Table 16-1. The information in the table pertains to an imaginary economy.
Refer to Table 16-1. What is the M2 money supply?
a. $125 billion
b. $296 billion
c. $351 billion
d. $431 billion
Suppose there are only two people in the world. Each person’s production possibilities
frontier also represents his or her consumption possibilities when
a. neither person faces trade-offs.
b. the frontiers are straight lines.
c. the frontiers are bowed out.
d. they choose not to trade with one another.
When prices are falling, economists say that there is
a. disinflation.
b. deflation.
c. a contraction.
d. an inverted inflation.
Suppose that a worker in Radioland can produce either 4 radios or 1 television per year,
and a worker in Teeveeland can produce either 2 radios or 4 televisions per year. Each
nation has 100 workers. Also suppose that each country completely specializes in
producing the good in which it has a comparative advantage. If Radioland trades 100
radios to Teeveeland in exchange for 100 televisions each year, then each country’s
maximum consumption of new radios and televisions per year will be
a. 100 radios, 300 televisions in Radioland and 300 radios, 100 televisions in
Teeveeland.
b. 300 radios, 100 televisions in Radioland and 100 radios, 300 televisions in
Teeveeland.
c. 200 radios, 100 televisions in Radioland and 100 radios, 200 televisions in
Teeveeland.
d. 300 radios, 100 televisions in Radioland and 100 radios, 400 televisions in
Teeveeland.
Figure 22-3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the left-hand diagram, Y represents output
and on the right-hand diagram, U represents the unemployment rate.
Refer to Figure 22-3. What is measured along the vertical axis of the left-hand graph?
a. the wage rate
b. the inflation rate
c. the price level
d. the change in output from one year to the next
Figure 2-11
Refer to Figure 2-11. The shift of the production possibilities frontier from A to B can
best be described as
a. a downturn in the economy.
b. economic growth.
c. an enhancement of equality.
d. an improvement in the allocation of resources.
If the tax on a good is tripled, the deadweight loss of the tax
a. remains constant.
b. triples.
c. increases by a factor of 9.
d. increases by a factor of 12.
Other things the same, if the government increases transfer payments to households,
then the effect of this on the government’s budget
a. will make investment rise.
b. will make the rate of interest rise.
c. will make public saving rise.
d. All of the above are correct.
Economists at which of the following offices help formulate spending plans and
regulatory policies?
a. Office of Management and Budget
b. Department of the Treasury
c. Congressional Budget Office
d. The Federal Reserve
If a country raises its budget deficit, then its
a. net capital outflow and net exports rise.
b. net capital outflow rises and net exports fall.
c. net capital outflow falls and net exports rise.
d. net capital outflow and net exports fall.
Which of the following phrases best captures the notion of efficiency?
a. absolute fairness
b. equal distribution
c. minimum waste
d. equitable outcome
Figure 9-2
Refer to Figure 9-2. With free trade, producer surplus is
a. $80.00.
b. $210.00.
c. $245.50.
d. $472.50.
If a binding price ceiling is imposed on the baby formula market, then
a. the quantity of baby formula demanded will increase.
b. the quantity of baby formula supplied will decrease.
c. a shortage of baby formula will develop.
d. All of the above are correct.
Figure 6-4
Refer to Figure 6-4. Which of the following statements is not correct?
a. When the price is $10, quantity supplied equals quantity demanded.
b. When the price is $6, there is a surplus of 8 units.
c. When the price is $12, there is a surplus of 4 units.
d. When the price is $16, quantity supplied exceeds quantity demanded by 12 units.
If the American company Stryker builds and operates a new factory in France,
a. it engages in foreign direct investment. By itself this action lowers U.S. net capital
outflow.
b. it engages in foreign direct investment. By itself this action raises U.S. net capital
outflow.
c. it engages in foreign portfolio investment. By itself this action lowers U.S. net capital
outflow.
d. it engages in foreign portfolio investment. By itself this action raises U.S. net capital
outflow.
A decrease in supply will cause the smallest increase in price when
a. both supply and demand are inelastic.
b. demand is elastic and supply is inelastic.
c. both supply and demand are elastic.
d. demand is inelastic and supply is elastic.
Which of the following will cause an increase in consumer surplus?
a. an increase in the production cost of the good
b. a technological improvement in the production of the good
c. a decrease in the number of sellers of the good
d. the imposition of a binding price floor in the market
If a country’s saving rate declined, then other things the same, in the long run the
country would have
a. lower productivity, but not lower real GDP per person.
b. lower productivity and lower real GDP per person.
c. lower real GDP per person, but not lower productivity
d. neither lower productivity nor lower real GDP per person.
