Economics Trivia Questions for Students — page 6

Assume the reserve requirement is 5 percent. If the FED buys $4 million worth of government securities in an open market operation then the money supply can

• Adecrease by $1.25 million.
• Bincrease by $80 million.
• Cincrease by $1.25 million.
• Dincrease by $20 million.

Given the table below which statement is true? Labor hours needed to produce a unit of: Country Wine Cheese France 40 80 Belgium 15 60

• AFrance has the comparative advantage in cheese.
• BFrance has the absolute advantage in both products.
• CFrance has the absolute advantage in cheese.
• DFrance should specialize in and export wine while Belgium should specialize in and export cheese.

A use of easy money (expansionary) policy by the Fed could result in which of the following?

• Aan increase in the real interest rate
• Ba decrease in net exports
• Can increase in net exports
• Dan increase in the nominal interest rate

On a bank's balance sheet which of the following is considered a liability?

• ADeposits
• BExcess reserves
• CLoans
• DRequired reserves

It is a monetarist point of view that

• Amonetary policy should be used to fine-tune the economy
• Bcrowding out is not a problem
• Cthe velocity of money is unstable
• Dthe money supply should be increased steadily

The FED's Board of Governors has members each serving -year terms.

• A50 2
• B14 7
• C8 8
• D7 14

Which of the following fiscal policy combinations would be most likely to slowly increase real GDP without putting tremendous upward pressure on the price level?

• AIncrease government spending with a matching decrease in taxes.
• BIncrease government spending with no change in taxes.
• CDecrease government spending with a matching increase in taxes.
• DIncrease taxes with a matching increase in government spending.

Suppose taxes are cut in an economy that is in equilibrium at full employment. In the long run the tax cut will

• Araise real output and lower the price level.
• Blower real output and raise the price level.
• Craise the price level.
• Draise real output and raise the price level.

Macroeconomics focuses on

• Athe resource use of the entire nation.
• Bindividuals and their resource use.
• Cgovernment and its laws that affect commerce.
• Dcorporations and their production levels.

If a market is organized by a cartel, we can expect

• Aan incentive for cartel firms to cheat on the cartel agreement.
• Bprofit maximization by individual firms in the cartel.
• Callocative efficiency.
• Dnormal profits for all cartel firms.

When a country has a balance of trade deficit

• Aits imports exceed its exports.
• Bit must make up the difference by shipping gold to its creditors.
• Cits currency will appreciate.
• Dits exports exceed its imports.

Which of the following is a consequence of a protective tariff on imported steel?

• ANet exports fall.
• BAllocative efficiency is improved.
• CIncome is transferred from domestic steel consumers to domestic steel producers.
• DIncome is transferred from domestic steel to foreign steel producers.

If 200 computers with a retail value of $100000 are domestically produced in 2005 but not sold until 2006 then GDP in 2005 is

• A200 higher because of the computers.
• B$100000 higher because of the computers.
• Chigher by the wholesale value of the computers.
• Dunaffected until 2006 when the computers are sold and the figure for GDP in 2005 is revised.

A change in government spending will have a greater short run impact on real output when

• Athe marginal propensity to consume is larger.
• Bthe marginal propensity to consume is lower.
• Cthe velocity of money is higher.
• Dthe velocity of money is lower.

Of the following choices the one most likely to be preferred by supply-side economists would be

• Aa tax credit on capital investment.
• Bincreased government spending.
• Clower taxes on household income.
• Dhigher tariffs on imported goods.

Theo loses his job at the public swimming pool when the pool closes for the winter. This is an example of

• Adiscouraged worker.
• Bcyclical unemployment.
• Cfrictional unemployment.
• Dseasonal unemployment.

If the world price of copper exceeds the domestic (U.S.) price of copper we would expect

• Athe demand for U.S. copper to fall.
• Bthe United States to be a net exporter of copper.
• Ca growing trade deficit in the United States in goods and services.
• Dthe United States to impose a tariff on imported copper to protect domestic producers.

