mid term exam econ

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Mid-term Exam Multiple Choice Questions 1. Economics is a social science that studies how individuals, institutions, and society may: A. Expand the amount of productive resources available to them B. Attain a minimum level of unemployment C. Best use scarce resources to achieve the maximum satisfaction of economic wants D. Reduce the prices of goods and services to consumers 2. The key economic concept that serves as the basis for the study of economics is: A. Inflation B. Unemployment C. Money D. Scarcity 3. A recurring theme in economics is that people: A. Have unlimited resources, but limited economic wants B. Can increase resources by limiting their economic wants C. Have limited economic wants and limited resources D. Have unlimited economic wants, but limited resources 4. As a consequence of the problem of scarcity: A. There is never enough of anything B. Individuals have to make choices from among alternatives C. Production has to be planned by government D. Things which are plentiful have relatively high prices

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Page 1: Mid Term Exam ECON

Mid-term Exam  

Multiple Choice Questions 

1. Economics is a social science that studies how individuals, institutions, and society may: A. Expand the amount of productive resources available to themB. Attain a minimum level of unemploymentC. Best use scarce resources to achieve the maximum satisfaction of economic wantsD. Reduce the prices of goods and services to consumers

 

2. The key economic concept that serves as the basis for the study of economics is: A. InflationB. UnemploymentC. MoneyD. Scarcity

 

3. A recurring theme in economics is that people: A. Have unlimited resources, but limited economic wantsB. Can increase resources by limiting their economic wantsC. Have limited economic wants and limited resourcesD. Have unlimited economic wants, but limited resources

 

4. As a consequence of the problem of scarcity: A. There is never enough of anythingB. Individuals have to make choices from among alternativesC. Production has to be planned by governmentD. Things which are plentiful have relatively high prices

 

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5. What is the economic meaning of the expression that "there is no such thing as a free lunch"? A. It means that scarce resources are used up to provide freebies and giveawaysB. It means that sometimes people may take friends out to lunch and pay for themC. It means that all items in the lunch menu have specific pricesD. It means that products only have value because people are willing to pay for them

 

6. The idea in economics that "there is no free lunch" means that: A. Businesses would go bankrupt if they offered free lunchesB. The thought of a free lunch is often better than the reality of consuming itC. There are opportunity costs involved when scarce resources are used up for free lunchesD. Businesses use free lunches to attract customers but this advertising practice is inefficient

 

7. Opportunity cost is best defined as: A. Marginal cost minus marginal benefitB. The time spent on an economic activityC. The value of the best forgone alternativeD. The money cost of an economic decision

 

8. Tammie makes $150 a day as a bank clerk. She takes off two days off work without pay to fly to another city to attend the concert of her favorite music group. The cost of transportation for the trip is $250. The cost of the concert ticket is $50. The opportunity cost of Tammie's attending the concert is: A. $600B. $450C. $300D. $50

 

9. When a state government chooses to build more roads, the required resources are no longer available for spending on public education. This dilemma illustrates the concept of: A. Production expensesB. Unemployment issuesC. Unintended consequencesD. Opportunity cost

 

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10. The opportunity cost of constructing a new public highway is the: A. Money cost of hiring contractors and construction workers for the new highwayB. Value of other goods and services that must be sacrificed to construct the new highwayC. Expected cost of constructing the new highway in a future yearD. Value of shorter driving times and distances when the new highway is completed

 

11. After graduating from high school, Ron Willis plans to go to college. The college tuition is $15,000 a year. Instead of going to college, Ron could take a full-time job that pays $20,000. If Ron decides to go to college, what is his opportunity cost of attending for one year? A. $5,000B. $15,000C. $20,000D. $35,000

 

12. The opportunity cost to a consumer who smokes cigarettes is the: A. Products that the consumer could have bought instead of cigarettesB. Costs imposed on others who inhale tobacco smokeC. Amount of tax levied on the cigarettes this consumer buysD. Cost of complementary products such as lighters, ashtrays, and cigarette holders

