July 28, 2015

Praxis II Economics (5911) Test Questions

1. Assume a society has a given production possibilities frontier (PPF) representing the production of guns and butter. Which of the following would cause the PPF to move outward?
a. The invention of a new machine that makes guns more efficiently
b. An increase in the production of butter
c. An increase in the production of guns
d. A decrease in the production of guns and butter
e. None of the above

2. Which of the following will result if two nations use the theory of comparative advantage when making decisions of which goods to produce and trade?
a. Each nation will make all of their own goods
b. Both nations will specialize in the production of the same specific goods
c. Each nation will specialize in the production of different specific goods
d. Neither nation will trade with one another
e. All of the above

Consider the following table to answer Question 3:

Inputs 1 2 3 4
Output 20 50 80 100

3. What does the data in this table most directly describe?
a. The Law of Diminishing Marginal Returns
b. Law of Increasing Opportunity Cost
c. Law of Demand
d. Consumer surplus
e. Marginal utility

4. Which of the following is not a part of the business cycle?
a. Expansion
b. Contraction
c. Recovery
d. Peak
e. Stagflation

5. Which of the following best defines American GDP?
a. The value, in American dollars, of all goods and services produced within American borders during one calendar year
b. The value, in American dollars, of all goods and services produced by American companies during one calendar year
c. The total value, in American dollars, of all American household incomes during one calendar year
d. The value, in American dollars, of a “market basket” of goods and services in one year divided by the value of the same market basket in a previous year multiplied by 100
e. None of the above

6. What must nominal GPD be multiplied by to arrive at real GDP?
a. GNP
b. CPI
c. Supply
d. Demand
e. A price deflator

7. Ivy loses her job because her skills as a seamstress are no longer required due to a new piece of machinery that does the work of a seamstress more quickly and for less money. Which type of unemployment is this?
a. Frictional
b. Structural
c. Cyclical
d. Careless
e. None of the above

8. Which is considered part of the natural rate of unemployment?
I. Structural unemployment
II. Frictional unemployment
III. Cyclical unemployment

a. I only
b. II only
c. III only
d. I and II only
e. I, II, and III

9. Assume that aggregate demand is at AD1 and the government borrows money and then spends that money in order to attempt to move aggregate demand to AD3. According to the theory of “crowding out,” where is AD likely to wind up?

problem9.jpga. AD1
b. AD2
c. AD3**
d. AD4
e. Any of the above

10. Which of the following statements about the long run aggregate supply (LRAS) curve is correct?
a. The horizontal part represents high levels of unemployment
b. The curved part represents high levels of unemployment
c. The vertical part represents high levels of unemployment
d. The LRAS curve is a straight, vertical line
e. The LRAS curve is a straight, horizontal line

Praxis II Economics Test Answer Key