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If steel workers obtain a substantial wage increase, employment in the steel industry will be most likely to fall if a. the demand curve for steel is highly inelastic. b. the demand curve for steel is highly elastic. c. the […]

A good that takes up a very large percentage of the consumer’s budget will tend to have a. an elastic demand. b. a perfectly elastic demand. c. an inelastic demand. d. an upward-sloping demand curve. e. very many substitutes. The […]

The GDP deflator is designed to adjust nominal GDP a. for changes in the unemployment rate. b. for changes in prices. c. for problems that arise because of externalities. d. for changes in interest rates. Which of the following will […]

If scientific research produces a technological breakthrough in the production of computer memory, then a. business costs will increase, profits will fall, and production will decrease. b. business costs will fall, but profits will also fall, and production will decrease. […]

If the money interest rate is 7 percent and the inflationary premium 4 percent, the real interest rate is a. 3 percent. b. 3 percent. c. 4 percent. d. 7 percent. Transfer payments are a. payments made to individuals who […]

U.S. GDP and U.S. GNP are related as follows: a. GNP = GDP  Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad. b. GNP = GDP + Income earned by foreigners in the U.S. […]

According to the theory of rational expectations, the government can influence output a. with appropriate fiscal and monetary policy. b. in the short run, but not in the long run. c. without affecting the price level. d. only by making […]

When there is an abrupt increase in the rate of inflation, a. the actual rate of inflation will tend to fall below the natural rate. b. the actual rate of inflation will tend to rise above the natural rate. c. […]

In response to the recession of 2008-2009, the fiscal policy of the federal government was a. highly expansionary, and this Keynesian stimulus promoted a rapid recovery. b. highly expansionary, but this was largely offset by the Fed’s restrictive monetary policy […]

Assume a certain competitive price-taker firm is producing Q = 1,000 units of output. At Q = 1,000, the firm’s marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. […]

When a country allows trade and becomes an importer of steel, a. the losses of the domestic producers of steel exceed the gains of the domestic consumers of steel. b. the losses of the domestic consumers of steel exceed the […]

Which of the following is most likely to reduce the nominal market wage in a job category? a. The job requires employees to work the night shift from 11 p.m. to 7 a.m. b. The job is prestigious, and the […]

When a country fixes the price of foreign exchange (in terms of the domestic currency) below equilibrium, which of the following will result? a. A black market will develop for foreign exchange. b. Residents of that country can buy as […]

When commercial banks extend loans, they are able to expand the supply of money in the United States because the U.S. has a. a fiat supply of money. b. money that is backed by gold. c. a fractional reserve banking […]

Use the figure below to answer the following question(s). Figure 9-2 The economy depicted in Figure 9-2 is a. operating at less than full employment. b. operating at more than full employment. c. in short-run equilibrium but not long-run equilibrium. […]

Which of the following is true? a. During any given year, the size of the economic pie available for allocation to individuals is fixed. b. When the link between worker productivity and reward is weakened, individuals have less incentive to […]

Because the height of the demand curve measures the marginal value of the good to consumers, the fact that a demand curve slopes downward to the right illustrates that a. as more of a product is consumed, consumers will value […]

An income tax is proportional if a. the tax liability of high-income earners exceeds the tax liability of those with low incomes. b. the tax liability of high-income earners is less than the tax liability of those with low incomes. […]

Why might an expansion in government spending increase the severity of the coordination problem during a recession? a. Increases in government spending will not affect the composition of aggregate demand. b. Congress is unlikely to approve increases in government spending […]

Countries that persistently expand the supply of money at a rapid rate can expect to experience a. high rates of inflation b. rapid economic growth. c. lower interest rates. d. low rates of unemployment. A firm’s stock price will be […]

Which of the following will decrease the demand for coffee? a. the discovery that caffeine can cause heart problems b. an increase in the price of coffee c. an increase in the price of tea, a substitute for coffee d. […]

If the U.S. price level decreased relative to price levels in foreign countries, what would be the impact on domestic aggregate supply and aggregate demand curves? a. the aggregate supply curve would shift outward and the aggregate demand curve would […]

Which of the following actions would the Fed undertake if it wants to follow a more restrictive monetary policy? a. sell some of its holdings of government bonds b. decrease government expenditures c. urge the Treasury to sell more U.S. […]

Use the figure below to answer the following question(s). Figure 11-2 Refer to Figure 11-2. When the economy is operating at point a, reliance on the self-correcting mechanism will a. result in higher resource prices and a shift to the […]

Economics Chapter 1—The Economic Approach MULTIPLE CHOICE 1. What do economists mean when they state that a good is scarce? a. There is a shortage or insufficient supply of the good at the existing price. b. It is impossible to […]

c. They lose, because the gain of the passengers must necessarily come at the expense of the airline. d. They benefit as long as the additional revenue from the passengers exceeds the marginal cost. 89. If an airline company has […]

100. For an oil-importing country such as the United States, the immediate effect of a supply shock caused by an increase in the price of imported oil would tend to be a. an increase in real output and a decrease […]

155. In Figure 10-11, which of the following would most likely cause the movement from point E1 to point E2? a. an increase in the expected inflation rate b. a decrease in the expected inflation rate c. a major technological […]

Economics Chapter 10—Dynamic Change, Economic Fluctuations, and the AD-AS Model MULTIPLE CHOICE 1. Which of the following would be most likely to cause an increase in current aggregate demand in the United States? a. increased fear that the U.S. economy […]

Economics Chapter 11—Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics MULTIPLE CHOICE 1. Which of the following would a Keynesian economist be most likely to stress? a. Supply creates its own demand. b. Businesses will not produce […]

63. According to the Keynesian view, if an economy was operating at long-run equilibrium, an increase in government expenditures (holding taxes constant) would a. be inflationary. b. lead to a recession. c. lower the real rate of interest. d. reduce […]

81. Which of the following is an argument for tax cuts rather than government spending as a way to promote recovery from a recession? a. Tax cuts are better suited to direct resources into projects that consumers value more highly […]