 

13. One major assumption of the economic perspective is: A. That scarcity is more important than choiceB. That costs are more important than benefitsC. That individuals' behavior reflect rational self-interestD. That there are scarce resources in the economy

 

14. The observation that people compare the marginal benefits with the marginal costs in making such decisions as how to spend time, which products to buy, whether or not to work, and which goods to produce and sell, is most closely associated with: A. The other things being equal assumptionB. The economic perspectiveC. Macroeconomic analysisD. Policy economics

 

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15. Which expression is another way of saying "marginal cost"? A. Scarce resourcesB. Additional costC. Opportunity costD. Unrecognized cost

 

16. Which expression is another way of saying "marginal benefit"? A. Benefits given upB. Unintended gainC. Employment benefitsD. Extra benefit

 

17. Henry wants to buy a book. The economic perspective suggests that Henry will buy the book if: A. He has enough money to pay for the marginal cost of the bookB. The marginal benefit of the book is a positive valueC. The marginal cost of the book is greater than its marginal benefitD. The marginal benefit of the book is greater than its marginal cost

 

18. From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the: A. Marginal costs of more insurance coverage is negativeB. Marginal benefits of more insurance coverage is greater than zeroC. Marginal benefits of more insurance coverage are greater than the marginal costsD. Marginal costs of more insurance coverage are equal to the payment for the extra coverage

 

19. From an economic perspective, when a student decides to attend another year of college, the student has concluded that the marginal: A. Benefits of attending college are greater than the marginal costsB. Costs of attending college has decreased that yearC. Benefits of attending college has increased that yearD. Costs of attending college will be partly subsidized by the parents or the government

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20. Competition denotes a condition where: A. The diffusion of economic power limits its potential abuseB. A given product can be purchased at a wide range of pricesC. There are significant hurdles to entering a marketD. A few large sellers are constantly jostling for market share

 

21. Which statement is correct? A. In a market system, buyers and sellers must be in face-to-face contact with each otherB. Prices affect the distribution of goods in a market system but not the allocation of resourcesC. In a market system, prices serve to ration goods and services to consumersD. The operation of a market system has little, if any, effect on the distribution of income in the economy

 

22. The construction and use of capital goods to aid in the production of consumer goods illustrates the: A. Division of laborB. Specialization of resourcesC. Coordinating and regulating function of pricesD. Roundabout but more efficient production

 

23. A characteristic of the market system is: A. Extensive use of direct methods of productionB. Extensive use of barterC. Extensive use of capital goodsD. Low interest rates

 

24. All of the following statements describe a market economy except: A. Government prescribes the desired prices for goods and servicesB. Prices serve as a signaling mechanism to buyers and sellersC. The allocation of resources is determined by their pricesD. The actions of buyers and sellers establish a product's price

 

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25. The system where workers concentrate on specialized tasks to make a product is referred to as: A. A coincidence of wantsB. Roundabout productionC. Freedom of enterpriseD. Division of labor

 

26. How does human specialization contribute to an economy's output? A. It makes use of differences in abilitiesB. It is a process of creative destructionC. It works like an "invisible hand"D. It decreases derived demand

 

27. Which of the following is not a reason why specialization and trade are beneficial to society? A. The output of economic goods may be increased even without any increase in resourcesB. Scarce resources are utilized more efficientlyC. Division of labor fosters learning by doing, thus lowering the unit-costs of productsD. Firms and workers become less dependent on others for producing goods and services

 

28. A required element of specialization is: A. A capitalist economyB. Exchange and tradeC. Free enterpriseD. Competition

 

29. Which is an example of barter? A. A person trades a desk for a box of toolsB. A person buys clothes at a used clothing storeC. A gift of tuition money from parents to their childrenD. The purchase of stock on the New York Stock Exchange

 

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30. An economic system in which money is not used is a: A. Planned economyB. Market economyC. Mixed economyD. Barter economy

