For a country that is considering the adoption of either a tariff or an import quota on a
particular good, an important difference is that
a. an import quota has no effect on consumer surplus, while a tariff decreases consumer
surplus.
b. an import quota has no effect on producer surplus, while a tariff decreases producer
surplus.
c. a tariff raises total surplus, while an import quota does not.
d. a tariff raises revenue for that country’s government, while an import quota does not.
Suppose the real exchange rate is .80 pounds of bananas in Guatemala per pound of
bananas in the U.S. If a pound of bananas in the U.S. costs $0.50, and the exchange rate
is 8 Guatemalan Quetzals per dollar, what is the price of bananas in Guatemala?
a. 3.20 Quetzals per pound
b. 4.00 Quetzals per pound
c. 5.00 Quetzals per pound
d. 6.40 Quetzals per pound
Equilibrium price must increase when demand
a. increases and supply does not change, when demand does not change and supply
decreases, and when demand decreases and supply increases simultaneously.
b. increases and supply does not change, when demand does not change and supply
decreases, and when demand increases and supply decreases simultaneously.
c. decreases and supply does not change, when demand does not change and supply
increases, and when demand decreases and supply increases simultaneously.
d. decreases and supply does not change, when demand does not change and supply
increases, and when demand increases and supply decreases simultaneously.
Ashley bakes bread that she sells at the local farmer’s market. If she purchases a new
convection oven that reduces the costs of baking bread, the
a. supply curve for Ashley’s bread will increase.
b. supply curve for Ashley’s bread will decrease.
c. demand curve for Ashley’s bread will increase.
d. demand curve for Ashley’s bread will decrease.
The one variable that stands out as the most significant explanation of large variations
in living standards around the world is
a. productivity.
b. population.
c. preferences.
d. prices.
Spain is an importer of computer chips, taking the world price of $12 per chip as given.
Suppose Spain imposes a $5 tariff on chips. As a result,
a. Spanish consumers of chips and Spanish producers of chips both gain.
b. Spanish consumers of chips gain and Spanish producers of chips lose.
c. Spanish consumers of chips lose and Spanish producers of chips gain.
d. Spanish consumers of chips and Spanish producers of chips both lose.
The money multiplier equals
a. 1/R, where R represents the quantity of reserves in the economy.
b. 1/R, where R represents the reserve ratio for all banks in the economy.
c. 1/(1+R), where R represents the quantity of reserves in the economy.
d. 1/(1+R), where R represents the reserve ratio for all banks in the economy.
Country A’s long-run Phillips curve is farther to the right than country B’s. Country A
and country B are identical in all other ways. In particular, they have the same money
supply growth rates. In the long run as compared to country B country A will have
a. higher unemployment and higher inflation.
b. higher unemployment and the same rate of inflation.
c. lower unemployment and higher inflation.
d. None of the above is correct.
It is claimed that mutual funds have two advantages. The first is that mutual funds allow
people with small amounts of money to diversify. The second is that mutual funds
provide the skills of professional money managers who buy stocks they believe will be
the most profitable and thereby increase the return that mutual fund depositors earn on
their savings.
a. Economists strongly agree with both claims.
b. Economists are skeptical of both claims.
c. Economists are skeptical of the first claim, but strongly agree with the second.
d. Economists strongly agree with the first claim, but are skeptical of the second.
Over one time horizon or another, Fed policy decisions influence
a. inflation and employment.
b. inflation but not employment.
c. employment but not inflation.
d. neither inflation nor employment.
In a market economy, who or what determines who produces each good and how much
is produced?
a. the government
b. lawyers
c. lotteries
d. prices
Figure 8-6
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-6. When the tax is imposed in this market, buyers effectively pay
what amount of the $10 tax?
a. $0
b. $4
c. $6
d. $10
For the general population, a 10 percent increase in the price of cigarettes leads to a
a. 1 percent reduction in the quantity demanded of cigarettes.
b. 4 percent reduction in the quantity demanded of cigarettes.
c. 10 percent reduction in the quantity demanded of cigarettes.
d. 12 percent reduction in the quantity demanded of cigarettes.
When box office receipts are corrected for inflation, the most popular movie of all time
is
a. Star Wars.
b. Titanic.
c. Gone With the Wind.
d. The Sound of Music.
If real GDP doubles and the GDP deflator doubles, then nominal GDP
a. remains constant.
b. doubles.
c. triples.
d. quadruples.
From 1991-2000, U.S. net capital outflow as a percent of GDP became a
a. larger positive number.
b. smaller positive number.
c. larger negative number.
d. smaller negative number.
