10. When a government imposes a binding price floor on an otherwise competitive agricultural market, what is the most likely outcome?
(A) Market efficiency increases because farmers receive a guaranteed higher price.
(B) A shortage of the agricultural good develops because consumers want to buy more.
(C) Total surplus is maximized, and deadweight loss is completely eliminated.
(D) A surplus of the agricultural good develops, creating deadweight loss in the market.

11. In the loanable funds market, what is the expected outcome if the government switches from a budget surplus to a budget deficit? (A) The supply of loanable funds shifts left, raising the equilibrium interest rate. (B) The supply of loanable funds shifts right, lowering the equilibrium interest rate. (C) The demand for loanable funds shifts left, lowering the equilibrium interest rate. (D) The demand for loanable funds shifts right, lowering the equilibrium interest rate.

12. If the central bank wants to close a recessionary gap using expansionary monetary policy, what action should it take? (A) Buy government bonds to increase the money supply and lower interest rates. (B) Sell government bonds to decrease the money supply and raise interest rates. (C) Raise the discount rate to discourage commercial banks from lending. (D) Increase the required reserve ratio for all commercial banks.

13. Country A can produce either 10 computers or 20 shirts per day. Country B can produce either 5 computers or 15 shirts per day. Which of the following statements is true regarding comparative advantage? (A) Country A has a comparative advantage in shirts because it can produce more than Country B. (B) Country B has a comparative advantage in shirts because its opportunity cost of making a shirt is lower than Country A's. (C) Country A has a comparative advantage in both goods because it has higher overall productivity. (D) Country B has a comparative advantage in computers because it gives up fewer shirts to make one.

14. If a country experiences a significant depreciation of its domestic currency relative to foreign currencies, what is the most likely short-run impact on its balance of trade? (A)Imports will rise and exports will fall, creating a trade surplus. (B)Imports will fall and exports will rise, creating a trade deficit. (C)Net exports will decrease because domestic imports become cheaper for citizens. (D)Net exports will increase because domestic exports become cheaper for foreigners.

15. Which of the following transactions would be directly included in the calculation of a nation's Gross Domestic Product (GDP) for the current year? (A) A family pays a local contractor to build a new deck on their house. (B) A consumer purchases a used car from a local dealership. (C) A bakery buys flour to use in baking bread for its daily customers. (D) The government distributes Social Security checks to retired citizens.

16. According to the principle of monetary neutrality, an increase in the money supply by the central bank will change which of the following variables in the long run? (A)Real GDP (B)Real wages (C) The aggregate price level (D) All of the above

17. According to economic growth theory, which of the following is the most critical long-run determinant of a nation's standard of living? (A) The total amount of physical currency in circulation. (B) The imposition of strict tariffs to protect domestic industries from trade. (C) The ability of the country's workers to produce goods and services. (D) The frequency of government interventions to fix market prices.

18. In the long run, what forces a typical firm in a monopolistically competitive industry to earn zero economic profit? (A)Strict government price regulations that cap profit margins. (B) The absence of close substitutes, which turns the market into a monopoly. (C) Collusion among the largest firms to deliberately restrict industry output. (D) The low barriers to entry, which allow new firms to enter the market when profits exist.

19. Unlike a perfectly competitive firm, why does a profit-maximizing monopolist produce a level of output where the market price is greater than marginal cost (P > MC)? (A) The monopolist's marginal revenue curve lies entirely below its downward-sloping demand curve. (B) The monopolist faces a perfectly elastic demand curve for its unique product. (C) The government forces monopolies to charge higher prices to offset corporate taxes. (D)Monopolists aim to minimize total revenue rather than maximize total profit.

20. Suppose the current nominal exchange rate between the United States and the United Kingdom is 1.50 USD/GBP. According to the theory of Purchasing Power Parity (PPP), if over the next year the inflation rate in the United States is 5%, while the inflation rate in the United Kingdom is 2%. Assuming the real exchange rate remains constant, which of the following is the closest estimate for the new nominal exchange rate after one year? (A)1.41 USD/GBP (B)1.46 USD/GBP (C)1.54 USD/GBP (D)1.59 USD/GBP

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