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Looking at the record of concentration in the United States during the last century, one finds concentration has a. steadily increased. b. risen dramatically in the past 15 years. c. changed very little. d. fallen steadily except in wartime. Productivity […]

The Industrial Revolution refers to the period 1950-1970, which was characterized by rapid manufacturing sector growth in the United States. a. True b. False The appropriate fiscal policy stance depends, at least partly, on the a. stance of trade policy. […]

Members of the Board of Governors of the Federal Reserve System are a. elected by member banks to serve four-year terms. b. appointed by Congress for 14-year terms. c. appointed by the president for 14-year terms. d. appointed by the […]

If the favorable supply shocks of the 1990s were reversed in the future, we should expect a(n) a. increase in inflation and unemployment. b. decrease in inflation and unemployment. c. increase in inflation and a decrease in unemployment. d. decrease […]

Bond prices and interest rates: a. are interrelated b. have no relationship to one another c. rise or fall in tandem d. none of these choices The national debt is defined as the total a. amount that U.S. citizens owe […]

If crowding out occurs, the Main Burden of the debt is a. smaller government assets passed along to the next generation. b. smaller capital stock passed along to the next generation. c. fewer government services during this generation. d. higher […]

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 […]

The existence of the “underground economy” causes measured GDP to overestimate actual output. a. True b. False If the multiplier is 4 and real GDP increases by $520 billion, the increase in investment spending must have been a. $110 billion. […]

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. […]

In 1962, Michael Harrington argued in The Other America that there was chronic, severe poverty in America. a. True b. False Table 20-2 In Table 20-2, what are net exports when GDP = 3,500? a. 400 b. 300 c. 200 […]

Jason considers a crystal bowl, a silver dish, and a pewter figurine, each priced $45 at the local gift shop. He chooses the silver dish because, according to economic theory a. his marginal utility per dollar is greatest. b. his […]

An example of indexing is a “cost of living” adjustment clause in a wage contract. a. True b. False When the average tax rate rises as income rises, this is known as progressive taxation. a. True b. False Answer: True […]

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 […]

The principal danger to Japan in 2001 when the yen was appreciating was that this would a. increase aggregate demand and make inflation worse. b. decrease aggregate demand and make the recession worse. c. decrease aggregate demand and make inflation […]

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. […]

Figure 20-7 In Figure 20-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy. Which of the following would cause a movement from C to B? a. a European economic […]

Tax deductions were significantly ____ under the Tax Reform Act of 1986. a. increased b. decreased c. expanded d. left unchanged for individual taxpayers Figure 3-7 What is the opportunity cost of moving from point B to point A in […]

Optimal decisions are made on the basis of a. rate of growth in total profit. b. average cost and average revenue figures. c. impact on market share. d. marginal cost and marginal revenue figures. If the price of a good […]

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 […]

The concept that increases in spending cause larger increases in equilibrium GDP is known as the a. profiler. b. mystifier. c. multiplier. d. depreciator. In the circular flow model, which of the following is considered a leakage? a. investment spending […]

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 […]

The Great Depression of the 1930s led to a revolution in macroeconomic thinking, following the work of a. Arthur Laffer. b. Milton Friedman. c. Adam Smith. d. John Maynard Keynes. e. David Ricardo. Unlike a perfectly competitive firm, a monopolistically […]

National income minus personal taxes net of transfer payments equals disposable income. a. True b. False Governments of market-oriented economies never tamper with the price mechanism. a. True b. False Answer: False Graphs are valuable because they facilitate interpretation of […]

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 […]

In 2013, corporate profits in the U.S. economy were about 14 percent of national income. a. True b. False Figure 13-1 In Figure 13-1, which panel shows the effect of a recession on the interest rate? a. Panel (A) b. […]

Which of the following is exempt from taxation (a tax exemption)? a. interest on a home mortgage b. interest from municipal bonds c. rent d. property taxes Member banks of the Federal Reserve System a. advise the Fed on monetary […]

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 […]

Given the labor force, either more capital or better technology will shift the production function downward. a. True b. False Assuming free trade between countries, exchange rates will change so that goods cost the same in all countries. This concept […]

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 […]

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 […]

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 […]

The decline in the value of the dollar from 1985 to 1988 was beneficial to a. American tourists travelling to Europe. b. firms importing goods into America. c. American exporting businesses. d. foreigners holding U.S. government bonds. Combating recession may […]

A tax is progressive if it raises a greater fraction of total tax revenue every year. a. True b. False Society benefits from monopolistic competition because the firms are allocatively efficient. a. True b. False Answer: False In an attempt […]

If the firm’s marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating a. short of an optimal input point. b. at the optimum input point. c. beyond the […]

Society definitely benefits by reducing the number of monopolistically competitive firms. a. True b. False In a simple, private economy, suppose that the MPC is .8 and investment rises by $20 million. At the new equilibrium, how much will saving […]

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 […]

Under an emissions tax program, the government sets ____; under an emissions permits program, the government sets ____. a. the price of the right to pollute; the price of the right to pollute b. the price of the right to […]

Average cost curves have the same shape as a. total cost curves. b. marginal cost curves. c. total fixed cost curves. d. average fixed cost curves. Taxes are either a. regressive, proportional, or degressive. b. regressive, proportional, or progressive. c. […]

The primary goal of supply-side economics is to a. balance the federal budget. b. reduce the balance of payments deficit. c. reduce the money supply. d. reduce inflation and increase growth at the same time. Prices set too low can […]

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 […]

All large firms have monopoly power. a. True b. False The growth rate of productivity is the most important determinant of material well-being in the short run. a. True b. False Answer: False Land on both sides of the border […]

Cost-reducing technological advancements allow suppliers to earn more profits but have no noticeable effect on the supply curve. a. True b. False A common characteristic in oligopolistic markets is a. consideration of rivals’ reactions. b. standardized products. c. high profits. […]

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 […]

A good will tend to be more price elastic if it a. is a luxury good. b. has no close substitutes. c. is a small part of the household budget. d. is a necessity. A government currently uses price controls […]

One major fault with factor pricing analysis is that marginal productivity theory merely attempts to justify the income distribution that the capitalist system yields. a. True b. False A recessionary gap exists when potential GDP a. falls short of equilibrium […]

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 […]

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. […]

Corporations have the disadvantage of (i) double taxation; (ii) unlimited liability. a. i and ii b. i not ii c. ii not i d. neither i nor ii Productivity increases, brought about by increased education and training, may shift the […]

Which of the following most resembles a perfectly competitive market? a. the stock market b. the publishing industry c. the steel industry d. the new car market The largest share of the typical American family budget goes to: a. goods […]

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 […]

Figure 4-20 If there are empty seats at the university basketball game when the price per ticket is P*, then this situation can best be represented by which graph in Figure 4-20? a. 1 b. 2 c. 3 d. 4 […]

Inefficient resource allocation is a major problem with monopolies. a. True b. False The cost of a hospital stay has been going down slowly. a. True b. False Answer: False A fall in the price of a competing product will […]

