Figure 9-11
Refer to Figure 9-11. Producer surplus in this market after trade is
a. C.
b. C + B.
c. A + B + D.
d. B + C + D.
Which of the following can the Fed do to change the money supply?
a. change reserves or change the reserve ratio
b. change reserves but not change the reserve ratio
c. change the reserve ratio but not change the reserve ratio
d. neither change reserves nor change the reserve ratio
A worker in Equador can earn $3 per day making cotton cloth on a hand loom. A
worker in the United States can earn $70 per day making cotton cloth with a mechanical
loom. What accounts for the difference in wages?
a. U.S. textile workers belong to a union.
b. There is little demand for cotton cloth in Equador and great demand in the U.S.
c. Labor is more productive making cotton cloth with a mechanical loom than with a
hand loom.
d. Equador has a low-wage policy to make its textile industry more competitive in
world markets.
Figure 5-14
Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply
between points D and G?
a. 1.89
b. 1.26
c. 0.53
d. 0.34
You put money into an account and earn a real interest rate of 5 percent. Inflation is 2
percent, and your marginal tax rate is 40 percent. What is your after-tax real rate of
interest?
a. 1 percent
b. 1.8 percent
c. 2.2 percent
d. 4.2 percent
Which of the following both make a firm more likely to pay efficiency wages?
a. it is easy to judge the quality of applicants and after workers have worked for the
firm a while they tend not to look for other jobs
b. it is easy to judge the quality of applicants and after workers have worked for the
firm a while they tend to look for other jobs
c. it is difficult to judge the quality of applicants and after workers have worked for the
firm a while they tend not to look for other jobs
d. it is difficult to judge the quality of applicants and after workers have worked for the
firm a while they tend to look for other jobs
Suppose the economy is closed and consumption is 6,500, taxes are 1,500, and
government purchases are 2,000. If national saving amounts to 1,000, then what is
GDP?
a. 9,500
b. 10,000
c. 10,500
d. 11,000
Willingness to pay
a. measures the value that a buyer places on a good.
b. is the amount a seller actually receives for a good minus the minimum amount the
seller is willing to accept.
c. is the maximum amount a buyer is willing to pay minus the minimum amount a seller
is willing to accept.
d. is the amount a buyer is willing to pay for a good minus the amount the buyer
actually pays for it.
In the open-economy macroeconomic model, the supply of loanable funds comes from
a. the sum of domestic investment and net capital outflow.
b. net capital outflow alone.
c. domestic investment alone.
d. None of the above is correct.
If the number of Japanese yen a dollar buys falls, but neither country’s price level
changes, then the real exchange rate
a. depreciates which causes U.S. net exports to increase.
b. depreciates which causes U.S. net exports to decrease.
c. appreciates which causes U.S. net exports to increase.
d. appreciates, which causes U.S. net exports to decrease.
For an economist, the idea of making assumptions is regarded generally as a
a. bad idea, since doing so leads to the omission of important ideas and variables from
economic models.
b. bad idea, since doing so invariably leads to data-collection problems.
c. good idea, since doing so helps to simplify the complex world and make it easier to
understand.
d. good idea, since economic analysis without assumptions leads to complicated results
that the general public finds hard to understand.
An increase in the price of dairy products produced domestically will be reflected in
a. both the GDP deflator and the consumer price index.
b. neither the GDP deflator nor the consumer price index.
c. the GDP deflator but not in the consumer price index.
d. the consumer price index but not in the GDP deflator.
The Federal Reserve
a. requires little time to change policy and aggregate demand responds quickly.
b. requires little time to change policy but aggregate demand responds slowly.
c. usually requires a substantial time to change policy but aggregate demand responds
quickly.
d. usually requires a substantial time to change policy and aggregate demand responds
slowly.
Total surplus in a market is equal to
a. value to buyers – amount paid by buyers.
b. amount received by sellers – costs of sellers.
c. value to buyers – costs of sellers.
d. amount received by sellers – amount paid by buyers.
The country of Sylvania has a GDP of $900, investment of $200, government purchases
of $200, and net capital outflow of -$100. What is consumption?
a. $700
b. $600
c. $500
d. $300
From 2008-2009 the Federal Reserve created a very large increase in the money supply.
According to the short-run Phillips curve this policy should have
a. raised inflation and unemployment.
b. raised inflation and reduced unemployment.
c. reduced inflation and raised unemployment.
d. reduced inflation and unemployment.
