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WHAT’S NEW IN THE EIGHTH EDITION: There is a new case study “Adam Smith Would Have Loved Uber.” LEARNING OBJECTIVES: By the end of this chapter, students should understand: that economics is about the allocation of scarce resources. that individuals […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. There are many possible answers. 2. A country is better o by trading because trade allows more goods and services to be 3. The three principles that describe how the economy, as a […]

Chapter 2/Thinking Like an Economist ❖ 13 w WHAT’S NEW IN THE EIGHTH EDITION: There is a new Ask the Experts feature on “Ticket Resale.” LEARNING OBJECTIVES: By the end of this chapter, students should understand: how economists apply the methods of […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Economics is like a science because economists devise theories, collect data, and analyze the data in an attempt to verify or refute their theories. In other words, economics is based on the scientic […]

WHAT’S NEW IN THE EIGHTH EDITION: There are two new In the News features, “Sex, Drugs, and GDP” and “Gauging the High Tech Economy.” The denition of investment has been changed. There are two new questions in the Problems and […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes: 1. Gross domestic product measures two things at once: (1) the total income of 2. The production of a pound of caviar contributes more to GDP than the production of a pound of hamburger […]

WHAT’S NEW IN THE EIGHTH EDITION: A new key term, core CPI, and a new Case Study on “Regional Dierences in the Cost of Living” have been added. LEARNING OBJECTIVES: By the end of this chapter, students should understand:  […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. The consumer price index measures the overall cost of the goods and services 2. Since Henry Ford paid his workers $5 a day in 1914 and the consumer price index was 10 in […]

WHAT’S NEW IN THE EIGHTH EDITION: There are three new features: Ask the Experts on “Innovation and Growth,” In the News on “Curmudgeon versus Optimist,” and In the News on “Using Experiments to Evaluate Aid.” There is also a new […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. The approximate growth rate of real GDP per person in the United States is 1.8 2. The four determinants of a country’s productivity are: (1) physical capital, which is the stock of equipment […]

WHAT’S NEW IN THE EIGHTH EDITION: There is a new Ask the Experts feature on “Fiscal Policy and Saving.” LEARNING OBJECTIVES: By the end of this chapter, students should understand:  some of the important nancial institutions in the U.S. […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. A stock is a claim to partial ownership in a rm. A bond is a certicate of 2. Private saving is the amount of income that households have left after paying their taxes […]

WHAT’S NEW IN THE EIGHTH EDITION: There is a new Ask the Experts feature on “Diversication.” LEARNING OBJECTIVES: By the end of this chapter, students should understand:  the relationship between present value and future value.  the eects of […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. The present value of $150 to be received in 10 years if the interest rate is 7 2. There are three ways in which a risk-averse person may reduce the risk she faces: […]

WHAT’S NEW IN THE EIGHTH EDITION: A new In the News feature on “Should the Minimum Wage Be Raised to $15 per Hour?” has been added. The FYI feature in the previous edition on “Who Earns the Miniminum Wage” has […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. The unemployment rate is measured starting with a survey of about 60,000 2. An increase in the world price of oil increases the amount of frictional unemployment as oil-producing %rms increase output and […]

WHAT’S NEW IN THE EIGHTH EDITION: There is a new In the News feature on “A Trip to Jekyll Island” and a new question in the Problems and Applications section. LEARNING OBJECTIVES: By the end of this chapter, students should […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. The three functions of money are: (1) medium of exchange; (2) unit of account; 2. The primary responsibilities of the Federal Reserve are to regulate banks, to ensure the health of the banking […]

WHAT’S NEW IN THE EIGHTH EDITION: There is a new Ask the Experts feature on “Trade Between China and the United States.” LEARNING OBJECTIVES: By the end of this chapter, students should understand: how everyone can benet when people trade […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Figure 1 shows Robinson Crusoe’s production possibilities frontier for gathering Figure 1 2. Crusoe’s opportunity cost of catching one sh is 10 coconuts, since he can gather 10 coconuts in the same amount […]

WHAT’S NEW IN THE EIGHTH EDITION: There are no major changes to this chapter. LEARNING OBJECTIVES: By the end of this chapter, students should understand:  why ination results from rapid growth in the money supply.  the meaning of […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. When the government of a country increases the growth rate of the money supply 2. Six costs of in’ation are: (1) shoeleather costs; (2) menu costs; (3) relative-price variability and the misallocation of […]

WHAT’S NEW IN THE EIGHTH EDITION: There is a new In the News feature on “The Complicated Politics of Trade Agreements,” and a new Ask the Experts feature on “Trade Balances.” LEARNING OBJECTIVES: By the end of this chapter, students […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Net exports are the value of a nation’s exports minus the value of its imports, also 2. The nominal exchange rate is the rate at which a person can trade the currency of […]

WHAT’S NEW IN THE EIGHTH EDITION: There is an updated discussion of capital ows from China. LEARNING OBJECTIVES: By the end of this chapter, students should understand:  how to build a model to explain an open economy’s trade balance […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. The supply of loanable funds comes from national saving. The demand for 2. The two markets in the model of the open economy are the market for loanable funds and the market for […]

WHAT’S NEW IN THE EIGHTH EDITION: There is an updated discussion of the Great Recession and its aftermath including a new In the News feature on “Lingering Fears from the Great Recession.” LEARNING OBJECTIVES: By the end of this chapter, […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Three key facts about economic uctuations are: (1) economic uctuations are irregular and unpredictable; (2) most macroeconomic quantities uctuate together; and (3) as output falls, unemployment rises. As output falls, unemployment rises, because […]

WHAT’S NEW IN THE EIGHTH EDITION: There is a new Ask the Experts feature on “Economic Stimulus” and a new question was added to the Problems and Applications section. LEARNING OBJECTIVES: By the end of this chapter, students should understand: […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. According to the theory of liquidity preference, the interest rate adjusts to balance the supply and demand for money. Therefore, a decrease in the money 2. If the government reduces spending on highway […]

WHAT’S NEW IN THE EIGHTH EDITION: There are no major changes to this chapter. LEARNING OBJECTIVES: By the end of this chapter, students should understand:  why policymakers face a short-run trade-o between ination and unemployment.  why the ination-unemployment […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. The Phillips curve is shown in Figure 1. Figure 1 Figure 2 2. Figure 3 shows the short-run Phillips curve and the long-run Phillips curve. The curves are di(erent because in the long […]

WHAT’S NEW IN THE EIGHTH EDITION: Two new features have been added, In the News on “On Kiwis and Currencies” and Ask the Experts on “Taxing Capital and Labor.” LEARNING OBJECTIVES: By the end of this chapter, students should understand: […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Monetary and scal policies work with a lag. Monetary policy works with a lag 2. A dollar of additional government spending has a larger eect on GDP than a dollar of tax cuts. […]

WHAT’S NEW IN THE EIGHTH EDITION: There is a new Ask the Experts feature on “Price Gouging.” LEARNING OBJECTIVES: By the end of this chapter, students should understand:  what a competitive market is.  what determines the demand for […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. A market is a group of buyers (who determine demand) and a group of sellers 2. Here is an example of a monthly demand schedule for pizza: Price of Pizza Slice Number of […]

4. a. Film streaming services and TV screens are likely to be complements because b. The technological improvement would reduce the cost of producing a TV screen, shifting the supply curve to the right. The demand curve would not be […]

WHAT’S NEW IN THE EIGHTH EDITION: A new question has been added to the Problems and Applications section. LEARNING OBJECTIVES: By the end of this chapter, students should understand:  the meaning of the elasticity of demand.  what determines […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. The price elasticity of demand is a measure of how much the quantity demanded 2. The price elasticity of supply is a measure of how much the quantity supplied of a good responds […]

WHAT’S NEW IN THE EIGHTH EDITION: There are two new Ask the Experts features on “Rent Control” and “The Minimum Wage.” LEARNING OBJECTIVES: By the end of this chapter, students should understand:  the eects of government policies that place […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. A price ceiling is a legal maximum on the price at which a good can be sold. Examples of price ceilings include rent controls, price controls on gasoline in the 2. With no […]

rkets WHAT’S NEW IN THE EIGHTH EDITION: There is a new Ask the Experts feature on “Supplying Kidneys.” LEARNING OBJECTIVES: By the end of this chapter, students should understand:  the link between buyers’ willingness to pay for a good […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Figure 1 shows the demand curve for turkey. The price of turkey is P1 and the 2. Figure 2 shows the supply curve for turkey. The price of turkey is P1 and the […]

Chapter 8 of Taxation WHAT’S NEW IN THE EIGHTH EDITION: A new Ask the Experts feature on “The Laer Curve” has been added. LEARNING OBJECTIVES: By the end of this chapter, students should understand: how taxes reduce consumer and producer […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Figure 1 shows the supply and demand curves for cookies, with equilibrium Figure 1 2. The deadweight loss of a tax is greater the greater is the elasticity of demand. Therefore, a tax […]

WHAT’S NEW IN THE EIGHTH EDITION: Two new features have been added, an In the News feature on “Trade as a Tool for Economic Development” and an Ask the Experts feature on “Trade Deals.” LEARNING OBJECTIVES: By the end of […]

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Since wool suits are cheaper in neighboring countries, Autarka would import suits 2. Figure 1 shows the supply and demand for wool suits in Autarka. With no trade, the price of suits is […]

Domestic producers of a good become better off, and domestic consumers of a good become worse off, when a country begins allowing international trade in that good and a. the country becomes an importer of the good as a result. […]

In the short run, an increase in the money supply is likely to lead to a. lower unemployment and lower inflation. b. lower unemployment and higher inflation. c. higher unemployment and lower inflation. d. higher unemployment and higher inflation. Josh […]

A production possibilities frontier can shift outward if a. government increases the amount of money in the economy. b. there is a technological improvement. c. resources are shifted from the production of one good to the production of the other […]

In the circularflow diagram, which of the following items flows from households to firms through the markets for goods and services? a. goods and services b. dollars paid to land, labor, and capital c. dollars spent on goods and services […]

In a certain economy, toys and greeting cards are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more toys and more greeting cards, relative to the […]

When OPEC raised the price of crude oil in the 1970s, it caused the a. demand for gasoline to increase. b. demand for gasoline to decrease. c. supply of gasoline to increase. d. supply of gasoline to decrease. Most studies […]