 

31. Which of the following is necessary to make a trade in a barter economy? A. MoneyB. Unlimited wantsC. A medium of exchangeD. A coincidence of wants

 

32. Consider a barter system where you have pens, but you want pencils. To satisfy your want there must be: A. Money in the economyB. Easy entry into the marketC. SpecializationD. Coincidence of wants

 

33. The use of money for exchange: A. Increases the use of barterB. Encourages more specialization in productionC. Reduces consumer sovereigntyD. Raises the need for a coincidence of wants

 

34. Anything that is generally acceptable in trading for goods and services is a: A. Medium of exchangeB. Measure of valueC. Store of valueD. Token money

 

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35. All of the following would affect the position of the demand curve for personal computers, except the: A. Price of computer softwareB. Size of the populationC. Price of personal computersD. Expected future price of personal computers

 

36. If the price of ground beef increases, the demand for hamburger buns is predicted to: A. IncreaseB. DecreaseC. Remain constantD. Shift to the right

 

37. An increase in the price of product B leads to an increase in the demand for product C. This indicates that products B and C are: A. Complementary goodsB. Substitute goodsC. Inferior goodsD. Normal goods

 

38. All of the following would cause an increase in the demand for private airplanes at a given price, except a(n): A. Decrease in interest ratesB. Increase in consumer incomesC. Increase in plane faresD. Decrease in the costs of making private airplanes

 

39. When economists say that the demand for a product has decreased, they mean that: A. The demand curve has shifted to the rightB. The product has become particularly scarce for some reasonC. The product has become more expensive and thus consumers are buying less of itD. Consumers are now willing and able to buy less of this product at each possible price

 

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40. Which would have no effect on the demand for motorcycles? A. A change in buyers' incomesB. A change in the prices of carsC. A change in the cost of steelD. A change in the price of gas

 

41. An increase in the price of product G will result in a: A. Shift of the demand curve for G to the leftB. Decrease in the demand for GC. Larger quantity of G demandedD. Movement up and to the left along the demand curve for G

 

    

 

42. Refer to the above graph with three demand curves. An increase in quantity demanded would be illustrated by a change from: A. Point 4 to point 6B. Point 2 to point 1C. Point 4 to point 1D. Point 2 to point 5

 

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43. Refer to the above graph with three demand curves. A decrease in demand would be illustrated as a change from: A. Point 1 to point 4B. Point 1 to point 3C. Line C to BD. Line A to C

 

44. Refer to the above graph with three demand curves. An increase in price, other factors constant, would cause a change from: A. Point 4 to point 5B. Point 3 to point 6C. Point 1 to point 5D. Point 2 to point 4

 

45. An increase in demand is shown graphically by a: A. Shift of the demand curve to the leftB. Movement up along the existing curveC. Shift of the demand curve to the rightD. Movement down the existing curve

 

46. A decrease in demand is shown graphically as a: A. Movement down along the demand curveB. Demand curve that slopes upC. Shift of the demand curve to the leftD. Movement up along the demand curve

 

47. Which statement is true about supply? A. There is an inverse relationship between product price and quantity suppliedB. There is some price at which quantity supplied of a product is negativeC. As product price decreases, producers are willing to put more of the good on the market for saleD. To entice producers to offer more of a product on the market for sale, product price must rise

 

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48. If the price of a product decreases, we would expect: A. Demand to increaseB. Quantity supplied to decreaseC. Supply to decreaseD. Quantity demanded to decrease

 

49. An "increase in the quantity supplied" suggests a: A. Rightward shift of the supply curveB. Movement down along the supply curveC. Movement up along the supply curveD. Leftward shift of the supply curve

 

50. Suppose that a more efficient way to produce a good is discovered, thus lowering production costs for the good. This will cause a(n): A. Increase in supply, or a rightward shift of the supply curveB. Decrease in supply, or a leftward shift of the supply curveC. Increase in quantity supplied, or movement down the supply curveD. Decrease in quantity supplied, or movement up the supply curve

