Question 1

What is the nominal value of money?

Accepted Answer

A)  discounts taken by multiple purchases 
B)  what can be purchased with the money 
C)  savings by shopping on specific days of the week 
D)  its actual face value 
A)  discounts taken by multiple purchases 
B)  what can be purchased with the money 
C)  savings by shopping on specific days of the week 
D)  its actual face value

Question 2

The principle that what matters to people is the real value or purchasing power of money is the:

Accepted Answer

A)  marginal principle. 
B)  spillover principle. 
C)  principle of diminishing returns. 
D)  real- nominal principle. 
A)  marginal principle. 
B)  spillover principle. 
C)  principle of diminishing returns. 
D)  real- nominal principle.

Question 3

The opportunity cost of going to a particular college is not the same for everyone.

Accepted Answer

A) True 
 B)False

Question 4

Table 2.2
-Julianne runs a business and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Julianne staying open 5 hours per day. If she is following the marginal principle, what must her marginal benefit be?

Accepted Answer

A)  $16 
B)  $10 
C)  $24 
D)  $20 
A)  $16 
B)  $10 
C)  $24 
D)  $20

Question 5

The opportunity cost of something is what you sacrifice to get it.

Accepted Answer

A) True 
 B)False

Question 6

The government uses the buying power of wages rather than face value or nominal value in reporting changes in "real wages" in the economy.

Accepted Answer

A) True 
 B)False

Question 7

An increase in the wages received by lawyers in general will result in an increase in the opportunity cost of law school.

Accepted Answer

A) True 
 B)False

Question 8

When economists use the term "marginal," they usually refer to

Accepted Answer

A)  average change. 
B)  no changes. 
C)  small, incremental change. 
D)  large changes. 
A)  average change. 
B)  no changes. 
C)  small, incremental change. 
D)  large changes.

Question 9

-Julianne runs a business and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Julianne staying open 3 hours per day. If she is following the marginal principle, what must her marginal benefit be?

Accepted Answer

A)  $16 
B)  $24 
C)  $18 
D)  $12 
A)  $16 
B)  $24 
C)  $18 
D)  $12

Question 10

An increase in the benefit from undertaking an activity will result in an increase in the opportunity cost of that activity.

Accepted Answer

A) True 
 B)False

Question 11

If real salaries decrease but nominal salaries do not, this means that:

Accepted Answer

A)  prices have fallen. 
B)  the purchasing power of money has increased. 
C)  prices have not changed. 
D)  prices have risen. 
A)  prices have fallen. 
B)  the purchasing power of money has increased. 
C)  prices have not changed. 
D)  prices have risen.

Question 12

-Julianne runs a business and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that Julianne's marginal benefit of staying open per hour is $3. If she is following the marginal principle, how many hours should Julianne stay open?

Accepted Answer

A)  6 hours 
B)  3 hours 
C)  1 hour 
D)  none of the above 
A)  6 hours 
B)  3 hours 
C)  1 hour 
D)  none of the above

Question 13

The principle of voluntary exchange is the concept that a voluntary exchange between two people makes both people better off.

Accepted Answer

A) True 
 B)False

Question 14

When deciding whether to engage in an activity or how much to do, people should follow:

Accepted Answer

A)  the law of supply and demand. 
B)  the principle of macroeconomics. 
C)  the marginal principle. 
D)  the principle of microeconomics. 
A)  the law of supply and demand. 
B)  the principle of macroeconomics. 
C)  the marginal principle. 
D)  the principle of microeconomics.

Question 15

Table 2.2
-Julianne runs a business and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that Julianne's marginal benefit of staying open per hour is $16. If she is following the marginal principle, how many hours should Julianne stay open?

Accepted Answer

A)  3 hours 
B)  5 hours 
C)  4 hours 
D)  7 hours 
A)  3 hours 
B)  5 hours 
C)  4 hours 
D)  7 hours

Question 16

What matters to people is the face value of money or income.

Accepted Answer

A) True 
 B)False

Question 17

-Julianne runs a business and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that Julianne's marginal benefit of staying open per hour is $12. If she is following the marginal principle, how many hours should Julianne stay open?