The theory of the kinked demand curve is that a. although the firm sells a differentiated product, too many competitors exist to make it worthwhile speculating on responses to the firm’s behavior. b. freedom of entry will reduce profits to […]

Technological change, such as the information technology revolution of the 1990s can shift the aggregate supply curve outward. If, at the same time, the government is decreasing spending, the most likely outcome of these two factors is a(n) a. increase […]

At a profit-maximizing output level, a. marginal revenue minus marginal cost equals zero. b. marginal profit equals zero. c. the slope of the total profit curve is zero. d. All of the above are true. Economists generally consider the use […]

Which of the following illustrates government acting as a referee? a. taxing high income persons b. enforcing contract provisions between buyer and seller c. buying new weapons for defense d. mailing checks to social security recipients e. collecting data on […]

In the short run, a firm has fixed costs but never any variable costs. a. True b. False If the production of a good generates a detrimental externality, then at that level of production of the good under perfect competition, […]

Figure 16-3 If budget deficits shift the money demand curve as is illustrated in Figure 16-3, which component of total expenditures will be affected the most? a. consumption spending b. government spending c. private investment spending d. net exports The […]

Inflation reduces the multiplier effect by reducing consumers’ wealth and purchasing power. a. True b. False When a shortage occurs in the market for a good, quantity a. demanded exceeds quantity supplied and the market mechanism pushes the price up, […]

If aggregate quantity demanded exceeds aggregate quantity supplied, we can expect an unplanned a. depletion of inventories, causing firms to raise prices. b. depletion of inventories, causing firms to lower prices. c. accumulation of inventories, causing firms to raise prices. […]

The banking industry is heavily regulated because a. banking is a monopoly industry. b. most banks are owned by government agencies. c. bankers do what is best for their stockholders, not necessarily what is best for the economy. d. All […]

Average cost a. is always larger than marginal cost. b. declines for some range of output, hits a minimum, and then increases. c. is always smaller than marginal cost. d. is total cost/price of the product. One intention of deposit […]

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 concept of “lender of last resort” is that when a. lending decreases, the Fed will be the last to resort to higher interest rates. b. borrowing increases, the Fed will be the last to increase lending. c. commercial banks […]

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 […]

Most of the investment decisions in the U.S. economy are made by a. consumers. b. businesses. c. governmental institutions. d. international financial agencies. Rent seeking is the term given a. to an attempt by firms to create a profitable monopoly […]

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 […]

Taxes constitute the difference between GDP and disposable income. a. True b. False An economist who claims that an increase in government spending would result mainly in a higher price level believes the economy is operating where a. the MPC […]

Cross-subsidization implies that a loss from one product’s sales will be made up by the profit from another product’s sales. a. True b. False In the second quarter of 1995, the following values were observed: real GDP = 4,359.3 billion; […]

What does the Herfindahl-Hirschman Index value near 10,000 imply about the market? a. Pure monopoly b. Perfect competition c. Monopolistic competition d. Oligopoly The statement “Resources employed in producing X are better suited to making Y” is another way of […]

If demand is inelastic, a drop in price will raise total expenditure. a. True b. False The concentration ratio of industry is a measure relating to the proportion of the industry’s total output that is produced by a small number […]

One of the reasons that pollution problems are as large as they are is that a. markets let individuals and firms deplete valuable resources without charging money for doing so. b. markets are incapable of incorporating valuable resources such as […]

When a teacher in a private school points out to her high school principal that since there are empty seats in all classrooms, the cost of additional students is really zero, she is using the a. law of comparative advantage. […]

The benefits principle states that those who a. pay the taxes should reap the benefits. b. reap the benefits from government should pay the taxes. c. are best able to pay should pay for what they receive. d. pay taxes […]

An empirical study determines that price exceeds marginal cost at the levels of output of firms in long-run equilibrium in the widget industry. The widget industry may therefore a. be monopolistically competitive. b. have firms whose goal is sales maximization. […]

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 […]

Compared to a perfectly competitive firm, a monopolist a. is less likely to advertise. b. will, according to Schumpeter, invest fewer resources in research and development. c. usually produces an inefficiently small level of output. d. is less likely to […]

Railroads have received significant attention from regulators because a. railroads enjoy significant economies of scale. b. conditions in the railroad industry are conducive to destructive competition. c. regulators would like to ensure universal service to all potential railroad customers. d. […]

Figure 21-1 In Figure 21-1, if the existing antipoverty program were replaced by a negative income tax, most economists believe that it would result in a move like which of the following? a. C to F b. A to B […]

If the aggregate supply curve is vertical, then the short-run Phillips curve will a. be horizontal. b. also be vertical. c. slope upward. d. slope downward. Which of the following acts prohibited false advertising? a. Sherman Act b. Clayton Act […]

How extensively does the United States use quotas? a. Very little; there are few quotas on imports. b. Selectively; there are more quotas than most people realize. c. Widely; quotas are extensive and cover a wide range of goods. d. […]

If the short-run Phillips curve has a very steep slope, the a. structural deficit will grow during inflation. b. structural deficit will fall during recession. c. inflation costs of reducing unemployment are relatively low. d. inflation costs of reducing unemployment […]

Two economists from Ohio University estimated that the demand curve for kerosene in Indonesia was such that a 10 percent increase in the price reduced the quantity demanded by 2.2 percent and that a 10 percent increase in the price […]

The productivity speed-up in the United States could be explained by a. improvements in labor force quality. b. falling energy prices. c. rising rates of domestic saving. d. advances in information technology. Table 20-2 In Table 20-2, assume that exports […]

Would a profit-maximizing firm sell where demand is inelastic? a. No, this would not follow the rule of MC = MR. b. No, the firm could not profitably raise price. c. Yes, the firm could profitably lower price to attract […]

In reality, commercial banks function most like ____ of the district Federal Reserve Banks. a. stockholders b. regulators c. customers d. competitors Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as “fairer.” a. […]

Net worth increases in the same proportion as liabilities increase. a. True b. False Which of the following countries would have the most difficulty raising its level of average educational attainment? a. Canada b. Italy c. India d. Sudan Answer: […]

The effect of opening trade between countries is a. living standards rise in the country with efficient, high-pay workers. b. both countries can exploit comparative advantage and increase productivity. c. total world production increases as both countries specialize in specific […]

An appreciation of the Japanese yen relative to the U.S. dollar will a. increase aggregate demand in the United States. b. increase aggregate supply in the United States. c. increase aggregate demand in Japan. d. decrease aggregate supply in Japan. […]

The rate of interest written on a contract between a borrower and a lender is the a. nominal interest rate. b. real interest rate. c. implied interest rate. d. expected interest rate. Economist John Maynard Keynes wrote that the economy […]

In an open economy, aggregate supply consists of domestic production plus imports. a. True b. False For each of the following, how would they be included in the national income accounts? a. The University of California buys a new computer. […]

The law of diminishing marginal utility is consistent with the consumer behavior that produces a negatively sloped demand curve. a. True b. False Increasing scarcity of a resource causes new supplies to become more and more costly. a. True b. […]