 

51. Which of the following is a determinant of supply? A. Tastes and preferencesB. Price of a complementary goodC. Consumer incomeD. Technology

 

52. If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the future, then this would cause a(n): A. Rightward shift in the supply of cornB. Decrease in the supply of cornC. Leftward shift in the demand for cornD. Increase in the demand for corn

 

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53. Which of the following will not cause the supply curve to shift? A. A change in the costs of resources needed to produce the goodB. A technological change in the production of the goodC. A change in the price of the goodD. A change in the prices of other goods that could be produced

 

54. Which would cause a rightward shift in the supply curve for telephone service? A. A decrease in the wages of telephone workersB. An increase in the price of telephonesC. An increase in the taxes paid by telephone companiesD. A decrease in a subsidy given to telephone companies

 

55. All of the following would affect the position of the supply curve for cranberries, except the: A. Popularity of cranberry drinksB. Price of agricultural land for cranberriesC. Cost of fertilizers for cranberry productionD. Development of a new pest control for cranberries

 

56. A leftward shift of the supply curve for oil in the United States is most likely to result from: A. A decrease in the fees that oil companies must pay for drilling licensesB. An increase in the subsidy for oil exploration and drillingC. A decrease in the world price of oilD. An increase in the costs of exploration and drilling for oil

 

57. All of the following are assumed to be constant when the supply curve for a product is drawn, except the: A. Price of the productB. State of technologyC. Number of producersD. Price of inputs used to make the product

 

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58. Because prices are sticky, positive demand shock will lead to: A. No change in unemploymentB. An increase in unemploymentC. A decrease in unemploymentD. An unpredictable change in unemployment

 

    

 

59. Refer to the graph above. Which of the following best represents a positive demand shock when prices are flexible? A. The shift from D2 to D3 in graph BB. The shift from D2 to D3 in graph AC. The shift from D2 to D1 in graph BD. The shift from D2 to D1 in graph A

 

60. Refer to the graph above. Which of the following best represents negative demand shock when prices are inflexible? A. The shift from D2 to D3 in graph BB. The shift from D2 to D3 in graph AC. The shift from D2 to D1 in graph BD. The shift from D2 to D1 in graph A

 

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61. Refer to the graph above. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. How will the firm respond to a positive demand shock if prices are inflexible? A. The firm will increase production to 650 computers per week and charge a price of $1000B. The firm will continue to produce 500 computers per week and charge a price of $1000C. The firm will cut production to 300 computers per week and charge a price of $1000D. The firm will cut production to 300 computers per week and charge a price of $600

 

62. Refer to the graph above. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. How will the firm respond to a negative demand shock if prices are flexible? A. The firm will continue to produce 500 computers per week and charge a price of $600B. The firm will continue to produce 500 computers per week and charge a price of $1200C. The firm will cut production to 300 computers per week and charge a price of $1000D. The firm will cut production to 300 computers per week and charge a price of $600

 

63. Refer to the graph above. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. What happens to the firm's inventory of computers if there is a negative demand shock and prices are inflexible? A. The firm's inventories will not changeB. The firm's inventories will increase by 200 computers per weekC. The firm's inventories will decrease by 150 computers per weekD. The firm's inventories will increase by 350 computers per week

 

64. Refer to the graph above. Suppose a firm is currently producing 500 computers per week and charging a price of $1000. What happens to the firm's inventory of computers if there is a negative demand shock and prices are flexible? A. The firm's inventories will not changeB. The firm's inventories will increase by 200 computers per weekC. The firm's inventories will decrease by 150 computers per weekD. The firm's inventories will increase by 350 computers per week

 

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65. Business cycle fluctuations typically arise because: A. The actual supply of goods and services ends up being more or less than what consumers were expectingB. The actual demand for goods and services ends up being more or less than the expected supply of goods and servicesC. The actual demand for goods and services ends up being more or less than what firms were expectingD. Prices tend to be flexible in the short run

