A 2009 Chevrolet model has more horsepower than the 2008 version and is included in
the BLS basket of goods. BLS attempts to account for this change in the market basket
by
a. dropping the good from the basket.
b. substituting in a different vehicle with the same horsepower as the 2008 model.
c. adjusting the share of the market basket allocated to transportation.
d. adjusting the price of the good to account for the quality change.
Figure 21-4. On the figure, MS represents money supply and MD represents money
demand.
Refer to Figure 21-4. Which of the following events could explain a shift of the
money-demand curve from MD1 to MD2?
a. a decrease in the price level
b. a decrease in the cost of borrowing
c. an increase in the price level
d. an increase in the cost of borrowing
Dewey earned a salary of $75,000 in 2001 and $95,000 in 2006. The consumer price
index was 177 in 2001 and 266 in 2006. Dewey’s 2001 salary in 2006 dollars is
a. $37,711.86.
b. $49,906.02.
c. $66,750.00.
d. $112,711.86.
A favorable supply shock will cause
a. unemployment to rise and the short-run Phillips curve to shift right.
b. unemployment to rise and the short-run Phillips curve to shift left.
c. unemployment to fall and the short-run Phillips curve to shift right.
d. unemployment to fall and the short-run Phillips curve to shift left.
The Bureau of Labor Statistics places people in the “employed” category if they
a. are without a job, but are available for work and have tried to find a job during the
previous 4 weeks.
b. work without pay in a family member’s business.
c. are waiting to be recalled to a job from which they had been laid off.
d. All of the above are correct.
According to purchasing power parity, if the same basket of goods costs $100 in the
U.S. and 50 pounds in Britain, then what is the nominal exchange rate?
a. 2 pounds per dollar
b. 1 pound per dollar
c. 1/2 pound per dollar
d. None of the above is correct
Over time both real GDP and the price level have trended upward. Which of these
trends would the classical dichotomy say could be explained by an upward trend in the
money supply?
a. both the upward trend in real GDP and the upward trend in the price level
b. the upward trend in real GDP but not the upward trend in the price level
c. the upward trend in the price level but not the upward trend in real GDP
d. neither the upward trend in the price level nor the upward trend in real GDP
The long-run response to an increase in the growth rate of the money supply is shown
by shifting
a. the short-run and long-run Phillips curves left.
b. the short-run and long-run Phillips curves right.
c. only the short-run Phillips curve left.
d. only the short-run Phillips curve right.
In which of the following countries has economic growth been sufficiently strong in
recent history to propel that country from being among the poorest in the world to being
among the richest in the world?
a. South Korea
b. Senegal
c. India
d. Indonesia
The deadweight loss from a tax of $5 per unit will be smallest in a market with
a. inelastic supply and elastic demand.
b. inelastic supply and inelastic demand.
c. elastic supply and elastic demand.
d. elastic supply and inelastic demand.
As price elasticity of supply increases, the supply curve
a. becomes flatter.
b. becomes steeper.
c. becomes downward sloping.
d. shifts to the right.
Economists generally agree that the most important tax in the U.S. economy is the
a. income tax.
b. tax on labor.
c. inheritance or death tax.
d. tax on corporate profits.
Which of the following is correct?
a. The Continental Congress used the inflation tax to help finance the American
Revolution.
b. The inflation is today a principal source of revenue for the U.S. government.
c. There is no way a person can avoid the inflation tax.
d. None of the above is correct.
Figure 8-5
Suppose that the government imposes a tax of P3 – P1.
Refer to Figure 8-5. The equilibrium price before the tax is imposed is
a. P1.
b. P2.
c. P3.
d. P4.
Which of the following represents a transfer payment?
a. You transfer $1,000 from your bank account to a mutual fund.
b. The government sends your grandfather his Social Security check.
c. You make a payment to get legal documents showing you purchased a previously
owned home.
d. Your employer automatically transfers $100 each month from your wages to a
non-taxable medical spending account.
The Bureau of Labor Statistics places people in the “employed” category if they
a. are temporarily absent from their jobs.
b. are self-employed.
c. work without pay in a family member’s business.
d. All of the above are correct.
When the relative price of a good decreases, consumers respond by buying
a. a larger quantity of that good and a larger quantity of substitutes for that good.
b. a larger quantity of that good and a smaller quantity of substitutes for that good.
c. a smaller quantity of that good and a larger quantity of substitutes for that good.
d. a smaller quantity of that good and a smaller quantity of substitutes for that good.
When a payroll tax is enacted, the wage received by workers
a. falls, and the wage paid by firms rises.
b. falls, and the wage paid by firms falls.
c. rises, and the wage paid by firms falls.
d. rises, and the wage paid by firms rises.
When a single person (or small group) has the ability to influence market prices, there
is
a. competition.
b. market power.
c. an externality.
d. a lack of property rights.
