Macroeconomics 104 Exam 1 Questions and Correct Answers Latest
2026/27 Update - George Mason University
Multiple Choice (4pts each)
1. Which of the following causes changes in the supply or demand for a good?
A. Technology
B. Relative price of a good
C. Own price of a good
D. Barter price of a good
E. Changes in the y-axis
2. The guiding force behind what economist call the “Invisible Hand” is
A. Encouraging “nudges” by government
B. An unseen, mysterious historical force that economics struggles to explain
C. The psychological biases of market participants
D. Self-interested, maximizing behavior by individuals
E. Benevolent, altruistic concern for the well being of others
3. The law of demand states that there exists:
A. A direct positive relationship between the relative price of the good and the
quantity of that good supplied
B. An inverse relationship between the relative price of the good and the quantity of that
good supplied
C. A direct positive relationship between the relative price of the good and the
quantity of that good demanded
D. An inverse relationship between the relative price of the good and the quantity of that
demanded
E. A direct positive relationship between the relative price of the good and the
supply
4. The major problem with the “Equality of Exchange” Idea was:
A. THere is no problem with the Equality of Exchange doctrine, as seen by modern price
theory being based on this principle
B. It could not explain why voluntary exchange occurs, because equal values in trade
benefits no one
C. Exchange is zero-sum, meaning one person gains at another’s expense
D. The Just Price Doctrine more closely resembles how transactions come into being
E. None of the above
Macroeconomics 104 Exam 1
, 5. Which of the following is an example of a normative statement?
A. The minimum wage causes unemployment
B. Price controls cause shortages and surpluses
C. Exchange benefits both parties, ex ante
D. Market exchange is more efficient than central planning by government
E. None of the above
6. Which of the following is NOT a mistake of the Classical School of thought?
A. The infinite regression in value
B. The objective theory of value
C. The labor theory of value
D. Exchange is a zero-sum game
E. The relevant quantities were wrong
7. Which of the following determines the law of supply?
A. The opportunity cost of the next unit
B. Increasing marginal utility with each successive unit
C. Law of diminishing marginal utility
D. The decreasing value of each successive unit
E. None of the above
8. Which of the following is true?
A. The Current Account is tabulated by the Federal Reserve, the US Treasury, and the IRS
B. The Current Account consists of the value of all goods and some services that move
through customs
C. Gains from trade are always the exports to foreign countries
D. Comparative advantage is the reason we should try to maximize our exports in
relation to our imports
E. Tariffs are beneficial to all citizens because they encourage people to purchase
U.S. made goods
9. Suppose there are two people on an island. Crusoe and Friday. Below is each person’s
underlying productivity with respect to picking coconuts and pineapples. Both people want
one of each good. The terms of trade (relative price) is one coconut for one pineapple.
Crusoe Friday
Coconuts: 90 minutes Coconuts: 70 minutes
Pineapples: 100 minutes Pineapples: 60 minutes
Which of the following is true?
A. The gains from trade are 20 minutes for Crusoe and 20 minutes for Friday
B. Crusoe specialized in pineapples
C. The gains from trade are 130 minutes for Crusoe and 190 minutes for Friday
Macroeconomics 104 Exam 1
2026/27 Update - George Mason University
Multiple Choice (4pts each)
1. Which of the following causes changes in the supply or demand for a good?
A. Technology
B. Relative price of a good
C. Own price of a good
D. Barter price of a good
E. Changes in the y-axis
2. The guiding force behind what economist call the “Invisible Hand” is
A. Encouraging “nudges” by government
B. An unseen, mysterious historical force that economics struggles to explain
C. The psychological biases of market participants
D. Self-interested, maximizing behavior by individuals
E. Benevolent, altruistic concern for the well being of others
3. The law of demand states that there exists:
A. A direct positive relationship between the relative price of the good and the
quantity of that good supplied
B. An inverse relationship between the relative price of the good and the quantity of that
good supplied
C. A direct positive relationship between the relative price of the good and the
quantity of that good demanded
D. An inverse relationship between the relative price of the good and the quantity of that
demanded
E. A direct positive relationship between the relative price of the good and the
supply
4. The major problem with the “Equality of Exchange” Idea was:
A. THere is no problem with the Equality of Exchange doctrine, as seen by modern price
theory being based on this principle
B. It could not explain why voluntary exchange occurs, because equal values in trade
benefits no one
C. Exchange is zero-sum, meaning one person gains at another’s expense
D. The Just Price Doctrine more closely resembles how transactions come into being
E. None of the above
Macroeconomics 104 Exam 1
, 5. Which of the following is an example of a normative statement?
A. The minimum wage causes unemployment
B. Price controls cause shortages and surpluses
C. Exchange benefits both parties, ex ante
D. Market exchange is more efficient than central planning by government
E. None of the above
6. Which of the following is NOT a mistake of the Classical School of thought?
A. The infinite regression in value
B. The objective theory of value
C. The labor theory of value
D. Exchange is a zero-sum game
E. The relevant quantities were wrong
7. Which of the following determines the law of supply?
A. The opportunity cost of the next unit
B. Increasing marginal utility with each successive unit
C. Law of diminishing marginal utility
D. The decreasing value of each successive unit
E. None of the above
8. Which of the following is true?
A. The Current Account is tabulated by the Federal Reserve, the US Treasury, and the IRS
B. The Current Account consists of the value of all goods and some services that move
through customs
C. Gains from trade are always the exports to foreign countries
D. Comparative advantage is the reason we should try to maximize our exports in
relation to our imports
E. Tariffs are beneficial to all citizens because they encourage people to purchase
U.S. made goods
9. Suppose there are two people on an island. Crusoe and Friday. Below is each person’s
underlying productivity with respect to picking coconuts and pineapples. Both people want
one of each good. The terms of trade (relative price) is one coconut for one pineapple.
Crusoe Friday
Coconuts: 90 minutes Coconuts: 70 minutes
Pineapples: 100 minutes Pineapples: 60 minutes
Which of the following is true?
A. The gains from trade are 20 minutes for Crusoe and 20 minutes for Friday
B. Crusoe specialized in pineapples
C. The gains from trade are 130 minutes for Crusoe and 190 minutes for Friday
Macroeconomics 104 Exam 1
