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In the debate between the monetarists and the Keynesians over how best to achieve economic stability, Keynesians have tended to emphasize the role of a. aggregate supply shifts. b. economic dualism. c. random events. d. the federal budget. e. the […]

The following questions are based on the following information. Country A can produce either 10,000 barrels of petroleum or 12,000 bushels of wheat with one unit of its resources. Country B can produce either 7,000 barrels of petroleum or 15,000 […]

A yellow dog contract is an agreement a. by labor not to strike. b. by employers not to participate in a lockout. c. in which a worker agrees not to join a union. d. to engage in pattern bargaining. e. […]

When the social costs of using a resource exceed the private costs a. that resource is underutilized. b. use of that resource becomes unprofitable. c. the price of that resource is bid up. d. an external diseconomy exists. e. there […]

When computing GDP via the income approach, we must include a. exports minus imports. b. gross investment. c. depreciation and indirect business taxes. d. household savings and consumption. e. government purchases of goods and services. Which of the following best […]

Pollution-generating companies tend to overproduce because a. consumers want something as compensation for the pollution. b. the supply curve of the firm incorporates only the private costs of production. c. the private costs exceed the social costs. d. consumers pay […]

The marginal propensity to consume is the a. fraction of an extra dollar of GDP that becomes disposable income. b. share of GDP spent by households and businesses. c. proportion of an extra dollar of disposable income that is spent […]

One reason why it is difficult to reform an existing welfare system is that a. the people who provide these services currently are not willing to see their programs eliminated. b. any reform provides disincentives to both taxpayers and welfare […]

From the standpoint of society, a stable Phillips curve indicates that a. it is possible to have lower rates of inflation and unemployment simultaneously. b. policies to increase employment also increase the price level. c. wage increases that exceed productivity […]

Fine-tuning the economy a. is made difficult because of the problem of forecasting the many destabilizing events that regularly occur. b. has rendered business fluctuations obsolete. c. became more effective since econometric models were replaced by the leading indicators. d. […]

Increases in the price level accompanied by reductions in total real output mean that the economy is experiencing a. leftward shifts in the aggregate demand curve. b. full employment. c. technological advances leading to increased productivity. d. leftward shifts in […]

The following questions are based on the following diagram of a monopolist: For this monopolist, the profit-maximizing price is a. 0. b. 0D. c. 0E. d. 0F. e. above 0F. The Taft-Hartley Act a. established the eight-hour workday and additional […]

If the actual federal budget shows a deficit but the structural budget deficit is falling, economists would conclude that a. the structural deficit is based on an incorrect estimate of potential output. b. the actual budget deficit should be revised […]

The following questions are based on the following graph: Cost divided by output is ________ cost. a. marginal b. average c. total d. deflated e. sunk Ampere Electronics estimates that it costs $50,000 to change its catalogs, price lists, and […]

Supply-side government policies emphasize measures to a. increase total real output while reducing the price level. b. shift aggregate demand to the classical range of the supply curve. c. shift the aggregate supply curve to the left. d. increase taxes […]

If monetary authorities ease credit or money, ________ will rise. a. interest rates b. unemployment c. tax rates d. the money supply e. the gold supply Large federal government budget deficits financed by foreign lenders tend to a. depress net […]

The most efficient way of reducing greenhouse gases is a. discouraging attempts to develop alternative energy sources. b. subsidizing “green” fuels. c. implementing carbon taxes. d. outlawing smog-producing industries. e. giving away cap-and-trade permits instead of auctioning them. An effluent […]

Excluded from the list of those having primary responsibility for making fiscal policy is the a. president of the United States. b. Council of Economic Advisers. c. Federal Reserve System. d. Congressional Budget Office. e. Joint Economic Committee of Congress. […]

When the oil-exporting countries of the Middle East raised the price of crude oil very sharply, tens of billions of dollars were transferred from the oil-consuming to the oil-exporting nations. From this one can conclude that a. there is no […]

