In August 2011, Standard & Poor’s (S&P) changed its rating on U.S. Treasury bonds
from ________ based on the state of the federal government’s budget deficit.
A) “A” to “D”
B) “A” to “AAA”
C) “A+” to “B+”
D) “AAA” to “AA+”
In recent years, a monetary growth rule has fallen out of favor because
A) it is believed that active monetary policy destabilizes the economy and makes the
business cycle worse.
B) the growth rate of GDP has been highly unstable.
C) the close relationship between movements in M1 and movements in real GDP has
become weaker.
D) the growth rate of M1 has become more stable.
An explicit cost is defined as
A) a cost that does not change as output changes.
B) a nonmonetary opportunity cost.
C) a cost that involves spending money.
D) a nonmonetary accounting cost.
What is a prisoner’s dilemma?
A) a game that involves no dominant strategies
B) a game in which prisoners are stumped because they cannot communicate with each
other
C) a game in which players act in rational, self-interested ways that leave everyone
worse off
D) a game in which players collude to outfox authorities
National income =
A) Consumption + Saving – Taxes
B) Consumption – Saving – Taxes
C) Consumption – Saving +Taxes
D) Consumption + Saving + Taxes
According to the Department of Justice merger guidelines, a proposed merger between
two firms may be challenged if the post-merger Herfindahl-Hirschman Index
A) lies between 1,000 and 1,800 and the merger raises the Index by 50 points.
B) lies between 1,000 and 1,800 and the merger raises the Index by more than 100
points.
C) lies above 1,800 and the merger raises the Index by less than 50 points.
D) lies below 1,000 and the merger raises the Index by 100 points.
Which of the following is part of the secondary market?
A) New York Stock Exchange
B) the over-the-counter market
C) NASDAQ
D) all of these
Which of the following is a correct statement?
A) Inflation is measured as the percent change in the CPI.
B) The CPI is a widely used measure of the inflation rate.
C) Real GDP is our best measure of economic growth.
D) The PPI measures inflation as experienced by producers.
Pookie’s Pinball Palace restores old Pinball machines. Pookie has just spent $300
purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once
he is finished with the restoration. After having spent $300, Pookie discovers that he
will need to rewire the entire machine at a cost of $1,100 in order to finish the
restoration. Alternatively, he can sell the machine “as is” now for $1,000. What is the
marginal cost of completing the task?
A) $300
B) $800
C) $1,100
D) $1,400
The level of real GDP in the long run is
A) potential GDP.
B) affected by changes in the price level.
C) determined solely by aggregate demand.
D) the same as the level of nominal GDP in the long run.
Consider an industry that is made up of nine firms each with a market share (percent of
sales) as follows:
a. Firm A: 30%
b. Firm B: 20%
c. Firms C, D and E: 10% each
d. Firms F, G, H and J: 5% each What is the value of the Herfindahl-Hirschman Index
and how is the industry categorized?
A) 1700; moderately concentrated
B) 1425; moderately concentrated
C) 1600; moderately concentrated
D) 2600; highly concentrated
Figure 24-4
In the figure above, LRAS1 and SRAS1 denote LRAS and SRAS in year 1, while LRAS2
and SRAS2 denote LRAS and SRAS in year 2. Given the economy is at point A in year 1,
what is the growth rate in potential GDP in year 2?
A) 8%
B) 9.1%
C) 10%
D) 12%
The difference between the salaries paid to movie stars and to actors who play
supporting roles is much greater today than it was in the 1930s and 1940s. What factor
explains this increase in relative salaries over time?
A) Technological advances in the entertainment industry increase the revenue that
successful movies can earn. This has increased the movie studios’ willingness to pay
high salaries to movie stars.
B) Agents of movies stars are effective in obtaining large salaries for their clients today.
Few movie stars had agents to negotiate for them in the 1930s and 1940s.
C) The studio system that dominated the industry in the 1930s and 1940s no longer
exists. The studio system allowed movie studios to sign actors to long-term contracts
that kept salaries down.
D) There was no actors’ union in the 1930s and 1940s. The rise of strong actors’ unions
has caused salaries of movies stars to be greater today than in previous years.
The increase in the amount that the government collects in taxes when the economy
expands and the decrease in the amount that the government collects in taxes when the
economy goes into a recession is an example of
A) automatic stabilizers.
B) discretionary fiscal policy.
C) discretionary monetary policy.
D) automatic monetary policy.
To maximize profit, a perfectly competitive firm
A) should sell the quantity of output determined by the interaction between industry
demand and supply.
B) should sell the quantity of output that results in a value for total revenue that is equal
to total cost.
C) should produce the quantity of output that results in the greatest difference between
total revenue and total cost.
D) should produce the quantity of output that results in the greatest difference between
marginal revenue and marginal cost.