Economy Quiz: less than 30 minutes 1) Which situation describes the increasing returns stage of the production function? a.Hiring one more tailor results in three more suits produced per hour. b.

Economy Quiz: less than 30 minutes

1) Which situation describes the increasing returns stage of the production function?

a.Hiring one more tailor results in three more suits produced per hour.

b. Hiring one more baker results in less than one oven available per baker.

c.Buying one more office computer causes there to be more computers than workers.

d.Extending the workday results in more tired and less productive workers.

2) CPI is measured as the change in

a.  The prices of the basket of consumer goods and services, excluding volatile food and energy prices.

b.  The prices of goods and services purchased by producers and consumers.

c.  The prices of consumer goods and services that are produced in the country.

d.  The prices of the entire basket of consumers' purchases of goods and services.

3) An example of a contractionary monetary policy is

a.  an decrease in the required reserve ratio.

b. a reduction in the interest banks receive on their reserves.

c. a decrease in the discount rate.

d. the Fed selling government securities in the open market.

4) Which of the following describes the short-run time production period?

a. Firms can vary only one of the inputs in the production process.

b. Firms can vary all inputs into the production process.

c. Firms cannot vary any of the inputs into the production process.

d. Firms can choose to go out of business.

5) Liquidity preference is

b. is the demand for holding cash money rather than bonds or other assets. 

a. is the demand for goods and services that can be easily sold for cash.

c. increases when interest rates rise.

d. causes interest rates to rise when liquidity preference falls.

6) An expansionary fiscal policy is when

a. the government lowers spending and raises taxes.

b. the Federal Reserve buys bonds on the open market.

c. the government increases spending and lowers taxes.

d. The Federal Reserve sells bonds on the open market.

7) The law of demand states that

a.with an increase in the price, the quantity demanded increases.

b.with an increase in the price, the quantity demanded decreases.

c.with an increase in price, demand falls.

d.with an increase in price, demand rises.

8) The U.S. dollar has

a. A fixed exchange rate.

b. A fixed purchasing power parity.

c. A fixed, overvalued exchange rate.

d. a floating exchange rate.

9) Margarine and butter can both be used as a spread on toast.  This means that they are:

a. complements.

b. substitutes.

c. inferior goods.

d. none of the above.

10) Which of the following describes the inflation-unemployment trade off?

a. Monetary policies that expand the money supply and lower interest rates will lower inflation and unemployment.

b. Monetary policies that expand the money supply and raise interest rates will lower inflation and unemployment.

c. Fiscal policies that increase government spending and lower unemployment will cause inflation.

d. Fiscal policies that increase government spending and lower unemployment will lower inflation.

11) A price ceiling on items like apartment rents or meat is likely to lead to

a. Supply exceeding demand.

b.  An increase in production.

c. Demand exceeding supply.

d. A decrease in demand.

12) Which of the following is NOT important in spurring faster economic growth?

a. Compulsory education.

b. Ownership of private property.

c. Population growth.

d. Higher interest rates.

13) Which statement does NOT correctly describe bonds?

a. Municipal bonds are used by state and local governments to finance school, roads and other public projects.

b. A one-year T-bill with a face value of $1000 and offered at $900 yields an interest rate of 11.1 percent.

c. U.S. treasury notes have maturities that range from 2 to 10 years whereas U.S. treasury bonds have maturities of 30 years.

d. Corporate bonds are usually issued at a lower rate of interest than government bonds because of their lower risk of default.

14) Allocative efficiency means that

a. Consumers get the most goods at the lowest prices possible.

b. Production reaches consumers on time.

c. A small number of sellers coordinate products and prices.caused by an expansionary monetary policy.

d. Government lowers taxes.

15) Which of the following is explained by the price elasticity of demand?

a. The effect of price changes on supply.

b. The effect of price changes on the quantity supplied.

c. The effect of price changes on demand.

d.  The effect of price changes on the quantity demanded.

16) Price discrimination is a situation where a producer

a. charges different prices in different markets.

b. charges the same price in different markets.

c. colludes with other companies on setting the same  price in all markets.

d. All of the above.

17) Demand-pull inflation is

a. caused by a shock to supply, such as a crop failure.

b. caused by price manipulation by cartels.

c. caused by an expansionary monetary policy.

d. caused by high unemployment.

18) All of these cause a change in supply except

a. prices of inputs

b. expected future prices

c. extent of competition in the market

d. the current price of the product.

19) Which of the following is NOT an example of a demand shift?

a.  A salary increase at her job leads the employee to increase spending on vacation travel.

b. A shoe store sale leads to higher demand for its shoes.

c. A shoe store sale leads to higher demand for its shoes.

d. An increase in the price of lattes leads to an increase in demand for tea.

20) Select the correct statement about fiat money.

a. Fiat money is tied to a fixed quantity of gold and therefore protects against inflation.

b. Fiat money eliminates the need for monetary policy and the Federal Reserve?s role in managing the money supply.

c. All fiat money is a type of soft currency that trades only within the issuing country.

d. The U.S. dollar is fiat money.