Macroeconomics practice

Which of the following does not cause changes in the supply or demand for a good

The most important function of the price system is that it has the ability to

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

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

In Capitalism, Socialism, and Democracy, Joseph Schumpeter describes the economic process of a capitalist system. Schumpeter refers to this process as

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

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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