Economic Concepts II

Question 1

What is a market structure characterized by a few selling firms, each of which is large enough to influence market price?

Answer 1

Oligopoly

Question 2

In which market structure are firms most likely to avoid price competition for fear of creating a “price war”?

Answer 2

Oligopoly

Question 3

Which market structure is least likely to be found in any industry in the U.S.?

Answer 3

Perfect competition

Question 4

what is an indicator that the economy is in a recessionary phase?

Answer 4

Potential national income exceeds actual national income

Question 5

Which graph shows the maximum combination of goods and services that can be produced at a given time, if all available resources are used efficiently?

Answer 5

Productive-possibility curve

Question 6

A positive gross domestic product (GDP) gap exists when

Answer 6

Potential GDP exceeds real GDP

Question 7

Gross domestic product (GDP) is a measure of

Answer 7

The market value of all final goods and services produced for exchange in the domestic economy during a year

Question 8

Which change in unemployment is most likely to be associated with a period of economic contraction?

Answer 8

Increase in the cyclical unemployment rate

Question 9

Which type of unemployment is not included in what is considered the natural rate of unemployment?

Answer 9

Cyclical unemployment

Question 10

As a result of the recession in 2009 and the related decline in tourism, several thousand hospitality industry workers in Florida became unemployed. These workers were

Answer 10

cyclically unemployed

Question 11

There can be official full employment when there is which of the following kinds of unemployment

Answer 11

I. Structural unemployment - Yes
II. Frictional unemployment - Yes
III. Seasonal unemployment - Yes

Question 12

Jason, 14 years old, has been working delivering newspapers for the past two years. Because he just entered high school, he has had to give up his newspaper delivery job. Although he has been seeking a new job, he has not been able to find one. Jason would be considered

Answer 12

frictionally unemployed - No
structurally unemployed - No
cyclically unemployed - No

Question 13

During 2008, Roy’s disposable income was $100,000 and he spent $90,000 on consumable goods. During 2009, Roy’s disposable income increased to $200,000 and he spent $150,000 on consumable goods. For 2009, when compared to 2008, what is Roy’s marginal propensity to consume?

Answer 13

.60

Question 14

In macroeconomics, what would not be considered investment spending?

Answer 14

An individual acquires shares of common stock

Question 15

What is most likely to increase aggregate demand?

Answer 15

Increased business investment

Question 16

The full-employment gross domestic product is $1.3 trillion, and the actual gross domestic product is $1.2 trillion. The marginal propensity to consume is 0.8. When inflation is ignored, what increase in government expenditures is necessary to produce full employment?

Answer 16

$20 billion
Multiplier Effect = Initial Change in Spending x (1/(1 - MPC))
Where: Initial Change in Spending = X, and substituting known values:
$.1T = X x [1/(1-.8)] [NOTE: .1T = 100B.]; therefore:
$100B = X x [1/.2]
$100B = X x 5
X = $100B/5
X = $20B

Question 17

An increase in spending on imported goods would most likely cause

Answer 17

Shift aggregate demand to the left

Question 18

An increase in the minimum wage rate would likely result in?

Answer 18

The aggregate supply curve would shift inward

Question 19

A rise in a country’s exports would most likely cause?

Answer 19

The aggregate demand curve would shift outward

Question 20

The aggregate demand and aggregate supply curves intersect at a price and quantity that are

Answer 20

Either at, above, or below potential GDP