Macro and Micro Economics Multiple Choice Questions

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ECONOMICS ASSIGNMENT 12
Questions on Lecture and D2L Readings
1.
A high rise apartment building has a spectacular view of the city until an office building
is built next to it, which destroys the view. This
a.
causes an external cost to the apartment building.
b.
causes an external cost to the office building.
c.
does not cause any externality because the office building has property rights.
d.
causes an external benefit to the apartment building
2.
The tax accessor’s office now says the owners of the apartment building should pay
more property tax because the apartments are more valuable. This reasoning is flawed
because losing the view causes the __________ curve for the apartments to shift to the
___________.
a.
supply // right
b.
supply // left
c.
demand // left
d.
demand // right
3.
a.
b.
c.
d.
Keynes’ solution to the Depression was
encourage business to spend more.
increase transfer payments but nothing else
increase government spending and taxes by the same amount.
increase government spending and to finance it via borrowing (deficit spending).
4.
a.
b.
The G (Government) component of GDP includes transfer payments.
true
false
5.
a.
b.
c.
d.
e.
The distinction of nominal vs. real GDP is necessary to
adjust GDP for the actual quality of life.
account for inflation.
distinguish exports from imports.
determine if the economy is in a recession.
both a) and b) are correct.
6.
A often used indicator of a recession is two consecutive quarterly falls in ______. The
official determination is made, however, by _________.
a.
either nominal or real GDP // the Federal Reserve Bank
b.
real GDP // NBER (National Bureau of Economic Research)
c.
nominal GDP // BLS (Bureau of Labor Statistics)
d.
real GDP // BEA (Bureau of Economic Analysis)
e.
real GDP // a consensus of economic commentators of the major news channels
7.
Deflation is the converse of inflation. In deflation the CPI would be declining and the
real value of money would increase. Therefore deflation
a.
would benefit everyone.
b.
makes debtors better off and creditors worse off.
c.
make creditors better off and debtors worse off.
d.
help corporate profits at the expense of wage earners.
8.
Buying a U.S. treasury bond is lending money to the government. In the last month the
nominal interest rate has declined by about 1.5 percentage points from 2.5 to 1.0 percent. It’s
still a better buy then before as long as the inflation rate
a.
Is steady
b.
falls by more than 1.5 percentage points
c.
rises moderately.
d.
falls at any rate greater than 0.
For the next three questions, consider that 97 people in a community already have a job
and in addition
* Joe has no job but is looking.
* Mary has a part-time job but can barely pay her bills. She wants a full-time job.
* Jim has given up looking for work and lives off his spouse’s income.
9.
a.
b.
c.
d
The labor force participation rate is
1/3
2/3
97/99
99/100
10.
a.
b.
c.
d.
The unemployment rate is
1/3
2/3
1/99
1/100
11.
a.
b.
c.
d.
Who could be called hidden unemployed?
Joe, Mary, Jim
Mary & Jim
Joe only
Jim only
12.
A major problem with health care insurance in general according to John Stossel is that
it encourages consumers to ________ health care because _________ is paying the bill.
a.
over consume // the federal government
b.
under consume // a monopoly or oligopoly seller
c.
over consume // a third-party
d.
under consume // the federal government
13.
The Canadian health care system most likely does a better job with the _________
problem than the U.S. system
a.
efficiency
b.
equity
14.
Grace Marie Turner’s concern with government provided health insurance is that it
takes away
a.
equity
b.
oligopoly and economies of scale.
c.
freedom.
d.
both a) and c) are correct.
15.
a.
b.
c.
d.
The Canadian system does not include
dental care.
eye care.
both of these.
neither of these since the system provides everything free.
16,
In one video a doctor is interviewed who has a clinic with much lower prices than other
providers. It is nonetheless profitable because it
a.
provides a lower quality of care.
b.
is affiliated with a publically supported hospital.
c.
uses only paraprofessionals on its staff instead of licensed doctors.
d.
does not take insurance, which saves considerable administrative expense.
17.
a.
b.
c.
d.
Which of the following can be considered a provider of medical care?
a hospital
an insurance company
consumer
both a) and b) are correct
18.
Consider the possibility that it is difficult to start a new hospital in a geographic area.
