American Economic History
Final Exam
Course Introduction
American Economic History explores the development of the United States' economy from colonial times to the present, examining key events, institutions, and trends that have shaped its growth and transformation. The course investigates topics such as the impact of slavery, industrialization, the growth of financial markets, migration and urbanization, the Great Depression, labor movements, government policy, and globalization. By analyzing economic data, historical sources, and scholarly interpretations, students gain a comprehensive understanding of how economic forces and decisions have influenced American society and its place in the world economy.
Recommended Textbook
Economics USA 8th Edition Edition by
Nariman Behravesh
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Page 2
Chapter 1: What is Economics
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Q1) Opportunity cost
A) is the production forgone from the best alternative use of a resource.
B) reduces the need to make choices.
C) applies only to allocating capital.
D) is another name for the "invisible hand."
E) is greater for free resources than for economic resources.
Answer: A
Q2) According to Richard Gill in the Economics U$A video,the opportunity costs for preserving the Alaskan wilderness are measured by the loss of
A) worker health benefits in textile manufacturing.
B) minerals rendered unavailable for development.
C) wilderness areas in the lower 48 states.
D) tax revenues to the federal government.
E) foreign oil because of the cutback in OPEC oil production.
Answer: B
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Chapter 2: Markets and Prices
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Q1) The Industrial Revolution was characterized by
A) significant declines in society's saving rates.
B) rapid increases in the growth rate of population relative to output.
C) falling standards of living for the majority of society.
D) considerable increases in capital.
E) a decline in technology.
Answer: D
Q2) There is neither excess supply nor excess demand when
A) actual price equals equilibrium price.
B) the quantity supplied plus the quantity demanded equals total output.
C) price equals quantity.
D) surpluses equal shortages.
E) the number of buyers equals the number of sellers.
Answer: A
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4
Chapter 3: The Business Firm: Organization,motivation,and
Optimal Input Decisions
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Q1) Person-hours of labor would be considered a(n)________ input.
A) fixed
B) variable
C) average
D) break-even
E) diminishing
Answer: B
Q2) If the marginal products of the first five units of labor are 120,105,85,60,and 30,respectively,then five units of labor can produce ________ units of output.
A) 30
B) 80
C) 90
D) 210
E) 400
Answer: E
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Page 5
Chapter 4: Getting Behind the Demand and Supply Curves
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Q1) The marginal cost of producing the first unit is
A) $5.
B) $10.
C) $16.
D) $20.
E) $30.
Q2) If the total cost of 100 units is $560 and the marginal cost of the 101st unit is $6
A) total cost will fall.
B) total fixed cost will rise.
C) total variable cost will fall.
D) average total cost will rise.
E) average variable cost will fall.
Q3) The average variable cost of producing 2 units is
A) $13.
B) $23.
C) $26.
D) $33.
E) $66.
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6
Chapter 5: Market Demand and Price Elasticity
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Q1) A recent sale at a department store advertised 50 percent price reductions on clothing.The store's clothing sales increased by 200 percent.The price elasticity of demand was
A) 0.25.
B) 0.5.
C) 1.0.
D) 2.5.
E) 4.0.
Q2) A market demand curve shows
A) what price will prevail in the marketplace.
B) how much of a commodity will be purchased in a given period of time at various prices.
C) the rate at which consumption of a commodity will increase as income goes up.
D) the minimum price consumers will have to pay to get a certain quantity.
E) that as price goes up, consumers will spend more money on a commodity.
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Chapter 6: Economic Efficiency,market Supply,and Perfect Competition
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Q1) At which price will the firm earn zero economic profits if it follows the Golden Rule of Output Determination?
A) $1
B) $2
C) $3
D) $4
E) $5
Q2) A perfectly competitive firm faces a demand curve that is
A) downward sloping.
B) horizontal.
C) greater than the market price.
D) equal to the total costs of production for each level of output.
E) nonexistent.
Q3) In the long run,perfectly competitive industries experiencing decreases in demand
A) gain firms.
B) lose resources.
C) require price controls.
D) become monopolies.
E) remain unaffected.
