In response to the recession of 2008-2009, the fiscal policy of the federal government
was
a. highly expansionary, and this Keynesian stimulus promoted a rapid recovery.
b. highly expansionary, but this was largely offset by the Fed’s restrictive monetary
policy
c. highly restrictive, but this was largely offset by the Fed’s highly expansionary
monetary policy
d. highly expansionary, but the unemployment rate nonetheless remained high during
2010 and 2011
Measured as a share of national income, government expenditures on income transfers
during the last 70 years have
a. grown rapidly.
b. declined substantially.
c. been virtually unchanged.
d. increased throughout much of that period, but they have declined substantially since
1980.
Last year your job at the university cafeteria paid you $9 an hour and the price of a
ten-minute long distance call to your girlfriend in California was $4. This year your
cafeteria job pays $9.90 per hour and the ten-minute phone call now costs $4.10. You
are clearly
a. worse off because of inflation.
b. worse off because the phone call is now relatively more expensive.
c. better off because your wage rate went up.
d. better off because the phone call now costs less work.
The government sometimes provides public goods because
a. private markets are incapable of producing public goods.
b. free-riders make it difficult for private markets to supply the efficient quantity.
c. markets are always better off with some government oversight.
d. external benefits will accrue to private producers.
If the demand for flashlights is highly inelastic, this indicates that
a. higher flashlight prices will increase the demand for flashlights.
b. the price elasticity of demand for flashlights is greater than 1.
c. the price elasticity of demand for flashlights equals 1.
d. the quantity of flashlights purchased by consumers is not very responsive to a change
in the price of flashlights.
In a dynamic economy under ideal conditions,
a. the unemployment rate should be near zero.
b. some unemployment would be present due to workers temporarily being out of work
while changing jobs.
c. unemployment would tend to move upward slightly as prices increased.
d. unemployment would tend to move slightly downward as unemployment
compensation benefits increased.
Which of the following factors would increase aggregate demand in the goods and
services market?
a. an decrease in stock prices
b. an increase in the real interest rate
c. a decrease in real incomes abroad
d. increased optimism on the part of consumers and businesses
Which of the following is most likely to be an implicit cost of production?
a. property taxes on a building owned by the firm
b. transportation costs paid to a trucking supplier
c. rental payments for a building utilized by the company and rented from another party
d. interest income foregone on funds invested in the firm by the owners
If Aisha were to get a $3,000 bonus from her employer, which of the following tax rates
would most accurately reflect the percent of this additional income that she would owe
in taxes?
a. her marginal tax rate
b. her average tax rate
c. her progressive tax coefficient
d. the rate of excess burden
Use the table to answer the following question.
If the market wage rate is $150 per worker, how many workers should be employed if
the firm wants to maximize profit?
a. 3
b. 4
c. 5
d. 6
The market demand for an item is
a. the sum of individual demands.
b. steeper for any given price change than the individual demand curves.
c. independent of the number of individuals in the market.
d. determined by dividing the quantity demanded by each individual by the number of
individuals in the market.
The economic principle that states that individuals or nations can gain by specializing in
the production of goods that they produce cheaply and exchanging for other desired
goods that they could only produce at a higher cost is
a. the law of absolute advantage.
b. the law of comparative advantage.
c. the law of production possibilities.
d. the exchange maximum principle.
In the long run, a firm might experience rising average total costs due to
a. economies of scale.
b. diseconomies of scale.
c. the law of supply.
d. the law of diminishing marginal returns.
Suppose that the quantity of chain saws sold increased from 200 to 400 when the price
fell from $225 to $175. Over this price range, the absolute value of the price elasticity
of demand for chain saws is
a. 0.25.
b. 0.375.
c. 1.0.
d. 2.67.
e. 4.0.
The time between implementation of a macro-policy change and when the change
exerts its primary influence is called the
a. impact lag.
b. recognition lag.
c. administrative lag.
d. tax reform lag.
When economists say the quantity demanded of a product has decreased, they mean the
a. demand curve has shifted to the left.
b. demand curve has shifted to the right.
c. price of the product has fallen, and consequently, consumers are buying more of it.
d. price of the product has risen, and consequently, consumers are buying less of it.
