ISBN 13: 978-0078021756

1) If you received a 4% increase in your nominal wage and the price level increased by 6%, then your real wage has increased by 2%. Answer: FALSE Answer: FALSE Answer: FALSE 2) In the extraction of a nonrenewable resource such as coal, the mining firm faces "user costs" which refer to the cost

1) The crowding-out effect will be minimal when the economy is in a severe recession. Answer: TRUE Answer: TRUE Answer: TRUE 2) Public regulation rather than public ownership has been the primary means used in the United States to ensure that the behavior of natural monopolists is socially acceptable. Answer: TRUE Answer: TRUE Answer: TRUE 3) The oil

1) The compound interest formula states that if X dollars is invested today at an interest rate i and allowed to grow for t years, it will become X(1 + i)(t) dollars in t years. Answer: FALSE Answer: FALSE Answer: FALSE 2) In the balance of payments statement, a current account deficit is always

1) Health maintenance organizations (HMOs) are like health clubs that operate facilities where people can exercise and get physical training. Answer: FALSE Answer: FALSE Answer: FALSE 2) In a well-functioning cap-and-trade system for pollution rights, the right to pollute will go to those who are able to acquire the largest net benefit from using the

1) If the cyclically-adjusted budget has a zero deficit but the actual budget has a $100 billion deficit, then that means that the government is pursuing an expansionary fiscal policy. Answer: FALSE Answer: FALSE Answer: FALSE 2) College graduates who dislike business risk will mostly seek to be hired by firms as labor, rather

1) The appeal to government for special benefits at taxpayers' or someone else's expense is the paradox of voting. Answer: FALSE Answer: FALSE Answer: FALSE 2) When you use money to purchase groceries, money is functioning as a store of value. Answer: FALSE Answer: FALSE Answer: FALSE 3) A business firm will purchase additional capital goods if the

1) Dictators/proposers tend act more self-interested when playing the dictator game versus the ultimatum game. Answer: TRUE Answer: TRUE Answer: TRUE 2) In a two-nation two-good world, if one nation is more efficient in producing both goods than the other nation, then the more-efficient nation cannot gain from trading with the other nation. Answer: FALSE Answer:

1) The modern view of technological advance is that it is an external force to which the economy adjusts. Answer: FALSE Answer: FALSE Answer: FALSE 2) An expansionary monetary policy will shift the Security Market Line down. Answer: TRUE Answer: TRUE Answer: TRUE 3) The equation of exchange indicates that an increase in money supply will always lead

1) Saving is a larger percentage of domestic output in DVCs than in IACs, but the saving is put to poor use. Answer: FALSE Answer: FALSE Answer: FALSE 2) The equivalent of the aggregate supply curve in the aggregate expenditures model is the 45-degree line. Answer: TRUE Answer: TRUE Answer: TRUE 3) Monetarists argue that government policy interference

1) The Laffer Curve indicates that lower tax rates will increase output. Answer: FALSE Answer: FALSE Answer: FALSE 2) Supply-side economists contend that aggregate supply is the relevant policy factor in influencing the price level and real output in an economy. Answer: TRUE Answer: TRUE Answer: TRUE 3) Prices tend to be sticky partially because sellers know that

1) Entrepreneurship refers to a new college graduate who is looking for a job with a large company. Answer: FALSE Answer: FALSE Answer: FALSE 2) Technological advances have occurred throughout the history of agriculture, resulting in higher productivity but lower incomes to farmers. Answer: TRUE Answer: TRUE Answer: TRUE 3) The two most important investor preferences are a

1) In 2008-2009, the U.S. economy lost 8 million jobs and saw the unemployment rate rise from 4.6 percent to as high as 10.1 percent. Answer: TRUE Answer: TRUE Answer: TRUE 2) China's GDP per person in 2011 was about one-third of U.S. GDP per person in the same year. Answer: FALSE Answer: FALSE Answer: FALSE 3) The

1) A decrease in the supply of loanable funds would tend to lower the interest rate. Answer: FALSE Answer: FALSE Answer: FALSE 2) Being a "jack-of-all-trades" implies reducing the reliance on the division of labor. Answer: TRUE Answer: TRUE Answer: TRUE 3) In the short run, firms are more likely to respond to demand shocks by altering inventory

1) If the newspapers report that there is a shortage of strawberries, it must mean that the current price of strawberries is below the equilibrium price. Answer: TRUE Answer: TRUE Answer: TRUE 2) Corporate income taxes contribute more to Federal tax revenues than do personal income taxes. Answer: FALSE Answer: FALSE Answer: FALSE 3) As of 2012, more than

