Question 1

-If war breaks out and the economy is at full employment,we would move from
A)W to X.
B)X to W.
C)X to Y.
D)Y to X.

Accepted Answer

In a situation where the economy is at full employment and war breaks out, the demand for goods, services, and labor typically increases to support the war effort. This increased demand can push the economy beyond its full employment level, moving it from point X (full employment) to point Y (an overheated economy or beyond full employment), indicating an increase in economic activity and potentially leading to inflationary pressures.

Question 2

Statement I.Full employment and full production mean exactly the same thing.
Statement II.You can attain full employment without attaining full production,but you cannot attain full production without attaining full employment.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Accepted Answer

Full employment means that all those who are willing and able to work are employed, but it doesn't necessarily mean that production is at its maximum capacity. On the other hand, full production means that the economy is operating at its maximum capacity and all resources are being utilized efficiently. Therefore, it is possible to have full employment without full production, but you cannot have full production without full employment. Thus, Statement II is true and Statement I is false.

Question 3

Referring to a production possibilities curve and the goods being compared,depict the economic event.The AIDS epidemic becomes rampant in America claiming millions of lives (capital goods vs.consumer goods).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

The AIDS epidemic, by claiming millions of lives, would reduce the labor force and potentially other resources, leading to a decrease in the nation's ability to produce both capital and consumer goods. This is represented by a leftward shift of the entire production possibilities curve, indicating a reduction in the economy's overall capacity.

Question 4

Referring to a production possibilities curve and the goods being compared,depict the economic event.Millions of immigrants came to the United States in the second half of the 19th century to work on the transcontinental railroad (capital goods vs.consumer goods).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

The influx of millions of immigrants to work on the transcontinental railroad would increase the availability of labor and potentially allow for the production of more capital goods (in this case, the railroad). This would cause a shift in the production possibilities curve to the right (outward).

Question 5

Referring to a production possibilities curve and the goods being compared,depict the economic event.Computerization in the 1990s launched thousands of new businesses in the United States (capital goods vs.consumer goods).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

The introduction of computerization as a capital good allowed for increased efficiency and productivity in many industries, leading to the creation of thousands of new businesses. This represents an increase in the economy's overall production capacity, resulting in a shift in the entire production possibilities curve to the right (outward).

Question 6

-Which of the following will NOT shift an economy's production possibilities curve outward?
A)An increase in technology
B)An improvement in the literacy rate
C)A reduction in the unemployment rate
D)An increase in the number of workers available

Accepted Answer

A reduction in the unemployment rate does not shift the production possibilities curve outward; it moves the economy closer to its existing curve by utilizing idle resources. In contrast, increases in technology, literacy rates, and the number of workers can expand an economy's productive capacity, shifting the curve outward.

Question 7

Referring to a production possibilities curve and the goods being compared,depict the economic event.Widespread use of the assembly line revolutionizes U.S.industry in the early 20th century (capital vs.consumer goods).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

The widespread use of the assembly line would increase the efficiency and productivity of U.S. industry, allowing for more capital goods to be produced. This would result in a shift of the entire production possibilities curve to the right (outward), indicating an increase in the maximum amount of both capital and consumer goods that can be produced.

Question 8

If the unemployment rate is 7 percent,our economy is operating
A)inside the production possibility curve.
B)on the production possibility curve.
C)outside the production possibility curve.

Accepted Answer

An unemployment rate of 7 percent indicates that there are some resources in the economy that are not being fully utilized, which suggests that the economy is operating inside the production possibility curve. If the economy were operating on or outside the curve, it would indicate that all resources were being fully utilized, and there would be no unemployment.

Question 9

Referring to a production possibilities curve and the goods being compared,depict the economic event.The literacy rate increases among workers (capital goods vs.consumer goods).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

An increase in the literacy rate among workers enhances their productivity, which can lead to an increase in the production of both capital and consumer goods. This is represented by an outward shift of the entire production possibilities curve, indicating that the economy can now produce more of both types of goods than before.

Question 10

Referring to a production possibilities curve and the goods being compared,depict the economic event.The economy moves from full employment to a serious recession (capital goods vs.consumer goods).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

A movement from a point on or near the curve to a point inside the curve represents a decrease in production due to a recession. The fact that it is a recession suggests a decrease in consumer demand, which leads to a decrease in the production of consumer goods. However, the production of capital goods may remain the same or decrease at a slower pace than consumer goods, leading to a shift from the frontier of the curve (full employment) to a point inside the curve (recession).

Question 11

Referring to a production possibilities curve and the goods being compared,depict the economic event.The bubonic plague (Black Death)in the 1300s killed one-third of Europe's population (capital goods vs.consumer goods).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

The bubonic plague significantly reduced the labor force, decreasing the capacity to produce both capital and consumer goods. This reduction in productive capacity is represented by a leftward shift of the entire production possibilities curve, indicating a decrease in the potential output of an economy.

Question 12

Referring to a production possibilities curve and the goods being compared,depict the economic event.The increase in government spending due to World War II pulls the U.S.economy out of a depression to full employment of resources (guns vs.butter).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

CA movement from a point inside the curve to a point on or near the curve (A) represents the economy moving from underutilization of resources to full employment, which is consistent with the U.S. economy's transition during World War II. Additionally, a shift in the entire curve to the right (outward) (C) indicates an increase in the economy's capacity to produce goods and services, which could result from technological advancements or an increase in resources, including labor mobilization during the war.

Question 13

Referring to a production possibilities curve and the goods being compared,depict the economic event.The SARS epidemic spreads rapidly throughout Toronto,Canada claiming millions of lives (capital vs.consumer goods).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

The SARS epidemic, by claiming millions of lives, would likely reduce the labor force and possibly disrupt production processes, leading to a decrease in the overall capacity to produce both capital and consumer goods. This is represented by a shift in the entire production possibilities curve to the left (inward), indicating a reduction in the potential output of the economy.