Economies of scale are so important. If true, which definition of perfect competition would be
violated?
a.
ease of entry
b.
homogenous products
c.
price searching behavior
d.
perfect knowledge
19.
Consider that there are many different specialties of doctors and hospitals and quality
varies among doctors and hospitals. If true, which definition of perfect competition would be
violated?
a.
ease of entry
b.
homogenous products
c.
price searching behavior
d.
perfect knowledge
20.
Consider that it may be impossible to do price comparison shopping among doctors
and hospitals. If true, which definition of perfect competition would be violated?
a.
ease of entry
b.
homogenous products
c.
price searching behavior
d.
perfect knowledge
21.
GDP has limitations as a quality of life (welfare) indicator because
a.
it never considers real vs. nominal spending.
b.
it also counts spending which is for the sole purpose of undoing the damage (external
costs) of other production.
c.
it includes transfer payments.
Use the following information for the next three questions: the U.S. can produce 4 tons
of potatoes per day or 2 tons of wheat per day. Ireland can produce 3 tons of potatoes
per day or one ton of wheat.
22.
If the U.S. produces one ton of wheat, its opportunity cost is ______ ton(s) of potatoes.
For Ireland it is ________ ton(s) of potatoes.
a.
two // three
b.
one-half // one-third
c.
one // one
d.
four // three
23.
The U.S. has an absolute advantage in producing
a.
potatoes.
b.
wheat.
c.
both.
d.
neither.
24.
The U.S. has a comparative advantage on producing
a.
potatoes.
b.
wheat.
c.
both.
d.
neither.
25.
It is possible to have a comparative advantage without having any absolute
advantages.
a.
true
b.
false
26.
The theory of comparative advantage can explain trade between individuals as well as
trade between countries.
a.
true
b.
false
27.
Which of the policy combinations given below would consistently work in the direction of
increasing the rate of growth of the money supply?
a.
Raise the discount rate, lower the reserve requirement and engage in open market sales.
b.
Lower the discount rate, lower the reserve requirement and engage in open market
purchases.
c.
Lower the discount rate, raise the reserve requirement and engage in open market sales.
d.
Raise the discount rate, raise the reserve requirement and engage in open market sales.
e.
Raise the discount rate, raise the reserve requirement and engage in open market
purchases.
28.
a.
b.
c.
d.
Why is it important to distinguish between the discount rate and the federal funds rate?
One is a short-term, and the other is a long-term rate.
One is a tool of monetary policy, and the other is a target of monetary policy.
One is a tool of fiscal policy, and the other is a tool of monetary policy.
All of the above.
29.
The President is proposing a cut in the payroll tax (social security & Medicare taxes) in
order to stimulate the economy. This can be considered
a.
anti-inflationary fiscal policy
b.
anti-inflationary monetary policy
c.
anti-recessionary fiscal policy
d.
anti-recessionary monetary policy
30.
An automatic stabilizer
a.
increases fluctuations in economic activity.
b.
decreases fluctuations in economic activity.
c.
take a long time to take effect since each time they’re used they require Presidential
and Congressional approval.
d.
can be considered both a fiscal and monetary policy.
Match the following: (Answers can be found in D2L Posting from 50 Economics Ideas You
Need to Know)
31.
Milton Friedman (monetarism)
32.
Supply-side Economics
33.
Both monetarism and supply-side economics
Choices: (One is not used.)
a.
Emphasis on the incentive effect of lower taxes
b.
Emphasis on the money supply rather than the Keynesian emphasis on fiscal policy
c.
Less emphasis on laissez-faire than Keynes.
d.
More emphasis on laissez-faire than Keynes
Questions on Patrono & Mathews, Chapters 7,8, 12 & 13 (Answer questions based on
the text discussion.)
33.
The dual confidence of wants is a problem in barter. For this reason money is an
improvement over barter with respect to the
a.
store of value function.
b.
medium of exchange function.
c.
both of these.
34.
a.
b.
Long-run changes in GDP is best associated with
economic growth.
business cycles.
35.
Intensive growth is ______ important for the long-run than extensive growth. Intensive
growth can also be described as ________.
a.
more // using more natural resources such as land
b.
less // using more natural resources such as land
c.
more // increases in worker productivity
d.
less /// increases in worker productivity
36.