Chad is willing to pay $5.00 to get his first cup of morning latté. He buys a cup from a
vendor selling latté for $3.75 per cup. Chad’s consumer surplus is
a. $8.75.
b. $5.00.
c. $3.75.
d. $1.25.
A newspaper article informs you that most businesses reduced production in the last
quarter but also sold from their inventories during the last quarter. Based on this
information GDP likely
a. increased.
b. decreased.
c. stayed the same.
d. may have increased, decreased, or stayed the same.
Which of the following events must cause equilibrium quantity to fall?
a. demand increases and supply decreases
b. demand and supply both decrease
c. demand decreases and supply increases
d. demand and supply both increase
Figure 7-17
Refer to Figure 7-17. When the price is P1, area A represents
a. total benefit.
b. producer surplus.
c. consumer surplus.
d. None of the above is correct.
In his famous article published in an economics journal in 1958, A.W. Phillips
a. used data for the United States to show a negative relationship between the rate of
change of the U.S. consumer price index and the U.S. unemployment rate.
b. used data for the United States to show a negative relationship between the rate of
change of wages in the U.S. and the U.S. unemployment rate.
c. used data for the United Kingdom to show a negative relationship between the rate of
change of the U.K. consumer price index and the U.K. unemployment rate.
d. used data for the United Kingdom to show a negative relationship between the rate of
change of wages in the U.K. and the U.K. unemployment rate.
Table 4-8
A country club usually only allows members to purchase tickets for its celebrity golf
tournament, but the club is considering allowing non-members to purchase tickets this
year. The demand and supply schedules are as follows:
Refer to Table 4-8. If both members and non-members are allowed to purchase tickets
to this year’s celebrity golf tournament, then what will be the equilibrium price?
a. $10
b. $15
c. $20
d. $25
The open-economy macroeconomic model includes
a. only the market for loanable funds.
b. only the market for foreign-currency exchange.
c. both the market for loanable funds and the market for foreign-currency exchange.
d. neither the market for loanable funds or the market for foreign-currency exchange.
Table 7-6
Refer to Table 7-6. You have two essentially identical extra tickets to the Midwest
Regional Sweet 16 game in the men’s NCAA basketball tournament. The table shows
the willingness to pay of the four potential buyers in the market for a ticket to the game.
You hold an auction to sell the two tickets. Who makes the winning bids, and what do
they offer to pay for the tickets?
a. Michael and Earvin; more than $350 but less than or equal to $400
b. Michael and Earvin; more than $400 but less than or equal to $500
c. Earvin and Larry; more than $300 but less than or equal to $350
d. Larry and Charles; less than $300
Scenario 5-3
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a
mysterious increase in bovine infertility decreases both the population of dairy cows
and the population of beef cattle by 50 percent.
Refer to Scenario 5-3. The equilibrium quantity will
a. increase in both the milk and beef markets.
b. increase in the milk market and decrease in the beef market.
c. decrease in the milk market and increase in the beef market.
d. decrease in both the milk and beef markets.
A decrease in quantity demanded
a. results in a movement downward and to the right along a demand curve.
b. results in a movement upward and to the left along a demand curve.
c. shifts the demand curve to the left.
d. shifts the demand curve to the right.
Figure 19-6
Refer to Figure 19-6. If the economy were originally in equilibrium at a and g and the
government removed import quotas on toys and textiles the economy would move to
a. b and e.
b. c and h.
c. d and i.
d. None of the above is correct.
According to the theory of liquidity preference, an increase in the price level causes the
a. interest rate and investment to rise.
b. interest rate and investment to fall.
c. interest rate to rise and investment to fall.
d. interest rate to fall and investment to rise.
Figure 8-10
Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity
sold in the market after the tax to Q2. With the tax, the consumer surplus is
a. (P0-P2) x Q2.
b. x (P0-P2) x Q2.
c. (P0-P5) x Q5.
d. x (P0-P5) x Q5.
If in some year nominal GDP was $18 billion and the GDP deflator was 120, what was
real GDP?
a. $6.7 billion
b. $15 billion
c. $21.6 billion
d. $38 billion
The inflation tax refers to
a. the revenue a government creates by printing money.
b. higher inflation which requires more frequent price changes.
c. the idea that, other things the same, an increase in the tax rate raises the inflation rate.
d. taxes being indexed for inflation.
Figure 4-21
Refer to Figure 4-21. Which of the following movements would illustrate the effect in
the market for chocolate chip cookies of an improved high-speed mixer that allows
bakers to produce cookies in less time?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D