Macroeconomics practice
Which of the following does not cause changes in the supply or demand for a good
Technology
Prices of other goods
Price
Number of Buyers
Income
The most important function of the price system is that it has the ability to
Transmit scarce information to billions of individuals
Remove scarcity
To ensure fairness
Allow for government regulation
None of the above
The law of supply states that there exists
An inverse relationship between the relative price of the good and the quantity of that good supplied
A direct positive relationship between the relative price of the good and the quantity of that good demanded
A direct positive relationship between the relative price of the good and the quantity of that good supplied
A direct positive relationship between the relative price of the good and supply
An inverse relationship between the relative price of the good and the quantity of the good demanded
Which of the following is an effect of a minimum wage law
Increased employment of low-skilled workers
An increase in demand for higher-skilled workers
A redistribution of wages from high-skilled union workers to low-skilled workers
A decrease in the quantity supplied of low-skilled labor
A vast reduction of poverty in low-skilled workers
The major problem with the "Equality of Exchange" idea was
Exchange is zero-sum, meaning one person gains at another’s expense
There is no problem with the Equality of Exchange doctrine, as seen by modern price theory being founded on this principle
The Just Price Doctrine more closely resembles how transactions come into being
It could not explain why voluntary exchange occurs, because equal values in trade benefits no one
None of the above
Which of the following is an example of a positive statement
Minimum wage should not be instituted because it causes unemployment
Price controls cause shortages and surpluses
Exchange is good for people, because it makes everyone better off
Market exchange is a better way for allocation of scarce resources than violence
B and D
Which of the following is not a mistake of the Classical School of Thought
The infinite regression in value
The objective theory of value
Exchange is a zero sum game
The labor theory of value
The relevant quantities were wrong
Which of the following determines the law of demand
The opportunity cost of the next unit
Increasing marginal utility with each successive unit
Law of diminishing marginal utility
The increasing value of each successive unit
None of the above
Which of the following is true?
The Current Account is tabulated by the Federal Reserve, The US Treasury, and the IRS
The Current Account consists of the value of all goods and some services that move through customs
Gains from trade are always the exports to foreign countries
Comparative advantage is the reason we should try to maximize our exports in relation to our imports
Tariffs are beneficial to all citizens, because they encourage people to purchase US made goods
Suppose there are two people on an island: Crusoe and Friday. Below is each person's underlying productivity with respect to picking coconuts and pineapples. Both people want one of each good. The terms of trade (relative price) is one coconut for one pineapple. Crusoe (Coconuts - 70 minutes; Pineapples - 60 minutes) and Friday (Coconuts - 90 minutes; Pineapples - 100 minutes). Which of the following is true
The gains from trade are 20 minutes for Crusoe and 20 minutes for Friday
Crusoe specializes in pineapples
The gains from trade are 130 minutes for Crusoe and 190 minutes for Friday
The gains from trade are 10 minutes for Crusoe and zero gains for Friday
None of the above
Which of the following is not true
Rent controls cause housing shortages
OPEC’s monopoly power is the direct result of price controls that were instituted on domestic oil prices
Price controls are people controls, since prices come from people’s values
A price support will cause a shortage
All of the above are true
The Neoclassical Revolution
Introduced the idea of subjectivism in value
Introduced absolute quantity of analysis
Was begun by Adam Smith
Introduced the Equality of Exchange Doctrine
Introduced the Law of Comparative Advantage
Suppose the exchange rate between dollars and yen is 1 dollar to 100 yen and then Japan runs a higher rate of inflation than America. Before the exchange rate adjusts, which of the following is true
There will be an excess supply of dollars in Japan relative to yen
There will be an excess supply of yen in Japan relative to dollars
There will be a surplus of yen in America relative to dollars
The relative price of goods in Japan will fall as compared to American goods
There will be a surplus of dollars in Japan relative to yen
Which of the following is not true?
The Purchasing Power Parity theory of exchange rates is the short-run theory
The Real Interest Rate Parity theory of exchange rates states that abnormal returns on assets and investments govern the foreign exchange rates
The Purchasing Power Parity theory of exchange rates states that relative rates of inflation will govern foreign exchange
Like goods in different countries should cost the same absent transactions costs
All of the above are true
Suppose we have 6 buyers and 7 sellers in the market for horses
$93 and $97
$97 and $98
$98 and $99
$99 and $102
There are no market cleaning prices in this example
In Capitalism, Socialism, and Democracy, Joseph Schumpeter describes the economic process of a capitalist system. Schumpeter refers to this process as
Perfect competition
Monopolistic competition
Creative Destruction
Economic stationary
Government planning
In "Function and Formation of Prices", Hans Sennholz writes that the value of a good or service comes from
The labor used to produce it
Its intrinsic worth
The most important needs served with the available quantities
The value of its inputs
The subjective judgments of buyers and sellers
According to F.A. Hayek in "The Use of Knowledge in Society", a market economic prices
Are chosen by technocrats trained in economic theory
Are determined by the cost of the good
Convey tacit information, not known by any single person in entirety, that is relevant to the decisions of producers and consumers
Convey scientific information that is relevant to the decisions of producers and consumers
None of the above
Fill in the blank
Rational
Due to laziness
Harmful to democracy
Beneficial to democracy
Can be overcome by selfless civil servants
According to Israel Kirzner in "Entrepreneurship", entrepreneurs earn pure economic profit by
Acting as Walrasian auctioneers
Discovering and facilitating previously unrealized gains from trade
Discovering new opportunities for monopolistic competition
Producing goods until the marginal cost is equal to marginal revenue
Forcing consumers to buy things they do not want or need
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