Online MCQ Assignment
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QN1: Which of the following actions is an example of expansionary fiscal policy
a. a decrease in welfare payments
b. a purchase of government securities in the open market
c. a decreasse in the Bank rate
d. a decrease in the corporate profits tax rate
Answer
Answer: d. a decrease in the corporate profits tax rate
QN2: The main cause of cyclical unemployement is that
a. firms engage in race, gender and sex discrimination in their hiring practices
b. some individuals do not have marketable job skills
c. the level of overall economic activity fluctuates
d. workers often voluntarily quit a job to look for a better job
Answer
Answer: c. the level of overall economic activity fluctuates
QN3: The aggregate demand (AE) curve would shift dawn if
a. government spending were increased
b. taxed were increased
c. the money supply were increased
d. the interest rate decreased
Answer
Answer: b. taxed were increased
QN4: As the economy nears full capacity, the short-run aggregate supply curve
a. become flatter
b. becomes steeper
c. shifts to the right
d. shifts to the left
Answer
Answer: b. becomes steeper
QN5: If the economy is operating at potential GDP, an increase in the money supply will lead to
a. stagflation
b. structural inflation
c. demand-side inflation
d. supply-side inflation
Answer
Answer: c. demand-side inflation
QN6: The sale of government securities by the Bank of Canada is predicted to
a. decrease reserves of the chartered banks, and eventually lead to an expansion of the money supply
b. decrease reserves of the chartered banks, and eventually cause a contraction of the money supply.
c. increase reserves of the chartered banks, and eventually cause a contractaction of the money supply
d. all of these
Answer
Answer: b. decrease reserves of the chartered banks, and eventually cause a contraction of the money supply.
QN7: How shortages are eliminated
a. lowering prices
b. equalising prices
c. raising prices
d. increasing demand
Answer
Answer: c. raising prices
QN8: During wartime supplies are likely to be
a. reduced
b. increased
c. remain constant
d. none
Answer
Answer: a. reduced
QN9: Rising prices can be lowered through
a. rationing
b. increase in imports
c. decrease in export
d. all of these
Answer
Answer: d. all of these
QN10: Sugar was rationed in the year
a. 1917
b. 1918
c. 1920
d. 1921
Answer
Answer: a. 1917
QN11: Point system of ration was applied to
a. footwear
b. Clothing
c. Luxury Goods
d. All of these
Answer
Answer: b. Clothing
QN12: The method to judge inflation rate is
a. Index No
b. rationing
c. Demand
d. Supply
Answer
Answer: a. Index No
QN13: Inflation means
a. Continuous rise in price
b. sudden rise
c. one time rise in price
d. none of these
Answer
Answer: a. Continuous rise in price
QN14: Macro econoics is a study of
a. aggregates
b. firm
c. demand
d. income
Answer
Answer: a. aggregates
QN15: With rise in prices
a. Value of money rise
b. value of money falls
c. remains same
d. none of these
Answer
Answer: b. value of money falls
QN16: Due to a scarcity of resources
a. every society must undertake central planning
b. the government must decide how to allocate available resources
c. some members of each society must live in poverty
d. every society must choose among competing uses of available resources.
Answer
Answer: d. every society must choose among competing uses of available resources.
