Practice Midterm 1A
Ch 1
1. Which is a Macroeconomic topic?
A. Market structures of specific industries
B. A key business decision like how much output the firm should produce
C. Federal Reserve taxation
D. Business cycles
2..B. Which of these pairs contains two Macroeconomic topics?
A. Wages in markets for high-skilled services; number of workers employed in those industries
B. The level of employment in the manufacturing sector; manufacturing wages
C. Fiscal policy; monetary policy
D. Prices for raw materials; quantity exchanged of those materials
3..B. Which of the following statements is not true of economics?
A. Theories are confirmed as true and accurate using only laboratory experiments.
B. It is a social science.
C. It is analytical.
D. It is concerned with people’s material well-being.
4. Which one of the following is a positive statement?
A. Profits of American corporations are too high.
B. the minimum wage is (in 2012) $8.00 per hour in California.
C. Labor unions are too powerful.
D. Congress ought to raise social security taxes.
5..D. Which one of the following is a normative statement?
A. The highest marginal tax rate for federal income taxation is 38 percent.
B. The interest earned on municipal bonds is exempt from federal income tax.
C. It would be an improvement if tax rates were decreased for the lowest earning 20% of the population.
D. Federal income taxation has a progressive schedule of rates.
6. Look at these two statements and identify them as positive or normative.
I: Over the past ten years, average unemployment in Japan has been lower than the U.S. so their economy is better.
II: After-school programs have been shown in nationwide studies to have caused a statistically significant decrease in juvenile delinquency.
A. Both are normative
B. Both are positive
C. I is normative, II is positive
D. I is positive, II is normative
CH 2
7..A. Moving along one given production-possibilities curve by producing more of one good requires that
A. the country acquires more resources
B. more of the other good be produced.
C. a better technology be employed.
D. less of the other good be produced.
8. Which term does not mean the same as the others?
A. Diminishing opportunity cost
B. Curved shape for the PPC
C. Resources are specialized toward one good or the other
D. Decreasing MRT
9. Which is an example of a progressive tax?
A. A flat income tax system
B. Luxury tax
C. Most sales taxes
D. Excise taxes (cigarette tax, alcohol tax)
10..D. A regressive tax is best illustrated by
A. property taxes.
B. sales taxes on food in grocery stores.
C. a “graduated” personal income tax system with tax brackets like in the U.S.
D. luxury tax
11. A ______tax is regressive and a ______tax is progressive.
A. Graduated personal income; property
B. flat sales; luxury
C. luxury; excise
D. flat income; flat sales
Chapter 3
12. Which is not known as one of the key economic questions all economies must answer?
A. how to eliminate scarcity
B. how the good is produced
C. who consumes the output
D. what is produced
13. Before analyzing how a shock to any leakage or injection will impact GDP, the presumed state of economic balance (equilibrium) is expressed by which equation (S = savings in this context):
A. G+I+S=T+M+X
B. T+M+S=G+X+I
C. G+T+S=M+X+I
D. T+S+X=G+I+M
E. I+X+S=G+T+M
14. Which will contract (decrease) GDP?
A. Government spends less than it taxes
B. Businesses invest more than they save
C. Exports exceed imports
D. Consumption is less than savings
15. If the circular flow of economic activity is to expand, which one of the following must exist?
A. What governments spends must be less than taxes.
B. What business firms invest must be greater than what governments spend.
C. What business firms invest must be greater than what households save.
D. What households save must be greater than taxes.
16. Which one of the following does not illustrate a functional distribution of income?
A. The percentage of total income that people get in the form of wages received for labor
B. The percentage of total income that people get in the form of profit received because they are entrepreneurs
C. The percentage of GDP going to the middle one-fifth of the population
D. The percentage of total income that people get in the form of rent received because they are owners of land
17. When a Lorenz curve shifts inward, this means:
A. the distribution of personal income has become more even.
B. consumer spending has increased.
C. the distribution of personal income has become more uneven.
D. income in the economy has increased.
18..A. Which is an advantage of the corporate form of business organization?