Economics Chapter 12—Fiscal Policy, Incentives, and Secondary Effects MULTIPLE CHOICE 1. The crowding-out effect suggests that a. expansionary fiscal policy causes inflation. b. restrictive fiscal policy is an effective weapon against inflation. c. a reduction in private spending that results […]

Economics Chapter 13—Money and the Banking System MULTIPLE CHOICE 1. Money is a. valuable because it is backed by gold. b. whatever is generally accepted in exchange for goods and services. c. anything that is a liability of a commercial […]

b. approximately doubled the M1 money supply. c. approximately doubled the monetary base. d. maintained the monetary base at a constant level. 164. Which of the following would lead to a rapid growth of the money supply in the future? […]

STA: DISC: Monetary and fiscal policy TOP: The Federal Reserve System KEY: Bloom’s: Comprehension 102. Which of the following is primarily responsible for controlling the money supply in the United States? a. the U.S. Congress b. the Board of Governors […]

Economics Chapter 14—Modern Macroeconomics and Monetary Policy MULTIPLE CHOICE 1. The velocity of money is a. the rate at which the price index for consumer goods rises. b. the multiple by which an increase in government expenditures will cause output […]

the growth rate of the M1 money supply d. A reduction in the monetary base, lower short-term interest rates, and a decline in the growth rate of the M2 money supply 159. Which of the following would be most indicative […]

a. large budget deficits. b. high taxes. c. rapid expansion of the money supply. d. government expenditures that are large relative to the size of the economy. 98. In the long run, the primary effect of rapid monetary growth is […]

Economics Chapter 15—Stabilization Policy, Output, and Employment MULTIPLE CHOICE 1. In the twentieth century, fluctuations in real GDP were a. less severe during the last 50 years than was true during the first half of the century. b. virtually eliminated […]

c. inflation turns out to be higher than what people expected. d. inflation turns out to be equal to what people expected. 83. When persons underestimate inflation (when actual inflation exceeds the expected rate), actual unemployment will a. exceed the […]

Economics Chapter 16—Creating an Environment for Growth and Prosperity MULTIPLE CHOICE 1. Economic growth is important because expansion in the output of goods and services a. necessarily creates more jobs (more work for people). b. makes it possible for individuals […]

67. Which of the following would be most likely to enhance the growth rate of an economy? a. imposition of a quota restricting the quantity of steel imports b. gradual elimination of all tariffs over the next 10 years c. […]

a. Japan and Italy b. Nigeria and Pakistan c. Sierra Leone and Zimbabwe d. Estonia and Hungary 62. Researchers have found that countries that were settled by Europeans who planned on staying permanently were a. more likely to protect private […]

Economics Chapter 17—Institutions, Policies, and Cross-Country Differences in Income and Growth MULTIPLE CHOICE 1. The purchasing power parity method of comparing income levels across countries a. calculates the cost of purchasing a common bundle of goods in each country and […]

c. Q4 − Q3. d. Q4 − Q3 + Q2 − Q1. 137. Refer to Figure 17-10. Consumer surplus with trade and without a tariff is a. A. b. A + B. c. A + C + G. d. A […]

89. Which of the following is a partially valid economic argument for restricting free trade? a. Restrictions on foreign trade will increase employment and permanently reduce unemployment. b. Infant industries may need temporary protection to develop and gain productive efficiency. […]

Economics Chapter 18—Gaining from International Trade MULTIPLE CHOICE 1. Measured as a share of the economy, the size of the trade sector (exports plus imports) of the United States has a. been increasing since 1980, but it declined during 1960-1980. […]

d. tend to increase if the nation is running a balance of trade surplus and decrease if it is running a balance of trade deficit. 84. Under a pure flexible exchange rate system, the rate that equates demand and supply […]

Economics Chapter 19—International Finance and the Foreign Exchange Market MULTIPLE CHOICE 1. A depreciation in the value of the U.S. dollar would a. encourage foreigners to travel on American owned airlines. b. make U.S. goods more expensive to foreign consumers. […]

147. Refer to Table 2-3. The opportunity cost of 1 pound of potatoes for the rancher is a. 5 hours of labor. b. 4 hours of labor. c. 5/4 pounds of meat. d. 4/5 pound of meat. ANS: C PTS: […]

d. cause an economy to move from one point on the production possibilities curve to another point on the curve. 95. Which of the following will most likely cause an outward shift in the production possibilities curve? a. a reduction […]

Economics Chapter 2 A—Some Tools of the Economist MULTIPLE CHOICE 1. Which of the following sayings best reflects the concept of opportunity cost? a. “You can’t teach an old dog new tricks.” b. “Time is money.” c. “I have a […]

Economics Chapter 2 B—Some Tools of the Economist MULTIPLE CHOICE 181. Melanie decided to sleep in today rather than attend her 9 a.m. economics class. According to economic analysis, her choice was a. irrational, because economic analysis suggests you should […]

d. increase tuition, which would generate more revenue. 94. The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller. The airlines base the policy on the assumption that a. consumers are […]

Economics Chapter 20—Consumer Choice and Elasticity MULTIPLE CHOICE 1. If Santiago thinks the last dollar spent on jeans yields less satisfaction than the last dollar spent on shoes, and Santiago is a utility-maximizing consumer, he should a. decrease his spending […]

141. Figure 7-10 depicts a demand curve with a price elasticity that is a. unitary, implying that a percent change in price leads to an equal percent change in quantity demanded. b. perfectly inelastic, implying that the same amount will […]

154. At what output does the firm depicted in Figure 8-6 begin to experience diminishing marginal returns to its variable factors of production? a. q1 b. q2 c. q3 d. an output beyond q3 155. At what output does the […]

Economics Chapter 21—Costs and the Supply of Goods MULTIPLE CHOICE 1. Which of the following is most likely to be an implicit cost of production? a. property taxes on a building owned by the firm b. transportation costs paid to […]

c. it must have increasing returns to each input at low levels of production and decreasing returns to each input at high levels of production. d. the firm can maximize its output by operating at the point of minimum long-run […]

Economics Chapter 22 B—Price Takers and the Competitive Process MULTIPLE CHOICE 186. Competitive price-taker markets are characterized by a. low entry barriers and a large number of firms selling a homogeneous product. b. intense rivalry among firms selling differentiated products. […]

