Challenge ECO 200
Student Name:
Multiple Choice
Identify the choice that best completes the statement or answers the question.
1. If the federal government spends more in any year than it receives in revenues, the difference is called
a. the fiscal shortfall.
. the fiscal deficit.
c. the fiscal debt.
d. the fiscal surplus.
e. the fiscal deficiency.
2. Economists generally argue that at the governmental level it makes sense to bo
ow for, and thus pay for over an
extended period of time, such things as all but which of the following?
a. roads
. salaries
c. war efforts
d. schools
e. environmental cleanup
3. Between 1981 and 1992, the federal deficit
a. roughly tripled.
. roughly doubled.
c. stayed roughly constant.
d. roughly halved.
e. roughly quadrupled.
4. In an open economy running a trade surplus, NCF stands fo
a. net capital outflows.
. net capital inflows.
c. net capital flows.
d. net capital finance.
e. net consumption flows.
5. In 1900, the agriculture sector of the U.S. economy employed _____ of the working population; today the figure is
_____ .
a. 2 percent; 39 percent
. 10 percent; 23 percent
c. 17 percent; 17 percent
d. 23 percent; 10 percent
e. 39 percent; 2 percent
6. Each of the following presents a probable violation of property rights except
a. sneaking into the movie theater and watching a movie.
. sharing a music file with a friend.
c. downloading an MP4 file from iTunes.
d. making your own copy of a DVD rental.
e. None of the above.
7. Each of the following is a critical function served by money except
a. medium of exchange.
. medium for coincidental wants.
c. store of value.
d. unit of account.
e. None of the above; each is a function of money.
8. The term of a member of the Board of Governors is
a. four years.
. six years.
c. seven years.
d. ten years.
e. fourteen years.
9. When a bank’s customers lose confidence in the bank and try to withdraw their deposits, this is termed a:
a. loan lacuna.
. bank run.
c. deposit disaster.
d. gold rush.
e. reserve requirement.
10. In the basic competitive model of an economy, firms _____ in the product market, _____ in the labor market, and_____ in the capital market.
a. sell goods; sell labor; bo
ow money
. buy goods; buy labor; lend money
c. buy goods; sell labor; lend money
d. buy goods; buy labor; bo
ow money
e. sell goods; buy labor; bo
ow money
11. Figure 6.4 shows an increase in demand for labor. Which of the following explanations for this shift is inaccurate?
a. an increase in the number of machines available for workers’ use
. an increase in the marginal productivity of available workers
c. an increase in the demand for the products that workers produce
d. a decrease in the minimum wage that firms are required to pay workers
e. None of the above; they are all co
ect.
12. Which of the following definitions is co
ect
a. The nominal rate of interest equals the real rate of interest plus the rate of inflation.
. The real rate of interest equals the nominal rate of interest plus the rate of inflation.
c. The nominal rate of interest equals the rate of inflation minus the real rate of interest.
d. The real rate of interest minus the nominal rate of interest equals the rate of inflation.
e. The nominal rate of interest equals the real rate of interest minus the rate of inflation.
14. When economists talk of government savings being negative, they mean
a. government revenue exceeds government expenditure, so there is a federal budget deficit.
. government revenue exceeds government expenditure, so there is a federal budget
surplus.
c. the accumulated difference between government expenditure and government revenue,
that is, the federal debt.
d. government expenditure exceeds government revenue, so there is a federal budget deficit.
e. government expenditure exceeds government revenue, so there is a federal budget
surplus.
16. When the level of national saving in the United States declines, all of the following occur except
a. an increase in real interest rates throughout the world.
. less investment in the United States.
c. more investment in the United States.
d. reductions in investment throughout the world.
e. a smaller impact on U.S. investment than if the United States were a closed economy.
17. When a country’s net capital inflows equal zero,
a. the country’s capital account is in surplus.
. the country has a trade deficit.
c. the country has neither a trade deficit nor a trade surplus.
d. the country has a trade surplus.
e. the country’s capital account is in deficit.
18. A country with a _____ will experience a net capital _____.
a. budget surplus; inflow
. trade surplus; inflow
c. trade deficit; outflow
d. trade deficit; inflow
e. budget deficit; outflow
19. Countries with a _____ will experience a net capital _____.
a. budget surplus; inflow
. trade surplus; inflow
c. trade deficit; outflow
d. trade deficit; inflow
e. budget deficit; outflow
20. If the exchange rate between the dollar and the euro changes from 1.2 euros per dollar to 1 euro per dollar,
a. the euro is now worth less than before.
. this represents an appreciation of the euro.
c. this represents a depreciation of the dollar.
d. this represents a depreciation of the euro.
e. the dollar is now worth more than before.
21. Thomas Malthus predicted that population would expand more rapidly than the capacity of the economy to support it. That his predictions were not borne out can be attributed to
a. growth in the labor force.
. the law of diminishing returns.
c. technological change.
d. the multiplier-accelerator.
e. capital deepening.
22. Property rights provide their holder with
a. the right to charge others for the use of a resource.
. the incentive to produce a product for sale.
c. the legal authority to determine how a resource is used.
d. All of the above.
e. Only a and b.
23. In the long-run, with the economy at full employment, a 10 percent increase in the money supply will cause all of the following except a 10 percent increase in
a. the price level.
. nominal wages.
c. nominal interest rates.
d. money demand.
e. employment.
24. In the full-employment equili
ium of a closed economy, money is neutral. This means that when the money supply is increased,
a. equili
ium investment and the equili
ium interest rate are unaffected.
. the equili
ium levels of employment, investment, and output are unaffected.
c. equili
ium output and the equili
ium price level are unaffected.
d. the equili
ium price level, money wage, and interest rate are unaffected.
e. equili
ium employment and the equili
ium money wage are unaffected.
25. Before the mid-1930s, the practice of towns and private companies issuing their own cu
ency, or scrip, was established in order to
a. replace mismanaged banks that had a habit of failing whenever the economy slowed
down.
. stimulate the local economy as a form of local business cycle management.
c. keep the economy functioning at a normal pace until official cu
ency became available.
d. All of the above.
e. Only b and c.
27. When the interest rate decreases,
a. the substitution effect of the decrease leads to lower saving.
. the substitution effect of the decrease reinforces the income effect.
c. the substitution effect of the decrease is indeterminate; savings can go up or down.
d. the change in the interest rate causes no substitution effect.
e. the substitution effect of the decrease leads to higher saving.
28. Most economists today believe that the intergenerational transfers that occur between cu
ent and future taxpayers
when the government bo
ows money to finance its expenditures are defensible for all but which of the following
activities?
a. roads
. schools
c. war efforts
d. tax cuts
e. environmental cleanup
29. As a percentage of GDP, the federal deficit was largest during the
a. 1960s.
. 1970s.
c. 1980s.
d. 1990s.
e. 2000s.
30. When economists speak of human capital, they are refe
ing to
a. the level of education and training that makes workers productive.
. the stock of accumulated experience and skills that make workers productive.
c. the ability of workers to shift the production function representing output per worker.
d. All of the above.
e. Only a and b.