General economics
(50 marks)
1.
In economics,
the central economic problem means:
|
a)
Output is
restricted to the limited availability
of resources
b)
Consumers do not
have as much money as they would wish
c)
There will always
be certain level of unemployment
d)
Resources are not
always allocated in an optimum way
2. The other names of ..................method are
abstract,analytical and priori method
a)
Inductive
method b) Economic method
c)Deductive
method d) Name of the above
3. All on PPC show that goods and services are produced
at :
a)
Least cost and some
resources are wasted
b)
High cost and no
resources are wasted
c)
Least cost and no
resources are wasted
d)
Moderate cost and
no resources are wasted
4. Which of the following is a cause of an economic
problem
a)
Scarcity of
resources b) unlimited wants
c) Alternative uses d) All of the above
5. Calculate income elasticity for the household when the
income of a household rises by 10%,the demand for rice reses by 5%
a)-.5 b) +.5c)
-2 d)
+2
6. When two goods are perfect substitutes of each other
then
a)
MRS is
falling b) MRS is
rising c) MRS is constant d) None of the above
7. The Law of scarcity
a)
Does not apply to
rich, developed countries
b)
Does not apply to
poor, under develiped countries
c)
Implies only to
socialist economies
d)
Implies that all
consumer wants will never be completely satisfied
8. Scarcity definition of economis is given by
a)
Alfred
Marshall b) J B say c) Allen and Hicks d) Robbins
9. In case of Giffin good,the demand curve will be
a)
Horizontal b) Downward sloping to the right c) vertical d) Upward sloping
10. Which of the
following statements is incorrect ?
a)
The services of
doctors, lawyers,teachers etc are termed as probuction
b)
Man cannot create
matter
c)
Accumulation of
capital does not depend solely on income
d)
None oof the
above
11. Which is the
other name given to Average revenue curve ?
a. Profit curve
b. Demand curve c.
Controller of credit d. Income curve
12. Which of the
following is not the function of RBI ?
a)
Issue of
currency
b) bankers’s bank
c) Controller of credit d) banker to general public
13. The IMF was set UP in :
a)
1945 b) 1946 c) 1947 d) 1950
14. 1 is defined by RBI (as per latest definition) as
a)
Currency +
Deposits other deposits with RBI
b)
Currency +Demand
Deposits + other deposits with RBI
c)
Currency + Fixed
Deposits +other deposits with RBI
d)
Currency + Time
Deposits +other deposits with RBI
15. Nationalised Banks include :
a)
SBI b) Citibank c) American Express Bank d) All of the above
16. Two
Nationalized banks were merged in the year :
a)1991 b) 1975 c) 1980 d) 1993
17. Out of 5.6lakh
villages in india, only ..............villages are being served by commercial
banks:
a)
56,000 b) 10,000 c) 5,000 d) 50,000
18. 100 percent privatization has taken place in :
a)
VSNL b) Hindustan Zine c) IBP Company d) Centaur Hotel
19. The disinvestment programme was started in :
a)
1990-91 b)1991-92 c) 1995-96 d) 1997-98
20. TRIPs stand for :
a)
Trade Related
intellectual property Rights
b)
Transaction
Related intellectual property Rights
c)
Trade Related
intelligence property rights
d)
Trade related
international property rights
21. 100% FDI is
permitted is :
a)
Oil
Refineries b) Banking c) Insurance d) Defense
22. Duty free
export credit scheme has been revamped and re-cast into :
a)
Made in India
model b)
Served from India Scheme
c) India’s Shining Scheme d) EPCG Scheme
23. Export promotion capital Goods scheme was abolished in
:
a)
1991 b) 2002 c) 2005 d) False, it is still continuing
24. Financial sector reforms mainly relate to :
a)
Banking sector
reforms b) Capital reforms
c)
Insurance sector reforms
d) All of the above
25. FDI has been allowed in defense upto :
a)
74% b) 49% c) 26% d) 100%
26. Administered
prices means
a)
Prices fixed bt
private secttor under the guidance of government
b)
Prices fixed by
consumer forums
c)
Prices fixed by
the Government and private sector
d)
Price level fixed
by the Government
27. Price support
policy means :
a)
Price at which
government would be buying agricultural products from farmers
b)
Prices at which
farmers will be selling goods to the private sector
c)
Subsidy received
by farmers from government
d)
None of the above
28. Stagflation :
a)
Means prices are falling and purchasing power
is increasing
b)
Is in the form of
a low rate of growth combined with the general price level increase
c)
Means high rate
of growth combined with rise in the general price level
d)
Means that due to
increase in the cost of products, prices of final products areincreasing
29. NPE stands far
a)
National Policy
on Education b)
Nuclear Policy on Electronics
c) National Policy On Electronics d)
National Policy On Elections
30. Sarva Shikshan
Abhiyan was launched in the year
a)
2000-01 b) 2001-02 c) 2002-03 d)2004-05
31. Secondary
education prepares students in the age group of:
a)
14-16 year b) 14-18 year c) 12-18 year d)
None of above
32. National
Literacy mission was launched for :
a)
Primary education b) Secondary
education
c)
Adult education d) All
of the above
33. Postal system was started in india in the year :
a)