Contestable markets improve the performance of imperfect markets with a. government regulations. b. the threat of entry. c. advertising. d. tacit collusion. Long-run average cost of the perfectly competitive firm includes the a. cost of raw materials per unit of […]

A severe freeze has once again damaged the Florida orange crop. The impact on the market for oranges will be a leftward shift in a. demand as consumers try to economize because of the shortage. b. both the supply and […]

The aggregate supply curve shows the relationship between ____ and ____, holding all other factors constant. a. price level; quantity of real GDP supplied b. price level; supply of nominal GDP c. nominal GDP; price level of real GDP d. […]

Collaborative research is especially important in high-technology sectors because a single firm might not have the resources to develop a significant innovation. a. True b. False The main international repercussion of either a fiscal expansion or monetary contraction is to […]

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 […]

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 […]

Compared to workers in poor countries, workers in richer countries have a. lower productivity but higher wages. b. higher productivity and higher wages. c. higher productivity but lower wages. d. the same productivity but higher wages. Given the economy’s existing […]

The windfall profits tax on oil will curtail oil production if a. oil executives decide to be spiteful. b. the demand for oil is inelastic. c. the supply curve for oil is upward sloping. d. the supply curve for oil […]

Environmental damage a. cannot be reduced to zero. b. is inevitable where humans exist. c. tends to increase as long as benefits outweigh the costs to the damagers. d. All of the above are correct. Explain why it makes a […]

A shift in the demand curve occurs when a. suppliers place more goods on the market. b. the price of a good rises. c. consumers want to buy more or less than before at a given price. d. the price […]

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 […]

A change in the price level will cause a shift in the expenditure schedule. a. True b. False Which of the following could explain a fall over time in the price of the depletable resource aloe? a. The productivity of […]

If the economy of Gwondanaland is growing more rapidly than the economy of Japan, most likely a. Japan has more current investment than Gwondanaland. b. Japan has more government spending than Gwondanaland. c. Japan spends more on capital goods than […]

Japanese employers tend to hire employees right out of college and train them for a lifetime job with the company. Over time they found that women often, but not always, married after a few years and left the company so […]

When large oligopolistic firms negotiate with the unions of their employees, the resulting bargaining process closely resembles a. perfect competition. b. a dual labor market. c. monopolistic competition. d. bilateral monopoly. Most economists believe that the theory of rational expectations […]

All two-dimensional graphs must have an origin, a horizontal axis, and a vertical axis. a. True b. False A depreciation of the U.S. dollar has the same effect on aggregate supply as an increase in foreign prices. a. True b. […]

A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q1, P1 and point Q2, P2 is a. [(P2 − P1)/(P2 + P1)]/[(Q2 − Q1)/(Q2 + Q1)]. b. [(P2 − P1)/P1]/[(Q2 − Q1)/Q1]. […]

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? […]

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 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 […]

In a simple economy (no government), the vertical distance between the consumption function and the expenditure schedule measures a. undesired inventory depletion. b. planned investment c. undesired investment. d. unintended investment. To “cure” their balance of payments deficits without altering […]

If demand is elastic, an increase in price will decrease total revenue. a. True b. False A typical American family sends about _____% of its budget on services. a. 20% b. 32% c. 66% d. 70% Answer: c It might […]

If wages or prices of other inputs change, the aggregate supply curve will shift to another position. a. True b. False Being a monopolist in the market a. guarantees a positive short-run profit. b. guarantees a positive long-run profit. c. […]

A demand schedule shows a. the “market potential” for a product. b. how much consumers are willing and able to buy at different prices. c. possible combinations of output under different conditions. d. how much producers would like to sell […]

Increases in the supply of scientists and engineers can increase the level of a. investment. b. consumption. c. government spending. d. technology. If a farmer’s opportunity cost of producing 50,000 bushels of wheat is 20,000 fewer bushels of soybeans, then […]

“A producer wanting to employ optimal quantity of inputs should choose the point where diminishing returns sets in.” True or false? “Assuming the long-run average cost curve is U-shaped, a firm will always seek to operate at the lowest point […]

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 […]

Appreciation of the Japanese Yen would lead to a. outward shift in the aggregate supply curve for Japan. b. upward shift in the aggregate demand curve for Japan. c. downward shift in the aggregate supply curve for Japan. d. downward […]

We should expect to see home construction activity decrease when interest rates increase. a. True b. False The accounting identity for the economy’s factor payments can be written as ____. a. GDP = wages + interest + rents + profits […]

The demand curve for any input is the MP curve. a. True b. False The way in which a country benefits from trade is that it can a. obtain goods at lower opportunity cost than producing them itself. b. exploit […]

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 […]

If there are strong economies of scale and scope, then society a. will not be able to prevent overt collusion. b. will benefit from establishing a cartel. c. cannot benefit from regulation of a natural monopoly. d. will not be […]

As the economy becomes more technologically sophisticated, the wage premium can be expected to a. continue rising. b. continue falling. c. rise. d. fall. Figure 18-1 According to the graph in Figure 18-1, the increase in the amount that consumers […]

Lower inflation rates are usually correlated with lower unemployment rates. a. True b. False GDP can be calculated by the value-added approach, which a. is useful in avoiding double counting. b. includes only the value-added portion from the sale of […]

Reductions in the personal income tax, often advocated by supply-siders to increase labor supply and effort, can be expected to also a. decrease consumption spending. b. increase consumption spending. c. decrease investment spending. d. increase export sales. If the fluctuations […]

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. […]

The “War on Poverty” was declared by President Ronald Reagan in 1982. a. True b. False Define the following terms and explain their importance to the study of economics. a. minimum wage law b. income and substitution effects c. backward-bending […]

Figure 12-2 In Figure 12-2, which of the graphs represents a monopolistic competitor in long-run equilibrium? a. 1 b. 2 c. 3 d. 4 Under the Bretton Woods system of fixed exchange rates, a. devaluations were frequent and small. b. […]

When will stabilization policy be most effective in combating inflation? a. when AS is flat b. when AS is very steep c. when AS has a moderately upward slope d. when AS has a moderately downward slope Self correcting mechanism […]

Many economists think that, in the long run, the Phillips curve is a. a horizontal line. b. a vertical line. c. the same as the short-run curve. d. a 45-degree line from the origin. The recent experience in Greece, Portugal, […]

Is GDP an accurate measure of a country’s well being? a. Yes, it is the best measure of national well being. b. Yes, provided we use real GDP and not nominal GDP. c. The answer is uncertain, depending on whether […]

A duopoly is a. a cartel in which all members try to cheat on the cartel. b. an industry with only two sellers. c. an industry with only two buyers. d. a cartel with only two members. Stabilization policy is […]

The Big Mac index is a measure of how well the purchasing power parity theory works. a. True b. False Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is […]

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 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: […]

Previously a creditor nation, in the 1980s the U.S. became a debtor nation. a. True b. False The reason that higher interest rates reduce aggregate demand in an open economy with capital flows is that investment a. increases generated by […]

