Archimedean Upper Conservatory Economics, October 2016

Transcription

1 Multiple Choice Identify the choice that best completes the statement or answers the question. Figure 6-2: DVD Market 1. Use the DVD Market Figure 6-2. The figure shows the weekend rental market for DVDs in Collegetown. The equilibrium price for DVD rentals is and the equilibrium quantity is. A. $5; 50 B. $3; 30 C. $9; 90 D. $6; 40 E. $7; If the supply and demand curves intersect at a price of $47, then any price above that would result in a(n): A. shortage. B. surplus. C. equilibrium. D. increase in demand. E. decrease in supply 3. Which of the following always results in an increase in price and quantity? A. an increase in supply and a decrease in demand B. an increase in demand and supply C. an increase in supply with no change in demand D. a decrease in demand and supply E. an increase in demand with no change in supply

2 Figure 7-2: Demand and Supply of Wheat 4. Use the Demand and Supply of Wheat Figure 7-2. If there were a decrease in supply of 2,000 bushels at each price, the equilibrium price and quantity would be and units, respectively. A. $5; 5,000 B. $7; 5,000 C. $6; 4,000 D. $8; 6,000 E. $10; 2, The market price of airline flights increased recently. Some economists suggest that the price increased because jet fuel is much more expensive than before. If the economists are correct, it must be the case that: A. supply increased. B. supply decreased. C. demand increased. D. demand decreased. E. supply increased while demand also decreased. 6. In the local market for coffee, what would happen if Joyce's Java and Everyday Joe's coffee shops go out of business? A. The supply curve shifts to the right. B. The demand curve shifts to the left. C. The supply curve shifts to the left. D. The demand curve shifts to the right. E. Both the demand curve and supply curve shift to the left.

3 Figure 7-3: Supply and Demand in the Orange Juice Market 7. Use the Supply and Demand in the Orange Juice Market Figure 7-3. A reputable scientist asserts in a major scientific publication that drinking orange juice will increase your life span. We can expect the new equilibrium point in the orange juice market to be at: A. A. B. B. C. D. D. E. E. C. 8. An increase in supply, with no change in demand, will lead to in equilibrium quantity and in equilibrium price. A. an increase; an increase B. an increase; a decrease C. a decrease; an increase D. a decrease; a decrease E. no change; no change 9. It is certain that the equilibrium quantity will rise when: A. supply stays the same and demand shifts to the left. B. the supply curve shifts to the right and the demand curve shifts to the left. C. supply and demand both shift to the left. D. supply shifts to the left and demand stays the same. E. the supply curve and the demand curve both shift to the right. 10. A binding price ceiling is designed to: A. keep prices high. B. increase the quality of the good. C. prevent shortages. D. increase efficiency. E. keep prices low.

4 11. Suppose the government of the oil-rich country of Oiland sets gasoline prices at $0.25 per gallon, when the market price is $1.50. The Oiland government's actions will: A. improve efficiency since the low prices will force producers to find cheaper production methods. B. result in gasoline surpluses even in an oil-rich country. C. result in an increase in the total quantity of gasoline consumed. D. improve equality between rich and poor since the poor can now afford gasoline. E. cause gasoline shortages even in an oil-rich country. Price ($/unit) Quantity Demanded (units) Quantity Supplied (units) Table 8-2: Market for a Can of Soda 12. Use Table 8-2. If the government imposes a price ceiling of $0.50 per can of soda, there will be: A. a shortage of 2 units. B. a shortage of 3 units. C. a surplus of 3 units. D. equilibrium in the market for soda. E. a total of 17 units produced. 13. Price controls: A. always increase economic efficiency. B. always lead to more equitable results. C. can result in inequitable outcomes. D. are always set below the equilibrium price. E. always benefit consumers at the expense of producers.