93. The supply curve of a price-taker firm in the short run is the a. firm’s average variable cost curve. b. portion of the firm’s average total cost curve that lies above average variable cost curve. c. portion of the […]

Use the figure to answer the following question(s). Figure 9-3 152. Figure 9-3 depicts the cost curves of a firm in a price-taker industry. At what output would the firm’s per-unit cost be at a minimum? a. 100 b. 125 […]

Economics Chapter 22 A—Price Takers and the Competitive Process MULTIPLE CHOICE 1. Which of the following is a primary difference between price searchers and price takers? a. Price searchers maximize profits, but price takers do not. b. Price searchers have […]

Economics Chapter 23—Price-Searcher Markets with Low Entry Barriers MULTIPLE CHOICE 1. In a competitive price-searcher market, the firms will a. be able to choose their price, and the entry barriers into the market will be low. b. be able to […]

96. A price-discriminating firm charges the lowest price to the group that a. has the most elastic demand. b. purchases the largest quantity. c. engages in the most arbitrage. d. is least responsive to price changes. 97. Price discrimination occurs […]

140. Given that the short-run cost and demand conditions shown in Figure 10-6 for the competitive price-searcher firm are representative for all firms in the industry, what will happen in this industry in the long run? a. The firm will […]

Economics Chapter 24 A—Price-Searcher Markets with High Entry Barriers MULTIPLE CHOICE 1. When economists talk about a barrier to entry, they are referring to a. a factor that makes it difficult for potential competitors to enter a market. b. the […]

96. Which of the following increases the likelihood that a group of sellers can increase profits as the result of collusion? a. the presence of a large number of firms in the industry b. intense quality competition among firms c. […]

Economics Chapter 24 B—Price-Searcher Markets with High Entry Barriers MULTIPLE CHOICE 189. Licensing is a process in which a firm wanting to enter a market must a. require all potential customers to obtain government permission to purchase the product. b. […]

151. The demand and cost conditions in an industry are as depicted in Figure 11-7. In the viewpoint of economic efficiency, what would the ideal price and output be? a. price, $7; quantity produced, 100 b. price, $10; quantity produced, […]

Economics Chapter 25—The Supply of and Demand for Productive Resources MULTIPLE CHOICE 1. The demand curve for a human resource will be more elastic when a. there are more and better substitutes are available for it. b. it is more […]

a. 4 b. 5 c. 6 d. 7 90. Jayden runs a company that sells its product for $250 each. When he employs 10 workers, they can sell 60 products per week, while only 54 products are sold when 9 […]

Economics Chapter 26—Earnings, Productivity, and the Job Market MULTIPLE CHOICE 1. If all persons had identical preferences and productivity factors (ability, skill level, education, experience, etc.), the highest paying jobs would be the most a. prestigious. b. convenient. c. undesirable. […]

Economics Chapter 27—Investment, the Capital Market, and the Wealth of Nations MULTIPLE CHOICE 1. Which of the following is true of saving and investment? a. There is no relationship between saving and investment; people can invest without having to save. […]

b. assembly-line workers to be lower than that of persons in other professions. c. assembly-line workers and that of persons in other professions to be nonetheless equal. d. both assembly-line workers and persons in other professions to be unaffected by […]

62. Data indicate that the large increase in government spending on income transfers that started with the War on Poverty during the latter half of the 1960s has resulted in a. a substantial reduction in the poverty rate. b. a […]

Economics Chapter 28—Income Inequality and Poverty MULTIPLE CHOICE 1. In 2010, high-income families (the top 20 percent) in the United States earned approximately ____ percent of the total before-tax income. a. 34 b. 48 c. 62 d. 79 2. Imagine […]

a. increase the price of salsa. b. decrease the demand for salsa. c. increase the demand for salsa. d. have no effect on the demand for salsa. 97. An increase in the expected future price of a good will cause […]

302. Refer to Figure 3-20. If 40 units of the good are being bought and sold, then a. cost to sellers is equal to the value to buyers. b. the value to buyers is greater than the cost to sellers. […]

Economics Chapter 3 B—Demand, Supply, and the Market Process MULTIPLE CHOICE 197. Suppose prices for new homes have risen and sales of new homes have also risen. We can conclude that a. the demand for new homes has risen. b. […]

KEY: Bloom’s: Application MSC: Graphics Questions 268. Given the demand (D) and supply (S) for gasoline in Figure 3-9, if the price of gasoline were $3 per gallon, a. consumers would wish to purchase more than was being supplied. b. […]

d. The cost of producing blue jeans will rise, and the supply curve for blue jeans will shift to the right. 152. Which of the following will lead to a decrease in supply of a good? a. an increase in […]

Economics Chapter 3 A—Demand, Supply, and the Market Process MULTIPLE CHOICE 1. Which of the following would most likely increase the demand for peanut butter? a. a decrease in the price of jelly, a good that is often used with […]

b. market (b) c. market (c) d. All of the above are correct. Figure 4-24 228. Refer to Figure 4-24. The equilibrium price before the tax is imposed is a. P1. b. P2. c. P3. d. None of the above […]

overweight. b. loss from the elimination of mutually beneficial exchanges that results from the imposition of a tax in a market. c. difference between the value consumers place on a good and the price they have to pay for it. […]

Economics Chapter 4 B—Supply and Demand: Applications and Extensions MULTIPLE CHOICE Figure 4-14 191. Figure 4-14 depicts the milk market. The horizontal line, P, represents a price ceiling imposed by the government. Which of the following is true? a. In […]

Economics Chapter 4 A—Supply and Demand: Applications and Extensions MULTIPLE CHOICE 1. Other things constant, a decrease in the demand for hair dryers will a. increase the price of hair dryers. b. increase the quantity supplied of hair dryers. c. […]

159. Figure 4-1 illustrates the market for compact discs. If the government imposes a price floor of $25 for compact discs, which of the following will be true? a. Consumers would wish to purchase 1,000 compact discs. b. Producers would […]

d. deadweight loss problem. 79. Which of the following about public goods is true? a. Consumption of a public good by one individual reduces the availability of the good for others. b. It is extremely difficult to limit the benefits […]

