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Gateway Macroeconomics Exam -- Sample #1

Gateway Macroeconomics Exam -- Sample #1

 
Name: 
 

Gateway Macroeconomics Exam -- Sample #1



Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

1. 

If expected inflation is 2%, the nominal interest rate is 7% and the economy is growing at a rate of 3%, the real interest rate is equal to
 
a.
6%
b.
12%
c.
4%
d.
5%
e.
9%
  
 

2. 

The GDP deflator is
 
a.
(Real GDP x 100)/(Nominal GDP).
b.
(Nominal GDP x 100)/(Real GDP).
c.
(Nominal GDP)/(Real GDP).
d.
(Real GDP)/(Nominal GDP).
e.
none of the above.
  
 

3. 

According to the loanable funds framework, if businesses see new opportunities to expand capacity by building new factories, the likely effect will be that:
 
a.
Interest rates decrease due to an increase in borrowing.
b.
Interest rates decrease due to a greater amount of saving.
c.
There will be no change in interest rates.
d.
The total quantity of borrowing and lending will fall.
e.
None of the above.
  
 

4. 

A full-time student who did not have a job and was not looking for work would be categorized as
 
a.
employed
b.
unemployed
c.
not in the labor force
d.
marginally unemployed
e.
partially employed
  
 

5. 

Which of the following statements is consistent with the theory of liquidity preference?
 
a.
When the Federal Reserve Board of Govenors increases the money supply faster than usual, interest rates fall.
b.
When the Federal Reserve Board of Governors increases the money supply faster than usual, interest rates rise.
c.
When the Federal Reserve Board of Governors increases the money supply faster than usual, interest rates don’t change in the short run, but we will get substantial inflation.
d.
When the Federal Reserve Board of Governors increases the money supply faster than usual, interest rates don’t change in the short run, but the cost of living is likely to fall.
e.
None of the above statements are correct.
  
 

6. 

An open market purchase is where the Fed
 
a.
purchases government bonds from the public, thereby decreasing the money supply.
b.
purchases government bonds from the public, thereby increasing the money supply.
c.
increases the money supply by selling government bonds to the public.
d.
decreases the money supply by selling government bonds to the public.
e.
none of the above.
  
 

7. 

All of the following would cause a rightward shift in the short-run aggregate-supply curve except
 
a.
a change in labor laws that facilitates labor mobility and thereby raises the productivity of workers.
b.
the invention of a new and more powerful computer chip that increases productivity throughout the economy.
c.
a war that reduces the economy’s physical capital stock.
d.
new educational advances that substantially increase the level of  human capital.
e.
an increase in immigration.
  
 

8. 

Which of the following is not an example of monetary policy?
 
a.
Purchasing of government bonds in an open market operation.
b.
A change in required reserve regulations.
c.
A change in the discount rate.
d.
An increase in the earned income tax credit.
e.
Selling of government bonds in an open market operation. 
  
 

9. 

If nominal wages adjust slowly to changing economic conditions, then a decrease in the price level will cause the real wage rate to rise and employment and real output to fall. This description of the impact of  a decrease in the price level on  real output  is used to explain:
 
a.
a shift in the aggregate-demand curve.
b.
the negative slope of the aggregate demand curve.
c.
a shift in the short-run aggregate-supply curve.
d.
the vertical shape of the long-run supply curve.
e.
the positive slope of the short-run aggregate-supply curve.
  
 

10. 

According to the theory of “money neutrality” which of the following statements is likely to be true?
 
a.
When the money supply is increased, real wage rates will rise.
b.
When the money supply is increased, real interest rates will fall.
c.
When the money supply is increased, real GDP will increase.
d.
When the money supply is increased, real wage rates will fall.
e.
When the money supply is increased, nominal wage rates will rise.
  
 

11. 

If the reserve ratio is 25 percent, the money multiplier is
 
a.
2.
b.
4.
c.
5.
d.
8.
e.
25.
  
 

12. 

Private property rights
 
a.
make it more likely that a society will develop rapidly.
b.
allow an individual to decide what to do with the product of his/her labor.
c.
force a person not to help support family members in need.
d.
allow the owners of a firm to decide what to do with any profits.
e.
all but “c”.
  
 

13. 

A country will grow faster if
 
a.
investment in human capital increases.
b.
saving decreases.
c.
the government raises taxes on savings.
d.
investment in physical capital decreases.
e.
all of the above.
  
 

14. 

