Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative foregone when a choice is made.

Question 2

Suppose Country A can produce either 10 units of wheat or 20 units of corn with the same resources, while Country B can produce either 8 units of wheat or 16 units of corn. According to the theory of comparative advantage, which country should specialize in wheat?

Accepted Answer

Country B, because it has a lower opportunity cost in wheat.

Question 3

Which of the following is included in the calculation of Gross Domestic Product (GDP) using the expenditure approach?

Accepted Answer

Government spending on new infrastructure projects.

Question 4

If the unemployment rate is calculated as $$ 	ext{Unemployment Rate} = \frac{	ext{Number of Unemployed}}{	ext{Labor Force}} 	imes 100 $$ and there are 8 million unemployed people in a labor force of 160 million, what is the unemployment rate?

Accepted Answer

$$ 5\% $$

Question 5

Which of the following best explains why inflation can be problematic for an economy?

Accepted Answer

It reduces the purchasing power of money, making it harder for people on fixed incomes to buy goods and services.

Question 6

Suppose the economy is experiencing a recession. According to Keynesian theory, which fiscal policy action is most likely to increase aggregate demand and output in the short run?

Accepted Answer

Increasing government spending on public projects.

Question 7

Which of the following is a function of the Federal Reserve System?

Accepted Answer

Regulating the money supply and conducting monetary policy.

Question 8

If the central bank wants to decrease the money supply, which of the following actions should it take?

Accepted Answer

Sell government securities in the open market.

Question 9

Which equation correctly represents the relationship between savings and investment in a closed economy?

Accepted Answer

$$ S = I $$

Question 10

Which of the following is most likely to increase long-run economic growth?

Accepted Answer

An increase in technological innovation.

Question 11

During a business cycle, which phase is characterized by rising GDP, falling unemployment, and increasing consumer confidence?

Accepted Answer

Expansion

Question 12

If the government runs a budget deficit, what is the immediate effect on government debt?

Accepted Answer

Government debt increases.

Question 13

The Phillips Curve illustrates the relationship between which two macroeconomic variables?

Accepted Answer

Unemployment and inflation

Question 14

Suppose the aggregate demand curve shifts to the right. Which of the following is the most likely short-run effect on output and the price level?

Accepted Answer

Output increases and the price level rises.

Question 15

Which of the following would cause the long-run aggregate supply (LRAS) curve to shift to the right?

Accepted Answer

An increase in the capital stock.

Question 16

If the marginal propensity to consume (MPC) is $$0.8$$, what is the value of the spending multiplier?

Accepted Answer

$$ 5 $$

Question 17

A country experiences a negative supply shock, such as a sudden increase in oil prices. In the short run, what is the most likely effect on the economy?

Accepted Answer

Output decreases and the price level increases.

Question 18

Which of the following best describes the role of banks in the money creation process?

Accepted Answer

Banks lend out a portion of deposits, which increases the money supply through the money multiplier.

Question 19

If the aggregate demand and aggregate supply curves are given by $$ AD: Y = 5000 - 100P $$ and $$ AS: Y = 2000 + 150P $$, what is the equilibrium price level $$ P^* $$?

Accepted Answer

$$ P^* = 8 $$

Question 20

Which of the following is an example of a real-world policy that addresses long-run economic growth?

Accepted Answer

Government investment in education and research.

Economics 112: Introductory Macroeconomics Syllabus and Core Concepts

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