Accepted Answer

A)  6 hours 
B)  7 hours 
C)  4 hours 
D)  3 hours 
A)  6 hours 
B)  7 hours 
C)  4 hours 
D)  3 hours

Question 18

When two people engage in voluntary trade,

Accepted Answer

A)  each will expect to lose. 
B)  one will necessarily lose. 
C)  both will expect to be made better off. 
D)  both will necessarily lose. 
A)  each will expect to lose. 
B)  one will necessarily lose. 
C)  both will expect to be made better off. 
D)  both will necessarily lose.

Question 19

Table 2.2
-Julianne runs a business and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that Julianne's marginal benefit of staying open per hour is $28. If she is following the marginal principle, how many hours should Julianne stay open?

Accepted Answer

A)  1 hour 
B)  6 hours 
C)  3 hours 
D)  7 hours 
A)  1 hour 
B)  6 hours 
C)  3 hours 
D)  7 hours

Question 20

You borrow money to buy a house in 2006 at a variable interest rate of 6.5%. Your interest rate is always 2% more than the rate of inflation. By 2009, the inflation rate has risen to 8.5%. Considering only your mortgage, is inflation good news or bad news for you?

Accepted Answer

A)  good news, because it makes the real value of your mortgage payments decrease 
B)  bad news, because inflation hurts everyone 
C)  bad news, because it makes the nominal value of your mortgage payments increase 
D)  neither, because your interest rate is tied to the rate of inflation 
A)  good news, because it makes the real value of your mortgage payments decrease 
B)  bad news, because inflation hurts everyone 
C)  bad news, because it makes the nominal value of your mortgage payments increase 
D)  neither, because your interest rate is tied to the rate of inflation

What is the nominal value of money?

The principle that what matters to people is the real value or purchasing power of money is the:

The opportunity cost of going to a particular college is not the same for everyone.

The opportunity cost of something is what you sacrifice to get it.

The government uses the buying power of wages rather than face value or nominal value in reporting changes in "real wages" in the economy.

An increase in the wages received by lawyers in general will result in an increase in the opportunity cost of law school.

When economists use the term "marginal," they usually refer to

-Julianne runs a business and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Julianne staying open 3 hours per day. If she is following the marginal principle, what must her marginal benefit be?

An increase in the benefit from undertaking an activity will result in an increase in the opportunity cost of that activity.

If real salaries decrease but nominal salaries do not, this means that:

The principle of voluntary exchange is the concept that a voluntary exchange between two people makes both people better off.

When deciding whether to engage in an activity or how much to do, people should follow:

What matters to people is the face value of money or income.

When two people engage in voluntary trade,

You borrow money to buy a house in 2006 at a variable interest rate of 6.5%. Your interest rate is always 2% more than the rate of inflation. By 2009, the inflation rate has risen to 8.5%. Considering only your mortgage, is inflation good news or bad news for you?

Introduction: What Is Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 2: The Key Principles of Economics

What is the nominal value of money?

The principle that what matters to people is the real value or purchasing power of money is the:

The opportunity cost of going to a particular college is not the same for everyone.

The opportunity cost of something is what you sacrifice to get it.

The government uses the buying power of wages rather than face value or nominal value in reporting changes in "real wages" in the economy.

An increase in the wages received by lawyers in general will result in an increase in the opportunity cost of law school.

When economists use the term "marginal," they usually refer to

-Julianne runs a business and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Julianne staying open 3 hours per day. If she is following the marginal principle, what must her marginal benefit be?

An increase in the benefit from undertaking an activity will result in an increase in the opportunity cost of that activity.

If real salaries decrease but nominal salaries do not, this means that:

The principle of voluntary exchange is the concept that a voluntary exchange between two people makes both people better off.

When deciding whether to engage in an activity or how much to do, people should follow:

What matters to people is the face value of money or income.

When two people engage in voluntary trade,

You borrow money to buy a house in 2006 at a variable interest rate of 6.5%. Your interest rate is always 2% more than the rate of inflation. By 2009, the inflation rate has risen to 8.5%. Considering only your mortgage, is inflation good news or bad news for you?

Introduction: What Is Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters