1.Scarcity implies that people mustA) be miserable. B) be selfish. C) make choices. D) not be selfish. 2.The value or cost of a good or service that is given up by choosing one alternative over another is calledA) an explicit cost. B) an opportunity cost. C) a historical cost. D) an accounting cost. 3.There are not enough of four goods to satisfy the wants of people. For good A, this is true when the price is $10. This is true for good B at a price of $1, for good C at a price of 25 cents, and for good D at a price of zero. Which situation reflects scarcity rather than shortage?A) A B) C C) D D) B 4.The opportunity cost of going to college might best be described asA) the money that must be paid in order to attend college. B) the lowest-valued alternative use of the student’s time. C) the highest-valued alternative use of the student’s time. D) the value that the student attaches to not working. 5.Suppose you are studying economics. If you weren’t studying economics, you would be studying literature, raising your grade in that class by a letter grade. If you weren’t studying literature, you would be working, making $500. If you weren’t working, you would be playing cards with friends. If you weren’t playing cards with friends, you would be sleeping, which would improve your quiz score at your early-morning accounting class in the morning by 3 points. The opportunity cost of studying economics isA) 3 points on the accounting quiz. B) the enjoyment of playing cards with friends. C) $500. D) a letter grade in literature. E) all of the other possible activities listed. 6.The slope is defined as:A) Rise + run B) The rise divided by the run. C) Change in X divided by the change in Y D) Simply the change in the Y variable 7.According to the law of demand, we would expectA) the demand curve to be negatively sloped. B) the demand curve to be positively sloped. C) the total quantity demanded by the market to move in the same direction as price.D) income to increase as quantity demanded increases. 8.The law of demand includes the statement “other things being equal.” These other things include all of the following EXCEPTA) incomes. B) consumer tastes. C) the price of related goods. D) the price of the good itself. 9.If more buyers came into the market for a good, we would expect to see the market demand curveA) shift inward. B) remain unchanged since none of the determinants of individual demand changed. C) shift outward. D) reflect a positive relationship between price and quantity demanded. 10.A demand curve shows the relationship between price and quantity demanded only so long as all other things are held constant.A) True B) False 11.A shift of the demand curve to the left representsA) an increase in demand. B) a decrease in quantity demanded. C) a decrease in demand. D) an increase in quantity demanded. 12.If bagels and croissants are substitute goods, which of the following is likely to occur if the price of bagels has decreased?A) The demand curve for bagels will shift to the right. B) The demand curve for croissants will shift to the left. C) The demand curve for croissants will shift to the right. D) There will be a leftward movement along the demand curve for bagels. 13.Assume that the figure below shows demand for cameras. An increase in the price of photographic film (a complement to cameras) changes demand fromA) D1 to D2 B) D2 to D1 C) D2 to D3 D) D1 to D3 14.Which of the following would cause a decrease in the demand for Pepsi (i.e., a leftward shift of the Pepsi demand curve)?A) An increase in the price of Coke. B) A decrease in the price of Coke. C) An increase in the price of Pepsi. D) A decrease in the price of Pepsi. 15.Besides the price of substitutes and complements, other determinants of demand areA) the price of inputs and natural resources. B) technology and the number of sellers. C) the price of the product, income, and consumers’ tastes. D) both A and C. 16.An upward-sloping supply curve shows thatA) buyers are willing to pay more for a scarce product. B) suppliers are willing to increase production of their goods if they can receive higher prices for them. C) buyers are unaffected by sellers’ costs of production. D) the price of a product is not influenced by the price buyers are willing to pay. 17.Which of the following is a determinant of supply?A) tastes and preferences B) technology C) consumer Income D) number of consumers 18.Which of the following will shift the supply curve to the right?A) input prices rise B) a new excise tax C) prices are expected to be higher in the future D) prices are expected to be lower in the future 19.A severe freeze has once again damaged the Florida orange crop. (Although this wasn’t mentioned specifically in the lesson, weather is an input in the production of many goods.) The impact on the market for oranges will be a leftward shift inA) the demand curve as consumers try to economize because of the shortage. B) both the supply and demand curves. C) the supply curve. D) the supply curve and a rightward shift in the demand curve, which will result in a higher price. 20.Real GDP is the value of final goods and services produced in an economy, in constant dollars (or adjusted for inflation).A) True B) False 21.There are many difficulties with using GDP as an indicator of social well-being. Which of the following is NOT one of the difficulties?A) Household labor is not included in GDP B) GDP cannot take account of changes in leisure time C) GDP fails to account for changes in air pollution or crime D) Intermediate products are not included in GDP 22.Per capita GDP representsA) how well people in a given economy live. B) real GDP divided by the population. C) real income per person. D) nominal income per person. 23.Real GDP is computed by adjusting nominal GDP forA) exchange rate changes. B) changes in the price level. C) capital consumption allowances. D) depreciation. 24.The production possibilities frontier showsA) all combinations of prices and quantities for all goods and services produced in the economy. B) all combinations of prices and quantities for all goods and services demanded by consumers. C) the maximum combinations of goods and services that an economy is able to produce given a fixed supply of resources and technology. 