Economics Trivia Questions for Students — page 8

The basis for the answer in number 1 is

• Atotal revenue is at a maximum.
• Btotal output is at a maximum.
• CP or wage rate of labor < MRP of labor and with one additional unit of labor WI, > MRP.
• DP or wage rate of labor > MRP of labor and with one additional unit of labor, wage rate < MRP.

In a command economy

• Astate and local governments respond to the fundamental economic questions.
• Bcompetition helps answer the fundamental economic questions.
• Cthe central government dictates the answers to the fundamental economic questions.
• Dthe market dictates the answers to the fundamental economic questions.

Automatic stabilizers in the economy serve an important role in

• Abalancing the budget.
• Bincreasing a budget surplus in a recession.
• Cincreasing the length of the business cycle.
• Dlessening the impact of a recession.

Compared to perfect competition in the long run, monopoly has

• Alower prices.
• Bmore choices of products for consumers.
• Cprice greater than marginal revenue.
• Dmore efficiency.

If the Federal Reserve was concerned about the "crowding-out" effect they could engage in

• Aexpansionary monetary policy by lowering the discount rate.
• Bcontractionary monetary policy by lowering the discount rate.
• Ccontractionary monetary policy by raising the discount rate.
• Dexpansionary monetary policy by selling Treasury securities.

Which of the following events has no effect on GDP?

• AA college buys computers.
• BYour friends make a music CD that doesn't sell any copies.
• CYou buy a 1957 Chevy from a friend.
• DThe Department of Transportation repaves a road.

Relative to a competitive product market with the same costs, a monopoly can be expected to involve

• Amore deadweight loss
• Bmore firms
• Clower prices
• Dhigher production levels

Which of the following is true of the complete circular flow model of an open economy?

• AThe government collects taxes from firms and households in exchange for goods and services.
• BHouseholds supply resources to producers in exchange for goods and services.
• CThere is no role for the foreign sector.
• DAll goods and services flow through the government in exchange for resource payments.

The Phillips curve represents the relationship between

• Ainflation and unemployment.
• Binflation and the money supply.
• Cunemployment and the money supply.
• Dthe money supply and the real interest rate.

Excess reserves in the banking system will increase if

• Athe reserve ratio is increased.
• Bthe discount rate is increased.
• Cthe checking deposits increase.
• Dthe Fed sells Treasury securities to commercial banks.

Which of the following goods is likely to provide both the largest total utility and the smallest marginal utility?

• APlastic
• BAutomobiles
• CComputers
• DAir

Monopolistic competition is often characterized by

• Amany resources devoted to advertising.
• Ba long-run price that exceeds average total cost.
• Cstrong barriers to entry.
• Da price that exceeds average variable cost, causing excess capacity.

Market economies

• Arely on courts to ensure people and firms get what they deserve.
• Brely on markets to coordinate economic activity.
• Crely on elected officials to make the most important economic decisions.
• Drely on the government to address the fundamental economic questions.

Of the following choices which combination of fiscal and monetary policy would most likely reduce a recessionary gap? FISCAL POLICY MONETARY POLICY

• ADecrease taxes. Buy Treasury securities.
• BDecrease spending. Sell Treasury securities.
• CIncrease spending. Increase the reserve ratio.
• DIncrease taxes. Increase the reserve ratio.

A monopsonist is identified by one of the following:

• AA wage payment lower than the marginal revenue product of labor.
• BEmployment level greater than that of a competitive labor market.
• CA single seller of labor services.
• DA wage payment higher than that of a competitive labor market.

Which of the following is not among the methods unions use to increase wages?

• AEfforts to decrease the prices of substitute resources
• BNegotiations to obtain a wage floor
• CFeatherbedding or make-work rules
• DRestrictive membership policies

Which of the following is not included in MI?

• ACredit cards.
• BCoins.
• CTravelers' checks.
• DPaper money.

Country A has a current account surplus; this means that

• ACountry A also has a financial account surplus.
• BCountry A is operating in a recessionary gap.
• CCountry A must borrow from its foreign reserves.
• DCountry A has a financial account deficit.