Question 14

If the unemployment rate is 5 percent (full employment),our economy is operating
A)inside the production curve.
B)on the production curve.
C)outside the production curve.

Accepted Answer

Full employment, or the natural rate of unemployment, occurs when there is no cyclical unemployment and the economy is producing at its maximum potential output. This means that the economy is operating on the production curve, where all available resources are being utilized efficiently. Therefore, the best choice is B.

Question 15

Referring to a production possibilities curve and the goods being compared,depict the economic event.Suppose the United States was at full employment in 2003 just before invading Iraq.Although the war was won quickly,winning the peace took a decade (guns vs.butter).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

The scenario describes a reallocation of resources from civilian goods ("butter") to military goods ("guns"), which is represented by a movement along the production possibilities curve.

Question 16

-The unemployment rate falls when we go from
A)W to X.
B)X to W.
C)X to Y.
D)Y to X.

Accepted Answer

The unemployment rate falls when we go from W to X because the number of unemployed people decreases while the labor force remains the same.

Question 17

Referring to a production possibilities curve and the goods being compared,depict the economic event.The Soviet Union entered World War II at a full employment production level (guns vs.butter).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

Entering World War II at full employment would necessitate reallocating resources from civilian (butter) to military (guns) production, represented by a movement along the production possibilities curve, not a shift of the curve itself.

Question 18

Which of the following is not an institutional constraint that limits our nation's production possibilities?
A)Blue laws that restrict bars and liquor stores from opening on Sunday
B)Restrictions on child labor
C)The fact that Americans dislike working at night or on the weekends
D)Workers who are "in between" jobs

Accepted Answer

Workers who are "in between" jobs represent a natural part of the labor market and do not constitute an institutional constraint. Institutional constraints are typically rules or laws that limit production possibilities, such as blue laws or labor restrictions.

Question 19

Referring to a production possibilities curve and the goods being compared,depict the economic event.Assuming the United States was producing at full employment levels in the late 1980s,peace breaks out as the Cold War ends (guns vs.butter).
A)A movement from a point inside the curve to a point on or near the curve
B)A movement from a point on or near the curve to a point inside the curve
C)A shift in the entire curve to the right (outward)
D)A shift in the entire curve to the left (inward)
E)A movement along the curve

Accepted Answer

The end of the Cold War and the subsequent reduction in military spending (guns) would allow resources to be reallocated to civilian goods (butter), representing a movement along the production possibilities curve rather than a shift of the curve itself. This is because the economy's resources are being reallocated between two types of goods without necessarily changing the total amount of resources or the economy's capacity to produce.

Question 20

Our nation
A)has sometimes attained productive efficiency.
B)usually attains productive efficiency.
C)never attained productive efficiency.

Accepted Answer

The use of "sometimes" implies that there have been instances where our nation has achieved productive efficiency, but it is not consistently or always achieved.

Quiz 2: Resource Utilization

-If war breaks out and the economy is at full employment,we would move from

Statement I.Full employment and full production mean exactly the same thing. Statement II.You can attain full employment without attaining full production,but you cannot attain full production without attaining full employment.

Referring to a production possibilities curve and the goods being compared,depict the economic event.The AIDS epidemic becomes rampant in America claiming millions of lives (capital goods vs.consumer goods) .

Referring to a production possibilities curve and the goods being compared,depict the economic event.Millions of immigrants came to the United States in the second half of the 19th century to work on the transcontinental railroad (capital goods vs.consumer goods) .

Referring to a production possibilities curve and the goods being compared,depict the economic event.Computerization in the 1990s launched thousands of new businesses in the United States (capital goods vs.consumer goods) .

-Which of the following will NOT shift an economy's production possibilities curve outward?

Referring to a production possibilities curve and the goods being compared,depict the economic event.Widespread use of the assembly line revolutionizes U.S.industry in the early 20th century (capital vs.consumer goods) .

If the unemployment rate is 7 percent,our economy is operating

Referring to a production possibilities curve and the goods being compared,depict the economic event.The literacy rate increases among workers (capital goods vs.consumer goods) .

Referring to a production possibilities curve and the goods being compared,depict the economic event.The economy moves from full employment to a serious recession (capital goods vs.consumer goods) .

Referring to a production possibilities curve and the goods being compared,depict the economic event.The bubonic plague (Black Death) in the 1300s killed one-third of Europe's population (capital goods vs.consumer goods) .

Referring to a production possibilities curve and the goods being compared,depict the economic event.The increase in government spending due to World War II pulls the U.S.economy out of a depression to full employment of resources (guns vs.butter) .

Referring to a production possibilities curve and the goods being compared,depict the economic event.The SARS epidemic spreads rapidly throughout Toronto,Canada claiming millions of lives (capital vs.consumer goods) .

If the unemployment rate is 5 percent (full employment) ,our economy is operating

Referring to a production possibilities curve and the goods being compared,depict the economic event.Suppose the United States was at full employment in 2003 just before invading Iraq.Although the war was won quickly,winning the peace took a decade (guns vs.butter) .

-The unemployment rate falls when we go from

Referring to a production possibilities curve and the goods being compared,depict the economic event.The Soviet Union entered World War II at a full employment production level (guns vs.butter) .

Which of the following is not an institutional constraint that limits our nation's production possibilities?

Referring to a production possibilities curve and the goods being compared,depict the economic event.Assuming the United States was producing at full employment levels in the late 1980s,peace breaks out as the Cold War ends (guns vs.butter) .

Our nation