1837 b)1847 c) 1857 d) 1867
34. Which is not the problem faced by indian ports ?
a)
Inadequate
dredging and container handling facilities
b)
Inefficient and
non optimal deployment of port equipment
c)
Proper
coordination in the entire chain
d)
Operational
constrains such as frequent break down of cargo handing equipment due to
obsolescence
35. GRT stands for
a)
Gross Registered
Tonnage b) Gross Regular Tonnage
c)
Gross Regulated Tonne d) Gross Registered Tollage
36. Pawan Hans Helicopters Ltd provides helicopter support
services to:
a)
Petroleum
sector b)
Sate and Union Territory government
c) Public sector undertaking d) All of the above
37. India has a long coastline of :
a)
7517 km, 12 major
ports and 187 minor ports
b)
7518 km, 12 major
ports and 87 minor ports
c)
7517 km, 11 major
ports and 187 minor ports
d)
7577 km, 12 major
ports and 187 minor ports
38. For the prices taking firm:
a)
Marginal revenue
is less than price
b)
Marginal revenue
is equal to price
c)
Marginal revenue
is greater than price
d)
The relationship
between marginal revenue and price is indeterminate
39. A monopolist is able to maximize his profits when :
a)
His output is
maximum b) He charges highprice
c)
His average cost is minimum
d)His marginal cost is equal to marginal revenue
40. In imperfect competition :
a)
Excess capacity
always exists b)
Excess capacity never exists
c)
Excess capacity may or may not exist
d) None of the above
41. In long run in perfectly competitive market there will
be :
a)
Normal
profit b) super normal
profit c) losses d) none of the above
42. In perfect competition utilization of resources is
a)
Partial b) Moderate c) Full d) Over
43. Which of following statements is false ?
a)
For equilibrium
the main codition is MC=MR
b)
AR curve and
Demand curve are same
c)
MC and AC curves
are U- shaped in every market
d)
None of the above
44. Product differentiation is the most important ferture
of :
a)
Monopolistic
Competition b)
Monopoly
c)
Oligopoly
d) Perfect Completition
45. MC=MR and MC cuts MR from below is a true equilibrium
condition in :
a)
Short run b) Long run c) Both in short run and long run d) None of theabove
46. Price discrimination occurs when :
a)
Producer sells a
specific commodity or service to different buyers for the same price
b)
Producer sells
specific commodity or service to different buyers at two or more differnt
prices due to differences in cost
c)
Producer sells
specific commodity or service to different buyers at two or more differnt
prices for reasons not associated with differece in cost
d)
Produser under
perfect competition sells different
goods to consumers at different prices
47. Mr curve under Monopoly lies between AR and Y-axis
because,the rate of decline of the MR is
a)
Just helf of the
rate of decline of A.R.
b)
Just equal to the
rate of decline of A.R.
c)
Just triple the
rate of decline of the average revenue
d)
Just double the
rate of decline of the average revenue
48. In a perfectly
competitive firm,MC curve above AVC IS THE ............ Curve of the firm
a)
Average cost b) marginal revenue c) demand d) supply
49. In the long run, normal profits are included in the
.............curve.
a)
LAC b) LMC c) AFC d) SAC
50. If (P+1) th term of A.P. is twice the (q+1)th
term;then the ratio of (p+q+1)th term and (3P+1)th term is :
a)
1:2 b)2:1 c) 1:3 d) None of these
51. If the common difference of an A.P. equals to the
first term,then the ratio of its mth term and nth term is :
a)
n : m b) m:n c) m2:m2 d) None of these
52. if the mth term of A.P is 1/n and the nth term is 1/m,
then its mnth term is :
a)
1 b) -1 c) 0 d) None of these
53. Sum the series upto terms 1/2.5
+ 1/5.8 + 1/8.11 + ......................
a)
n/ 2(3n+2) b) –n/ 2(3n+2) c) n/2(3n-2) d) None of these
54. which term of the series 0.004 + 0.1+
....................... is 12.5
a)
5 b) 10 c) 6 d) None of these
55. Find the compound interest on Rs.2,000 at 5% per
annum, compounded yearly for 2 ½ years.
a)
RS. 250 b) Rs. 250.50 c) Rs. 260.12 d) None of these
56. At what rate percent S upto n terms 1/2.5
+ 1/5.8 + 1/8.11 + ......................
a)
n/ 2(3n+2) b) –n/ 2(3n+2) c) n/2(3n-2) d) None of these
57. if the compound interest on certain sum for 2 years at
3 % be Rs. 101.50, what would be the S.L ?
a)
RS. 100 b) Rs. 200 c) Rs 300 d) None of these
58. The difference between the compound interest and the
simple interest on a certain sum of money at 5 % per annum for 2 years is Rs
1.50 find the sum.
a)
Rs. 500 b) Rs. 700 c) Rs. 600 d) None of these
59. A batsman in his 17th innings markes a
score of 85 and thereby increases his average by 3. What is his average after
17th innings ?
a)
37 b) 35 c) 36 d) None of these
60. A person travels from A to B at the rate of 20 km/h
and from B to A at the rate of 30 km/hr. What is the average rate for whole
journey ?
a)
20 km/hr b) 24 km/hr. c) 30 km/hr. d) None of these
61. A person divides his journey into three equal parts
and decides to travel on three parts at the speeds of 40,30 and 15 km/hr
respectively. Find his average speed during the whole journey.
a)
30 km/hr. b) 24 km/hr. c) 35 km./hr d) None of these
62. A person covers 12km at 3 km/hr,18 km at 9 km/hr and
24 km at 4 km/hr. find the average speed in covering the whole distance.
a)
4.5 km./hr. b) 5 km./hr c) 10 km./hr d) None of these
63. A person runs the first 1/5th of the
didttance at 2 km/hr, the next one half at 3 km/hr and the remaining distance
at 1 km/hr. find his average speed.
