1.

According to the _____________, there is a relationship that a higher price leads to a

higher quantity supplied.
a. law of demand
b. law of supply
c. market equilibrium
d. price model

2. When quantity demanded increases because of a change in price:

a. the demand curve shifts to the right.
b. the demand curve shifts to the left.
c. there is a movement down along the demand curve.
d. There is a movement up along the demand curve.

3. At every price, a firm will produce a higher quantity of its product, and the supply curve
will shift to the right when __________________.
a. prices rise
b. equilibrium is achieved
c. input price decreases
d. there is a population increase

4. The downward slope of the demand curve illustrates the pattern that as _____________
rises,_________________ decreases.
a. quantity demanded, price
b. quantity supplied, quantity demanded
c. price, quantity demanded
d. price, quantity supplied

5. Refer to Figure 14-8.1. Suppose the figure shows the market demand for Iphone 14 from
Apple Inc. Suppose the price of Samsung Galaxy S22 Ultra, a substitute good, decreases.
Which of the following will correctly describe the change of demand of Iphone 14 that
would occur?
a. a shift from D2 to D1
b. a shift from D1 to D2
c. a movement along D2 from point B to point A
d. a movement along D2 from point A to point B

6. Double shift: Determine the new equilibrium and what happens to the price and quality?
a. New equilibrium (P2,Q2); P indeterminate, Q increases.
b. New equilibrium (P1,Q2);P decrease, Q decrease.
c. New equilibrium (P1,Q1); P increase, Q indeterminate.
d. New equilibrium (P2,Q1); P indeterminate, Q decrease.

7. Which of the following goods is more likely to be inelastically demanded?

a. Demand for Vietnamese coffee
b. Demand for cars
c. Demand for insulin
d. Demand for cereals

8. An increase in price causes an increase in total revenue when demand is

a. inelastic
b. elastic
c. unit elastic
d. All of above are possible

9. Refer to Figure 5-1. Between point A and point B, the price elasticity of demand is:

a. 0.33
b. 1.5
c. 0.67
d. 1.75

10. Thousands of apartments are being constructed in your town by real estate developers.
Should you hope that apartment demand is elastic or inelastic if you want to pay the least
amount of rent possible?
a. Inelastic
b. Elastic
c. Both of them
d. Not having enough information to conclude

11. If there is a surplus existing in a market, the actual price is

a. below the equilibrium price, and the quantity demanded is greater than the quantity
supplied.
b. above the equilibrium price, and the quantity supplied is greater than the quantity
demanded.
c. below the equilibrium price, and the quantity supplied is greater than the quantity
demanded.
d. above the equilibrium price, and the quantity demanded is greater than the quantity
supplied.

12. In a market economy, equilibrium is determined

a. when the government sets a stable price
b. by the sellers
c. by the buyers
d. through the interaction of buyers and sellers

13.The following equations are for the supply and demand of CDs in the United States (in
millions of CDs). Qd = -2P + 29; QS = 0.5P-1.
(QD = Quantity Demanded; QS = Quantity Supplied; P = Price; Y = income. Question: Calculate
the equilibrium price of CDs
a. Pe= 12
b. Pe = 10
c. Pe = 14
d. Pe =13

14. Assume a per unit sales tax ‘t’ is introduced. How is the tax shared between buyers and
sellers?
a. Customer pay ⅖ t, sellers pay ⅗ t
b. Customer pay ⅗ t, sellers pay ⅕ t
c. Customer pay ⅕ t, sellers pay ⅘ t
d. Customer pay ⅖ t, sellers pay ⅕ t

15. Refer to the graph below. At the higher price P2, consumer surplus is

a. A
b. A + B + D
c. A + B + C
d. A + B

16. Jess would be willing to pay $100 to watch Thor: Love and Thunder movie but buy a
ticker for only $20. Jess values the performance at
a. $20
b. $100 (A buyer’s willingness to pay (WTP) for a good is the maximum amount the buyer will
pay for that good. It measures how much the buyer values a good)
c. $0
d. $80

