Question 1

In any given economic system, the function of money is to be a:
A)medium of exchange
B)tool for the wealthy classes
C)tool for the oligopoly
D)medium of competitive qualities

Accepted Answer

In any given economic system, the function of money is to be a medium of exchange.
Key Takeaway: Money serves a number of functions in a given economic system including a medium of exchange. Other functions of money is to store wealth and a means to establish the value of future payments on goods and services.

Question 2

The short term aggregate supply curve slopes upwards due to these reasons EXCEPT:
A)worker misperception
B)market saturation
C)imperfect information
D)sticky wage

Accepted Answer

Market saturation is not a reason for the short term aggregate supply curve to slope upwards.
Key Takeaway: An aggregate supply curve plots price level against product output. Since it slopes upwards, this means that as price levels increase, so do product outputs. Worker misperception, imperfect information, and sticky wage are all reasons for a short term aggregate supply curve to slope upwards.

Question 3

Echo Energies is a gas company facing increasing shipment costs in the new fiscal year. To maximize its profits in the short run when costs are less than market prices, they should:
A)increase production
B)decrease production
C)layoff employees
D)renegotiate loans

Accepted Answer

The company should increase production.
Key Takeaway: A short run is a decision making period for a company during which at least one variable is held constant. To maximize its profits in a short run when costs are less than market prices, a company should increase production.

Question 4

Price Elasticity of Demand (PED) illustrates how well quantities of goods and services demanded by consumers respond to changes in prices. The following are determinants of PED EXCEPT:
A)income percentage spent on goods
B)availability of substitute goods and services
C)decreased choice
D)time period

Accepted Answer

Decreased choice is not a determinant of PEN.
Key Takeaway: When goods and services are demanded in large quantities, prices fluctuate in response. For example, a certain product's abundance in the market can lead to decreased pricing. How well quantities of goods and services demanded by consumers respond to changes in prices is referred to Price Elasticity of Demand (PED). Determinants of PEN are percentages of income spent on goods and services, availability of substitute good, and the time period elapsed.

Question 5

The following are different types of market structures EXCEPT:
A)perfect competition
B)monopoly
C)oligopoly
D)imperfect competition

Accepted Answer

Imperfect competition is not a type of market structure.
Key Takeaway: There are four kinds of market structures: perfect competition, monopoly, oligopoly, and monopolistic competition. The differences between these markets are described in terms of freedom of entry of enterprises, product differentiation, and the number of companies and firms that operate within each structure. For example, monopolies have few products, severely restrict entry of companies and firms, and products tend to be unique. In contrast, perfect competition markets have many products and make it easy for companies and firms to present their products.

Question 6

The slope of the aggregate demand (AD) curve is determined and influenced by all of the following EXCEPT:
A)the interest rate effect
B)the international effect
C)the multiplier effect
D)the local inflation effect

Accepted Answer

The local inflation effect is not a determinant of the aggregate demand curve.
Key Takeaway: The aggregate demand curve slopes downward, influenced by a number of factors that include the interest rate effect and the international effect. Additionally, the multiplier effect (an amplification of initial changes in spending) causes a shift in the curve.

Question 7

With the introduction of government-funded health programs for the elderly and the poor, private health insurers have lost a substantial portion of their insured clients to these programs. The introduction of government-sponsored spending that curbs private investment is referred to as:
A)squeezing-out
B)crowding-in
C)crowding-out
D)squeezing-in

Accepted Answer

The introduction of government-sponsored spending that curbs private investment is referred to as crowding-out.
Key Takeaway: Crowding-out occurs when government-sponsored investment in programs leads to a curb or a reduction in private investment. This is shown in health programs, for example, for the elderly and the poor. Private insurance companies essentially find themselves losing clients to the government programs.

Question 8

In the long run aggregate supply (LRAS), the curve is affected by the following EXCEPT:
A)labor
B)capital
C)technological capability
D)trade deficits

Accepted Answer

Trade deficits do not affect the long run aggregate supply.
Key Takeaway: In a long run aggregate supply (LRAS), a period of optimal use of resources is assumed. This means that the curve becomes increasingly vertical with aggregate demand producing only temporary changes in economic output. LRAS is affected by labor, capital availability, and technological capability.