 

66. Which of the following statements is true? A. Short-run economic fluctuations are made worse because prices are flexibleB. Short-run economic fluctuations would be less severe if prices were inflexibleC. If prices were fully inflexible, there would be no short-run economic fluctuationsD. If prices were fully flexible, there would be no short-run economic fluctuations

 

67. If prices of goods and services quickly adjust to demand shocks, then: A. Firms would find it difficult to produce at their optimal output ratesB. Output rates would quickly adjust to changes in demandC. Firms would find it easier to produce at their optimal output ratesD. The economy would experience severe short-run fluctuation

 

68. If prices of goods and services are free to quickly adjust, then: A. A negative demand shock would lead to increased unemployment in the short runB. A positive demand shock would lead to increased unemployment in the short runC. A negative demand shock would have no short-run effect on unemploymentD. There would be no short-run demand shocks

 

69. If prices of goods and services are inflexible, then: A. A negative demand shock would lead to increased real GDP in the short runB. A positive demand shock would lead to increased real GDP in the short runC. A negative demand shock would have no short-run effect on real GDPD. There would be no short-run demand shocks

 

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70. Inventories: A. Tend to increase the severity of short-run fluctuationsB. Tend to reduce the severity of short-run fluctuationsC. Are held by businesses because they are a costless way of responding to demand shocksD. Are the result of positive demand shocks

 

71. Inventories rise when: A. Actual demand for output is more than expectedB. Actual demand for output is less than expectedC. Actual supply for output is less than expectedD. Actual demand for output is about the same as expected

 

72. Suppose that inventories are rising. We could expect that, in the future A. real GDP will likely increaseB. real GDP will likely decreaseC. we can't predict what will happen to real GDPD. firms will raise prices of their goods and services

 

73. Suppose that inventories are falling. We could expect that, in the future A. unemployment will likely increaseB. unemployment will likely decreaseC. we can't predict what will happen to unemploymentD. real GDP will likely increase

 

74. Suppose that prices are sticky in the short-run. Which of the following best describes the economy's response to a negative demand shock? A. Firms' inventories will increase, causing them to cut production. Ultimately, real GDP will decrease and unemployment will increase.B. Firms' inventories will decrease, causing them to increase production. Ultimately, real GDP will increase and unemployment will decrease.C. Firms' inventories will increase, causing them to cut production. Ultimately, real GDP will increase and unemployment will increase.D. Firms' inventories will increase, causing them to cut production. Ultimately, real GDP will decrease and unemployment will decrease.

 

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75. Refer to the above data. Net exports are equal to: A. - $155 billionB. $288 billionC. - $424 billionD. $1483 billion

 

76. Refer to the above data. Gross private domestic investment is equal to what percentage of GDP? A. 10 percentB. 15 percentC. 20 percentD. 25 percent

 

77. Refer to the above data. Corporate profits are equal to: A. $442 billionB. $532 billionC. $621 billionD. $788 billion

 

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78. Refer to the above data. The net domestic product is equal to: A. $6,942 billionB. $7,336 billionC. $8,121 billionD. $9,053 billion

 

79. Refer to the above data. National income is equal to: A. $5,977 billionB. $7,304 billionC. $8,348 billionD. $9,013 billion

 

80. Refer to the above data. Personal income is equal to: A. $8,348 billionB. $8,899 billionC. $9,053 billionD. $10,446 billion

 

81. Which of the following represents an income flow in the circular flow of domestic output and national income? A. Net exportsB. Investment expendituresC. Government purchasesD. Corporate profits

 

82. That portion of corporate profits which is included in personal income is: A. DividendsB. Corporate income taxesC. Consumption of fixed capitalD. Undistributed corporate profits

 

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83. Personal income (PI) refers to all income: A. ReceivedB. EarnedC. Earned but not receivedD. Received but not earned

 

