# C719 Macroeconomics Pre-Assessment Questions and Answers

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C719 Macroeconomics Pre-Assessment Questions

1. According to the production possibilities curve model, as you increase the production of one good. What will happen to the sacrifices of the alternate good?
2. A farmer fully utilizes his resources to produce cauliflower and kale. As the farmer produces more cauliflower.
3. So he has fewer resources available to produce kale.Which curve is illustrated in this scenario?
4. What are the main foci of economics?
5. Study the two-sector circular-flow diagram.Classify each statement as either a flow of resources or a flow of dollars. As a result Answer options may be used more than once or not at all. Select your answers from the pull-down list.
6. ##### Florence could earn an annual salary of \$70,000 as a financial advisor or \$60,000 as a bank manager.
7. Currently, Florence is a teacher and earns an annual salary of \$35,000.
8. What is Florence’s opportunity cost for choosing to be a teacher instead of a financial advisor?
9. Florence is a teacher and earns \$35,000 a year. Her spouse is a part-time IT specialist who earns \$45,000 a year.
10. Because Florence and her spouse decide that one of them should quit work and become a stay-at-home parent.
11. Based on the principle of comparative advantage, who should be the full-time, stay-at-home parent?
12. ##### Referring to the three economic questions (what, how, and for whom), in a market system, by whom are these questions determined?
13. In the car manufacturing industry, the supply for cars has a positive slope.What happens if the price of cars increases?
14. In the car manufacturing industry, the supply for cars has a positive slope.Which two factors can cause the supply curve to shift?
15. Textbooks and class enrollments are complements.What happens to the demand curve for textbooks if the tuition rate increases?
16. Below are likely scenarios that affect the demand curve for automobiles. Which scenario is correct?
17. Classify each option as either increasing or decreasing if the price of tablets is expected to go down.
18. As a result answer options may be used more than once or not at all. Select your answers from the pull-down list.
19. A drought in Columbia destroyed the rice crops, which caused the supply of rice to decrease.
20. Which scenario will occur as a result of the decrease in supply?
21. The maximum number of skilled and unskilled workers are employed in an economy.
22. ##### What type of employment is this?
23. In January, Harry was laid off from his job, and he immediately began seeking employment.
24. In May, he stopped looking for a job. It is now July, and he is still receiving unemployment benefits.
25. How would you classify Harry’s employment status?
26. A country has a population of 50,000,000 people and a labor force of 20,000,000 people.
27. The unemployment rate is 9.5%.How many people are unemployed in this country?
28. An economist gave a lecture on economic fluctuations. When a student said that inflation hurts everyone. So the economist said that this is not necessarily true.Who would most likely benefit from inflation?
29. A business owner is creating a sales forecast for the next year. She chose to monitor the consumer price index for indications of inflation. Therefore, she is worried that there may be drawbacks to this index.
30. What is a limitation faced by the owner in using the consumer price index?
31. The Federal Reserve recently announced that it will promote an expansionary policy. It is expected that output will increase.
32. Which event will also occur as a result?
33. ##### Assume the following:

Personal consumption expenditures = \$20,000

Gross private domestic investment = \$4,000
Government purchases of goods and services = \$6,000
Exports = \$4,400
Imports = \$4,400
what is GDP equal to?

