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Things that are valuable are things that are __________________________________________


Maria spends $100 on a ticket to a concert and goes without telling her mother, who did not
want her to go, and who finds out from someone else that Maria went anyway. The
opportunity cost of the concert to Maria is:
a. the $100 she spent
b. the loss of her mothers trust
c. both a and b
d. neither a nor b



Globalization is defined as:

a. an unusual expansion of trade
b. the economic integration of nations
c. the domination of one country by another
d. the financing of national governments by other governments


On the ______________________________________________ is the economists word for making

decisions based on the costs or benefits of one more of something.


Which of the following is NOT true about mercantilism?

a. it believes that trade is a form of war
b. it is about making a country strong
c. it recommends that countries export but not import
d. it is not followed by any countries in the modern world



Comparative advantage requires that countries:

a. export, but not import
b. limit trade to targeted industries only
c. specialize, then trade as much as possible
d. make as many different products as possible


______________________________________________________________ was the name of the

person who taught us that competition is required for markets to work correctly.


Which of the following is NOT true?

a. demand for a good requires that we are both willing and able to buy it at its price
b. the law of demand is an inverse relationship between price and quantity demanded
c. is the price is too high, a shortage will result
d. the supply curve is driven by profits of the business


Use the letters A, B, C, and D from the figure above to answer questions 11 to 14.

Graph _________ represents an increase in the price of a substitute.


Graph _________ represents a decrease in workers wages.


Graph _________ represents an increase in consumers income for a normal good.


Graph _________ represents a decrease in the number of sellers of a good.


An increase in supply will _____ equilibrium price and _____ equilibrium quantity sold.
a. increase, increase
b. increase, decrease
c. decrease, increase
d. decrease, decrease



________ (True/False) An export requires the movement of a physical good from one country
to another.


A German tourist coming to Las Vegas would appear in the _______ account of the Balance of
a. capital
b. trade
c. current
d. financial



The ______________________________________________________ is the organization that

replaced GATT and is supposed to promote free trade.


The purchase of Rolls Royce by BMW would show in the ______ account for the British
Balance of Payments.
a. capital
b. trade
c. current
d. financial



________ (True/False) An increase in exports from the US to Brazil should raise the value of
the dollar against the Brazilian Real.


__________________________________________ float is the phrase that means that exchange

rates are supposed to float, but governments dont let them do it freely.


If the US has a trade deficit, how will it be corrected if markets are free to work?
a. the dollar will fall
b. the dollar will rise
c. the government must correct the exchange rate, markets wont work
d. jobs will leave the US and move overseas



Which of the following is NOT true about Bretton Woods?

a. it was fixed exchange rates
b. it was in place from the end of World War II to 1992
c. it was designed to let the US help stabilize the world after the war
d. it allowed foreigners to trade dollars for gold at the US Treasury


GDP measures:
a. total production in the economy
b. total expenditure in the economy
c. both a and b
d. neither a nor b, it is total income


___________________________________________________ GDP is adjusted for inflation.


When we look at the GDP per person in countries around the world, what we see is:
a. they are in two distinct groups with space between them
b. they are in three distinct groups with space between them
c. they are mostly continuous without breaks
d. they are in five distinct groups, though two of the groups are very small (1 or 2 countries)





Which of the following would be included in GDP?

a. the purchase of an 1863 gold coin by a coin collector
b. the proceeds from an illegal drug deal
c. the trade of a car for medical care
d. none of the above
GDP equals:
a. C + S + G
b. C + I + T + (X-M)
c. C + I + G + (X-M)
d. C + S + T + (X-M)
In the period after World War II, compared to the 150 years before the war,
a. contractions got shorter and expansions got longer
b. contractions got longer and expansions got shorter
c. both contractions and expansions got longer
d. expansions got longer, contractions remained about the same


Prior to the 1970s, every expansion in US history longer than three years was associated
with what phenomenon?


The traditional definition of a recession is a decline in ______ GDP for _______.

a. real, two quarters
b. real, two month
c. per capita, two quarters
d. per capita, two months




The civilian non-institutional population includes everyone who is not institutionalized

a. and over 16, who is not in the military
b. and over 16, including the military
c. over 16 and under 66, who is not in the military
d. over 16, under 66, or in the military
The labor force is defined as
a. everyone over 16 willing and able to work
b. the employed and the unemployed
c. everyone not retired over 16 who is actively seeking employment
d. everyone over 16 and under 65 willing and able to work


A _________________________________________________________________________________ is
someone who has given up looking for work, but still wants a job.


The unemployment rate is the percentage of the _____ that is unemployed.

a. non-institutional population
b. civilian non-institutional population
c. labor force
d. either a or b depending on who is doing the calculation




To be unemployed you must be:

a. not employed full time and actively seeking new employment
b. actively seeking new employment regardless of your current job status
c. not employed and actively seeking new employment
d. not employed and actively willing to take a new job if offered


People who are voluntarily changing jobs are referred to as _____ unemployment.
a. floating
b. marginal
c. intermediate
d. frictional


_______________ unemployment refers to someone unemployed because we are in a recession.


If a country has 100,000 population, 80,000 in its labor force, 50,000 full time workers, and
10,000 part time workers, what is its unemployment rate?


_______(True/False) All prices must rise for it to be inflation.


If prices today are 3 times prices in the base year, then Index for today would equal _______.


If the price of a hamburger in 1960 was 12 cents and the CPI then was equal to 15, how much
should that hamburger cost today?


What are the costs of inflation and unemployment?


Why are inflation and unemployment statistics likely to be inaccurate?


Explain the mechanism by which a trade deficit should naturally go away if markets work


Why are politicians likely to be concerned about unemployment over other problems?