Question 9

In a short run aggregate supply (SRAS) curve, an upward turn results in the following shift:
A)decrease in price and output
B)increase in price and output
C)increase in price but no increase in output
D)increase in output but no increase in price

Accepted Answer

In an SRAS curve, an upward turn results in an increase in output but no increase in price.
Key Takeaway: In a short run aggregate supply (SRAS), the economy experiences a period when resources are underused and staff can be hired without capital investment. An upward turn in an SRAS curve means that there is an increase in product output but no matching increases in price levels which means that the curve becomes horizontal.

Question 10

All of the following are approaches to calculate a country's GDP EXCEPT:
A)product
B)income
C)expenditure
D)imports

Accepted Answer

Imports are not used in the calculation of a country's GDP.
Key Takeaway: A country's Gross Domestic Product (GDP) can be measured in a number of ways. The product approach looks at the value of final goods produced by industries such as manufacturing and agricultural are added. In the income approach, total income is measured. In the expenditure approach, both private consumption and government spending are counted.

Question 11

Gross Domestic Product (GDP) is an index that measures the market value of all goods and products produced within a country in a given year. The correlation between the GDP and the standard of living of an individual in that country at any given time is:
A)positive
B)negative
C)approaching zero
D)weakly negative

Accepted Answer

The correlation between GDP and individual standard of living is positive.
Key Takeaway: The correlation between GDP and individual standard of living is positive. In other words, the higher the market value of all goods and products that are made, the more likely that individuals are gainfully employed in making those products.

Question 12

The aggregate quantity of raw and manufactured goods demanded by consumers increases when the:
A)personal consumption increases
B)government spending decreases
C)foreign investment decreases
D)interest rates remain the same

Accepted Answer

The aggregate quantity of goods demanded by consumers increases when personal consumption increases.
Key Takeaway: The aggregate demand curve is influenced by a number of factors that include personal consumption, government spending, investment, and trade. As personal consumption increases, the aggregate quantity of raw and manufactured goods demanded by consumers also increases.

Question 13

When calculating unemployment figures in a given population, economists count those:
A)looking for paid work
B)early retirees seeking extra income
C)discouraged after long searches
D)incarcerated in prisons

Accepted Answer

Unemployment figures count those people who are looking for paid work.
Key Takeaway: In a given society, unemployment figures are only indirectly related to the number of people who are without work. In other words, those figures only count people who are actively seeking paid work. Unemployment figures do not count early retirees seeking extra income, those discourage after long searches, and prison inmates. The figures also do not count people in the military and people who are self-employed or wish to be self-employed.

Question 14

The short run aggregate supply (SRAS) curve is graphed:
A)as a sloping upward line
B)is steeper below full employment than above it
C)as a horizontal line
D)with consumer personal income against product quantity

Accepted Answer

The short run aggregate supply (SRAS) curve is graphed as a horizontal line.
Key Takeaway: In a short run aggregate supply (SRAS), an upward turn in the curve means that raw and manufactured product quantities increase but price levels remain constant. This means that the curve becomes increasingly horizontal.

Question 15

A small Latin American country has been running a trade deficit for the past few years. A trade deficit occurs when:
A)a government exports more than it imports
B)a government imports more than it exports
C)a government imports raw goods only
D)a government exports manufactured goods only

Accepted Answer

A trade deficit occurs when a government imports more than it exports.
Key Takeaway: Trade among countries often leads to greater competition, responds to differences in demands, and decreases costs. Trade deficits occur when governments import more goods (raw and manufactured) and services than they export. In the face of trade deficits, governments become indebted to foreign countries.

Question 16

In a small county, the total number of people in the labor force is 15,000. There are currently 12,850 people who are working in paid jobs in both private and public enterprises. What is the unemployment rate in this county?
A)85.7%
B)14.3%
C)87.5%
D)13.4%

Accepted Answer

The unemployment rate for this county is 14.3%.
Key Takeaway: To calculate unemployment figures, the number of people in the labor force is taken into account according to the following equation: Unemployment rate = Number of unemployed/Labor X 100%. In this example, Unemployment rate = (15,000 - 12,850)/ 15,000 X 100% = 14.3%.