Explain how and why economic events in the U.S. affected the economies of Thailand, South Korea, and Indonesia and vice-versa. Part of the normal aftermath of a period of excessive aggregate demand is a. improvement in the quality of life. […]

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 […]

Which of the following is an imperfection of market economies? a. They produce inexpensive services but expensive manufactured goods. b. They place undue importance on the needs of future generations. c. They cannot provide certain goods such as national defense. […]

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, […]

The relative concept of poverty is based on how far behind average income a particular family gets. a. True b. False If the supply curve of a commodity is upward sloping, and the producing country begins to export more in […]

Bankers must always trade off a. honesty and dishonesty. b. stocks and loans. c. prudence and profits. d. gold and cash. e. All of the above are correct. If the Fed raises the discount rate, what will be the effect […]

Which of the following is most likely to affect the supply of labor in any particular industry? a. the size of the available working population b. the nonmonetary attractiveness of the job c. the amount of ability and training necessary […]

Which of the following would impose the greatest costs to society? a. high levels of expected inflation b. low levels of expected inflation c. variable rates of inflation d. stable rates of inflation An optimal decision is one that chooses […]

The elasticity of a straight-line demand curve is the same as its slope. a. True b. False The marginal revenue curve for a monopolist is the same as its demand curve. a. True b. False Answer: False Table 22-2 Using […]

Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit. What is most likely to happen? a. a gradual increase in the value of its currency b. a gradual decrease in […]

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 […]

Once the profit-maximizing output where MR = MC is determined, price is set by a. adding a standard markup percentage to marginal cost. b. the demand curve. c. making it equal to MR = MC. d. subtracting the marginal cost […]

The Fed’s purchase and sale of government securities is known as a. margin operations. b. open market operations. c. bank reserve operations. d. cash management operations. A bond and stock differ in that a stock is an IOU for a […]

Economics can decide a. the appropriate trade-off between fairness and efficiency. b. which pricing arrangements are fair and which are unfair. c. whether a pricing decision will impose heavy inefficiency costs on society. d. All of the above are correct. […]

On the job training: a. is an important component for building human capital b. may be just as important as formal education in raising productivity c. is less amenable to influence by the government d. All of the above are […]

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 […]

Critics of affirmative action programs argue that they a. promote statistical discrimination. b. impair economic efficiency by preventing firms from freely choosing the most productive employee for a particular job. c. are not as efficient as quota systems at hiring […]

Figure 7-10 In Figure 7-10, the curve labeled C is a. average fixed cost. b. average total cost. c. average variable cost. d. marginal cost. Under perfect competition the price of a depletable resource whose cost of extraction is not […]

When the Art Institute of Chicago purchases a painting by Mary Cassatt that she produced in Paris in 1885, this would not be included in the U.S. GDP for 2015. a. True b. False The macroeconomic conditions during the mid-1990s […]

Define the following terms and explain their importance to the study of economics: a. regressive tax b. proportional tax c. progressive tax d. direct tax e. indirect tax When it is cheaper for one firm to produce a particular product, […]

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 […]

Economists disagree on most economic issues facing an economy. a. True b. False When income rises, total expenditures remain constant. a. True b. False Answer: False In hindsight, mortgage-backed securities implied very limited risk because the underlying mortgages were spread […]

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 […]

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 net export component of aggregate demand is defined as U.S. a. imports minus U.S. exports. b. imports plus U.S. exports. c. exports minus U.S. imports. d. exports minus taxes and customs duties. At higher interest rates, banks will want […]

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 […]

Which term refers to provisions in a law or a contract whereby monetary payments are automatically adjusted whenever a specified price index changes? a. Contango b. Swap c. Averaging d. Indexing A price-discriminating firm will always maximize profit by following […]

The successes of the 1960s were ascribed to the effects of a. classical policies from the 1800s. b. classical policies from the 1930s. c. classical policies from the 1950s. d. Keynesian policies from the 1930s. e. Keynesian policies from the […]

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 […]

At equilibrium, the market will clear, with no surpluses or shortages occurring. a. True b. False The supply curve of a depletable natural resource is usually a. downward sloping because the resource runs out over time. b. upward sloping because […]

Mercantilist policy is to do everything it can to promote exports and to discourage imports. a. True b. False To maximize sales revenue, an oligopoly will expand output until the price is zero. a. True b. False Answer: False In […]

If workers and firms forecast inflation accurately, a. the aggregate supply curve will be vertical. b. the real wage will not decline as the price level rises. c. workers will not lose from inflation, and firms will not gain. d. […]

If a good has “snob appeal,” consumers may purchases less when the price falls. a. True b. False Net benefit is equal to total benefit minus marginal cost. a. True b. False Answer: False In the basic 45-degree line model, […]

The world price of a commodity will settle at the level where a. supply and demand are equal within each country. b. the excess demand of the importing country is equal to the excess supply of the exporting country. c. […]

The share of GDP taken by taxes is considerably higher in the United States than in other countries. a. True b. False In March 2015, many college students bet on the NCAA finals in dorm gambling pools. This is an […]

The production function shifts upward as the capital stock increases. a. True b. False A profit-maximizing monopolist a. is just as socially efficient as a perfectly competitive firm in allocating resources to production since she, too, seeks the largest return […]

When the growth rates of actual and potential GDP diverge, they usually diverge because a. actual GDP growth equals potential GDP growth. b. actual GDP growth falls below potential GDP growth. c. potential GDP growth rates fall below actual GDP […]

In which of the following monetary aggregates are Treasury Bills included? a. M1 only b. M2 only c. both M1 and M2 d. neither M1 nor M2 Game theory is based on the idea that each participant makes decisions based […]

In August 1988, the Los Angeles Kings hired Wayne Gretzky for $15 million in cash. The hockey team’s decision must have been based on the expectation that a. Gretzky’s opportunity cost will exceed $15 million. b. Gretzky’s marginal revenue product […]

“Rate averaging” is only possible if a. the firm is protected from price competition and new entry. b. the firm is protected from losses resulting from unsuccessful innovation. c. the firm can choose the level of service it wishes to […]

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. […]

Which of the following scenarios best illustrates the concept of cyclical unemployment? a. Grace loses her job because of new automated machinery. b. Sean quits his job to look for work that is more fun. c. Ellen quits looking for […]

If the quantity of euro demanded were greater than the quantity supplied, then the price of the a. euro would rise. b. euro would fall. c. dollar would rise. d. euro would be in equilibrium. From 2000 to 2001, the […]

Total profit is maximized where a. MR = MC. b. marginal profit is zero. c. the slope of the marginal profit curve is zero. d. All of the above are correct. According to Baumol and Blinder, from the demand side […]

In the Keynesian causal chain, changes in GDP cause changes in the level of interest rates. a. True b. False Which of the following is concerned with the distribution part of resource allocation? a. An economy decides to produce equal […]

Deregulation has led to higher prices. a. True b. False The most volatile component of aggregate demand is a. consumption spending. b. government spending. c. investment spending. d. net exports. Answer: c Under the gold standard, a. no nation had […]

Which of the following might lead a nation to engage in international trade? a. Differences in natural endowments such as climate b. Differences in skills of labor force c. Differences in endowments of natural resources d. All of the above […]