From 1960 to about 1975 in the United States, net capital outflow was
a. small but always positive.
b. small and sometimes negative and sometimes positive.
c. large and positive.
d. large but sometimes negative and sometimes positive.
Table 5-6
Supply is Demand is
Scenario A elastic elastic
Scenario B elastic inelastic
Scenario C inelastic elastic
Scenario D inelastic inelastic
Refer to Table 5-6. Which scenario describes the market for oil in the long run?
a. A
b. B
c. C
d. D
You and your college roommate eat three packages of Ramen noodles each week. After
graduation last month, both of you were hired at several times your college income.
Your roommate still enjoys Ramen noodles very much and buys even more, but you
plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking at
income elasticity of demand for Ramen noodles, yours would
a. be negative and your roommate’s would be positive.
b. be positive and your roommate’s would be negative.
c. be zero and your roommate’s would approach infinity.
d. approach infinity and your roommate’s would be zero.
One thing economists do to help them understand how the real world works is
a. make assumptions.
b. ignore the past.
c. try to capture every aspect of the real world in the models they construct.
d. All of the above are correct.
The x-coordinate of an ordered pair specifies the
a. diagonal location of the point.
b. vertical location of the point.
c. horizontal location of the point.
d. quadrant location in which the point is located.
Suppose that the demand for picture frames is highly inelastic, and the supply of picture
frames is highly elastic. A tax of $1 per frame levied on picture frames will decrease the
effective price received by sellers of picture frames by
a. less than $0.50.
b. $0.50.
c. between $0.50 and $1.
d. $1.
During a financial crisis the possibility of bank failures rose. An increase in the
likelihood of a bank failing shifts demand for its stock
a. right, so the price rises.
b. right, so the price falls.
c. left, so the price rises.
d. left, so the price falls.
Over the last few decades, Americans have chosen to cook less at home and eat more at
restaurants. This change in behavior, by itself, has
a. reduced measured GDP.
b. not affected measured GDP.
c. increased measured GDP by the value of the restaurant meals.
d. increased measured GDP by the value added by the restaurant’s preparation and
serving of the meals.
The price paid by buyers in a market will decrease if the government
a. imposes a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. increases a tax on the good sold in that market.
d. decreases a binding price floor in that market.
Which of the following transactions adds to U.S. GDP for 2010?
a. In 2010, Ashley sells a car that she bought in 2006 to William for $5,000.
b. An American management consultant works in Mexico during the summer of 2010
and earns the equivalent of $30,000 during that time.
c. When John and Jennifer were both single, they lived in separate apartments and each
paid $750 in rent. John and Jennifer got married in 2010 and they bought a previously
unoccupied house that, according to reliable estimates, could be rented for $1,600 per
month.
d. None of the above transactions adds to U.S. GDP for 2010.
Figure 2-14
Refer to Figure 2-14. The movement from point A to point B is a(n)
a. shift of the demand curve.
b. indication of a change in preferences for grapes.
c. movement along the demand curve.
d. indication of an increase in income.
If the price elasticity of supply is 0.2, and a price increase led to a 3% increase in
quantity supplied, then the price increase is about
a. 0.07%.
b. 0.60%.
c. 6%.
d. 15%.
A movement along a supply curve is called a change in supply while a shift of the
supply curve is called a change in quantity supplied.
One common example of a price floor is the minimum wage.
A tax on gasoline is an incentive that encourages people to drive smaller more
fuel-efficient cars.
For the U.S. economy, the most important reason for the downward slope of the
aggregate-demand curve is the interest-rate effect.
If monetary policy moves unemployment below its natural rate, both expected and
actual inflation will rise.
When you purchase school supplies at the book store using cash, you are using money
as a medium of exchange.
When a good is taxed, the tax revenue collected by the government equals the decrease
in the welfare of buyers and sellers caused by the tax.
The cross-price elasticity of demand for bacon and eggs likely would be negative
because bacon and eggs are complements for many people.
There are always some workers without jobs, even when the overall economy is doing
well.
Normal goods have negative income elasticities of demand, while inferior goods have
positive income elasticities of demand.
The quantity supplied of a good or service is the amount that sellers are willing and able
to sell at a particular price.
In the circular-flow diagram, one loop represents the flow of goods, services, and
factors of production, and the other loop represents the corresponding flow of dollars.
Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A
year later, Bob withdraws his $105. If deflation was 7 percent during the year the
money was deposited, then Bob’s purchasing power has increased by 12 percent.
Public saving is equal to national saving minus private saving.
Other things the same, an increase in domestic prices raises the real exchange rate.
The purpose of measuring the overall level of prices in the economy is to permit
comparison between dollar figures from different times.
There is no easy way for policymakers to reduce the economy’s natural rate of
unemployment.
Generally, if people begin to expect a company to have higher future profits, the price
of the company’s stock will begin to decrease.
Lenders sell bonds and borrowers buy them.