A voluntary export restraint is an agreement negotiated by two countries that places
________ that can be imported by one country from another country.
A) a tax on goods
B) a minimum quantity of a good
C) quality standards on goods
D) a numerical limit on the quantity of a good
Even when the demand for one good is high, the price of the good is also affected by
supply. The textbook illustrates this by comparing the price of two items that were
auctioned on the same day. Which of the following describes the results of the auction?
A) A letter written by Abraham Lincoln sold for a higher price than a letter written by
John Wilkes Booth.
B) A letter written by Abraham Lincoln was sold for a higher price than a letter written
by Adam Smith.
C) A letter written by John Wilkes Booth sold for a higher price than a letter written by
Lee Harvey Oswald.
D) A letter written by John Wilkes Booth sold for a higher price than a letter written by
Abraham Lincoln.
If a person takes $100 from his/her piggy bank at home and puts it in his/her savings
account, then M1 will ________ and M2 will ________.
A) increase; increase
B) not change; increase
C) decrease; increase
D) decrease; not change
E) increase; decrease
Figure 15-15
Refer to Figure 15-15. In the figure above, suppose the economy in Year 1 is at point A
and expected in Year 2 to be at point B. Which of the following policies could the
Federal Reserve use to move the economy to point C?
A) decrease income taxes
B) increase the required-reserve ratio
C) buy Treasury bills
D) sell Treasury bills
Except for recessions, the duration of unemployment for the typical person lasts
A) less than six months.
B) six to nine months.
C) over nine months.
D) over one year.
E) over five years.
Of the $840 billion American Recovery and Reinvestment Act stimulus package which
was enacted in 2009, approximately ________ took the form of tax cuts and ________
took the form of increases in government expenditures.
A) one-half; one-half
B) three-fourths; one-fourth
C) one-tenth; nine-tenths
D) one-third; two-thirds
If interest rates in the United States fall,
A) the value of the dollar will fall as foreign investors decrease their holdings of U.S.
investments.
B) the value of the dollar will rise as foreign investors increase their holdings of U.S.
investments.
C) the value of the dollar will fall as foreign investors increase their holdings of U.S.
investments.
D) the value of the dollar will rise as foreign investors decrease their holdings of U.S.
investments.
Figure 17-7
Refer to Figure 17-7. Consider the Phillips curves depicted in the graph above. The Fed
announces its intention to decrease inflation from 10 percent to 5 percent per year, and
it succeeds. If the assumptions of the rational expectations school hold true, and the
Fed’s announcement is credible, the rate of unemployment will be ________ in the
short run.
A) less than 5.5 percent
B) 5.5 percent
C) between 5.5 and 7.5 percent
D) 7.5 percent
Disease, poor nutrition, and substandard health care in developing nations can reduce
growth in an economy by
A) reducing physical capital.
B) reducing human capital.
C) increasing labor productivity.
D) increasing technological change.
Assume there is a surplus in the market for hybrid automobiles. Which of the following
statements correctly describes this situation?
A) The supply of hybrid automobiles is greater than the demand for hybrid automobiles.
B) Some consumers will be unable to obtain hybrid automobiles at the market price and
will have an incentive to offer to buy the product at a higher price.
C) The price of hybrid automobiles will fall in response to the surplus; as the price falls
the quantity demanded will increase and the quantity supplied will decrease.
D) the surplus will cause an increase in the equilibrium price of hybrid automobiles.
To combat inflation, Congress and the president should
A) decrease government spending.
B) decrease taxes.
C) raise interest rates.
D) increase transfer payments.
Article Summary
For only the second time in the previous 10 quarters, China’s GDP grew at a faster rate
than from the same period a year earlier. From July through September 2013, China’s
GDP increased 7.8 percent, but a decline in exports, growing inflation, and slowing
growth in factory production all suggest that growth will be slowing down. China has
recently been attempting to restructure its economy by moving toward increasing
consumption and relying less on exports and investments as a means to achieving more
sustainable economic growth. In the first nine months of 2013, 46 percent of growth
was due to consumption, 56 percent was due to investment, and exports accounted for
negative 1.7 percent.
Source: Aileen Wang and Kevin Yao, “China’s third-quarter GDP growth fastest this
year, but outlook dim,” Reuters, October 18, 2013.
Refer to the Article Summary. In China, ________ is (are) the main driver of economic
growth, while in the United States, ________ is the main driver of economic growth.
A) consumption; investment
B) net exports; government purchases
C) investment; consumption
D) consumption; net exports
In 2011, the dividend yield on Microsoft (MSFT) stock rose from 1.97% to 3.10%.
Which of the following would have generated that result?
A) The closing price of Microsoft stock rose.
B) Microsoft announced an increase in the dividend it would pay per share.
C) The price-earnings ratio rose.
D) Microsoft issued bonds with a coupon rate equal to 3.10%.
The difference between GDP and net taxes is
A) personal income.
B) actual investment spending.
C) disposable income.
D) unplanned investment spending.
If Finland has an absolute advantage in the production of two goods compared to
Latvia, Finland can still benefit from trade with Latvia.
The basic economic problem of scarcity
A) has always existed and will continue to exist.
B) will eventually disappear as technology continues to advance.
C) is a problem only in developing economies.
D) does not apply to the wealthy in society.
Figure 16-1
Refer to Figure 16-1. Suppose the economy is in short-run equilibrium above potential
GDP and wages and prices are rising. If contractionary policy is used to move the
economy back to long run equilibrium, this would be depicted as a movement from
________ using the static AD–AS model in the figure above.
A) D to C
B) C to B
C) A to E
D) B to A
E) E to A