Which of the following allows you to provide information about the relationship between two variables? a. coordinate system. b. pie chart c. bar graph d. timeseries graph Table 510 Supply Curve XSupply Curve YSupply Curve Z Price $5.00$7.00$5.00$7.00$5.00$7.00 Quantity Supplied200300300400400500 […]

Figure 924 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit. Refer to Figure 924. With free trade, consumer surplus is a. $400 and producer […]

Consumer surplus equals the a. value to buyers minus the amount paid by buyers. b. value to buyers minus the cost to sellers. c. amount received by sellers minus the cost to sellers. d. amount received by sellers minus the […]

Figure 422 Refer to Figure 422. At a price of $20, there is a a. surplus of 4 units. b. surplus of 8 units. c. shortage of 4 units. d. shortage of 8 units. Figure 922 The following diagram shows […]

Table 63 The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $2 above the equilibrium price in this market. […]

Table 55 PriceTotal Revenue $5$70 $6$78 $7$84 $8$88 $9$90 $10$90 Refer to Table 55. Demand is unit elastic when quantity demanded changes from a. 9 to 8. b. 10 to 9. c. 10 to 11. d. There is not enough […]

The law of supply states that, other things equal, an increase in a. price causes quantity supplied to increase. b. price causes quantity supplied to decrease. c. quantity supplied causes price to increase. d. quantity supplied causes price to decrease. […]

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of a. a 0.2 percent increase in the price. b. a 2.5 percent increase in the […]

A movement downward and to the right along a demand curve is called a(n) a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded. Suppose Jim and Tom can both produce two […]

Consider Frank’s decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in […]

1. Which of the following is true about the percent of total income all levels of government in the U.S. take as taxes? a. In 1902 the government collected about 7 percent of total income. In recent years, it collected […]

CUSTOM ID: 055.12.1 – MC – MANK08 56. Medicaid is a. the government’s health plan for the elderly. b. the government’s health plan for the poor. c. another name for Social Security. d. Both a and c are correct. ANSWER: […]

1. Which of the following is not correct? a. When developing economic theories, graphs offer a way to visually express ideas that might be less clear if described with equations or words. b. Graphs are one way of expressing the […]

TOPICS: Demand Supply and demand KEYWORDS: BLOOM’S: Application CUSTOM ID: 040.02.5 – MC – MANK08 41. The slope of a line is equal to a. the change in the value of x divided by the change in the value of […]

1. John Maynard Keynes referred to economics as an easy subject, a. at which very few excel. b. but not as easy as philosophy or the pure sciences. c. which very few can enjoy. d. which deals primarily with common […]

1. When economists are trying to explain the world, they are a. scientists. b. policy advisers. c. in the realm of microeconomics rather than macroeconomics. d. in the realm of normative economics rather than positive economics. ANSWER: a DIFFICULTY: Easy […]

normative. TOPICS: Economic thinking KEYWORDS: BLOOM’S: Application CUSTOM ID: 039.02.2 – MC – MANK08 40. Which of the following is an example of a normative, as opposed to positive, statement? a. Gasoline prices ought to be lower than they are […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.162 – Given a graph of a production possibilities frontier, determine the opportunity cost for producing each commodity. TOPICS: Production possibilities model Opportunity cost KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 237.02.1 – MC – MANK08 238. Refer […]

TOPICS: Production possibilities model Efficiency KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 138.02.1 – MC – MANK08 139. Efficiency is illustrated by a. both the production possibilities frontier and the circular-flow diagram. b. neither the production possibilities frontier nor the circular-flow diagram. […]

LEARNING OBJECTIVES: ECON.MANK.162 – Given a graph of a production possibilities frontier, determine the opportunity cost for producing each commodity. TOPICS: Production possibilities model Opportunity cost KEYWORDS: BLOOM’S: Application CUSTOM ID: 201.02.1 – MC – MANK08 202. Refer to Figure […]

Subjective Short Answer 1. Like biologists and physicists, economists use the dispassionate development and testing of how the world works known as the ANSWER: scientific method. DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.024 – Classify the different functions an economist may serve. […]

1. “If all economists were laid end to end, they would not reach a conclusion.” Who made this whimsical observation? a. Harry Truman b. George Bernard Shaw c. John Maynard Keynes d. Ronald Reagan ANSWER: b DIFFICULTY: Easy LEARNING OBJECTIVES: […]

Subjective Short Answer 1. For the economy as a whole, how does income compare to expenditures? Explain. ANSWER: For the economy as a whole income and expenditures are equal. This is because every dollar of spending by some buyer is […]

1. GDP is defined as the a. value of all goods and services produced within a country in a given period of time. b. value of all goods and services produced by the citizens of a country, regardless of where […]

1. GDP per person tells us the income and expenditure of the a. richest person in the economy. b. poorest person in the economy. c. average person in the economy. d. entire economy. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: […]

1. In the equation Y = C + I + G + NX, a. Y represents the economy’s total expenditure. b. C represents household expenditures on services and durable goods. c. all of the variables are always positive numbers. d. […]

d. $4400 ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Components of GDP LEARNING OBJECTIVES: ECON.MANK.15.113.28d – LO: Given data on a country’s expenditures, calculate GDP. TOPICS: DISC:Measuring Output KEYWORDS: BLOOM’S: Application DATE CREATED: 9/19/2016 1:11 PM DATE MODIFIED: 9/21/2016 […]

45. If consumption is $7000, exports are $600, government purchases are $2000, government transfers are $900, imports are $800, and investment is $1000, then GDP is $9,800. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.15.116.28d […]

37. If nominal GDP is $10 trillion and real GDP is $12 trillion, then the GDP deflator is a. 83.33, and this indicates that the price level has decreased by 16.67 percent since the base year. b. 83.33, and this […]

GDP Deflator KEYWORDS: BLOOM’S: Application DATE CREATED: 9/19/2016 1:11 PM DATE MODIFIED: 9/21/2016 1:44 PM CUSTOM ID: 066.23.4 – MC – MANK08 QUESTION ID: JFND-GO3A-ERHD-YTBO QUESTION GLOBAL ID: GCID-E7BW-1TBP-GH5S-EQDD-GBUG-KAUD-GITN-4CJT-CRH1-43MF-CO4N- 4P3I-GPUN-43TO-GTTG-RCTW-GJDI-GWN8-EPRW-EMMG-GY5D-O3BT-8BOS- KCTO-GASU-KPJT-8YSS-KQMR-GOSS-CA3S-GCSU-N3TO-CC3G-G3UG-E7JI- YT4D-JFNN-4OTI-GO4W-NQNBEE PREFACE GLOBAL ID: GCID-5d38c799e8e0-9128–2a64–3510–a4ed3b91 Table 23-6 The table […]

1. If total spending rises from one year to the next, then a. the economy must be producing a larger output of goods and services. b. goods and services must be selling at higher prices. c. either the economy must […]

DIFFICULTY: Moderate REFERENCES: The Measurement of GDP QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: ECON.MANK.15.112.28 – LO: Examine the economic indicator of GDP NATIONAL STANDARDS: United States – BUSPROG: Analytic TOPICS: DISC:Measuring Output Gross National Product KEYWORDS: BLOOM’S: […]

1. Gross domestic product measures a. income and expenditures. b. income but not expenditures. c. expenditures but not income. d. neither income nor expenditures. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Economy’s income and Expenditure LEARNING OBJECTIVES: ECON.MANK.15.111.28 – […]

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Measurement of GDP QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: ECON.MANK.15.112.28 – LO: Examine the economic indicator of GDP NATIONAL STANDARDS: United States – BUSPROG: Analytic TOPICS: DISC:Measuring Output KEYWORDS: […]

a. a transfer payment. b. consumption. c. investment. d. None of the above is correct. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: The Components of GDP LEARNING OBJECTIVES: ECON.MANK.15.113.28c – LO: Given a scenario, determine which expenditure category of GDP […]

1. In years of economic contraction, firms throughout the economy increase their production of goods and services, employment rises, and jobs are easy to find. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.15.110.38 – LO: […]

LEARNING OBJECTIVES: ECON.MANK.15.112.28 – LO: Examine the economic indicator of GDP NATIONAL STANDARDS: United States – BUSPROG: Analytic TOPICS: DISC:Measuring Output GDP KEYWORDS: BLOOM’S: Application DATE CREATED: 9/19/2016 1:11 PM DATE MODIFIED: 9/21/2016 1:41 PM CUSTOM ID: 070.23.2 – MC […]

1. Macroeconomists study a. the decisions of individual households and firms. b. the interaction between households and firms. c. economy-wide phenomena. d. regulations imposed on firms and unions. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Measuring a Nation’s Income QUESTION […]

Subjective Short Answer 1. List the five steps for calculating the consumer price index and inflation rate. ANSWER: (1) Survey consumers to determine a fixed basket of goods, (2) find the price for each good, (3) calculate the cost of […]

True / False 1. The consumer price index is used to monitor changes in an economy’s production of goods and services over time. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.103 – Examine various cost […]

1. The CPI is a measure of the overall cost of a. the inputs purchased by a typical producer. b. the goods and services purchased by a typical consumer. c. the goods and services produced in the economy. d. the […]

DATE MODIFIED: 9/21/2016 1:54 PM CUSTOM ID: 046.24.1 – MC – MANK08 47. Refer to Table 24-1. What belongs in space A? a. 14 b. 150 c. 144 d. 154 ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Consumer Price […]

CUSTOM ID: 187.24.1 – MC – MANK08 188. For some racquet sports, there have been increases in the size of the racquets; also, the methods and materials used for making racquets have improved. To which problem in the construction of […]

a. 24.7 percent. b. 54.0 percent. c. 32.8 percent. d. 38.0 percent. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: The Consumer Price Index LEARNING OBJECTIVES: ECON.MANK.247 – Given CPI data, calculate the annual inflation rate for a specified year. NATIONAL […]

KEYWORDS: BLOOM’S: Knowledge DATE CREATED: 9/19/2016 1:20 PM DATE MODIFIED: 9/21/2016 1:54 PM CUSTOM ID: 139.24.1 – MC – MANK08 140. The relative importance of housing in the breakdown of consumer spending is a. 42 percent. b. 15 percent. c. […]

