Devry Eco312 final exam spring 2014

Page 1

Question
1.1.(TCO
1) As a consequence of the problem of scarcity (Points : 4)

there is never enough of
anything.
individuals have to make
choices from among alternatives.
production has to be planned
by government.
things which are plentiful
have relatively high prices.

Question
2.2.(TCO1)
Which is not a factor of production? (Points : 4)

Money
Land
Labor
Capital

Question
3.3.(TCO1)
A point inside the production possibilities curve is (Points : 4)

attainable and the economy is
efficient.
attainable, but the economy
is inefficient.
unattainable, but the economy
is inefficient.
unattainable and the economy
is efficient.

Question
4.4.(TCO1)
Which would not be characteristic of a capitalist economy? (Points : 4)

Government ownership of most
factors of production
Competition and unrestricted
markets
Reliance on the market system
Freedom of enterprise and
choice

Question
5.5.(TCO
2) The rationale for the law of demand can best be understood on the
basis of (Points
: 4)

diminishing marginal utility.
capitalist markets.
the invisible hand.
the rationing function of
price.

Question
6.6.(TCO
2) What combination of changes would most likely decrease the equilibrium
price? (Points
: 4)

When supply decreases and
demand increases
When demand increases and
supply increases
When demand decreases and
supply decreases
When supply increases and
demand decreases

Question
7.7.(TCO
2) When the price of movie tickets in a certain town was reduced, the
movie theaters’ revenues did not change. This suggests that the
demand for movie tickets in that town has a price-elasticity coefficient
of (Points
: 4)

1.0.
greater than 1.
0.5.
zero.

Question
8.8.(TCO
2) Which of the following factors will make the demand for a product
relatively elastic? (Points
: 4)

There are few substitutes.
The time interval considered
is long.
The good is considered a
necessity.
Purchases of the good require
a small portion of consumers’ budgets.

Question
9.9.(TCO
2) Which is true for a purely competitive firm in short-run equilibrium? (Points : 4)

The firm is making only
normal profits.
The firm’s marginal cost is
greater than its marginal revenue.
The firm’s marginal revenue
is equal to its marginal cost.
A decrease in output would
lead to a rise in profits.

Question
10.10.(TCO
2) Consumers who clip and redeem discount coupons (Points : 4)

exhibit the same price
elasticity of demand for a given product than consumers who do not clip and
redeem coupons.
exhibit more price elasticity
of demand for a given product than consumers who do not clip and redeem
coupons.
exhibit less price elasticity
of demand for a given product than consumers who do not clip and redeem
coupons.
cause total revenue to
decrease for firms that issue coupons for their products.

Question
11.11.(TCO
3) A cartel is (Points
: 4)

a form of covert
collusion.
legal in the United States.
always successful in raising
profits.
a formal agreement among
firms to collude.

Question
12.12.(TCO
3) In the short run (Points
: 4)

a firm cannot vary its
output level.
all factors of production can
be varied.
a firm can change its
fixed inputs.
output is raised or reduced
by changing the levels of variable inputs.

Question
13.13.
(TCO
4) Refer to the diagram. The phases of the business cycle from
points A to D are, respectively:

.next.ecollege.com/CurrentCourse/Transcripts/Final_Exam_Pool13_question1_Transcript.pdf”>Graph Description
(Points
: 4)

Peak, recession, expansion,
trough
Trough, recovery, expansion,
peak
Expansion, recession, trough,
peak
Peak, recession, trough,
expansion

Question
14.14.(TCO
4) In calculating the unemployment rate, part-time workers are (Points : 4)

counted as unemployed because
they are not working full-time.
counted as employed because
they are receiving payment for work.
used to determine the size of
the labor force, but not the unemployment rate.
treated the same as
“discouraged” workers who are not actively seeking employment.

Question
15.15.(TCO
4) Adding the market value of all intermediate goods and services to
those of final goods and services in an economy in a given year
would result in (Points
: 4)

the calculation of GDP for
that year.
the calculation of NDP for
that year.
an amount less than GDP for
that year.
an amount greater than GDP
for that year.

