MACROECONO 231 Final Exam - The author of The Wealth of Nations was

MACROECONO 231 Final Exam

1. The author of The Wealth of Nations was

b. John Maynard Keynes.
c. Karl Marx.
a. adam smith

2. Adam Smith believed that the basic motivation of human beings was

b. desire for the social good.
c. self-interest.
d. concern for one's fellow humans.
A. a desire for meditative contemplation

3. Most American economists probably believe that

a. self-interest as the chief economic motivation comes closer to explaining and predicting economic behavior than does any other single assumption.
b. the idea that self-interest is people's main economic motivation is irrelevant in the late twentieth century.
c. the idea that self-interest is people's main economic motivation is incorrect.
d. the idea that self-interest is people’s main economic is precisely correct

4. Economics can best be described as the study of how:

a. scarce resources are produced and distributed
b. people make money
c. government controls money supply
d. Supply and demand for a firm.

5. 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. Central planners make the best choices for society.
d. None of the above.


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

a. inflation
b. Unemployment
c. National income accounting
d. The theory of the firm


7. The market system is best defined as

a. the means by which buyer –sellers exchanges are made
b. the resource base of a society.
c. the physical locations in which wholesale transactions occur.
d. the places in which retail transactions take place.


8. The most likely example of a free good is

a. land in Detroit, Michigan.
b. Clean air in pittssburgh, pennsylvania
c. clean air in the Mojave desert.
d. water in the Mojave desert.


9. 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 various kinds of technology and a society's rate of output
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 rates of output that are associated with different levels of savings and investment.


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

a. a better technology be employed.
b. The production of the other good be held constant
c. more of the other good be produced.
d. less of the other good be produced.

11. On a production-possibilities curve, unemployment is represented by

a. a point below or to the left of the production-possibilities curve.
b. A point on the production – possibilities curve
c. a point above and to the right of the production-possibilities curve.
d. the points at which the production-possibilities curve touches each axis.


12. In Table 2-1, alternatives A, B, C, D, and E represent

Table 2-1 Production-Possibilities Table for Urbania
    PRODUCTION RATES
PRODUCT    A    B    C    D    E
Present (consumer) goods    0    40    80    120    160
Future (capital) goods    30    26    20    12    0


a. the five different rates of output that Urbania can produce simultaneously.
b. The five combinations of goods that will become available as urbania’s technology changes
c. the five combinations from among which Urbania may choose its rate of output of present and future goods.
d. the five combinations of goods that Urbania could produce, given different endowments of resources.

13. Economic development is the process by which


a. the material well-being of a society's people is significantly increased.
b. Income is distributed in  a more nearly equal way
c. a nation's market system evolves.
d. a nation's planning system evolves.


14. A competitive market is a market in which

a. organized buyers determine demand.
b. there is intense price rivalry.
c. no individual buyer or seller has influence over the market price.
d. organized sellers determine supply


15. To economists, demand means

a. the set of relationships showing the quantities of good that consumers will buy over a range of prices within a specific period of time
b. the quantities of a good that consumers will buy as their incomes change.
c. the quantities that buyers will purchase at the going price.
d. the price that buyers will pay to obtain something.


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

a. a smaller quantity of bread demanded
b. a larger quantity of bread demanded.
c. an increase in the demand for bread.
d. a decrease in the demand for bread.


17. Supply is defined as

a. the quantity of a good that firms will offer to sell at a given price.
b. the quantity of a good that consumers will buy at a given price.
c. the quantities of a good that firms will offer for sale as their profits increase
d. the quantities of a product that a firm will offer for sale at each possible price within a specific period of time


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

a. The prices of other goods
b. The price of that good
c. Firms' expectations about future prices
d. The technology of production


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

a. corporations and labor unions
b. business firms and households.
c. governments and households.
d. government and business firms.

20. Business cycles are

a. expansions and contractions in economic activity that occur over long periods of time (50 to 100 years).
b. Variants in economic activity that occurs every few years but are not regular periodic
c. variations in economic activity that occur regularly each year.
d. irregular variations that don't follow any regular pattern.


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

a. 20
b. none of the above
c. 60.
d. 40


22. 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.


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

a. At times interest payments did not increase as rapidly as GDP.
b. Total interest payments on the federal debt have increased consistently from 1929.
C, federal debt has increase since 1929
d. Interest payments, as a percent of GDP, have increased every year since 1929.


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

a. If crowding-out of investment occurs then future generations have less investment and less output.
b. The generation that incurs the debt carries the burden because each individual owes more
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.


25. The supply of M1money in the economy consists of

a. all demand deposits and all currency and coin in circulation.
b. all demand deposits, currency, coin, and savings accounts.
c. all demand deposits and all currency and coin, printed or minted
d. all demand deposits, currency, coin, savings accounts, and government securities.


26. The equation of exchange, MV = PQ, is

a. true by definition.
b. true only when P is held constant
c. true only when M is held constant.
d. true only when the economy is t full employment


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

a. Q must double.
b. when V is constant , prices must be cut in half
c. V must double.
d. when V is constant, prices must double.


28. Legal tender

a. makes money money.
b. must be accepted for all purchases.
c. requires gold backing to be money.
d. must be accepted in payment for all debts public or private


29. Which one of the following owns the Federal Reserve Banks?

a. Member banks
c. The Treasury
d. The board of governors
b. the federal government


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

a. Issuing paper currency
c. Acting as a fiscal agent and bank for the U.S. Treasury
d. Deciding on fiscal policy
b. acting as a banker’s bank


31. The biggest factor affecting extensive growth is

a. subsoil minerals.
c. weather patterns.
d. population change.
B, technological change


32. With respect to international trade, it is not true that

a. invisible items of trade include charges for financing and shipment of goods
b. exports consist of goods and services sold to other nations.
d. trade consists only of visible items.
c. imports are goods and services bought from other nations.


33. When a nation's exports are greater than its imports,

b. an "unfavorable" commodity balance of trade exists.
c. the rate of unemployment must be falling
d. a "favorable" commodity balance of trade exists.
a. net foreign trade must be zero


34. With respect to international trade , it is not true that

a. Invisible items of trade include charges for financing and shipment of goods
b. Export consist of good services sold to other nations
c. Import are good and services bought from other nations
d. Trade consist of visible items


35. When a nation export are greater than its import

A. Net foreign trade must be zero
B. An unfavorable commodity balance of trade exists
C. The rate of unemployment must be falling
D. A favorable commodity balance of trade exists