a)
15/17
km./hr. b) 30/17 km./hr. c) 17/30 km./hr. d) None of these
64. The mean of 100 observations is 50. If one of the
observations which was 50 is replaced by 40, the resulting mean will be
a)
40 b)49.90 c) 50 d) None of these
65. The combined mean of three groups is 12 and the
combined mean of first two groups is 3. If the first, second and third groups
have 2,3 and 5 items respectively, then the mean of third group is
a)
10 b) 21 c) 12 d) 13
66. Mode is
a)
Least frequent
value b) middle most value
c)
most frequent value d) None of
these
67. If the arithmetic mean of two numbers is 10 and their
geometric mean is 8, the numbers are
a)
20,5 b) 16,4 c) 15,5 d) 12,8
68. A frequency distribution can be presented graphically
by a
a)
Pia diagram b) Histogram c) pictogram d) line diagram
69. In co-verince method the sum of difference of rank is
a)
1 b) -1 c) 0 d) Connot say
70. The relation between the production of pig iron and
soot content in a factory is
a)
Positive b) Negative c) 0 d) None of these
71. If the relation between two randim veriable X and Y is
2X + 3Y = 4, then the correlation coefficient between them is
a)
-2/3 b) 1 c) -1 d) None of these
72. For a two way frequency table having (mxn)
classification the total number of cell is
a)
M b) n c) m+n d) mn
73. For a mxn two
way or bivariate frequncy table, the maximum nuber of marginal distribution is
a)
1 b) 2 c) m +n d) m.n
74. The correlation cofficient r is the
....................... of the two regression coefficients
a)
G.M. b) H.M. c) arithmetic mean d) None of these
75. Each and every index number is independent of unit of
measurment
a)
True b) False c) Both (a) & (b) d) None of these
76. For factor reversal test : P01 X Q01
= S P1Q1 / S P0 Q0 = true Ratio
(T.V.R.) This is
a)
False b) True c) Both (a) & (b) d) None of these
77. Factor reversal test is satisfied by
a)
Fisher’s ideal
index number b)
Laspeyre’s index number
c) Paasche’s index number d) All of the
above
78. During a certain period, the cost of living index
number goes up from 110 to 200 and the salary of the worker if also raised from
Rs.3,250 to Rs. 5,000. Does the worker really gain ?
a)
No b) Yes c) cannot determine d) None of these
79. Ticket numbered 1 to 20 are mixed up and a tiket is
drawn at random. What is the probability that the ticket drawn bears a number
which is multiple of 3 or 7 ?
a)
1/5 b) 2/5 c) 3/5 d) None of these
80. A card is drawn from a playing cards at random. What
is the probability that the card drawn is neither a king nor a heart ?
a)
4/13 b) 9/13 c) 2/13 d) None of these
81. A bag contains 3 red,5 yellow and 4 green balls. 3
balls are drawn at random. Find the chance that balls drawn contain exactly two
green balls.
a)
12/55 b) 10/55 c) 13/55 d) None of these
82. A husband and a wife appear in an interview for two
vacancies in the same post. The probability of husband’s selection is 3/5 and
that of wife’s selection is 1/5. Than the probability that only one of them is
selected is
a)
16/25 b) 17/25 c) 14/25 d) None of these
83. A bag contain 4 white black balls. Another contains 3
white and 5 black balls. If one ball is
drawn from each bag. Than the probability that one is white and one is black is
a)
11/24 b) 13/24 c) 15/25 d)None of these
84. Poison distribution is a biparametric distribution.
This is
a)
True b) False c) Either (a) or (b) d) None of these
85. Binomial distribution is a biparametric distribution.
This is
a)
True b) False c) Either (a) or (b) d) None of these
86. If x and y are two independent variance follow poison
distribution in the parameters m1&m2 respectively. If
z = x +y and also follows the poison distribution then the parameter of Z is
a)
m1-m2 b) m1+ m2 c) m1.m2 d) None of these
87. If X and Y are two independent variables such that x
–B (n1,P) and y – B (n2,P) then the parameter of Z = X +
Y is
a)
(n1+ n2),P b) (n1- n2),P c) (n1+ n2),2P d) None of these
88. The Binomial or poison distribution could be uni-
modal or bi- modal. This is
a)
True b) False c) Either (a) & (b) d) None of these
89. If X be a normal variate with mean 3 and variances 16,
find the value of t such that : p (3 < x <t ) = 0.4772 (Given : P ( Z < 2 ) =
0.9772, where Z is N (0,1) variate)
a)
10 b) 11 c) 12 d) None of these
90. A bag contains 5 red and 4 blackballs. A ball is drawn
at random from the bag and put into another bag contains 3 red and 7 balls. A
ball is drawn randomly from the second bag what is probability that it is red
a)
32/99 b) 1/3 c) 74/99 d) None of these
91. A committee of 4 persons is to be appointed from 3
officers of the production depertment, 4 officers of the purchase department,two
officers of the sales department and 1 chartered accountant. Find the chance
there must be one from each category.
a)
4/35 b) 3/35 c) 1/7 d) None of these
92. A committee of 4 persons is to be appointed from 3
officers of the production depertment, 4 officers of the purchase
department,two officers of the sales department and 1 chartered accountant.
Find the chance that it should have at least one from the purchase department.
a)
4/35 b) 39/42 c) 42/105 d) None of these
93. A committee of 4 persons is to be appointed from 3
officers of the production depertment, 4 officers of the purchase
department,two officers of the sales department and 1 chartered accountant.
Find the chance that the chartered Accountant must be in the committee
a)
4/35 b) 39/42 c) 42/105 d) None of these
94. Six boys and five girls are to be seated in a such
that no two girls and no two boys sit together. Find the number of ways in
which this can be done.
a)
86,400 b) 85,000 c) 85,400 d) None of these
95. A six faced die is so biased that it is twice as
likely to show an even number as an odd number when it is thrown. What is the
probability that the sum of the two numbers is even.
a)
4/9 b) 5/9 c) 3/8 d) None of these
96. A and B select a digit at random from
0,1,2,3,...................9 independently. Find the chance that the product of
the two digits chosen is Zero.
a)
1/5 b) 2/5 c) 4/5 d) None of these
97. In the sequnce (Xn) where Xn = 195/4n! – n + 3P3/(n + 1)! &
nEN, the set of natural numbers. The number of positive terms is
a)
1 b) 2 c) 4 d) 5
98. If 1/x+y,
1/2y, 1/y+2 are in A.P., then x,
y, z are in
a)
A.P. b) G.P. c) cannot determined d) None of these
1. Which of the following statements is correct?
a.