In a given period the average price level in the country of Sherwood tripled and Robin's income increased from $30000 to $60000. What happened to Robin's nominal and real income? Nominal Income Real Income

• A(A) Increased Decreased
• B(B) Increased Increased
• C(D) Increased Stayed the same
• D(C) Decreased Decreased

The "crowding-out" effect refers to which of the following?

• ALower interest rates that result from borrowing to conduct expansionary monetary policy
• BHigher interest rates due to borrowing to conduct contractionary monetary policy
• CHigher interest rates that result from borrowing to conduct contractionary fiscal policy
• DHigher interest rates that result from borrowing to conduct expansionary fiscal policy

If the wage paid to all units of labor is $4.50, how many units of labor are hired?

• A2
• B3
• C1
• D4

The "crowding-out" effect is the result of

• Aincreasing unemployment rates from expansionary monetary policy.
• Bincreasing interest rates from expansionary monetary policy.
• Cincreasing interest rates from expansionary fiscal policy.
• Ddecreasing interest rates from contractionary fiscal policy.

According to experts the CPI

• Aaccurately estimates changes in the cost of living.
• Bunderstates increases in the cost of living.
• Coverstates increases in the cost of living.
• Dcould over- or underestimate changes depending on the season.

An industry described as an oligopoly would most likely have

• Anormal profits in the long run.
• Bno opportunities for collusive behavior.
• Cprice-taking behavior.
• Dsignificant barriers to entry.

Crowding out

• Aoccurs when consumers and firms spend less offsetting expansionary fiscal policy.
• Bcauses the aggregate demand curve to shift to the right.
• Cis one reason fiscal policy is so effective.
• Doccurs when interest rates fall due to government borrowing.

Which of the following transactions would be counted in GDP?

• AThe cash you receive from babysitting your neighbor's kids
• BThe sale of cucumbers to a pickle manufacturer
• CThe sale of illegal drugs
• DThe sale of a pound of tomatoes at a supermarket

If supply and demand both increase, the result is

• Aa definite decrease in price and a definite increase in quantity
• Ba definite decrease in quantity and an indeterminate change in price
• Ca definite increase in price and an indeterminate change in quantity
• Da definite increase in quantity and an indeterminate change in price

Which of the following statements is true?

• AM I is backed by gold and M2 is backed by silver.
• BSome of the things included in M2 are not as liquid as the things in MI.
• CM2 is smaller than MI.
• DThe biggest component of M I is currency.

How would fiscal and monetary policymakers combine spending tax and monetary policy to fight a recessionary gap while avoiding large budget deficits? SPENDING POLICY TAX POLICY MONETARY POLICY

• ALower spending Lower taxes Increasing the reserve ratio
• BLower spending Higher taxes Buy Treasury securities
• CHigher spending Lower taxes Sell Treasury securities
• DHigher spending Higher taxes Lowering the discount rate

An expansionary monetary policy tends to

• Ahave no effect on exports.
• Bworsen the balance of trade.
• Chave no effect on imports.
• Dimprove the balance of trade.

What could the government do to most effectively avoid a free rider problem?

• AProvide more complete information about the relevant goods
• BTax those creating negative externalities
• CEnact stricter antitrust legislation
• DSupply public goods using tax dollars

When nominal GDP is rising we would expect money demand to

• Adecrease as consumers demand more money for transactions increasing the interest rate.
• Bincrease as consumers demand more money for transactions increasing the interest rate.
• Cdecrease as the purchasing power of the dollar is falling decreasing the interest rate.
• Dincrease as consumers demand more money as a financial asset increasing the interest rate.

The appropriate fiscal policy to remedy a recession

• Acalls for the federal government to run a surplus.
• Bis decreased government spending and taxes.
• Ccalls for the federal government to run a deficit.
• Dis increased taxes and government spending.