17. What is the producer surplus?

a. Difference between what consumers are willing to pay and what they do pay.
b. Difference between what consumers are not willing to pay and what they do pay.
c. Difference between what producers are willing to sell and what they do sell.
d. Difference between what producers are not willing to sell and what they do sell
.
18. Suppose the daily market for ice-cream sandwiches in Broward City as: Supply: Q =
500 (P - 2) Demand: Q = 11000 - 1000P. What is the equilibrium producer surplus (PS),
consumer surplus (CS), and total surplus (TS)?
a. PS = 4,500; CS = 9,000; TS = 13,500
b. PS = 4,000; CS = 2,000; TS = 6,000
c. PS = 3,750; CS = 8,250; TS = 12,000
d. PS = 2,225; CS = 11,750; TS = 13,975

19. Where are goods and services exchanged in the circular flow?
a. Product market
b. Households
c. Factors market
d. Businesses
20. The Money flows from Market for factors of production to Household is called:
a. Revenues
b. Wages, rent, and profit
c. Income
d. Spending

22. If households are buyers in the markets represented by Box C of this circular-flow
diagram, then

a. firms are sellers in the markets represented by Box C.

b. firms are buyers in the markets represented by Box C.
c. firms are sellers in the markets represented by Box D.
d. firms are both buyers and sellers in the markets represented by Box D.

23. Inflation can be measured by the

a. change in the consumer price index.
b. percentage change in the consumer price index.
c. percentage change in the price of a specific commodity.
d. change in the price of a specific commodity.

24. If the price level last year was 180 and this year it is 176, then there
a. was inflation of 2.3 percent.
b. there was inflation of 4.0 percent.
c. there was deflation of 2.2 percent.
d. there was a deflation of 4.0 percent.

25. The payments you make on your automobile loan are given in terms of dollars. As
prices rise you notice you give up fewer goods to make your payments.
a. The dollar amount you pay is a nominal value. The number of goods you give up is a real
value.
b. The dollar amount you pay is a real value. The number of goods you give up is a nominal
value.
c. Both the dollar amount you pay and the goods you give up are nominal values.
d. Both the dollar amount you pay and the goods you give up are real values.
26. When inflation rises people will
a. demand more money so the price level rises.
b. demand more money so the price level falls.
c. demand less money so the price level rises.
d. demand less money so the price level falls.
27. In which of the following cases was the inflation rate 12 percent over the last year?
a. CPI1 = 110, CPI2 = 120
b. CPI1 = 1200, CPI2 = 132
c. CPI1 = 134, CPI2 = 150
d. CPI1 = 145, CPI2 = 163

28. In the economy of Canada in 2020, GDP was $2500, consumption was $900, investment
was $700, government purchases were $400, and exports were $1000. What were Canada’s
imports in 2020?
a. $250
b. $1000
c. $500
d. $1500

29. Changes in Real GDP reflect:

a. changes in prices
b. changes in the quantities being produced
c. Both changes in prices and in the amounts being produced
d. Neither changes in prices nor changes in the amounts being produced

30. Refer to the below table:

2019 2020
P Q P Q
Good A 20 800 30 890
Good B 75 150 100 155

Assume that 2019 is the base year. Choose the correct answer:
a. Nominal GDP in 2020 = 29425 and Real GDP in 2020 = 42200
b. Nominal GDP in 2020 = 42200 and Real GDP in 2020 = 29425
c. Nominal GDP in 2019 = 29425 and Real GDP in 2020 = 42200
d. Nominal GDP in 2019 = 42200 and Real GDP in 2020 = 29425