A monopoly is less efficient than a perfect competitor because

• Aa perfect competitor breaks even in the short run and the monopoly does not
• Ba monopoly can make profit in the short run but not in the long run
• Ca monopoly produces more output and sells for a higher price
• Da monopoly produces less output and sells for a higher price

Appropriate fiscal and monetary polices during the contractionary phase of the business cycle include

• Aincreases in government spending and higher discount rates.
• Bbudget surpluses and lower discount rates.
• Cbudget surpluses and higher discount rates.
• Dtax reductions and open market purchases.

Some economists believe that when aggregate demand declines prices are inflexible or "sticky" in the downward direction. This implies that the short-run aggregate supply curve is

• Avertical below full employment.
• Bvertical at full employment.
• Cupward sloping at full employment.
• Dhorizontal below full employment.

An import quota on foreign automobiles is expected to

• Aincrease the price of automobiles and protect domestic producers at the expense of consumers.
• Bincrease domestic efficiency and protect domestic producers at the expense of foreign producers.
• Cdecrease the price of automobiles and protect domestic consumers at the expense of foreign producers.
• Dincrease the price of automobiles and protect domestic consumers at the expense of domestic producers.

What will happen to the equilibrium price level and the equilibrium quantity of output if the aggregate demand curve shifts to the right? Assume an upward sloping aggregate supply curve.

• AThe equilibrium price level increases while the equilibrium quantity of output decreases.
• BThe equilibrium price level decreases while the equilibrium quantity of output increases.
• CThe equilibrium price level and quantity of output increase.
• DThe equilibrium price level and quantity of output decrease.

A minimum wage in the market for fast-food workers is likely to produce

• Aan increase in the demand for fast-food workers.
• Ba surplus of fast-food workers.
• Ca decrease in the supply of fast-food workers.
• Da shortage of fast-food workers.

Expansionary fiscal policy would best be prescribed to

• Areduce inflation
• Beliminate a recessionary gap
• Celiminate an inflationary gap
• Dreduce the interest rate

Which of the following was not a landmark antitrust act?

• AThe Wagner Act
• BThe Robinson-Patman Act
• CThe Clayton Act
• DThe Sherman Act

A demand curve slopes downward for an individual as the result of

• Adiminishing marginal utility
• Bthe Fisher effect
• Cdiminishing returns to scale
• Ddiminishing marginal returns

Suppose that an expansionary fiscal policy leads to a large increase in real output and a small increase in the price level. From this it can be inferred that

• Ainflation had already impacted the economy before the fiscal stimulus.
• Baggregate demand is steeply sloped.
• Caggregate supply decreased.
• Dthe economy initially had some unemployed resources.

Which of the following would be included in U.S. GDP calculations?

• AHigh school students spending their Saturdays building homes for the homeless
• BAn auto mechanic fixing his dentist's car for a filling
• CA stay-at-home dad providing childcare for his children
• DA worker donating $200 to the Red Cross

If the FED buys bonds in the secondary market

• Athe money supply will decrease.
• Bthe money supply will not be affected.
• Cthe discount rate would be affected.
• Dthe money supply will increase.

When the cross-price elasticity of demand is negative, the goods in question are necessarily

• Ainferior
• Bcomplements
• Csubstitutes
• Dnormal

Which of the following is true of a price floor?

• ATo be an effective floor, it must be set above the equilibrium price.
• BThe price floor shifts the supply curve of the good to the right.
• CAn effective floor creates a shortage of the good.
• DThe price floor shifts the demand curve to the left.

According to the quantity theory of money increasing the money supply serves to

• Aincrease the nation's long-run capacity to produce.
• Bincrease short-run output but it is the source of long-run inflation.
• Cstimulate short-run production and employment with very little long-run inflation.
• Dlower the unemployment rate while also lowering the rate of inflation.

Which of the following is characteristic of a centrally planned economic system?

• AThe circular flow of goods and services minimizes the role of the federal government.
• BGovernment planners decide how best to produce goods and services.
• CPrivate ownership of resources is fundamental to economic growth.
• DResources are allocated based on relative prices.

In a competitive labor market for housepainters, which of the following would increase the demand for housepainters?

• AAn effective minimum wage imposed on this labor market.
• BAn increase in the construction of new houses.
• CAn increase in the price of mechanical painters so long as the output effect exceeds the substitution effect.
• DAn increase in the price of gallons of paint.

