Q1. Which of the following, other things constant, will shift the money demand curve to the left?

Select one:
a. an increase in the interest rate
b. a decrease in the interest rate
c. a decrease in real GDP
d. an increase in real GDP

Q2. Suppose inflation is expected to be 4% next year, and your employer agrees to a 6% increase in
your nominal wage. You expect your real wage to:
Select one:
a. Increase by 2%
b. Increase by 6%
c. Decrease by 10%
d. Increase by 4%

Q3. A firm could differentiate its product by all of the following means except one. Which is the
exception?
Select one:
a. using packaging or advertising to create a special subjective image of the product in the consumer's
mind
b. increasing the number of services that accompany the product
c. emphasizing that the product provides the same benefits to consumers as the others on the
market, even when it is really physically different
d. making the product available at a number of different locations

Q4. Gross Domestic Product equals the

Select one:
a. market value of all goods and services produced by resources located in a country
b. value added to the economy by intermediate goods and services minus original cost
c. total output of all goods and services produced by resources located in a country
d. market value of all final goods and services produced by resources located in a country.

Q5. If toy stores overestimate the demand for a toy in 2004 and, as a result, have an unexpectedly
large number of them on hand at the end of the year, the value of the increased inventory of those
toys will be counted as
Select one:
a. investment in 2005
b. consumption in 2005
c. consumption in 2004
d. investment in 2004

Q6. Which of the following is the best example of an intermediate good or service?
Select one:
a. any good bought by a household, rather than a firm
b. pizzas bought at a restaurant
c. sunglasses worn on a summer vacation in Florida
d. legal services hired by a public accounting firm

Q7. If a monopolistically competitive firm can earn a profit, it will adjust production until
Select one:
a. MR > AVC
b. MR = ATC
c. MC > MR
d. MR = MC
Q8. The view that union wage demands may be a source of inflation would be best associated with
the
Select one:
a. supply shock view of inflation
b. demand push view of inflation
c. demand pull view of inflation
d. cost push view of inflation

Q9. What is the opportunity cost of holding money rather than some other financial asset?
Select one:
a. the forgone leisure
b. the forgone interest income
c. the forgone utility
d. time

Q10. Demand-pull inflation is associated with

Select one:
a. increasing aggregate demand and greater unemployment
b. decreasing aggregate demand and lower unemployment
c. increasing aggregate demand and lower unemployment
d. decreasing aggregate demand and greater unemployment

Q11. If the inflation rate is higher than expected, which of the following groups in society would be
most likely to gain?
Select one:
a. lenders
b. persons on fixed incomes
c. borrowers
d. persons holding large amounts of money

Q12. Gross Domestic Product includes final goods and services, but not intermediate goods because
Select one:
a. the value of the intermediate goods is already included as inventory investment
b. intermediate goods are not part of investment spending
c. intermediate goods are only produced by government
d. the value of the intermediate goods is already included in the value of the final goods

Q13. Which of the following is true about inflation?

Select one:
a. If people accurately anticipate inflation, their actions will prevent it.
b. Inflation is more damaging if it is unanticipated.
c. Inflation promotes social harmony by uniting people against the government.
d. Accurate anticipation of inflation is possible for everyone who is well informed about economic
events.

Q14. In deciding how much money to hold, you should compare the
Select one:
a. advantage of storing wealth with the advantage of having a medium of exchange
b. advantage of liquidity with the disadvantage of losing interest
c. disadvantage of liquidity with the advantage of earning more interest
d. disadvantage of storing wealth with the advantage of having a medium of exchange

Q15. Which of the following would directly reduce GDP?

Select one:
a. The switch from home-cooked meals to restaurant meals lowers the nutritional value of the
average diet.
b. An unscrupulous disposal company dumps barrels of toxic waste near a suburban water supply.
c. The Resident Welfare Association of Primus Estates decides to lay-off local guards at the local
swimming pool.
d. Pollution of international waters increases.

Q16. In an oligopoly, the demand curve facing an individual firm depends upon
Select one:
a. the firm's supply curve
b. the shape of the firm's marginal cost curve
c. the behavior of competing firms
d. the shape of the firm's average total cost curve

Q17. If Ford raises the price of its automobiles, the demand curve for GM automobiles
Select one:
a. shifts to the left
b. shifts to the right
c. is unaffected
d. becomes more elastic

Q18. Which of the following would be included in this year's GDP?

Select one:
a. one hundred shares of IBM stock that Tony Hanks bought this Year
b. George Garcia's purchase of a fishing rod and reel at a garage sale
c. the used car Tracey sold to Justin
d. that bucket of Kentucky Fried Chicken you bought this Year

Q19. If future price changes were perfectly anticipated by both borrowers and lenders, what would
happen to the real interest rate in the future if the price level changed?
Select one:
a. it would decrease by the amount of the price increase
b. it would increase
c. it would not change
d. it would decrease

Q20. During periods when the inflation rate fluctuates widely,

Select one:
a. uncertainty about changes in relative prices causes a decrease in economic efficiency
b. all money prices rise at the same rate, causing relative prices to increase
c. economic efficiency increases because decision makers pay closer attention to changes in money
prices
d. all relative prices increase at the same rate, leaving money prices constant

Q21. The opportunity cost of holding money increases when

Select one:
a. the interest rate falls
b. nominal GDP rises
c. the interest rate rises
d. the price level falls

Q22. In which market structure(s) might firms produce an undifferentiated product?