31. Suppose a nation's nominal GDP was 95 million in 2021 and 70 million in 2020, and its
GDP deflator was 120 in 2021 and 110 in 2020. Based on the information, we can conclude
that from 2020 to 2021:
a. real output rose and prices fell.
b. real output fell and prices rose.
c. real output fell and prices fell.
d. real output rose and prices rose.
32. If a certain combination of goods and services lies outside the production possibilities of
an economy, which of the following is TRUE?
a. Effective trade barriers have reduced foreign imports into the economy.
b. New technology is being used in production.
c. Resources are not available to achieve that combination of goods or services.
d. Resources are not being used efficiently to achieve that combination of goods or services.
33. For Company A, the opportunity cost of 1 pair of WHITE gloves is
Pairs of WHITE gloves Pairs of BLACK gloves
per worker per hour per worker per hour
Company A
5 4
Company B
3 1

a. ⅘ pair of black gloves

b. 5/4 pair of black gloves
c. ⅘ pair of white gloves
d. 5/4 pair of white gloves

34. Refer to the table below. Assume both countries are using equal amounts of resources.
If they always produce at full employment, which of the following statements must be
corect?
Number of computers Number of coats
Country A 100 100
Country B 20 80

a. Mutually advantageous trade can occur between the two countries when I unit of coat
from Country A is exchanged for 2 computers from Country B.
b. Mutually advantageous trade can occur between the two countries when 2 units of coat
from Country B are exchanged for 1 computer from Country A.
c. Country A has an absolute and comparative advantage in the production of computers,
and Country B has an absolute and comparative advantage in the production of coats.
d. Country B has an absolute advantage in the production of both commodities, but a
comparative advantage in the production of coats.

35. You are a college student and not working or looking for work. You are:
a. unemployed.
b. in the labor force but not employed.
c. not part of the labor force.
d. not described by any of the above.

36. _________ unemployment is unemployment that occurs as workers move between jobs
a. Frictional
b. Structural
c. Natural
d. Cyclical

37. If a country has a working-age population of 200 million, 120 million people with jobs,
and 30 million people unemployed and seeking employment, then its unemployment rate is:
a. 5%.
b. 7.5%.
c. 15%.
d. 20%.

38. A bank has a 5% reserve requirement, $5000 in deposits, and has loaned out all of it
can given the reserve requirement
a. It has $25 in reserved and $4,975 in loans
b. It has $250 in reserved and $4,750 in loans
c. It has $1,000 in reserved and $4,000 in loans
d. None of the above is correct

39. A bank’s reserve ratio is 8% and the bank has $3,500 in reserve. Its deposits amount to
a. $43,750
b. $280
c. $4,375
d. $2,800

40. If the reserve ratio is 8%, the money multiplier is

a. 12.5
b. 11.5
c. 10.5
d. 8

SHORT ANSWER
1. Refer to this table:
NGDP RGDP GDP Deflator Annual Inflation Rate

2019 $30000 $30000 100

 2020 $34865 $31200 111.75

2021 $40000 $32000 125

Calculate the GDP Deflator and Annual Inflation Rate

2. Refer to this table:

Inflation
P of Apples Q of Apples P of Grapes Q of Grapes Basket CPI
rate
Year 1 2$ 125 6$ 40 620 $ 76.31
Year 2 -
2.5 85 8 75 812.5 100
base
Year 3 4 140 10 105 1090 134.15

Year 4 7 120 12 120 1495 184

Calculate CPI and Inflation Rate

3. When the price of a certain commodity is 20 the quantity demanded is 320 and the
quantity supplied is 120. If the price rises to 40 then the quantity supplied rises to 360, but
the quantity demanded drops to 160.
a. Then the market equilibrium price is ________ and the equilibrium quantities demanded and
supplied is ________.
b. Suppose that there is a double shift of demand and supply to the right, then
- Equilibrium quantity will ________.
- Equilibrium price will ________.

4. Given the following table

Total population of Morningstar country

Demographic group Number of residents

Employed 5,000
Unemployed and looking for work 1,000
Not working due to disability 200
 Not working due to retirement 700
Unemployed and not looking for work 500
Under the age of 16 2,000
Total population 9,400

a. How many people are in the labor force in the county?

b. What is the labor force participation rate in the county?
c. What is the unemployment rate in the county?
d. If discouraged workers are included in the labor force, what is the labor force in
Morningstar County?
e. If discouraged workers are included in the labor force and in the unemployment
rate, what is the unemployment rate in this economy?