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Correcting Economic Variables for the Effects of Inflation LEARNING OBJECTIVES: ECON.MANK.269 – Given data on the nominal interest rate and inflation, calculate the real interest rate. NATIONAL STANDARDS: United States – BUSPROG: Analytic […]

a. The consumer price index is a measure of the overall level of prices, whereas the GDP deflator is not a measure of the overall level of prices. b. If, in the year 2011, the consumer price index has a […]

56. Refer to Table 24–12. Suppose Will’s 2009 food expenditures in 2011 dollars amount to $5,750. Then x, the consumer price index for 2011, has a value of a. 184.0. b. 185.8. c. 187.5. d. 189.4. ANSWER: a POINTS: 1 […]

b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.280 – Given pricing and consumption data on a fixed basket of goods, calculate the CPI. NATIONAL STANDARDS: United States – BUSPROG: Analytic TOPICS: Price levels Consumer price index KEYWORDS: […]

1. Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude […]

1. The primary purpose of measuring the overall level of prices in the economy is to a. allow for the measurement of GDP. b. allow consumers to know what kinds of prices to expect in the future. c. allow for […]

d. is the same as the quantity of labor. ANSWER: c DIFFICULTY: Moderate REFERENCES: Productivity: Its Role and Determinants LEARNING OBJECTIVES: ECON.MANK.225 – Given a scenario, identify which productivity determinant it represents. TOPICS: Factors of production KEYWORDS: BLOOM’S: Comprehension CUSTOM […]

1. The average income in a rich country, such as the United States or Japan, is more than a. 3 times, but less than 5 times, the average income in a poor country, such as Indonesia or Nigeria. b. 5 […]

Subjective Short Answer 1. In order to assess the level of prosperity in a nation in a given year, should we examine the level of that nation’s real GDP per person, or should we examine the growth rate of that […]

63. Which of the following is consistent with the catch-up effect? a. The United States had a higher growth rate before 1900 than after. b. After World War II the United States had lower growth rates than war-ravaged European countries. […]

60. Which of the following is an example of physical capital? a. the strength of workers b. on the job training c. financial assets like cash and bonds d. the equipment in a factory ANSWER: d DIFFICULTY: Easy REFERENCES: Productivity: […]

1. Economists differ in their views of the role of the government in promoting economic growth. At the very least, the government should a. lend support to the invisible hand by maintaining property rights and political stability. b. limit foreign […]

1. A nation’s standard of living is best measured by its a. real GDP. b. real GDP per person. c. nominal GDP. d. nominal GDP per person. ANSWER: b DIFFICULTY: Easy REFERENCES: Economic Growth around the World LEARNING OBJECTIVES: ECON.MANK.007 […]

DIFFICULTY: Moderate REFERENCES: Economic Growth and Public Policy LEARNING OBJECTIVES: ECON.MANK.007 – Analyze the factors that affect a country’s growth. TOPICS: International trade Free trade KEYWORDS: BLOOM’S: Application CUSTOM ID: 113.25.3 – MC – MANK08 114. Outward-oriented policies a. allow […]

True / False 1. Real GDP per person in rich countries, such as Germany, is sometimes more than 10 times that of poor countries like India. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.264 – Given data […]

1. Consider three imaginary countries. In Aziria, saving amounts to $3,000 and consumption amounts to $7,000; in Graniva, saving amounts to $2,000 and consumption amounts to $8,000; and in Tanistan, saving amounts to $4,500 and consumption amounts to $10,500. The […]

1. Which of the following is correct? a. Although levels of real GDP per person vary substantially from country to country, the growth rate of real GDP per person is similar across countries. b. Productivity is not closely linked to […]

DIFFICULTY: Challenging REFERENCES: Financial Institutions in the U.S. Economy LEARNING OBJECTIVES: ECON.MANK.067 – Determine the effect of an event on the loanable funds market. TOPICS: Financial economics KEYWORDS: BLOOM’S: Application CUSTOM ID: 126.26.1 – MC – MANK08 127. Refer to […]

1. When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures a. capital investment. b. investment in human capital. c. business consumption expenditures. d. personal saving. ANSWER: a DIFFICULTY: Easy REFERENCES: […]

1. The financial system coordinates investment and saving, which are important determinants of long-run real GDP. a. True b. False ANSWER: True LEARNING OBJECTIVES: ECON.MANK.067 – Determine the effect of an event on the loanable funds market. TOPICS: Investment KEYWORDS: […]

1. Which of the following is not correct? a. Gross domestic product is both total income in an economy and total expenditures on the economy’s output of goods and services. b. In a closed economy net exports are zero. c. […]

1. The source of the supply of loanable funds a. is saving and the source of demand for loanable funds is investment. b. is investment and the source of demand for loanable funds is saving. c. and the demand for […]

determine if the government is experiencing a budget deficit or a budget surplus. TOPICS: Budget deficits Fiscal policy KEYWORDS: BLOOM’S: Application CUSTOM ID: 052.26.2 – MC – MANK08 53. You have some estimates of national accounts numbers for a closed […]

d. national saving increases, the interest rate falls, and the economy’s long-run growth rate is likely to increase. ANSWER: d DIFFICULTY: Moderate REFERENCES: The Market for Loanable Funds LEARNING OBJECTIVES: ECON.MANK.067 – Determine the effect of an event on the […]

Subjective Short Answer 1. What is the main function of the financial system? ANSWER: Matching savers with investors. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.067 – Determine the effect of an event on the loanable funds market. TOPICS: Financial economics […]

d. neither high credit risk nor a long term ANSWER: a DIFFICULTY: Easy REFERENCES: Financial Institutions in the U.S. Economy LEARNING OBJECTIVES: ECON.MANK.125 – Explain the relationship between risk and return in the markets for financial assets. TOPICS: Financial economics […]

166. Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company’s less productive factories are sold. What type of risk for bondholders falls? What happens to the interest rate on […]

TOPICS: Interest rates Budget surpluses KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: 066.26.3 – MC – MANK08 67. A larger budget deficit a. raises the interest rate and investment. b. reduces the interest rate and investment. c. raises the interest rate and […]

1. At the broadest level, the financial system moves the economy’s scarce resources from a. the rich to the poor. b. financial institutions to business firms and government. c. households to financial institutions. d. savers to borrowers. ANSWER: d DIFFICULTY: […]

a. For a fee, an insurance company provides you with regular income until you die. b. A surcharge is added to life-insurance premiums paid by persons in dangerous occupations. c. Annuity is another name for stock funds managed by mutual […]

Subjective Short Answer 1. Write the formula for finding the future value in n years of $x today. ANSWER: $x(1+ r)n POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.013 – Apply the basic tools of finance. TOPICS: Financial economics Future value […]

1. When a person engages in detailed analysis of a company to determine its value, he or she is engaging in a. standard deviation analysis. b. informational analysis. c. fundamental analysis. d. efficiency analysis. ANSWER: c DIFFICULTY: Easy REFERENCES: Asset […]

1. If the interest rate is 8 percent, then the present value of $1,000 to be received in 4 years is $735.03. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.017 – Calculate the present value […]

KEYWORDS: BLOOM’S: Application CUSTOM ID: 063.27.1 – MC – MANK08 64. Your accountant tells you that if you can continue to earn the current interest rate on your balance of $500 for ten years, you will have about $983.58. If […]

92. A risk-averse person has a. a utility function whose slope gets flatter as wealth rises. This means they have increasing marginal utility of wealth. b. a utility function whose slope gets flatter as wealth rises. This means they have […]

REFERENCES: Asset Valuation LEARNING OBJECTIVES: ECON.MANK.013 – Apply the basic tools of finance. TOPICS: Financial economics KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: 039.27.3 – MC – MANK08 40. An asset market is said to experience a speculative bubble when a. the […]

d. $1814.06 ANSWER: d DIFFICULTY: Easy REFERENCES: Present Value: Measuring the Time Value of Money LEARNING OBJECTIVES: ECON.MANK.017 – Calculate the present value of a sum of money received in n years. TOPICS: Financial economics KEYWORDS: BLOOM’S: Application CUSTOM ID: […]

KEYWORDS: BLOOM’S: Application CUSTOM ID: 124.27.1 – MC – MANK08 125. A judge requires Harry to make a payment to Sally. The judge says that Harry can pay her either $10,000 today or $11,000 two years from today. Of the […]

1. Stock market fluctuations a. often go hand in hand with fluctuations in the economy more broadly. b. rarely have anything to do with fluctuations in the economy more broadly. c. have few, if any, macroeconomic implications. d. are attributable […]

1. Suppose you put $500 into a bank account today. Interest is paid annually and the annual interest rate is 3 percent. The future value of the $500 after 1 year is a. $485.44. b. $496.50. c. $509.28. d. $515.00. […]

1. Most financial decisions involve two related elements: a. advice and consent. b. investment and taxes. c. time and risk. d. saving and consumption. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: The Basic Tools of Finance LEARNING OBJECTIVES: ECON.MANK.013 – […]

1. Risk aversion helps to explain various things we observe in the economy, including a. adherence to the old adage, “Don’t put all your eggs in one basket.” b. insurance. c. the risk-return trade-off. d. All of the above are […]

TOPICS: Labor economics Unemployment KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 063.28.1 – MC – MANK08 64. Sheamous loses his job and decides to sit on the beach rather than look for work during the next few months. Other things the same, […]

True / False 1. Most people rely primarily on income other than their labor earnings to maintain their standard of living. a. True b. False ANSWER: False DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.009 – Analyze the presence of unemployment in an […]

Subjective Short Answer 1. An important determinant of a country’s standard of living is the amount of __________ it typically experiences. ANSWER: unemployment DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.009 – Analyze the presence of unemployment in an economy. TOPICS: Labor economics […]

ANSWER: c DIFFICULTY: Moderate REFERENCES: Identifying Unemployment LEARNING OBJECTIVES: ECON.MANK.016 – Calculate the effect of including discouraged workers on the unemployment rate. TOPICS: Labor economics Unemployment KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 168.28.1 – MC – MANK08 169. Some individuals would […]

1. To maintain their standard of living, most people rely on a. government assistance. b. their personal savings. c. their labor earnings. d. rental income. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Unemployment LEARNING OBJECTIVES: ECON.MANK.009 – Analyze the presence […]