Select one:
a. monopoly only
b. monopolistic competition only
c. perfect competition and homogenous oligopoly
d. perfect competition only
Q23. Which of the following would cause a downward movement along the money demand curve?
Select one:
a. an increase in the interest rate
b. a decrease in the interest rate
c. an increase in real GDP
d. a decrease in real GDP

Q24. Monopolistic competition is different from perfect competition because monopolistic

competitors produce
Select one:
a. a homogeneous but unique product
b. unique products
c. a homogeneous product
d. differentiated products

Q25. A decrease in autonomous net taxes

Select one:
a. increases GDP as much as an equal decrease in government purchases
b. decreases GDP more than an equal decrease in government purchases
c. changes GDP in an unpredictable manner
d. increases GDP less than an equal increase in government purchases

Q26. Monopolistically competitive firms ignore the effect of their decisions upon other firms in the
industry because
Select one:
a. each firm is small relative to the market
b. there are few sellers in the market
c. there is only one seller in the market
d. each firm is large relative to the market

Q27. In periods of high inflation,

Select one:
a. nobody wants to work and earn income
b. the purchasing power of money is decreasing
c. low nominal interest rates are likely to result
d. the purchasing power of money is increasing

Q28. Inflation is
Select one:
a. a rise in the real prices of all goods and services
b. a continuing rise in everyone's standard of living
c. a reduction in everyone's standard of living
d. a general and continuous rise in the money prices of goods and services

Q29. A cartel's profit-maximizing price is

Select one:
a. on the demand curve at the quantity where combined marginal cost equals marginal revenue
b. on the demand curve where it intersects its marginal cost curve
c. determined by using the cost-plus pricing model
d. the highest price possible

Q30. An oligopoly is characterized by

Select one:
a. a large number of firms and no barriers to entry
b. many firms and some barriers to entry
c. few firms, which have control over market price
d. a single firm and no barriers to entry

Q31. Which of the following is the best example of an intermediate good or service?
Select one:
a. legal services hired by a public accounting firm
b. sunglasses worn on a summer vacation in Florida
c. pizzas bought at a restaurant
d. any good bought by a household, rather than a firm

Q32. If a monopolistically competitive firm can earn a profit, it will adjust production until
Select one:
a. MR = ATC
b. MR > AVC
c. MC > MR
d. MR = MC

Q33. A decrease in autonomous net taxes

Select one:
a. increases GDP less than an equal increase in government purchases
b. changes GDP in an unpredictable manner
c. increases GDP as much as an equal decrease in government purchases
d. decreases GDP more than an equal decrease in government purchases

Q34. Which of the following assumptions is usually made about government purchases?
Select one:
a. They are autonomous.
b. They equal the level of net taxes in equilibrium.
c. They vary directly with the interest rate.
d. They vary directly with the level of income.

Q35. If the inflation rate is higher than expected, which of the following groups in society would be
most likely to gain?
Select one:
a. borrowers
b. persons holding large amounts of money
c. persons on fixed incomes
d. lenders

Q36. In both monopolistic competition and non-price-discriminating monopoly,

Select one:
a. the marginal revenue curve lies above the average revenue curve
b. the marginal revenue curve lies above the demand curve
c. marginal revenue is equal to average revenue
d. the marginal revenue curve lies below the demand curve

Q37. Gross Domestic Product equals the

Select one:
a. value added to the economy by intermediate goods and services minus original cost
b. market value of all final goods and services produced by resources located in a country.
c. total output of all goods and services produced by resources located in a country
d. market value of all goods and services produced by resources located in a country

Q38. Monopolistic competition is different from perfect competition because monopolistic

competitors produce
Select one:
a. a homogeneous but unique product
b. a homogeneous product
c. differentiated products
d. unique products

Q39. Suppose that storage costs increase, so that firms decide to hold less output in inventory, other
things constant. Which of the following istrue?
Select one:
a. consumption spending will increase
b. investment will decrease
c. investment will increase
d. consumption spending will decrease

Q40. What is the opportunity cost of holding money rather than some other financial asset?
Select one:
a. the forgone leisure
b. the forgone utility
c. the forgone interest income
d. time

Q41. Monopolistically competitive firms ignore the effect of their decisions upon other firms in the
industry because
Select one:
a. each firm is small relative to the market
b. each firm is large relative to the market
c. there are few sellers in the market
d. there is only one seller in the market

Q42. Suppose inflation is expected to be 4% next year, and your employer agrees to a 6% increase in
your nominal wage. You expect your realwage to:
Select one:
a. Increase by 4%
b. Decrease by 10%
c. Increase by 6%
d. Increase by 2%

Q43. A movement upward and to the left along the money demand curve is caused by
Select one:
a. an increase in the interest rate
b. an increase in real GDP
c. a decrease in the interest rate
d. a decrease in real GDP

Q44. During periods when the inflation rate fluctuates widely,

Select one:
a. economic efficiency increases because decision makers pay closer attention to changes in money
prices
b. all relative prices increase at the same rate, leaving money prices constant
c. uncertainty about changes in relative prices causes a decrease in economic efficiency
d. all money prices rise at the same rate, causing relative prices to increase

Q45. Which of the following would lead to the most inflation?

Select one:
a. Both aggregate demand and aggregate supply decrease.
b. Both aggregate demand and aggregate supply increase.
c. Aggregate demand increases and aggregate supply decreases.
d. Aggregate demand increases and aggregate supply increases.