The demand for reserves depends on income and the price level. a. True b. False The negative slope of a production possibilities frontier is a graphic representation of opportunity cost. a. True b. False Answer: True All of the following […]

The “Taylor rule” for monetary policy provides the Fed with a a. mechanical prescription for monetary policy. b. benchmark to guide policy decisions. c. time frame for discount rate changes. d. rule for changing the M1 money supply. A budget […]

Bigness, or large firms, may benefit consumers in which of the following ways? a. Larger firms usually charge lower prices than smaller firms. b. Larger firms with monopoly power definitely have greater incentive to be efficient and innovative. c. Larger […]

Policy makers who believe that the costs of unemployment are very high will tend to favor which of the following during a recessionary gap? a. moderate fiscal stimulus, no monetary stimulus b. fiscal and monetary tightness c. moderate monetary stimulus, […]

Economists define “efficiency” as the absence of waste. a. True b. False With regard to the characteristics of production indifference curves, which of the following statements is/are NOT true? a. Higher curves correspond to larger outputs. b. An indifference curve […]

The principle of “comparable worth” asserts that people with comparable, if not identical, skills and responsibilities should receive the same pay. If this principle were to become law, it would tend to a. reduce the problem of the “cost disease […]

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 […]

Which of the following observations concerning poverty rates in America is true? a. Major increase in poverty in the decade from 1963 to 1973. b. It hit an all-time low by 1983. c. The economic boom of the 1990s restored […]

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© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website […]

© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website […]

ACCREDITING STANDARDS: Perfect competition TOPICS: The Perfectly Competitive Firm KEYWORDS: BLOOM’S: Comprehension Essay 174. Give a complete but concise definition of the following terms. a. perfect competition b. perfectly competitive firm’s demand curve c. shutdown point d. long-run equilibrium in […]

True / False 1. Perfect competition is an ideal market structure. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Perfect competition NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Perfect competition TOPICS: Perfect Competition […]

DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Perfect competition NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Perfect competition TOPICS: The Perfectly Competitive Industry KEYWORDS: BLOOM’S: Comprehension 134. Perfectly competitive firms ____ earn zero economic profit in long-run equilibrium because ____. […]

b. an industry in which numerous firms produce identical products. c. an industry untouched by government regulation. d. the kind of industry any American would support. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Perfect competition NATIONAL STANDARDS: United […]

True / False 1. A pure monopoly is defined as having only one seller. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Monopoly NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monopoly TOPICS: Monopoly […]

ACCREDITING STANDARDS: Monopoly TOPICS: Price Discrimination Under Monopoly KEYWORDS: BLOOM’S: Analysis 174. Discrepancies in profitability tempt rivals to charge the more profitable consumers somewhat lower prices in order to lure them away from the firm that is “overcharging” them. This […]

133. In Figure 11-5 are the cost and revenue curves of a monopolist in the theater market, Crown Theater, which is the only movie theater in the city. At its profit-maximizing quantity of tickets sold, movie goers will buy ____ […]

POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Monopoly NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monopoly TOPICS: Monopoly Defined KEYWORDS: BLOOM’S: Comprehension 76. Which of these contributes to the existence of monopoly power? a. a continuously decreasing long-run […]

NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Oligopoly TOPICS: Oligopoly KEYWORDS: BLOOM’S: Comprehension 140. Cartels usually succumb to divisive forces caused by a. limited information. b. members cheating by giving secret discounts. c. entry by new rivals seeking […]

True / False 1. Most economic activity in the United States is carried out by monopolies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Monopoly NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monopoly […]

b. full information about the market among buyers and sellers c. product homogeneity d. freedom of entry into the market ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Monopolistic competition NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: […]

c. sometimes leave the regulated firm with economic losses. d. leave the regulated firm with profits that are about 10 percent higher than those of other firms. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: The role of government […]

True / False 1. The goal of all regulation is the creation of perfectly competitive markets. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The role of government NATIONAL STANDARDS: United States – BPROG: Analytic […]

DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The role of government NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: The role of government TOPICS: Measuring Market Power: Concentration KEYWORDS: BLOOM’S: Comprehension 75. The share of industry output sold by the top […]

TOPICS: Scarcity and the Need to Coordinate Economic Decisions KEYWORDS: BLOOM’S: Comprehension 138. When box lunches are handed out at an elementary school, Jimmy (who loves chocolate and hates raisins) gets a raisin cookie and Johnny (who hates chocolate and […]

c. allocate their resources equitably. d. exploit their resources. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Supply and demand NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Supply and demand TOPICS: Efficient Resource Allocation and Pricing KEYWORDS: […]

True / False 1. A market economy provides solutions to almost all social ills such as poverty and environmental damage. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Markets, market failure, a – DISC: Markets, […]

TOPICS: Efficient Resource Allocation: A Review KEYWORDS: BLOOM’S: Comprehension 76. In a properly functioning free market a. the price of any good reflects its marginal utility to consumers. b. price will equal marginal cost. c. the invisible hand will assure […]

a. valuable socially. b. not depletable and not excludable. c. subject to the “free rider” problem. d. All of the above are correct. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Markets, market failure, a – DISC: Markets, market […]

DIFFICULTY: Difficult LEARNING OBJECTIVES: DISC: The role of incentives NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: The role of government TOPICS: Basic Approaches to Environmental Policy KEYWORDS: BLOOM’S: Comprehension 138. Economists generally prefer to deal with emissions of […]

True / False 1. Increasing GDP generally causes increases in problems of waste disposal. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities NATIONAL STANDARDS: […]

a. air pollution has worsened in most U.S. cities. b. many new pollutants have been introduced or identified. c. the federal government has reduced its reliance on economic incentives as a means of reducing pollution. d. All of the above […]

182. Which of the following is most likely to reduce the consumption of an exhaustible natural resource? a. a decrease in monopoly control of the market for the resource b. government tax policies that give tax breaks to entrepreneurs who […]

DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The study of economics, an – DISC: The study of economics, and definitions in economics NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: The study of economics, and defi – The study of economics, […]

True / False 1. For about the last 45 years, federal taxes have remained relatively constant as a percentage of GDP. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: […]

ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monetary and fiscal policy TOPICS: Shifting the Tax Burden: Tax Incidence KEYWORDS: BLOOM’S: Comprehension 182. Suppose that the […]

d. rent seeking. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: The study of economics, an – DISC: The study of economics, and definitions in economics NATIONAL STANDARDS: United States – BPROG: Analytic LOCAL STANDARDS: United States – OH […]

NATIONAL STANDARDS: United States – BPROG: Analytic LOCAL STANDARDS: United States – OH – Default City – Measuring the Economy ACCREDITING STANDARDS: Measuring the Economy TOPICS: The Principle of Marginal Productivity KEYWORDS: BLOOM’S: Comprehension 67. In 2013 ____ of national […]

True / False 1. MRP represents what the marginal physical product is worth. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The study of economics, an – DISC: The study of economics, and definitions in […]