1. The Bureau of Labor Statistics is part of the U.S. Department of a. the Treasury. b. Commerce. c. Labor. d. the Interior. ANSWER: c DIFFICULTY: Easy REFERENCES: Identifying Unemployment LEARNING OBJECTIVES: ECON.MANK.009 – Analyze the presence of unemployment in […]

b. white females c. black males d. black females ANSWER: c DIFFICULTY: Moderate REFERENCES: Identifying Unemployment LEARNING OBJECTIVES: ECON.MANK.009 – Analyze the presence of unemployment in an economy. TOPICS: Labor economics Unemployment rate KEYWORDS: BLOOM’S: Application CUSTOM ID: 124.28.1 – […]

82. Causes of the decline in the U.S. men’s labor-force participation rate over the past several decades include young men now staying in school longer than their fathers and grandfathers did, older men now retiring earlier and living longer, and […]

1. Which of the following is correct? a. Union membership in the United States peaked in the 1940s and 1950s. b. Unions play a larger role in the United States than in European countries such as Belgium, France, and Germany. […]

1. The theory of efficiency wages explains why a. setting wages at the equilibrium level may increase unemployment. b. it may be in the best interest of firms to offer wages that are above the equilibrium level. c. the most […]

1. Job search a. is one reason economies always experience some unemployment. b. is the process of matching workers with appropriate jobs. c. would not be a problem if all workers and all jobs were the same. d. All of […]

1. Which of the following is not correct? a. Frictional unemployment results from the process of matching workers and jobs. b. Structural unemployment results when the number of jobs is insufficient for the number of workers. c. Minimum wages are […]

unemployment. a. True b. False ANSWER: False DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.295 – Identify if a policy will reduce frictional unemployment. TOPICS: Labor economics Unemployment KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 159.28 – TF – MANK08 160. Unemployment insurance is designed […]

1. You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency a. has no intrinsic value. The exchange is an example of barter. b. has no intrinsic value. The exchange is not an […]

1. Which of the following institutions is a central bank? a. the Bank of Japan b. the Bank of England c. the Federal Reserve System d. All of the above are correct. ANSWER: d DIFFICULTY: Easy REFERENCES: The Federal Reserve […]

True / False 1. In an economy that relies on barter, trade requires a double-coincidence of wants. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.012 – Apply basic, economic principles of individual decision making that determine how […]

1. Which of the following can the Fed do to change the money supply? a. change reserves or change the reserve ratio b. change reserves but not change the reserve ratio c. change the reserve ratio but not change the […]

1. Which of the following lists is included in what economists call “money”? a. cash b. cash and stocks and bonds c. cash and stocks and bonds and real estate d. cash and stocks and bonds and real estate and […]

REFERENCES: The Fed’s Tools of Monetary Control LEARNING OBJECTIVES: ECON.MANK.249 – Given data on a bank’s balance sheets, evaluate the bank’s reserve situation. TOPICS: Financial intermediaries Reserve requirements Central banks KEYWORDS: BLOOM’S: Application CUSTOM ID: 096.29.4 – MC – MANK08 […]

Subjective Short Answer 1. What does the “double coincidence of wants” refer to? ANSWER: “Double coincidence of wants” refers to an undesirable characteristic of barter economies. In an economy without money, trade can only occur if two people each have […]

TOPICS: Financial intermediaries Central banks KEYWORDS: BLOOM’S: Application DATE CREATED: 9/19/2016 1:35 PM DATE MODIFIED: 9/21/2016 3:54 PM CUSTOM ID: 039.29 – SAE – MANK08 40. What is the change in the money supply when the Fed purchases $700 worth […]

d. neither demand deposits nor money market mutual funds ANSWER: a DIFFICULTY: Moderate REFERENCES: The Meaning of Money LEARNING OBJECTIVES: ECON.MANK.101 – Examine the role of monetary policy in governing an economy. TOPICS: Money KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 057.29.1 […]

ANSWER: c DIFFICULTY: Moderate REFERENCES: The Fed’s Tools of Monetary Control LEARNING OBJECTIVES: ECON.MANK.075 – Determine the impact on the money supply of an open market operation by the Federal Reserve. TOPICS: Central banks Financial intermediaries Open market operations Reserve […]

1. Which of the following is not an example of the principle that trade can make everyone better off? a. Americans buy tube socks from China. b. Residents of Maine drink orange juice from Florida. c. A homeowner hires the […]

d. an absolute advantage in the production of both meat and potatoes. ANSWER: c DIFFICULTY: Challenging LEARNING OBJECTIVES: ECON.MANK.082 – Determine whether a producer has an absolute advantage, a comparative advantage, or both, by comparing two producers’ production advantages. TOPICS: […]

CUSTOM ID: 122.03.2 – MC – MANK08 123. Refer to Table 3-27. Assume that Huang and Min each has 36 labor hours available. Originally, each person divided his/her time equally between the production of parasols and plates. Now, each person […]

True / False 1. In most countries today, many goods and services consumed are imported from abroad, and many goods and services produced are exported to foreign customers. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.089 – […]

1. Which of the following is not a reason people choose to depend on others for goods and services? a. to improve their lives b. to allow them to enjoy a greater variety of goods and services c. to consume […]

d. 5 sweaters and 7 jackets ANSWER: a DIFFICULTY: Challenging LEARNING OBJECTIVES: ECON.MANK.163 – Given a graph of a production possibilities frontier, identify a bundle as inefficient, efficient, feasible, or infeasible. TOPICS: Production possibilities model KEYWORDS: BLOOM’S: Analysis CUSTOM ID: […]

178. Refer to Figure 3-18. The opportunity cost of 1 bowl for Bintu is a. 1/4 cup. b. 1/2 cup. c. 2 cups. d. 4 cups. ANSWER: d DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.278 – Given information on production possibilities, determine […]

TOPICS: Production possibilities model Opportunity cost KEYWORDS: BLOOM’S: Application CUSTOM ID: 062.03.2 – MC – MANK08 63. Refer to Table 3-21. Jamaica has an absolute advantage in the production of a. coolers and Norway has an absolute advantage in the […]

1. Assume for the United States that the opportunity cost of each airplane is 50 cars. Which of these pairs of points could be on the United States’ production possibilities frontier? a. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 […]

Labor Hours Needed to Make 1 Quantity Produced in 36 Hours Mittens Hats Mittens Hats Max 2 6 18 6 Min 2 4 18 9 51. Refer to Table 3-11. Assume that Max and Min each has 36 labor hours […]

Subjective Short Answer 1. Suppose that Venezuela produces beef and oil and it can switch production between each at a constant rate. If the most beef it can produce is 300 million pounds and the most oil it can produce […]

1. People who provide you with goods and services a. are acting out of generosity. b. do so because they get something in return. c. have chosen not to become interdependent. d. are required to do so by the government. […]

TOPICS: Money Interest rates KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 117.30.1 – MC – MANK08 118. Interest rates adjusted for the effects of inflation a. and inflation are nominal variables. b. and inflation are real variables. c. are real variables; inflation […]

1. In order to maintain stable prices, a central bank must a. maintain low interest rates. b. keep unemployment low. c. tightly control the money supply. d. sell indexed bonds. ANSWER: c DIFFICULTY: Easy REFERENCES: Conclusion TOPICS: Price levels Inflation […]

True / False 1. The inflation rate is measured as the percentage change in a price index. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.247 – Given CPI data, calculate the annual inflation rate for a specified […]

a. P x Y must rise. b. P x Y must fall. c. P x Y must be unchanged. d. the effects on P x Y are uncertain. ANSWER: a DIFFICULTY: Moderate REFERENCES: The Classical Theory of Inflation LEARNING OBJECTIVES: […]

b. 5.4 percent c. 7.2 percent d. 4.2 percent. ANSWER: d DIFFICULTY: Challenging REFERENCES: The Costs of Inflation LEARNING OBJECTIVES: ECON.MANK.032 – Compare the results of a low-inflation scenario against a high– inflation scenario with regards to tax distortions. TOPICS: […]

1. Over the past 80 years, prices in the U.S. have risen on average about a. 2 percent per year. b. 4 percent per year. c. 3.6 percent per year. d. 6 percent per year. ANSWER: c DIFFICULTY: Easy REFERENCES: […]

ANSWER: d DIFFICULTY: Moderate REFERENCES: The Classical Theory of Inflation LEARNING OBJECTIVES: ECON.MANK.173 – Given a graph of the market for money, show the effect of a change in the money supply on the market equilibrium. TOPICS: Money Money supply […]

Subjective Short Answer 1. The increase in the overall level of prices is known as _____. ANSWER: inflation DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.247 – Given CPI data, calculate the annual inflation rate for a specified year. TOPICS: Price levels Inflation […]

1. The classical theory of inflation a. is also known as the quantity theory of money. b. was developed by some of the earliest economic thinkers. c. is used by most modern economists to explain the long-run determinants of the […]

216. The nominal interest rate is 5 percent and the real interest rate is 3 percent. What is the inflation rate? a. 8 percent b. 15 percent c. 2 percent d. 1.7 percent ANSWER: c DIFFICULTY: Easy REFERENCES: The Classical […]

1. In the 1970s, the U.S. inflation rate reached about a. 7 percent per year. b. 10 percent per year. c. 14 percent per year. d. 20 percent per year. ANSWER: b DIFFICULTY: Easy REFERENCES: The Costs of Inflation LEARNING […]

1. A country with negative net exports has a trade surplus. a. True b. False ANSWER: False DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.011 – Apply basic principles about the international flow of goods and capital. TOPICS: Balance of trade International trade […]

1. Which type(s) of economies interact with other economies? a. only closed economies b. only open economies c. closed economies and open economies d. neither closed nor open economies ANSWER: b DIFFICULTY: Easy REFERENCES: Open Economy Macroeconomics Basic Concepts LEARNING […]

1. The nominal exchange rate is the a. nominal interest rate in one country divided by the nominal interest rate in the other country. b. the ratio of a foreign country’s interest rate to the domestic interest rate. c. rate […]

1. Foreign-produced goods and services that are purchased domestically are called a. imports. b. exports. c. net imports. d. net exports. ANSWER: a DIFFICULTY: Easy REFERENCES: The International Flows of Goods and Capital LEARNING OBJECTIVES: ECON.MANK.011 – Apply basic principles […]

d. neither the tall latte nor the Big Mac ANSWER: b DIFFICULTY: Moderate REFERENCES: A First Theory of Exchange-Rate Determination: Purchasing-Power Parity LEARNING OBJECTIVES: ECON.MANK.261 – Given data on prices in various countries, compute the exchange rate that is consistent […]