Question 17

Changes in economic activities that are expressed in price fluctuations are attributed to inflation. All of the following are types of inflation EXCEPT:
A)built-in
B)opportunity-pull
C)demand-pull
D)cost-push

Accepted Answer

Opportunity-pull is not a type of inflation.
Key Takeaway: According to the Triangle Model, there are three types of inflation: built-in, demand-pull, and cost-push. Increased individual and governments' spending leads to demand-pull inflation while an overall reduction in materials and goods' supplies leads to cost-push inflation. Built-in inflation is caused by workers increasing their wages with prices that are passed on to the consumers by producers.

Question 18

The United States is facing a large budget deficit that is only expected to increase as new social programs and unemployment benefits are offered to citizens. This budget deficit is more likely to produce a demand-pull inflation when:
A)outsourcing leads to low employment
B)GDP is higher and unemployment is lower
C)GDP is lower and unemployment is higher
D)foreign investment is limited to manufacturing

Accepted Answer

This budget deficit is more likely to produce a demand-pull inflation when the GDP is higher and unemployment is lower.
Key Takeaway: Demand-pull inflation occurs when high demands lead to a higher GDP and lower unemployment. With too few supplies being chased by too much demand, such an inflation occurs.

Question 19

An aggregate demand curve is the sum of demand curves from different segments of the economy. Such a curve (Yd) takes into account four different economic indicators as seen below. What does the "C" stand for? Yd = C + I + G + (X-M)
A)consumption
B)cost
C)competition
D)cycle

Accepted Answer

The "C" stands for consumption.
Key Takeaway: Personal consumption expenditures are one of the components of the aggregate demand curve equation. This consumption by households and unattached individuals is a function of disposable income.

Question 20

Germany's manufacturing base has seen an increase in productivity and exports over the past decade. A rightward shift in the aggregate supply curve in this country is most likely due to:
A)a change in price levels
B)an increase in foreign investments
C)a change in government spending
D)a change in imports

Accepted Answer

A rightward shift in the aggregate supply curve in this country is most likely due to a change in price levels.
Key Takeaway: A change in the aggregate supply (AS) of all goods is affected by both price levels and quantities of goods produced. A rightward shift in the AS curve is most likely due to a change in price levels.

Quiz 3: Economics

In any given economic system, the function of money is to be a:

The short term aggregate supply curve slopes upwards due to these reasons EXCEPT:

Echo Energies is a gas company facing increasing shipment costs in the new fiscal year. To maximize its profits in the short run when costs are less than market prices, they should:

Price Elasticity of Demand (PED) illustrates how well quantities of goods and services demanded by consumers respond to changes in prices. The following are determinants of PED EXCEPT:

The following are different types of market structures EXCEPT:

The slope of the aggregate demand (AD) curve is determined and influenced by all of the following EXCEPT:

With the introduction of government-funded health programs for the elderly and the poor, private health insurers have lost a substantial portion of their insured clients to these programs. The introduction of government-sponsored spending that curbs private investment is referred to as:

In the long run aggregate supply (LRAS) , the curve is affected by the following EXCEPT:

In a short run aggregate supply (SRAS) curve, an upward turn results in the following shift:

All of the following are approaches to calculate a country's GDP EXCEPT:

Gross Domestic Product (GDP) is an index that measures the market value of all goods and products produced within a country in a given year. The correlation between the GDP and the standard of living of an individual in that country at any given time is:

The aggregate quantity of raw and manufactured goods demanded by consumers increases when the:

When calculating unemployment figures in a given population, economists count those:

The short run aggregate supply (SRAS) curve is graphed:

A small Latin American country has been running a trade deficit for the past few years. A trade deficit occurs when:

In a small county, the total number of people in the labor force is 15,000. There are currently 12,850 people who are working in paid jobs in both private and public enterprises. What is the unemployment rate in this county?

Changes in economic activities that are expressed in price fluctuations are attributed to inflation. All of the following are types of inflation EXCEPT:

The United States is facing a large budget deficit that is only expected to increase as new social programs and unemployment benefits are offered to citizens. This budget deficit is more likely to produce a demand-pull inflation when:

An aggregate demand curve is the sum of demand curves from different segments of the economy. Such a curve (Yd) takes into account four different economic indicators as seen below. What does the "C" stand for? Yd = C + I + G + (X-M)

Germany's manufacturing base has seen an increase in productivity and exports over the past decade. A rightward shift in the aggregate supply curve in this country is most likely due to: