Question 1

Which of the following claims is consistent with the views of mainstream economists?

Accepted Answer

A)   If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall.
B)   If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily rise.
C)   If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently fall.
D)   If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently rise.E) None of the above
F) A) and B)

Question 2

A rational decision maker takes an action only if the

Accepted Answer

A)   marginal benefit is less than the marginal cost.
B)   marginal benefit is greater than the marginal cost.
C)   average benefit is greater than the average cost.
D)   marginal benefit is greater than both the average cost and the marginal cost.E) A) and B)
F) None of the above

Question 3

Economists are particularly adept at understanding that people respond to

Accepted Answer

A)   laws.
B)   incentives.
C)   punishments more than rewards.
D)   rewards more than punishments.E) C) and D)
F) None of the above

Question 4

When a society cannot produce all the goods and services people wish to have,it is said that the economy is experiencing

Accepted Answer

A)   scarcity.
B)   surpluses.
C)   inefficiencies.
D)   inequalities.E) A) and B)
F) B) and C)

Question 5

For a very long time Treeland has had an inflation rate of 9%.Suddenly its inflation rate drops to 3%.The drop in the inflation rate

Accepted Answer

A)   could be due to slower money supply growth. We would expect unemployment to be higher.
B)   could be due to slower money supply growth. We would expect unemployment to be lower.
C)   could be due to higher money supply growth. We would expect unemployment to be higher.
D)   could be due to higher money supply growth. We would expect unemployment to be lower.E) B) and D)
F) A) and B)

Question 6

A direct or positive relationship exists between a country's

Accepted Answer

A)   productivity and its standard of living.
B)   amount of government spending and its productivity.
C)   total population and its average citizen's income.
D)   rate of population growth and the extent of its trade with other countries.E) All of the above
F) C) and D)

Question 7

Germany could have avoided the high inflation that it experienced in the 1920s by

Accepted Answer

A)   not directing so many of its resources toward preparation for World War II.
B)   not increasing taxes so much on the German middle class.
C)   not allowing the quantity of money to increase so rapidly.
D)   using government policies to stimulate the economy more so than what was done.E) C) and D)
F) A) and C)

Question 8

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor.This redistribution of wealth

Accepted Answer

A)   is more efficient and more equal for society.
B)   is more efficient but less equal for society.
C)   is more equal but less efficient for society.
D)   is less equal and less efficient for society.E) All of the above
F) A) and B)

Question 10

In communism,central planners decide which of the following?

Accepted Answer

A)   what goods and services will be produced
B)   how much will be produced
C)   who produced and consumed the goods and services
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 11

When the France trades with Russia,

Accepted Answer

A)   both countries are likely made better off.
B)   only Russia benefits since France can produce all goods at a higher level of quality than Russia.
C)   only France benefits since Russia's low wages guarantee profitable firms in Russia regardless of trade.
D)   neither country will benefit since France is more efficient than Russia at producing all goods.E) A) and C)
F) A) and B)

Question 12

Market failure refers to a situation in which the market does not allocate resources efficiently.

Accepted Answer

A) True 
 B)False

Question 13

When the "invisible hand" guides economic activity,prices of products reflect

Accepted Answer

A)   only the values that society places on those products.
B)   only the costs to society of producing those products.
C)   both the values that society places on those products and the costs to society of producing those products.
D)   none of the above; when the "invisible hand" guides economic activity, prices of products are set by the government in a manner that is thought to be "fair."E) All of the above
F) B) and C)

Question 14

Trade with any nation can be mutually beneficial.

Accepted Answer

A) True 
 B)False

Question 15

The business cycle refers to fluctuations in economic activity such as employment and production.

Accepted Answer

A) True 
 B)False

Question 16

A typical society strives to get the most it can from its scarce resources.At the same time,the society attempts to distribute the benefits of those resources to the members of the society in a fair manner.In other words,the society faces a tradeoff between

Accepted Answer

A)   guns and butter.
B)   efficiency and equality.
C)   inflation and unemployment.
D)   work and leisure.E) B) and C)
F) C) and D)

Question 17

In the short run,which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

Accepted Answer

A)   3 percent per year
B)   5 percent per year
C)   7 percent per year
D)   9 percent per yearE) A) and B)
F) C) and D)

Question 18

The slow growth of U.S.incomes during the 1970s and 1980s can best be explained by

Accepted Answer

A)   unstable economic conditions in Eastern Europe.
B)   increased competition from abroad.
C)   a decline in the rate of increase in U.S. productivity.
D)   a strong U.S. dollar abroad, hurting U.S. exports.E) A) and B)
F) None of the above

Question 19

With the understanding that people respond to incentives,outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year.

Accepted Answer

The concept of working longer per year w...

Question 20

Prices usually reflect

Accepted Answer

A)   only the value of a good to society.
B)   only the cost to society of making a good.
C)   both the value of a good to society and the cost to society of making the good.
D)   neither the value of a good to society nor the cost to society of making the good.E) B) and C)
F) A) and C)

Exam 1: Ten Principles of Economics.

When the "invisible hand" guides economic activity,prices of products reflect

Correct AnswerverifiedShow Answer

Germany could have avoided the high inflation that it experienced in the 1920s by

Correct AnswerverifiedShow Answer

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor.This redistribution of wealth

Correct AnswerverifiedShow Answer

The slow growth of U.S.incomes during the 1970s and 1980s can best be explained by

Correct AnswerverifiedShow Answer

With the understanding that people respond to incentives,outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year.

Correct AnswerverifiedThe concept of working longer per year w...View AnswerShow Answer

Trade with any nation can be mutually beneficial.

Correct AnswerverifiedShow Answer

When a society cannot produce all the goods and services people wish to have,it is said that the economy is experiencing

Correct AnswerverifiedShow Answer

A rational decision maker takes an action only if the

Correct AnswerverifiedShow Answer

Prices usually reflect

Correct AnswerverifiedShow Answer

The business cycle refers to fluctuations in economic activity such as employment and production.

Correct AnswerverifiedShow Answer

Which of the following claims is consistent with the views of mainstream economists?

Correct AnswerverifiedShow Answer

In communism,central planners decide which of the following?

Correct AnswerverifiedShow Answer

When the France trades with Russia,

Correct AnswerverifiedShow Answer

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

Correct AnswerverifiedShow Answer

Market failure refers to a situation in which the market does not allocate resources efficiently.

Correct AnswerverifiedShow Answer

Economists are particularly adept at understanding that people respond to

Correct AnswerverifiedShow Answer

For a very long time Treeland has had an inflation rate of 9%.Suddenly its inflation rate drops to 3%.The drop in the inflation rate

Correct AnswerverifiedShow Answer

A direct or positive relationship exists between a country's

Correct AnswerverifiedShow Answer

A typical society strives to get the most it can from its scarce resources.At the same time,the society attempts to distribute the benefits of those resources to the members of the society in a fair manner.In other words,the society faces a tradeoff between

Correct AnswerverifiedShow Answer

In the short run,which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

Correct AnswerverifiedShow Answer

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The concept of working longer per year w...
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