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Chapter 7: Monopoly and Its Regulation
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Q1) Schumpeter argues that the rate of technological change is likely to be greater in imperfectly competitive industries because imperfectly competitive firms
A) earn profits that support expenditures on research and development.
B) lack the power necessary to keep rivals from imitating their innovations.
C) have a vested interest in maintaining demand for existing products.
D) use their power to keep out rivals who would be more inclined to use new techniques.
E) are composed of a large number of independent decision-making units that are less inclined to be conservative.
Q2) In addition to misallocating resources,monopolists are also accused of
A) being slow to innovate and adopt new technologies.
B) equating average costs with demand.
C) producing more of a good than society can absorb.
D) charging the highest prices they can possibly get.
E) maximizing per unit profits rather than total profits.
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9
Chapter 8: Monopolistic Competition,oligopoly,and Antitrust Policy
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Q1) The Clayton Act outlawed
A) horizontal mergers.
B) unjustified price discrimination.
C) the rule of reason.
D) deceptive advertising.
E) "cutthroat" competition.
Q2) In 1961,major electrical equipment manufacturers were convicted of illegal practices undertaken during the 1950s,consisting primarily of
A) tying contracts.
B) collusive agreements.
C) horizontal mergers.
D) vertical mergers.
E) conglomerate mergers.
Q3) The condition whereby firms aggressively undercut one another on price is known as A) collusion.
B) perfect competition.
C) price warring.
D) profit sharing.
E) price leadership.
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Chapter 9: Pollution and the Environment
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Q1) The price system functions most effectively when
A) supply equals demand.
B) there is no divergence between private costs and social costs.
C) prices equal output.
D) external diseconomies equal external economies.
E) there is a complete absence of direct regulation.
Q2) The economic rationale behind effluent fees is
A) to eliminate all pollution.
B) to create external diseconomies.
C) to expand the role of regulatory agencies.
D) unsound because the private market system is not given the freedom to eliminate the pollution problem.
E) to bring the private cost of waste disposal closer to the social cost.
Q3) Environmental pollution is an economic problem because
A) levels of pollution decline as the rate of economic growth increases.
B) firms that maximize profits rarely pollute.
C) capitalist market economies normally minimize pollution-causing activities.
D) firms and individuals that pollute pay less than the true social cost of disposing of their wastes.
E) it is a sign that the price system is functioning in an optimal way.
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Chapter 10: The Supply and Demand for Labor
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Q1) The AFL-CIO is
A) a loose affiliation of small local unions.
B) a powerful management-sponsored organization designed to bargain with large national labor unions.
C) a government agency to mediate labor-employer disputes.
D) a federation of national unions that serves as a spokesperson for the U.S. labor movement.
E) the governing body of all U.S. labor unions.
Q2) In a union shop,workers
A) must be union members before they can be hired.
B) need not be union members to work.
C) must become union members within a certain period of time once they have been hired.
D) are not able to strike under any circumstances.
E) sign yellow dog contracts before they begin work.
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Chapter 11: Interest,rent,and Profit
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Q1) If the desire for present consumption by individuals and households increases,the supply of loanable funds will
A) shift to the right, causing the interest rate to rise.
B) shift to the right, causing the interest rate to fall.
C) shift to the left, causing the interest rate to fall.
D) shift to the left, causing the interest rate to rise.
E) be unaffected, but the demand for loanable funds will fall.
Q2) If the interest rate remains constant,the present value of a dollar
A) declines as the length of time increases before the dollar is received.
B) is unaffected by the length of time before the dollar is received.
C) rises as the length of time increases before the dollar is received.
D) is calculated by dividing the interest rate by one, raised to the power of the number of years in the future the money will be received.
E) is calculated by multiplying the interest rate per dollar by the number of dollars to be received.
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13
Chapter 12: Poverty,income Inequality,and Discrimination
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Q1) In 1996,the government replaced Aid to Families with Dependent Children (once the most important single program of welfare cash payments)with
A) a system of payments in return for work.
B) food stamps.
C) a negative income tax.
D) Medicare.
E) unemployment compensation.
Q2) Some elements of a negative income tax have been incorporated into the U.S.federal tax code in the form of
A) reduced inheritance and estate taxes.