34. While GDP is useful for evaluating a standard of living, it does not account for the side effects of increased production. What is an example of a side effect that is not included in GDP?
35. Country Y is a large country with a population of 100,000. It has a low standard of living, as reflected by its real GDP per capita of \$50.What is the GDP of Country Y?
36. In the aggregate demand curve, what explains the negative relationship between price level and real output?
37. ##### Which event would cause the aggregate demand curve to shift to the right?
38. According to the law of diminishing productivity, if capital stock is fixed, what will happen to marginal productivity with each additional worker?
39. Heather is watching the news and expresses her frustration with the Federal Reserve’s inability to control the economic recession over the past five years. Her frustration stems from her belief that the government cannot time its policies to react quickly enough to the stagnating economy.What kind of economist is Heather?
40. At the end of World War II, people feared that another economic recession would occur.What did Keynesian economists encourage as a means of avoiding another recession?
41. When wages are lower, production yields the same output, but at a lower cost. The lower costs allow the firm to hire more workers and increase output. Sellers will have to reduce prices to sell the extra output.How is this advantageous to a seller?
42. ##### According to Keynes, household spending habits are stable.
43. Which factor has the most significant impact on consumer spending, according to Keynes?
44. According to Keynes, what is the only way to bring the economy out of a downturn as severe and prolonged as the Great Depression?
45. The nation is entering a recession. The classical economist says the government should do nothing and the market will correct itself eventually.What would the Keynesian economist suggest?
46. Why do classical economists believe that the government should not become involved with markets during an economic downturn?
47. If a worker spends 50% of every dollar he earns, what is the worker’s expenditure multiplier?
48. According to Keynes, what should the government do when the economy is booming? (c719 pre-assessment)
49. The U.S. economy is experiencing a time of slow economic growth and is entering a recession. The economy
is operating at point A and is experiencing a recessionary gap. What effect would a decrease in taxes have on the economy?
50. China is experiencing fast economic growth that has caused an increase in the price level. The economy is
operating at point C of the graph below and is experiencing an inflationary gap.
What should the government focus on to bring the economy back to full employment equilibrium?
51. ##### Japan has been experiencing a time of economic stability with its full employment real GDP at U.S. \$12 trillion.
52. A market shock has caused the economy to slow down, and there is now a recessionary gap at real GDP U.S. \$11.5 trillion. Which two actions should the government take to close this recessionary gap? (Choose 2 answers)
53. Japan has been experiencing a time of economic stability with its full employment real GDP at U.S. \$12 trillion. As a market shock has caused the economy to slow down, and there is now a recessionary gap at real GDP U.S. \$11.5 trillion
At a current level of real GDP U.S. \$11.5 trillion, the economy is below the full-employment level.Which fiscal policy action should be implemented to reduce the size of this recessionary gap? (c719 pre-assessment)
54. Several economists have recognized the limits of fiscal policies when attempting to stabilize or aid economic recovery. During times of economic contraction, fiscal policies are enacted to close the recessionary gap. In which statement explains why the federal tax rebate in 2008 had minimal effects on economic activity?
55. ##### Several economists have recognized the limits of fiscal policies when attempting to stabilize or aid economic recovery.
56. During times of economic contraction, fiscal policies are enacted to close the recessionary gap. Which three lags make fiscal policies less effective? Choose 3 answers
57. One of the offsets of fiscal policies is the time that passes from when the government ascertains there is a need to enact a fiscal policy to when the fiscal policy is officially enacted.What is the name of this time lag?
58. Due to the lengthy impact lag between the time the contractionary fiscal policy was enacted and the time it
was effective, the economy has self-adjusted to full employment.What are the potential implications of a contractionary fiscal policy?
59. The government outlays are caused by transfer payments and approved expenditures to fund Federal programs, whereas the government collects revenue through tax collection.What happens when there is a budget deficit? (c719 pre-assessment)
60. During a time of economic downturn, unemployment increases.So, what would be the effect of an increase in unemployment benefit payments?
61. During the late 90s, the U.S. government ran a budget surplus for several consecutive years by reducingfederal spending and increasing some tax rates.What effect do budget surpluses have on the national debt?
62. ##### What does it mean if the government runs a federal deficit of \$230 billion?Choose 2 answers
63. Budget deficits and surpluses are a flow concept, while the national debt is a stock concept made up by the sum of past budget deficits minus all past budget surpluses. The national debt is the amount of debt the federal government owes its lenders. What are two problems Congress faces when trying to determine the budget deficit?Choose 2 answers
64. Therefore, the national debt is often a topic of debate on the news and among economists, who are concerned about how it will be paid off and by whom. In the first quarter of 2015, the U.S. national debt was almost 103% of its GDP and was held mostly by foreign lenders. How do agencies compare the national debts of different countries? (c719 pre-assessment)
65. The national debt is often a topic of debate on the news and among economists. Another concerned about how it will be paid off and by whom. In the first quarter of 2015, the U.S. national debt was almost 103% of its GDP and was held mostly by foreign lenders. Which two things will happen if the government has to borrow funds to finance the increases in government spending?Choose 2 answers
66. ##### The standard currency used in the United States is the dollar bill.
67. Among other functions, dollars are universally accepted as a form of payment for goods and services. If you say, “My computer costs \$500,” which function of money are you referring to? (c719 pre-assessment)
68. Money can have several forms, including dollar bills, coins, or other commodities that are accepted as form of payment in exchange of goods and services.What did World War II soldiers use as money while they were held in prisoners’ camps in Germany?
69. Bernice deposits \$15,000 into her checking account at Bank of America, and the required reserve ratio is 10%.How much do the bank’s excess reserves increase as a result of Bernice’s deposit?
70. So, What does a bank’s balance sheet show?
71. The Federal Reserve Bank can engage in expansionary or contractionary monetary policies to pursue economic stability.
72. ##### What should the Federal Reserve do to contract the money supply?
73. The Federal Reserve engages in policy actions that change the amount of the money supply when it wants to change interest rates.What are the results of a contractionary monetary policy? (c719 pre-assessment)
74. The Federal Reserve engages in policy actions that change the amount of the money supply when it wants to change interest rates.What are two reasons why banks prefer to get loans from other banks, rather than from the Federal Reserve Bank?Choose 2 answers
75. When faced with an output gap, whether recessionary or inflationary. In the Federal Reserve can engage in monetary policy actions, manipulate interest rates and money supply, and bring the economy back to full employment. What is the direct effect of an increase of the money supply when the economy faces a recessionary gap?
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