Question 1

If the central bank creates too much money,_____ is the result.If the central bank doesn't create enough money,an economic _____ is the result.

Accepted Answer

A)  deflation;boom 
B)  inflation;boom 
C)  deflation;slowdown 
D)  inflation;slowdown

Question 2

Booms and busts refer to the:

Accepted Answer

A)  fluctuations in economic activity over time. 
B)  theory of the second best. 
C)  decreases in a nation's output growth over time. 
D)  monetary inflation and deflation caused by the central bank.

Question 3

When it comes to getting the flu shot,most people consider _______,not _________.

Accepted Answer

A)  the social interest;their self-interest 
B)  their public interest;their social interest 
C)  their costs;their benefits 
D)  their self-interest;the social interest

Question 4

While trade has many benefits,the division of knowledge is a negative outcome of trade.

Accepted Answer

A) True 
 B)False

Question 5

Based on the ideas of Adam Smith,it is ______ dentists clean and repair teeth,but ______.

Accepted Answer

A)  not out of benevolence that;from their regard for their own self-interest 
B)  out of benevolence that;sometimes from their regard for their own self-interest 
C)  not out of self-interest that;out of their benevolence 
D)  from charity and good will that;only if they can charge high prices

Question 6

Explain why central banking is a hard job.

Accepted Answer

The answer of Explain why central banking is a hard...

Question 7

Let's assume that your favorite musician (who sells platinum records and has sold-out concerts)is a great cook.He also makes splendid cakes and pies.He could sell the pies and cakes for $30 each.Why doesn't he spend his whole day baking and cooking?

Accepted Answer

The answer of Let's assume that your favorite musician (who...

Question 8

When the unemployment rate rises,college enrollment tends to:

Accepted Answer

A)  rise. 
B)  remain the same. 
C)  fall. 
D)  defy prediction.

Question 9

Because people instinctively act in the social interest,markets will produce outcomes in line with the social interest.

Accepted Answer

A) True 
 B)False

Question 10

In the market for pharmaceuticals,the issue of "drug lag" illustrates which of the following ideas?

Accepted Answer

A)  The longer a drug is tested for safety,the lower the opportunity cost in terms of lives lost. 
B)  If a drug is not tested for safety,it might kill more people. 
C)  Because of the higher the cost of testing a drug,it takes longer to make it,and more lives are lost. 
D)  Lives are being lost because safe drugs that are still in the testing stage have not yet been approved.

Question 11

Every day people rely on the work of others to provide us with food,clothing,and shelter.These people work for our benefit because:

Accepted Answer

A)  people think at the margin. 
B)  trade-offs are everywhere. 
C)  they benefit by doing so. 
D)  institutions require them to do so.

Question 12

It makes sense that Martha Stewart hires another person to do her ironing because:

Accepted Answer

A)  she never learned how to iron. 
B)  her opportunity cost of ironing is the same as the opportunity cost for the person she hires. 
C)  her opportunity cost of ironing is lower than the opportunity cost for the person she hires. 
D)  her opportunity cost of ironing is higher than the opportunity cost for the person she hires.

Question 13

The average tax on a professor's income of $100,000 is 18 percent,and the marginal tax rate above $100,000 is 45 percent.If the professor teaches during the summer and earns an additional $10,000 (bringing her total earnings for the year to $110,000),how much of the summer income does she keep after paying taxes?

Accepted Answer

A)  $4,500 
B)  $1,800 
C)  $6,300 
D)  $5,500

Question 14

Suppose you have ordered a value meal at a local fast-food restaurant.The cashier asks if you would like to "super-size" your meal.In order to make an efficient decision,you should compare:

Accepted Answer

A)  the total cost of the larger,"super-sized" meal versus the total benefits received. 
B)  the additional cost of the larger meal versus the additional benefits received. 
C)  the total cost of the larger meal versus the additional cost to the restaurant. 
D)  the benefits of the smaller meal versus the additional benefits obtained from consuming the "super-sized" meal.

Question 15

Decreasing one's driving speed when a police cruiser is seen is an application of the principle of:

Accepted Answer

A)  gains from trade. 
B)  returns from specialization. 
C)  marginal thinking. 
D)  opportunity cost.

Question 16

An example of a marginal decision is deciding whether to:

Accepted Answer

A)  invest half your savings in Google or Microsoft. 
B)  buy one more apple or one more banana. 
C)  commit your life to economics or biology. 
D)  study for 5 hours or for 10 hours.

Question 17

Most developed countries:

Accepted Answer

A)  have stopped growing. 
B)  grow at an unsteady rate. 
C)  grow at a steady rate. 
D)  grow at an increasing rate.

Question 18

Economists argue that self-interested people only respond to monetary incentives.

Accepted Answer

A) True 
 B)False

Question 19

The central bank of the United States is:

Accepted Answer

A)  the Senate. 
B)  the Department of Treasury. 
C)  the Federal Reserve. 
D)  Wall Street.

Question 20

Which of the following explains why economic booms and busts cannot be avoided?

Accepted Answer

A)  The effects of fiscal and monetary policies will never be completely understood. 
B)  The time lags of both fiscal and monetary policies make eliminating boom/bust cycles impossible. 
C)  Economic booms/busts could be avoided,if politicians would put good economics ahead of good politics. 
D)  The economy is always being struck by unavoidable shocks.

Exam 1: The Big Ideas

If the central bank creates too much money,_ is the result.If the central bank doesn't create enough money,an economic _ is the result.

Booms and busts refer to the:

When it comes to getting the flu shot,most people consider _,not ___.

While trade has many benefits,the division of knowledge is a negative outcome of trade.

Based on the ideas of Adam Smith,it is dentists clean and repair teeth,but .

Explain why central banking is a hard job.

Let's assume that your favorite musician (who sells platinum records and has sold-out concerts)is a great cook.He also makes splendid cakes and pies.He could sell the pies and cakes for $30 each.Why doesn't he spend his whole day baking and cooking?

When the unemployment rate rises,college enrollment tends to:

Because people instinctively act in the social interest,markets will produce outcomes in line with the social interest.

In the market for pharmaceuticals,the issue of "drug lag" illustrates which of the following ideas?

Every day people rely on the work of others to provide us with food,clothing,and shelter.These people work for our benefit because:

It makes sense that Martha Stewart hires another person to do her ironing because:

Suppose you have ordered a value meal at a local fast-food restaurant.The cashier asks if you would like to "super-size" your meal.In order to make an efficient decision,you should compare:

Decreasing one's driving speed when a police cruiser is seen is an application of the principle of:

An example of a marginal decision is deciding whether to:

Most developed countries:

Economists argue that self-interested people only respond to monetary incentives.

The central bank of the United States is:

Which of the following explains why economic booms and busts cannot be avoided?