Question
16.16.(TCO
4) GDP tends to overstate economic well-being because it takes into
account (Points
: 4)

improvements in product
quality over time.
expenditures undertaken to
correct pollution.
illegal activities of
individuals and businesses.
nonmarket activities, such as
the productive work of homemakers.

Question
17.17.(TCO
6) When the federal government uses taxation and spending actions to
stimulate the economy it is conducting (Points : 4)

fiscal policy.
incomes policy.
monetary policy.
employment policy.

Question
18.18.(TCO
6) Refer to the graph. What combination would most likely cause a
shift from AD1 to AD3?

.next.ecollege.com/CurrentCourse/Transcripts/final_exam_18ab_graph.docx”>Graph Description (Points : 4)

Increases in taxes
and government spending
Decrease in taxes
and increase in government spending
Increase in taxes
and decrease in government spending
Decreases in taxes
and government spending

Question
19.19.(TCO
6) The American Recovery and Reinvestment Act of 2009 included mostly (Points : 4)

increases in taxes
and government spending.
decreases in taxes
and government spending.
increases in government
spending and decreases in taxes.
decreases in government
spending and increases in taxes.

Question
20.20.(TCO
6) The time which elapses between the beginning of a recession or an
inflationary episode and the identification of the macroeconomic problem
is referred to as a(n) (Points : 4)

budget lag.
recognition lag.
operational lag.
administrative lag.

Page 2

Question
1.1.(TCO
5) An increase in aggregate demand is most likely to be caused by a
decrease in (Points
: 4)

the wealth of consumers.
consumer and business
confidence.
expected returns on
investment.
the tax rates on household
income.

Question
2.2.(TCO
5) The short-run aggregate supply curve (Points : 4)

becomes flatter at output
levels above the full-employment output.
becomes vertical at
output levels above the full-employment output.
is upward-sloping with a
constant slope.
is horizontal.

Question
3.3.(TCO
5) If the price of crude oil decreases, then this event would most likely (Points : 4)

decrease aggregate supply in
the U.S.
increase aggregate supply in
the U.S.
increase aggregate demand in
the U.S.
decrease aggregate demand in
the U.S.

Question
4.4.(TCO
5) Disinflation refers to a situation where (Points : 4)

price level falls, but the
rate of inflation does not.
Price level rises, but the
rate of inflation does not.
the rate of inflation falls,
but the price level does not.
the rate of inflation rises,
but the price level does not.

Question
5.5.(TCO
6) If a family’s MPC is .7, it means that the family is (Points : 4)

operating at the break-even
point.
spending seven-tenths of
any additional income.
necessarily dissaving.
spending 70 percent of its
disposable income.

Question
6.6.(TCO
7) The M1 money supply is composed of (Points : 4)

all coins and paper money
held by the general public and the banks.
bank deposits of households
and business firms.
bank deposits and mutual
funds.
checkable deposits and
currency in circulation.

Question
7.7.(TCO
7) United States currency has value primarily because it (Points : 4)

is legal tender, is generally
acceptable in exchange for goods or services, and is backed by the gold and
silver of the federal government.
is generally acceptable in
exchange for goods or services, is backed by the gold and silver of the
federal government, and facilitates trade.
is relatively scarce, is
legal tender, and is generally acceptable in exchange for goods and
services.
facilitates trade, is legal
tender, and permits the use of credit cards and near-monies.

Question
8.8.(TCO
7) The Federal Reserve System of the U.S. is the country’s (Points : 4)

financial adviser.
comptroller or accountant.
central bank.
deposit insurance provider.

Question
9.9.(TCO
7) Which group is responsible for the policy of changing the money
supply? (Points
: 4)

Federal Open Market Committee
Office of Management and
Budget
Thrift Advisory Council
Federal Advisory Council

Question
10.10.(TCO
7) The Federal funds rate is the rate that banks pay for loans from (Points : 4)

the Fed.
the U.S. Treasury.
other banks.
large corporations.

Question
11.11.(TCO
7) The establishment of a federal deposit insurance program resulted from
the (Points
: 4)

establishment of the Federal
Reserve System in 1913.
speculation during World War
I.
stock market crash of 1987.
bank panics of 1930-1933.

Question
12.12.(TCO
7) The purchase and sale of government securities by the Fed is called (Points : 4)

federal funds market.
open market operations.
money market transactions.
term auction facility.

Question
13.13.(TCO
7) The tools of monetary policy for altering the reserves of commercial
banks are the (Points
: 4)

tax rate, transfer payments,
and level of government spending.
consumer price index,
inflation, and unemployment rate.
public debt, budget surplus,
budget deficit, and interest rates.
discount rate, reserve ratio,
open market operations, and term auction facility.

Question
14.14.(TCO
8) Which nation has greatly increased its role in international trade in
recent years? (Points
: 4)

Japan
Iran
Peru
China

Question
15.15.(TCO
8) The principal concept behind comparative advantage is that a nation
should (Points
: 4)

maximize its volume of trade
with other nations.
use tariffs and quotas to
protect the production of vital products for the nation.
concentrate production on
those products for which it has the lowest domestic opportunity cost.
strive to be self-sufficient
in the production of essential goods and services.

Question
16.16.(TCO
8) A tariff is a (Points
: 4)

tax.
price ceiling.
quantity limit.
subsidy.

Question
17.17.(TCO
8) A key difference between import quotas and voluntary export restraints
(VERs) is that the (Points
: 4)

domestic government
administers the former, whereas the foreign government administers the
latter.
foreign government
administers the former, whereas the domestic government administers the
latter.
one is a tax, whereas the
other is a quantity limit.
one raises the price of the
imported product involved, whereas the other one does not.

Question
18.18.(TCO
8) Tariffs and import quotas would benefit the following groups, except (Points : 4)

consumers of the product.
domestic producers of the
product.
workers in domestic firms
producing the product.
the government of the
importing country.

Question
19.19.(TCO
8) Which organization meets regularly to establish rules and settle
disputes related to international trade? (Points : 4)

The United Nations Commission
on Trade Law
The United Nations Conference
on Trade and Development
The World Trade Organization
The Federal Reserve Board

Question
20.20.(TCO
9) U.S. imports (Points
: 4)

increase the foreign demand
for foreign currencies.
increase the domestic demand
for foreign currencies.
decrease the foreign supply
of foreign currencies.
increase the domestic supply
of foreign currencies.

Page 3

Question
1.1.(TCO
9) Which of the following appears as a positive item on the balance of
payments account for the United States? (Points : 4)

U.S. government sending aid
to natural disaster victims in Asia
American tourists spending
money in the other countries
Buying of U.S. Treasury bonds
by a foreign bank
Payment of stock dividends by
U.S. firms to foreign shareholders

Question
2.2.(TCO
9) A trade deficit means a net (Points : 4)

inflow of payments for goods
and services.
outflow of goods and
services.
inflow of goods and services.
excess of exports over
imports.

Question
3.3.(TCO
9) If an American can purchase 40,000 British pounds for $90,000, the
dollar rate of exchange for the pound is (Points : 4)

$0.44.
$0.23.
$2.25.
$2.00.

Question
4.4.(TCO
9) When the exchange rate between pounds and dollars moves from $2 = 1
pound to $1 = 1 pound, we say that the dollar has (Points : 4)

depreciated.
appreciated.
inflated.
deflated.

Question
5.5.(TCO
9) The monetary system for conducting international trade is usually
described as a system of (Points : 4)

fixed exchange rates.
freely floating exchange
rates.
a managed gold standard.
managed floating exchange
rates.

Question
6.6.
(TCO
8) a) Explain four problems with the argument that trade protection is
needed to protect American jobs. b) Describe the economic reasons why
businesses use offshoring.
(Points : 40)

Question
7.7.
(TCO
6) a) Identify the four major tools of monetary policy. b)
Describe how changes in the Fed’s major policy tools leads to [1]
expansionary and [2] restrictive or contractionay monetary policies.
(Points : 40)

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