S. Payesteh ECO 203

PROBLEM SET #1

Please use Figure 1 to answer questions 1-3.

	1998	2000	2002	2004

1. In what year in Figure 1 does the economy begin a traditional demand-side recession (recession by reduction in AD)?

a. 1998 d. 2004

b. 2000 e. can't determine with given information

c. 2002

2. In what year in Figure 1 does the economy enter a period of stagflation?

a. 1998 d. 2004

b. 2000 e. can't determine with given information

c. 2002

3. In what year in Figure 1 does the economy enter a period of growth with inflation?

a. 1998 d. 2004

b. 2000 e. can't determine with given information

c. 2002

4. A demand schedule:

a. provides information about what quantity a consumer would be willing and able to purchase at each price

b. tells a buyer how may other buyers will be trying to purchase an item

c. is a schedule that regulates monthly sales of scarce goods and services

d. is of no use without its accompanying supply schedule

5. A market will experience a _____when the price is above equilibrium and a ______when the price is below:

a. shortage, shortage c. shortage, surplus

b. surplus, surplus d. surplus, shortage

6. We observe that the price of food rises and the quantity purchased also rises. This means the:

a. supply curve shifted to the left

b. demand curve shifted to the right

c. demand curve shifted to the left

d. supply curve shifted to the right

7. When GM advertises its cars, the company is trying to cause a:

a. rightward shift in the supply of cars

b. rightward shift in the demand for cars

c. leftward shift in the supply of cars

d. leftward shift in the demand for cars

8. Gross Domestic Product is a dollar measure of:

a. total investment in an economy

b. total industrial output in any given time period

c. the value of all final goods and services produced in one defined period of time

d. the value of all tangible goods produced in a defined time period

9. The most severe depression experienced by the United States was the 31 percent drop in the production of goods and services which occurred between:

a. 1929 and 1933 d. 1959 and 1963

b. 1939 and 1943 e. 1969 and 1973

c. 1949 and 1953

10. "Stagflation" is a term designating the coexistence of:

a. increases in the general price level and high levels of unemployment

b. increases in unemployment and decreases in the general price level

c. economic growth and price increases

d. depression and recession

11. When the economist says that the demand for a product has increased, he means that:

a. the demand curve has shifted to the left

b. product price has fallen and as a consequence consumers are buying a larger quantity of the product

c. the product has become particularly scarce for some reason

d. consumers are now willing to purchase more of this product at each possible price

12. Economics is best defined as:

a. how people attempt to maximize their satisfaction, given their limited incomes

b. how firms attempt to maximize their profits, given some production target

c. how prices are determined in a capitalist system

d. how people allocate scarce resources among competing wants

e. the study of how to make money

13. Macroeconomics is concerned with:

a. individual consumer behavior

b. the operation of a particular firm

c. the labor market

d. the entire economy

e. a detailed examination of how price and output decisions are made in specific markets

14. A direct relationship is one for which:

a. there is no slope

b. there is no dependent variable

c. there is no independent variable

d. the dependent and independent variables change in the same direction

e. the dependent and independent variables change in the opposite directions

15. The basic economic problem is:

a. inflation d. scarcity

b. unemployment e. lack of money

c. poverty