Real GDP is the total
market value of the final goods and
services produced in America
b.
Your buying stock in the stock market is an example of investment spending
c.
Potential Real GDP is
always greater than Equilibrium Real
GDP
d.
Social security and welfare are examples of spending on infrastructure.
e.
All of the above
2. The period of the business cycle in which real
GDP is increasing is called the:
a.
expansion b. peak
c. recession d.
trough e. stagflation
3. Assume that, in the population, 95 million
people worked for pay last week, 5 million people did not work for pay but had
been seeking a job, 5 million people did not work for pay and had not been
seeking a job for the past several months, and 45 million were under age
16. The unemployment rate, given these numbers, is:
a.
5% b. 8%
c. 10% d.
20% e. 45%
4. A type of unemployment in which workers are in-between jobs or are
searching for new and better jobs is called _______ unemployment:
a.
frictional b. cyclical
c. structural d.
turnover
5. Consider three consumer goods: 100 of Good A,
100 of Good B, and 100 of Good C. In the
base year, Good A sold at a price of $1, Good B sold at a price of $1, and Good
C sold at a price of $1. In the current
year, Good A sold at a price of $3, Good B sold at a price of $5, and Good C
sold at a price of $10. The Consumer Price Index (CPI) for the
current year is:
a.
100 b. 300
c. 500 d.
600 e. 1000
6. Which of the following is a "loser" from unexpected
inflation?
a.
workers with COLAs
c. people who own Treasury Bills
b.
the middle class
d. people who own homes and have
fixed-rate mortgages
7. If the nominal interest rate on a checking
account is 2% and the inflation rate is 3% this year, the real interest rate is:
a.
5% b. 2%
c. 2/3% d. –1%
e. 3%
8. Which of the following would cause the demand curve for automobiles to shift to the left?
a.
an increase in the price of the automobiles
b.
an increase in the interest rate paid to borrow money to pay for the
automobile
c.
an increase in buyers' incomes
d.
an increase in the cost of production of automobiles
9. Suppose it is announced that industry
analysts are predicting that decreased
oil supplies from Iraq
a.
shift the supply of gasoline right
c. shift the demand for gasoline
left
b.
shift the demand for gasoline right
d. have no effect on the demand
or supply of gasoline
10. "At the price of
$500, tickets for the Super Bowl are expensive.
Yet, the are long lines of people who wish to buy them. Many people who desire tickets will not be
able to find them."
From this quote, we know that the price of Super Bowl tickets must be:
a.
below equilibrium b. above
equilibrium c. equal to equilibrium
11. Assume that the market for
computers begins in equilibrium. Then,
there is a decrease in a price of
Pentium processors used in the production of computers. When the new equilibrium is reached,
a.
the price and quantity of computers will both have risen
b.
the price and quantity of computers will both have fallen
c.
the price of computers will have risen and the quantity will have fallen
d.
the price of computers will have fallen and the quantity will have risen
12. Assume that the market for
the stock of Microsoft begins in equilibrium.
Then, both buyers and sellers
expect that the new Linux (a competitor of Microsoft Windows) will be a large
success, reduing Microsoft sales.
When the new equilibrium is reached,
a.
the price and quantity of the stock will both have risen
b.
the price and quantity of the stock will both have fallen
c.
the quantity of the stock will fall and the price will rise
d.
the quantity of the stock will fall but the effect on price cannot be
determined
e.
the price of the stock will fall but the effect on quantity cannot be
determined
13. Assume that the market
for Mexican pesos begin in equilibrium.
Then, the Mexican economy
experiences a severe recession.
Because of the recession, the Mexican companies lower their prices. As a
result of the recession and lower prices in Mexico
a.
the dollar depreciates and the peso appreciates c. the
dollar and the peso both appreciate
b.
the dollar appreciates and the peso depreciates d. the
dollar and the peso both depreciate
14. Which of the following is an example of "portfolio investment"?
a.
An American places funds in a savings account in Canada
b. Tokyo Bank of Japan United States
c. Saturn Corp. (owned by General Motors) builds
a new factory in Tennessee
d. An
American puts $10,000 into a money market fund
e.
All of the above
PLEASE DO NOT WRITE ON THIS EXAMINATION FORM
15. Which of the following
would cause the aggregate demand
curve to shift to the right?
a.
an increase in purchases by the federal government
b.
an increase in real interest rates
c.
an appreciation of the American dollar
d.
a decrease in the money supply
16. Assume that an economy begins in
macroeconomic equilibrium. Then, taxes are significantly decreased. As a result of this change:
a.
there is expansion and inflation in the US US
b.
there is recession and deflation in the US US
17. A large increase in oil prices, such as the ones occurring in 1973
and 1979, will cause
a.
inflation and expansion
c. inflation and recession
b.
recession and disinflation
d. expansion and deflation
18. Assume that production in
the United States
a.
0 b. $500 surplus c.
$500 deficit d. $1,000 deficit e.
$2,000 deficit
19. From 1990 to 1995, the U.S.
a.
wages should have fallen which would cause more workers to be hired
b.
prices should have fallen which would increase consumer spending
c.
interest rates should have fallen which would increase consumer and investment
spending
d.
all of the above should have occurred
20. Which of the following statements is/are true
about the classical quantity theory of
money?
a.
The equation of exchange is MV = PQ
b.
The classical economists assumed that V would rise when real interest
rates rise
c.
The classical economists concluded that increases
in the money supply cause increases
in real GDP and nothing else
d. all of the above
21.
Assume that the United States Great Britain
inflation in the United States but not in Great Britain . As a result of the inflation in the United States ,
a.
Gold would leave the United States Great Britain
b.
Gold would leave Great Britain United States
c.
