Holding all other factors constant and using the midpoint method, if a calculator
manufacturer increases production from 40 to 50 units when price increases by 20
percent, then supply is
a. inelastic, since the price elasticity of supply is equal to .91.
b. inelastic, since the price elasticity of supply is equal to 1.1.
c. elastic, since the price elasticity of supply is equal to 0.91.
d. elastic, since the price elasticity of supply is equal to 1.1.
According to a 2009 article in The Economist, the multiplier effect and crowding-out
effect would exactly offset each other when the economy is
a. operating at full capacity.
b. in recession.
c. experiencing zero inflation.
d. experiencing high rates of inflation.
Get Smart University is contemplating an increase in tuition to enhance revenue. If
GSU feels that raising tuition would enhance revenue, it is
a. ignoring the law of demand.
b. assuming that the demand for university education is elastic.
c. assuming that the demand for university education is inelastic.
d. assuming that the supply of university education is elastic.
Which famous person referred to compounding as “the greatest mathematical discovery
of all time?”
a. Abraham Lincoln
b. Thomas Edison
c. Benjamin Franklin
d. Albert Einstein
When the yen gets ‘stronger” relative to the dollar,
a. the U.S. trade deficit with Japan will rise.
b. the U.S. trade deficit with Japan will fall.
c. the U.S. trade deficit with Japan will be unchanged.
d. None of the above necessarily happens.
Which particular interest rate(s) do we attempt to explain using the theory of liquidity
preference?
a. only the nominal interest rate
b. both the nominal interest rate and the real interest rate
c. only the interest rate on long-term bonds
d. only the interest rate on short-term government bonds
In 2009, based on concepts similar to those used to estimate U.S. employment figures,
the Swedish adult non-institutionalized population was 7.568 million, the labor force
was 4.888 million, and the number of people employed was 4.486 million. According to
these numbers, the Swedish labor-force participation rate and unemployment rate were
about
a. 64.6% and 8.2%.
b. 64.6% and 5.3%.
c. 59.3% and 8.2%.
d. 59.3% and 5.3%.
Fundamental analysis determines the value of a stock based on
a. dividends.
b. the expected final sale price.
c. the ability of the corporation to earn profits.
d. All of the above are correct.
Scenario 5-2
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both
goods are considered to be normal goods by a majority of consumers. Suppose that a
large income tax increase decreases the demand for both goods by 10%.
Refer to Scenario 5-2. The change in equilibrium quantity will be
a. greater in the aged cheddar cheese market than in the bread market.
b. greater in the bread market than in the aged cheddar cheese market.
c. the same in the aged cheddar cheese and bread markets.
d. Any of the above could be correct.
A key determinant of the price elasticity of supply is the
a. number of close substitutes for the good in question.
b. extent to which buyers alter their quantities demanded in response to changes in
prices.
c. length of the time period.
d. extent to which buyers alter their quantities demanded in response to changes in their
incomes.
As rationing mechanisms, prices
a. and long lines are efficient.
b. are efficient, but long lines are inefficient.
c. are inefficient, but long lines are efficient.
d. and long lines are inefficient.
The average income in a rich country, such as the United States or Japan, is more than
a. 3 times, but less than 5 times, the average income in a poor country, such as
Indonesia or Nigeria.
b. 5 times, but less than 10 times, the average income in a poor country, such as
Indonesia or Nigeria.
c. 10 times, but less than 20 times, the average income in a poor country, such as
Indonesia or Nigeria.
d. more than 20 times the average income in a poor country, such as Indonesia or
Nigeria.
Macroeconomists study
a. the decisions of individual households and firms.
b. the interaction between households and firms.
c. economy-wide phenomena.
d. regulations imposed on firms and unions.
Suppose that telemarketers are not unionized. If they unionize, then the supply of labor
in other sectors of the economy will
a. decrease, raising wages in industries that are not unionized.
b. decrease, reducing wages in industries that are not unionized.
c. increase, raising wages in industries that are not unionized.
d. increase, reducing wages in industries that are not unionized.
Figure 19-3
Refer to this diagram to answer the questions below.
Refer to Figure 19-3. National saving is represented by the
a. demand curve in panel a.
b. demand curve in panel c.
c. supply curve in panel a.
d. supply curve in panel c.
Velocity is
a. Y/(M x P) and increases if dollars are exchanged less frequently.
b. Y/(M x P) and increases if dollars are exchanged more frequently.
c. (P x Y)/M and increases if dollars are exchanged less frequently.
d. (P x Y)/M and increases if dollars are exchanged more frequently.
Figure 7-15
Refer to Figure 7-15. If the government imposes a price floor of $60 in this market,
then total surplus will be
a. higher by $57.50 than it would be without the price floor.
b. lower by $20.00 than it would be without the price floor.
c. lower by $45.00 than it would be without the price floor.
d. lower by $62.50 than it would be without the price floor.
Figure 22-6
Use the two graphs in the diagram to answer the following questions.