B) unemployment compensation programs.
C) capital gains taxes.
D) the Earned Income Tax Credit.
E) the Aid to Families with Dependent Children program.
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Page 14
Chapter 13: Economic Growth
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Q1) The shift in the marginal product of labor curve shown in the diagram might be caused by
A) population growth.
B) an increase in the price of food.
C) a declining average product of labor.
D) technological change.
E) a decreasing total product of labor.
Q2) Once an economy is at full employment,further growth can occur only by A) running a budget deficit.
B) expanding the money supply.
C) promoting slack in labor markets by reducing employment.
D) increasing the capital-output ratio above its full-employment values.
E) influencing factors that cause potential output to expand.
Q3) A more rapid rate of growth can often be achieved only if A) consumers are willing to forego current consumption.
B) the government runs a budget deficit in perpetuity.
C) the level of current investment is diminished.
D) government involvement is eliminated.
E) private saving is discouraged.
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Chapter 14: Public Goods and the Role of the Government
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Q1) There appears to be some consensus that the proper economic role of government includes all of the following EXCEPT
A) providing help for those unable to care for themselves.
B) providing some public goods.
C) maintaining competition.
D) discouraging external economies.
E) maintaining a legal and social framework.
Q2) The amount of tax shifted forward onto the consumer is best illustrated by A) AB.
B) DE.
C) CE.
D) DC.
E) CF.
Q3) Government requirements that food and drug products be pure and properly labeled are an example of
A) economic stabilization policy.
B) income redistribution.
C) establishing the "rules of the game."
D) trust busting.
E) providing public goods.
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Chapter 15: National Income and Product
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Q1) Which of the following is excluded from GDP?
A) gasoline purchased for the family car
B) services performed by municipal law enforcement officials
C) the purchase of cloth by a homemaker to make draperies for the bedroom
D) steel sold to a refrigerator manufacturer
E) goods and services sold to foreigners
Q2) In an economy as complex as ours,the only way to achieve a meaningful estimate of what we produce is to
A) reduce everything to a common denominator: money.
B) consider the number of hours of labor involved in production.
C) calculate the ultimate value of each product to our social welfare.
D) count only tangible products, not intangible services.
E) aggregate all financial transactions for a given year.
Q3) A measure of the extent of production taking place in a particular firm is called
A) value added.
B) double counting.
C) a nonmarket transaction.
D) a transfer payment.
E) opportunity cost.
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Page 17
Chapter 16: Business Fluctuations and Unemployment
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Q1) The unemployment rate
A) indicates the extent to which people are unemployed.
B) measures only cyclical unemployment.
C) uses a definition of unemployment that places attention on the serious cases of joblessness.
D) measures the percent of the population that does not have a job.
E) is a measure of the jobless proportion of the labor force actively seeking employment.
Q2) If the money supply is fixed,increases in the price level
A) raise the purchasing power of the money supply and increase the amount people spend.
B) reduce the average money cost of each transaction, thus lowering total spending.
C) reduce interest rates; thus, the cost of borrowing money falls, leading to more consumption and investment.
D) raise the incentive for people to spend on big-ticket items such as appliances, automobiles, and houses.
E) increase the size of the money balances people want in order to maintain the real value of their purchases, thus causing interest rates to rise.
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Chapter 17: The Determination of National Output and the Keynesian Multiplier
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Q1) John Maynard Keynes shocked the economic world with his theory that the Great Depression could continue in a never-ending downward spiral unless government intervened.According to Keynes,the reason the economy could NOT pull itself out of the Depression was that
A) the government continued to insist on high tax rates.
B) price controls precluded business expansion.
C) we no longer had a balanced budget.
D) the lack of income had reduced aggregate demand.
E) wages and prices were much too flexible.
Q2) If the marginal propensity to consume is 0.6,a $1.2 billion increase in intended investment will increase equilibrium GDP by ________ billion.
A) $0.4
B) $0.6
C) $1.2
D) $2.5
E) $3
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Chapter 18: Fiscal Policy and National Output
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Q1) The greatest source of revenue for local governments is the ________ tax.