The American dollar would depreciate
d.
The American money supply would increase
22. At an income of $100,000, I spent $90,000 on
consumer goods. When my income rose to
$200,000, I spent $160,000 on consumer goods.
My marginal propensity to consume
is:
a.
0.9 b. 0.8
c. 0.7 d.
1 e. $70,000
23. National Disposable
Income Taxes Income Consumption Investment Government
$100 $100 0 $ 50 $ 25 $100
200 100 100 125 25 100
300 100 200 200 25 100
400 100 300 275 25 100
500 100 400 350 25 100
600 100 500 425 25 100
700 100 600 500 25 100
800 100 700 575 25 100
Using these numbers, the equilibrium real GDP (equal to National Income) is:
a.
300 b. 400
c. 500 d.
600 e. 700
24. Which of the following would cause consumption to rise?
a.
the GDP Deflator rises
b.
a greater proportion of the population is between age 20 and 30
c.
transitory income increases
d.
income is taken from poor people and given to rich people
25. Which of the following would cause business investment spending to rise?
a.
an increase in real interest rates from 5% to 8%
b.
a decrease in the corporate profits tax rate from 48% to 34%
c.
a reduction of the investment tax credit from 10% to 2%
d.
sales falling in relation to capacity from 90% to 60%
26. Assume that net exports increase by $1
billion. Equilibrium Real GDP will rise
by more than $1 billion. Explain
why. (i.e., why is there a multiplier?).
a.
an increase in net exports appreciates the dollar causing a further
increase in net exports
b.
an increase in net exports causes an increase in tax revenues which
increases
government spending
c.
an increase in net exports increases income causing an increase in induced consumption
d.
an increase in net exports causes an increase in the money supply
27. The
largest transfer in the federal budget
is:
a. defense
b. education c.
social security d. welfare
e. police
28. The
largest tax collected at the federal government level is the:
a. income tax
b. sales tax c.
property tax d. social security tax
29. A
person had an income of $20,000 last year and paid $10,000 in tax. This year, the person
had an income of $100,000 and
paid $30,000 in tax. The person’s marginal tax rate is:
a.
25% b. 30% c.
50% d. 100%
30. The
tax in question 29 is:
a. progressive b.
regressive c. proportional
31. Assume that Equilibrium GDP is $4,000
billion. Potential GDP is $5,000
billion. The marginal propensity to
consume is 4/5 (0.8). By how much and in
what direction should government
purchases be changed?
a.
increase by $1,000 billion
c. increase by $100 billion
b. decrease by $1,000 billion d.
increase by $200 billion
32. Using the numbers in question 31, by how much
should taxes be changed?
a.
increased by $1,000 billion
c. decreased by $200 billion
b. decreased by $1,000 billion d.
decreased by $250 billion
33. Assume that Equilibrium Real GDP is $20,000
while Potential Real GDP is $15,000. The
marginal propensity to consume is 9/10.
Assume that government decides to lower
taxes by $1,000. To pay for this, it
lowers government purchases by
$1,000. As a result of these two
changes, what is the new Equilibrium Real GDP?
a.
$19,000 b. $20,000
c. $21,000 d.
$14,000 e. $1,000
34. Which of the following statements is true
about the national debt?
a.
In total, it is higher now than it has ever been
b.
Most of it is owed by the federal government to foreigners
c.
It means that a tremendous burden is being passed to our children
d.
Because of it, the United
States
e.
All of the above
35. If the official
federal budget shows a deficit
of $200 billion while the structural
budget is has a surplus
of $200 billion, it can be concluded that:
a.
the intent of fiscal policy is very expansionary
b.
there is hyperinflation
c.
the unemployment rate is well above the natural rate
d.
state and local governments have large surpluses
e.
off-budget spending is counted in the official deficit but not in the
structural deficit
36. The Phillips
curve describes the relationship between:
a.
the federal budget deficit and the trade deficit
b.
savings and investment
c.
the unemployment rate and the inflation rate
d.
marginal tax rates and tax revenues
37. Several adjustments have been suggested to
the official budget deficit to be able to measure the effects of the budget
deficit on the economy. For which of the
following would the adjusted deficit be larger
than the official budget deficit?
a.
state and local budget surpluses need to be added to the official budget
deficit
- the effects of unemployment need to be taken
out of the official budget deficit
- the effects of inflation need to be taken
out of the official budget deficit
- off-budget spending needs to be added to the
official budget deficit
38. Which of the following is
included in M-1?
a.
gold c. checkable deposits e. stock
b.
credit cards d. money market mutual funds
39. Which of the following is true about the Federal Reserve System?
a.
its seven Board members are appointed by the President of the United States
b.
its main policy-making body is called the CBO
c.
it insures checking accounts against bank failure
d.
it accepts deposits from individuals and makes loans for mortgages
e.
All of the above
40. Assume that the Fed increases the monetary base by $1 billion when the
reserve requirement is 1/7. As a result,
the money supply will:
a.
increase by $1 billion c. increase by $7 billion
b. decrease by $1 billion d.
increase by $143 million
41. If the Fed
wishes to decrease (tighten) the money supply, it should:
a.
buy Treasury securities in the open market
b.
raise the discount rate
c.
lower the reserve requirements
d.
raise marginal tax rates
42. The demand
for money will fall if:
a.
