Practice Exam 3 MCQ Questions and Answers
100% Scored Updated
An economy is operating at a point inside its production possibilities curve (PPC). Which
of the following will most likely cause the economy to move toward the current PPC in
the short run?
A decrease in government spending
A decrease in inflation
An increase in human capital
An increase in employment
An increase in imports - ANSWER-An increase in employment- more workers means
the opportunity to make more goods
An increase in which of the following will most likely promote economic growth?
Taxes on investment
The price level
Human capital
Consumption of nondurable goods
Interest rates - ANSWER-Human Capital- capital is growth
Which of the following will cause aggregate supply to increase in Country X?
An increase in personal income taxes
The discovery of low-cost alternative sources of energy
A decrease in labor productivity with no change in nominal wages
Depreciation of country X's currency on the foreign exchange market
An increase in the price level - ANSWER-The discovery of low-cost alternative sources
of energy- supply increases because of increased efficiency
,The graph above shows the production possibilities curve for Factory X and Factory Y.
If Factory X uses the same amount of resources to produce skateboards and bikes as
Factory Y uses, which of the following is true?
Factory X has an absolute advantage in producing bikes.
Factory X has an absolute advantage in producing skateboards.
Factory X has a comparative advantage in producing skateboards.
Factory Y has a comparative advantage in producing skateboards.
Factory Y has an absolute advantage in producing skateboards. - ANSWER-Factory X
has a comparative advantage in producing skateboards- Factory X can't have an
advantage in bikes so they have to have an advantage in skateboards
An increase in the price of oil, an important input to production, will result in which of the
following in the short run?
A decrease in the price level
A decrease in short-run aggregate supply
A decrease in unemployment
An increase in real wages
An increase in aggregate demand - ANSWER-A decrease in short-run aggregate
supply- supply decreases because its more expensive to make a product
An economy is currently operating at the full-employment level of output. Which of the
following would result in a recessionary gap in the short run?
An increase in the costs of production
An improvement in the productivity of labor
An increase in money supply
A positive supply shock
A decrease in income tax rates - ANSWER-An increase in the costs of production-
recessionary gap is when current is less than potential so supply is less when there is
an increase in cost of production
, Thailand and Malaysia are trading partners. If the price level in Thailand decreases
relative to the price level in Malaysia, what will happen to Thailand's exports to Malaysia
and Thailand's aggregate demand?
Thailand E- increase Thailand AD- Decrease
Thailand E- Increase Thailand AD- Increase
Thailand E- Increase Thailand AD- Indeterminate
Thailand E- Decrease Thailand- Decrease
Thailand E- Decrease Thailand- Increase - ANSWER-Thailand Exports- Increase and
Thailand AD- Increase, Thailand's exports will increase because its cheaper for
countries to buy goods from them. AD increases because more goods will be
demanded because of the cheaper prices
Country X produces only apples and bananas. The following table shows prices and
quantities of both products in two years.
Assuming year 11 is the base year, what is the nominal and real gross domestic product
(GDP)(GDP) for year 2 ? - ANSWER-Nominal- $280 Real- $200
Which of the following is a fiscal policy action aimed at reducing unemployment?
Decreasing government expenditures
Decreasing income taxes
Decreasing tax credits
Increasing nominal interest rates
Increasing required reserves - ANSWER-Decreasing Income Taxes
Increases in human capital can be achieved by which of the following?
Responses
Building more factories
Reducing immigration of skilled workers
Improving the quality of job-training programs
Increasing the physical capital per worker
Increasing government spending on infrastructure - ANSWER-Improving the quality of
job-training programs
100% Scored Updated
An economy is operating at a point inside its production possibilities curve (PPC). Which
of the following will most likely cause the economy to move toward the current PPC in
the short run?
A decrease in government spending
A decrease in inflation
An increase in human capital
An increase in employment
An increase in imports - ANSWER-An increase in employment- more workers means
the opportunity to make more goods
An increase in which of the following will most likely promote economic growth?
Taxes on investment
The price level
Human capital
Consumption of nondurable goods
Interest rates - ANSWER-Human Capital- capital is growth
Which of the following will cause aggregate supply to increase in Country X?
An increase in personal income taxes
The discovery of low-cost alternative sources of energy
A decrease in labor productivity with no change in nominal wages
Depreciation of country X's currency on the foreign exchange market
An increase in the price level - ANSWER-The discovery of low-cost alternative sources
of energy- supply increases because of increased efficiency
,The graph above shows the production possibilities curve for Factory X and Factory Y.
If Factory X uses the same amount of resources to produce skateboards and bikes as
Factory Y uses, which of the following is true?
Factory X has an absolute advantage in producing bikes.
Factory X has an absolute advantage in producing skateboards.
Factory X has a comparative advantage in producing skateboards.
Factory Y has a comparative advantage in producing skateboards.
Factory Y has an absolute advantage in producing skateboards. - ANSWER-Factory X
has a comparative advantage in producing skateboards- Factory X can't have an
advantage in bikes so they have to have an advantage in skateboards
An increase in the price of oil, an important input to production, will result in which of the
following in the short run?
A decrease in the price level
A decrease in short-run aggregate supply
A decrease in unemployment
An increase in real wages
An increase in aggregate demand - ANSWER-A decrease in short-run aggregate
supply- supply decreases because its more expensive to make a product
An economy is currently operating at the full-employment level of output. Which of the
following would result in a recessionary gap in the short run?
An increase in the costs of production
An improvement in the productivity of labor
An increase in money supply
A positive supply shock
A decrease in income tax rates - ANSWER-An increase in the costs of production-
recessionary gap is when current is less than potential so supply is less when there is
an increase in cost of production
, Thailand and Malaysia are trading partners. If the price level in Thailand decreases
relative to the price level in Malaysia, what will happen to Thailand's exports to Malaysia
and Thailand's aggregate demand?
Thailand E- increase Thailand AD- Decrease
Thailand E- Increase Thailand AD- Increase
Thailand E- Increase Thailand AD- Indeterminate
Thailand E- Decrease Thailand- Decrease
Thailand E- Decrease Thailand- Increase - ANSWER-Thailand Exports- Increase and
Thailand AD- Increase, Thailand's exports will increase because its cheaper for
countries to buy goods from them. AD increases because more goods will be
demanded because of the cheaper prices
Country X produces only apples and bananas. The following table shows prices and
quantities of both products in two years.
Assuming year 11 is the base year, what is the nominal and real gross domestic product
(GDP)(GDP) for year 2 ? - ANSWER-Nominal- $280 Real- $200
Which of the following is a fiscal policy action aimed at reducing unemployment?
Decreasing government expenditures
Decreasing income taxes
Decreasing tax credits
Increasing nominal interest rates
Increasing required reserves - ANSWER-Decreasing Income Taxes
Increases in human capital can be achieved by which of the following?
Responses
Building more factories
Reducing immigration of skilled workers
Improving the quality of job-training programs
Increasing the physical capital per worker
Increasing government spending on infrastructure - ANSWER-Improving the quality of
job-training programs
