Figure 29-1
Currency speculators believe that the value of the euro will decrease relative to the
dollar. Assuming all else remains constant, how would this be represented?
A) Supply would decrease, demand would decrease and the economy moves from B to
C to D.
B) Supply would increase, demand would decrease and the economy moves from C to
B to A.
C) Supply would decrease, demand would increase and the economy moves from A to
D to C.
D) Supply would increase, demand would increase and the economy moves from D to
A to B.
If the consumption function is defined as C = 7,250 + 0.8Y, what is the marginal
propensity to save?
A) 0.2
B) 0.8
C) 5.8
D) 9.1
Of the $840 billion American Recovery and Reinvestment Act stimulus package which
was enacted in 2009, the largest spending increase occurred in which category?
A) energy and the environment
B) military, veterans, and homeland security
C) health care, social services, and education
D) transportation and housing
The people firms hire to attempt to convince state legislators and members of Congress
to pass laws that are favorable to the economic interests of the firms are called
A) economic advisors.
B) legislative assistants.
C) government bureaucrats.
D) lobbyists.
Assume that production from an electric utility caused acid rain and that the
government imposed a tax on the utility equal to the cost of the acid rain. This is an
example of
A) a transaction cost.
B) a Pigovian tax.
C) a Pigovian subsidy.
D) the Coase Theorem.
When someone takes out a mortgage loan to buy a house, the mortgage lender can take
possession of the house and sell it if the borrower defaults by failing to make payments
on the loan because the house is being pledged as ________ for the loan.
A) goodwill
B) a liability
C) insurance
D) collateral
In the 1973 movie Save the Tiger, Jack Lemmon plays Harry Stoner, the CEO of a
clothing manufacturer whose business has fallen on hard times. In one of the key scenes
of the movie, Stoner tries to convince his partner that they should hire someone to burn
one of their buildings in order to collect on their insurance policy. Harry Stoner’s
actions are an example of
A) adverse selection.
B) moral hazard.
C) self-interest.
D) asymmetric information.
All of the following represent differences between stocks and bonds except
A) a stock can possibly pay dividends forever, but bonds have a fixed number of
payments.
B) differences of opinion about a stock’s future may vary considerably but there is less
difference about a bond’s future.
C) the future growth of a stock is more uncertain than the payments of a bond.
D) bonds represent partial ownership in a firm but stocks do not.
The base period for CPI calculations is generally 1982-84. In 2005, 50% of households
accessed the Internet through a broadband connection that would not have existed in the
1980s. This potential for bias in the CPI is referred to as ________ bias and results in
________.
A) outlet; the CPI underestimating the true change in the cost of living
B) new product; the CPI overestimating the true change in the cost of living
C) outlet; the CPI overestimating the true change in the cost of living
D) net product; the CPI underestimating the true change in the cost of living
The sum of the marginal propensity to consume and the marginal propensity to save is
always equal to
A) zero.
B) 0.5.
C) 1.
D) 100.
Figure 17-1
Suppose that the economy is currently at point A on the short-run Phillips curve in the
figure above, and the unemployment rate at A is the natural rate. If the economy was to
move to point B, which of the following must be true?
A) The economy is producing a level of GDP equal to potential GDP.
B) Aggregate demand must have increased.
C) Equilibrium GDP at point B must be below potential GDP.
D) The Fed conducted expansionary policy to cause the move.
E) The Fed purchased treasury bills to cause the move.
What is an inside director?
A) a movie director who also appears in the movie
B) a member of a corporate board of directors that is also a manager of the business
C) the CEO that is selected by the corporation’s board of directors
D) a board of director chair who has been in the job for at least three years
In the United States in 2012, the percentage of people who received health insurance
through a government program was about
A) 10%.
B) 16%.
C) 36%.
D) 64%.
On average, jobs at small firms pay ________ wages than jobs at large firms and are
________ likely to offer fringe benefits such as health insurance and retirement
accounts.
A) higher; more
B) lower; more
C) higher; less
D) lower; less
Table 18-9
Table 18-9 shows the income tax brackets and tax rates for single taxpayers in
Monrovia.
Sylvia is a single taxpayer with an income of $70,000. What is her marginal tax rate and
what is her average tax rate?
A) marginal tax rate = 30%; average tax rate = 30%
B) marginal tax rate = 8%; average tax rate = 19.3%
C) marginal tax rate = 30%; average tax rate = 22.5%
D) marginal tax rate = 20%; average tax rate = 30%
Table 1-2
Julius runs a small tailor shop in the city of Bloomfield. He is debating whether he
should extend his hours of operation. Julius figures that his sales revenue will depend
on the number of hours the tailor shop is open as shown in the table above. He would
have to hire a worker for those hours at a wage rate of $18 per hour. Using marginal
analysis, determine how many hours should Julius extend his shop’s hours of
operations?
A) 2 hours
B) 3 hours
C) 4 hours
D) 5 hours
E) 6 hours
Sam Lewis owns a firm in New York City’s garment district. If Sam keeps adding
workers to use the same number of sewing machines, eventually the workplace will
become so crowded that workers will get in each other’s way. At this point
A) the marginal product of labor in Sam’s business would be negative and his total
output would decrease.
B) Sam should encourage his workers to share their sewing machines.
C) Sam’s business will be in violation of safety rules that have been established by the
New York City government.
D) Sam should begin using a division of labor in his business.
Table 4-11
The equations above describe the demand and supply for Chef Ernie’s Sushi-on-a-Stick.
The equilibrium price and quantity for Chef Ernie’s sushi are $60 and 20 thousand units.
What is the value of consumer surplus?
A) $100 thousand
B) $200 thousand
C) $600 thousand
D) $800 thousand
China’s economy has grown tremendously from 1979 to the present. The reason for this
growth is
A) the introduction of the centrally planned economy in 1978.
B) the introduction of market-oriented reforms in 1978.
C) the introduction of the social networking site, Facebook.
D) the total lack of governmental intervention in the economy.
Assume that the price for lawn care has fallen and sales of lawn care services have also
fallen. One can conclude that
A) the law of supply has been violated.
B) the number of lawn care service companies has increased.
C) the demand for lawn care service has decreased.
D) lawn care services are deliberately charging low prices because they want to
discourage people from maintaining their own lawns.