Real GDP rises
c. the GDP Deflator rises
b.
real interest rates rise
d. people expect deflation soon
43. An increase
in the money supply causes:
a.
interest rates to fall, investment spending to rise, and aggregate demand to rise
b.
interest rates to rise, investment spending to rise, and aggregate
demand to rise
c.
interest rates to rise, investment spending to fall, and aggregate
demand to fall
d.
interest rates to fall, investment spending to fall, and aggregate demand to fall
44. If individuals forecast future prices by examining the rates of inflation of the present
and recent past, they are using:
a.
adaptive expectations c. inflationary expectations
b.
rational expectations d. structural expectations
45. If the
actual unemployment rate is below the natural rate of unemployment,
it would be expected that:
a.
the rate of inflation would increase
c. the Phillips curve would shift
to the left
b.
wages would fall d. the natural rate of unemployment would fall
46. According
to the monetarist acceleration theory, in
the long-run,
a.
the actual unemployment rate will be below the
natural rate of unemployment
b.
the actual unemployment rate will be equal to the
natural rate of unemployment
c.
the actual inflation rate will be equal to the
natural inflation rate
d.
the budget deficit will be equal to zero
e.
the money supply will be growing at a constant
rate per year
47.
According to the monetarists, in the long-run,
the Phillips Curve is:
a. vertical c. downward-sloping
b. horizontal
d. upward-sloping
48. Which of the following statements is true
about supply-side economics?
a.
The main change made by the tax laws of 1981 and 1986 was to
increase marginal tax rates in
order to balance the budget
b. The Laffer Curve says that, if
marginal tax rates fall, tax
revenues will rise, and the budget
deficit will decrease
c.
If the tax laws of 1981 and 1986 had had their
intended effect, consumption would have
risen,
causing an increase in both real GDP and in the price level
d.
All of the above
49. Those who oppose a Constitutional amendment to require a balanced federal
budget would make which of the following arguments:
a.
Deficits are bad because they can cause crowding out
b.
Such an amendment could force the government to undertake
policies that would increase a
recessionary gap
c.
Deficits can cause inflation by increasing aggregate demand
d.
Budget deficits can cause an increase in the trade deficit by
appreciating the dollar
50. If the money supply is: The interest rate is:
$100 billion 10%
120 billion 8%
140 billion 6%
160 billion 4%
120 billion 2%
If the interest rate is: Investment spending is:
10% $10 billion
8% 20 billion
6% 30 billion
4% 40 billion
2% 50 billion
Assume that equilibrium GDP is $400
billion, potential GDP is $500 billion, the marginal propensity to consume is
9/10, the interest rate is 8%, investment spending is $20 billion, the money
supply is $120 billion, and the reserve requirement is 1/10. By how
much and in what direction should the Fed change the monetary base?
a.
increase it by $20 billion
d. increase it by $2 billion
b.
decrease it by $100 billion
e. decrease it by $10 billion
c.
increase it by $90 billion
Answers
1. A
2. A 3.
A 4. A
5. D 6.
C 7. D
8. B 9.
B 10. A
11. D 12.
E 13. A
14. A 15.
A 16. A
17. C 18.
B 19. D
20. A
21. A 22.
C 23. B
24. B 25.
B 26. C
27. C 28.
A 29. A
30. B
31. D 32.
D 33, A
34. A 35.
C 36. C
37. D 38.
C 39. A
40. C
41. B 42.
B 43. A
44. A 45.
A 46. B
47. A 48.
B 49. B
50. D
1.Economics is ( b )
a. the study of the markets for stocks
and bonds
b. the study of choice under conditions
of scarcity
c. exclusively the study of business
firms
d. fundamentally the same as sociology
e. applicable only when scarcity is not
a problem
2.People and organizations have to make
choices about how to allocate time and money because
of ( c)
a. government rules and regulations
b. corporate control of our lives
c. scarcity of time and money
d. religious values
e. unlimited resources
3.Under capitalism, individuals are
forced to make choices due to ( d)
a. scarce time, but not scarce spending
power 2
b. scarce spending power, but not scarce
time
c. neither scarce time nor scarce
spending power
d. both scarce time and scarce spending
power
e. a low material standard of living
4.Land, labor, and money are the three
categories of economic resources.( b )
a. True
b. False
5.Due to a scarcity of resources, (d )
a. every society must undertake central
planning
b. the government must decide how to
allocate available resources
c. some members of each society must
live in poverty
d. every society must choose among
competing uses of available resources
e. resource availability exceeds the
possible uses for available resources
6. In every economic system, scarcity
imposes limitations on ( a )
a. households, business firms,
governments, and the nation as a whole
b. households and business firms, but
not the governments
c. local and state governments, but not
the federal government
d. households and governments, but not
business firms
e. business firms, governments, and the
nation as a whole
7. The three groups of decision makers
in the economy are ( b )
a. households, business firms, and banks
b. households, business firms, and
governments
c. business firms, governments, and
banks
d. business firms, banks, and foreign
traders
e. households, governments, and banks
8. Macroeconomics focuses on the
behavior of economic agents such as the consumer, a business
firm, or a specific market. ( b )
a. True
b. False
9.Microeconomic topics include the
overall unemployment rate in the United States and the rate
of inflation. ( b )
a. True
b. False
10.Microeconomics deals with which of
the following? ( c )
a. the total output of an economy
b. the measurement of a nation's
inflation rate
c. how producers and consumers interact
in individual markets
d. how tax policies influence economic
growth
e. whether wage growth will outpace
inflation in the coming year
11.Suppose that the following headlines
appeared in a newspaper. Which would most clearly
represent a macroeconomic issue? ( a )
a. "Central Bank Raises Interest
Rates"
b. "Auto Dealership to Cut
Prices" 3
c. "Fanny's Freeze Dried Prunes to
Lay Off 50 Workers"
d. "United Workers Union to Strike
April 15"
e. "Brazilian Coffee Bean Crop
Falls by 10 Percent"
12.Which of the following would be
strictly a microeconomic topic? ( e )
a. a general rise in interest rates
b. a drop in inflation
c. an increase in total production in
the United States
d. a drop in the nation's unemployment
rate
e. an increase in the price of the Ford
Taurus
13.If the president of Chile commented
that "the crime rate in Chile is currently too high," this
would be an example of a normative
statement. ( a )
a. True
b. False
14.Economists tend to disagree primarily