The production possibilities curve shows that ceteris paribus the counties that grow the
most put more emphasis on __________. Economic growth is represented in the model by
_______.
a.
consumer goods // moving along the curve
b.
consumer goods // shifting the curve to the right
c.
capital goods // moving along the curve
d.
capital goods // shifting the curve to the right
37.
A gold standard is ______ likely to cause inflation than monetary policy as it is currently
practiced by the ________.
a.
more // Federal Reserve Bank
b.
more // President and Congress
c.
less// Federal Reserve Bank
d.
less// President and Congress
38.
Imagine because of inflation one must make several weekly trips back and forth
between two banks. Bank A pays interest (necessary to avoid losing the real value of money
from inflation) but does not allow one to write checks to facilitate transactions. Bank B allows
for check writing but does not pay any interest.
This scenario is sometimes called the shoe leather costs of inflation and best relates to
a.
transaction costs.
b.
hyperinflation.
c.
open market operations.
d.
discount rate.
39.
a.
b.
c.
d.
Which term is most inconsistent with the others?
utilitarian justice
Rawlsian justice
socialism
libertarian justice
40.
a.
b.
c.
d.
Which type of tax would most likely increase income inequality?
progressive tax
the U.S. income tax system as it is currently designed
regressive tax
proportional tax
The following 8 questions are on the article “Economists: U.S. has reasons to up debt.”
41.
a.
b.
c.
d.
Consider the remark shaded in yellow “I think we can afford….” This is referring to
expansionary monetary policy
expansionary fiscal policy
contractionary fiscal policy.
contractionary monetary policy.
42.
a.
b.
c.
d.
The chronic low interest rates (shaded in grey) refer to
expansionary monetary policy
expansionary fiscal policy
contractionary fiscal policy.
contractionary monetary policy.
43.
The passage marked in blue refers to low real interest rates. Which of the following
gives the lowest positive (not negative) real interest rate?
a.
Inflation rate of 5 percent and nominal interest rate of 6 percent.
b.
Inflation rate of 3 percent and nominal interest rate of 5 percent.
c.
Inflation rate of 6 percent and nominal interest rate of 5 percent
d.
Inflation rate of 4.5 percent and nominal interest rate of 5 percent.
44.
The green passage refers to automatic stabilizers. Food stamps could be considered
an example of ________, and automatic stabilizers is part of _______.
a.
transfer payments // fiscal policy
b.
the progressive income tax // fiscal policy
c.
marginal tax rates // monetary policy
d.
GDP but not personal income // fiscal policy
45.
The proposal would mean more food stamps and less payroll (social security,
Medicare) taxes when unemployment increases. When the unemployment rate decreased
there would automatically be _______ food stamps and _______ payroll taxes. This would be
in order to fight ____________.
a.
more // less // recession
b.
less // more // inflation
c.
more // less // inflation
d.
less // more // recession
46.
a.
b.
c.
The article is written in the spirit of
Keynesian economics.
classical economics.
microeconomics.
47.
This article was published in January. Since then business spending and consumer
spending has declined because of the coronavirus pandemic. This makes ________
a.
the proposals more urgent now than before.
b.
the proposals less urgent now than before
c.
monetary policy more important than fiscal policy.
d.
Keynesian economics unrealistic and implies classical economics and laissez-faire as
the best way to go.
For the final 3 questions go to the following links:
https://www.thebalance.com/current-federal-reserve-interest-rates-4770718
https://www.bls.gov/cps/
https://www.usinflationcalculator.com/inflation/consumer-price-index-and-annual-percent-changesfrom-1913-to-2008/
48.
a.
b.
c.
d.
e.
The latest federal funds rate is
0.0 – 0.25 percent
0.1 percent
3.7 percent
1.8 percent
63.4 percent
49.
a.
b.
c.
d.
e.
The unemployment rate for 2019 was
0.0 – 0.25 percent
0.1 percent
3.7 percent
1.8 percent
63.4 percent
50.
What was the inflation rate for 2019 (annual percent change in CPI from previous year
based on average – average)
a.
0.0 – 0.25 percent
b.
0.1 percent
c.
3.7 percent
d.
1.8 percent
e.
63.4 percent
EACH QUESTION IS WORTH 8 ½ POINTS.

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