5 Figure 8-11: Market for Blue Jeans 14. Use Market for Blue Jeans Figure If a binding price floor exists in the market for jeans, the market outcome would be: A. a surplus of 25 jeans. B. a surplus of 23 jeans. C. a shortage of 25 jeans. D. a shortage of 23 jeans. E. neither a shortage nor a surplus of jeans. Figure 19-2: Macroeconomics Equilibrium 15. Use the Macroeconomics Equilibrium Figure In the accompanying figure, curve 1 refers to _, curve 2 refers to _, and curve 3 refers to _. A. long-run aggregate supply; short-run aggregate supply; aggregate demand B. aggregate demand; short-run aggregate supply; long-run aggregate supply C. short-run aggregate supply; long-run aggregate supply; aggregate demand D. aggregate demand; long-run aggregate supply; short-run aggregate supply E. short-run aggregate supply; aggregate demand; long-run aggregate supply

6 16. A decrease in aggregate demand will generate in real GDP and in the price level in the short run. A. an increase; no change B. a decrease; no change C. a decrease; a decrease D. no change; an increase E. a decrease; an increase 17. An improvement in the business outlook of firms is a type of _ and therefore shifts the _ to the _. A. positive supply shock; long-run aggregate supply curve; right B. positive demand shock; aggregate demand curve; left C. positive supply shock; short-run aggregate supply curve; right D. positive demand shock; aggregate demand curve; right E. positive supply shock; short-run aggregate supply curve; left 18. A negative short-run supply shock: A. decreases aggregate output with no impact on the aggregate price level. B. increases aggregate output and decreases the aggregate price level. C. decreases both aggregate output and the aggregate price level. D. increases both aggregate output and the aggregate price level. E. decreases aggregate output and increases the aggregate price level. 19. Potential real GDP is equal to $10,000 and the current level of real GDP is equal to $9,000. The output gap is therefore equal to: A. 90% B. 110% C. 10% D. 10% E. - 50% 20. When the economy is producing output below potential, it has a(n): A. full-employment output. B. natural level of employment. C. recessionary gap. D. inflationary gap. E. expanding economy. 21. An inflationary gap is automatically closed by wages that shift the. A. lower; SRAS curve rightward B. lower; SRAS curve leftward C. higher; SRAS curve rightward D. higher; SRAS curve leftward E. higher; AD curve leftward

7 Figure 19-6: AD AS Model I 22. Use the AD AS Model I Figure If the economy is at point X, the appropriate monetary policy is to: A. increase taxes and decrease government spending. B. decrease taxes and increase government spending. C. increase the money supply and decrease interest rates. D. decrease the money supply and increase interest rates. E. increase the money supply and increase interest rates. 23. A recessionary gap is when: A. potential output is below aggregate output. B. potential output is receding. C. aggregate output is below potential output. D. aggregate output is above potential output. E. the unemployment rate is below the natural rate of unemployment. 24. If actual GDP is less than potential output, then the economy is A. in an inflationary gap. B. in a recessionary gap. C. in a long-run equilibrium. D. at full employment. E. experiencing zero cyclical unemployment. 25. A negative demand shock, holding everything else constant: A. shifts AD to the left and results in lower aggregate price levels and lower real GDP in the short run. B. shifts SRAS to the left and results in lower aggregate price levels and lower real GDP in the short run. C. moves the economy downward along the AD curve. D. moves the economy upwards along the AD curve. E. shifts AD to the left and results in lower aggregate price levels and higher real GDP in the

8 short run. 26. Fiscal policy refers to: A. the manipulation of interest rates. B. the manipulation of government spending and taxations. C. the manipulation of the quantity of money. D. the manipulation of interest rates and of government spending. E. the manipulation of imports and exports. 27. Fiscal policy attempts to affect the level of overall spending in the economy by changes in: A. the interest rate. B. the money supply. C. banking regulations. D. taxes and spending. E. imports and exports. 28. Keynesian economics propagates the economic ideas: A. that argue that the government intervention in the economy can be destabilizing. B. that argue that the government can help a depressed economy through fiscal and monetary policies. C. that argue that the private sector is perfectly capable to regulate itself. D. that argue that the free market system will always prevail. E. that economic recessions will self-correct without active government intervention. 29. Government payments to households for which no good or service is provided in return are called: A. transfer payments. B. government purchases. C. consumption expenditures. D. investment expenditures. E. tax revenues. 30. Suppose the economy is experiencing a recessionary gap. To move equilibrium aggregate output closer to the level of potential output, the best fiscal policy option is to: A. decrease government purchases. B. decrease taxes. C. decrease government transfers. D. increase real interest rates. E. increase the money supply.