Janet bought flour and used it to bake bread she ate. ABC Bakery bought flour which it
used to bake bread that customers purchased. In which case will the flour be counted as
a final good?
a. Janet’s purchase and ABC Bakery’s purchase.
b. ABC Bakery’s purchase but not Janet’s purchase.
c. Janet’s purchase but not ABC Bakery’s purchase.
d. Neither Janet’s purchase nor ABC Bakery’s purchase.
Two years ago Lenny put some money into an account. He earned 6 percent interest on
this account and now he has about $1,000. About how much did Lenny deposit into his
account two years ago?
a. about $860
b. about $870
c. about $880
d. about $890
Table 11-12. Will’s expenditures on food for three consecutive years, along with other
values, are presented in the table below.
Refer to Table 11-12. Suppose the consumer price index is 15.5 percent higher in 2011
than in 2009. Then Will’s food expenditures for 2010 in 2011 dollars amount to
a. $6,352.
b. $6,380.
c. $6,426.
d. $6,651.
The GDP deflator is the ratio of
a. real GDP to nominal GDP multiplied by 100.
b. real GDP to the inflation rate multiplied by 100.
c. nominal GDP to real GDP multiplied by 100.
d. nominal GDP to the inflation rate multiplied by 100.
Table 3-7
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Hours Needed
to Make 1 Quantity Produced
in 2400 Hours
Refer to Table 3-7. Assume that Japan and Korea each has 2400 hours available.
Originally, each country divided its time equally between the production of cars and
airplanes. Now, each country spends all its time producing the good in which it has a
comparative advantage. As a result, the total output of cars increased by
a. 16.
b. 40.
c. 64.
d. 80.
Figure 3-2
Peru’s Production Possibilities Frontier
Refer to Figure 3-2. If the production possibilities frontier shown is for one month of
production, then which of the following combinations of emeralds and rubies could
Peru not produce in a given month?
a. 6 emeralds and 60 rubies
b. 4 emeralds and 120 rubies
c. 3 emeralds and 160 rubies
d. 1 emeralds and 210 rubies
Which of the following involves financial intermediation?
a. a bank makes a loan
b. a household buys stock issued by a corporation
c. a foreign government purchases U.S. government bonds
d. All of the above are correct.
The problems with using the consumer price index as a measure of the cost of living are
important because
a. even the appearance of high rates of inflation cause voters to become disenchanted.
b. politicians have manipulated the measurement problems to their advantage.
c. many government programs use the CPI to adjust for changes in the overall level of
prices.
d. if the price level is overstated, consumers will be taken advantage of by sellers of
consumer goods.
If inflation is lower than what was expected,
a. creditors receive a lower real interest rate than they had anticipated.
b. creditors pay a lower real interest rate than they had anticipated.
c. debtors receive a higher real interest rate than they had anticipated.
d. debtors pay a higher real interest rate than they had anticipated.
According to studies using international data, an increase in the saving rate
a. does not increase the growth rate of output.
b. increases the growth rate of output for a few years.
c. increases the growth rate of output for about a decade.
d. increases the growth rate of output for several decades.
The notion that our ability to conserve natural resources is growing more rapidly than
their supplies are dwindling is supported by the fact that
a. most economists do not regard the availability of natural resources as a determinant
of productivity.
b. the quantity of natural resources does not enter into any production function.
c. inflation-adjusted prices of most natural resources have been stable or fallen over
time.
d. inflation-adjusted prices of most natural resources have risen over time.
Suppose there is an earthquake that destroys several corn canneries. Which of the
following would not be a direct result of this event?
a. Sellers would not be able to produce and sell as much as before at each relevant
price.
b. The supply would decrease.
c. Buyers would not be willing to buy as much as before at each relevant price.
d. The equilibrium price would rise.
Producer surplus is the
a. area under the supply curve to the left of the amount sold.
b. amount a seller is paid minus the cost of production.
c. area between the supply and demand curves, above the equilibrium price.
d. cost to sellers of participating in a market.
Which of the following statements is correct?
a. NASDAQ is an important stock exchange in the United States.
b. The Standard & Poor’s 500 Index and the New York Stock Exchange are two
examples of stock indexes.
c. The most significant influence on the demand for a corporation’s stock is the number
of shares of the stock that the corporation has issued.
d. All of the above are correct.
Which of the following is not correct?
a. Economists use some familiar words in specialized ways.
b. Economics has its own language and its own way of thinking, but few other fields of
study do.
c. Supply, demand, elasticity, comparative advantage, consumer surplus, and
deadweight loss are all terms that are part of the economist’s language.
d. The value of the economist’s language lies in its ability to provide you with a new
and useful way of thinking about the world in which you live.
An increase in government spending initially and primarily shifts
a. aggregate demand to the right.
b. aggregate demand to the left.
c. aggregate supply to the right.
d. neither aggregate demand nor aggregate supply in either direction.