Q46. Which of the following would cause a downward movement along the money demand curve?
Select one:
a. an increase in the interest rate
b. an increase in real GDP
c. a decrease in the interest rate
d. a decrease in real GDP

Q47. If MPC is 0.8, the simple tax multiplier is:

Select one:
a. 4
b. 3
c. -4
d. 5

Q48. If future price changes were perfectly anticipated by both borrowers and lenders, what would
happen to the real interest rate in the futureif the price level changed?
Select one:
a. it would increase
b. it would decrease by the amount of the price increase
c. it would decrease
d. it would not change

Q49. Demand-pull inflation is associated with

Select one:
a. decreasing aggregate demand and lower unemployment
b. increasing aggregate demand and lower unemployment
c. decreasing aggregate demand and greater unemployment
d. increasing aggregate demand and greater unemployment

Q50. Inflation is
Select one:
a. a general and continuous rise in the money prices of goods and services
b. a reduction in everyone's standard of living
c. a continuing rise in everyone's standard of living
d. a rise in the real prices of all goods and services

Q51. If toy stores overestimate the demand for a toy in 2004 and, as a result, have an unexpectedly
large number of them on hand at the end ofthe year, the value of the increased inventory of those
toys will be counted as
Select one:
a. consumption in 2005
b. investment in 2005
c. consumption in 2004
d. investment in 2004

Q52. Which of the following is most likely produced in a monopolistically competitive market?
Select one:
a. motorcycles
b. firewood
c. computer chips
d. detergents

Q53. If the economy experiences a contractionary gap and the RBI buys government securities in the
open-market, then:
Select one:
a. Money supply decreases, the investment decreases, and the aggregate demand increases
b. Money supply increases, investment increases, aggregate demand increases
c. Money supply decreases, the interest rate decreases, and the aggregate demand falls
d. Money supply increases, the interest rate increases, and the aggregate demand increases

Q54. Which of the following would not be included in the calculation of GDP?
Select one:
a. Laurie pays $15 for a haircut.
b. Joe pays a plumber $100 to fix a broken pipe.
c. Jim purchases a new automobile.
d. Sandy, who is on welfare, receives $100 in food stamps.

Q55. Which of the following is not true about Gross Domestic Product?
Select one:
a. Intermediate goods and services are excluded to prevent double counting.
b. It reflects production in a particular year.
c. It includes only final goods and services.
d. It includes transfer payments.
Q56. Which of the following would directly reduce GDP?
Select one:
a. An unscrupulous disposal company dumps barrels of toxic waste near a suburban water supply.
b. Pollution of international waters increases.
c. The Resident Welfare Association of Primus Estates decides to lay-offlocal guards at the local
swimming pool.
d. The switch from home-cooked meals to restaurant meals lowers the nutritional value of the
average diet.

Q57. For firms in an oligopoly to be interdependent,

Select one:
a. goods must be differentiated and few sellers
b. goods can be either undifferentiated or differentiated and there are few firms large in size
c. goods must be undifferentiated and many sellers
d. firms must be small in size and selling differentiated goods

Q58. The demand for money is based primarily on money's role as a(n)
Select one:
a. interest-bearing asset
b. store of wealth
c. standard of value
d. medium of exchange

Q59. Oligopolists are more sensitive to the pricing and output policies of their rivals when
Select one:
a. there are barriers to entry
b. there is freedom of entry and exit
c. all firms produce identical products
d. their products are highly differentiated

Q60. Which monetary policy would be appropriate to close a contractionary gap?

Select one:
a. the RBI decreasing the bank rate
b. a decrease in government purchases
c. an increase in reserve requirements
d. a tax cut

Q61. If Ford raises the price of its automobiles, the demand curve for GM automobiles
Select one:
a. shifts to the left
b. shifts to the right
c. becomes more elastic
d. is unaffected

Q62. Inflation is
Select one:
a. a reduction in everyone's standard of living
b. a general and continuous rise in the money prices of goods and services
c. a continuing rise in everyone's standard of living
d. a rise in the real prices of all goods and services
Q63. Discretionary fiscal policy is policy that
Select one:
a. applies to some states but not others
b. applies to some industries but not others
c. is developed in secret by the Government
d. is an intentional change in taxation or government spending

Q64. Which of the following is true about inflation?

Select one:
a. If people accurately anticipate inflation, their actions will prevent it.
b. Inflation promotes social harmony by uniting people against the government.
c. Inflation is more damaging if it is unanticipated.
d. Accurate anticipation of inflation is possible for everyone who is well informed about economic
events.

Q65. If MPC is 0.8, the simple tax multiplier is:

Select one:
a. 4
b. 5
c. 3
d. -4
Q66. If the MPC equals 0.75 and Government expenditure increases by $100, real GDP demanded will
increase by
Select one:
a. 25 percent
b. 75 percent
c. 50
d. 400

Q67. An oligopoly is characterized by

Select one:
a. a large number of firms and no barriers to entry
b. a single firm and no barriers to entry
c. many firms and some barriers to entry
d. few firms, which have control over market price

Q68. In both monopolistic competition and non-price-discriminating monopoly,

Select one:
a. marginal revenue is equal to average revenue
b. the marginal revenue curve lies above the average revenue curve
c. the marginal revenue curve lies below the demand curve
d. the marginal revenue curve lies above the demand curve

Q69. For firms in an oligopoly to be interdependent,

Select one:
a. goods can be either undifferentiated or differentiated and there are few firms large in size
b. goods must be undifferentiated and many sellers
c. goods must be differentiated and few sellers
d. firms must be small in size and selling differentiated goods

