short run, a firm employs labor and capital to produce gadgets. If the annual price of capital increases, what will happen to the short-run cost curves?

• AThe marginal cost and average variable cost curves will shift upward.
• BThe marginal cost and average fixed cost curves will shift upward.
• CThe marginal cost, average fixed cost, average variable cost, and average total cost curves will all shift upward.
• DThe average fixed cost and average total cost curves will shift upward.

Suppose an economy is in long-run equilibrium at the full-employment level of output. If government spending then increases

• Aan inflationary gap is created because the aggregate demand curve shifts to the right
• Ban inflationary gap is created because potential GDP shifts to the left
• Can inflationary gap is created because the aggregate supply curve shifts to the right
• Da recessionary gap is created because the aggregate supply curve shifts to the left

The supply curve for lawn-mowing services is likely to slope upward because of

• Adiminishing marginal utility
• Bdecreasing marginal costs
• Cincreasing returns to scale
• Dincreasing opportunity cost of time

Suppose that there are only two goods: x and y. Which of the following is NOT correct?

• AOne can have absolute advantage and no comparative advantage in producing x.
• BOne can have comparative advantage and no absolute advantage in producing x.
• COne can have comparative advantage in producing both goods.
• DOne can have both an absolute advantage and a comparative advantage in producing x.

In the balance of payments the trade balance

• Aappears in the current account
• Bis ignored.
• Cappears in the capital account.
• Dis included in the official reserves.

The market demand curve for labor would shift to the left as the result of

• Aa decrease in the marginal product of labor
• Ban increase in the price of the good which the labor is producing
• Can increase in the wage rate paid to workers
• Dan increase in demand for the good which the labor is producing

Which of the following represents a combination of contractionary fiscal and expansionary monetary policy? FISCAL POLICY MONETARY POLICY

• AHigher taxes Buying Treasury securities
• BHigher taxes Selling Treasury securities
• CLower government spending Increasing the reserve ratio
• DLower taxes Buying Treasury securities

Suppose transfer payments are greater than Social Security contributions corporate taxes and retained earnings combined. In that case

• ADPI will be greater than PI.
• BPI will be greater than NI.
• CNDP will be greater than GDP.
• DNI will be greater than GDP.

"Flash" estimates of GDP

• Aare subject to revision.
• Bboth (A) and (C)
• Cdo not require revision.
• Dare available after a thirty-day lag.

The necessity for a monopoly to lower its price in order to sell more units of its product explains why

• Amonopolies are common among public utilities
• Bmonopolies are able to maintain market power
• Cthe marginal revenue curve is below the demand curve for a monopoly
• Dthe marginal cost curve for a monopoly slopes upward

A bilateral monopoly exists when

• Aa monopsony buys from a monopoly
• Ba monopoly buys from a monopsony
• Ca monopolist sells two different types of goods
• Da monopoly sells to two different types of consumers

A balance of trade surplus can be the result of

• Aan appreciation of the country's currency.
• Bforeigners having no taste for this country's products.
• Clow levels of income relative to other nations.
• Da loose monetary policy.

To deflate nominal gross domestic product (GDP) you must

• Amultiply nominal GDP by the GDP deflator.
• Bdivide nominal GDP by the GDP deflator.
• Cdivide real GDP by the GDP deflator.
• Dmultiply real GDP by the GDP deflator.

Which of the following statements is true for a firm in a perfectly competitive industry?

• ATotal revenue increases and then decreases.
• BMarginal revenue is decreasing.
• CAverage revenue is initially negative and then becomes positive.
• DAverage revenue equals marginal revenue.

Which of the following is an example of capital as an economic resource?

• AA registered nurse
• BA share of corporate stock
• CA cement mixer
• DA barrel of crude oil

An effective price ceiling in the market for good X likely results in

• Aa persistent shortage of good X.
• Ban increase in the demand for good Y, a substitute for good X.
• Ca decrease in the demand for good Z, a complement with good X.
• Da persistent surplus of good X.

Which of the following certainly lowers the equilibrium price of a good exchanged in a competitive market?

• AThe supply curve shifts to the left.
• BThe demand curve shifts to the right.
• CThe demand curve shifts to the right, and the supply curve shifts to the left.
• DThe demand curve shifts to the left, and the supply curve shifts to the right.

Tariffs and quotas

• Araise the amount of the product sold domestically.
• Bsometimes raise and sometimes lower the amount of the product sold domestically.
• Cresult in lower domestic prices.
• Dlower the amount of the product sold domestically.

In the equation of exchange if V and Q are constant then

• Athe equation is invalid.
• Bchanges in the money supply have no effect on the price level.
• Cchanges in the price level must be proportional to changes in the money supply.
• Dchanges in the price level have no effect on the money supply.

Which of the following is NOT included in GDP?

• AFederal government purchases of goods and services.
• BExports.
• CImports.
• DState and local government purchases of goods and services.

An increase in the price level and a decrease in real GDP in the short run could be the result of

• Aa decrease in the money supply.
• Ba prolonged period of very bad weather.
• Ca decrease in consumer confidence.
• Dan increase in consumer confidence.

When the production or consumption of a good creates a positive externality, it is deemed a market failure because at the market quantity

• Athe private benefits from consuming the good exceed the social benefits.
• Bsociety produces too much of the good.
• Cthe marginal social benefit exceeds the marginal social cost.
• Dthe marginal social cost exceeds the marginal social benefit.

Economists use the term "capital" to mean

• Athe center of the economy.
• Bmoney.
• Cplant and equipment.
• Dwhere the central government is located.

Which of the following is not included in the U.S. GDP?