QN17: In every economic system, scarcity imposes limitations on
a. households, business firms, governments, and the nation as a whole
b. households and business firms, but not governments
c. local and state governments, but not the federal govern
d. None of these
Answer
Answer: a. households, business firms, governments, and the nation as a whole
QN18: The three groups of decision makers in the economy are
a. households, business firms, and banks
b. households, business firms, and governments
c. business firms, governments and banks
d. business firms, bank and foreign traders
Answer
Answer: b. households, business firms, and governments
QN19: The period of the business cycle in which real GDP is increasing is called the
a. expansion
b. peak
c. recession
d. trough
Answer
Answer: d. trough
QN20: A type of unemployement in which workers are in-between jobs or are searching for new and better jobs is called___ unemployment
a. frictional
b. cyclical
c. structural
d. turnover
Answer
Answer: a. frictional
QN21: Which of the following would cause the aggregate demand curve to shift to the right
a. an increase in purchases by the federal government
b. an increase in real interest rates
c. an appreciation of the american dollar
d. a decrease in the money supply
Answer
Answer: a. an increase in purchases by the federal government
QN22: Which of the following statements is correct
a. Real GDP is the total market value of the final goods and services produced in America for sale in a year valued in the prices of 1992
b. Your buying stock in the stock market is an example of investment spending
c. Potential Real GDP is always greater than Equilibrium Real GDP
d. Social security and welfare are examples of spending on infrastructure
Answer
Answer: a. Real GDP is the total market value of the final goods and services produced in America for sale in a year valued in the prices of 1992
QN23: Assume that an economy begins in macroeconomics equilibrium. Then, taxes are significantly decreased. As a result of this change
a. there is expansion and inflation in the US
b. there is recession and deflation in the US
c. there is stagflation in the US
d. there is expansion and deflation in the US
Answer
Answer: a. there is expansion and inflation in the US
QN24: A large increase in oil prices, such as the ones occuring in 1973 and 1979, will cause
a. inflation and expansion
b. inflation and recession
c. recession and disinflation
d. expansion and deflation
Answer
Answer: c. recession and disinflation
QN25: From 1990 to 1995, the U.S. economy was in a recessionary gap. According to the classical economics, which of the following have occured
a. wages should have fallen which would cause more workers to be hired
b. prices should have fallen which would increase consumer spending
c. interest rates should have fallen which would increase consumer and investment spending
d. all of the above should have occured
Answer
Answer: d. all of the above should have occured
QN26: Which of the following statement is/are true about the classical quantity theory of money
a. The equation of exchange is MV=PQ
b. The classical economists assumed that V would rise when real interest rates rise
c. The classical economists concluded that increases in the money supply cause increases in real GDP and nothing else
d. All of these above
Answer
Answer: a. The equation of exchange is MV=PQ
QN27: Which of the following would cause consumption to rise
a. the GDP Deflator rises
b. a greater proportion of the population is between age 20 and 30
c. transitory income increases
d. income is taken from poor people and given to rich people
Answer
Answer: c. transitory income increases
QN28: Which of the following would cause business investments spending to rise
a. an increase in real interest rates from 5% to 8%
b. a decrese in the corporate profits tax rate from 48% to 34%
c. a reduction of the investment tax credit from 10% to 2%
d. sales falling in relation to capacity from 90% to 60%
Answer
Answer: b. a decrese in the corporate profits tax rate from 48% to 34%
QN29: Assume that net exports increase by $1 billion. Equilibrium Real GDP will rise by more than $1 billion. Explain why. (i.e. why is there a multiplier?)
a. an increse in net exports appreciates the dollar causing a further increse is net exports
b. an increase in net exports causes an increase in tax revenues which increase government spending
c. an increase in net exports increases income causing an increase in induced consumption
d. an increase in net exports cause an increase in the money supply
Answer
Answer: c. an increase in net exports increases income causing an increase in induced consumption
QN30: The largest transfer in the federal budget is
a. defense
b. education
c. social security
d. welfare
Answer
Answer: c. social security
QN31: The largest tax collected at the federal government level is the
a. income tax
b. sales tax
c. property tax
d. social security tax
Answer
Answer: a. income tax
QN32: A person had an income of $20,000 last year and paid $10,000 in tax. This year, the person had an income of $100,000 and paid $30,000 in tax. The person’s marginal tax rate is
a. 25%
b. 30%
c. 50%
d. 100%
Answer
Answer: a. 25%
QN33: Assume that Equilibrium GDP is $4,000 billion. Potential GDP is $5,000 billion. The marginal propensity to consume 4/5(0.8). By how much and in what direction should government purchases be changed
a. increase by $1,000 billion
b. increase by $100 billion
c. decrease by $1000 billion
d. increase by $200 billion
Answer
Answer: d. increase by $200 billion
QN34: Using the numbers in question 31, by how much should taxes be changed
a. increased by $1,000 billion
b. decreased by $1,000 billion
c. decreased by $200 billion
d. decreased by $250 billion
Answer
Answer: d. decreased by $250 billion
QN35: If the interest rate falls, then
a. bond prices will remain the same
b. bond prices will rise
c. bond prices will fall
d. None of these
Answer
Answer: b. bond prices will rise
QN36: If the quantity of money demanded is less than the quattity of money supplied, then the interest rate will
a. either increase or decrease, depending on the amount of excess demand
b. increase
c. decrease
d. not change
Answer
Answer: c. decrease
QN37:Which of the following is a microeconomics statement
a. the real domestic output increased by 2.5 percent last year
b. Unemployment was 9.8 percent of the labour force last year
c. The price of wheat declined last year.
d. The general price level increased by 4 percent last year
Answer
Answer: c. The price of wheat declined last year.