CUSTOM ID: 183.31.1 – MC – MANK08 184. If Israel’s domestic investment exceeds its national saving, then Israel has a. positive net capital outflows and negative net exports. b. positive net capital outflows and positive net exports. c. negative net […]

1. The law of one price states that a. a good must sell at the price fixed by law. b. a good must sell at the same price at all locations. c. a good cannot sell for a price greater […]

d. purchases of foreign assets and sales of domestic assets abroad. ANSWER: d DIFFICULTY: Easy REFERENCES: The International Flows of Goods and Capital LEARNING OBJECTIVES: ECON.MANK.011 – Apply basic principles about the international flow of goods and capital. TOPICS: Balance […]

Subjective Short Answer 1. Last month a country sold more goods and services to residents of foreign countries than it purchased from them. What does this imply about this country’s trade balance? ANSWER: This country had a trade surplus. DIFFICULTY: […]

REFERENCES: The Prices for International Transactions: Real and Nominal Exchange Rates LEARNING OBJECTIVES: ECON.MANK.038 – Contrast a country’s nominal exchange rate with its real exchange rate. TOPICS: Exchange rates International trade KEYWORDS: BLOOM’S: Application CUSTOM ID: 042.31.2 – MC – […]

DIFFICULTY: Easy REFERENCES: The International Flows of Goods and Capital LEARNING OBJECTIVES: ECON.MANK.079 – Determine the outcome of different trade balances on the variables found in national income identities. TOPICS: National income accounting Open economy KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: […]

1. If a country raises its budget deficit, then its a. net capital outflow and net exports rise. b. net capital outflow rises and net exports fall. c. net capital outflow falls and net exports rise. d. net capital outflow […]

1. Over the past three decades, the United States has a. generally had, or been very near to a trade balance. b. had trade deficits in about as many years as it has trade surpluses. c. persistently had a trade […]

LEARNING OBJECTIVES: ECON.MANK.050 – Describe the market for foreign-currency exchange. TOPICS: Exchange rate determination Loanable funds Investment KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 058.32.3 – MC – MANK08 59. Refer to Figure 32–4. Suppose that the government goes from a budget […]

149. If after a country experiences capital flight, people become more confident about the safety of its assets, then in that country a. the real exchange rate and the real interest rate will rise. b. the real exchange rate will […]

1. Which of the following is always correct in an open economy? a. S = I b. S = NX + NCO c. S = NCO d. S = I + NCO ANSWER: d DIFFICULTY: Easy REFERENCES: Equilibrium in the […]

True / False 1. Over the past two decades, the U.S. has persistently exported more goods and services than it has imported. a. True b. False ANSWER: False DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.011 – Apply basic principles about the international […]

a. the movement of workers across international borders in response to exchange rate changes. b. the movement of funds between financial intermediaries when interest rates change. c. the ability of foreign direct investment to lift a country out of poverty. […]

Subjective Short Answer 1. What is the source of the supply of loanable funds in the open-economy macroeconomic model? ANSWER: national saving DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.049 – Describe the loanable funds market. TOPICS: Loanable funds National saving KEYWORDS: BLOOM’S: […]

1. Which of the following is correct? a. Short run fluctuations in economic activity happen only in developing countries. b. During economic contractions most firms experience rising profits. c. Recessions come at irregular intervals and are easy to predict. d. […]

1. The classical dichotomy refers to the separation of a. prices and nominal interest rates. b. taxes and government spending. c. decisions made by the public and decisions made by the government. d. real and nominal variables. ANSWER: d DIFFICULTY: […]

a. interest rates fall and so aggregate demand shifts right. b. interest rates fall and so aggregate demand shifts left. c. interest rates rise and so aggregate demand shifts right. d. interest rates rise and so aggregate demand shifts left. […]

CUSTOM ID: 087.33.5 – MC – MANK08 Figure 33-11. 88. Refer to Figure 33–11. A movement from P1 and Y2, to P2 and Y1 would be consistent with a. a decrease in consumption expenditures. b. stagflation. c. sticky-wages. d. an […]

Subjective Short Answer 1. Explain how a recession differs from a depression. ANSWER: Recessions are relatively mild periods of declining real incomes and rising unemployment. Depressions are severe recessions. DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.186 – Given a scenario about an […]

True / False 1. According to classical macroeconomic theory, changes in the money supply change nominal but not real variables. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.112 – Explain how the classical dichotomy relates to money […]

1. The aggregate demand and aggregate supply graph has the a. quantity of output on the horizontal axis. Output is best measured by real GDP. b. quantity of output on the horizontal axis. Output is best measured by nominal GDP. […]

TOPICS: Appreciation and depreciation International trade KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: 063.33.3 – MC – MANK08 64. When the dollar depreciates, U.S. a. net exports rise, which increases the aggregate quantity of goods and services demanded. b. net exports rise, […]

c. policymakers are unable to mitigate the severity of economic fluctuations. d. All of the above are correct. ANSWER: a DIFFICULTY: Easy REFERENCES: Two Causes of Economic Fluctuations LEARNING OBJECTIVES: ECON.MANK.169 – Given a graph of the aggregate-demand curve, determine […]

1. If output is above its natural rate, then according to sticky-wage theory a. workers and firms will strike bargains for lower wages. In response to the lower wages firms will produce less at any given price level. b. workers […]

1. In the long run, fiscal policy influences a. saving, investment, and growth; in the short run, fiscal policy primarily influences technology and the production function. b. saving, investment, and growth; in the short run, fiscal policy primarily influences the […]

1. Both monetary policy and fiscal policy affect aggregate demand. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.080 – Determine the short-run and long-run effects of a macroeconomic event using the aggregate demand and aggregate supply model. […]

Subjective Short Answer 1. The Federal Reserve sets _____ policy, while the president and Congress set _____ policy. These two policies influence aggregate _____. ANSWER: monetary, fiscal, demand POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.080 – Determine the short-run and […]

1. The interest-rate effect a. depends on the idea that increases in interest rates increase the quantity of money demanded. b. depends on the idea that increases in interest rates increase the quantity of money supplied. c. is the most […]

. 60. Refer to Figure 34-2. What is measured along the horizontal axis of the left-hand graph? a. nominal output b. real output c. the opportunity cost of holding money d. the quantity of money ANSWER: d DIFFICULTY: Easy REFERENCES: […]

LEARNING OBJECTIVES: ECON.MANK.122 – Explain the multiplier effect of a change in government purchases. TOPICS: Fiscal policy Fiscal multipliers KEYWORDS: BLOOM’S: Application CUSTOM ID: 058.34.2 – MC – MANK08 59. If the marginal propensity to consume is 0.75, and there […]

aggregate supply. TOPICS: Money Liquidity preference theory KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 118.34.1 – MC – MANK08 119. According to liquidity preference theory, a decrease in the price level causes the interest rate to a. increase, which increases the quantity […]

DIFFICULTY: Moderate REFERENCES: How Monetary Policy Influences Aggregate Demand LEARNING OBJECTIVES: ECON.MANK.305 – Illustrate the short-run impact of a change in the price level under liquidity preference theory according to the model of aggregate demand and aggregate supply. TOPICS: Liquidity […]

TOPICS: Monetary policy Lags KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: 040.34.3 – MC – MANK08 41. Most recessions and depressions a. are accurately forecasted. b. usually occur with ample advance warning. c. cause falling unemployment. d. occur with little advance warning. […]

1. Shifts in the aggregate-demand curve can cause fluctuations in a. neither the level of output nor the level of prices. b. the level of output, but not in the level of prices. c. the level of prices, but not […]

1. The Employment Act of 1946 states that a. the Fed should use monetary policy only to control the rate of inflation. b. the government should promote full employment and production. c. the government should periodically increase the minimum wage […]

KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 094.34.2 – MC – MANK08 95. Suppose the MPC is 0.9. There are no crowding out or investment accelerator effects. If the government increases its expenditures by $30 billion, then by how much does aggregate […]

1. Soon after he became the chairman of the Federal Reserve System in 1979, Paul Volcker embarked on a course a. of accommodative monetary policy. b. of disinflation. c. that was designed to reduce the unemployment rate. d. that produced […]

CUSTOM ID: 047.35.4 – MC – MANK08 48. Refer to the Economy in 2008. The effects of increased prices of world commodities is shown by shifting a. aggregate demand to the right. b. aggregate demand to the left. c. aggregate […]

c. reduces expected inflation so the short-run Phillips curve shifts left. d. None of the above is correct. ANSWER: a DIFFICULTY: Moderate REFERENCES: Shifts in the Phillips Curve: The Role of Expectations LEARNING OBJECTIVES: ECON.MANK.176 – Given a graph of […]

1. Closely watched indicators such as the inflation rate and unemployment are released each month by the a. Bureau of the Budget. b. Bureau of Labor Statistics. c. Department of the Treasury. d. President’s Council of Economic Advisors. ANSWER: b […]

1. In 1968, economist Milton Friedman published a paper criticizing the Phillips curve on the grounds that a. it seemed to work for wages but not for inflation. b. monetary policy was ineffective in combating inflation. c. the Phillips curve […]

1. The short-run relationship between inflation and unemployment is often called a. the Classical Dichotomy. b. Money Neutrality. c. the Phillips curve. d. None of the above is correct. ANSWER: c DIFFICULTY: Easy REFERENCES: The Phillips Curve LEARNING OBJECTIVES: ECON.MANK.102 […]

Phillips curve KEYWORDS: BLOOM’S: Analysis CUSTOM ID: 062.35.2 – MC – MANK08 Figure 35-6 Use the graph below to answer the following questions. 63. Refer to Figure 35-6. Curve 1 is the a. long-run aggregate supply curve. b. short-run aggregate […]

Subjective Short Answer 1. As the aggregate demand curve shifts to the right, what happens to the price level and output? What do these changes imply happens to the inflation rate and the unemployment rate? ANSWER: The price level and […]

49. Refer to Figure 35-2. If the economy starts at C and 1, then in the short run, an increase in the money supply growth rate moves the economy to a. A and 1 b. B and 2 c. C […]