Intended investment in a given year a. leads to stagflation in a subsequent year. b. reduces the productivity of the labor force. c. raises the following year’s full-employment level of GDP. d. reduces the amount of investment possible in a […]

A paper mill that degrades river water while producing its product creates a divergence between private and social costs if, and only if, the a. mill treats the water to restore its quality before returning it to the river. b. […]

The following questions are based on the following data for a monopolist: The profit-maximizing price is a. above $5. b. $5. c. between $4.50 and $5. d. below $4.50. e. impossible to determine; more information is needed. For a market […]

A significant cost of economic growth is a. increased consumer satisfaction. b. higher levels of per capita output. c. increased leisure time. d. environmental pollution. e. economies of scale. U.S. antitrust laws and their enforcement a. reflect the principle that […]

The following questions are based on the following table showing the supply curves of the five individual firms constituting the rutabaga market in a small community. Assume that simultaneous changes in output by all firms do NOT affect input prices. […]

The following questions are based on the following graph, showing the market for pesos. Mexico and the United States are engaged in a system of flexible exchange rates. If more people in the United States decide to purchase Mexican goods, […]

If intended spending is greater than GDP a. firms will experience unexpected increases in their planned inventory levels. b. consumption expenditures must be greater than disposable income. c. firms will attempt to increase production. d. GDP will fall. e. the […]

When firms get together and agree on prices and output, it is called a. price leadership. b. the rule of reason. c. monopolistic competition. d. collusion. e. intermediation. An external diseconomy results in a socially nonoptimal use of a resource […]

Wage and price controls and incomes policies are a. techniques used to increase aggregate demand without increasing aggregate supply. b. methods used by government to try to reduce inflation without increasing unemployment. c. examples of discretionary monetary policies. d. currently […]

Wage and price controls and income policies are techniques advocated to a. shift the Phillips curve to the left. b. shift the aggregate supply curve to the left. c. shift the 45-degree line to the left. d. shift the production […]

If the velocity of circulation is seven and the money supply declines by 10 percent, nominal GDP declines by ________ percent. a. 0 b. 3 c. 7 d. 10 e. 70 Shown in this diagram are demand and supply conditions […]

In a simple circular flow model of an economy a. households buy factors of production from businesses. b. the flow of income to households from businesses is greater than the flow of expenditures by households for goods produced by businesses. […]

An upward shift in the consumption function a. results if people decide they want to save more. b. has the same kind of multiplier effect as an increase in investment. c. occurs if people’s incomes rise. d. raises the average […]

The following questions are based on the following graph, showing short-run supply and demand curves for a perfectly competitive market. The initial supply curve is labeled “Supply” and the initial demand curve is labeled “Demand.” Price 0A and output rate […]

A firm’s total output divided by the amount of input used to produce it is the ________ of the input. a. cost b. supply c. average product d. marginal product e. combined product When a price decrease produces a decline […]

The following questions are based on the following rates of return for five independent investment projects: A 2 percent increase in the interest rate might result in canceling the decision to undertake project a. A. b. B. c. C. d. […]

The model of perfect competition is useful because a. most firms in the real world are perfectly competitive. b. perfectly competitive firms exert significant pricing power. c. government regulation is designed to eliminate perfect competition. d. it is a model […]

The Glow-in-the-Dark Lamp Company produces 3.2 million light bulbs per year at a per unit cost of $0.50. If its total variable cost is $1.2 million, its a. marginal cost is $0.375. b. total fixed cost is $400,000. c. average […]

Demand-side and supply-side inflations differ in that, in one case a. total real output rises, and in the other, it falls. b. the price level rises, and in the other, it falls. c. borrowers benefit, and in the other, savers […]

If for a firm the price of input A is four times the price of input B, costs will be minimized for a given level of output when the a. firm uses four times as much input A as input […]

The following questions are based on the following diagram: Point C represents the a. highest cost of pollution. b. average cost of pollution. c. optimal level of pollution d. absence of pollution. e. point where the costs of pollution equal […]