1) Transfer payments that increase as GDP falls are a type of automatic stabilizer in the economy. Answer: TRUE Answer: TRUE Answer: TRUE 2) When QE2 and Operation Twist were implemented, the Fed suspended its policy of forward commitment. Answer: FALSE Answer: FALSE Answer: FALSE 3) Recent studies indicate that as the price of a barrel of oil

1) A surplus indicates that the quantity demanded is greater than the quantity supplied at that price. Answer: FALSE Answer: FALSE Answer: FALSE 2) Answer the question on the basis of the following information. Assume that by devoting all its resources to the production of X, nation Alpha can produce 20 units of X. By

1) As long as government officials have to be elected, they are always held accounted for their policy decisions and choices. Answer: FALSE Answer: FALSE Answer: FALSE 2) The "hedonic treadmill" of prospect theory suggests that if people's incomes rise and stay at the new higher level, then their feelings of satisfaction also rise

1) If a particular R&D expenditure is expected to be worthwhile, the firm should undertake it because the project will definitely increase the firm's future profits. Answer: FALSE Answer: FALSE Answer: FALSE 2) The 'stimulus package" that the government implemented in response to the Great Recession of 2007-09 made the cyclically-adjusted budget of the

1) In game theory, credible threats can be used to maintain collusive agreements between firms. Answer: TRUE Answer: TRUE Answer: TRUE 2) A budget deficit will require the government to issue bonds to fill in the gap in the budget. Answer: TRUE Answer: TRUE Answer: TRUE 3) When U.S. households buy new imported European and Japanese cars, the

1) In a natural monopoly case, the socially-optimal pricing policy rule will often yield a higher price than the fair-return pricing rule. Answer: FALSE Answer: FALSE Answer: FALSE 2) When the government bails out large banks when the banks become unstable, it could lead to a moral hazard problem. Answer: TRUE Answer: TRUE Answer: TRUE 3) In purely competitive

1) A decline in the real interest rate will shift the investment demand curve to the right. Answer: FALSE Answer: FALSE Answer: FALSE 2) In a purely competitive labor market, a profit-maximizing firm will hire labor up to the point where the marginal resource cost equals the wage rate. Answer: FALSE Answer: FALSE Answer: FALSE 3) Recognition heuristics

1) The World Trade Organization was established by the United States to force other nations to open their markets to U.S. goods. Answer: FALSE Answer: FALSE Answer: FALSE 2) All illegal immigrants enter the U.S. and arrive here illegally. Answer: FALSE Answer: FALSE Answer: FALSE 3) Investment is highly stable; it increases over time at a very steady

1) A monopsonist faces an upsloping supply curve of labor, but it could face a horizontal demand curve for its product in the output market. Answer: TRUE Answer: TRUE Answer: TRUE 2) U.S. exports to Japan create a supply of dollars and a demand for yen in the foreign-exchange market. Answer: FALSE Answer: FALSE Answer: FALSE 3) A

1) The largest factor that raised labor productivity in the U.S. economy since the 1950's has been the increased amount of capital available. Answer: FALSE Answer: FALSE Answer: FALSE 2) When a nation is experiencing a balance-of-payments deficit, its treasury or central bank will engage in a net sale of its official reserves. Answer: TRUE Answer:

1) The Lorenz curve is a graph that relates income to household spending. Answer: FALSE Answer: FALSE Answer: FALSE 2) Profits are the primary 'success indicator" for firms in a centrally planned economy. Answer: FALSE Answer: FALSE Answer: FALSE 3) When the total product is at its maximum level, the marginal product is zero. Answer: TRUE Answer: TRUE Answer: TRUE 4) When

1) Insurance companies are a major category of financial institutions. Answer: TRUE Answer: TRUE Answer: TRUE 2) Official unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed. Answer: FALSE Answer: FALSE Answer: FALSE 3) The maximum deposit creation that can be made in the banking system is equal to the

1) A price-discriminating monopolist will set a higher price where demand is more elastic and a lower price where demand is less elastic. Answer: FALSE Answer: FALSE Answer: FALSE 2) Mutually-cancelling advertising by oligopolistic firms tend to improve economic efficiency in the industry. Answer: FALSE Answer: FALSE Answer: FALSE 3) Economists widely agree that the value of the

1) Consumer surplus is the reason why sometimes a shopper regrets having bought a particular item. Answer: FALSE Answer: FALSE Answer: FALSE 2) One implication of the median-voter model as applied to a vote regarding how much government involvement to have in the economy is that most voters would find the resulting government involvement

1) The budget line shows the various incomes that an individual can earn from different jobs. Answer: FALSE Answer: FALSE Answer: FALSE 2) One implication of the Laffer Curve in supply-side arguments is that cutting taxes may actually reduce the budget deficit, contrary to what traditional economics teaches. Answer: TRUE Answer: TRUE Answer: TRUE 3) When corporations use