If a country has net exports of $8 billion and sold $40 billion of goods and services
abroad, then it has
a. $48 billion of imports and $40 billion of exports.
b. $48 billion of exports and $40 billion of imports.
c. $40 billion of imports and $32 billion of exports.
d. $40 billion of exports and $32 billion of imports.
An increase in government spending on goods to build or repair infrastructure
a. shifts the aggregate demand curve to the right.
b. has a multiplier effect.
c. shifts the aggregate supply curve to the right, but this effect is likely more important
in the long run.
d. All of the above are correct.
Marcus is of the opinion that the theory of liquidity preference explains the
determination of the interest rate very well. Most economists would say that Marcus’s
opinion is
a. Keynesian in nature, and that his view is more valid for the long run than for the
short run.
b. classical in nature, and that his view is more valid for the long run than for the short
run.
c. Keynesian in nature, and that his view is more valid for the short run than for the
long run.
d. classical in nature, and that his view is more valid for the short run than for the long
run.
Which of the following events is consistent with an increase in the deadweight loss of
the gasoline tax from $30 million to $120 million?
a. The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon.
b. The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon.
c. The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon.
d. The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon.
The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for
a. the slope of short-run aggregate supply.
b. the slope of long-run aggregate supply.
c. the slope of the aggregate-demand curve.
d. everything that makes the aggregate-demand curve shift.
Figure 8-2
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to
a. decrease by $2.
b. increase by $3.
c. decrease by $4.
d. increase by $5.
When two variables have a negative correlation and the x-variable decreases,
a. the y-variable increases.
b. the y-variable decreases.
c. the y-variable stays the same.
d. the x-variable can never be positive.
About what percentage of jobs are destroyed every year and about what percentage of
workers leave their jobs in a typical month?
a. 1% and 5%
b. 5% and 1%
c. 3% and 10%
d. 10% and 3%
Use the (hypothetical) information in the following table to answer the following
questions.
Table 18-2
Refer to Table 18-2. In real terms, U.S. goods are less expensive than goods in which
country(ies)?
a. Bolivia and Morocco
b. Japan, Norway, and Thailand
c. Japan and Norway
d. Thailand
Caroline sharpens knives in her spare time for extra income. Buyers of her service are
willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a
particular day, she is willing to sharpen the first knife for $2.00, the second knife for
$2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is
rational in deciding how many knives to sharpen. Her producer surplus is
a. $0.95.
b. $1.15.
c. $1.30.
d. $1.85.
Which of the following statements is correct?
a. The demand for natural gas is more elastic over a short period of time than over a
long period of time.
b. The demand for smoke alarms is more elastic than the demand for Persian rugs.
c. The demand for bourbon whiskey is more elastic than the demand for alcoholic
beverages in general.
d. All of the above are correct.
If your firm’s production function has constant returns to scale and you increase all your
inputs by 60%, then your firm’s output will
a. not change.
b. increase, but by less than 60%
c. increase by 60%
d. increase by more than 60%.
If the sacrifice ratio is 2, reducing the inflation rate from 10 percent to 6 percent would
require sacrificing
a. 2 percent of annual output.
b. 6 percent of annual output.
c. 8 percent of annual output.
d. 12 percent of annual output.
Minimum wages create unemployment in markets where they create a
a. shortage of labor. Minimum wage laws are not the predominant reason for
unemployment in the U.S.
b. shortage of labor. Minimum wage laws are the predominant reason for
unemployment in the U.S.
c. surplus of labor. Minimum wage laws are not the predominant reason for
unemployment in the U.S.
d. surplus of labor. Minimum wage laws are the predominant reason for unemployment
in the U.S.
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 force of specialization.
Table 15-1
Labor Data for Aridia
Refer to Table 15-1. The labor-force participation rate of Aridia
a. increased from 2010 to 2011 and increased from 2011 to 2012.
b. increased from 2010 to 2011 and decreased from 2011 to 2012.
c. decreased from 2010 to 2011 and increased from 2011 to 2012.
d. decreased from 2010 to 2011 and decreased from 2011 to 2012.
