ECON 101 FINAL EXAM PRACTICE
QUESTIONS WITH CORRECT ANSWERS
2. Suppose you are forced to take a pay cut of 5% when the economy is
| | | | | | | | | | | | | | | |
experiencing overall deflation of | | |
5%. If in response to your pay cut you also reduce your consumption by
| | | | | | | | | | | | | |
5%, then economists would say:
| | | |
A) the quantity theory of money held.
| | | | | |
B) you are exhibiting money illusion.
| | | | |
C) you made a rational decision.
| | | | |
D) your real wage decreased by 5%. - CORRECT ANSWER✔✔-B
| | | | | | | | |
3. Continued long-run economic growth requires that economies:
| | | | | | |
A) continue to increase their investment rates.
| | | | | |
B) reach their steady-state levels of capital and output.
| | | | | | | |
C) have high levels of capital stock.
| | | | | |
D) have institutions in place that encourage research and development
| | | | | | | | | |
of new ideas. - CORRECT ANSWER✔✔-D
| | | | |
4. The average rate of inflation in the United States over the past 10
| | | | | | | | | | | | | |
years has been around 2.4%. If this
| | | | | |
,trend continues, prices in the United States will double in about _____
| | | | | | | | | | | |
years.
A) 29
|
B) 10
|
C) 18
|
D) 39 - CORRECT ANSWER✔✔-A
| | | |
5. Which of the following is NOT true regarding the natural rate of
| | | | | | | | | | | | |
unemployment?
A) The natural rate of unemployment equals the sum of the frictional
| | | | | | | | | | | |
and structural rates.
| |
B) If the economy is operating at the natural rate of unemployment,
| | | | | | | | | | | |
cyclical unemployment is equal to
| | | |
zero.
C) The natural rate of unemployment correlates positively with the level
| | | | | | | | | | |
of GDP growth in an
| | | |
economy.
D) The actual rate of unemployment varies around the natural rate over
| | | | | | | | | | | |
time. - CORRECT ANSWER✔✔-A
| | |
7. Because of spillovers, the social benefit of research and development:
| | | | | | | | | |
A) is greater than the private benefit, therefore the private market
| | | | | | | | | | |
produces less than the socially | | | |
, efficient quantity. |
B) is greater than the private benefit, therefore the private market
| | | | | | | | | | |
produces more than the socially | | | |
efficient quantity. |
C) is less than the private benefit, therefore the private market produces
| | | | | | | | | | |
more than the socially
| | | |
efficient quantity. |
D) is less than the private benefit, therefore the private market
| | | | | | | | | | |
produces less than the socially efficient
| | | | |
quantity. - CORRECT ANSWER✔✔-A | | |
8. In the Solow model, if a country's saving rate increased from 10% to
| | | | | | | | | | | | | |
12% and it was operating at its
| | | | | |
steady state before the change, we would expect to see:
| | | | | | | | |
A) a decrease in both the capital stock and output.
| | | | | | | | |
B) an increase in the capital stock only.
| | | | | | |
C) an increase in output only.
| | | | |
D) an increase in both the capital stock and output. - CORRECT
| | | | | | | | | | | |
ANSWER✔✔-D
9. In nations that have large underground, or illegal, sectors:
| | | | | | | | |
A) poverty will be significantly greater than in countries with fewer
| | | | | | | | | | |
illegal market activities.
| |
QUESTIONS WITH CORRECT ANSWERS
2. Suppose you are forced to take a pay cut of 5% when the economy is
| | | | | | | | | | | | | | | |
experiencing overall deflation of | | |
5%. If in response to your pay cut you also reduce your consumption by
| | | | | | | | | | | | | |
5%, then economists would say:
| | | |
A) the quantity theory of money held.
| | | | | |
B) you are exhibiting money illusion.
| | | | |
C) you made a rational decision.
| | | | |
D) your real wage decreased by 5%. - CORRECT ANSWER✔✔-B
| | | | | | | | |
3. Continued long-run economic growth requires that economies:
| | | | | | |
A) continue to increase their investment rates.
| | | | | |
B) reach their steady-state levels of capital and output.
| | | | | | | |
C) have high levels of capital stock.
| | | | | |
D) have institutions in place that encourage research and development
| | | | | | | | | |
of new ideas. - CORRECT ANSWER✔✔-D
| | | | |
4. The average rate of inflation in the United States over the past 10
| | | | | | | | | | | | | |
years has been around 2.4%. If this
| | | | | |
,trend continues, prices in the United States will double in about _____
| | | | | | | | | | | |
years.
A) 29
|
B) 10
|
C) 18
|
D) 39 - CORRECT ANSWER✔✔-A
| | | |
5. Which of the following is NOT true regarding the natural rate of
| | | | | | | | | | | | |
unemployment?
A) The natural rate of unemployment equals the sum of the frictional
| | | | | | | | | | | |
and structural rates.
| |
B) If the economy is operating at the natural rate of unemployment,
| | | | | | | | | | | |
cyclical unemployment is equal to
| | | |
zero.
C) The natural rate of unemployment correlates positively with the level
| | | | | | | | | | |
of GDP growth in an
| | | |
economy.
D) The actual rate of unemployment varies around the natural rate over
| | | | | | | | | | | |
time. - CORRECT ANSWER✔✔-A
| | |
7. Because of spillovers, the social benefit of research and development:
| | | | | | | | | |
A) is greater than the private benefit, therefore the private market
| | | | | | | | | | |
produces less than the socially | | | |
, efficient quantity. |
B) is greater than the private benefit, therefore the private market
| | | | | | | | | | |
produces more than the socially | | | |
efficient quantity. |
C) is less than the private benefit, therefore the private market produces
| | | | | | | | | | |
more than the socially
| | | |
efficient quantity. |
D) is less than the private benefit, therefore the private market
| | | | | | | | | | |
produces less than the socially efficient
| | | | |
quantity. - CORRECT ANSWER✔✔-A | | |
8. In the Solow model, if a country's saving rate increased from 10% to
| | | | | | | | | | | | | |
12% and it was operating at its
| | | | | |
steady state before the change, we would expect to see:
| | | | | | | | |
A) a decrease in both the capital stock and output.
| | | | | | | | |
B) an increase in the capital stock only.
| | | | | | |
C) an increase in output only.
| | | | |
D) an increase in both the capital stock and output. - CORRECT
| | | | | | | | | | | |
ANSWER✔✔-D
9. In nations that have large underground, or illegal, sectors:
| | | | | | | | |
A) poverty will be significantly greater than in countries with fewer
| | | | | | | | | | |
illegal market activities.
| |