Q70. Oligopolists are more sensitive to the pricing and output policies of their rivals when
Select one:
a. all firms produce identical products
b. there is freedom of entry and exit
c. there are barriers to entry
d. their products are highly differentiated

Q71. If the economy experiences a contractionary gap and the RBI buys government securities in the
open-market, then:
Select one:
a. Money supply decreases, the investment decreases, and the aggregate demand increases
b. Money supply decreases, the interest rate decreases, and the aggregate demand falls
c. Money supply increases, the interest rate increases, and the aggregate demand increases
d. Money supply increases, investment increases, aggregate demand increases

Q72. A cartel's profit-maximizing price is

Select one:
a. on the demand curve at the quantity where combined marginal cost equals marginal revenue
b. on the demand curve where it intersects its marginal cost curve
c. the highest price possible
d. determined by using the cost-plus pricing model

Q73. Demand-pull inflation is associated with

Select one:
a. increasing aggregate demand and greater unemployment
b. decreasing aggregate demand and greater unemployment
c. increasing aggregate demand and lower unemployment
d. decreasing aggregate demand and lower unemployment

Q74. In which market structure(s) might firms produce an undifferentiated product?

Select one:
a. perfect competition and homogenous oligopoly
b. monopolistic competition only
c. monopoly only
d. perfect competition only

Q75. Which of the following would lead to the most inflation?

Select one:
a. Both aggregate demand and aggregate supply increase.
b. Aggregate demand increases and aggregate supply increases.
c. Aggregate demand increases and aggregate supply decreases.
d. Both aggregate demand and aggregate supply decrease.

Q76. Monopolistic competition is different from perfect competition because monopolistic

competitors produce
Select one:
a. differentiated products
b. unique products
c. a homogeneous product
d. a homogeneous but unique product

Q77. During periods when the inflation rate fluctuates widely,

Select one:
a. economic efficiency increases because decision makers pay closer attention to changes in money
prices
b. uncertainty about changes in relative prices causes a decrease in economic efficiency
c. all money prices rise at the same rate, causing relative prices to increase
d. all relative prices increase at the same rate, leaving money prices constant

Q78. Fiscal policy

Select one:
a. uses the Union government's powers over the money supply and interest rates to affect
employment, the price level, and GDP
b. can affect employment and prices, but not the level of GDP
c. can affect employment and the level of GDP, but not the price level
d. uses the Union government's powers of spending and taxation to affect employment, the price
level, and GDP

Q79. In deciding how much money to hold, you should compare the
Select one:
a. advantage of storing wealth with the advantage of having a medium of exchange
b. advantage of liquidity with the disadvantage of losing interest
c. disadvantage of storing wealth with the advantage of having a medium of exchange
d. disadvantage of liquidity with the advantage of earning more interest

Q80. Which of the following would not be included in the calculation of GDP?
Select one:
a. Jim purchases a new automobile.
b. Sandy, who is on welfare, receives $100 in food stamps.
c. Joe pays a plumber $100 to fix a broken pipe.
d. Laurie pays $15 for a haircut.

Q81. If toy stores overestimate the demand for a toy in 2004 and, as a result, have an unexpectedly
large number of them on hand at the end of
the year, the value of the increased inventory of those toys will be counted as
Select one:
a. investment in 2004
b. consumption in 2004
c. investment in 2005
d. consumption in 2005

Q82. Which of the following is most likely produced in a monopolistically competitive market?
Select one:
a. detergents
b. firewood
c. motorcycles
d. computer chips

Q83. In an oligopoly, the demand curve facing an individual firm depends upon
Select one:
a. the shape of the firm's average total cost curve
b. the shape of the firm's marginal cost curve
c. the behavior of competing firms
d. the firm's supply curve

Q84. If future price changes were perfectly anticipated by both borrowers and lenders, what would
happen to the real interest rate in the future if the price level changed?
Select one:
a. it would increase
b. it would decrease by the amount of the price increase
c. it would not change
d. it would decrease

Q85. Which of the following, other things constant, will shift the money demand curve to the left?
Select one:
a. an increase in the interest rate
b. a decrease in the interest rate
c. an increase in real GDP
d. a decrease in real GDP

Q86. Suppose inflation is expected to be 4% next year, and your employer agrees to a 6% increase in
your nominal wage. You expect your real
wage to:
Select one:
a. Increase by 2%
b. Increase by 4%
c. Decrease by 10%
d. Increase by 6%

Q87. The view that union wage demands may be a source of inflation would be best associated with
the
Select one:
a. demand pull view of inflation
b. demand push view of inflation
c. cost push view of inflation
d. supply shock view of inflation

Q88. Suppose that storage costs increase, so that firms decide to hold less output in inventory, other
things constant. Which of the following is true?
Select one:
a. investment will increase
b. consumption spending will increase
c. consumption spending will decrease
d. investment will decrease

Q89. Which of the following is the best example of an intermediate good or service?
Select one:
a. sunglasses worn on a summer vacation in Florida
b. legal services hired by a public accounting firm
c. any good bought by a household, rather than a firm
d. pizzas bought at a restaurant

Q90. Gross Domestic Product includes final goods and services, but not intermediate goods because
Select one:
a. intermediate goods are not part of investment spending
b. the value of the intermediate goods is already included as inventory investment
c. the value of the intermediate goods is already included in the value of the final goods
d. intermediate goods are only produced by government