Refer to Figure 22-6. Starting from C and 3, in the short run an unexpected increase in
money supply growth moves the economy to
a. A and 1.
b. B and 2.
c. back to C and 3.
d. D and 4.
Table 7-3
The only four consumers in a market have the following willingness to pay for a good:
Refer to Table 7-3. If the market price for the good is $20, who will purchase the
good?
a. Ming-la only
b. Carlos and Quilana only
c. Quilana and Wilbur only
d. Quilana, Wilbur, and Ming-la only
The outer loop of the circular-flow diagram represents the flows of dollars in the
economy. Which of the following does not appear on the outer loop?
a. Wages
b. Income
c. Capital
d. Rent
Proponents of rational expectations theory argued that, in the most extreme case, if
policymakers are credibly committed to reducing inflation and rational people
understand that commitment and quickly lower their inflation expectations, the sacrifice
ratio could be as small as
a. 0.
b. 1.
c. 4.
d. 5.
Figure 5-10
Refer to Figure 5-10. When the price is $30, total revenue is
a. $3,000.
b. $5,000.
c. $7,000.
d. $9,000.
Assume that a 4 percent increase in income results in a 2 percent increase in the
quantity demanded of a good. The income elasticity of demand for the good is
a. negative, and the good is an inferior good.
b. negative, and the good is a normal good.
c. positive, and the good is a normal good.
d. positive, and the good is an inferior good.
The sticky-wage theory of the short-run aggregate supply curve says that when the price
level rises more than expected,
a. production is more profitable and employment rises.
b. production is more profitable and employment falls.
c. production is less profitable and employment rises.
d. production is less profitable and employment falls.
Countries that grew the fastest over the last 100 or so years had growth rates of real
income per person of about
a. 0.5 percent per year.
b. 1.5 percent per year.
c. 2.0 percent per year.
d. 2.5 percent per year.
Which of the programs below would transfer wealth from the young to the old?
a. Taxes are raised to provide better education.
b. Taxes are raised to improve government infrastructure such as roads and bridges.
c. Taxes are raised to provide more generous Social Security benefits.
d. None of the above transfer wealth form the young to the old.
Suppose the government imposes a 25-cent tax on the buyers of incandescent light
bulbs. Which of the following is not correct? The tax would
a. shift the demand curve downward by 25 cents.
b. lower the equilibrium price by 25 cents.
c. reduce the equilibrium quantity.
d. discourage market activity.
In the U.S., the average adult holds about $3,700 in
a. currency.
b. wealth.
c. M1.
d. M2.
If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it
receives a new deposit of $400, it
a. must increase required reserves by $20.
b. will initially see reserves increase by $400.
c. will be able to use this deposit to make new loans amounting to $380.
d. All of the above are correct.
Economists compute the price elasticity of demand as the
a. percentage change in price divided by the percentage change in quantity demanded.
b. change in quantity demanded divided by the change in the price.
c. percentage change in quantity demanded divided by the percentage change in price.
d. percentage change in quantity demanded divided by the percentage change in
income.
A manufacturer produces 1,000 units, regardless of the market price. For this firm, the
price elasticity of supply is
a. infinity.
b. zero.
c. one.
d. negative one.
The principle that trade can make everyone better off applies to
a. individuals.
b. families.
c. countries.
d. All of the above
Table 10-1
The table below contains data for country A for the year 2010.
Refer to Table 10-1. What were country A’s net exports in 2010?
a. -$32
b. $32
c. $88
d. $120
The term loanable funds refers to all income that is not used for consumption or
government expenditures.
A person’s subjective measure of well-being or satisfaction is called aversion.
In the months of November and December, people in the United States hold a larger
part of their money in the form of currency because they intend to shop and travel for
the holidays. As a result, other things the same, the money supply increases.
Within the U.S., teenagers have higher rates of unemployment than older workers.
Government-run employment agencies and public training programs both seek to
reduce frictional unemployment.
A market economy cannot produce a socially desirable outcome because individuals are
motivated by their own selfish interests.
When a country abandons no-trade policies in favor of free-trade policies and becomes
an importer of steel, then the domestic price of steel will increase as a result.
If a firm is facing inelastic demand, then the firm should decrease price to increase
revenue.
The United States has never had deflation.
For a country such as the U.S., the wealth effect exerts a very important influence on
the slope of the aggregate-demand curve, since U.S. wealth is large relative to wealth in
most other countries.
What is meant by the term “lender of last resort?” In what circumstances might the Fed
be a lender of last resort?
One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines
ordering new, fuel-efficient aircraft.
The U.S. income tax system is completely indexed for inflation.
A price floor set above the equilibrium price causes a surplus in the market.
GDP is a good measure of economic well-being for all purposes.
Points inside the production possibilities frontier represent feasible levels of production.
A tax credit for purchases of capital goods causes the interest rate to increase and the
exchange rate to appreciate.
Figure 2-14
Refer to Figure 2-14. The opportunity cost of moving from point B to point A is zero.
If a firm is facing elastic demand, then the firm should decrease price to increase
revenue.