Economics Chapter 5—Difficult Cases for the Market and the Role of Government MULTIPLE CHOICE 1. Which of the following is the most fundamental function of government? a. protection of individuals and their property b. imposing progressive taxes to fund income-transfer […]

Economics Chapter 6—The Economics of Political Action MULTIPLE CHOICE 1. In 2012, the combined expenditures of federal, state, and local governments in the United States were approximately a. 9 percent of GDP. b. 24 percent of GDP. c. 38 percent […]

81. Logrolling refers to a. vote trading among legislators. b. the tendency of voters to free-ride on the payment for public goods. c. the power of well-organized interest groups. d. the tendency of legislators to favor the interests of the […]

91. Which of the following is a deficiency of the regular (or traditional) consumer price index (CPI) as a measure of the cost of living? a. The CPI fails to make any adjustment for changes in the price of housing. […]

Economics Chapter 7 A—Taking the Nation’s Economic Pulse MULTIPLE CHOICE 1. Which of the following would be included in this year’s GDP? a. the value of a used car, at its sale price b. the value of a new domestic […]

142. Given the following figures, by approximately what percentage did Aiden’s real income increase between 2004 and 2005? Aiden’s 2004 money income = $50,000 Aiden’s 2005 money income = $55,000 2004 CPI = 120.0 2005 CPI = 128.0 a. zero […]

Economics Chapter 7 B—Taking the Nation’s Economic Pulse MULTIPLE CHOICE 188. Accurate measurement of GDP is important to business decision-makers because this information will help them better determine the a. general happiness of a country’s citizens. b. course of the […]

Economics Chapter 8—Economic Fluctuations, Unemployment, and Inflation MULTIPLE CHOICE 1. Over the past century, the growth rate of real GDP in the United States has averaged approximately a. 1 percent. b. 3 percent. c. 6 percent. d. 10 percent. 2. […]

100. In a modern dynamic economy such as the United States, full employment generally means a. cyclical unemployment is present. b. everyone (excluding teenagers) that would like to work is employed. c. approximately 95 percent of the labor force is […]

156. Americans needing foreign currencies get those currencies from a bank. The ultimate source of these currencies is a. U.S. investments abroad. b. U.S. sales to foreign countries. c. U.S. purchases of foreign goods, services, and assets. d. the International […]

Economics Chapter 9 A—An Introduction to Basic Macroeconomic Markets MULTIPLE CHOICE 1. Which of the following is a correct statement? a. Fiscal policy is the use of tax and spending policies by Congress and the president. b. Fiscal policy involves […]

Economics Chapter 9 B—An Introduction to Basic Macroeconomic Markets MULTIPLE CHOICE 197. The macroeconomy is said to be in long-run equilibrium only if a. the resource, loanable funds, foreign exchange, and goods and services markets are all in equilibrium. b. […]

b. The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods increased at 1.5 percent. c. The dollar value of savings increased at 3.5 percent, and the value of savings measured in goods […]

Other things constant, an increase in consumer income will a. shift the demand curve for automobiles to the left. b. shift the demand curve for automobiles to the right. c. cause a movement along the demand curve for automobiles, but […]

In economics, man-made resources such as tools, equipment, and structures that are used to produce other goods and services are referred to as a. consumer goods. b. capital. c. marginal goods. d. infrastructures. A reserve requirement of 20 percent implies […]

Even countries that depend primarily on market forces to resolve the basic economic questions will usually rely on the collective decision-making process to a. determine the prices of goods and resources. b. allocate goods that are essential to life. c. […]

When a banker accepts a deposit of $1,000 in cash and puts $200 aside as required reserves and then makes a loan of $800 to a new borrower, this set of transactions a. decreases the money supply by $1,000. b. […]

People are willing to pay more for a diamond than for a bottle of water because a. the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. b. the marginal […]

Which of the following is true of the per person income of the West (Western Europe and its offshoots of the United States, Canada, Australia, and New Zealand) a. It has increased each century and grown steadily since 1500. b. […]

A profit-maximizing price searcher will expand output to the point where a. total revenue equals total cost. b. marginal revenue equals marginal cost. c. price equals average total cost. d. price equals marginal cost. The share of the labor force […]

Property right enforcement and markets can be imperfect, so environmental regulations are often used to correct market failures that result in environmentaldamages. But governmental regulation itself can be imperfect because a. both environmental harms and the benefits of reducing them […]

Countries with more economic freedom tend to invest a ____ share of their GDP and the productivity of that investment is ____ than for countries that are less free. (Fill in the blanks.) a. larger; higher b. larger; lower c. […]

Which of the following will most likely result from an unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas? a. a decrease in inflation b. a decrease in unemployment c. a decrease in the general level […]

If the supply of a good decreased, what would be the effect on the equilibrium price and quantity? a. Price would increase, and quantity would decrease. b. Price would decrease, and quantity would decrease. c. Price would increase, and quantity […]

Other things being equal, the effect of a decrease in the price of grapes would be illustrated by a. a rightward shift in the demand curve for grapes. b. an increase in the quantity demanded for grapes. c. a leftward […]

If an economy is at its potential output level, which of the following is not true? a. The economy is at its full-employment output level. b. Unemployment is at the natural level. c. The price level is zero. d. The […]

Which of the following factors would be most likely to encourage capital formation in a less-developed nation? a. high and variable rates of inflation b. tariffs and quotas that restrict international trade c. a legal system that provides for secure […]

After a natural disaster, such as a hurricane, the increased demand for certain items (like lumber, electric generators, and chainsaws) causes their prices to rise. These higher prices a. discourage the flow of these items into the area. b. encourage […]

Retired persons travel by bus and automobile more frequently than do business executives, who more commonly use air travel. An economic explanation for this would be that a. business executives have more time to travel. b. it is more important […]

Suppose the economy is initially in long-run equilibrium and aggregate demand rises. In the long run prices a. and output are higher than in the original long-run equilibrium. b. and output are lower than in the original long-run equilibrium. c. […]