Q91. A firm could differentiate its product by all of the following means except one. Which is the
exception?
Select one:
a. making the product available at a number of different locations
b. increasing the number of services that accompany the product
c. emphasizing that the product provides the same benefits to consumers as the others on the
market, even when it is really physicallydifferent
d. using packaging or advertising to create a special subjective image of the product in the consumer's
mind

Q92. Fiscal policy focuses on manipulating

Select one:
a. both aggregate supply and aggregate demand to smooth out business fluctuations
b. aggregate supply to smooth out business fluctuations
c. aggregate demand to stimulate the economy and aggregate supply to contract it
d. aggregate demand to smooth out business fluctuations

Q93. Gross Domestic Product equals the

Select one:
a. market value of all goods and services produced by resources located in a country
b. value added to the economy by intermediate goods and services minus original cost
c. market value of all final goods and services produced by resources located in a country.
d. total output of all goods and services produced by resources located in a country

Q94. Monopolistically competitive firms ignore the effect of their decisions upon other firms in the
industry because
Select one:
a. each firm is small relative to the market
b. there is only one seller in the market
c. each firm is large relative to the market
d. there are few sellers in the market

Q95. In an oligopoly, the demand curve facing an individual firm depends upon
Select one:
a. the firm's supply curve
b. the shape of the firm's marginal cost curve
c. the shape of the firm's average total cost curve
d. the behavior of competing firms

Q96. Which of the following would be included in this year's GDP?

Select one:
a. the used car Tracey sold to Justin
b. George Garcia's purchase of a fishing rod and reel at a garage sale
c. one hundred shares of IBM stock that Tony Hanks bought this Year
d. that bucket of Kentucky Fried Chicken you bought this Year
Q97. Which of the following would cause a downward movement along the money demand curve?
Select one:
a. a decrease in the interest rate
b. a decrease in real GDP
c. an increase in real GDP
d. an increase in the interest rate

Q98. If the MPC equals 0.75 and Government expenditure increases by $100, real GDP demanded will
increase by
Select one:
a. 400
b. 75 percent
c. 25 percent
d. 50

Q99. Suppose inflation is expected to be 4% next year, and your employer agrees to a 6% increase in
your nominal wage. You expect your realwage to:
Select one:
a. Increase by 4%
b. Increase by 2%
c. Increase by 6%
d. Decrease by 10%

Q100. A decrease in autonomous net taxes

Select one:
a. changes GDP in an unpredictable manner
b. increases GDP as much as an equal decrease in government purchases
c. increases GDP less than an equal increase in government purchases
d. decreases GDP more than an equal decrease in government purchases

Q101. During periods when the inflation rate fluctuates widely,

Select one:
a. all relative prices increase at the same rate, leaving money prices constant
b. all money prices rise at the same rate, causing relative prices to increase
c. economic efficiency increases because decision makers pay closer attention to changes in money
prices
d. uncertainty about changes in relative prices causes a decrease in economic efficiency

Q102. Which of the following is true about inflation?

Select one:
a. If people accurately anticipate inflation, their actions will prevent it.
b. Inflation promotes social harmony by uniting people against the government.
c. Inflation is more damaging if it is unanticipated.
d. Accurate anticipation of inflation is possible for everyone who is well informed about economic
events.

Q103. The demand for money is based primarily on money's role as a(n)
Select one:
a. standard of value
b. interest-bearing asset
c. medium of exchange
d. store of wealth

Q104. Which of the following assumptions is usually made about government purchases?
Select one:
a. They vary directly with the interest rate.
b. They vary directly with the level of income.
c. They are autonomous.
d. They equal the level of net taxes in equilibrium.

Q105. Which of the following would not be included in the calculation of GDP?
Select one:
a. Sandy, who is on welfare, receives $100 in food stamps.
b. Laurie pays $15 for a haircut.
c. Joe pays a plumber $100 to fix a broken pipe.
d. Jim purchases a new automobile.

Q106. The view that union wage demands may be a source of inflation would be best associated with
the
Select one:
a. cost push view of inflation
b. demand pull view of inflation
c. supply shock view of inflation
d. demand push view of inflation

Q107. A movement upward and to the left along the money demand curve is caused by
Select one:
a. a decrease in real GDP
b. an increase in real GDP
c. a decrease in the interest rate
d. an increase in the interest rate

Q108. A cartel's profit-maximizing price is

Select one:
a. on the demand curve at the quantity where combined marginal cost equals marginal revenue
b. on the demand curve where it intersects its marginal cost curve
c. the highest price possible
d. determined by using the cost-plus pricing model

Q109. If toy stores overestimate the demand for a toy in 2004 and, as a result, have an unexpectedly
large number of them on hand at the end ofthe year, the value of the increased inventory of those
toys will be counted as
Select one:
a. consumption in 2005
b. investment in 2005
c. investment in 2004
d. consumption in 2004

Q110. Which of the following is the best example of an intermediate good or service?
Select one:
a. any good bought by a household, rather than a firm
b. legal services hired by a public accounting firm
c. pizzas bought at a restaurant
d. sunglasses worn on a summer vacation in Florida

Q111. Which of the following would lead to the most inflation?

Select one:
a. Both aggregate demand and aggregate supply decrease.
b. Aggregate demand increases and aggregate supply decreases.
c. Both aggregate demand and aggregate supply increase.
d. Aggregate demand increases and aggregate supply increases.

