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Short-run macroeconomic equilibrium occurs when
A) aggregate demand and short-run aggregate supply intersect.
B) the equilibrium lies on the long-run aggregate supply curve.
C) structural and frictional unemployment equal zero.
D) A and B
Suppose we want to use game theory to analyze how an oligopolist selects its optimal
price. The cells of the payoff matrix show
A) the profit that each producer can expect to earn by pursuing a single strategy.
B) the profit that each producer can expect to earn from every combination of strategies
by the firms in the market.
C) the strategy that a firm must pursue to earn various levels of profit.
D) the expected profits of rival firms.
A Big Mac costs $4.56 in the United States and 9.2 zlotys in Poland. If the exchange
rate is 3 zlotys per dollar, purchasing power parity predicts that
A) the dollar is undervalued.
B) the dollar is overvalued.
C) the zloty is overvalued.
D) both the zloty and dollar are undervalued.
Contractionary fiscal policy to prevent real GDP from rising above potential real GDP
would cause the inflation rate to be ________ and real GDP to be ________.
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower
Maximizing the level of output for a given total cost of production
A) is equivalent to producing the profit maximizing output level.
B) is equivalent to minimizing cost for a given level of output.
C) necessitates using only relatively low-priced inputs.
D) will maximize total revenue.
China's current rate of GDP growth is quite rapid. Its current growth rate is probably
three times that of the United States. However, the levels of pollution are much higher
in China. Would you consider China to be better off than the United States given this
information? Why or why not?
For many products, such as fast foods, a variety of prices can be found, but sellers with
higher prices can expect to sell their products because
A) consumers are not sensitive to prices.
B) arbitrage will quickly eliminate price differences.
C) firms differentiate products in many ways, for example, higher priced fast food
restaurants may offer better service.
D) their demand is perfectly inelastic.
Explain how the listed events (a-d) would affect the following at Hilton Hotels.
i. Marginal cost
ii. Average variable cost
iii. Average fixed cost
iv. Average total cost a. Hilton decides on an across-the-board 5 percent increase in
executive salaries.
b. Hilton decides to eliminate all print advertising.
c. Hilton signs a new contract with the Culinary Workers Union that requires the
company to increase wages for all its kitchen workers.
d. The federal government starts to levy a $5 room tax on all hotel rooms.
The United States abandoned the Bretton Woods system of exchange rates in
A) the 1920s.
B) the 1940s.
C) the 1970s.
D) the 1990s.
Table 9-11 Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-11 shows the production
and consumption quantities without trade, and the production numbers with trade.
All of the following are terms of trade that could possibly benefit both countries except
A) 1 hat : 2 clocks
B) 1 hat : 4 clocks
C) 1 hat : 5 clocks
D) 1 hat : 8 clocks
All of the following are examples of spending on goods and services in the circular
flow model except
A) Giovani buys a new cell phone to replace the one he flushed down the toilet.
B) Amir buys a new humidor for his cigar shop.
C) Isabella buys the sushi plate for lunch at the Turning Japanese Sushi Bar.
D) Vijay buys a new minivan for his family's cross-country vacation.
The invention of the cotton gin ushered in the Industrial Revolution and began a long
period of technological innovation. What did this technological change do the short-run
supply curve?
A) It shifted the short-run aggregate supply curve to the left.
B) It shifted the short-run aggregate supply curve to the right.
C) It moved the economy up along a stationary short-run aggregate supply curve.
D) It moved the economy down along a stationary short-run aggregate supply curve.
After an unexpected ________ in the price of oil, the long-run adjustment decreases the
price level and ________ the unemployment rate as they return to their original levels.
A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases
Figure 26-4
In the figure above, a movement from point A to point B would be caused by
A) a decrease in real GDP.
B) an increase in the price level.
C) a decrease in the price level.
D) an increase in the interest rate.
Using the Taylor rule, if the current inflation rate equals the target inflation rate and real
GDP equals potential GDP, then the federal funds target rate equals the
A) current discount rate.
B) current inflation rate.
C) real equilibrium federal funds rate.
D) current inflation rate plus the real equilibrium federal funds rate.
Figure 2-9
Carlos Vanya grows tomatoes and strawberries on his land. A portion of his land is more
suitable for growing tomatoes and the other portion is better suited for strawberry
cultivation. Which of the graphs in Figure 2-3 represent his production possibilities
frontier?
A) Graph A
B) Graph B
C) Graph C
D) either Graph A or Graph B
E) either Graph B or Graph C
Explain how each of the following events would affect the aggregate demand curve.
a. Lower interest rates
b. A decrease in net exports
c. A decrease in the price level
d. Slower income growth in other countries
e. A decrease in imports
An increase in aggregate demand causes an increase in ________ only in the short run,
but causes an increase in ________ in both the short run and the long run.
A) the price level; real GDP
B) real GDP; real GDP
C) the price level; the price level
D) real GDP; the price level