A. In the corporation, there is greater likelihood of a principal-agent problem.
B. For a corporation, there is double taxation.
C. There are laws requiring more frequent financial reporting for corporations.
D. Corporations have limited liability.
19. Which is not an example of the Principal-Agent problem?
A. Insufficient effort
B. Profit-based pay packages
C. Sales Maximizing
D. Unnecessary Mergers and Acquisitions
E. Entrenchment strategies
Chapter 4
20. Which shock would be described as causing a change in quantity demanded:
A. Consumer confidence
B. Population
C. Input costs
D. Buyer’s price expectations
E. Price of complements
21. In the market for McDonalds Hamburgers, if their workers now receive better training and Burger King is running a promotional sale on all items, the result for price is ______and for quantity is______:
A. ambiguous; an increase
B. a decrease; an increase
C. an increase; a decrease
D. a decrease; ambiguous
E. a decrease; a decrease
22. Which concept does not fit with the others:
A. A change in supply causes a change in demand
B. hold all else constant
C. ceteris paribus
D. a change in demand does not cause a change in supply
E. one shock shifts one curve in one direction one time
23. If tuition has increase 30% and inflation is 3%, the change in real price of tuition is:
A. -27%
B. -33%
C. 33%
D. 27%
E. 30%
24. Home Prices have fallen 20% while there was 4% deflation. The real change in home prices was:
A. 24%
B. 16%
C. 20%
D. -16%
E. -24%
25. Companies like Sony produce both laptops and stereos. When consumers buy fewer laptops as they shift instead to smartphones and tablets, there is a shift in the stereo market. The shifter is called:
A. Price and availability of substitutes
B. Price of a related good from suppliers’ perspective
C. Consumer’s expectations
D. Tastes
E. Producer’s Expectations
Chapter 5
26. Which of the following will decrease the surplus in a market with a price floor?
A. The price floor increases (the horizontal line shifts up)
B. Input costs fall
C. US population decreases
D. The consumers’ income (PCI) goes up
E. The subsidy amount increases
27. Which is a way landlords reduce quantity of apartments rented out under rent-control?
A. black market
B. subletting
C. price system
D. waiting in line
E. abandon the building
28. Which is not an alternative allocative method:
A. waiting in line
B. lottery
C. price system
D. rationing
E. seller’s preference
29. Which is the least protectionist policy?
A. Quota
B. Tariff
C. Price Ceiling
D. Third-party payer market
E. Subsidy
30. A price ceiling causes a ______while a price floor causes a ______.
A. surplus; shortage
B. excess demand; surplus
C. excess supply; excess supply
D. excess demand; shortage
Chapter 6
31. Frictional, Seasonal, and Structural Unemployment add up to:
A. the actual reported Unemployment rate
B. Search Unemployment
C. Cyclical Unemployment
D. The natural rate
E. Discouraged workers
32. The actual reported Unemployment rate minus Cyclical Unemployment equals:
A. Seasonal Unemployment
B. Search Unemployment
C. Cyclical Unemployment
D. The natural rate
E. Discouraged workers
33. In the equation Unemployment rate= [# looking/ Labor Force (LF)]*100
Use the official data as a starting point: (15m/150m)*100=10%
If there are 3 million people enjoying a “spot of leisure” – taking a break, not employed, not actually seeking work, yet counted in the official data as unemployed, compared to a statistic that excludes these people, the official data is an ______of actual unemployment.
A. Understatement
B. Overstatement
C. Neither Understatement nor Overstatement
D. Could be either Understatement or Overstatement
34. In the equation Unemployment rate= [# looking/ Labor Force (LF)]*100
Use the official data as a starting point: (15m/150m)*100=10%
If there are 2.5 million people in active duty military excluded from the official statistic, compared to a statistic that includes the military, the official data is an ______of actual unemployment.
A. Understatement
B. Overstatement
C. Neither Understatement nor Overstatement
D. Could be either Understatement or Overstatement
35. In the equation Unemployment rate= [# looking/ Labor Force (LF)]*100
Use the official data as a starting point: (15m/150m)*100=10%
If there are 20 million part-time workers who are, on average, working 60% of full-time, and all 20 million are counted as fully employed, compared to a statistic that counts them as 40% unemployed, the official data is an ______of actual unemployment.
A. Understatement
B. Overstatement
C. Neither Understatement nor Overstatement
D. Could be either Understatement or Overstatement
36. In the equation Unemployment rate= [# looking/ Labor Force (LF)]*100
Use the official data as a starting point: (15m/150m)*100=10%
If there are 15 million workers in the informal economy who are excluded from the official rate, then the official data is an ______of actual unemployment.
A. Understatement
E. Overstatement
F. Neither Understatement nor Overstatement
G. Could be either Understatement or Overstatement
37. The third stage of a business cycle, starting at stage one being recession, is:
A. Contraction
B. Trough
C. Peak
D. Expansion
38. Y* is 11 Trillion. Y is 10.5 Trillion. What is the current unemployment rate? (Use Okun’s Rule).
______
39. Which was not on the list of leading economic indicators:
A. Consumer confidence
B. New home building permits
C. Home prices
D. Capital goods orders
40. A double-dip recession is also known as the ______-shaped recession/recovery pattern.
A. V
B. W
C. U
D. L
41. Durable goods have a more fixed ______during a recession than non-durables.
A. Price
B. Quantity
Answers:
1 / D2 / C
3 / A
4 / B
5 / C
6 / C
7 / D
8 / A
9 / B
10 / B
11 / B
12 / A
13 / A
14 / A
15 / C
16 / C
17 / A
18 / D
19 / B
20 / C
21 / D
22 / A
23 / D
24 / D
25 / B
26 / D
27 / E
28 / C
29 / C
30 / B
31 / D
32 / D
33 / B
34 / B
35 / A
36 / E
37 / D
38 / 7.27%
39 / C
40 / B
41 / A
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