Q112. A cartel is
Select one:
a. a group of monopolistically competitive firms which charge the same price
b. usually legal in India
c. a group of oligopolistic firms that engage in formal collusion
d. an agreement among rival firms to set prices independently

Q113. If the economy experiences a contractionary gap and the RBI buys government securities in the
open-market, then:
Select one:
a. Money supply increases, investment increases, aggregate demand increases
b. Money supply increases, the interest rate increases, and the aggregate demand increases
c. Money supply decreases, the interest rate decreases, and the aggregate demand falls
d. Money supply decreases, the investment decreases, and the aggregate demand increases

Q114. If the inflation rate is higher than expected, which of the following groups in society would be
most likely to gain?
Select one:
a. persons holding large amounts of money
b. lenders
c. persons on fixed incomes
d. borrowers

Q115. An oligopoly is characterized by

Select one:
a. few firms, which have control over market price
b. a single firm and no barriers to entry
c. a large number of firms and no barriers to entry
d. many firms and some barriers to entry

Q116. Monopolistic competition is different from perfect competition because monopolistic

competitors produce
Select one:
a. a homogeneous but unique product
b. unique products
c. a homogeneous product
d. differentiated products

Q117. If Ford raises the price of its automobiles, the demand curve for GM automobiles
Select one:
a. shifts to the right
b. shifts to the left
c. becomes more elastic
d. is unaffected

Q118. If a monopolistically competitive firm can earn a profit, it will adjust production until
Select one:
a. MR = MC
b. MR > AVC
c. MR = ATC
d. MC > MR

Q119. In both monopolistic competition and non-price-discriminating monopoly,

Select one:
a. the marginal revenue curve lies below the demand curve
b. marginal revenue is equal to average revenue
c. the marginal revenue curve lies above the demand curve
d. the marginal revenue curve lies above the average revenue curve

Q120. It is harder to explain the behavior of firms in oligopoly than in other market structures
because in oligopoly
Select one:
a. the firms act independently of each other
b. only homogeneous products are produced
c. only differentiated products are produced
d. firms base their decisions on what their rivals do

Q121. It is harder to explain the behavior of firms in oligopoly than in other market structures
because in oligopoly
Select one:
a. only homogeneous products are produced
b. firms base their decisions on what their rivals do
c. the firms act independently of each other
d. only differentiated products are produced

Q122. Which of the following assumptions is usually made about government purchases?
Select one:
a. They equal the level of net taxes in equilibrium.
b. They are autonomous.
c. They vary directly with the interest rate.
d. They vary directly with the level of income.

Q123. Which of the following is the best example of an intermediate good or service?
Select one:
a. any good bought by a household, rather than a firm
b. pizzas bought at a restaurant
c. legal services hired by a public accounting firm
d. sunglasses worn on a summer vacation in Florida

Q124. Which of the following, other things constant, will shift the money demand curve to the left?
Select one:
a. an increase in the interest rate
b. a decrease in the interest rate
c. a decrease in real GDP
d. an increase in real GDP

Q125. In which market structure(s) might firms produce an undifferentiated product?

Select one:
a. perfect competition and homogenous oligopoly
b. monopolistic competition only
c. perfect competition only
d. monopoly only

Q126. Gross Domestic Product includes final goods and services, but not intermediate goods because
Select one:
a. intermediate goods are only produced by government
b. the value of the intermediate goods is already included in the value of the final goods
c. the value of the intermediate goods is already included as inventory investment
d. intermediate goods are not part of investment spending

Q127. Discretionary fiscal policy is policy that

Select one:
a. is an intentional change in taxation or government spending
b. applies to some states but not others
c. applies to some industries but not others
d. is developed in secret by the Government

Q128. Inflation is
Select one:
a. a reduction in everyone's standard of living
b. a continuing rise in everyone's standard of living
c. a general and continuous rise in the money prices of goods and services
d. a rise in the real prices of all goods and services

Q129. An oligopoly is characterized by

Select one:
a. a large number of firms and no barriers to entry
b. a single firm and no barriers to entry
c. many firms and some barriers to entry
d. few firms, which have control over market price

Q130. Demand-pull inflation is associated with

Select one:
a. increasing aggregate demand and lower unemployment
b. increasing aggregate demand and greater unemployment
c. decreasing aggregate demand and lower unemployment
d. decreasing aggregate demand and greater unemployment

Q131. For firms in an oligopoly to be interdependent,

Select one:
a. goods must be undifferentiated and many sellers
b. goods can be either undifferentiated or differentiated and there are few firms large in size
c. firms must be small in size and selling differentiated goods
d. goods must be differentiated and few sellers

Q132. If Ford raises the price of its automobiles, the demand curve for GM automobiles
Select one:
a. becomes more elastic
b. shifts to the right
c. is unaffected
d. shifts to the left

Q133. In both monopolistic competition and non-price-discriminating monopoly,

Select one:
a. the marginal revenue curve lies below the demand curve
b. the marginal revenue curve lies above the demand curve
c. the marginal revenue curve lies above the average revenue curve
d. marginal revenue is equal to average revenue

Q134. In an oligopoly, the demand curve facing an individual firm depends upon
Select one:
a. the firm's supply curve
b. the shape of the firm's marginal cost curve
c. the behavior of competing firms
d. the shape of the firm's average total cost curve

Q135. A cartel's profit-maximizing price is

Select one:
a. the highest price possible
b. on the demand curve at the quantity where combined marginal cost equals marginal revenue
c. determined by using the cost-plus pricing model
d. on the demand curve where it intersects its marginal cost curve

Q136. Which of the following would directly reduce GDP?

