The author of The Wealth of Nations was
a. John Maynard Keynes.
b. Adam Smith.
c. Karl Marx.
Adam Smith believed that the basic motivation of human beings was
b. a desire for meditative contemplation.
c. concern for one’s fellow humans.
d. desire for the social good.
Most American economists probably believe that
a. the idea that self-interest is people’s main economic motivation is incorrect.
b. self-interest as the chief economic motivation comes closer to explaining and predicting economic behavior than does any other single assumption.
c. the idea that self-interest is people’s main economic motivation is irrelevant in the late twentieth century.
d. the idea that self-interest is people’s main economic motivation is precisely correct.
Economics can best be described as the study of how:
a. scarce resources are produced and distributed
b. Supply and demand for a firm.
c. people make money
d. government controls money supply
Which idea best represents Adam Smith’s “Invisible Hand?”
a. The actions of buyers and sellers in a market make the best choices for people.
b. The actions of a benevolent government make the best choices for society.
c. None of the above.
d. Central planners make the best choices for society.
Which of the following is not included in the subject matter of macroeconomics?
a. The theory of the firm
d. National income accounting
The market system is best defined as
a. the places in which retail transactions take place.
b. the means by which buyer-seller exchanges are made.
c. the physical locations in which wholesale transactions occur.
d. the resource base of a society.
The most likely example of a free good is
a. water in the Mojave desert.
b. clean air in the Mojave desert.
c. land in Detroit, Michigan.
d. clean air in Pittsburgh, Pennsylvania.
Which of the following relationships does a production-possibilities curve show?
a. The goods that a society can produce and how these goods change in the course of time
b. The rates of output that are associated with different levels of savings and investment.
c. The various combinations of two goods that a society can produce with the full-employment use of its resources (including its best technology)
d. The various kinds of technology and a society’s rate of output
Along a given production-possibilities curve involving two goods, producing more of one good requires that
a. a better technology be employed.
b. more of the other good be produced.
c. less of the other good be produced.
d. the production of the other good be held constant.
On a production-possibilities curve, unemployment is represented by
a. a point on the production-possibilities curve.
b. the points at which the production-possibilities curve touches each axis.
c. a point below or to the left of the production-possibilities curve.
d. a point above and to the right of the production-possibilities curve.
Economic development is the process by which
a. income is distributed in a more nearly equal way.
b. the material well-being of a society’s people is significantly increased.
c. a nation’s planning system evolves.
d. a nation’s market system evolves.
A competitive market is a market in which
a. organized buyers determine demand.
b. organized sellers determine supply.
c.no individual buyer or seller has influence over the market price.
d. there is intense price rivalry.
To economists, demand means
A . the price that buyers will pay to obtain something.
b. the quantities of a good that consumers will buy as their incomes change.
c. the set of relationships showing the quantities of good that consumers will buy over a range of prices within a specific period of time.
d. the quantities that buyers will purchase at the going price.
Suppose that the demand curve for bread is downward-sloping. An increase in the price of bread will result in
a. a decrease in the demand for bread.
b. a smaller quantity of bread demanded.
c. a larger quantity of bread demanded.
d. an increase in the demand for bread.
Supply is defined as
a. the quantities of a product that a firm will offer for sale at each possible price within a specific period of time.
b. the quantity of a good that firms will offer to sell at a given price.
c. the quantities of a good that firms will offer for sale as their profits increase
d. the quantity of a good that consumers will buy at a given price.
Which one of the following factors does not determine changes in the supply of a good?
a. The prices of other goods
b. Firms’ expectations about future prices
c. The technology of production
d. The price of that good
In the simple circular-flow model of an economy, the two basic units of the economy are
a. government and business firms.
b. corporations and labor unions.
c. business firms and households.
d. governments and households.
Business cycles are
a. variations in economic activity that occur regularly each year.
b. variations in economic activity that occur every few years but are not regular or periodic.
c. irregular variations that don’t follow any regular pattern.
d. expansions and contractions in economic activity that occur over long periods of time (50 to 100 years).
Consider an economy of 1000 people:940 hold jobs, 40 are looking for work, and 20 are retired.The number counted as unemployed is:
d. none of the above
Fiscal policy involves
a. variations in the interest rate and the supply of money
b. variations in government expenditures and taxes.
c. variations in the interest ratio rate and government expenditures.
d. variations in the supply of money and taxes.
Which of the following is not true about the federal debt?
a. At times interest payments did not increase as rapidly as GDP.
b. Federal debt has increased since 1929.
c. Interest payments, as a percent of GDP, have increased every year since 1929.
d. Total interest payments on the federal debt have increased consistently from 1929.
Which of the following would be right about the debt burden?
a. The generation that incurs the debt carries the burden because each individual owes more
b. If crowding-out of investment occurs then future generations have less investment and less output.
c. There is no burden to federal debt because it will never be paid off.
d. The burden falls on those who must pay the debt when it comes due.
The supply of M1money in the economy consists of
a. all demand deposits, currency, coin, savings accounts, and government securities.
b. all demand deposits and all currency and coin in circulation.
c. all demand deposits, currency, coin, and savings accounts.
d. all demand deposits and all currency and coin, printed or minted.
The equation of exchange, MV = PQ, is
a. true only when the economy is at full employment.
b. true only when M is held constant.
c. true by definition.
d. true only when P is held constant
According to the equation of exchange, MV = PQ, if the supply of money doubles and the economy is at full employment, then
a. when V is constant, prices must double.
b. when V is constant, prices must be cut in half.
c. V must double.
d. Q must double.
a. makes money money.
B. must be accepted in payment for all debts public or private.
c. requires gold backing to be money.
d. must be accepted for all purchases.
Which one of the following owns the Federal Reserve Banks?
a. The Treasury
b. The federal government
c. Member banks
d. The board of governors
Which one of the following is not a function of the Federal Reserve?
a. Acting as a fiscal agent and bank for the U.S. Treasury
b. Acting as a bankers’ bank
c. Issuing paper currency
d. Deciding on fiscal policy
The biggest factor affecting extensive growth is
a. technological change.
b. subsoil minerals.
c. population change.
d. weather patterns.
With respect to international trade, it is not true that
a. exports consist of goods and services sold to other nations.
b. imports are goods and services bought from other nations.
c. invisible items of trade include charges for financing and shipment of goods
d. trade consists only of visible items.
When a nation’s exports are greater than its imports,
a. net foreign trade must be zero.
b. the rate of unemployment must be falling
c. a “favorable” commodity balance of trade exists.
d.an “unfavorable” commodity balance of trade exists.