A) personal income
B) corporate income
C) estate and gift
D) general sales
E) property
Q2) Excluded from the list of those having primary responsibility for making fiscal policy is the
A) president of the United States.
B) Council of Economic Advisers.
C) Federal Reserve System.
D) Congressional Budget Office.
E) Joint Economic Committee of Congress.
Q3) Excessive unemployment is a sign of a(n)
A) vertical short-run aggregate supply curve.
B) automatic stabilizer.
C) rapidly increasing price level.
D) recessionary gap.
E) excessive amount of total aggregate spending.
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Page 20
Chapter 19: Inflation
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Q1) Which of the following conditions imposes the largest disincentive to speculate in precious metals and collectibles?
A) runaway inflation
B) negative real interest rates
C) price stability
D) significant increases in the general price level
E) a breakdown in the monetary system
Q2) Inflation
A) means demand is falling and supply is rising.
B) increases the value of the money supply.
C) rarely affects the distribution of income or wealth.
D) is generally highest when there is plenty of excess capacity and unemployed resources.
E) is a general upward movement in the average level of prices.
Q3) Income adjusted for changes in the price level is called ________ income.
A) fixed
B) money
C) nominal
D) current
E) real
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Chapter 20: Money and the Banking System
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Q1) The total increase in the money supply that can be achieved from a given amount of excess reserves can be found by
A) adding the excess reserve ratio to the amount of excess reserves.
B) multiplying the excess reserve ratio by the amount of excess reserves.
C) subtracting the required reserve ratio from the excess reserve ratio.
D) dividing the amount of excess reserves by the required reserve ratio.
E) adding the required reserve ratio to the excess reserve ratio and multiplying the reciprocal of the result by the amount of required reserves.
Q2) In the U.S.economy,a major deterrent to bank runs is
A) the fact that most banks keep 50 percent of their deposits as reserves.
B) government ownership of commercial banks.
C) the stock of gold owned by the government.
D) the ability of commercial banks to create money when needed.
E) the FDIC.
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22
Chapter 21: The Federal Reserve and Monetary Policy
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Q1) When the Fed buys government securities on the open market
A) the national debt increases.
B) bank deposits decrease.
C) the Treasury Department realizes a profit.
D) interest rates rise.
E) bank reserves increase.
Q2) The Fed has
A) increased bank reserves, thereby decreasing the supply of money.
B) sold government securities, thereby decreasing the supply of money.
C) sold government securities, thereby increasing the supply of money.
D) increased the national debt.
E) purchased government securities, thereby increasing the supply of money.
Q3) The Fed can decrease the money supply by
A) selling government securities.
B) raising taxes.
C) lowering reserve requirements.
D) lowering discount rates.
E) decreasing government spending.
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Chapter 22: Supply Shocks and Inflation
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Q1) A general criticism of the Kennedy-Johnson guidelines was that they A) required price reductions equal to the rate of increase in overall productivity.
B) permitted no increases in wages or prices regardless of the rate of inflation.
C) resulted in inefficiency, waste, and a loss of economic freedom over time.
D) applied solely to the steel industry, rather than to the economy at large.
E) were long-run remedies and thus of no help during emergencies.
Q2) Leftward shifts in the aggregate supply curve are expected to
A) reduce real output and raise unemployment.
B) increase real output but raise the price level.
C) increase the price level unless the money supply is allowed to increase to bring down prices.
D) leave output and employment unchanged when the aggregate demand curve intersects the aggregate supply curve's vertical range.
E) reduce output but leave the price level unchanged if the economy is at full employment.
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24
Chapter 23: Productivity,growth,and Technology Policy
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Q1) In a 1999 study,Professor Robert Gordon showed that the gains in productivity during the 1990s
A) were nonexistent when adjusted for changes in the unemployment rate.
B) occurred primarily in the traditional manufacturing sector.
C) were due entirely to gains in the high-tech sector.
D) were in line with the earlier results of a Federal Reserve Bank study.
E) matched the performance of the economy during the 1970s and 1980s.
Q2) To produce a rightward shift in the aggregate supply curve,supply-siders argue for
A) a large surplus of unemployed workers to hold down wage rates.
