The nominal exchange rate is the:
A. market on which currencies of various nations are traded for one another.
B. price of the average domestic good or service relative to the price of the average
foreign good or service, when prices are expressed in terms of a common currency.
C. quantity of foreign currency assets held by a government for the purpose of
purchasing the domestic currency in the foreign exchange market.
D. rate at which two currencies can be traded for each other.
Total taxes paid divided by total before-tax income is called the:
A. average tax rate.
B. substitution effect.
C. opportunity cost.
D. marginal tax rate.
Economies of scale exist when:
A. firms become extremely large.
B. input prices are falling.
C. average costs fall as the scale of production grows.
D. a 10% increase in all inputs causes a 9% increase in output.
Refer to the figure above. As Jeff increases the number of movies he watches in a day,
from ______ to ______ his marginal utility decreases, from 15 to 5
A. 1, 5
B. 2, 5
C. 2, 4
D. 1, 4
When a Peruvian buys a U.S. government bond, from the perspective of Peru, this is
a(n):
A. import.
B. export.
C. capital outflow.
D. capital inflow.
Refer to the table above. The marginal revenue of the third unit of output is:
A. $24.
B. $6.
C. $2.
D. $0.
Refer to the figure above. What is the price elasticity of supply at point B and C?
A. 1/2; 3/4
B. 3/4; 1/2
C. 3; 2
D. 1; 1
Refer to the figure above. This firm’s marginal revenue function would intersect the
vertical axis at a price of _______.
A. $70
B. $0
C. $20
D. $35
The United States was unable to maintain its dominance in the production of televisions
because:
A. the highly technical skills necessary to produce televisions are greater in other
countries.
B. the raw materials necessary to build televisions became scarce in the United States.
C. the product designs evolved too rapidly for United States engineers to keep up.
D. automated production allowed production to be outsourced to countries with
less-skilled workers.
In Macroland, currency held by the public is 2000 econs, bank reserves are 300 econs,
and the desired reserve/deposit ratio is 10%. If the Central Bank prints an additional
200 econs and uses this new currency to buy government bonds from the public, the
money supply in Macroland will increase from ______ econs to ______ econs,
assuming that the public does not wish to change the amount of currency it holds.
A. 20,000; 22,000
B. 5,000; 2,000
C. 3,000; 5,000
D. 5,000; 7,000
Refer to the figure above. What is the equilibrium price of bananas in this market?
A. 0
B. $1/pound
C. $4/pound
D. $5/pound
An economy produces 500,000 tables valued at $100 each. Households purchase
100,000 tables, of which 50,000 are imported. Businesses purchase 200,000
domestically produced tables, the government purchases 100,000 domestically
produced tables, and 50,000 domestically produced tables are sold abroad. The unsold
tables at the end of the year are held in inventory by the table manufacturers. What is
value of the investment component of GDP?
A. $10 billion
B. $20 million
C. $25 million
D. $30 million
Money is:
A. the same as income.
B. all financial assets.
C. any asset used to make purchases.
D. the sum of assets minus debts.
A reduction in the marginal tax rate can cause potential output to increase by
A. encouraging early entry into the labor market by reducing the incentive to earn
advanced degrees.
B. increasing after-tax wage rates and thus allowing workers to work fewer hours.
C. increasing the incentive to invest more in education and earn advanced degrees.
D. increasing government revenues and thus government expenditure.
Falling growth rates during the 2007-2009 recession occurred:
A. only in the high-tech sectors of the U.S. economy.
B. only in the United States.
C. in the United States, Canada, Germany, the United Kingdom and Japan.
D. in the United States and Canada, but not in Germany, the United Kingdom or Japan.
Suppose a monopolist charges a uniform price of $10 based on profit maximization and
has constant marginal costs of $3. Cody is willing to pay $6 for the monopolist’s output.
Therefore:
A. the monopolist should lower its price to $6 for all consumers.
B. the monopolist should ignore Cody’s want; it is already profit maximizing.
C. if resale of the output is impossible, the monopolist should lower its price to $6 just
for Cody.