Figure 3-15 Refer to Figure 3-15. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers? a. BCE b. ACF c. DEF d. ABED Interest rates in the loanable funds market […]

The real wages of workers will tend to be high when a. output per worker is high. b. capital is scarce. c. industries are automating at a slow rate. d. profits are low. The actual rate of unemployment will generally […]

How did the Fed’s conduct of open market operations change during the economic crisis of 2008? a. Open market operations are no longer the most common tool that the Fed utilizes. b. The Fed now buys and sells a broader […]

The new classical view of fiscal policy holds that a. budget deficits will stimulate consumption. b. budget deficits will decrease the saving rate. c. individuals fail to recognize that debt-financing implies higher future taxes. d. individuals fully anticipate the added […]

Which of the following will be most likely to contribute to the growth of a less-developed country? a. price controls that keep the cost of agricultural products low b. rapid population growth c. exchange rate controls and export restrictions d. […]

A strike, or the threat of one, is most likely to be effective when a. demand for the firm’s product is strong. b. foreign competition for the product is high. c. the firm has a high product inventory. d. demand […]

An expansionary monetary policy is most likely to produce an inflationary effect with little impact on output when the economy a. is near full employment and the short-run aggregate supply curve is flat. b. is near full employment and the […]

Each point on the demand curve indicates a. the demand for the product. b. the quantity demanded at that price. c. the amount that people need. d. the amount people want to buy at different income levels. A decrease in […]

When a conflict arises in a major oil-exporting area of the world, such as the Middle East, the price of gasoline already in the storage tanks at local gas stations usually increases. Which of the following best explains this occurrence? […]

According to the Keynesian view, the rapid increase in government spending and large budget deficits in response to the recession of 2008-2009 would a. slow the recovery process and result in weak long-term growth of real GDP. b. speed the […]

Which of the following would help control the future growth of healthcare prices and expenditures? a. an increase in the share of healthcare costs paid for either directly or from personal medical savings accounts b. the substitution of catastrophic (high […]

When earnings differentials are adjusted for such factors as age, education, and marital status, the a. differential between the earnings of white males and those of minority males increases. b. differential between the earnings of white males and those of […]

Figure 18-3 Figure 18-3 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The supply curve in graph (B) is comprised of a. U.S. citizens attempting to purchase Japanese-made goods. b. Japanese […]

One difficulty of computing the value of GDP is that there are no market prices for a. exports and imports. b. business investments. c. government goods and services. d. resource values. Which of the following is characteristic of a firm […]

Which of the following is a normative economic statement? a. If we doubled the size of welfare payments, we would reduce the number of homeless persons. b. Companies should be concerned with more than just their profits. c. An increase […]

When a nuclear-powered electrical plant is permitted to dump radioactive waste at no cost into a recreational waterway lowering the value boaters receive from the waterway, the a. firm’s cost of producing electricity will be higher than the community’s true […]

Figure 3-22 Refer to Figure 3-22. Suppose the events depicted in graphs A and C were illustrated together on a single graph. A definitive result of the two events would be a. an increase in the equilibrium quantity. b. an […]

If coal and oil are substitute inputs in the production of electricity, an increase in the price of oil a. will increase the demand for coal. b. will reduce the demand for coal. c. will increase the supply of coal. […]

Compared to low-income families, a larger proportion of high-income families a. is headed by a person with a college degree. b. has both a husband and a wife who work full time. c. is headed by a person between the […]

If a third party pays a larger and larger share of the purchasing price of a good, economic theory indicates that a. the total expenditures (including those made by the third party) on the good will decline. b. the demand […]

Which of the following is true? a. In a competitive capital market, private investors have a strong incentive to evaluate projects carefully and allocate their funds toward those projects expected to yield the highest rates of return. b. In a […]

Economic analysis indicates that growth in the size of government as a share of the economy will a. always reduce economic growth and reduce the living standards of the citizenry. b. enhance economic growth and lead to higher income levels […]

When a park is funded by visitors, but not by taxpayers in general, a. there will be too few parks because most people simply will not pay to use a park. b. visitors will be better served because poor service […]

Economic analysis indicates that the monetary policy of the 1930s, which shifted back and forth between restrictive monetary policy and expansionary monetary policy, would likely result in a. economic stability and growth in real levels of output. b. keeping the […]

What impact did the soaring oil prices of 2007 and the first half of 2008 have on the economy? a. They increased SRAS, causing real output and employment to increase. b. They reduced SRAS, causing real output and employment to […]

A subsidy on a product will generate more actual benefit for consumers (and less for producers) when a. the supply of the product is relatively inelastic. b. the supply of the product is relatively elastic. c. the demand for the […]

As the large baby-boom generation moves into the retirement phase of life, this will a. make it easier for the federal government to finance its budget deficit because the baby-boomers will be the wealthiest generation of retirees in American history. […]

The long-run average total cost (LRATC) curve a. indicates the per-unit cost of producing various rates of output with a specific size of plant but variable levels of labor and technology. b. indicates the minimum per-unit cost that can be […]

Figure 15-1 As shown in Figure 15-1, 80 percent of families earned a cumulative share of about ____ of income. a. 5 percent b. 15 percent c. 30 percent d. 50 percent Which of the following events will leave GDP […]

In order to increase the money supply, the banking system must have a. required reserves. b. the authority to buy corporate stocks. c. the authority to print U.S. currency. d. excess reserves. e. the authority to engage in interstate banking. […]

Which of the following is most likely to increase the money wages that will be required to attract a given number of workers into a job category? a. the job is widely viewed as prestigious. b. the employer provides child […]

If the CEO of a large corporation uses the corporate jet to fly friends to the Super Bowl at company expense, this is most clearly an example of a. the duality problem. b. the violation of ceteris paribus conditions. c. […]

Which of the following would be the most likely long-run effect if the United States increased its tariff rates and adopted stricter import quotas? a. a decrease in both U.S. imports and exports b. an increase in both U.S. imports […]