84. Personal income will equal disposable income when: A. Corporate profits are zeroB. Personal taxes are zeroC. Transfer payments are zeroD. Social Security contributions are zero

 

85. The total income earned through the use of resources, plus taxes on production and on imports, equals: A. National incomeB. Gross domestic productC. Personal incomeD. Disposable income

 

86. The amount of new output produced per year for both consumption and additions to capital stock is measured by: A. GDPB. Net investmentC. NDPD. Net exports

 

87. If the price index is 130, this means that: A. Prices are 130 percent higher than in the base yearB. Prices are .13 times that in the base yearC. Prices are 30 percent higher than in the base yearD. Nominal GDP must be inflated to determine the real GDP

 

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88. Which of the following is a correct statement? A. It is relatively easy to distinguish between cost-push and demand-pull inflation even if you don't know the source of the inflationB. A supply shock will cause a variation of demand-pull inflation that can lead to hyperinflationC. Demand-pull inflation will continue so long as there is excess total spending in the economyD. Demand-pull inflation is usually accompanied by higher unemployment rates

 

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89. Inflation caused by a rise in the prices of inputs is referred to as: A. Cost-push inflationB. Demand-pull inflationC. Unanticipated inflationD. Hyperinflation

 

90. When oil and energy prices rise, the economy tends to experience: A. Natural inflationB. Demand-pull inflationC. Cost-push inflationD. Unanticipated inflation

 

91. Only two resources, capital and labor, are used in an economy to produce an output of 600 million units. If the total cost of capital resources is $300 million and the total cost of labor resources is $100 million, then the per-unit production costs in this economy are: A. $0.67B. $1.50C. $2.00D. $3.00

 

92. In an economy, only two resources, capital and labor, are used to produce 50 units of output. If the total cost of capital resources is $125 and the total cost of labor resources is $25, then the per unit production costs are: A. $150B. $100C. $9D. $3

 

93. When total input costs rise slower than the total units of output produced, then the per-unit production costs: A. Will decreaseB. Will increaseC. Would be unaffectedD. May either increase or decrease

 

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94. If you knew that the per-unit production cost was $8 and that the total cost of inputs was $1,000, then the number of units of output would be: A. 75B. 100C. 125D. 150

 

95. Cost-push inflation tends to be characterized by all of the following, except: A. Rising general price levelB. Falling real outputC. Automatically self-limitingD. Falling unemployment

 

96. Core inflation refers to the inflation picture after stripping away the: A. Capital goods pricesB. Food and energy pricesC. Government-regulated pricesD. Service-sector prices

 

97. For a given amount of nominal income, the real income will: A. Fall if the price level risesB. Fall if the price level fallsC. Be unaffected if the price level fallsD. Rise as the price level rises

 

98. If the average level of nominal income in a nation is $44,000 and the price level index is 175, the average real income would be about: A. $18,857B. $25,143C. $44,000D. $77,000

 

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99. Real income will rise from one year to the next if nominal income: A. Falls and the price level falls fasterB. Rises and the price level rises fasterC. Falls and the price level risesD. Falls faster than the price level

 

100. In Year 1, the price level was 120 and the average nominal income was $30,000. In Year 2, the price level was 125 and the average nominal level of income was $32,000. What happened to real income from Year 1 to Year 2? A. It fell by $400B. It rose by $400C. It rose by $600D. It rose by $2,000

 

101. If a person's nominal income increases by 5% while the price level increases by 2%, then that person's real income: A. Increases by 3%B. Increases by 5%C. Decreases by 7%D. Decreases by 2%

 

102. A person's real income will increase by 3% if her nominal income: A. Increases by 5% while the price index falls by 2%B. Increases by 5% while the price index rises by 2%C. Increases by 2% while the price index rises by 5%D. Increases by 2% while the price index falls by 5%

 

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Mid-Term Exam

Department of Economics

Morgan State University

Student’s name_________________________________________________________

Instructor Charles Nwanegwo Ph.D