Question 1. Which of the following statements regarding Gross Domestic Product is not true?
a. It is a stock variable.
b. It is measured for a particular time period, usually one year.
c. It is perhaps the most effective means of viewing the same economy over time
d. It is a measure of the economy's performance
Question 2. Long-term growth in production can be partially explained by
a. trade surpluses that lead to accumulations of precious metals
b. a gradual but consistent increase in the price level
c. general optimism about the future and the pioneering spirit of America
d. improvements in technology
Question 3. Which of the following explains why the aggregate demand curve slopes downward?
a. If the price level increases, we feel poorer and therefore buy less.
b. If the price level increases, we feel richer and therefore buy more.
c. If domestic prices increase, we substitute domestic goods for imported ones.
d. If the price of a particular good increases, we substitute away from that good.
Question 4. Adam Smith's "invisible hand" explains
a. why people act in their own best interests
b. why the government intervenes to overcome failures in private markets.
c. how people, acting out of self-interest, unintentionally promote the general good
d. how comparative advantage and specialization promote international trade
Question 5. According to Keynes, in order to get the economy out of a recession, the government should
a. plan for a budget deficit
b. encourage firms to export to other nations, thereby jump-starting the economy
c. follow an expansionary monetary policy
d. follow a contractionary monetary policy
Question 6. The difference between human capital and physical capital is that
a. human capital is used by humans whereas physical capital isnot
b. only human capital increases labor productivity
c. human capital is not physical; an example of human capital is education
d. physical capital requires investment, whereas human capital does not
Question 7. An improvement in the quality of capital would
a. rotate the per-worker production function upward
b. make the per-worker production function flatter
c. shift the per-worker production function downward
d. rotate the per-worker production function downward
Question 8. The rules of the game refer to
a. any factor that facilitates production and exchange
b. a gradual but consistent change in the price level until a fair price is attained
c. the set of election laws that ensure that all votes are counted in every election
d. the requirements place on firms earning a profit
Question 9. Which of the following best describes the impact of technological change on labor?
a. It causes unemployment in the short run and lower incomes in the long run
b. It causes unemployment in the short run and higher incomes in the long run.
c. It causes unemployment in the long run and higher incomes in the short run.
d. It causes unemployment in the long run and lower incomes in the short run.
Question 10. An increase in the amount of capital per worker is called
a. capital deepening
b. marginal capital
c. per-worker production function
d. human capital