25.The two principal components A and B of the circular flow model illustrated in the figure below are theA) government and foreign trade. B) net national product and personal income. C) firms and households. D) households and government. 26.If nominal GDP increased from $5 trillion to $9 trillion while prices increased from $10 to $20, then real GDPA) increased. B) decreased. C) stayed the same. D) we cannot tell. 27.If a country is operating at a point inside its production possibilities frontier, itA) has unemployed resources. B) must decrease production of one good to increase production of the other good. C) cannot experience economic growth. D) has full employment. 28.If nominal GDP is $7 million and the GDP deflator is 140, real GDP equals _________.A) $20,000 B) $50,000 C) $2,000,000 D) $5,000,000 29.Disposable income equalsA) personal income plus transfer payments. B) personal income minus personal income taxes. C) Social Security contributions minus personal income taxes. D) Social Security contributions plus transfer payments minus personal income taxes.30.Residential housing is part of the _____ component of GDP.A) consumption B) investment C) savings D) none of the above. 31.The expenditures approach to calculating GDPA) sums each component of total spending in an economy over a given period of time. B) equals the income approach to calculating GDP. C) is illustrated by the circular flow model. D) All of the above are correct. 32.Assume the nominal interest rate is 8%. If the inflation rate is 10%, which of the following statements is true?A) The real rate of interest is 2%. B) The person that owns this asset will gain purchasing power. C) The real rate of interest is 18%. D) The real rate of interest is -2%. 33.The consumer price index, or CPI,A) is a measure of the average price level of all goods and services produced in the economy in a given year relative to the average price level of all goods and services produced in the economy in a base year. B) is a measure of the average price level of all goods and services produced in the economy in a base year relative to the average price level of all goods and services produced in the economy in a given year. C) is a measure of the average price level of the goods and services bought by a typical consumer in a given year relative to the average price level of the goods and services bought by a typical consumer in a base year. D) is a measure of the average price level of the goods and services bought by a typical consumer in a base year relative to the average price level of the goods and services bought by a typical consumer in a given year. 34.The base year CPI is always _______.A) B) 1 C) 10 D) 100 35.The term “business cycles” refers toA) changes in overall business activity, as evidenced by changes in real GDP, employment, and the price level. B) changes in the general price level from inflation to deflation, or vice versa. C) changes in the full employment level. D) changes in the value of the dollar. 36.The MPS in the economy represented in Exhibit 0030 isA) 0B) 0.1C) 0.2D) 0.8E) 20 37.The larger the marginal propensity to save, other things constant,A) the larger the marginal propensity to consumeB) the larger the multiplierC) the steeper the consumption functionD) the steeper the saving functionE) the flatter the saving function 38.If the marginal propensity to consume is 4/5, the value of the simple multiplier isA) 4 B) 1/5 C) 4/5 D) 5/4 E) 5 39.The graph in Exhibit 0041 shows a(n)A) increase in short-run aggregate supply B) increase in long-run aggregate supply C) decrease in short-run aggregate supplyD) decrease in long-run aggregate supply E) decrease in aggregate quantity demanded 40.Stagflation is defined asA) decreased output accompanied by a higher price levelB) decreased output accompanied by a lower price levelC) increased output accompanied by a lower price levelD) increased output accompanied by a higher price levelE) stagnation in the rate of inflation (i.e., no appreciable change in the rate of inflation for a year or more) 41.If we were to rank the three types of money from the largest measure to the smallest, we would have the orderingA) M1, M2, M3. B) M3, M2, M1. C) All are equal. D) They cannot be ranked, because they measure different things. 42.One common problem with commodity money is thatA) it has little intrinsic value. B) it is not useful as a unit of account. C) it may not be divisible. D) gold is in short supply. 43.From the definitions of M1 and M2, we know thatA) M1 is always larger than M2. B) M2 is always larger than M1. C) M1 and M2 are always equal. D) M1 is sometimes larger than M2, and sometimes smaller than M2. 44.When the demand for money exceeds the supply,A) more money will be printed to meet the demand. B) the interest rate will rise. C) the interest rate will fall. D) inflation will decrease. 45.Given that the money market is in equilibrium, a decrease in the money supply will result inA) an increase in the equilibrium interest rate. B) a decrease in the equilibrium interest rate. C) no change in the equilibrium interest rate. 46.A bond is aA) legal claim to a part of a corporation’s future profits that doe not include voting rights. B) legal claim against a firm, providing a fixed annual coupon payment and a lump- sum payment at maturity. C) legal claim to a part of a corporation’s future profits that includes voting rights. D) nonlegal promise to provide an annual payment to the holder when the corporation makes profits. 47.A share of stock in a corporation is aA) guarantee to a fixed amount of income from the corporation. B) legal claim to a lump-sum payment at a specified point of time in the future. C) legal claim to a dividend, regardless of the corporation’s ability to pay its interest payments. D) legal claim to a share of the company’s future profits. 48.The Fed can affect interest rates byA) changing the reserve requirements. B) changing the discount rate. C) open market operations. D) all of the above. 49.If the Fed wants to increase the money supply, it shouldA) buy government bonds in the open market. B) raise the discount rate. C) raise the legal reserve requirement. D) do any of the above. 50.If the Fed decreases reserve requirements, which of the following is true?A) This is called a tightening of the money supply. B) Money supply will shift left. C) The equilibrium interest rate will increase. D) None of the above are true.