Use the figure to answer the following question(s). Figure 10-2 What is the maximum economic profit this firm depicted in Figure 10-2 will be able to earn? a. zero b. $20 c. $30 d. $100 Which of the following is […]

The student government associations at several universities have experimented with purchasing bicycles to leave around campus for everyone’s use. Anyone who needs the bike can use it, and they are not allowed to lock the bike up or take it […]

Frictional unemployment a. would be eliminated if the economy were more stable. b. would be eliminated if the minimum wage were raised. c. is the result of workers’ skills not matching the jobs available. d. is present even when labor […]

In a market economy, differences in incomes will a. reflect the relative scarcity of resources. b. provide individuals with an incentive to supply resources that are valued by others. c. determine the income distribution among market participants. d. do all […]

When economists say an activity is consistent with economic efficiency, they mean a. a majority of citizens favor the activity. b. the benefits that result from the activity exceed the costs. c. the number of people who gain from the […]

In the short run, the firm’s average fixed costs a. always increase as output increases. b. always decline as output increases. c. equal zero. d. remain constant as output expands. Which of the following is true of high and variable […]

Use the figure below to answer the following question(s). Figure 4-9 Refer to Figure 4-9. The market for gasoline was initially in equilibrium at point b and a $.40 excise tax is illustrated. Which of the following states the actual […]

Which of the following is not consistent with the basic postulate of economics that incentives matter? a. Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. b. A politician votes against a proposal […]

A decrease in the dollar price of foreign currency would cause a. the nation’s imports to increase and exports to decline. b. the nation’s exports to increase and imports to decline. c. both imports and exports to decline. d. both […]

Two goods are considered substitutes if a. a decrease in the demand for one leads to a decrease in the supply of the other. b. an increase in the demand for one leads to a decrease in the supply of […]

If a nation wants to maintain a fixed exchange rate at a time when supply and demand are causing an excess of imports over exports, the nation might a. shift to a more expansionary monetary policy. b. shift to a […]

If you were a government official that wanted to raise the equilibrium price of milk, which of the following actions would you take? a. Take milk from government storage and sell it. b. Encourage farmers to produce more milk. c. […]

A shift to a more expansionary monetary policy will have its greatest effect on a. the interest rate on a 30-year fixed-rate mortgage. b. the interest rate on 10-year government bonds. c. short-term interest rates. d. the 15-year corporate bond […]

In a market economy, which of the following is most important if a worker is going to achieve high earnings? a. hard work b. provision of goods and/or services that others value highly c. having a graduate degree in a […]

Legislation that offers immediate and easily recognized benefits, at the expense of costs that are observable only in the distant future, is often enacted even when economic inefficiency results. This can be expected because of a. a lack of incentive […]

If marginal cost exceeds marginal revenue, a profit-maximizing monopolist will a. restrict output to increase the price even higher. b. raise price and expand output to increase profit. c. lower price and expand output to increase profit. d. attempt to […]

The optimal level of resource use comes when a. MRP exceeds input price. b. MRP is less than input price. c. MRP equals input price. d. use of the resource exhausts the producer’s funds. Relative to a no-trade situation, if […]

If debit cards become more widely used by consumers and businesses, which of the following is most likely to happen? a. Currency holdings will remain the same, but the M1 money supply will fall. b. The amount of currency held […]

Which of the following would cause prices to fall and output to rise in the short run? a. Short-run aggregate supply shifts right. b. Short-run aggregate supply shifts left. c. Aggregate demand shifts right. d. Aggregate demand shifts left. Data […]

Figure 17-13 In Figure 17-13, the world price of a baseball is $3. With free trade, how many baseballs will the United States import? a. 4,000 b. 6,000 c. 8,000 d. 10,000 e. 12,000 In which of the following situations […]

A tax on the buyers of coffee will a. increase the price of coffee paid by buyers, increase the net price of coffee received by sellers, and increase the equilibrium quantity of coffee. b. decrease the price of coffee paid […]

In an environment of tournament pay, it is quite likely that marginally more productive employees will receive a. less than their marginal revenue product, while less productive employees receive more than theirs. b. more than their marginal revenue product, while […]

Under a flexible exchange system, which of the following will most likely cause a nation’s currency to appreciate on the foreign exchange market? a. an acceleration in the nation’s inflation rate b. a balance of trade deficit c. a current […]

Commercial banks can borrow reserves directly from the Fed at the a. prime interest rate. b. federal funds rate. c. discount rate. d. real interest rate. Which of the following was an underlying cause of the economic crisis of 2008? […]

Systematic overestimation or underestimation of inflation will a. occur under rational expectations but not under adaptive expectations. b. occur under adaptive expectations but not under rational expectations. c. occur under both rational and adaptive expectations. d. not occur under either […]

In recent years, the ratio of earnings of the typical U.S. college graduate to the earnings of the typical high school graduate without additional education has a. risen as the demand for skilled labor has increased relative to the demand […]

Suppose the development of new drought-resistant hybrid seed corn leads to a 50-percent increase in the average yield per acre without increasing the cost to the farmers who use the new technology. If the conditions in the corn production industry […]

The primary tool of fiscal policy is a. the money supply. b. the stock market. c. the federal budget. d. regulation of the bond market. Use the figure to answer the following question(s). Figure 9-4 Figure 9-4 indicates the cost […]

Which of the following is a necessary condition for price discrimination to be profitable? a. All consumers must have an identical demand for the product. b. Groups of consumers with different demand elasticities must be easily distinguishable. c. The market […]

In the Central Utah Project, the water delivered from dams to users a. is very well utilized, because planners allocated water to its highest valued uses and users. b. cannot generally be traded, so is often wastefully used in low-valued […]

The political popularity of a tariff on imported goods that compete with products of a well-established domestic industry is a. surprising since one would expect the political power of consumers to override the interests of even a well-established domestic industry. […]

When competition is present and private ownership rights are clearly defined and securely enforced, a. production and trade are encouraged and plunder (taking from others) is discouraged. b. people get ahead by helping others in exchange for income. c. employers […]

If decreased government borrowing drives down real interest rates in the United States, a. private investment will tend to decline. b. the dollar will depreciate leading to an increase in net exports. c. an inflow of capital will cause the […]

