Which of the following would generate positive externalities?
a. Flu vaccinations.
b. Farmers’ use of pesticides.
c. Cigarette smoking in elevators.
d. Litter left at the beach.
e. An unkept front yard.
Althea, a brilliant new Ph.D. in economics, has turned down many job offers because
she hopes eventually to teach at one of the top 10 universities in her field. The type of
unemployment she is experiencing is:
a. frictional.
b. structural.
c. seasonal.
d. cyclical.
e. underemployment.
A decrease in consumer income decreases the demand for compact discs. As a result of
the change to a new equilibrium, there is a(n):
a. leftward shift of the supply curve.
b. rightward shift of the supply curve.
c. upward movement along the supply curve.
d. downward movement along the supply curve.
Consumer surplus is the:
a. amount by which the quantity supplied of a good exceeds the quantity demanded of a
good.
b. measure of consumes’ willingness to buy a good plus the price of the good.
c. measure of how much consumers value a good.
d. amount consumers are willing to pay for a good minus the amount the consumers
actually pays for it.
GDP includes:
a. the negative attributes from erosion and deforested landscape.
b. all quality improvements resulting from higher quality goods replacing inferior
goods.
c. the cleaning-up expenses associated with pollution.
d. the value of leisure time.
e. the illegal activities related to the underground economy.
Within the framework of the aggregate expenditures model, what will happen if an
economy is operating at a real GDP greater than full-employment real GDP?
a. An inflationary gap exists.
b. Real GDP will fall.
c. The inventories of firms will rise.
d. Firms will cut back on their current rate of output.
The federal funds market is the market where:
a. the federal government raises funds to cover its budget deficit.
b. the Federal Reserve System makes loans to commercial banks.
c. commercial banks with excess reserves make loans to commercial banks seeking
reserves.
d. commercial banks make loans to the Federal Reserve.
Farmers can produce wheat and/or rice. What will happen in the wheat market if there
is an increase in the price of rice?
a. Wheat supply will increase.
b. Wheat supply will decrease.
c. Wheat demand will increase.
d. Wheat demand will decrease.
Exhibit 1A-7 Straight line relationship
What is the slope of the line shown in Exhibit 1A-7?
a. 1/20.
b. 1/10.
c. 1/5.
d. 1/2.
Exhibit 16A-2 Macro AD/AS Models
In Panel (b) of
Exhibit 16A-2, the economy is initially in short-run equilibrium at real GDP level Y1
and price level P2. Classical theory argues that:
a. SRAS will shift to leftward and establish full employment at P3Y without
government intervention.
b. higher wages will result in a leftward shift of SRAS.
c. long-run equilibrium will be established at Y and P3.
d. all of these will take place.
Which of the following characterizes the Monetarist viewpoint?
a. They believe that money can never affect investment.
b. They believe that monetary policy is transmitted to the economy only through its
effects on the interest rate and investment.
c. Both a and b are part of the debate.
d. Neither a nor b are part of the debate.
Exhibit 10-2 Aggregate supply and demand curves
A shift in the aggregate supply curve in Exhibit 10-2 from AS1 to AS2 would be caused
by a(n):
a. decrease in input prices.
b. increase in input prices.
c. increase in real GDP.
d. decrease in real output.
How would a decrease in consumer income affect the market for new automobiles?
a. Demand would decrease, leading to an increase in price and a reduction in quantity
sold.
b. Demand would decrease, leading to a reduction in price and a reduction in quantity
sold.
c. Demand would increase, leading to an increase in price and an increase in quantity
sold.
d. Demand would increase, leading to a reduction in price and an increase in quantity
sold.
If the price of hot dogs increases, what will happen in the market for potato chips, a
complementary good?
a. Demand will increase.
b. Quantity demanded will increase.
c. Demand will decrease.
d. Quantity demanded will decrease.
e. Supply will decrease.
A change in which of the following would shift the aggregate demand curve?
a. Consumption (C)
b. Investment (I)
c. Government spending (G)
d. Net Exports (NX)
e. All of these
Rational expectations theory rejects the concept that only unanticipated or surprise
policies can influence inflation.
A market system does not operate based on self-interest.
Distinguish a direct and an inverse or negative relationship. Provide an example of each
type of relationship.
According to the infant industry argument, a new domestic industry needs protection
because it has higher costs than established foreign competitors.
The consumption function has a negative slope.