ISBN 13: 978-1305280595

Saving is often discouraged by usury laws during inflationary periods because a. nominal rates of interest are kept above real rates of interest. b. nominal rates of interest are kept below inflation rates. c. nominal rates of interest are kept […]

Compared to an economy’s self-correcting mechanism, active contractionary fiscal policy will a. work more slowly and calmly. b. work more quickly. c. have less deflationary effects. d. have a smaller effect on real GDP. Invention is the act of generating […]

A given income-expenditure diagram always assumes a variable price level. a. True b. False As more of a good is produced, its opportunity cost tends to increase because resources are not equally efficient at producing all goods. a. True b. […]

An airline is considering adding a flight from Chicago to Sioux Falls. Total cost of the flight is $5,500. Variable cost is $2,000. Revenue from the flight is expected to be $3,000. Should the flight be added? a. No, the […]

On May 12, 2011, the U.S. dollar was worth 28 Russian rubles. How many U.S. dollars did it take to buy one Russian ruble? a. 0.01 b. 0.04 c. 0.28 d. 0.40 How will a cut in a fixed tax […]

“Rent seeking” describes the search and battle for opportunities to collect economic rents. a. True b. False In 2010, many politicians argued that the deficit should be reduced at all costs but many economists countered that deficit reduction would be […]

According to economists, one of the signs of an unhealthy economy is a(n) a. rising labor productivity. b. increasing real GDP. c. declining real GDP. d. declining unemployment. What involves taking the risks that are necessary to seek out business […]

The current debate about fiscal and monetary policy tends to focus on a. which policy is less destabilizing. b. which policy is more effective. c. whether the Fed can control the money supply. d. which policy works more quickly. Which […]

The relationship between consumption and disposable income is very unreliable and unpredictable. a. True b. False Since the debt is measured in dollars, the presence of inflation serves to understate the true level of indebtedness. a. True b. False Answer: […]

The sum of capital inflows and the trade balance must be zero. a. True b. False A liability to a bank is a. something that the bank owns. b. something that the bank owes. c. something a customer owes the […]

If short-run equilibrium GDP is above potential GDP, prices will eventually rise. a. True b. False At any given moment there is one exchange rate a. for currencies in the free world. b. between every pair of currencies. c. for […]

A monopsony is a market situation in which there is only one seller. a. True b. False Economists use the term capital to describe that factor of production that includes human-made resources such as factories, buildings, machinery and tools. a. […]

If European economies experience a strong economic recovery, U.S. net exports will a. increase and AD will shift outward. b. increase and AD will shift inward. c. decrease and AD will shift inward. d. decrease and AD will shift outward. […]

Life expectancy in the U.S.: a. is the highest in the world b. is the lowest in the world c. ranks about 100th in the world d. ranks about 40th in the world If marginal cost of an additional unit […]

Explain the effect of the following changes on equilibrium price and quantity of a commodity: (a) increase in average incomes. (b) increase in population. The construct used to demonstrate efficient use of society’s resources is the a. production possibilities frontier. […]

Prohibiting price increases in situations of true scarcity could best be described as a. interfering with the “law” of supply and demand. b. thwarting the “law” of increasing returns to scale. c. violating the “law” of increasing cost. d. interfering […]

If a currency increases in value as a result of government decree rather than market forces, the process is known as a. reflation. b. revaluation. c. appreciation. d. value-added. If marginal revenue and marginal cost are not equal, profit can […]

If workers expect inflation, and negotiate wage increases that exactly match price increases, the result is a a. horizontal aggregate supply curve at the level of potential GDP. b. vertical aggregate supply curve at the level of potential GDP. c. […]

If savings exceeds investment at full employment, demand will fall short of total output. a. True b. False Figure 4-23 In Figure 4-23, which movement will be caused by changes in income? a. A to C b. C to A […]

Efficiency in the choice of outputs requires that marginal cost be equal to marginal revenue and nothing else. a. True b. False In an ideal free unregulated market a. supply curves reflect all negative externalities. b. external benefits are abundant. […]

Bankers’ business decisions effect the money supply because bankers a. are respected men and women. b. have the ability to create money. c. use a special accounting system developed by the Federal Reserve Board. d. All of the above are […]

Economists are very good at explaining how individual markets work. Economists are less successful at explaining a. market pricing. b. recessions and inflation. c. central planning. d. business firm profits. The supply-demand mechanism will bring an international market into equilibrium […]

Government-imposed limits on price movements are likely to a. increase economic efficiency. b. decrease economic efficiency. c. leave economic efficiency unchanged. d. promote economic growth in the economy. An employer who refuses to hire women because of the chance they […]

In the short run, a perfectly competitive firm can make a profit, a loss, or shut down. a. True b. False In an ideal competitive market economy a. resources are allocated according to a person’s needs. b. resources are allocated […]

The long run for the industry is defined as a period of time long enough for a. any new firm that desires to enter the industry. b. any old firm that desires to leave the industry. c. all aspects of […]