D. the monopolist will not be better off if it lowers its price to $6 just for Cody.
A policy maker has argued for higher taxes on gasoline to reduce the negative
externalities associated with driving. This policy will lead to a relatively ______
reduction in driving if demand is _______.
A. small; perfectly elastic
B. large; perfectly inelastic
C. small; relatively inelastic
D. large; relatively inelastic
Suppose the stock market crashed, wiping out $5 trillion of household wealth.
Consistent with economic models based on historical trends, consumption spending
might fall by as much as, but probably not more than, ______.
A. $35 billion
B. $200 billion
C. $350 billion
D. $2 trillion
Statistical discrimination in the automobile insurance industry means that young male
drivers that drive __________ will pay __________ rates relative to the claims they
generate.
A. carefully; lower
B. recklessly; higher
C. carefully; higher
D. slowly; lower
When the interest rate in the U.S. rises, U.S. financial assets:
A. become less attractive to foreign buyers.
B. become more attractive to both foreign and domestic buyers.
C. become less attractive to both foreign and domestic buyers.
D. become less attractive to domestic buyers and more attractive to foreign buyers.
At the household level, higher saving rates lead to ______ and greater economic
security.
A. greater current consumption
B. greater wealth
C. less wealth
D. less current income
Two firms can use five different technologies to produce the same quantity of output:
1,2,3,4 and 5. The first technology is the cheapest, but also the dirtiest. The fifth
technology is the most expensive, but results in the lowest levels of pollution. The
amount of pollution emitted by each firm and the cost of the technologies are shown in
the table.
In the absence of either government regulation or private negotiation, the 2 firms will
produce using technology __________ and pollution will be __________.
A. 3; 12 tons
B. 5; 4 tons
C. 2; 16 tons
D. 1; 20 tons
Bank depositors will not lose their deposits in a banking panic if:
A. there is fractional reserve banking.
B. there is 100% reserve banking.
C. there is a central bank.
D. the actual reserve/deposit ratio equal to the desired reserve/deposit ratio.
In an open economy, domestic investment equals:
A. net capital inflows.
B. domestic saving plus net capital outflows.
C. domestic saving.
D. domestic saving plus net capital inflows.
Household saving in the U.S.:
A. is low relative to previous periods, but approximately equal to the rate in other
countries.
B. is low relative to other countries, but has increased during the 1990s.
C. had decreased since the 1960s, but, because the economy was so strong during the
1990s, has recently increased.
D. is low relative to other countries and has been declining since the mid-1980s.
Consumption spending includes spending on:
A. durables, nondurables, and services.
B. stocks, bonds, and other financial instruments.
C. capital goods, residential housing, and changes in inventories.
D. goods and services by federal, state, and local governments.
Statistical discrimination occurs when
A. individuals are judged by their personal characteristics.
B. individuals are judged on the basis of the groups to which they belong.
C. groups are composed of individuals with the same characteristics.
D. statistics are used to make employment decisions.
Supply and Demand Curve for Jeans in Gallania Mall. Refer to the figure above. The
price of $60 each will lead to an _____ of _____ pairs of jeans per day.
A. excess supply; 8
B. excess supply; 16
C. equilibrium quantity; 16
D. excess demand; 16
Spike pays $14,000 in taxes while earning $100,000. Ace earns $120,000. If the tax
system is progressive, Ace will pay taxes of
A. $15,500.
B. more than $16,800.
C. more than $15,500 but less than $16,800.
D. $16,800.
If households and firms increase their expectation for the rate of inflation, the ______
curve will shift _____.
A. AD; rightward
B. AS; rightward
C. AS; leftward
D. AS; upward
Suppose that both supply and demand for iPads decrease. One can predict that the:
A. equilibrium price will rise but the equilibrium quantity can increase or decrease.
B. equilibrium price and quantity will decrease.
C. equilibrium price and quantity will rise.
D. equilibrium quantity will fall but the equilibrium price can rise or fall.
The interest rate that commercial banks charge each other for very short-term loans is
called the:
A. prime rate.
B. federal funds rate.
C. Federal Reserve discount rate.
D. commercial paper rate.