over positive statements about the economy. ( b )
a. True
b. False
15."The Consumer Price Index
increased by 4.2 percent in the first quarter of this year." What
type of statement is this? ( c )
a. normative
b. negative
c. positive
d. subjective
e. biased
16.Which of the following is a normative
statement? ( d )
a. the Philadelphia Phillies have won 70
baseball games this year
b. the Consumer Price Index rose
three-tenths of one percent in May
c. in January, the average temperature
in San Diego exceeds the average temperature in
Minneapolis
d. the Philadelphia Phillies need a
better manager
e. the French trade deficit reached an
all-time high last year
17.Which of the following is a positive
statement? ( b )
a. driving speeds should be lowered so
that fewer accidents will occur
b. when per capita income falls, fewer
meals are consumed at restaurants
c. the minimum wage is too low; college
students deserve a raise
d. cigarette sales should be made
illegal in order to reduce the incidence of cancer
e. Social Security is a good program for
U.S. workers
18."Senior citizens deserve an
income that will allow them to live in comfort for their remaining
years." This is ( e )
a. neither a normative nor a positive
statement
b. both a positive and a normative
statement
c. strictly a macroeconomic issue
d. a positive statement
e. a normative statement 4
19. A newspaper headline announces that
"more college graduates than ever are in the labor
force." This is an example of (d )
a. microeconomic analysis
b. an abstraction
c. a value judgment
d. a positive statement
e. macroeconomic analysis
20.Economic models do not have to
completely describe every aspect of the economy in order to
be useful. ( a )
a. True
b. False
21.Economic models come in the form of (
b )
a. three-dimensional objects
b. all of the following
c. words
d. diagrams
e. mathematical equations
22. Consider an economic model designed
to analyze the purchasing decisions of households. An
assumption that a household chooses
between only two goods would be an example of a ( a )
a. simplifying assumption
b. critical assumption
c. macroeconomic assumption
d. financial assumption
e. positive assumption
23 Suppose your friends take you out for
dinner on your birthday and you have a much better
time than you would have had doing
anything else. There is still an opportunity cost, even though
they will not let you pay for anything.
( a )
a. True
b. False
24 Opportunity costs arise because of
resource scarcity. ( a )
a. True
b. False
25 The opportunity cost of a particular
activity ( b )
a. is the same for everyone pursuing
this activity
b. may include both monetary costs and
forgone income
c. always decreases as more of that
activity is pursued
d. usually is known with certainty
e. measures the direct benefits of that
activity
26 After graduating from high school,
Steve had three choices, listed in order of preference: (1)
matriculate at our campus, (2) work in a
printed circuit board factory, or (3) attend a rival college.
His opportunity cost of going to college
here includes which of the following? (b )
5
a. the cost of books and supplies at the
rival college
b. the income he could have earned at
the printed circuit board factory plus the direct cost of
attending college here (tuition,
textbooks, etc.)
c. the benefits he could have received
from going to the rival college
d. only the tuition and fees paid for
taking classes here
e. cannot be determined from the given
information
27 A professional basketball players'
union negotiates a contract that dramatically increases all
players' salaries. How would this
influence the opportunity cost for a player who was considering
giving up basketball to pursue a career
in broadcasting? ( d )
a. it would not affect the opportunity
cost of playing basketball or of broadcasting
b. it would increase the opportunity
cost of continuing to play professional basketball
c. it would cause the production
possibilities frontier to become convex
d. it would increase the opportunity
cost of becoming a broadcaster
e. it should have no bearing on the
player's decision from an economic standpoint
28 Assume that Kelly's various possible
activities are mutually exclusive. The opportunity cost
from choosing one activity equals the (
c )
a. summed value of all her alternative
activities
b. summed value of all her alternative
activities minus the value of the chosen activity
c. value of the next most valuable
alternative activity
d. value of the next most valuable
alternative activity minus the value of the chosen activity
e. summed value of all her alternative
activities minus the value of the next most valuable
alternative activity
29 Carl is considering attending a
concert with a ticket price of $35. He estimates that the cost of
driving to the concert and parking there
will total an additional $20. In order to attend the concert,
Carl will have to take time off from his
part-time job. He estimates that he will lose 5 hours at
work, at a wage of $6 per hour. Carl's
opportunity cost of attending the concert equals ( e )
a. $35
b. $55
c. $30
d. $65
e. $85
30 High-income people will sometimes pay
higher prices at convenience stores for goods that are
available at discount stores. They do
this because ( c )
a. they are irrational
b. their opportunity cost of time is low
c. crowded and understaffed discount
stores impose higher time costs
d. they like to be seen paying more
money
e. they do not mind wasting time
31 Opportunity costs arise in production
because ( b )
a. resources are unlimited
b. resources must be shifted away from
producing one good in order to produce another
c. wants are limited in society
d. monetary costs of inputs usually
outweigh non-monetary costs
e. the monetary costs of only a few
resources are zero 6
32 In one hour, George can fix 4 flat tires
or type 200 words. His opportunity cost of fixing a flat
tire is ( d )
a. 200 words
b. 4 flat tires
c. 1 word
d. 50 words
e. 800 words
33 If the economy is producing a
combination of goods inside its production possibilities frontier,
then ( c )
a. workers are on vacation
b. a significant number of workers have
little education
c. some resources are being wasted
d. technology must improve before output
can increase
e. the opportunity cost of producing
more output is greater than the value of the additional
output that could be produced
34 When there is an improvement in
technology, holding all else constant, ( e )
a. the production possibilities frontier
will shift inward
b. society faces larger opportunity
costs from shifting productive resources from one use to
another
c. goods and services will increase in
price
d. the economy must have some idle
resources
e. the production possibilities frontier
will shift outward
35 If an economy's production
possibilities frontier shifted to the right, this would illustrate ( d )