The concentration ratio for a monopoly is

• A5
• B10
• C0
• D100

Which of the following indicates that two goods are complements?

• AA demand elasticity greater than one
• BA positive income elasticity
• CA negative cross-price elasticity
• DA horizontal demand curve

If a business wants to increase its revenue and it knows that the demand price elasticity of its product is equal to 0.78, it should

• Aincrease price because demand is inelastic
• Bdecrease price because demand is inelastic
• Cdecrease price because demand is elastic
• Ddecrease price because demand is unit elastic

Stagflation is the result of

• Aa rightward shift in the aggregate supply curve.
• Ba leftward shift in the aggregate demand curve.
• Ca leftward shift in both the aggregate supply and aggregate demand curves.
• Da leftward shift in the aggregate supply curve.

Which of the following results from stagflation?

• AUnemployment decreases
• BThe Phillips curve shifts to the right
• CThe price level decreases
• DThe aggregate supply curve shifts to the right

Which of the following is a direct accurate link within the circular flow?

• AHousehold income results in revenues via the factor markets.
• BWages and rents are exchanged for income via the product markets.
• CHousehold expenditures result in revenues for firms via the product markets.
• DGoods and services are exchanged for inputs via the factor markets.

According to Classical economic theory the equation of exchange demonstrates the neutrality of money only if the

• Avelocity of money supply and the quantity of output are constant.
• Bvelocity of money supply equals the speed of transactions.
• Cmoney supply and its velocity are inversely related.
• Dmoney supply and its velocity are equal.

What will happen to the equilibrium price and the equilibrium quantity of good A when producers of good A expect the price to be higher in the near future?

• AThe equilibrium price will rise and the equilibrium quantity will fall.
• BThe equilibrium price and the equilibrium quantity will rise.
• CThe equilibrium price will fall and the equilibrium quantity will rise.
• DThe equilibrium price and the equilibrium quantity will fall.

Which of the following will cause the aggregate demand curve to shift to the left?

• AAn increase in foreign income
• BA decrease in income taxes
• CAn increase in government spending
• DExpectations of surpluses of goods in the future

The demand curve for the firm operating under perfect competition is

• Aperfectly vertical line.
• Bperfectly horizontal function.
• Cupward sloping to the right.
• Ddownward sloping to the right.

If firms that make a particular product expect its price will be lower in the future

• Athis will have no effect on the amount of the product supplied right now.
• Bthis will cause the supply of the product to increase right now.
• Cthis will have no effect on the supply of the product now or later.
• Dthis will cause the supply of the product to decrease right now.

The cabbages you grow in your summer garden are

• Acounted in GDP under I.
• Bcounted in GDP but not NDP.
• Cnot counted in GDP.
• Dcounted in GDP under C.

A production possibility frontier will be a straight line when

• Athe goods on the axes are perfect substitutes in consumption
• Befficiency is achieved
• Cutility is maximized
• Dresources are not specialized

Good X is exchanged in a competitive market. Which of the following is true if an excise tax is now imposed on the production of good X?

• AThe consumer's burden of the tax rises as the demand curve is more elastic.
• BIf the demand curve is perfectly elastic, the price rises by the amount of the tax.
• CThe consumer's burden of the tax rises as the demand curve is less elastic.
• DConsumer surplus rises as a result of the tax.

One of the reasons that the government discourages and regulates monopolies is that

• Aproducer surplus is lost and consumer surplus is gained.
• Bconsumer surplus is lost with higher prices and lower levels of output.
• Cmonopoly prices ensure productive efficiency but cost society allocative efficiency.
• Dmonopoly firms do not engage in significant research and development.

What will happen to the equilibrium price level and the equilibrium quantity of output if the aggregate demand curve shifts to the right? Assume a Classical aggregate supply curve.

• AThe equilibrium price level and quantity of output increase.
• BThe equilibrium price level increases while the equilibrium quantity of output remains unchanged.
• CThe equilibrium price level decreases while the equilibrium quantity of output increases.
• DThe equilibrium price level increases while the equilibrium quantity of output decreases.