B) large government deficits to hold down aggregate demand.
C) higher taxes on personal and corporate incomes.
D) financial incentives to encourage additional saving.
E) a money supply that is absolutely fixed over time.
Q3) In 1840,the country with the highest per capita output was
A) the United States.
B) Canada.
C) Germany.
D) Japan.
E) England.
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Page 25
Chapter 24: Surpluses,deficits,public Debt,and the
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Q1) The national debt differs from consumer debt in that
A) no interest is paid on the national debt.
B) the national debt is of no economic consequence.
C) most of the national debt is held by foreigners.
D) the national debt influences the amount of aggregate spending.
E) the national debt need never be paid off if it is held internally.
Q2) The crowding-out effect
A) is a basic tenet of Keynesian analysis.
B) occurs when people expect prices to rise as a result of stabilization policy and take measures to raise their wages.
C) asserts that expansionary fiscal policy will bid up interest rates and reduce private spending.
D) asserts that an increase in aggregate supply will force down price levels and reduce competition for output by households and businesses.
E) states that increasing the money supply will lower interest rates, making it impossible for some borrowers to obtain adequate funds.
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Chapter 25: Monetary Policy,interest Rates,and Economic Activity
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Q1) The average number of times per year a dollar is used to make transactions for final goods and services is called the
A) price level.
B) quantity theory of money.
C) interest rate.
D) nominal GDP.
E) velocity of circulation.
Q2) An increase in the money supply
A) shifts the aggregate demand curve to the left.
B)shifts the aggregate demand curve to the right.
C) shifts the aggregate supply curve to the left.
D) shifts the aggregate supply curve to the right.
E) affects neither the aggregate demand nor the aggregate supply curve, only the interest rate.
Q3) Our money has value because
A) it is backed by gold.
B) its supply is unlimited.
C) it is guaranteed by banks.
D) people accept it in payment for goods and services.
E) it is the result of public and private debt.
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Chapter 26: Controversies Over Stabilization Policy
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Q1) Costs incurred by a firm when it changes its prices are called ________ costs.
A) opportunity
B) fixed
C) menu
D) variable
E) advertising
Q2) The new classical macroeconomists stress that output fluctuations and unemployment
A) result from random errors and cannot be minimized by government stabilization policies.
B) require rational government actions to reduce the gap between actual and potential output.
C) will disappear if most large industries are nationalized.
D) are absent in a free market capitalist economy.
E) can be minimized if all sectors of the economy rationally expect high rates of inflation.
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28
Chapter 27: International Trade
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Q1) From this information,country
A) A has an absolute advantage in petroleum.
B) A has an absolute advantage in wheat.
C) A has a comparative advantage in wheat.
D) B has an absolute advantage in petroleum.
E) B has a comparative advantage in petroleum.
Q2) Cash rebates,tax exemptions,preferential financing,and insurance arrangements are all examples of
A) prohibitive tariffs.
B) voluntary quotas.
C) export subsidies.
D) terms of trade.
E) bilateral accommodations.
Q3) From the diagrams,it can be seen that
A) country A has a comparative advantage in both commodities.
B) country B has an absolute advantage in both commodities.
C) country B has a comparative advantage in chemicals.
D) it is more costly in terms of resources to produce steel in country A.
E) the slopes of the two curves indicate both countries will specialize in chemicals.
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Chapter 28: Exchange Rates and the Balance of Payments
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Q1) The 1973 abandonment of the Bretton Woods system was largely brought about by the
A) bankruptcy of the International Monetary Fund.
B) reestablishment of the gold exchange standard.
C) appreciation of the U.S. dollar.
D) growing U.S. dollar glut in foreign exchange markets.
E) aftermath of Watergate.
Q2) Which diagram best illustrates the effect of an increase in the U.S.demand for Danish cheese and cookware?
A) A
B) B
C) C
D) D
E) E
Q3) A country's currency appreciates relative to other currencies when
A) its inflation rate exceeds that of other countries.
B) its rate of economic growth exceeds that of other countries.
C) its interest rate levels rise more rapidly than elsewhere.
D) it increases the price of gold.
E) gold flows into the country from abroad.
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