QN38: If the supply of product X is perfectly elastic, an increase in the demand for it will increase
a. equilibrium quantity but reduce equilibrium price
b. equilibrium quantity but equilibrium price will be unchanged
c. equilibrium price but reduce equilibrium quantity
d. equilibrium price but equilibrium quantity will be unchanged
Answer
Answer: b. equilibrium quantity but equilibrium price will be unchanged
QN39: If we say that two variables are inversely related, this means that
a. the two graph as an up-sloping line
b. an increase in one variable is associated with a decrease in the other
c. an increase in one variable is associated with an increase in the other
d. the resulting relationship can be portrayed by a straight line parallel to the horizontal axis
Answer
Answer: b. an increase in one variable is associated with a decrease in the other
QN40: If the equation y = 5 + 0.6 was graphed, the
a. slope would be -5
b. slope would be +5
c. slope would be +0.6
d. vertical intercept would be +0.6
Answer
Answer: c. slope would be +0.6
QN41: If the simple circular flow model
a. households are suppliers of resource
b. businesses are suppliers of final products
c. households are demanders of final products
d. all of the above are true
Answer
Answer: d. all of the above are true
QN42: The law of demand states that
a. price and quantity demanded are inversely related
b. the larger the number of buyers in a market, the lower will be product price
c. price and quanntity demanded are directly related
d. consumers will buy more of the given product at high price than they will at low prices
Answer
Answer: a. price and quantity demanded are inversely related
QN43: The simple circular flow model shows that
a. households are on the demnd side of both product and resource markets
b. business are on the supply side of both product and resource markets
c. households are on the supply side of the resource market and on the demand side of the product market
d. business are on the demand side of the product market and on the supply side of the resource market
Answer
Answer: c. households are on the supply side of the resource market and on the demand side of the product market
QN44: The demand curve shows the relationship between
a. money income and quantity demanded
b. price and production costs
c. price and quantity demanded
d. consumer tasts and the quantity demanded
Answer
Answer: c. price and quantity demanded
QN45: The relationship between quantity supplied and price is___and the relationship between quantity demanded and price is___
a direct, inverse
b. inverse, direct
c. inverse, inverse
d. direct, direct
Answer
Answer: a direct, inverse
QN46: When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower.” This statement describes
a. an inferior good
b. the rationing function of prices
c. the substitution effect
d. the law of supply
Answer
Answer: c. the substitution effect
QN47: One reason why the quantity of a good demanded increases when its price falls in that the
a. price decline shifts the supply curve to the left
b. lower price shifts the demand curve to the left
c. lower price shifts the demand curve to the right
d. lower price increases the real income of buyers enabling them to buy more
Answer
Answer: c. lower price shifts the demand curve to the right
QN48: A shift to the right in the demand curve for product A can be most reasonably explained by saying that
a. consumer incomes have declined and they now want to buy less of A at each possible price
b. the price of A has incresed and, as a result, consumers want to purchase less of it
c. consumer preferences have changed in favour of A so that they now want to buy more at each possible price
d. the price of A has declined and, as a result, consumers want to purchase more of it
Answer
Answer: c. consumer preferences have changed in favour of A so that they now want to buy more at each possible price
QN49: Other things being equal, which of the following might shift the demand curve for gasoline to the left
a. the discovery of vast new oil reserves in Alberta
b. the development of a low-cost electric automobile
c. an increase in the price of train and air transportation
d. a large decline in the price of automobiles
Answer
Answer: b. the development of a low-cost electric automobile
QN50: If consumer income increase, the demand for product X
a. will necessarily remain unchanged
b. may shift either to the right or left
c. will necessarily shift to the right
d. will necessarily shift to the left
Answer
Answer: b. may shift either to the right or left
QN51: An increase in product price will cause
a. quantity demanded to decrease
b. quantity supplied to decrease
c. quantity demanded to increase
d. the supply curve to shift to the right
Answer
Answer: a. quantity demanded to decrease
QN52: The law of supply indicates that
a. producers will offer more of a product at high prices that they will at low prices
b. the product supply curve is downsloping
c. consumers will purchase less of a food at high prices than they will at low prices
d. producers will offer more of a product at low prices than they will at at high prices
Answer
Answer: a. producers will offer more of a product at high prices that they will at low prices
QN53: An improvement in production technology will