If the construction of a new elementary school would create $5 million worth of
benefits for citizens and cost $7 million to construct, then using the criterion of
economic efficiency, the school
a. should be built.
b. should not be built.
c. results in a substantial improvement to the welfare of society.
d. should be built if it passes by a majority vote.
During the last three decades, the real (adjusted for inflation) expenditures
a. on Medicare have grown rapidly, but the real expenditures on Medicaid have been
virtually constant.
b. on the Medicare program have been virtually constant but the real expenditures on
Medicaid have increased substantially.
c. on both Medicare and Medicaid have increased substantially.
d. on both Medicare and Medicaid have been virtually constant.
When natural monopoly is present in an industry, the per-unit costs of production will
be
a. lowest when there are a large number of producers in the industry.
b. lowest when a single firm generates the entire output of the industry.
c. lower for small firms than for large firms.
d. minimized at the output that maximizes the industry’s profitability.
Economists are generally opposed to tariffs or other restrictions on imported goods
because of the negative secondary effects they create that more than offset the benefits
to employment in the domestic industry. Which of the following could be considered a
secondary effect of these trade restrictions?
a. The price to consumers of the good in question will be higher as a result of the
restriction, meaning consumers will be worse off.
b. As consumers must spend more money to purchase the good, there will be
employment losses in other domestic industries as consumers cut back on their
spending on other things.
c. Because there is a link between a country’s imports and its exports, less imports from
other countries will result in lower domestic employment in export industries.
d. All of the above.
Which one of the following statements is correct?
a. Policymakers have good intentions and therefore their proposals will create good
outcomes.
b. Potential secondary effects do not need to be considered when deciding whether to
implement a new government program.
c. A good outcome is guaranteed from a government program if it is created with good
intentions.
d. Government programs can be implemented with good intentions but can lead to
undesirable outcomes because of unintended consequences.
Figure 4-20
Refer to Figure 4-20. The amount of the tax per unit is
a. $1.
b. $2.
c. $3.
d. $5.
Economic studies have generally found that professional sports players have salaries
that
a. greatly exceed their marginal contribution to a team’s revenue stream.
b. are approximately equal to their marginal revenue products.
c. are about one-half of what they contribute to a team’s profitability.
d. are less than one-tenth of their marginal revenue products.
Use the data below to answer the following question.
What is the unemployment rate of the economy?
a. 3.3 percent
b. 4 percent
c. 5 percent
d. 5.3 percent
If the public decides to hold less currency and more deposits in banks, bank reserves
a. decrease and the money supply eventually decreases.
b. decrease but the money supply does not change.
c. increase and the money supply eventually increases.
d. increase but the money supply does not change.
Use the figure to answer the following question(s).
Figure 9-7
If the market price in Figure 9-7 increases to $4, what should the firm do?
a. produce 5,000 per week
b. produce 7,500 per week
c. produce 10,000 per week
d. increase its price to $5
Controlling the money supply to achieve desired macroeconomic goals is called
a. monetary policy.
b. cyclical policy.
c. fiscal policy.
d. industrial policy.
Monetary and price instability will
a. make it easier for both individuals and businesses to plan wisely for the future.
b. generate uncertainty, and encourage investors and businesses to move their activities
to countries with a more stable monetary environment.
c. encourage businesses to invest and expand their future output.
d. encourage domestic citizens to increase their rate of saving.
The real rate of interest is
a. interest paid by commercial banks.
b. interest paid by the Fed.
c. equal to the money rate of interest plus the inflationary premium.
d. the money rate of interest adjusted for inflation.
Total government spending (federal, state, and local) sums to approximately
a. 10 percent of the U.S. economy.
b. 20 percent of the U.S. economy.
c. 40 percent of the U.S. economy.
d. 50 percent of the U.S. economy.
The policy response to the recession of 2008-2009 provided an experiment on the
potency of Keynesian fiscal policy. In what respect was this true?
a. The money supply increased rapidly and the short-term interest rates were pushed to
near zero just as the Keynesian model of fiscal policy recommends.
b. Government spending increased sharply and the budget deficits were large just as the
Keynesian model of fiscal policy recommends.
c. The money supply increased rapidly and the budget was shifted toward a surplus just
as the Keynesian model recommends.
d. The federal budget was balanced just as the Keynesian model indicates would be
prudent policy during a recession.