a. increasing opportunity cost
b. decreasing opportunity cost
c. a fall in resource utilization
d. economic growth
e. a rise in resource utilization
36 Along a society's production
possibilities frontier, ( d )
a. the level of technology is changing
b. more of one good can be produced
without giving up some of the other good
c. resources are not being fully
utilized
d. available resources are being used
efficiently
e. there is productive inefficiency in
the economy 7
Figure-1
37 Which of the following could explain
the shift in the production possibilities frontier from
AB to AC in Figure-1? ( d )
a. a productive improvement in petroleum
production that has no effect on clothing production
b. a productive improvement in clothing
production that has no effect on petroleum production
c. an increase in the size of the labor
force that can produce either petroleum products or
clothing
d. major oil reserves in Alaska are
declared off-limits to producers in order to protect the
environment
e. major oil reserves are discovered off
the coast of Africa
38 Which of the following could explain
the shift in the production possibilities frontier shown
in Figure-1 from AC to AB? ( e )
a. technical improvements in both
petroleum and clothing production
b. a productive improvement in clothing
production that has no effect on petroleum production
c. a decrease in the size of the labor
force that can produce either petroleum products or
clothing
d. major oil reserves in Alaska are
declared off-limits to producers in order to protect the
environment
e. major oil reserves are discovered off
the coast of Africa
39 The law of increasing opportunity
cost is based on the idea that ( d )
a. wages tend to increase with the level
of employment
b. interest rates tend to rise with
increasing inflation
c. labor costs for a typical firm are a
large and growing proportion of total cost
d. most resources are better suited to
producing some goods than others
e. the less of something we produce, the
greater is the opportunity cost of producing still more 8
40 If a society is on its production
possibilities frontier, and decides to produce more health
care,( a )
a. the cost of producing an additional
unit of health care will rise
b. it must employ some previously
unemployed resources
c. its standard of living will rise
d. some kind of inefficiency will occur
e. the cost of producing an additional
unit of some other good will rise
41 . After graduating from high school,
Steve had three choices, listed in order of preference: (1)
study economics
at Iowa State University, (2) work in a
printed circuit board factory, or (3) attend a rival college.
His opportunity cost of going to college
here includes which of the following? ( b )
a. the cost of books and supplies at the
rival college
b. the income he could have earned at
the printed circuit board factory plus the direct cost of
attending college here (tuition,
textbooks, etc.)
c. the benefits he could have received
from going to the rival college
d. only the tuition and fees paid for
taking classes here
e. cannot be determined from the given
information
Figure-2
42 Figure-2 illustrates the trade-off
for a particular student between time spent studying per week
and income per week from working
part-time. What is the opportunity cost for this person of
moving from point a to point b? ( b )
a. $5 of income per week
b. $10 of income per week
c. two hours of studying per week
d. $10 per hour of studying per week
e. $20 of income per week 9
Figure-3
43 Assume that U.S. agricultural land is
used either to raise cattle for beef or to grow wheat.
Figure -3 represents the production
possibility frontier for beef and wheat. Between points F and
G, the opportunity cost of one bushel of
wheat equals ( c )
a. 0.25 million pounds of beef
b. 1.75 million pounds of beef
c. 0.125 pounds of beef
d. 8.0 pounds of beef
e. 0.5 pounds of beef
44 Assume that U.S. agricultural land is
used either to raise cattle for beef or to grow wheat.
Figure -3 represents the production
possibility frontier for beef and wheat. Production at point H
is ( a )
a. unattainable given currently
available technology and resources
b. attainable by more fully employing
already available resources
c. attainable by using better technology
which is already available
d. attainable if beef production drops
to zero
e. attainable if all available resources
are used to produce wheat
45 Assume that U.S. agricultural land is
used either to raise cattle for beef or to grow wheat.
Figure -3 represents the production
possibility frontier for beef and wheat. What is assumed
constant as the economy moves from point
F to point G? ( a )
a. both d and e
b. the money supply
c. consumer tastes and preferences
d. the level of currently available
technology
e. the amount of available
resources 10
46 . Assume that U.S. agricultural land
is used either to raise cattle for beef or to grow wheat.
Figure -3 represents the production
possibility frontier for beef and wheat. Between points F and
G, the opportunity cost of each pound of
beef equals ( d )
a. 0.25 million bushels of wheat
b. 1.75 million bushels of wheat
c. 0.125 bushels of wheat
d. 8 bushels of wheat
e. 0.5 bushels of wheat
Figure-4
47. Assume that the publishing industry
produces novels and textbooks, as shown in the
production possibilities frontier in
Figure-4. Between points F and G, the opportunity cost of one
more novel equals _____. Between points
G and H, the opportunity cost of one more novel equals
_____. ( a )
a. 0.4 textbooks; 0.5 textbooks
b. 4 textbooks; 5 textbooks
c. 4 million textbooks; 5 million
textbooks
d. 2.5 textbooks; 2 textbooks
e. 10 million textbooks; 5 million
textbooks
48. Assume that the publishing industry
produces novels and textbooks, as shown in the
production possibilities frontier in
Figure-4. Between points G and H, the opportunity cost of one
more textbook equals ( e )
a. 0.5 novels
b. 10 million novels
c. 3 novels
d. 8 novels
e. 2 novels
49. Which of the following statements
could explain the concave shape of the production
possibilities curve in Figure-4? ( d )
a. the publishing industry develops
improved printing presses
b. productive efficiency increases as
the publishing industry moves from point F to point H
c. more editors and writers are employed
as the publishing industry moves from point F to
point H
11
d. some writers are better suited to
writing novels; some are better suited to writing textbooks
e. the prices of paper and ink fall as
the publishing industry moves from point H to point F
50. The three primary systems for
allocating resources are ( d )
a. tradition, command, and central
planning
b. tradition, central planning, and
communal
c. command, market, and socialism
d. tradition, command, and market
e. communal, command, and capitalism