9 Figure 20-4: Inflationary and Recessionary Gaps 31. Use the Inflationary and Recessionary Gaps Figure An inflationary gap would be: A. Y 3 -Y 1. B. Y 3 -Y 2. C. Y 2 -Y 1. D. Y 3 -Y 0. E. Y 1 -Y 3.

10 Figure 20-5: Fiscal Policy I 32. Use the Fiscal Policy I Figure Suppose that this economy is in equilibrium at E 2. If there is a decrease in government purchases, then: A. AD 2 will shift to the left, causing an increase in the price level and a decrease in real B. AD 2 will shift to the left, causing a decrease in the price level and a decrease in the real C. AD 1 will shift to the right, causing an increase in the price level and an increase in real D. AD 1 will shift to the right, causing a decrease in the price level and an increase in real E. AD 2 will shift to the left, causing a decrease in the price level and a increase in the real 33. Use the Fiscal Policy I Figure Suppose that this economy is in equilibrium at E 2. If there is an increase in government transfers, then: A. AD 2 will shift to the right, causing an increase in the price level and an increase in real B. AD 2 will shift to the left, causing a decrease in the price level and a decrease in the real C. AD 1 will shift to the right, causing an increase in the price level and an increase in real D. AD 1 will shift to the right, causing a decrease in the price level and an increase in real E. AD 2 will shift to the right, causing an increase in the price level and a decrease in real

11 Figure 20-6: Fiscal Policy II 34. Use the Fiscal Policy II Figure Suppose that this economy is in equilibrium at E 1. If there is a decrease in government transfers, then: A. AD 2 will shift to the left, causing an increase in the price level and a decrease in real B. AD 2 will shift to the left, causing a decrease in the price level and a decrease in the real C. AD 1 will shift to the right, causing an increase in the price level and an increase in real D. AD 1 will shift to the left, causing a decrease in the price level and a decrease in real E. AD 1 will shift to the left, causing an increase in the price level and a decrease in real 35. Use the Fiscal Policy II Figure Suppose that this economy is in equilibrium at E 1. If there is a decrease in government purchases, then: A. AD 2 will shift to the left, causing an increase in the price level and a decrease in real B. AD 2 will shift to the left, causing a decrease in the price level and a decrease in the real C. AD 1 will shift to the right, causing an increase in the price level and an increase in real D. AD 1 will shift to the left, causing a decrease in the price level and a decrease in real E. AD 1 will shift to the left, causing a decrease in the price level and an increase in real 36. Expansionary fiscal policy causes the aggregate demand curve to shift to the and is used to close a(n) gap. A. right; inflationary B. right; recessionary C. left; inflationary D. left; recessionary E. right; trade

12 37. Contractionary fiscal policy causes the aggregate demand curve to shift to the and is used to close a(n) gap. A. right; inflationary B. right; recessionary C. left; inflationary D. left; recessionary E. left; trade 38. Discretionary fiscal policy refers to: A. any changes in interest rates. B. any change in money supply. C. changes in government spending or taxes to close a recessionary or inflationary gap. D. changes in taxes to account for externalities and control pollution. E. manipulation of foreign exchange rates. 39. When potential output is less than actual aggregate output: A. the economy faces an inflationary gap. B. the SRAS curve intersects the AD curve to the left of the LRAS curve. C. government needs to follow an expansionary policy to correct this problem. D. a decrease in taxes would solve this problem. E. the SRAS curve intersects the AD curve on the LRAS curve. 40. An example of an automatic stabilizer is: A. tax receipts rising when GDP rises. B. a discretionary increase in taxes. C. government purchases rising when GDP rises. D. government transfers rising when GDP rises. E. government purchases falling when GDP falls.