a. tend to increase equilibrium price
b. shift the supply curve to the left
c. shift the supply curve to the right
d. shift the demand curve to the left
Answer
Answer: c. shift the supply curve to the right
QN54: A leftward shift of a product supply curve depends upon
a. an improvement in the relevant technique of production
b. a decline in the prices of needed inputs
c. an increase in consumer incomes
d. some firms leaving an industry
Answer
Answer: d. some firms leaving an industry
QN55: Which of the following statement is incorrect
a. If demand increases and supply decreases, equilibrium price will rise
b. If supply increases and demand decreases, equilibrium price will fall
c. If demand decreases and supply increases, equilibrium price will rise
d. If supply declines and demand remains constant, equilibrium price will rise
Answer
Answer: c. If demand decreases and supply increases, equilibrium price will rise
QN56: A market is in equilibrium
a. provided there is no surplus of the produc
b. at all prices above that shown by the intersection of the supply and demand curves
c. if the amount that producers want to sell is equal to the amount that consumers want to buy
d. whenever the demand curve is down-sloping and the supply curve is up-sloping
Answer
Answer: c. if the amount that producers want to sell is equal to the amount that consumers want to buy
QN57: Given conventional supply and demand curves, a change in the determinants of supply and demand will
a. in all likelihood alter both equilibrium price and quantity
b. alter equilibrium quantity, but not equilibrium price
c. alter equilibrium price, but not equilibrium quantity
d. have no effect upon equilibrium price or quantity
Answer
Answer: a. in all likelihood alter both equilibrium price and quantity
QN58: An unusual bountiful crop of coffee beans might be expected to
a. increase the supply of coffee
b. reduce the price of coffee
c. increase the quantity of coffee consumed
d. do all of the above
Answer
Answer: d. do all of the above
QN59: Given the down-sloping demand curve and an up-sloping supply curve for a product, a decrease is resource price will
a. increase equilibrium price and quantity
b. decrease equilibrium price and quantity
c. decrease equilibrium price and increase equilibrium quantity
d. increase equilibrium price and decrease equilibrium quantity
Answer
Answer: c. decrease equilibrium price and increase equilibrium quantity
QN60: A change in demand means
a. a change in the elasticit of a demand curve
b. the sift of a demand curve
c. a movement along a given demand schedule or curve
d. the quantity demanded changes as price changes
Answer
Answer: b. the sift of a demand curve
QN61: Suppose that a severe frost destroys one-half of Ontario’s apple crops. As a result, we would expect
a. an increase in the demand for apples
b. a rise in the price of pears
a. decline in the price of apples
d. none of the above
Answer
Answer: b. a rise in the price of pears
QN62: At the current price there is a shortage of a product. We would expect price to
a. increase, quantity demanded to increase, and quantity supplied to decrease
b. increase, quantity demanded to decrease, and quantity supplied to increase
c. increase, quantity demanded to increase, and quantity supplied to increase
d. decrease, quantity demanded to increase, and quantity supplied to decrease
Answer
Answer: b. increase, quantity demanded to decrease, and quantity supplied to increase
QN63: A surplus of a product will arise when price is
a. above equilibrium with the result that quantity demanded exceeds quantity supplied
b. above equilibrium with the result that quantity supplied exceeds quantity demanded
c. below equilibrium with the result that quantity demanded exceeds quantity supplied
d. below equilibrium with the result that quantity supplied exceeds quantity demanded
Answer
Answer: b. above equilibrium with the result that quantity supplied exceeds quantity demanded
QN64: Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will
a. decrease, quantity demanded will decrease, and quantity supplied will increase
b. decrease and quantity demanded and quantity supplied will both decrease
c. decrease, quantity demanded will increase, and quantity supplied will decrease
d. incresae, quantity demanded will decrease, and quantity supplied will increase
Answer
Answer: c. decrease, quantity demanded will increase, and quantity supplied will decrease
QN65: The demand for a product is said to be inelatic with respect to price if
a. consumers are largely unresponsive to a per unit price change
b. the elasticity coefficient is greater that 1
c. a drop in price is accompanied by a decrease in the quantity demanded
d. a drop in price is accompanied by an increase in the quantity demanded
Answer
Answer: a. consumers are largely unresponsive to a per unit price change
QN66: The basic formula for the price elasticity of demand coefficient is
a. absolute decline in quantity demanded/absolute increase in price
b. percentage change in quantity demanded/percentage change in price
c. absolute increase in price/absolute decline in quantity demanded
d. percentage change in price/percentage chnge in quantity demanded
Answer
Answer: b. percentage change in quantity demanded/percentage change in price
QN67: For a linear demand curve
a. elasticity is constant along the curve
b. elasticity is unity at every point on the curve
c. demand is elastic at low prices
d. demand is inelastic at high prices
Answer
Answer: d. demand is inelastic at high prices
QN68: The larger the coefficient of price elasticity of demand for a product, the
a. larger the resulting price change for a given increase in supply
b. more rapid the rate at which the marginal utility of that product diminishes
c. less competitive will be the industry supplying that product
d. smaller the resulting price change for a given increase in supply
Answer
Answer: d. smaller the resulting price change for a given increase in supply
QN69: If a demand for a product is said to be “elastic”, the value of the elasticity coeffecient is
a. zero
b. greater than one
c. equal to one
d. less than one
Answer
Answer: b. greater than one
QN70: The concept of price elasticity of demand measures
a. the slope of the demand curve
b. the number of buyers in a market
c. the extent to which the demand curve shifts as the result of a price decline
d. the sensitivity of consumers to price changes
Answer
Answer: d. the sensitivity of consumers to price changes
QN71: If the price-quantity relationship for a product can be expressed by the equation P = 100 – 0.5Q then
a. the equation for the corresponding MR function is MR = 100 -.10Q
b. the total revenue derived from teh sale f the item will be maximum at a sales volume of 1000 units;
c. the equation for the corresponding TR function is TR = 100Q – 0.5QN2
d. all of the above
Answer
Answer: d. all of the above
QN72: An increase in the minimum wage would be expected to
a. raise unemployment;
b. lower unemployment;
c. have no effect on uneployment;
d. raise total wages received by workers who work for an hourly wage below the minimum level
e. shift the supply curve of labour to the right
Answer
Answer: a. raise unemployment;
QN73: Barriers to entry are highest in which two types of markets
a. differentiated competition and oligopoly
b. perfect competition and differentiated competition
c. monopoly and differentiated competition
d. oligopoly and monopoly
Answer
Answer: d. oligopoly and monopoly
QN74: In which type of market do you have the largest number of firms
a. perfect competition and oligopoly
b. perfect competition and differentiated competition
c. perfect competition and monopoly
d. differentiated competition and oligopoly
Answer
Answer: b. perfect competition and differentiated competition
QN75: If marginal revenue is $6 and marginal cost is $4, the firm seeking to maximize profits should
a. increase its output
b. reduce its output
c. raise its price
d. none of the above
Answer
Answer: a. increase its output
QN76: A monopoly is a market structure in which
a. a single firm exercises its power over smaller firms
b. a single firm produces a product with a wide variety of very close substitute
c. each firm is run by a small properietor
d. there is only one firm producing a product which has no close substitutes
Answer
Answer: d. there is only one firm producing a product which has no close substitutes
QN77: A natural monopoly is a market situation in which
a. all firms sell natural resources
b. a single firm supplies natural resources to an entire industry
c. a single firm can supply the market output more efficiently than many firms
d. none of the above
Answer
Answer: c. a single firm can supply the market output more efficiently than many firms
QN78: The profit-seeking monopolist operates at a level of output where
a. P = MC
b. MC = AC
c. MR = MC
d. All of these above
Answer
Answer: c. MR = MC
QN79: An investor has invested $1,00,000 in an company which has produced an accounting profit of $250,000 for the year. If the average return in this industry is 10%, what is the pure (economic) profit
a. 25%
b. 10%
c. 5%
d. 15%
e. 35%
Answer
Answer: d. 15%
QN80: A group of three plants that is owned and operated by a single firm and which consists of a farm growing wheat, a flour milling plant, and a plant that bakes and sells, bread, is an example of a
a. horizontal integration
b. vertical integration
c. holding company
d. trust
Answer
Answer: b. vertical integration
QN81: If the price declines from $450 to $350, and, as a result, quantity demanded increases from 1200 to 1500, elasticity of demand is
a. 1.78
b. 0.86
c. 1.12
d. 3.42
Answer
Answer: b. 0.86
QN82: To find the profit-maximizing price and production rate, the firm compares its
a. P to AC
b. P to AVC
c. MR to MC
d. AVC to AFC
e. AR to AC
Answer
Answer: c. MR to MC
QN83: To find out whether it should temporarily shutdown its operations, a profit-maximizing firm compares its
a. P to AC
b. AC to AVC
c. P to MC
d. P to AVC
e. AVC to AFC
Answer
Answer: d. P to AVC
QN84: To maximize total sales revenue (TR) the firm should produce where
a. MR = MC
b. MR = O
c. MR = P
d. P = AVC
e. TR = TVC
Answer
Answer: b. MR = O
QN85: A monopolist has a downward sloping demand curve because
a. it has an inelastic demand
b. typically, it sells only to a few large buyers
c. its demand curve is the same as the industry’s demand curve
d. consumers prefer that product
Answer
Answer: c. its demand curve is the same as the industry’s demand curve
