Columbia College – Macro Economics Name _________________

Mid-Term Exam (50 questions worth 2 points each = 100)

True/False

__ 1. Economic analysis is used in all decision making.

__ 2. In economics, all the items that people would consume if they had unlimited income are known as outputs.

__ 3. Scarcity arises because resources are finite and are inadequate to meet all human wants.

__ 4. Economic goods are available in desired quantities at a zero price.

__ 5. According to the law of demand, other things being equal, when the price a good goes up, then people buy less of that good.

__ 6. The equilibrium or market clearing price occurs at the point at which quantity demanded equals quantity supplied.

__ 7. In order to be effective, a price floor must be set below equilibrium price.

__ 8. Price ceilings often generate black markets.

__ 9. Market failures prevent the price system from attaining economic efficiency.

__ 10. An increase in injuries to pedestrians caused by accidents resulting from electronic billboards distracting drivers is an example of a negative externality.

__ 11. The main source of government funding is user fees.

__ 12. The average tax rate is defined as total tax due divided by total taxable income.

__ 13. The term “unemployment” is best described as the total number of people not working.

__ 14. The labor force is defined as all individuals who are at least 16 years old and are currently employed or unemployed.

__ 15. According to the World Bank and the International Monetary Fund, China has shown the greatest rate of economic growth in the past two decades.

Multiple Choice

1. Economics is best defined as the

A) study of how people make choices to satisfy their wants.

B) study of individual self-interests.

C) study of how government can most efficiently raise funds by taxation.

D) process by which goods are sold in free markets.

2. In economics, items that are used to produce goods and services are known as

A) wants.

B) aggregates.

C) factors of need.

D) resources.

3. In economics, the term physical capital

A) refers to funds used by businesses to acquire goods and services.

B) refers to all manufactured resources used for production.

C) refers to the process of raising funds through the stock market.

D) defines the stock of merchandise already produced.

4. A man-made resource such as a building or a machine is an example of which resource?

A) entrepreneurial ability

B) labor

C) physical capital

D) human capital

5. Markets are

A) a mechanism through which prices of goods and services are determined by the forces of supply and demand.

B) specific geographic locations.

C) hypothetical constructs used to analyze how people form their tastes and preferences.

D) places where people can inspect goods and services carefully.

6. Which of the following statements is consistent with a decrease in supply?

A) Prices of raw material inputs have increased.

B) There has been an advance in technology.

C) Consumers’ incomes have increased.

D) The market price has decreased.

7. The price of a good always changes when

A) either a shortage or a surplus occurs.

B) quantity demanded and quantity supplied are constant.

C) there is an increase in demand and an increase in supply.

D) there is a decrease in demand and a decrease in supply.

8. An increase in supply causes

A) quantity supplied to decrease.

B) supply and price to increase.

C) price to decrease.

D) price to increase.

9. All of the following illustrate how government can correct for positive externalities EXCEPT

A) subsidies.

B) regulation.

C) government financing and production.

D) charging effluent fees.

10. A negative externality such as pollution can be corrected by

A) a subsidy to producers.

B) a tax on producers.

C) a subsidy to consumers.

D) a stimulus to production.

11. Over the long run, a government’s fundamental source of revenues is

A) printing money.

B) user fees and taxes.

C) exports.

D) gold sales.

12. In a proportional income tax system

A) marginal tax rates are the same regardless of the level of taxable income.

B) marginal tax rates increase as the level of taxable income increases.

C) marginal tax rates decline as the level of taxable income declines.

D) everyone pays the same dollar amount in taxes.

13. Which of the following is TRUE of unemployment?

A) It is defined as the number of people actively looking for work who do not have jobs.

B) The result is that the economy operates inside its production possibilities curve.

C) There are psychological consequences associated with unemployment.

D) All of the above.

14. To be officially counted as unemployed, a person must be

A) at least 16 years old.

B) at least 18 years old.

C) at least 21 years old.

D) any age, so long as you are looking for work.

15. The term “economic growth” refers to increases in

A) resources use.

B) nominal income.

C) satisfaction.

D) productive capacity.

Matching

__ 1. This is the study of how people make choices.

__ 2. This is the study of aggregate economic variables.

__ 3. This refers to the inability of society to satisfy all human wants because of limited resources.

__ 4. This refers to any activity that results in the conversion of resources into goods and services that can be consumed.

__ 5. This occurs when the quantity supplied is equal to quantity demanded.

__ 6. This exists in a market when the current price is below the market clearing price and the price will rise.

__ 7. This is someone who benefits from a good who does not have to contribute to paying for it.

__ 8. Under this income tax system, the marginal income tax rate paid by taxpayers rises as their incomes increase.

__ 9. This is a person who previously had a full-time job, has been paroled from prison, and has applied for a job.

__ 10. An increase in this will cause an increase in economic growth.

a. Scarcity

b. Shortage

c. Macroeconomics

d. Production

e. Progressive

f. Economics

g. Human capital

h. Equilibrium

i. Free Rider

j. Reentrant

Fill in the Blank

1. Economics can be described as the study of how people use ________ resources to satisfy ________ wants.

2. __________ measures are a total measure of a variable across the economy.

3. __________ is achieved when producers are getting the maximum possible output from the available resources.

4. In economics, _________ refers to how much of a good people will buy at any price during a given time period.

5. Tennis rackets and tennis balls are most likely to be considered ______________ goods?

6. A ________ ________ is an example of a price floor.

7. Market failures occur when ______________ exist.

8. The _____ _____ is the value of all goods, services, incomes, or wealth subject to taxation.

9. A ______________ worker is someone who is not in the labor force.

10. The _________ and __________ approaches are the two primary methods of measuring GDP.

(Word Base = compliment, limited, efficiency, tax rate, discouraged, power, expenditure, price floor, substitute, minimum wage, market, macroeconomics, tax base, demand, unlimited, terminated, income, factors of production, aggregate, externalities, price ceiling, free rider, supply, labor)