National income minus personal taxes net of transfer payments equals disposable
income.
a. True
b. False
Governments of market-oriented economies never tamper with the price mechanism.
a. True
b. False
Graphs are valuable because they facilitate interpretation of data.
a. True
b. False
Which of the following countries has the most equal income distribution?
a. Sweden
b. Japan
c. United States
d. Netherlands
Figure 10-5
In Figure 10-5, points which lie on the firm’s short-run supply curve are
a. A, B, C.
b. C, D, H.
c. F, E, G.
d. A, C, H.
When the price level in the United States rises, then net exports should
a. rise and equilibrium real GDP should increase.
b. fall and equilibrium real GDP should increase.
c. fall and equilibrium real GDP should decrease.
d. rise and equilibrium real GDP should decrease.
During inflationary periods
a. the real value of money rises.
b. the real value of money remains constant.
c. the real value of money falls.
d. the purchasing power of money rises.
A monopolistic competitor can expect to earn an economic profit in the long run.
a. True
b. False
A decrease in price of a certain good most likely will lead to
a. an increase in quantity demanded and an increase in demand.
b. an increase in quantity demanded but no change in demand.
c. an increase in demand but no change in quantity demanded.
d. no change in demand and no change in quantity demanded.
Which of the following statements is correct?
a. Low prices may not always be in the public interest.
b. If prices on scarce resources are set “too low,” consumers will receive the “wrong”
signals and be encouraged to consume more, thus squandering resources.
c. Raising prices on scarce resources is generally politically unpopular.
d. All of the above are correct.
In general, as productivity levels decrease, the potential for productivity growth
a. decreases.
b. increases.
c. remains the same.
d. decreases if GDP decreases.
The existence of differences between the average earnings of men and women
a. proves the existence of economic discrimination.
b. may be partially due to factors other than economic discrimination.
c. proves that men on average invest more in their human capital than women do.
d. indicates that men are on average smarter than women.
Transfer payments are money received as grants from government.
a. True
b. False
Define the following terms and explain their importance to the study of
macroeconomics:
a. Phillips curve
b. rational expectations
c. indexing
d. stagflation
The public often overestimates the negative effects of inflation due to a focus on
nominal rates of interest.
a. True
b. False
The typical value for the MPC is less than 1.0.
a. True
b. False
Which of the following statements is equivalent to the law of diminishing marginal
returns?
a. A stitch in time saves nine.
b. You can’t make an omelet without breaking eggs.
c. Too many cooks spoil the broth.
d. If you can’t stand the heat, get out of the kitchen.
The most important indirect taxes in the United States are
a. federal and state income taxes.
b. inheritance taxes.
c. corporate profits taxes.
d. sales and property taxes.
The term opportunity cost refers to the
a. value of what is gained when a choice is made.
b. difference between the value of what is gained and the value of what is forgone when
a choice is made.
c. value of what is forgone when a choice is made.
d. direct costs involved in making a choice.
As an apparent result of airline deregulation,
a. many small communities have been left without airline service.
b. the wages and benefits of airline workers have been reduced.
c. air fares have risen more quickly than they probably would have under continued
regulation.
d. small commuter airlines have almost vanished.
When the government taxes and spends, each activity affects GDP in the same
proportion.
a. True
b. False
Retained earnings may be a better source of funds than issuing stocks or bonds because
management does not have to account for their effectiveness this way.
a. True
b. False
An optimal decision is one that is selected based on an analysis of
a. explicit costs but not implicit costs.
b. implicit costs but not explicit costs.
c. both explicit costs and implicit costs.
d. neither explicit costs nor implicit costs.
Price floors are only effective below the market equilibrium.
a. True
b. False
When there is an increase in demand,
a. the demand curve shifts toward the origin of the graph.
b. the demand curve twists clockwise.
c. the demand curve shifts away from the origin of the graph.
d. the demand curve twists counterclockwise.
e. a lower price has increased the amount of the good that consumers will buy.
A recession can best be defined as a period of time in which
a. total output of the economy falls.
b. total output of the economy rises very slowly.
c. total unemployment falls.
d. total international trade fails to rise.
e. Both a and c
Why are checking account balances included in the M1 definition of the money supply?
a. They are a traditional form of money that pre-dates paper money.
b. They are used to make so many payments.
c. They are backed by gold and silver.
d. They pay interest.
Figure 10-6
In Figure 10-6, the price at long-run equilibrium is
a. $5.
b. $10.
c. $20.
d. $35.
Perfectly elastic demand curves are vertical.
a. True
b. False
A currency appreciation reduces aggregate demand and increases aggregate supply.
a. True
b. False
The different points on a cost curve represent alternative production possibilities in the
same time period.
a. True
b. False
“Demand” is a series of quantities demanded, one for each person in the market.
a. True
b. False
Appropriate fiscal policy depends on the other major tool of governmental stabilization
policy:
a. trade policy.
b. tax policy.
c. monetary policy.
d. labor market policy.