1. In the long run, the natural rate of unemployment depends primarily on the growth rate of the money supply. a. True b. False ANSWER: False DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.102 – Examine the trade–off between inflation and unemployment. TOPICS: […]

1. The Federal Open Market Committee meets about a. every six days. b. every six weeks. c. every six months. d. every sixteen months. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Should Monetary Policy Be Made by Rule Rather Than […]

Subjective Short Answer 1. Why is it desirable, if possible, to use policy to offset the effects of a decrease in aggregate demand? ANSWER: Because a decrease in aggregate demand wastes resources. Unemployment rises and factories are idle. POINTS: 1 […]

1. For the Fed to fully eliminate the costs of inflation, how low does the inflation rate need to be? a. 0 percent b. 3 percent c. 5 percent d. 6 percent ANSWER: a DIFFICULTY: Moderate REFERENCES: Should the Central […]

True / False 1. One prominent debate over macroeconomic policy centers on the question of whether monetary and fiscal policy should be used to try to stabilize the economy. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.044 […]

1. An increase in the money supply a. reduces interest rates and shifts aggregate demand to the right. b. reduces interest rates and shifts aggregate supply to the right c. raises interest rates and shifts aggregate demand to the right. […]

1. Higher saving is associated with a. a larger capital stock and a higher standard of living. b. a larger capital stock but not a higher standard of living. c. a higher standard of living but not a larger capital […]

1. Fluctuations in employment and output result from changes in a. aggregate demand only. b. aggregate supply only. c. aggregate demand and aggregate supply. d. neither aggregate demand nor aggregate supply. ANSWER: c DIFFICULTY: Easy REFERENCES: Should Monetary and Fiscal […]

1. The six debates over macroeconomic policy exist mostly because a. economists disagree over basic issues such as the importance of saving for economic growth. b. there are tradeoffs and people disagree about the best way to deal with them. […]

1. Government deficits mean that a. national saving is negative so public saving is negative. b. national saving is negative so public saving is lower than otherwise. c. public saving is negative so national saving is negative. d. public saving […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.076 – Determine the market demand curve for a good by summing two or more individual demand curves. TOPICS: Demand Supply and demand KEYWORDS: BLOOM’S: Application CUSTOM ID: 060.04.2 – MC – MANK08 61. Refer to […]

b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.208 – Given a scenario, determine if that scenario will cause a movement along or a shift of a good’s supply curve. TOPICS: Supply Supply and demand KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: […]

1. Which of the following statements is correct? a. Buyers determine supply, and sellers determine demand. b. Buyers determine demand, and sellers determine supply. c. Buyers determine both demand and supply. d. Sellers determine both demand and supply. ANSWER: b […]

True / False 1. Prices allocate a market economy’s scarce resources. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.110 – Explain how prices allocate resources. TOPICS: Economic thinking Economic systems KEYWORDS: BLOOM’S: Knowledge CUSTOM ID: 001.04 – […]

1. The quantity demanded of a good is the amount that buyers are a. willing to purchase. b. willing and able to purchase. c. willing, able, and need to purchase. d. able to purchase. ANSWER: b DIFFICULTY: Easy LEARNING OBJECTIVES: […]

DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.306 – Indicate the effect of a change in a demand determinant on the demand curve for a good. TOPICS: Demand Supply and demand KEYWORDS: BLOOM’S: Application CUSTOM ID: 120.04.2 – MC – MANK08 121. When […]

Subjective Short Answer 1. A group of buyers and sellers of a particular good or service is called a ANSWER: market. DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.092 – Examine firms in competitive markets. TOPICS: Supply and demand KEYWORDS: BLOOM’S: Knowledge CUSTOM […]

1. In any economic system, scarce resources have to be allocated among competing uses. Market economies harness the forces of a. government to allocate scarce resources. b. supply and demand to allocate scarce resources. c. credit cards to allocate scarce […]

KEYWORDS: BLOOM’S: Application CUSTOM ID: 130.05.1 – MC – MANK08 131. In the case of perfectly inelastic demand, a. the change in quantity demanded equals the change in price. b. the percentage change in quantity demanded equals the percentage change […]

True / False 1. Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.091 – Evaluate various […]

1. The price elasticity of demand measures how much a. quantity demanded responds to a change in price. b. quantity demanded responds to a change in income. c. price responds to a change in demand. d. demand responds to a […]

b. decrease total revenue of textbook sellers. c. not change total revenue of textbook sellers. d. There is not enough information to answer this question. ANSWER: a DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.272 – Given data on the price elasticity of […]

Subjective Short Answer 1. The measure of how willing consumers are to buy less of a good as its price rises is called ANSWER: price elasticity of demand. DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.091 – Evaluate various demand elasticities. TOPICS: Elasticity […]

as either normal or inferior. TOPICS: Elasticity Income elasticity of demand KEYWORDS: BLOOM’S: Application CUSTOM ID: 291.05.1 – MC – MANK08 292. Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded […]

250. Refer to Figure 5-11. If price increases from $10 to $20, total revenue will a. increase by $120, so demand must be inelastic in this price range. b. increase by $320, so demand must be inelastic in this price […]

67. When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is […]

True / False 1. Economic policies often have effects that their architects did not intend or anticipate. a. True b. False ANSWER: True DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.042 – Contrast when an economist acts as a policy adviser and when […]

Rent control KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 177.06.1 – MC – MANK08 178. One economist has argued that rent control is “the best way to destroy a city, other than bombing.” Why would an economist say this? a. He fears […]

CUSTOM ID: 130.06.2 – MC – MANK08 131. Refer to Figure 6-27. Suppose a tax of $6 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed? a. $16 b. between […]

CUSTOM ID: 130.06 – TF – MANK08 131. Buyers and sellers always share the burden of a tax equally. a. True b. False ANSWER: False DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.025 – Compare the distribution of the tax burden among buyers […]

c. (i) and (iii) only d. (i) and (iv) only ANSWER: a DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.025 – Compare the distribution of the tax burden among buyers and sellers with differing elasticities. TOPICS: Taxes KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 172.06.2 […]

73. Refer to Figure 6-18. The price that buyers pay after the tax is imposed is a. $8. b. $10. c. $16. d. $24. ANSWER: d DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.231 – Given a supply and demand graph, determine the […]

Subjective Short Answer 1. Define a price ceiling. ANSWER: A price ceiling is a legal maximum on the price at which a good can be sold. DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.005 – Analyze the effects of price controls on market […]

1. If the government removes a tax on a good, then the quantity of the good sold will a. increase. b. decrease. c. not change. d. All of the above are possible. ANSWER: a DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.099 – […]

LEARNING OBJECTIVES: ECON.MANK.005 – Analyze the effects of price controls on market outcomes. TOPICS: Supply and demand Minimum wage KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 083.06 – TF – MANK08 84. A binding minimum wage may not help all workers, but […]

Price floors KEYWORDS: BLOOM’S: Application CUSTOM ID: 123.06.1 – MC – MANK08 Figure 6-11 124. Refer to Figure 6-11. If the government imposes a price ceiling at $6, it would be a. binding if market demand is Demand A or […]

Price floors KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 066.06.1 – MC – MANK08 67. If a binding price floor is imposed on the video game market, then a. the quantity of video games demanded will decrease. b. the quantity of video […]

1. A seller’s opportunity cost measures the a. value of everything she must give up to produce a good. b. amount she is paid for a good minus her cost of providing it. c. consumer surplus. d. out of pocket […]

1. The maximum price that a buyer will pay for a good is called a. consumer surplus. b. willingness to pay. c. equilibrium. d. efficiency. ANSWER: b DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.014 – Assess a market’s efficiency. TOPICS: Consumer theory […]

1. Which of the following statements is correct? a. Buyers always want to pay less and sellers always want to be paid more. b. Buyers always want to pay less and sellers always want to be paid less. c. Buyers […]

True / False 1. Welfare economics is the study of the welfare system. a. True b. False ANSWER: False DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.012 – Apply basic, economic principles of individual decision making that determine how an economy generally works. […]

ANSWER: d DIFFICULTY: Challenging LEARNING OBJECTIVES: ECON.MANK.014 – Assess a market’s efficiency. TOPICS: Consumer surplus Welfare economics KEYWORDS: BLOOM’S: Application CUSTOM ID: 110.07.1 – MC – MANK08 111. Motor oil and gasoline are complements. If the price of motor oil […]

b. A+B+C. c. D+H+F. d. A+B+C+D+H+F. ANSWER: b DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.236 – Given a supply and demand graph, indicate the area that represents consumer surplus. TOPICS: Consumer surplus Welfare economics KEYWORDS: BLOOM’S: Application CUSTOM ID: 063.07.3 – MC […]

CUSTOM ID: 058.07.2 – MC – MANK08 Figure 7-11 59. Refer to Figure 7-11. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus? a. $625 b. $1,250 […]

Welfare economics KEYWORDS: BLOOM’S: Application CUSTOM ID: 061.07.1 – MC – MANK08 Table 7-9 The only four consumers in a market have the following willingness to pay for a good: Buyer Willingness to Pay Ashleigh $12 Barb $15 Carolyn $19 […]

90. Refer to Figure 7-16. If the price of the good is $500, then producer surplus amounts to a. $450. b. $575. c. $700. d. $800. ANSWER: c DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.194 – Given a scenario describing sellers’ costs, […]

1. Which tools allow economists to determine if the allocation of resources determined by free markets is desirable? a. profits and costs to firms b. consumer and producer surplus c. the equilibrium price and quantity d. incomes of and prices […]

Subjective Short Answer 1. In terms of gains from trade, why is it true that taxes cause deadweight losses? ANSWER: Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade. DIFFICULTY: Easy […]

1. Which of the following explains why production rises in most years? a. increases in the labor force b. increases in the capital stock c. advances in technological knowledge d. All of the above are correct. ANSWER: d DIFFICULTY: Easy […]

1. An event that directly affects firms’ costs of production and thus the prices they charge is called a. a Phillips contraction. b. an inflationary spiral. c. a demand shock. d. a supply shock. ANSWER: d DIFFICULTY: Easy REFERENCES: Shifts […]

c. fall and shift the short-run Phillips curve right. d. fall and shift the short-run Phillips curve left. ANSWER: d DIFFICULTY: Moderate REFERENCES: Shifts in the Phillips Curve: The Role of Supply Shocks LEARNING OBJECTIVES: ECON.MANK.198 – Given a scenario […]