If a government increases its budget deficit, then domestic interest rates
a. and net exports rise.
b. rise and net exports fall.
c. fall and net exports rise.
d. and net exports fall.
Which of the following examples does not illustrate the principle represented by the
adage, “There is no such thing as a free lunch”?
a. Joe needs to pay his rent and his electric bill.
b. Pete must choose between buying a new flat screen television and buying his
textbooks for this semester.
c. Kevin must decide between studying for his economics exam and working at his
part-time job.
d. Lisa can spend her money on a new sweater or a pair of jeans.
The government’s benefit from a tax can be measured by
a. consumer surplus.
b. producer surplus.
c. tax revenue.
d. All of the above are correct.
An increase in government purchases is likely to
a. decrease interest rates.
b. result in a net decrease in aggregate demand.
c. crowd out investment spending by business firms.
d. decrease money demand.
Table 3-10
Juanita and Shantala run a business that programs and tests cellular phones. Assume
that Juanita and Shantala can switch between programming and testing cellular phones
at a constant rate. The following table applies.
Minutes Needed to Number of Cellular Phones
Programmed or Tested in a
40-Hour Week
Program 1
Cellular Phone Test 1
Cellular Phone Cellular Phones
Programmed Cellular Phones
Refer to Table 3-10. The number of minutes needed by Juanita to program a cellular
phone is
a. 4.
b. 5.
c. 7.5.
d. 15.
Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the
good, other things equal, the
a. smaller is the response of quantity supplied to the tax.
b. larger is the tax burden on sellers relative to the tax burden on buyers.
c. larger is the deadweight loss of the tax.
d. All of the above are correct.
Over the past century in the United States, real GDP per person has grown, on average,
by about
a. 1 percent per year.
b. 2 percent per year.
c. 3 percent per year.
d. 5 percent per year.
It costs $80 for a dental appointment in the U.S. It costs 600 Egyptian pounds for the
same appointment in Egypt. The nominal exchange rate is 7 pounds per dollar. The real
exchange rate is
a. less than one. Dental appointments in Egypt are cheaper than in the U.S.
b. less than one. Dental appointments in Egypt are more expensive than in the U.S.
c. greater than one. Dental appointments in Egypt are cheaper than in the U.S.
d. greater than one. Dental appointments in Egypt are more expensive than in the U.S.
The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3.
Which of the following prices for a particular good are consistent with these exchange
rates?
a. $4 in the U.S. and 3 euros in Italy.
b. $4 in the U.S. and 3.75 euros in Italy.
c. $5 in the U.S. and 3 euros in Italy.
d. $6 in the U.S. and 2.50 euros in Italy.
If the demand for dollars in the market for foreign-currency exchange shifts right, then
the exchange rate
a. rises and the quantity of dollars exchanged rises.
b. rises and the quantity of dollars exchanged does not change.
c. falls and the quantity of dollars exchanged falls.
d. falls and the quantity of dollars exchanged does not change.
Suppose businesses in general believe that the economy is likely to head into recession
and so they reduce capital purchases. Their reaction would initially shift
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
Figure 2-8
Panel (a) Panel (b)
Refer to Figure 2-8, Panel (a). The opportunity cost of moving from point J to point L
is
a. 2 donuts.
b. 2 donuts and 2 cups of coffee.
c. 2 cups of coffee.
d. 6 cups of coffee.
Which of the following is not implied by the quantity equation?
a. If velocity is stable and money is neutral, an increase in the money supply creates a
proportional increase in nominal output.
b. If velocity is stable and money is neutral, an increase in the money supply creates a
proportional increase in the price level.
c. With constant money supply and output, an increase in velocity creates an increase in
the price level.
d. With constant money supply and velocity, an increase in output creates a proportional
increase in the price level.
When studying the effects of changes in public policy, economists believe that
a. it is important to distinguish between the short run and the long run.
b. the assumptions used in studying those effects should be the same for the short run as
for the long run.
c. the short-run effects of those changes are always more beneficial to society than are
the long-run effects.
d. the long-run effects of those changes are always more beneficial to society than are
the short-run effects.