The aggregate supply-aggregate demand model suggests that the government can stabilize an economy that experiences a sudden and unexpected decline in consumer confidence and aggregate demand by: 
 
a.
increasing the money supply.
b.
decreasing government spending to balance the budget.
c.
raising taxes.
d.
all of the above.
e.
none of the above.
  
 

15. 

Suppose that aggregate consumption is $1,000,000, aggregate investment is $200,000, government spending is $300,000, the value of exports is $100,000, and the value of imports is $200,000.  What is the value of Gross Domestic Product (GDP)? 
 
a.
$1,800,000
b.
$1,500,000
c.
$1,400,000
d.
$1,700,000
e.
$1,600,000
  
 

16. 

If the dollar value of a country’s exports is greater than the value of its imports,
 
a.
net foreign investment is generally positive.
b.
net foreign investment is unaffected.
c.
net foreign investment is generally negative.
d.
investment flows into the country.
e.
both a and d.
  
 



 
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Gateway Microeconomics Exam -- Sample #2

Gateway Microeconomics Exam -- Sample #2

 
Name: 
 

Gateway Microeconomics Exam -- Sample #2



Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

1. 

The U.S. and China produce guns and rice. The country with the lowest opportunity cost of guns (in terms of rice) will
 
a.
import guns.
b.
have an absolute advantage in guns.
c.
export rice.
d.
have a comparative advantage in rice.
e.
have a comparative advantage in guns.
  
 

2. 

Which of the following is a correct statement about marginal cost (MC)? 
 
a.
Marginal cost is the same as average total cost.
b.
Marginal cost is the same as variable cost.
c.
Marginal cost is the same as fixed cost. 
d.
Marginal cost is the difference between fixed and variable cost.
e.
none of the above
  
 

3. 

 
 
 
Itchy
Scratchy
Bombs
10
8
Missiles
6
4
   
 
The table above shows how many bombs or missiles Itchy and Scratchy can produce in one year.  (For example, Itchy could produce 10 bombs or 6 missiles in a year.)  Which of the following is an accurate statement about absolute advantage?
 
a.
Itchy has the absolute advantage in both goods.
b.
Scratchy has the absolute advantage in both goods.
c.
No one has the absolute advantage in missiles.
d.
Itchy has the absolute advantage in bombs, while Scratchy has the absolute advantage in missiles.
e.
Itchy has the absolute advantage in missiles, while Scratchy has the absolute advantage in bombs.
  
 

4. 

When one person uses a common pool resource,
 
a.
an externality arises.
b.
other people are worse off.
c.
it is difficult to charge him or her for usage of it.
d.
that person gets the benefits of usage. 
e.
all of these answers are correct.
  
 

5. 

Producer surplus is measured by
 
a.
profits.
b.
the area above the supply curve but below the price.
c.
the area below the demand curve but above the price.
d.
the area below the supply curve.
e.
the area above the average cost curve but below the price.
  
 

6. 

If the price elasticity of demand for radios is 2.5, then a 50 percent reduction in the price of radios will lead to
 
a.
the sale of 200 additional radios.
b.
the sale of 125 percent more radios than before.
c.
the sale of 150 percent more radios than before.
d.
the sale of 50 percent more radios than before.
e.
the sale of 25 percent more radios than before.
  
 

7. 

An important implicit cost of almost every business is
 
a.
the cost of accounting services.
b.
the cost of compliance with government regulations.
c.
the return capital invested in the business could have earned elsewhere.
d.
interest payments on debt.
e.
payments to outside contractors.
  
 

8. 

Other things remaining the same, as U.S. imports increase, the quantity of     
 
a.
U.S. dollars demanded increases.
b.
foreign currency demanded decreases.
c.
U.S. dollars supplied decreases.
d.
foreign currency demanded increases.
e.
none of the above
  
 

9. 

 
 
The silverware industry has been in serious decline since the 1980s. Family dining habits are less formal so people purchase less silverware. Also, in 1979-1980, the price of silver increased from $5 to $21 per ounce. Which graph in the above figure best illustrates these developments?
 
a.
(1)
b.
(2)
c.
(3)
d.
(4)
e.
all of these figures are equally good
  
 

10. 

In 1862, the Homestead Act made land available to farmers at a price of zero. Yet many farmers preferred to purchase land along the rail line from the railroad. The farmers
 
a.
were fooled by the railroad owners.
b.
did not understand supply and demand analysis.
c.
knew the soil was better near the railroad tracks.
d.
realized it would be less costly to grow and transport crops on land near railroads.
e.
were bribed by the railroad owners.
  
 

11. 