ANSWER: b DIFFICULTY: Easy REFERENCES: Banks and the Money Supply LEARNING OBJECTIVES: ECON.MANK.288 – Given the reserve ratio, calculate the value of the money multiplier. TOPICS: Monetary policy Money multiplier KEYWORDS: BLOOM’S: Application CUSTOM ID: 054.29.3 – MC – MANK08 […]

ANSWER: d DIFFICULTY: Moderate REFERENCES: Supply and Demand for Loanable Funds and for Foreign-Currency Exchange LEARNING OBJECTIVES: ECON.MANK.049 – Describe the loanable funds market. TOPICS: Loanable funds Open economy Equilibrium KEYWORDS: BLOOM’S: Application CUSTOM ID: 062.32.1 – MC – MANK08 […]

1. In a system of 100-percent-reserve banking, a. banks do not make loans. b. currency is the only form of money. c. deposits are banks’ only assets. d. All of the above are correct. ANSWER: a DIFFICULTY: Moderate REFERENCES: Banks […]

a. the quantity of aggregate goods and services supplied falls, which is shown by a shift of the short-run aggregate supply curve to the left. b. the quantity of aggregate goods and services supplied falls, as shown by a movement […]

KEYWORDS: BLOOM’S: Comprehension CUSTOM ID: 103.32.1 – MC – MANK08 104. If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the a. supply of dollars in the market for foreign-currency exchange shifts right. b. […]

1. Which of the following is not a determinant of the long-run level of real GDP? a. the price level. b. the amount of capital used by firms. c. available stock of human capital. d. available technology ANSWER: a DIFFICULTY: […]

1. In an open economy, national saving equals a. domestic investment plus net capital outflow. b. domestic investment minus net capital outflow. c. domestic investment. d. net capital outflow. ANSWER: a DIFFICULTY: Easy REFERENCES: Supply and Demand for Loanable Funds […]

Table 320 Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. Minutes Needed to Make 1 Bushel of Wheat Pound of Beef Brad1012 Theresa610 Refer to Table 320. What is Brad’s opportunity […]

Which of the following is a decision that economists study? a. how much people work b. what people buy c. how much money people save d. All of the above are correct. The two basic reasons why economists often appear […]

Figure 89 The vertical distance between points A and C represents a tax in the market. Refer to Figure 89. The amount of amount of deadweight loss as a result of the tax is a. $4,000. b. $5,000. c. $6,000. […]

Suppose buyers of computers and printers regard the two goods as complements. Then an increase in the price of computers will cause a(n) a. decrease in the demand for printers and a decrease in the quantity supplied of printers. b. […]

Figure 716 Refer to Figure 716. If the price of the good is $600, then producer surplus amounts to a. $650. b. $800. c. $900. d. $1,000. Figure 86 The vertical distance between points A and B represents a tax […]

Table 41 PriceQuantity Demanded by MichelleQuantity Demanded by LauraQuantity Demanded by Hillary $55411 $46613 $37815 $281017 $191219 $0101421 Refer to Table 41. If the market consists of Laura and Hillary only and the price falls by $1, the quantity demanded […]

Scenario 54 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. Refer to Scenario […]

Figure 622 Refer to Figure 622. Sellers pay how much of the tax per unit? a. $0.50. b. $1.50. c. $3.00. d. $5.00. Which of the following will cause a decrease in producer surplus? a. the imposition of a nonbinding […]

At the equilibrium price of a good, the good will be purchased by those buyers who a. value the good more than price. b. value the good less than price. c. have the money to buy the good. d. consider […]

Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself. Dee has determined that she can earn more in the hour it would take her to work on her […]

Figure 314 Arturo’s Production Possibilities FrontierDina’s Production Possibilities Frontier Refer to Figure 314. Arturo would incur an opportunity cost of 36 burritos if he increased his production of tacos by a. 27. b. 48. c. 108. d. 144. Scenario 55 […]

Figure 319 Chile’s Production Possibilities FrontierColombia’s Production Possibilities Frontier Refer to Figure 319. Chile and Colombia would not be able to gain from trade if Colombia’s opportunity cost of one pound of soybeans changed to a. 1/2 pound of coffee. […]

Figure 45 Refer to Figure 45. Which of the following would cause the demand curve to shift from Demand B to Demand A in the market for oranges in the United States? a. a freeze in Florida b. a technological […]

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the a. crossprice elasticity of demand is negative. b. price elasticity of demand is elastic. c. income elasticity of demand […]

A macroeconomist — as opposed to a microeconomist — might study the effect of a. changes in the money supply on the inflation rate. b. an increase in the gas tax on fuel consumption. c. a technological advance on the […]

If the government passes a law requiring sellers of mopeds to send $200 to the government for every moped they sell, then a. the supply curve for mopeds shifts downward by $200. b. sellers of mopeds receive $200 less per […]

Table 321 Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced […]

Figure 611 Refer to Figure 611. If the government imposes a price floor at $10, it would be a. binding if market demand is Demand A or Demand B. b. nonbinding if market demand is Demand A or Demand B. […]

Figure 310 Alice and Betty’s Production Possibilities in one 8hour day. Alice’s Production Possibilities FrontierBetty’s Production Possibilities Frontier Refer to Figure 310. If point A represents Alice’s production and point B represents Betty’s production, a. Alice produces 200 pitchers of […]

Suppose there is a decrease in the price of corn. If corn is an input into the production of ethanol, we would expect the supply curve for ethanol to a. shift rightward. b. shift leftward. c. become flatter. d. remain […]

Water pollution from pulp and paper mills harms plants, animals, and humans. This is an example of a. a market failure caused by an externality. b. a market failure caused by market power. c. a market failure caused by equality. […]

Table 34 Assume that Andrea and Paul can switch between producing wheat and producing beef at a constant rate. Minutes Needed to Make 1 Bushel of WheatPound of Beef Andrea3015 Paul155 Refer to Table 34. Which of the following combinations […]

The imposition of a binding price floor on a market a. causes quantity demanded to be greater than quantity supplied. b. causes quantity demanded to be less than quantity supplied. c. causes quantity demanded to be equal to quantity supplied. […]

If a tax is levied on the sellers of a product, then there will be a(n) a. downward shift of the demand curve. b. upward shift of the demand curve. c. decrease in quantity demanded. d. increase in quantity demanded. […]

In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. […]

The English word that comes from the Greek word for “one who manages a household” is a. market. b. consumer. c. producer. d. economy. Table 78 During the last two days, Chad purchased a latte from two different stores. The […]

A decrease in demand is represented by a a. movement downward and to the right along a demand curve. b. movement upward and to the left along a demand curve. c. rightward shift of a demand curve. d. leftward shift […]

Figure 91 The figure illustrates the market for coffee in Guatemala. Refer to Figure 91. With trade, total surplus in the Guatemalan coffee market amounts to a. 1,250. b. 1,468. c. 1,870. d. 1,980. Which of the following statements is […]

If a price floor is not binding, then a. the equilibrium price is above the price floor. b. the equilibrium price is below the price floor. c. there will be a surplus in the market. d. there will be a […]

When the United States trades with China, a. both countries will likely benefit. b. only United States will benefit. c. only China will benefit. d. neither country will benefit. Figure 619 Refer to Figure 619. Suppose a tax of $2 […]

Figure 618 The vertical distance between points A and B represents the tax in the market. Refer to Figure 618. The perunit burden of the tax on sellers is a. $6. b. $8. c. $10. d. $14. Figure 219 In […]

Saddle shoes are not popular right now, so very few are being produced. If saddle shoes become popular, then how will this affect the market for saddle shoes? a. The supply curve for saddle shoes will shift right, which will […]

You know an economist has crossed the line from scientist to policy adviser when he or she a. claims that the problem at hand is widely misunderstood by noneconomists. b. talks about the evidence. c. makes normative statements. d. makes […]

Figure 822 Refer to Figure 822. Suppose the government changed the perunit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would a. increase tax revenue and increase the deadweight loss from the tax. […]

To say that government intervenes in the economy to promote equality is to say that government is aiming to a. create a more fair distribution of income. b. change the ingredients that are used to “bake” the economic pie. c. […]

Economists typically measure efficiency using a. the price paid by buyers. b. the quantity supplied by sellers. c. total surplus. d. profits to firms. The opportunity cost of an item is a. the number of hours needed to earn money […]

When motorcycles are taxed and sellers of motorcycles are required to pay the tax to the government, a. the quantity of motorcycles bought and sold in the market is reduced. b. the price paid by buyers of motorcycles decreases. c. […]

Policymaking in a representative democracy a. is straightforward and does not involve any disagreement. b. benefits from the input of economists, even if their advice is not always followed. c. is conducted without the input of economists. d. is always […]

Figure 82 The vertical distance between points A and B represents a tax in the market. Refer to Figure 82. The loss of consumer surplus as a result of the tax is a. $1.50. b. $3. c. $4.50. d. $6. […]

Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding? a. An increase in the price of […]

Figure 318 Bintu’s Production Possibilities FrontierJuba’s Production Possibilities Frontier Refer to Figure 318. The opportunity cost of 1 bowl for Juba is a. 1/4 cup. b. 2/3 cup. c. 3/2 cups. d. 4 cups. In January the price of dark […]

Figure 915 Refer to Figure 915. Producer surplus with trade and without a tariff is a. G. b. C + G. c. A + C + G. d. A + B + C + G. Figure 84 The vertical distance […]

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs.. Given this, we know that a. Ken has […]

Figure 715 Refer to Figure 715. Area B represents a. the combined profits of all producers when the price is P2. b. the increase in producer surplus to all producers as the result of an increase in the price from […]

If Freedonia changes its laws to allow international trade in software and the world price is lower than its domestic price, then it must be the case that a. both consumer surplus and producer surplus increase. b. consumer surplus increases […]

The selfinterest of the participants in an economy is guided into promoting general economic selfinterest by a. the invisible hand. b. market power. c. government intervention. d. oikonomos. The unique point at which the supply and demand curves intersect is […]

In a market economy, economic activity is guided by a. the government. b. central planners. c. large businesses. d. prices and selfinterest. Scenario 82 Roland mows Karla’s lawn for $25. Roland’s opportunity cost of mowing Karla’s lawn is $20, and […]