When the labor demand curve is downward-sloping, an increase in the minimum wage is

• Aharmful to all workers and employers
• Bbeneficial to all workers and harmful to some employers
• Cbeneficial to some workers and harmful to other workers
• Dbeneficial to all workers and employers

If real GDP per capita was $10000 in 1990 and $15000 in 2000 then the amount of economic growth is

• A3.3 percent.
• B50 percent.
• C5.0 percent.
• D0.5 percent.

In a private closed economy which of the following statements is true?

• AThe economy is in equilibrium when consumption equals saving.
• BSaving is equal to zero when consumption equals disposable income.
• CHousehold saving can never be negative.
• DInvestment is always greater than savings.

Corn is exchanged in a competitive market. Which of the following definitely increases the equilibrium price of corn?

• ABoth supply and demand shift rightward.
• BSupply shifts to the right; demand shifts to the left.
• CBoth supply and demand shift leftward.
• DSupply shifts to the left; demand shifts to the right.

An increase in corporate optimism will have which of the following effects in the market for loanable funds?

• AAn increase in supply lowering the interest rate.
• BA decrease in demand increasing the interest rate.
• CAn increase in demand increasing the interest rate.
• DAn increase in both supply and demand and an ambiguous change in interest rates.

If the Japanese economy suffers a deep prolonged recession in what ways would U.S. net exports and the values of the dollar and yen change? U.S. NET EXPORTS VALUE OF DOLLAR VALUE OF YEN

• AIncreases Decreases Increases
• BDecreases Increases Increases
• CDecreases Decreases Decreases
• DDecreases Decreases Increases

In 2004 the United States had a trade deficit of $603 billion; therefore

• A$603 billion worth of capital flowed out of America.
• BAmerica's government spent more than it took in.
• Cnet exports were positive.
• DAmericans consumed more than they produced.

A decrease in the price of a particular product will result in

• Aa decrease in the quantity demanded.
• Ban increase in the quantity demanded.
• Ca decrease in demand.
• Dan increase in demand.

The greater (higher) the wage elasticity of demand, the

• Agreater the price elasticity for the product produced by labor.
• Bthe smaller the time period.
• Cgreater the proportion of capital costs to labor costs in the production of goods.
• Dthe smaller the number of substitutes for labor.

A policy supported by supply-side economists would be

• Ahigher taxes on corporate profits.
• Bremoval of investment tax credits.
• Clower tax rates on interest earned from savings.
• Da longer duration of unemployment benefits.

The price elasticity of demand for a product is greater if

• Athe product is a necessity.
• Bthe proportion of the good of the consumer's budget is high.
• Cthe number of substitute products is limited.
• Dthe period of time to respond to a price change is short.

Which of the following statements accurately describes the relationship between average product (AP) and marginal product (MP) of labor?

• AAP rises when MP is above it and falls when MP is below it.
• BMP intersects AP at the maximum of MP.
• CAP and MP are always parallel to each other.
• DAP and MP are either both rising or both falling at all levels of labor.

Which of the following would NOT shift the aggregate demand curve?

• AA change in consumer confidence.
• BA change in the money supply.
• CA change in spending by state governments.
• DA change in technology.

The appropriate fiscal policy to remedy inflation calls for

• Athe federal government to run a deficit.
• Bdecreased government spending and taxes.
• Cthe federal government to run a surplus.
• Dincreased taxes and government spending.

Which of the following would be an example of fiat money?

• ADollar bills
• BCigarettes used as money in prisons
• CGold coins
• DArrowheads used as a medium of exchange

Suppose the President plans to cut taxes for consumers and also plans to increase spending on the military. How does this affect real GDP and the price level?

• AGDP increases and the price level increases.
• BGDP decreases and the price level increases.
• CGDP stays the same and the price level increases.
• DGDP increases and the price level decreases.

If there is a positive externality associated with the production of a private good, which of the following is an action of government that would most likely move the market to an efficient outcome?

• ATax the firm.
• BSubsidize the firm or its customers.
• CAppoint a commission.
• DClose the firm producing the good.