KEYWORDS: BLOOM’S: Comprehension 121. If the rate of interest increases, firms will most likely respond by a. increasing investment. b. decreasing investment. c. not changing investment. d. increasing capital stock. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Supply […]

KEYWORDS: BLOOM’S: Comprehension 76. A bilateral monopoly is a market situation in which there is only one buyer and only one seller. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Monopoly NATIONAL STANDARDS: United States […]

True / False 1. Average real wages have not risen significantly since approximately 1973. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Labor markets NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Labor markets […]

c. both the income and substitution effect. d. neither the income effect nor the substitution effect. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Labor markets NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Labor markets TOPICS: The […]

KEYWORDS: BLOOM’S: Knowledge 71. If California were a separate economy, it would be the ____ largest economy on earth. a. second b. third c. fifth d. eighth ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Measuring the Economy NATIONAL […]

True / False 1. The United States is the largest national economy in the world. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Measuring the Economy NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: […]

LEARNING OBJECTIVES: DISC: The role of government NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: The role of government TOPICS: Policies to Combat Poverty KEYWORDS: BLOOM’S: Comprehension 127. Who would receive payments from the government under a negative income […]

d. has already been won. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: The role of government NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: The role of government TOPICS: The Facts: Poverty KEYWORDS: BLOOM’S: Comprehension 74. Under […]

c. an inexpensive patent system d. All of the above are correct. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Productivity and growth NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Productivity and growth TOPICS: Entrepreneurship KEYWORDS: BLOOM’S: […]

1. The U.S. remains the world’s economic leader in all respects. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The study of economics, an – DISC: The study of economics, and definitions in economics NATIONAL […]

LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: Aggregate demand and aggregate supply NATIONAL STANDARDS: United States – BPRPOG: Analysis ACCREDITING STANDARDS: Aggregate demand and aggregate s – Aggregate demand and aggregate supply TOPICS: Supply and Demand in Macroeconomics […]

c. lower rates of unemployment. d. higher rates of price level growth. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monetary and fiscal policy TOPICS: The […]

ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Markets, market failure, and ext – Markets, market failure, and externalities […]

True / False 1. The key characteristic of macroeconomics is the process of aggregation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: Aggregate demand and aggregate supply NATIONAL STANDARDS: […]

ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Markets, market failure, and ext – Markets, market failure, and externalities […]

True / False 1. Small differences in economic growth rates translate into significant differences in living standards. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Productivity and growth NATIONAL STANDARDS: United States – BPROG: Analytic […]

71. The growth rate of potential GDP is the sum of two other growth rates. These other growth rates are a. population and resource base. b. goods output and services output. c. labor input and labor hours worked. d. labor […]

c. 6 percent. d. 3 percent. ANSWER: b POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States – Analytic – BB-Legal ACCREDITING STANDARDS: Understanding and applying econo – Understanding and applying economic models TOPICS: The Goal of Low Inflation 139. Workers […]

True / False 1. College tuition costs have risen faster than prices in general from 1979 to 2009. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Productivity and growth NATIONAL STANDARDS: United States – BPROG: […]

NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Productivity and growth TOPICS: The Productivity Slowdown and Speed-Up in The United States KEYWORDS: BLOOM’S: Comprehension 188. From the late 1960s to the late 1980s, SAT scores in the United States […]

LEARNING OBJECTIVES: DISC: The role of government NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: The role of government TOPICS: Growth Policy: Improving Education And Training KEYWORDS: BLOOM’S: Comprehension 139. In the United States, the wage premium for college […]

73. Human capital is the amount of a. capital available to workforce. b. skill embodied in the workforce. c. output the labor force can produce. d. healthy work force in the total population. ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING […]

True / False 1. Both President Bush and President Obama wanted tax cuts to stimulate consumer spending during the 2007-2009 recession. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: […]

c. an increase in the value of real wealth d. an increase in the price level ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: Aggregate demand and aggregate supply NATIONAL STANDARDS: United States […]

TOPICS: Appendix: National Income Accounting KEYWORDS: BLOOM’S: Comprehension 179. The equation representing the final demand approach to calculating GDP is a. Y = C + I + X + IM. b. Y = C + I + G. c. Y […]

72. Which of the following is a transfer payment? a. Work-study students receive wages transferred from the university budget. b. A company pays the moving expenses for a transferred employee. c. A student transfers to another college and receives a […]

True / False 1. Free markets coordinate economic activity in such a way as to eliminate the possibility of inflation or unemployment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Markets, market failure, a – […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: Aggregate demand and aggregate supply NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis ACCREDITING STANDARDS: Aggregate demand and aggregate s – Aggregate demand and aggregate supply […]

NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Aggregate demand and aggregate s – Aggregate demand and aggregate supply TOPICS: The Mechanics of Income Determination KEYWORDS: BLOOM’S: Comprehension 72. 45° line diagrams show how a. investment varies with income. […]

NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Aggregate demand and aggregate s – Aggregate demand and aggregate supply TOPICS: Demand-Side Equilibrium and Full Employment KEYWORDS: BLOOM’S: Analysis 135. In Table 9-1, inventories will be increasing as long as […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: Aggregate demand and aggregate supply NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Aggregate demand and aggregate s – Aggregate demand and aggregate supply TOPICS: Recessionary and Inflationary […]

ACCREDITING STANDARDS: Aggregate demand and aggregate s – Aggregate demand and aggregate supply TOPICS: The Aggregate Supply Curve KEYWORDS: BLOOM’S: Comprehension 73. Resource prices are fixed for some period of time because a. some workers enter into long-term contracts. b. […]

True / False 1. Supply-side economics concerns itself with the interaction between demand and supply, the price level, and real GDP. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: […]

NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Aggregate demand and aggregate s – Aggregate demand and aggregate supply TOPICS: Adjusting to an Inflationary Gap: Inflation KEYWORDS: BLOOM’S: Comprehension 187. Self correcting mechanism reveals that a. real wages will […]

ANSWER: b POINTS: 1 DIFFICULTY: Difficult LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: Aggregate demand and aggregate supply NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Aggregate demand and aggregate s – Aggregate demand and aggregate supply […]

True / False 1. Fiscal policy is the use of taxes and spending by the government to affect aggregate demand. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: Aggregate […]

KEYWORDS: BLOOM’S: Comprehension 134. Policy makers and citizens who want to expand the size of the government sector would favor stabilization policies that a. raise G to eliminate a recessionary gap and lower taxes to eliminate an inflationary gap. b. […]

c. Taxes reduce total spending directly. d. Taxes do not have a multiplier effect on equilibrium GDP. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: Aggregate demand and aggregate supply NATIONAL STANDARDS: United […]

True / False 1. Most observers nowadays see monetary policy as much less important than fiscal policy. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: United States – BPROG: […]

b. reduce shopping time. c. protect against inflation. d. quote prices. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: The role of money NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: The role of money TOPICS: The Nature […]

highest interest rates. b. refuse to make risky loans and make loans only to the safest borrowers. c. invest in U.S. government securities and make loans only to established businesses. d. strike the appropriate balance between the attraction of bank […]

c. change in money supply = (1/m) × change in reserves. d. change in money supply = m/change in reserves. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: The role of money NATIONAL STANDARDS: United States – BPROG: Analytic […]

DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The study of economics, an – DISC: The study of economics, and definitions in economics NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis ACCREDITING STANDARDS: The study of economics, and defi – […]

b. No, scarcity does not apply to governments. c. Yes, resources are limited even for the U.S. government. d. Yes, although the U.S. government can easily obtain more resources. e. Uncertain-economic theory has no answer to this question. ANSWER: c […]

1. If the budget deficit was eliminated, the federal government would have more money than it could spend. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Scarcity, tradeoffs, and o – DISC: Scarcity, tradeoffs, and […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Gains from trade, speciali – DISC: Gains from trade, specialization and trade NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Gains from trade, specialization – Gains from trade, specialization and trade TOPICS: The Three […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monetary and fiscal policy TOPICS: America’s Central Bank: The Federal Reserve System KEYWORDS: BLOOM’S: Comprehension 72. The Federal Open Market Committee consists […]

True / False 1. The central bank in the United States is known as the Federal Reserve System. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: United States – […]

d. will probably cause inflation if the economy is at potential GDP. ANSWER: d POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monetary and fiscal policy TOPICS: Implementing […]

KEYWORDS: BLOOM’S: Comprehension 177. If the Fed reduces the required reserve ratio, a. excess reserves will increase. b. excess reserves will decrease. c. total reserves will increase. d. total reserves will decrease. ANSWER: a POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: […]

KEYWORDS: BLOOM’S: Comprehension 38. Assume that Michaela purchases $12,000 worth of a stock. To do so she uses $2,000 of her own money and borrows the remaining $10,000 at an 8.0% interest rate. If the stock’s value increases by 20% […]

True / False 1. The United States has not experienced a recession as severe as the 2007-2009 downturn since the 1930s. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Markets, market failure, a – DISC: […]

d. velocity of money is zero. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: The study of economics, an – DISC: The study of economics, and definitions in economics NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: The […]

True / False 1. The differences between monetarist and Keynesian theories are more apparent than real. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The study of economics, an – DISC: The study of economics, […]

LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monetary and fiscal policy TOPICS: Debate: The Shape of the Aggregate Supply Curve KEYWORDS: BLOOM’S: Comprehension 180. When will stabilization policy be most effective […]

d. decreased and the Treasury interest rate had fallen. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monetary and fiscal policy TOPICS: Debate: Should the Fed […]

POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monetary and fiscal policy TOPICS: Debts, Interest Rates, and Crowding Out KEYWORDS: BLOOM’S: Comprehension 178. If the government ran a […]

KEYWORDS: BLOOM’S: Comprehension 71. Deficit is to debt as a. responsible is to irresponsible. b. increase is to decrease. c. flow is to stock. d. important is to unimportant. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Monetary and […]

DIFFICULTY: Difficult LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Monetary and fiscal policy TOPICS: Why is the National Debt Considered a Burden? KEYWORDS: BLOOM’S: Comprehension 135. In contrast to Argentina in […]

True / False 1. The federal budget deficit in 2009 was more than eight times larger than the deficit in 2007. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Monetary and fiscal policy NATIONAL STANDARDS: […]

ACCREDITING STANDARDS: Aggregate demand and aggregate s – Aggregate demand and aggregate supply TOPICS: What the Phillips Curve is Not KEYWORDS: BLOOM’S: Comprehension 130. The main process by which a recessionary gap is eliminated is a(n) a. increase in wages […]

True / False 1. Inflation can come from the demand side or from the supply side of the economy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: Aggregate demand […]

a. It is horizontal in the short and long run. b. It is vertical in the short and long run. c. It is vertical in the short run and upward sloping in the long run. d. It is downward sloping […]

b. supply-side inflation. c. falling prices. d. stable prices. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: Aggregate demand and aggregate supply NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Aggregate demand […]

POINTS: 1 DIFFICULTY: Difficult NATIONAL STANDARDS: United States – Analytic – BB–Legal ACCREDITING STANDARDS: International trade and finance TOPICS: International Versus Intranational Trade 86. Which of the following is an extreme form of risk associated with investing in a foreign […]

ACCREDITING STANDARDS: International trade and finance TOPICS: The Law of Comparative Advantage 148. As a result of pure free trade in a commodity the a. price of the commodity must be the same in all countries. b. total quantity imported […]

NATIONAL STANDARDS: United States – Analytic – BB–Legal ACCREDITING STANDARDS: International trade and finance TOPICS: Why Inhibit Trade? 191. The trade philosophy of the Clinton administration is best characterized as a. protectionist. b. mercantilist. c. free trade. d. strategic trade. […]

1. Something other than exploiting cheap foreign labor must be driving international trade. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy NATIONAL STANDARDS: United States – Analytic – BB–Legal ACCREDITING STANDARDS: Labor markets TOPICS: ISSUE: How Can Americans […]

TOPICS: When Governments Fix Exchange Rate: The Balance Of Payments KEYWORDS: BLOOM’S: Comprehension 134. A balance of payments deficit is defined as the amount by which a. a country’s exports exceed its imports. b. a currency must appreciate in order […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Markets, market failure, and ext – Markets, market failure, and externalities TOPICS: Why Try to […]

d. euro would be in equilibrium. ANSWER: b POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Supply and demand NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Supply and demand TOPICS: Exchange Rate Determination in a Free Market KEYWORDS: BLOOM’S: […]

True / False 1. In 2007, the value of the American dollar rose relative to the euro. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: International trade and fi – DISC: International trade and finance […]

True / False 1. In an open economy net exports must always be positive. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: International trade and fi – DISC: International trade and finance NATIONAL STANDARDS: United […]

POINTS: 1 DIFFICULTY: Difficult LEARNING OBJECTIVES: DISC: International trade and fi – DISC: International trade and finance NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis ACCREDITING STANDARDS: International trade and finance TOPICS: International Aspects of Deficit Reduction […]

TOPICS: Fiscal and Monetary Policies in an Open Economy KEYWORDS: BLOOM’S: Comprehension 132. The sequence of events following a contractionary monetary policy would be higher interest rates followed by dollar a. depreciation, higher exports, and lower imports. b. depreciation, lower […]

LEARNING OBJECTIVES: DISC: Aggregate demand and aggre – DISC: Aggregate demand and aggregate supply NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Aggregate demand and aggregate s – Aggregate demand and aggregate supply TOPICS: International Trade, Exchange Rates, and […]

TOPICS: Supply and Demand Equilibrium KEYWORDS: BLOOMS: Application 244. If the price of a good is below the equilibrium price, a. suppliers will find inventories building; they will cut output and raise prices. b. suppliers will find inventories being depleted. […]

1. Scarcity and choice are the basic problems of economics; the supply and demand mechanism is the basic investigative tool of economics. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Supply and demand NATIONAL STANDARDS: […]

ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: The role of government NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: The role of government TOPICS: Battling The Invisible Hand: The Market Fights Back KEYWORDS: BLOOM’S: Comprehension 76. Price […]