A firm’s total cost is $10,957 when it produces a quantity of 50.  Rounded to the nearest dollar, what is the firm’s average total cost at this quantity? 
 
a.
413
b.
250
c.
219
d.
187
e.
none of the above
  
 

12. 

Wendy sells motor homes in the retail market.  She buys the motor homes from the manufacturer for a cost that does not vary with the number she purchases. She can sell six per week at $20,000 each. If she limits sales to five, she can charge $21,000 each. She will sell six per week if the cost of buying each motor home from the manufacturer is no more than
 
a.
$20,000
b.
$10,000
c.
$15,000
d.
$21,000
e.
$30,000
  
 

13. 

Suppose the price elasticity of demand for a product is infinite. This means that:
 
a.
if you increase the price 1%, revenues will increase.
b.
if you increase the price 1%, revenues will stay the same.
c.
if you increase the price 1%, revenues will fall to zero.
d.
if you increase the price 1%, profit will increase.
e.
none of the above
  
 

14. 

Which of these would cause a leftward shift of the demand for tongue piercings?
 
a.
a tongue ring fad
b.
discovery that tongue piercings can lead to infections
c.
lower price of tongue rings
d.
higher incomes among young people
e.
higher wages for tongue piercers
  
 

15. 

In a market-based economic system, the use of scarce resources
 
a.
occurs in an essentially random manner.
b.
is determined primarily by consumer demand. 
c.
does not respond to changes in preferences. 
d.
is fixed by the appropriate government agency.
e.
depends entirely on the whims of wealthy capitalists.
  
 

16. 

 
 
In the figure above, how much more than the competitive price will the monopolist charge?
 
a.
$15
b.
$3
c.
$12
d.
$2
e.
$1
  
 



 
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Gateway Microeconomics Exam -- Sample #1

Gateway Microeconomics Exam -- Sample #1

 
Name: 
 

Gateway Microeconomics Exam -- Sample #1



Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

1. 

Suppose the price elasticity of supply for a product is zero.  This means that:
 
a.
There is a shortage.
b.
The firm makes the same amount of product even if the price changes some.
c.
The firm makes the same amount of revenue even if the price changes some.
d.
No one wants to buy the good.
e.
The supply curve is horizontal. 
  
 

2. 

Tony is a wheat farmer, but he spends part of his day teaching guitar lessons. He has more students requesting lessons than he has time to teach and still maintain his farm. Tony charges $25/hr for guitar lessons. One spring day he spends 10 hours in his field planting $130 worth of seeds, which he expects will produce $300 worth of wheat. What will Tony’s economic profit equal?
 
a.
-$80
b.
$130
c.
$170
d.
$300
e.
$140
  
 

3. 

 
Refer to the figure above.  At a price of $9, the dollar value of consumer surplus is:
 
a.
$450
b.
$180
c.
$400
d.
$220
e.
$380
  
 

4. 

Which of the following most resembles a perfectly competitive market?
 
a.
wheat industry
b.
publishing industry
c.
oil industry
d.
automobile industry
e.
electricity industry
  
 

5. 

If supply and demand both shift to the right at the same time, what can we say about equilibrium price and quantity?
 
a.
both will increase
b.
price will increase, quantity may increase or decrease
c.
both will decrease
d.
quantity will increase, price may increase or decrease
e.
price will decrease, and quantity will increase
  
 

6. 

Following the events of 9/11, the airlines have been forced to increase security at a cost of $800 million per year. The number of inspectors and machines does not vary with the number of passengers -- the airlines must have sufficient staff to handle the full-capacity load. These security expenditures will
 
a.
increase MC and ATC.
b.
increase MC and leave ATC unchanged.
c.
increase ATC and leave MC unchanged.
d.
increase MC and AVC.
e.
increase MC and leave AVC unchanged.
  
 

7. 

Suppose it is discovered that drinking cranberry juice prevents the common cold.  What effect do you predict this discovery will have on the price and quantity of cranberry juice sold, other things equal?
 
a.
both price and quantity will increase
b.
both price and quantity will decrease
c.
price will increase while quantity will decrease
d.
price will decrease while quantity will increase
e.
price and quantity will both remain constant
  
 

8. 

Other things remaining the same, as Japanese imports from the U.S. increase, the quantity of
 
a.
U.S. dollars supplied increases.
b.
U.S. dollars demanded increases.
c.
yen supplied decreases.
d.
U.S. dollars demanded decreases.
e.
none of the above.
  
 

9. 