A legal system that provides secure private property rights and unbiased enforcement of contracts a. is unnecessary for the smooth operation of markets. b. reduces the efficiency of markets. c. enhances the efficiency of markets. d. makes it easier for […]

International trade does all the following except a. allow a country to specialize in producing certain goods and services. b. reduce world output. c. allow a country to move to higher consumption levels. d. increase world output. When the top […]

Crony capitalism is present when a. businesses are either implicitly or explicitly prohibited from making donations to political candidates. b. businesses either implicitly or explicitly provide political decision-makers with contributions and other forms of political support in “exchange” for government […]

Which of the following transactions would increase GDP? a. a new tricycle purchased at a department store sale by the parents of a three-year-old child b. the retirement check your uncle received for spending 25 years in the Marine Corps […]

A competitive price-searcher market is characterized by firms a. being able to choose their price and by low barriers preventing firms from entering or leaving the market. b. being able to choose their price and by high barriers preventing firms […]

The resource market involves transactions dealing with a. natural resources and financial services. b. the borrowing and lending of financial capital. c. the buying and selling of final goods and services. d. labor services, natural resources, and physical capital. When […]

In the aggregate demand and aggregate supply model, a. the factors that cause the individual demand curve to slope downward are the same as the factors that cause the aggregate demand curve to slope downward. b. the factors that cause […]

Which of the following is a positive economic statement? a. Government control of rent is a fair way to help poor people afford housing. b. Government control of rent keeps landlords from charging too much rent. c. Government control of […]

Which of the following is an example of a normative economic statement? a. The inflation rate in the United States decreased from 4 percent last year to 3 percent this year as a result of lower energy prices. b. The […]

Which of the following tends to reduce bank failures as the result of bank runs by depositors? a. The Federal Deposit Insurance Corporation b. The Federal Open Market Operations Committee c. The comptroller of the currency d. The Senate Banking […]

Economic theory indicates that the growth of subsidies to healthcare consumers and accompanying expansion in third-party payments will a. place downward pressure on the prices of healthcare services. b. lead to higher healthcare prices. c. increase the incentive of consumers […]

A Japanese automobile manufacturer building an auto plant in the United States creates a a. supply of dollars and demand for yen in the foreign exchange market. b. demand for dollars and a supply of yen in the foreign exchange […]

The consequences of an economic change that are not immediately identifiable but are felt only with the passage of time are known in economics as a. opportunity costs. b. utility curves. c. secondary effects. d. comparative advantages. An increase in […]

Which of the following is consistent with the implications of the economic guidepost that information is costly to acquire? a. Most people do not know the names of their legislators in the U.S. Congress, but those same individuals are likely […]

Which of the following is true of debt financing? a. Elected political officials will find debt financing attractive because it allows them to provide voters with visible current benefits while pushing the more visible costs into the future. b. Debt […]

How will a reduction in the price of cotton influence the market for blue jeans? a. The cost of producing blue jeans will fall, and the supply curve for blue jeans will shift to the left. b. The cost of […]

When foreigners are making more “investments” in a country than the residents of the country are making abroad, which of the following is most likely to occur? a. Inflation. b. Rapid growth of the money supply. c. A balance of […]

Federal budget deficits generally grow during recessions because a. both tax revenues and transfer payments decrease. b. both tax revenues and transfer payments increase. c. tax revenues decrease while transfer payments increase. d. tax revenues increase while transfer payments decrease. […]

If a surplus exists in a market we know that the actual price is a. above equilibrium price and quantity supplied is greater than quantity demanded. b. above equilibrium price and quantity demanded is greater than quantity supplied. c. below […]

Since the mid-1980s, the debt-to-income ratio of American households a. has remained about the same as the previous 25 years. b. has been slowly declining. c. has fluctuated between about 55 and 70 percent of after-tax income. d. has rapidly […]

Which of the following will tend to lower the ability of a union to increase the wages of its members? a. strong competition from nonunion labor b. threat of a strike c. increased demand for union labor d. all of […]

Use the figure to answer the following question(s). Figure 8-6 At what output does the firm depicted in Figure 8-6 begin to experience diminishing marginal returns to its variable factors of production? a. q1 b. q2 c. q3 d. an […]

During a period of rapid growth in output, a. employment generally increases and unemployment decreases. b. employment generally decreases and unemployment increases. c. both employment and unemployment generally increase. d. both employment and unemployment generally decrease. For a monopolist that […]

When a government subsidy is granted to the buyers of a product, sellers can end up capturing some of the benefit because a. the market price of the product will fall in response to the subsidy. b. the market price […]

The optimal plant size depends on a. whether the firm confronts diminishing returns on its fixed factors of production. b. the output the firm expects to produce. c. whether the plant uses capital-intensive or labor-intensive production techniques. d. the preferences […]

A decrease in aggregate demand and the subsequent cutbacks in production lead to a. frictional unemployment. b. cyclical unemployment. c. cost-push unemployment. d. structural unemployment. e. transitory unemployment. If firms in a competitive price-searcher market are incurring economic losses, which […]

Private ownership and competitive markets are important for economic growth because they provide individuals with a strong incentive to a. care for resources and use them beneficially. b. innovate and introduce new products that are highly valued relative to their […]

Which of the following will likely have the strongest demand for large expenditures on environmental quality? a. wealthy countries b. poor countries c. countries with air pollution problems d. countries with water pollution problems Which economist made the following statement: […]

The unemployment rate is defined as the number of a. unemployed individuals divided by the number of employed individuals. b. employed individuals divided by the number of individuals in the working-age population. c. unemployed individuals divided by the number of […]

The long-run equilibrium price level is the price level the economy is expected to reach when the a. economy produces its potential output b. Fed has stabilized interest rates c. federal budget is balanced d. discount rate equals the prime […]

Figure 4-24 Refer to Figure 4-24. The price that sellers receive after the tax is imposed is a. P1. b. P2. c. P3. d. impossible to determine from the figure. If the exchange rate of the English pound goes from […]