Dawn’s bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to a. only existing customers who now get lower prices on the gowns they were already planning […]

Figure 629 Suppose the government imposes a $2 on this market. Refer to Figure 629. Suppose D1 represents the demand curve for gasoline in both the short run and long run, S1 represents the supply curve for gasoline in the […]

Table 54 The following table shows the demand schedule for a particular good. PriceQuantity $200 $163 $126 $89 $412 $015 Refer to Table 54. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand […]

Table 77 BuyerWillingness to Pay Michael$500 Earvin$400 Larry$350 Charles$300 Refer to Table 77. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men’s NCAA basketball tournament. The table shows the willingness to pay […]

In analyzing international trade, we often focus on a country whose economy is small relative to the rest of the world. We do so a. because it is impossible to analyze the gains and losses from international trade without making […]

The longrun effects of rent controls are a good illustration of the principle that a. society faces a shortrun tradeoff between unemployment and inflation. b. the cost of something is what you give up to get it. c. people respond […]

Table 75 For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three […]

A tshirt maker would be willing to supply 75 tshirts per day at a price of $18.00 each. At a price of $20.00, the tshirt maker would be willing to supply 100 tshirts. Using the midpoint method, the price elasticity […]

Which of the following expressions can be used to compute the price elasticity of demand? a. Price elasticity of demand = • . b. Price elasticity of demand = • . c. Price elasticity of demand = • . d. […]

Figure 92 The figure illustrates the market for calculators in a country. Refer to Figure 92. With free trade, consumer surplus is a. $320. b. $640. c. $845. d. $1,690. When we move along a given supply curve, a. only […]

Which of the following statements is not correct? a. Trade allows for specialization. b. Trade has the potential to benefit all nations. c. Trade allows nations to consume outside of their production possibilities curves. d. Absolute advantage is the driving […]

When two variables have a positive correlation, a. they tend to move in opposite directions. b. they tend to move in the same direction. c. one variable will move while the other remains constant. d. the variables’ values are never […]

Which of the following questions is more likely to be studied by a microeconomist than a macroeconomist? a. Why do prices in general rise by more in some countries than in others? b. Why do wages differ across industries? c. […]

Table 710 The following table represents the costs of five possible sellers. SellerCost Abby$1,600 Bobby$1,300 Dianne$1,100 Evaline$900 Carlos$800 Refer to Table 710. If the market price is $1,000, the producer surplus in the market is a. $1000. b. $300. c. […]

A key determinant of the price elasticity of supply is the a. time horizon. b. income of consumers. c. price elasticity of demand. d. importance of the good in a consumer’s budget. Suppose the income of buyers in a market […]

An increase in the size of a tax is most likely to increase tax revenue in a market with a. elastic demand and elastic supply. b. elastic demand and inelastic supply. c. inelastic demand and elastic supply. d. inelastic demand […]

The historical rise in living standards of American workers is primarily a result of a. the influence of labor unions in America. b. tariff protection imposed by the American government. c. the enactment of minimumwage laws in America. d. the […]

Figure 427 Panel (a)Panel (b) Panel (c)Panel (d) Refer to Figure 427. Panel (d) shows which of the following? a. a decrease in demand and a decrease in quantity supplied b. a decrease in demand and a decrease in supply […]

Table 25 Corn (in bushels)Wheat (in bushels) 20000 1600700 12001300 8001800 4002200 02500 Refer to Table 25. Table 25 shows one set of production possibilities. Which of the following combinations of corn and wheat is not currently attainable but would […]

The amount of goods and services produced from each unit of labor input is called a. opportunity cost. b. productivity. c. externality. d. marginal benefit. Suppose that Honduras opens its markets to international trade. As a result of this, the […]

Figure 24 Refer to Figure 24. This economy has the ability to produce at which point(s)? a. Q, R, T, U b. R, T, U c. R, U d. T Suppose the government imposes a 50cent tax on the sellers […]

When a tax is levied on the sellers of a good, the a. supply curve shifts upward by the amount of the tax. b. quantity demanded decreases for all conceivable prices of the good. c. quantity supplied increases for all […]

Figure 917 Refer to Figure 917. Without trade, consumer surplus is a. $400 and producer surplus is $200. b. $400 and producer surplus is $800. c. $1,600 and producer surplus is $200. d. $1,600 and producer surplus is $800. The […]

Figure 314 Arturo’s Production Possibilities FrontierDina’s Production Possibilities Frontier Refer to Figure 314. Suppose Arturo is willing to trade 6 burritos to Dina for each 10 tacos that Dina produces and sends to Arturo. Which of the following combinations of […]

The scientific method is a. the use of modern technology to understand the way the world works. b. the use of controlled laboratory experiments to understand the way the world works. c. the dispassionate development and testing of theories about […]

Table 36 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. Machine Minutes Needed to Make 1 ToothbrushHairbrush Zimbabwe310 Portugal56 Refer to Table 36. Assume that Zimbabwe and Portugal each has 180 […]

In the circularflow diagram, which of the following items flows from firms to households through the markets for the factors of production? a. goods and services b. land, labor, and capital c. dollars spent on goods and services d. wages, […]

Figure 820 On the vertical axis of each graph, DWL is deadweight loss. Refer to Figure 820. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax? […]

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable? a. profits and costs to firms b. consumer and producer surplus c. the equilibrium price and quantity d. incomes of and prices paid […]

Jane decides to spend four hours working overtime rather than going to a family gathering. She earns $12.50 per hour for overtime work. Her opportunity cost of working is a. the $50 she earns working. b. the $50 minus the […]

Figure 89 The vertical distance between points A and C represents a tax in the market. Refer to Figure 89. The total surplus without the tax is a. $8,000. b. $12,000. c. $20,000. d. $40,000. Figure 515 Refer to Figure […]

Figure 53 Refer to Figure 53. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna’s demand for gas is represented by demand curve a. A. b. B. c. […]

Figure 89 The vertical distance between points A and C represents a tax in the market. Refer to Figure 89. The imposition of the tax causes the price paid by buyers to a. increase from $600 to $800. b. increase […]

The minimum wage, if it is binding, raises the incomes of a. no workers. b. only those workers who cannot find jobs. c. only those workers whose jobs would pay less than the minimum wage if it didn’t exist. d. […]

If Iowa’s opportunity cost of corn is lower than Oklahoma’s opportunity cost of corn, then a. Iowa has a comparative advantage in the production of corn. b. Iowa has an absolute advantage in the production of corn. c. Iowa should […]

Figure 724 Refer to Figure 724. At equilibrium, consumer surplus is a. $18. b. $36. c. $54. d. $72. The infantindustry argument a. is based on the belief that protecting industries when they are young will pay off later. b. […]

Figure 86 The vertical distance between points A and B represents a tax in the market. Refer to Figure 86. The tax results in a deadweight loss that amounts to a. $600. b. $900. c. $1,500. d. $1,800. Figure 314 […]

Figure 43 Consumer 1Consumer 2 Refer to Figure 43. If these are the only two consumers in the market, then the market quantity demanded at a price of $10 is a. 0 units. b. 5 units. c. 8.33 units. d. […]

Table 337 Output of pottery in one sixhour session VasesMugs Sarah 8 32 Charles 10 25 Refer to Table 337. Sarah and Charles are both potters and each can switch between the production of vases and mugs at a constant […]

Assume that for good X the supply curve for a good is a typical, upwardsloping straight line, and the demand curve is a typical downwardsloping straight line. If the good is taxed, and the tax is doubled, the a. base […]

Suppose the crossprice elasticity of demand between hot dogs and mustard is 2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to a. fall by 200 percent. b. […]

Figure 624 Refer to Figure 624. Which of the following statements is correct? a. The amount of the tax per unit is $6. b. The tax leaves the size of the market unchanged. c. The tax is levied on buyers […]

For economists, historical episodes a. are not worthy of study because they offer few insights into current economic events and problems. b. are not worthy of study because laboratory experiments provide more reliable data. c. are worthy of study because […]

Table 65 PriceQuantity DemandedQuantity Supplied $01500 $312045 $69090 $960135 $1230180 $150225 Refer to Table 65. Which of the following price floors would be binding in this market? a. $3 b. $6 c. $9 d. None of the above price floors […]

Which of these activities will most likely impose an external cost? a. Betty plants flowers in her garden. b. Bonnie gets a flu vaccine. c. Bridget drives her car after having too much alcohol to drink. d. Becky buys a […]

A demand curve shows the relationship between price and a. income. b. quantity demanded. c. production. d. income and quantity demanded. If the crossprice elasticity of two goods is negative, then the two goods are a. necessities. b. complements. c. […]

The President receives economic policy advice from economists at each of the following except a. the Council of Economic Advisors. b. the Department of the Treasury. c. the Congressional Budget office. d. the Department of Labor. Table 712 The numbers […]

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will a. raise both price and total revenues. b. lower both […]

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, […]

Figure 629 Suppose the government imposes a $2 on this market. Refer to Figure 629. Suppose D1 represents the demand curve for paperback novels, D2 represents the demand curve for gasoline, and S1 represents the supply curve for paperback novels […]

Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if a. Canada requires fewer resources than the U.S. to produce a bushel of wheat. b. the opportunity cost […]

Which of the following is not a characteristic of a perfectly competitive market? a. Different sellers sell identical products. b. There are many sellers. c. Sellers must accept the price the market determines. d. All of the above are characteristics […]

An decrease in the price of oranges would lead to a(n) a. increased supply of oranges. b. increase in the prices of inputs used in orange production. c. a movement down and to the left along the supply curve for […]

Suppose the price of milk is $2.39 per gallon, and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk. Starting from this initial situation, which of the following scenarios would result in the […]

Which of the following is not a determinant of the price elasticity of demand for a good? a. the time horizon b. the steepness or flatness of the supply curve for the good c. the definition of the market for […]

Figure 95 The figure illustrates the market for tricycles in a country. Refer to Figure 95. Without trade, consumer surplus amounts to a. $810. b. $1,620. c. $3,240. d. $6,480. Table 75 For each of three potential buyers of oranges, […]

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron’s consumer surplus from the purchase is a. $175. b. […]

Figure 87 The vertical distance between points A and B represents a tax in the market. Refer to Figure 87. Suppose a 20th unit of the good were sold by a seller to a buyer. Which of the following statements […]