Efficiency wage models imply that workers are more productive when they are paid a
higher wage, as compared to when they are paid a lower wage.
a. True
b. False
In an economy with 100 million people, 70 million hold civilian jobs and 19 million are
not working but are looking for jobs. The unemployment rate is
a. 12.86%
b. 21.35%.
c. 9.19%.
d. 27.14%.
e. 2.87%
Which of the following statements is false?
a. A government with the power to tax can solve the free rider problem.
b. A government with the power to tax can set a tax greater than the MEC when trying
to change the market outcome into the efficient outcome.
c. A government with the power to subsidize can set a subsidy greater than the MEB
when trying to change the market outcome into the efficient outcome.
d. Government can remove individuals from a prisoner’s dilemma setting by changing
the payoffs in the payoff matrix.
e. none of the above
An “open market operation” is said to occur when the Fed
a. arranges for the merger of two banks.
b. changes the interest rate at which it lends reserves.
c. transfers reserves between banks.
d. buys or sells government securities.
Which of the following pairs of goods would be most likely to be substitutes?
a. pasta and pasta sauce
b. olive oil and vegetable oil
c. chips and salsa
d. tires and automobiles
e. all of the above
In the supply-and-demand diagram of the market for peanut butter, the equilibrium
point has moved down and to the right. What could have caused this?
a. a fall in the price of peanuts
b. a rise in the price of peanuts
c. a rise in income, assuming that peanut butter is an inferior good
d. a shift in preferences toward peanut butter
Exhibit 16-2
Suppose the economy starts at point B. Fed monetary policy shifts the AD curve to
AD1. If policy is correctly anticipated and people hold rational expectations, according
to new classical theory the economy in the short run will
a. move to A.
b. stay at B.
c. move to F.
d. move to E.
With an increase in the budget deficit, the open-economy outcome compared to the
closed-economy outcome features a ___________ in Real GDP.
a. larger increase
b. smaller increase
c. larger decrease
d. smaller decrease
M2 is comprised of
a. small-denomination time deposits + savings deposits + money market accounts.
b. small-denomination time deposits + credit cards + money market accounts + gold
deposits.
c. M1 + small-denomination time deposits + savings deposits + retail money market
mutual funds.
d. M1 + small denomination time deposits + credit cards + money market accounts.
Here are four positions that Farmer Gomez can be in:(1) bad weather for Gomez and
good weather for all other farmers; (2) bad weather for all farmers except Gomez (who
witnesses good weather); (3) bad weather for all farmers; (4) good weather for all
farmers. Assuming the demand for foodstuffs is inelastic, Farmer Gomez would
probably rank these four positions, from best for him to worst for him, the following
way:
a. 1,2,3,4.
b. 2,1,3,4.
c. 2,3,4,1.
d. 4,3,2,1.
e. 3,4,1,2.
If a production possibilities frontier (PPF) is concave outward, it follows that
a. opportunity costs are constant between two goods.
b. the opportunity cost (of producing the good on the horizontal axis) rises as more of
the good is produced.
c. the opportunity cost (of producing the good on the horizontal axis) falls as more of
the good is produced.
d. the opportunity cost (of producing the good on the horizontal axis) first rises and then
falls as more of the good is produced.
e. none of the above
There is a direct relationship between the opportunity cost of bad behavior in a public
venue and the use of bad behavior in that venue.
a. True
b. False
A simultaneous decrease in the demand and the supply of good X always leads to a
decrease in the price of good X.
a. True
b. False
The frictional unemployment rate is 2.5 percent, the structural unemployment rate is 3.1
percent, and the economy’s current unemployment rate is 5.6 percent. The economy is
in
a. an inflationary gap producing more than Natural Real GDP.
b. a recessionary gap producing more than Natural Real GDP.
c. an inflationary gap producing Natural Real GDP.
d. a recessionary gap producing less than Natural Real GDP.
e. long-run equilibrium.