The burden of a tax will fall primarily on buyers when the a. demand for the product is highly inelastic and the supply is relatively elastic. b. demand for the product is highly elastic and the supply is relatively inelastic. […]

The highest valued alternative that must be given up in order to choose an option is called a. opportunity cost. b. utility. c. scarcity. d. disutility. For a typical product, a decrease in consumer income will cause the market demand […]

Which of the following describes a situation in which demand must be inelastic? a. Total revenue decreases by 10 percent when the price of jeans rises by 10 percent. b. Total revenue decreases by less than 10 percent when the […]

Figure 4-25 Refer to Figure 4-25. The tax causes a reduction in producer surplus that is represented by area a. A. b. B + C. c. D + E. d. F. Within the AD/AS model, if consumers increase their savings […]

The figure below depicts the demand, marginal revenue and marginal cost curves of a profit-maximizing monopolist. Figure 11-15 Refer to Figure 11-15. Which of the following areas represents the deadweight loss due to monopoly pricing? a. Triangle bde b. Triangle […]

Which of the following will lead to a decrease in supply of a good? a. an increase in the price of the good b. an increase in consumer incomes c. an increase in the price of an important resource used […]

Which of the following shifts short-run, but not long-run aggregate supply to the right? a. a decrease in the actual rate of inflation b. a decrease in the expected rate of inflation c. a decrease in the capital stock d. […]

Which of the following most accurately states the function of middlemen? a. Middlemen add to the expense of buyers and sellers without providing any benefit. b. Our economy would work just as well without middlemen since they do not expand […]

Use the figure below to answer the following question(s). Figure 4-8 Refer to Figure 4-8. The supply curve S1 and the demand curve D indicate initial conditions in the market for soft coal. A $40-per-ton tax on soft coal is […]

Figure 11-21 In Figure 11-21, the increase in consumer surplus that occurs when price is set equal to marginal cost rather than at the profit-maximizing level, as it would be in an unregulated monopoly, is shown by area a. abc […]

According to the Keynesian view, if policy makers thought the economy was about to fall into a recession, which of the following would be most appropriate? a. a change in government spending and taxation that will lead to a budget […]

An institution that issues a currency at a fixed rate in exchange for an equivalent amount of another designated currency and invests the funds in bonds and liquid assets that provide 100 percent backing for the currency units issued is […]

The demand and total cost schedules of a monopolist are presented in Table 11-2. What price should a profit-maximizing monopolist charge? a. $10 b. $9 c. $8 d. $7 Figure 9-1 Answer: B Use the table to answer the following […]

The 2012 box office receipts for the movie The Avengerswere $1,515.8 million. By way of comparison, the 1977 receipts forStar Wars were $798.0 million. If the Consumer Price Index was 60.6 in 1977 and 229.6 in 2012, which of the […]

An appreciation in the value of the U.S. dollar would a. encourage foreigners to make more investments in the United States. b. encourage U.S. consumers to purchase more foreign-produced goods. c. increase the number of dollars that could be purchased […]

Which of the following is the most efficient way to reduce pollution emissions? a. Emission standards that cap allowable pollution. b. Government pollution charges or taxes. c. Legislated regulations limiting the quantity of emissions allowed by each firm. d. Enforcement […]

According to the Economic Freedom of the World measure, between 2000 and 2010 the economic freedom of the United States a. declined and its rank fell from third to tenth during this period. b. increased, and the U.S. became the […]

When economists say the demand for a good is highly inelastic, they mean that a. even if the price rose substantially, suppliers would be unwilling to offer much more of the good. b. the facilities utilized by producers of the […]

Which of the following is true about inflation? a. It reduces the cost-of-living of the typical worker. b. It is measured by changes in the cost of a typical market basket of goods between time periods. c. It causes the […]

Economics Special Topic 1—Government Spending and Taxation MULTIPLE CHOICE 1. Between 1960 and 2012, the share of federal spending allocated to national defense a. declined sharply, while the share allocated to health care increased substantially. b. rose sharply, while the […]

Economics Special Topic 2—The Economics of Social Security MULTIPLE CHOICE 1. The payments made to the beneficiaries of the Social Security program are financed by a. insurance premiums previously paid into the system by the beneficiaries. b. current receipts derived […]

Economics Special Topic 10—Do Labor Unions Increase the Wages of Workers? MULTIPLE CHOICE 1. Since 1970, union membership, as a percent of the labor force, has a. remained virtually unchanged. b. increased slightly. c. declined steadily. d. increased significantly. 2. […]

Economics Special Topic 11—The Question of Resource Exhaustion MULTIPLE CHOICE 1. Predictions of severe shortages due to impending natural resource depletion a. are widely accepted by resource economists even though such predictions are a relatively new occurrence. b. have been […]

Economics Special Topic 12—Difficult Environmental Cases and the Role of Government MULTIPLE CHOICE 1. When it is difficult to assign and enforce property rights, a. markets result in outcomes that are often inefficient. b. courts can easily negotiate efficient outcomes. […]

Economics Special Topic 3—The Stock Market: Its Function, Performance, and Potential as an Investment Opportunity MULTIPLE CHOICE 1. Which of the following is true? a. Most stockholders own stock because they want to run the business. b. The shareholders of […]

Economics Special Topic 4—Great Debates in Economics: Keynes Versus Hayek MULTIPLE CHOICE 1. The General Theory of John Maynard Keynes exerted a major impact on macroeconomics during the 20th century primarily because a. it provided the only logically consistent view […]

Economics Special Topic 7—The Federal Budget and the National Debt MULTIPLE CHOICE 1. Which of the following is true? a. A budget deficit will reduce the national debt. b. A budget deficit will increase the national debt. c. A balanced […]

Economics Special Topic 8—The Economics of Health Care MULTIPLE CHOICE 1. Real expenditures on Medicare and Medicaid a. rose during the 1970s and 1980s, but they have been declining since 1990. b. fell during the 1970s and 1980s, but they […]

Economics Special Topic 9—Earnings Differences Between Men and Women MULTIPLE CHOICE 1. Since 1980, the female/male annual earnings ratio of full-time workers has been ____, while the labor force participation rate of women has been ____ during this same period. […]