LEARNING OBJECTIVES: DISC: Supply and demand NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Supply and demand TOPICS: Battling The Invisible Hand: The Market Fights Back KEYWORDS: BLOOM’S: Comprehension 284. Tampering with the price mechanism a. can be efficient […]

a. supply curve shifted to the left. b. demand curve shifted to the right. c. demand curve shifted to the left. d. supply curve shifted to the right. ANSWER: b POINTS: 1 DIFFICULTY: Difficult LEARNING OBJECTIVES: DISC: Supply and demand […]

POINTS: 1 DIFFICULTY: Difficult LEARNING OBJECTIVES: DISC: Supply and demand NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis ACCREDITING STANDARDS: Supply and demand TOPICS: Supply and Quantity Supplied KEYWORDS: BLOOMS: Application Figure 4-6 196. Grapes can be […]

KEYWORDS: BLOOM’S: Comprehension 134. A budget line is a straight line designed to show a. how income is related to hours worked. b. all combinations of two goods that can be purchased with a given income. c. the way a […]

TOPICS: Utility: A Tool to Analyze Purchase Decisions KEYWORDS: BLOOM’S: Comprehension 75. When the price of a commodity falls, we can expect a. total utility will fall. b. marginal utility of the last unit purchased will fall. c. marginal utility […]

a. D to C. b. B to D. c. C to B or A. d. D to A but not B. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Utility and consumer choic – DISC: Utility and consumer choice […]

True / False 1. Because the consumer’s budget is limited, purchase decisions among available goods must of necessity be interdependent. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Utility and consumer choic – DISC: Utility […]

TOPICS: Price Elasticity of Demand: Its Effect on Total Revenue and Total Expenditure KEYWORDS: BLOOM’S: Analysis 133. A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91. The administration is considering a tuition increase […]

a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Supply and demand NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Supply and demand TOPICS: Price Elasticity of Demand: Its Effect on Total Revenue and Total […]

True / False 1. The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING […]

b. decreasing returns to scale. c. constant returns to scale. d. increasing costs per unit of output. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Costs of production NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Costs of […]

True / False 1. The short run is that period during which there are no fixed commitments. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: DISC: Costs of production NATIONAL STANDARDS: United States – BPROG: Analytic […]

Table 7-1 Workers Toys 1 5 2 12 3 22 4 30 5 35 75. 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. (a) b. (b) c. (c) d. (d) ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Costs of production NATIONAL STANDARDS: United States – BPROG: Analytic ACCREDITING STANDARDS: Costs of production TOPICS: Cost and Its Dependence on Output KEYWORDS: […]

d. both a and c ANSWER: c POINTS: 1 DIFFICULTY: Difficult LEARNING OBJECTIVES: DISC: Marginal costs & benefits NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis ACCREDITING STANDARDS: Marginal costs & benefits TOPICS: Generalization: The Logic of […]

True / False 1. Once a firm has selected a price for its product, quantity is decided by consumers and their demand curves. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: DISC: Supply and demand NATIONAL […]

Someone who is out of work because they are between jobs is experiencing a. frictional unemployment. b. structural unemployment. c. seasonal unemployment. d. cyclical unemployment. How does the calculation of GDP include the costs of natural resource depletion that occurs […]

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 […]

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 […]

Fixed exchange rates are determined in free markets by the forces of demand and supply. a. True b. False Figure 18-2 Figure 18-2 shows the widget market before and after an excise tax is imposed. The tax per widget equals […]

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 […]

Gold and silver have historically been the most common form of commodity money. a. True b. False If the credit market is close to being a competitive market, an interest rate ceiling imposed by usury laws will bring misallocations of […]

In reality, there is not one labor market, but many. a. True b. False There is some agreement between the beliefs of President George W. Bush in 2001 on the effectiveness of tax cuts with the beliefs of former President […]

A tariff is a limitation on the amount of a good that can be imported. a. True b. False When new farmers enter the wheat industry, the equilibrium price of wheat a. always falls. b. falls only if existing firms […]

The immediate impetus for the establishment of the Federal Reserve System came from a. severe outbreaks of inflation in the early 1900s. b. four severe banking panics between 1873 and 1907. c. the discovery of gold in Alaska. d. the […]

The school of engineering at a modern university would be a supporter of the new a. consumption theory. b. growth theory. c. monetary theory. d. construction theory. Which of the following would be the most likely candidate for direct application […]

Which of the following shows the relationship between national income (GDP) and total spending? a. Demand schedule b. Consumption curve c. Expenditure schedule d. Balance schedule The price of coffee rose 50 percent and coffee sales fell 25 percent. Doughnut […]

The market allocates goods to individuals according to the individuals’ a. desire for the good. b. ability to pay for the good. c. desire and ability to pay for the good. d. political influence. In a perfectly contestable market in […]

Demand shifts due to changes in price. a. True b. False The accounting relationship between the budget deficit and the trade deficit may be expressed as ____. a. G + T = (S + I) + (X − IM) b. […]

The “investment” component of aggregate demand will include all of the following except a. expenditures of business firms on new plants. b. expenditures of business firms on new equipment. c. resales of existing physical assets. d. household spending on new […]

The supply curve for a perfectly competitive industry is obtained by a. making an empirical study of historical data. b. vertically summing the supply curves of firms in the industry. c. horizontally summing the average cost curves of firms in […]

“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 […]

Prices are useful in coordinating society’s economic planning because a. they convey information about which goods are scarce and which are plentiful. b. economies based on price systems are more flexible than centrally planned economies. c. economies based on price […]

The Fed relies on open market operations, which work a. with the Treasury in creating money to finance bonds. b. through major stock exchanges to influence bond prices. c. directly through the nonbank public to change their assets. d. through […]

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 […]

Gross domestic product is the money value of manufacturing production in a year. a. True b. False Figure 9-1 Which of the graphs in Figure 9-1 best illustrates the path of a composite of common stock prices over the long […]

Define the following terms and explain their importance to the study of macroeconomics. a. the relationship between interest rates and velocity b. lags in stabilization policy c. rules versus discretion An improvement in productivity will usually increase profits. a. True […]

Inflation refers to an increase in the a. price level. b. rate of inflation. c. total income. d. real GDP. A society must make three sorts of decision: what goods to produce, how to produce them, and how to distribute […]

Activist capitalists who seek out or create earnings opportunities and assume risk, for which they receive profits, are called a. rent seekers. b. entrepreneurs. c. muckrakers. d. marginalists. Critics of supply-side economics argue that a. tax cuts do not affect […]

When the expenditure schedule is too low, the result is a(n) a. unemployment surplus. b. inflationary gap. c. recessionary gap. d. budgetary gap. Average revenue is slightly higher than price. a. True b. False Answer: False A country that must […]

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. […]

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 […]

What is the most probable reason why garbage men have higher wages than nurses? a. marketplace discrimination b. active unionization in the garbage collection field c. higher demand for garbage men than nurses d. the nonmonetary attractiveness of garbage collection […]