Under the Bretton Woods exchange rate system, ________ could sell their dollars to the
American government in exchange for gold.
A) foreign central banks
B) American citizens
C) foreign citizens
D) all of the above
Table 2-5
Table 2-5 shows the number of labor hours required to produce a cell phone and a board
foot of lumber in Estonia and Finland.
Refer to Table 2-5. Does either Estonia or Finland have an absolute advantage and if so,
in what product?
A) Finland has an absolute advantage in lumber.
B) Estonia has an absolute advantage in lumber.
C) Finland has an absolute advantage in both products.
D) Estonia has an absolute advantage in cell phones.
The short-run Phillips curve will not shift unless there is
A) an increase in the unemployment rate.
B) an increase in inflation that is unanticipated.
C) a decrease in inflation that is unanticipated.
D) a change in inflation expectations.
Consumer spending ________ and investment spending ________.
A) is very volatile and subject to fluctuations; follows a smooth trend
B) follows a smooth trend; is more volatile and subject to fluctuations
C) follows a smooth trend; is the most stable component of aggregate expenditure
D) is very erratic; is also erratic, but less erratic than consumer spending
Of the following high-income countries, which has the highest male life expectancy at
age 65?
A) Canada
B) Japan
C) the United Kingdom
D) the United States
Compare the effect on the price level and real GDP of a decrease in tax rates assuming a
supply-side effect versus no supply-side effect. Compared to no supply-side effect,
including a supply-side effect for the decrease in tax rates will cause the price level to
increase ________ and real GDP to increase ________.
A) less; less
B) less; more
C) more; less
D) more; more
Figure 13-1
Refer to Figure 13-1. Ceteris paribus, a decrease in the value of the domestic currency
relative to foreign currencies would be represented by a movement from
A) AD1 to AD2.
B) AD2 to AD1.
C) point A to point B.
D) point B to point A.
Table 2-7
Table 2-7 shows the output per week of two people, Minnie and Mickey. They can
either devote their time to making hats or making umbrellas.
Refer to Table 2-7. What is Minnie’s opportunity cost of making a hat?
A) 1/5 of an umbrella
B) 1/4 of an umbrella
C) 4 umbrellas
D) 10 umbrellas
If a hospital knows that an insurance company will pay for most of a patient’s bill, the
hospital has more of an incentive to require additional medical procedures and tests,
even if the patient may not require them. This is an example of
A) moral hazard.
B) the principle-agent problem.
C) asymmetric information.
D) adverse selection.
A decrease in the real interest rate will
A) increase consumption and reduce investment.
B) increase saving and investment.
C) decrease investment and government spending.
D) increase consumption and investment.
Laura’s Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit
costs. The restaurant earns $1.3 million in revenues. Based on this information, what is
accounting profit for Laura’s Pizza Place?
A) $200,000
B) $400,000
C) $500,000
D) $900,000
Figure 16-2
Refer to Figure 16-2. In the graph above, if the economy is at point A, an appropriate
fiscal policy by the Congress and the president would be to
A) lower the discount rate of interest.
B) execute an open market sale of government securities.
C) increase government transfer payments.
D) increase marginal income tax rates.
The factors of production include
A) wages.
B) capital.
C) investment.
D) transfers.
Which of the following are primarily macroeconomic topics and which are primarily
microeconomic topics?
a. college tuition rates
b. farm subsidies
c. national income
d. automobile prices
e. air traffic congestion
f. economic recession
Suppose a bank has $100 million in checking account deposits with no excess reserves
and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required
reserve ratio to 8 percent, then the bank can make a maximum loan of
A) $0.
B) $2 million.
C) $8 million.
D) $10 million.
Figure 4-9
Figure 4-9 shows the market for cigarettes. The government plans to impose a unit tax
in this market.
Refer to Figure 4-9. How much of the tax is paid by buyers?
A) $8
B) $5
C) $4
D) $3
George Gnat subscribes to a monthly pest control service for his home. Last week the
owner of the service informed George that he will have to raise his monthly service fee
because of increases in the price of gasoline used by his workers on their service trips.
How is the market for pest control services affected by this?
A) There is an increase in the supply of pest control services.
B) There is a decrease in the demand for pest control services.
C) There is a decrease in the quantity supplied of pest control services.
D) There is a decrease in the supply of pest control services.
A lumberjack loses his job because timber cutting restrictions were imposed by the EPA
to protect the spotted owl habitat. This lumberjack would be
A) frictionally unemployed.
B) cyclically unemployed.
C) structurally unemployed.
D) seasonally unemployed.
Which of the following statements is true about a simple circular flow model?
A) Producers are neither buyers nor sellers in the product market.
B) Households are neither buyers nor sellers in the input market.
C) Producers are buyers in the factors market.
D) Households are sellers in the product market.