Market equilibrium occurs where supply equals demand.
Inflation targeting, typically, has been accompanied by lower inflation.
In order to maintain an undervalued yuan to encourage a trade surplus, the Chinese
government must buy dollars and increase the supply of yuan.
A member of a cartel earns more profits by producing more than its quota and selling at
a price higher than the cartel’s price.
An increase in the number of firms in a market will cause the quantity of a good
supplied to increase.
Competition in the form of advertising, better customer service, or longer warranties
can also reduce profits by raising costs.
In a centrally planned economy, the households and firms decide how economic
resources will be allocated.
Contractionary monetary policy and expansionary fiscal policy both reduce net exports
in an open economy.
If demand is inelastic, the absolute value of the price elasticity coefficient is greater
than one.
The demand for a Giffen good slopes upward.
Technological change is the key to sustaining economic growth.
Which of the following would cause an increase in the supply of peanut butter?
A) a decrease in the price of grape jelly (assuming that peanut butter and grape jelly are
complements)
B) an increase in the price of peanut butter
C) an increase the price of a product that producers sell instead of peanut butter
D) an increase in the number of firms that produce peanut butter
Potential GDP refers to
A) the level of GDP attained when all firms are producing at capacity.
B) the level of GDP attained by the country with the highest growth in real GDP in a
given year.
C) the difference between the highest level of real GDP per quarter and the lowest level
of real GDP per quarter within any given year.
D) the extent to which real GDP is above or below nominal GDP.
The provision of the Patient Protection and Affordable Care Act (ACA) which states
that, with limited exceptions, every resident of the United States must have health
insurance that meets certain basic requirements is the ________ provision.
A) employer mandate
B) state health exchanges
C) individual mandate
D) regulation of health insurance
In the circular flow model, the value of total production for an economy ________ the
value of total expenditures on final goods and services.
A) equals
B) is greater than
C) is less than
D) may be greater than or less than
According to Steven Cheung: “Pollination contracts usually include stipulations
regarding the number and strength of …[bee] colonies, the rental fee per hive, the time
of delivery…the protection of bees from pesticides, and the strategic placing of hives.”
Cheung cites this as evidence that
A) the high costs of writing and enforcing complicated written agreements between
owners of beehives and apple orchards prevents economic efficiency from being
achieved in these markets.
B) government intervention is not always necessary to bring about an economically
efficient number of apple trees and beehives.
C) government regulation of contracts between owners of beehives and apple orchards
is necessary to bring about an economically efficient number of apple trees and
beehives.
D) the beekeeping and apple growing businesses have become more complicated and
costly over time due to the legal costs involved.
Under the Bretton Woods system, a fixed exchange rate supported by central banks was
known as a(n) ________ exchange rate.
A) par
B) equilibrium
C) fundamental
D) target
Assume the market for organically-grown produce is perfectly competitive. All else
equal, as farmers find it less profitable to produce and sell organic produce in this
market,
A) the demand curve will shift to the left and the equilibrium price will decrease.
B) the supply curve will shift to the left and the equilibrium price will increase.
C) the supply curve will shift to the right, the demand curve will shift to the left, and the
equilibrium price will decrease.
D) the supply curve will shift to the left, the demand curve will shift to the left, and the
equilibrium price will increase.
The labor market in Major League Baseball features
A) a monopoly by the League in employing professional baseball players that is offset
by the players’ membership in a labor union.
B) a monopsony by the League in employing professional baseball players that is offset
by the players’ membership in a labor union.
C) an oligopoly by the League in employing professional baseball players that is offset
by an oligopsony by the players in the labor market.
D) monopolistic competition between the teams and professional baseball players.
If GDP per capita rises by 2% between 2013 and 2014, which of the following is
necessarily true?
A) Real GDP has risen by more than 2%.
B) The population has decreased.
C) The population has increased, but by less than 2%.
D) None of the above is necessarily true.
When the market value of the dollar falls relative to other currencies around the world,
we say that
A) the dollar has appreciated.
B) the dollar has depreciated.
C) the demand for dollars has decreased.
D) the supply of dollars has decreased.
In response to the destructive bank panics of the Great Depression, future bank panics
are designed to be prevented by
A) the Federal Reserve System acting as a lender of last resort.
B) the Federal Reserve System conducting open market operations.
C) the establishment of the Federal Deposit Insurance Corporation.
D) establishing a fractional reserve system of banking.
E) increasing the required reserve ratio to 100%.
If the consumption function is defined as C = 5,500 + 0.9Y, what is the value of the
multiplier?
A) 0.1
B) 0.9
C) 9
D) 10
The ________ illustrates the relationship between the price level and the quantity of
planned aggregate expenditure, holding constant all other factors that affect aggregate
expenditure.
A) aggregate demand curve
B) savings line
C) 45-degree line
D) consumption function
Figure 5-11 Coal burning utilities release
sulfur dioxide and nitric acid which react with water to produce acid rain. Acid rain
damages trees and crops and kills fish. Because the utilities do not bear the cost of the
acid rain they overproduce the quantity of electricity. This is illustrated in Figure 5-11.
S1 represents the supply curve that reflects the private cost of production and S2
represents the supply curve that reflects the social cost of production. One way to
internalize the external cost generated by utilities is to impose a Pigovian tax on the
production of electricity. What is the size of the Pigovian tax that will internalize the
cost of the externality?
A) P0
B) P2 – P0
C) P1 – P0
D) P2 – P1
Which of the following is not a consequence of minimum wage laws?
A) Low skilled workers are hurt because minimum wage reduces the number of jobs
providing low skilled workers with training.
B) Employers will be reluctant to offer low-skill workers jobs with training.
C) Producers have an incentive to offer workers non-wage benefits such as health care
benefits and convenient working hours rather than a higher wage.
D) Some workers benefit when the minimum wage is increased.
Which of the following statements about rent seeking is false?
A) Rent seeking often involves governments because governments transfer huge
amounts of funds that economic agents must compete for.
B) A person is engaging in rent seeking behavior when he uses the political process to
acquire ownership of a resource that belongs to the public.
C) Because rent seeking redistributes society’s resources, anyone engaging in such
behavior is violating the law.
D) If a firm can benefit from government intervention in the economy, it is more likely
to spend resources attempting to secure this intervention than toward innovating its
product to gain a competitive edge in the market.
The U.S. economy has seen a faster increase in productivity since the mid-1990s as
compared to the economies of many Western European countries. Which of the
following explains this?
A) U.S. unions impose stricter work rules as compared to unions in Western European
countries.
B) U.S. government regulations impose stricter work rules as compared to government
regulations in Western Europe.
C) The United States has a higher rate of job mobility than do many Western European
countries.
D) U.S. workers can obtain unemployment insurance for a longer period of time as
compared to workers in most Western European countries.
Give an example of an automatic stabilizer. Explain how automatic stabilizers work in
the case of recession.
Suppose that Federal Reserve policy leads to higher interest rates in the United States.
How will this policy affect real GDP in the short run if the United States is a closed
economy, and how will it affect real GDP in the short run if the United States is an open
economy?
If you know that a country’s net foreign investment is positive, what does that tell you
about the relationship between the country’s national saving and private investment?
(Assume that the capital account is zero and net transfers are zero.)
What are the four functions of money? Can something be considered money if it does
not fulfill all four functions?
Beginning in 2008, The Federal Reserve and the U.S. Treasury Department responded
to the financial crisis by intervening in financial markets in unprecedented ways.
Briefly summarize the actions of the Fed and Treasury.