Marginal revenue product is the a. additional revenue from one additional dollar increase in price. b. change in the revenue product resulting from one additional unit of input. c. additional revenue from one additional unit of input. d. change in […]

Profits will be maximized when the slope of the total revenue curve and the slope of the total cost curve equal zero. a. True b. False The marginal propensity to consume is calculated by dividing the change in consumer spending […]

The central idea behind the Troubled Asset Relief Program was for the Treasury to sell mortgage-backed securities to interested investors, wait for prices to increase, and then buy these securities back for a profit. a. True b. False If the […]

The price of a ride on the Washington, D.C. metro depends on the time of day you ride. This is an example of a. exploitation. b. inefficiency. c. political interference with a market. d. pricing to spread out demand. The […]

In the 2007-2009 period, the expenditure level in the United States intersected the 45-degree line below potential GDP, causing a. hyperinflation. b. a growing trade deficit. c. a government budget surplus. d. unemployment. The United States has approximately a. 80,000 […]

Whether prices or real GDP exhibit the greater response to increased aggregate demand depends on the degree of capacity utilization in the economy. a. True b. False One of the key factors in the economic success of South Korea was […]

Governments in market economies usually have significant control over a. investment spending. b. personal consumption spending. c. import spending. d. education spending. You are a collector of antique coins. You purchase a silver dollar minted in 1898. Is this sale […]

According to the quantity theory of money, a decision on the part of all business firms currently paying employees on a monthly basis to begin paying on a weekly basis would be expected to a. increase velocity and increase nominal […]

Economic theory shows that the current account deficit is always equal to the capital account surplus. This means that a. the federal budget must always be in balance. b. when a country exports more goods and services than it imports, […]

During the 1960s and early 1970s, economists believed that the Phillips curve indicated a. that higher inflation was the price for more unemployment. b. that higher levels of employment could be achieved with lower inflation. c. a menu of choices […]

The process of research and development a. always leads to useful products. b. almost never leads to useful products. c. often involves a waste of resources. d. is usually conducted in governmental laboratories. The definition of efficiency implies that production […]

The shrinking gap between the income levels of poor and rich countries is known as the a. conservative hypothesis. b. divergence hypothesis. c. convergence hypothesis. d. confluent hypothesis. Any reserves held by a bank above the amount of minimum legal […]

A public good is a. always depletable and excludable. b. always depletable and often excludable. c. never depletable and always excludable. d. never depletable and always nonexcludable. If the U.S. purchases oil from Venezuela, what is the effect in the […]

Usury laws typically regulate a. interest rates paid on savings. b. interest rates charged on loans. c. rents charged on land. d. economic rent earned in all factor markets. Government policy to reduce unemployment and increase national output can be […]

Between 1981 and 1986, as the federal budget deficit increased, a. consumption spending fell. b. investment spending was crowded out. c. net exports increased. d. net exports were crowded out. As the rate of interest on borrowed funds increases, the […]

Monetarists typically favor strong policy measures to fight recession. a. True b. False The payoff matrix is a fundamental tool of a. monopolistic competition. b. game theory. c. corporate finance theory. d. regulatory oversight. Answer: b The efficiency of the […]

It presently costs 50 Canadian dollars for a lift ticket at Whistler Ski Resort in British Columbia. If the current value of the Canadian dollar is 0.68 U.S. dollars, how many U.S. dollars does it cost to ski at Whistler? […]

Among young Americans aged 19 to 25, _____% have no health insurance. a. 11% b. 17% c. 22% d. 26% A ceiling on interest rates is likely to lead to a. an increase in lending activity. b. more rapid capital […]

If a woman marries her housekeeper, GDP would remain constant. a. True b. False The short-run equilibrium output of a competitive firm is found by equating marginal cost with price. a. True b. False Answer: True “Cream skimming” usually results […]

The reserve demand schedule is drawn on a graph that has the quantity of reserves on the horizontal axis and a. the price level is on the vertical axis. b. the federal funds rate is on the vertical axis. c. […]

The ability to shift a tax burden depends on the relative elasticities of demand and supply for the taxed commodity. a. True b. False Politicians always agree with economists about the most efficient way of doing things. a. True b. […]

The Marginal Propensity to Consume (MPC) is defined as the change in a. C over the change in DI. b. income over the change in disposable income. c. DI over the change in C. d. total income over the change […]

Which of the following usually leads to currency appreciation? a. galloping inflation b. relatively low interest rates c. declining real GDP d. fixed exchange rates The price of imported oil decreased in 2001. How did this affect the aggregate supply […]

Table 7-1 In Table 7-1, the marginal physical product of labor after the addition of the fourth worker is a. 8. b. 7. c. 10. d. 5. A factor that would reduce the ability of the Social Security system to […]

Serious environmental problems are a. unique to industrial economies. b. unique to Western economies. c. unique to civilized economies (i.e., those in which people live mainly in cities). d. None of the above is correct. Points along a budget line […]