Select one:
a. The switch from home-cooked meals to restaurant meals lowers the nutritional value of the
average diet.
b. Pollution of international waters increases.
c. The Resident Welfare Association of Primus Estates decides to lay-off local guards at the local
swimming pool.
d. An unscrupulous disposal company dumps barrels of toxic waste near a suburban water supply.

Q137. Oligopolists are more sensitive to the pricing and output policies of their rivals when
Select one:
a. all firms produce identical products
b. their products are highly differentiated
c. there are barriers to entry
d. there is freedom of entry and exit

Q138. Which of the following would be included in this year's GDP?

Select one:
a. that bucket of Kentucky Fried Chicken you bought this Year
b. one hundred shares of IBM stock that Tony Hanks bought this Year
c. the used car Tracey sold to Justin
d. George Garcia's purchase of a fishing rod and reel at a garage sale

Q139. Which of the following would not be included in the calculation of GDP?
Select one:
a. Sandy, who is on welfare, receives $100 in food stamps.
b. Laurie pays $15 for a haircut.
c. Jim purchases a new automobile.
d. Joe pays a plumber $100 to fix a broken pipe.

Q140. Fiscal policy

Select one:
a. can affect employment and the level of GDP, but not the price level
b. uses the Union government's powers over the money supply and interest rates to affect
employment, the price level, and GDP
c. uses the Union government's powers of spending and taxation to affect employment, the price
level, and GDP
d. can affect employment and prices, but not the level of GDP

Q141. If a monopolistically competitive firm can earn a profit, it will adjust production until
Select one:
a. MR = MC
b. MR = ATC
c. MR > AVC
d. MC > MR

Q142. Gross Domestic Product equals the

Select one:
a. total output of all goods and services produced by resources located in a country
b. market value of all goods and services produced by resources located in a country
c. market value of all final goods and services produced by resources located in a country.
d. value added to the economy by intermediate goods and services minus original cost

Q143. During periods when the inflation rate fluctuates widely,

Select one:
a. all money prices rise at the same rate, causing relative prices to increase
b. uncertainty about changes in relative prices causes a decrease in economic efficiency
c. economic efficiency increases because decision makers pay closer attention to changes in money
prices
d. all relative prices increase at the same rate, leaving money prices constant

Q144. In periods of high inflation,

Select one:
a. low nominal interest rates are likely to result
b. the purchasing power of money is decreasing
c. the purchasing power of money is increasing
d. nobody wants to work and earn income

Q145. The demand for money is based primarily on money's role as a(n)
Select one:
a. interest-bearing asset
b. store of wealth
c. standard of value
d. medium of exchange

Q146. What is the opportunity cost of holding money rather than some other financial asset?
Select one:
a. the forgone utility
b. the forgone interest income
c. the forgone leisure
d. time

Q147. A movement upward and to the left along the money demand curve is caused by
Select one:
a. a decrease in the interest rate
b. an increase in real GDP
c. an increase in the interest rate
d. a decrease in real GDP

Q148. Which of the following is true about inflation?

Select one:
a. Inflation is more damaging if it is unanticipated.
b. Inflation promotes social harmony by uniting people against the government.
c. If people accurately anticipate inflation, their actions will prevent it.
d. Accurate anticipation of inflation is possible for everyone who is well informed about economic
events.

Q149. Fiscal policy focuses on manipulating

Select one:
a. aggregate supply to smooth out business fluctuations
b. aggregate demand to stimulate the economy and aggregate supply to contract it
c. both aggregate supply and aggregate demand to smooth out business fluctuations
d. aggregate demand to smooth out business fluctuations

Q150. Which of the following is not true about Gross Domestic Product?
Select one:
a. It reflects production in a particular year.
b. It includes transfer payments.
c. Intermediate goods and services are excluded to prevent double counting.
d. It includes only final goods and services.

Q151. Q63. Discretionary fiscal policy is policy that

Select one:
a. applies to some states but not others
b. applies to some industries but not others
c. is developed in secret by the Government
d. is an intentional change in taxation or government spending

Q152. If the MPC equals 0.75 and Government expenditure increases by $100, real GDP demanded
will increase by
Select one:
a. 25 percent
b. 75 percent
c. 50
d. 400

Q153. During periods when the inflation rate fluctuates widely,

Select one:
a. uncertainty about changes in relative prices causes a decrease in economic efficiency
b. all money prices rise at the same rate, causing relative prices to increase
c. economic efficiency increases because decision makers pay closer attention to changes in money
prices
d. all relative prices increase at the same rate, leaving money prices constant

Q154. Q53. If the economy experiences a contractionary gap and the RBI buys government securities
in the open-market, then:
Select one:
a. Money supply decreases, the investment decreases, and the aggregate demand increases
b. Money supply increases, investment increases, aggregate demand increases
c. Money supply decreases, the interest rate decreases, and the aggregate demand falls
d. Money supply increases, the interest rate increases, and the aggregate demand increases

Q155. Which of the following would not be included in the calculation of GDP?
Select one:
a. Laurie pays $15 for a haircut.
b. Joe pays a plumber $100 to fix a broken pipe.
c. Jim purchases a new automobile.
d. Sandy, who is on welfare, receives $100 in food stamps.

Q156. In which market structure(s) might firms produce an undifferentiated product?

