The author of The Wealth of Nations was

Select one:

a. John Maynard Keynes.

b. Adam Smith.

c. Karl Marx.

Question 2

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Adam Smith believed that the basic motivation of human beings was

Select one:

a. self-interest.

b. a desire for meditative contemplation.

c. concern for one’s fellow humans.

d. desire for the social good.

Question 3

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Most American economists probably believe that

Select one:

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.

Question 4

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Economics can best be described as the study of how:

Select one:

a. scarce resources are produced and distributed

b. Supply and demand for a firm.

c. people make money

d. government controls money supply

Question 5

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Which idea best represents Adam Smith’s “Invisible Hand?”

Select one:

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.

Question 6

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Which of the following is not included in the subject matter of macroeconomics?

Select one:

a. The theory of the firm

b. Unemployment

c. Inflation

d. National income accounting

Question 7

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The market system is best defined as

Select one:

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.

Question 8

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The most likely example of a free good is

Select one:

a. water in the Mojave desert.

b. clean air in the Mojave desert.

c. land in Detroit, Michigan.

d. clean air in Pittsburgh, Pennsylvania.

Question 9

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Which of the following relationships does a production-possibilities curve show?

Select one:

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

Question 10

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Along a given production-possibilities curve involving two goods, producing more of one good requires that

Select one:

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.

Question 11

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On a production-possibilities curve, unemployment is represented by

Select one:

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.

Question 13

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Economic development is the process by which

Select one:

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.

Question 14

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A competitive market is a market in which

Select one:

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.

Question 15

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To economists, demand means

Select one:

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.

Question 16

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Suppose that the demand curve for bread is downward-sloping. An increase in the price of bread will result in

Select one:

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.

Question 17

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Supply is defined as

Select one:

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.

Question 18

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Which one of the following factors does not determine changes in the supply of a good?

Select one:

a. The prices of other goods

b. Firms’ expectations about future prices

c. The technology of production

d. The price of that good

Question 19

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In the simple circular-flow model of an economy, the two basic units of the economy are

Select one:

a. government and business firms.

b. corporations and labor unions.

c. business firms and households.

d. governments and households.

Question 20

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Business cycles are

Select one:

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).

Question 21

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Consider an economy of 1000 people:940 hold jobs, 40 are looking for work, and 20 are retired.The number counted as unemployed is:

Select one:

a. 20

b. 40

c. 60.

d. none of the above

Question 22

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Fiscal policy involves

Select one:

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.

Question 23

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Which of the following is not true about the federal debt?

Select one:

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.

Question 24

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Which of the following would be right about the debt burden?

Select one:

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.

Question 25

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The supply of M1money in the economy consists of

Select one:

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.

Question 26

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The equation of exchange, MV = PQ, is

Select one:

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

Question 27

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According to the equation of exchange, MV = PQ, if the supply of money doubles and the economy is at full employment, then

Select one:

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.

Question 28

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Legal tender

Select one:

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.

Question 29

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Which one of the following owns the Federal Reserve Banks?

Select one:

a. The Treasury

b. The federal government

c. Member banks

d. The board of governors

Question 30

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Which one of the following is not a function of the Federal Reserve?

Select one:

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

Question 31

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The biggest factor affecting extensive growth is

Select one:

a. technological change.

b. subsoil minerals.

c. population change.

d. weather patterns.

Question 32

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With respect to international trade, it is not true that

Select one:

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.

Question 33

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When a nation’s exports are greater than its imports,

Select one:

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.

 
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