 
 
 
Perfume (bottles)
Cloth (yards)
Nancy
20
15
Roger
24
12
   
 
The table above shows how much each of two people can produce in 40 hours.  (For example, Nancy can produce 20 bottles of perfume in 40 hours.)  For Nancy, what is the opportunity cost of producing 1 bottle of perfume?
 
a.
4/3 yards of cloth
b.
3/4 yards of cloth
c.
1 yard of cloth
d.
1/4 yards of cloth
e.
1/2 yards of cloth
  
 

10. 

 
 
Quantity
TC
MC
75
5000
 
  
X
80
5100
 
   
 
The table above shows a firm's total cost and marginal cost for a range of output.  What is X equal to?
 
a.
66.7
b.
20
c.
63.75
d.
100
e.
68
  
 

11. 

Four consumers, A, B, C, and D, are each willing to pay $9, $8, $7, and $6, respectively, to buy one unit of some good. Four producers, E, F, G, and H, are each able to produce one unit of that good at a cost of $3, $4, $5, and $6, respectively. At a price of $6, what is the combined total of consumer surplus and producer surplus in this market?
 
a.
$8
b.
$9
c.
$10
d.
$11
e.
$12
  
 

12. 

 
 
Q (in units)
AFC (in dollars)
AVC (in dollars)
MC (in dollars)
0
-----
-----
-----
2
2.5
18
10
4
1.25
14
14
6
0.83
18
42
8
0.63
30
94
10
0.50
50
170
    
 
The table above shows the cost schedules of a perfectly competitive firm. If the market price of output is $50, the firm will produce _____ units and earn a profit of _____ . 
(Hint: ATC = AFC + AVC.)
 
a.
6; $187.02
b.
6; $48.00
c.
8; $154.96
d.
8; $245.04
e.
10; $0.00
  
 

13. 

Suppose the world’s iron mines are running out of ore, and new sources of iron are not being discovered.  In a market system, the users of iron (such as auto manufacturers who buy steel) will
 
a.
continue buying the same amount of iron.
b.
be surprised when the world suddenly runs out of iron. 
c.
increase their buying of iron in the long run. 
d.
decrease their use of iron in response to rising iron prices. 
e.
need a government agency to inform them of the impending iron shortage. 
  
 

14. 

 
 
Suppose the graphs above show the airline market. A general strike by American Airline pilots will probably cause changes in the market. Which panel shows these changes?
 
a.
Panel A
b.
Panel B
c.
Panel C
d.
Panel D
e.
all of the above
  
 

15. 

Jane spends an hour studying instead of working at her part time job which pays $5/hour. The opportunity cost to her of studying is
 
a.
the improvement in her grades from studying for the hour.
b.
the difference between the value she places on the improvement in her grades and the $5 she would have earned if she had worked instead of studying.
c.
the $5 she would have earned if she worked for another hour instead of studying.
d.
zero since it costs nothing to study.
e.
the increase in her earning power from getting an education.
  
 

16. 

A lighthouse is typically considered a good example of a public good because
 
a.
the owner of the lighthouse is able to exclude beneficiaries from enjoying the lighthouse.
b.
there is rarely another lighthouse nearby to provide competition.
c.
a nearby port authority cannot avoid paying fees to the lighthouse owner.
d.
all passing ships are able to enjoy the benefits of the lighthouse without paying.
e.
the more ships there are, the less light each ship gets.
  
 


 
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The 2013 Envisioning California Lecture with Larry Mantle & Raphael Sonenshein

Tuesday, April 16, 2013 - 6:30pm

Event postcard

 

The annual Envisioning California Lecture will feature KPCC AirTalk host Larry Mantle in conversation with political scientist and Director of the Pat Brown Institute at California State University Los Angeles, Raphael Sonenshein. They will discuss the future of Los Angeles politics on the eve of the 2013 Mayoral elections. Read more

Helping Families Change Conference

Wednesday, February 13, 2013 - 8:00am to Friday, February 15, 2013 - 5:00pm

Event postcard

An international conference bringing together world experts in the field of parenting and families.  Read more

Cross-Examine the Judges Night

Thursday, April 25, 2013 - 7:00pm

Black and white image of blind justice

Join us for an open forum with Los Angeles Superior Court judges. Take advantage of this unique opportunity to ask questions and get answers about your court system. Read more

Whitsett Graduate Seminar & Whitsett Lecture

Thursday, April 25, 2013 - 8:30am to 9:30pm

Event flyer

The W.P. Whitsett Endowment in the Department of History invite you to attend two events of interest including the Annual Whitsett Graduate Seminar followed by the W.P. Whitsett Lecture. Read more

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