• AJapanese consumers buy thousands of CDs produced in the United States.
• BAn American pop singer performs a sold-out concert in Paris.
• CThe U.S. military opens a new base in a foreign country with 1000 U.S. personnel.
• DA French theatrical production tours dozens of American cities.

Which of the following is most likely to produce stronger economic growth over time?

• AHigher adult illiteracy rates.
• BInvestment tax credits.
• CMore rapid consumption of natural resources.
• DA falling stock of capital goods.

Which of the following will promote economic growth?

• ALower wages.
• BIncreased government spending.
• CPrice controls that keep prices low.
• DAn increase in the amount of capital.

Suppose the real interest rate in a country rises. What can be expected to happen to the demand for this nation's currency and therefore the value of its currency and net exports? Demand for currency Value of currency Net exports

• AIncreases Appreciate Increases
• BDecreases Depreciate Increases
• CDecreases Depreciate Decreases
• DDecreases Appreciate Decreases

The best example of a negative supply shock to the economy would be

• Aan increase in the money supply.
• Ba decrease in government spending.
• Cunexpectedly higher resource prices.
• Da decrease in the real interest rate.

If, for each additional unit of a variable input, the increases in output become smaller, which of the following correctly identifies the concept?

• AIncreasing marginal utility.
• BDiminishing marginal utility.
• CDiminishing marginal productivity.
• DIncreasing marginal productivity.

One strategy a corporation may use to gain market share in a foreign market is

• Adumping.
• Braising the price of its product.
• Cconvincing its government to put an import tariff on the product.
• Dconvincing its government to place a quota on the product.

Which of the following is an example of an economic rent?

• AA social security retirement income.
• BA check to a college student from a parent or guardian.
• CA superstar basketball player's $50 million earnings.
• DA welfare payment from social services.

Allocative efficiency

• Ameans that those who work hardest will get more.
• Bimplies that the economy's output is distributed evenly.
• Cimplies that resources are used to produce the goods and services society desires in just the right amounts.
• Dmeans that no inferior products will be produced.

All else equal when the United States exports more goods and services

• Athe value of the dollar falls as demand for dollars decreases.
• Bthe value of the dollar rises as demand for dollars increases.
• Cthe value of the dollar falls as the supply of dollars increases.
• Dthe value of the dollar rises as the supply of dollars increases.

According to Keynesian analysis the Great Depression was caused by

• Atoo much foreign influence on the economy.
• Ba sharp rise in the marginal propensity to consume.
• Ca lack of spending.
• Dtoo much investment.

The law of diminishing marginal utility is most useful for explaining the

• Alaw of supply
• Blaw of demand
• Ccurvature of the total cost curve
• Dshape of the production possibilities frontier

Suppose that current disposable income is $10000 and consumption spending is $8000. For every $100 increase in disposable income saving increases $10. Given this information

• Athe marginal propensity to save is .20.
• Bthe marginal propensity to save is .10.
• Cthe marginal propensity to consume is .80.
• Dthe marginal propensity to save is .90.

Suppose today's headline is that private investment has decreased as a result of an action by the Federal Reserve. Which of the following choices is the most likely cause?

• ALowering of the discount rate
• BElimination of a corporate tax credit on investment
• CDecreasing the reserve ratio
• DSelling Treasury securities to commercial banks

Land refers to

• Aall natural resources.
• Breal estate.
• Call productive resources.
• Dfarmland only.

The natural rate of unemployment

• Aincludes structural frictional and cyclical unemployment
• Bincludes cyclical and frictional unemployment
• Cincludes structural and frictional unemployment
• Dincludes structural and cyclical unemployment

The Federal Reserve is

• Apart of the judicial branch of government.
• Bthe monetary authority for banks but not other depository institutions.
• Cin control of the money supply.
• Dpart of the legislative branch of government.

Which of the following might worsen a nation's trade deficit?

• AA higher interest rate on financial assets relative to other nations.
• BLower wages relative to other nations.
• CA higher rate of inflation relative to other nations.
• DLower taxes on corporate profits relative to other nations.

Which of the following is true of equilibrium in a purely (or perfectly) competitive market for good X?

• AA surplus of good X exists.
• BA shortage of good X exists.
• CThe quantity demanded equals the quantity supplied of good X.
• DThe government regulates the quantity of good X produced at the market price.

In the short run contractionary monetary policy causes aggregate demand to output to and the price level to Aggregate demand Output Price Level

• AIncreases Increases Decreases
• BDecreases Decreases Decreases
• CIncreases Increases Increases
• DDecreases Decreases Increases

Operating in the intermediate range of the aggregate supply curve an increase in aggregate demand results in an increase in

• Aneither price level nor real GDP
• Bprice level and real GDP
• Cprice level only
• Dreal GDP only

If, as the price of a particular good increases, the added satisfaction of each additional unit of this good for the consumer decreases, which of the following correctly identifies the concept?

• AIncreasing marginal utility.
• BDiminishing marginal productivity.
• CIncreasing marginal productivity.
• DDiminishing marginal utility.

Monopolistic competition is said to be productively inefficient because

• Along-run profits are positive.
• Bthere exist no barriers to entry.
• Cthe long-run price is above minimum average total cost.
• Dfirms engage in collusive behavior.

When we observe an unplanned decrease in inventories we can expect

• Aoutput to begin to fall.
• Boutput to begin to rise.
• Cprices to begin to fall.
• Dsaving to begin to fall.

Which of the following best exemplifies economies of scale?

• AAs a firm's output decreases, average costs for production decrease.
• BAs a firm's inputs triple, its output quadruples.
• CAs a firm's output increases, average costs for production increase.
• DAs a firm's inputs triple, its output doubles.