The profit of a monopolist facing a downward-sloping demand curve typically a. rises steadily as the monopolist increases the price. b. rises steadily as the monopolist reduces the price. c. first rises as the monopolist reduces the price, then falls. […]

The following questions are based on the following graph, which shows two different Phillips curves, labeled (1) and (2): Phillips curve (2) could shift up to curve (1) as a result of a. the decreased bargaining power of unions. b. […]

A significant increase in the toll rates on a major turnpike leads to an increase in the a. number of vehicles using the turnpike. b. demand for vehicle and food services provided by the turnpike service areas. c. demand for […]

The fear that continued growth at current rates will exhaust basic resources is diminished by a. data contained in the Club of Rome’s The Limits to Growth report. b. the knowledge that amounts of the most basic resources are virtually […]

Goods and services produced in other countries and sold to U.S. residents are called a. extracts. b. implants. c. exurbs. d. imports. e. exports. To say that a tax is progressive means that a. the receipts from the tax are […]

Using monetary policy to help eliminate an inflationary gap a. shifts the aggregate supply curve to the right. b. is ineffective if the short-run aggregate supply curve is very steep. c. leads to an increase in unemployment, at least temporarily. […]

Balancing the government’s budget every year a. is necessary because all debts eventually come due. b. is a fundamental tenet of Keynesian economics. c. is sensible for the same reasons as is balancing the family budget. d. makes it difficult […]

The purchase of a new living room sofa from a major furniture store would be explicitly counted when computing the gross domestic product by the ________ approach. a. income b. expenditures c. surplus value d. intermediate product e. standard of […]

To ensure the acceptability of money, a government must a. back it with gold or silver. b. create enough of it so people can purchase all the goods they want and need. c. limit its quantity relative to output. d. […]

The phase of the business cycle in which output is highest relative to its potential level is the a. peak. b. trough. c. recession. d. expansion. e. trend. The following questions are based on the following information. On June 1, […]

The following questions are based on the following diagram of a monopolist: If the monopolist is currently producing 0A and wants to maximize profits, it should a. do nothing because it is maximizing profits. b. decrease output to zero. c. […]

A major contribution to economic growth comes from a. increases in the labor-output ratio. b. a growing proportion of youths and unskilled people in the labor force. c. runaway inflation. d. expansions in the level of government regulation. e. expenditures […]

Leftward shifts in the aggregate supply curve are expected to a. reduce real output and raise unemployment. b. increase real output but raise the price level. c. increase the price level unless the money supply is allowed to increase to […]

The U.S. government’s fiscal year runs from a. January 1 to December 31. b. April 15 to April 14. c. June 1 to May 31. d. October 1 to September 30. e. December 1 to November 30. A market consisting […]

Propositions in positive economics a. can be tested by comparisons with facts. b. yield results that depend on individual values or preferences. c. are rarely agreed to by both conservative and liberal economists. d. make statements about what ought to […]

The following questions are based on the following demand schedule for wheat: In this range, the demand for wheat is a. perfectly elastic. b. of unit elasticity. c. price inelastic. d. arc elastic. e. invariant. The following questions are based […]

The following questions are based on the following diagram illustrating the results of a study of food expenditures and income for a group of families: If a graph of two variables shows a downward-sloping relationship, that relationship is considered to […]

If the Fed accommodates a leftward shift in the aggregate supply curve a. real output will fall. b. the price level will rise considerably. c. the aggregate demand curve will shift downward to the left. d. the Phillips curve will […]

Statements, propositions, or predictions about economic issues that can be tested in principle by an appeal to the facts are called ________ economics. a. positive b. passive c. normative d. mechanical e. comparative High rates of inflation often characterize a. […]

The following questions are based on the following diagram: Suppose a sales tax on the commodity is imposed where S and D are the market supply and demand curves before the tax was levied. The equilibrium price with the tax […]

The federal budget is a. for a fiscal year, from January 1 to December 31. b. a statement of the government’s anticipated expenditures and revenues. c. a statement of how much the various agencies of the federal government would like […]