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1) The World Trade Organization was established by the United States to force other nations to open their markets to U.S. goods. 2) All illegal immigrants enter the U.S. and arrive here illegally. Answer: FALSE 3) Investment is highly stable; […]

1) Dictators/proposers tend act more self-interested when playing the dictator game versus the ultimatum game. 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 […]

1) Saving is a larger percentage of domestic output in DVCs than in IACs, but the saving is put to poor use. 2) The equivalent of the aggregate supply curve in the aggregate expenditures model is the 45-degree line. Answer: […]

1) In game theory, credible threats can be used to maintain collusive agreements between firms. 2) A budget deficit will require the government to issue bonds to fill in the gap in the budget. Answer: TRUE 3) When U.S. households […]

1) Consumer surplus is the reason why sometimes a shopper regrets having bought a particular item. 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 […]

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

1) A decrease in the supply of loanable funds would tend to lower the interest rate. 2) Being a “jack-of-all-trades” implies reducing the reliance on the division of labor. Answer: TRUE 3) In the short run, firms are more likely […]

1) The crowding-out effect will be minimal when the economy is in a severe recession. 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 […]

1) A decline in the real interest rate will shift the investment demand curve to the right. 2) In a purely competitive labor market, a profit-maximizing firm will hire labor up to the point where the marginal resource cost equals […]

1) The appeal to government for special benefits at taxpayers’ or someone else’s expense is the paradox of voting. 2) When you use money to purchase groceries, money is functioning as a store of value. Answer: FALSE 3) A business […]

1) Health maintenance organizations (HMOs) are like health clubs that operate facilities where people can exercise and get physical training. 2) In a well-functioning cap-and-trade system for pollution rights, the right to pollute will go to those who are able […]

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. 2) When a nation is experiencing a balance-of-payments deficit, its treasury or central bank will engage in […]

1) Entrepreneurship refers to a new college graduate who is looking for a job with a large company. 2) Technological advances have occurred throughout the history of agriculture, resulting in higher productivity but lower incomes to farmers. Answer: TRUE 3) […]

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. 2) U.S. exports to Japan create a supply of dollars and a demand for yen […]

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

1) The Lorenz curve is a graph that relates income to household spending. 2) Profits are the primary ‘success indicator” for firms in a centrally planned economy. Answer: FALSE 3) When the total product is at its maximum level, the […]

1) The modern view of technological advance is that it is an external force to which the economy adjusts. 2) An expansionary monetary policy will shift the Security Market Line down. Answer: TRUE 3) The equation of exchange indicates that […]

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%. 2) In the extraction of a nonrenewable resource such as coal, the mining firm […]

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. 2) In the balance of […]

1) As long as government officials have to be elected, they are always held accounted for their policy decisions and choices. 2) The “hedonic treadmill” of prospect theory suggests that if people’s incomes rise and stay at the new higher […]

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. 2) Corporate income taxes contribute more to Federal tax revenues than do personal income […]

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. 2) China’s GDP per person in 2011 was about one-third of U.S. GDP per person […]

1) In a natural monopoly case, the socially-optimal pricing policy rule will often yield a higher price than the fair-return pricing rule. 2) When the government bails out large banks when the banks become unstable, it could lead to a […]

1) Insurance companies are a major category of financial institutions. 2) Official unemployment statistics overstate unemployment because discouraged workers who are not actively seeking work are counted as unemployed. Answer: FALSE 3) The maximum deposit creation that can be made […]

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. 2) College graduates who dislike business risk will mostly seek […]

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. 2) The ‘stimulus package” that the government implemented in response to the Great Recession […]

1) A surplus indicates that the quantity demanded is greater than the quantity supplied at that price. 2) Answer the question on the basis of the following information. Assume that by devoting all its resources to the production of X, […]

1) The budget line shows the various incomes that an individual can earn from different jobs. 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 […]

1) The Laffer Curve indicates that lower tax rates will increase output. 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 3) Prices tend […]