Select one:
a. monopoly only
b. monopolistic competition only
c. perfect competition and homogenous oligopoly
d. perfect competition only

Q157. In periods of high inflation,

Select one:
a. nobody wants to work and earn income
b. the purchasing power of money is decreasing
c. low nominal interest rates are likely to result
d. the purchasing power of money is increasing

Q158. If toy stores overestimate the demand for a toy in 2004 and, as a result, have an unexpectedly
large number of them on hand at the end of the year, the value of the increased inventory of those
toys will be counted as
Select one:
a. investment in 2005
b. consumption in 2005
c. consumption in 2004
d. investment in 2004

Q159. In both monopolistic competition and non-price-discriminating monopoly,

Select one:
a. the marginal revenue curve lies above the average revenue curve
b. the marginal revenue curve lies above the demand curve
c. marginal revenue is equal to average revenue
d. the marginal revenue curve lies below the demand curve

Q160. A decrease in autonomous net taxes

Select one:
a. increases GDP as much as an equal decrease in government purchases
b. decreases GDP more than an equal decrease in government purchases
c. changes GDP in an unpredictable manner
d. increases GDP less than an equal increase in government purchases

Q161. It is harder to explain the behavior of firms in oligopoly than in other market structures
because in oligopoly
Select one:
a. the firms act independently of each other
b. only homogeneous products are produced
c. only differentiated products are produced
d. firms base their decisions on what their rivals do

Q162. Inflation is
Select one:
a. a rise in the real prices of all goods and services
b. a continuing rise in everyone's standard of living
c. a reduction in everyone's standard of living
d. a general and continuous rise in the money prices of goods and services

Q163. Monopolistic competition is different from perfect competition because monopolistic

competitors produce
Select one:
a. a homogeneous but unique product
b. unique products
c. a homogeneous product
d. differentiated products

Q164. Which of the following is the best example of an intermediate good or service?
Select one:
a. any good bought by a household, rather than a firm
b. pizzas bought at a restaurant
c. sunglasses worn on a summer vacation in Florida
d. legal services hired by a public accounting firm

Q165. Monopolistically competitive firms ignore the effect of their decisions upon other firms in the
industry because
Select one:
a. each firm is small relative to the market
b. there are few sellers in the market
c. there is only one seller in the market
d. each firm is large relative to the market

Q166. If a monopolistically competitive firm can earn a profit, it will adjust production until
Select one:
a. MR > AVC
b. MR = ATC
c. MC > MR
d. MR = MC

Q167. If future price changes were perfectly anticipated by both borrowers and lenders, what would
happen to the real interest rate in the future if the price level changed?
Select one:
a. it would decrease by the amount of the price increase
b. it would increase
c. it would not change
d. it would decrease

Q168. The opportunity cost of holding money increases when

Select one:
a. the interest rate falls
b. nominal GDP rises
c. the interest rate rises
d. the price level falls

Q169. A movement upward and to the left along the money demand curve is caused by
Select one:
a. an increase in the interest rate
b. an increase in real GDP
c. a decrease in the interest rate
d. a decrease in real GDP

Q170. Suppose inflation is expected to be 4% next year, and your employer agrees to a 6% increase in
your nominal wage. You expect your real wage to:
Select one:
a. Increase by 2%
b. Increase by 6%
c. Decrease by 10%
d. Increase by 4%

Q171. Fiscal policy focuses on manipulating

Select one:
a. both aggregate supply and aggregate demand to smooth out business fluctuations
b. aggregate supply to smooth out business fluctuations
c. aggregate demand to stimulate the economy and aggregate supply to contract it
d. aggregate demand to smooth out business fluctuations

Q172. A cartel's profit-maximizing price is

Select one:
a. on the demand curve at the quantity where combined marginal cost equals marginal revenue
b. on the demand curve where it intersects its marginal cost curve
c. determined by using the cost-plus pricing model
d. the highest price possible
Q173. The view that union wage demands may be a source of inflation would be best associated with
the
Select one:
a. supply shock view of inflation
b. demand push view of inflation
c. demand pull view of inflation
d. cost push view of inflation

Q174. Which of the following is most likely produced in a monopolistically competitive market?
Select one:
a. motorcycles
b. firewood
c. computer chips
d. detergents

Q175. Which of the following would cause a downward movement along the money demand curve?
Select one:
a. an increase in the interest rate
b. a decrease in the interest rate
c. an increase in real GDP
d. a decrease in real GDP

Q176. Oligopolists are more sensitive to the pricing and output policies of their rivals when
Select one:
a. there are barriers to entry
b. there is freedom of entry and exit
c. all firms produce identical products
d. their products are highly differentiated

Q177. A change in autonomous net taxes affects the equilibrium quantity of GDP demanded
Select one:
a. in the same way as a change in autonomous planned investment
b. in the same way as a change in autonomous net exports
c. in the same way as a change in autonomous government purchases
d. only indirectly, by first changing the level of disposable income

Q178. Gross Domestic Product equals the

Select one:
a. market value of all goods and services produced by resources located in a country
b. value added to the economy by intermediate goods and services minus original cost
c. total output of all goods and services produced by resources located in a country
d. market value of all final goods and services produced by resources located in a country.

Q179. An oligopoly is characterized by

Select one:
a. a large number of firms and no barriers to entry
b. many firms and some barriers to entry
c. few firms, which have control over market price
d. a single firm and no barriers to entry

Q180. Which of the following, other things constant, will shift the money demand curve to the left?
Select one:
a. an increase in the interest rate
b. a decrease in the interest rate
c. a decrease in real GDP
d. an increase in real GDP