In which of the following instances would the deadweight loss of the tax on cartons of
cigarettes increase by a factor of 9?
a. The tax on cartons of cigarettes increases from $10 to $11.11.
b. The tax on cartons of cigarettes increases from $10 to $20.
c. The tax on cartons of cigarettes increases from $10 to $30.
d. The tax on cartons of cigarettes increases from $10 to $90.
The Social Security tax is a tax on
a. capital.
b. labor.
c. consumption expenditures.
d. earnings during retirement.
Figure 4-20
The graph below pertains to the supply of paper to colleges and universities.
Refer to Figure 4-20. All else equal, sellers expecting the price of paper to decrease
next month when many college students leave campuses for the summer would cause a
current move from
a. x to y.
b. y to x.
c. SA to SB.
d. SB to SA.
Table 3-11
Assume that Falda and Varick can switch between producing wheat and producing cloth
at a constant rate.
Quantity Produced in 1 Hour
Refer to Table 3-11. Falda’s opportunity cost of one yard of cloth is
a. 2/3 bushel of wheat and Varick’s opportunity cost of one yard of cloth is 2/5 bushel of
wheat.
b. 2/3 bushel of wheat and Varick’s opportunity cost of one yard of cloth is 5/2 bushels
of wheat.
c. 3/2 bushels of wheat and Varick’s opportunity cost of one yard of cloth is 2/5 bushel
of wheat.
d. 3/2 bushels of wheat and Varick’s opportunity cost of one yard of cloth is 5/2 bushels
of wheat.
Which of the following would make the equilibrium real interest rate increase and the
equilibrium quantity of funds decrease?
a. The demand for loanable funds shifts right.
b. The demand for loanable funds shifts left.
c. The supply of loanable funds shifts right.
d. The supply of loanable funds shifts left.
Over the last ten years productivity grew faster in Oceania than in Freedonia and the
population and total hours worked remained the same in both countries. It follows that
a. real GDP per person must be higher in Oceania than in Freedonia.
b. real GDP per person grew faster in Oceania than in Freedonia.
c. the standard of living must be higher in Oceania than in Freedonia.
d. All of the above are correct.
The nation of Pineland forbids international trade. In Pineland, you can buy 1 pound of
fish for 2 pounds of pineapples. In other countries, you can buy 1 pound of fish for 1.5
pounds of pineapples. These facts indicate that
a. Pineland has a comparative advantage, relative to other countries, in producing fish.
b. other countries have a comparative advantage, relative to Pineland, in producing
pineapples.
c. the price of pineapples in Pineland exceeds the world price of pineapples.
d. if Pineland were to allow trade, it would import fish.
Consider an identical basket of goods in both the U.S. and India. For a given nominal
exchange rate, in which case is it certain that the U.S. real exchange rate with India
falls?
a. the price of the basket of goods rises in the U.S. and India.
b. the price of the basket of goods rises in the U.S. and falls in India.
c. the price of the basket of goods falls in the U.S. and rises in India.
d. the price of the basket of goods falls in both India and the U.S..
Evidence indicates that the typical person who becomes unemployed will
a. soon find a job.
b. find a job, but not before a year or more has gone by.
c. leave the labor force and never return.
d. retire soon after
Suppose the American Medical Association announces that men who shave their heads
are less likely to die of heart failure. We could expect the current demand for
a. hair gel to increase.
b. razors to increase.
c. combs to increase.
d. shampoo to increase.
To improve living standards, policymakers should
a. impose restrictions on foreign competition.
b. formulate policies designed to increase productivity.
c. impose tougher immigration policies.
d. provide tax breaks for the middle class.
The marginal tax rate on labor income for many workers in the United States is almost
a. 30 percent.
b. 40 percent.
c. 50 percent.
d. 65 percent.
Which of the following will reduce the price level and real output in the short run?
a. an increase in the money supply
b. an increase in oil prices
c. a decrease in the money supply
d. technical progress
The terms equality and efficiency are similar in that they both refer to benefits to
society. However they are different in that
a. equality refers to uniform distribution of those benefits and efficiency refers to
maximizing benefits from scarce resources.
b. equality refers to maximizing benefits from scarce resources and efficiency refers to
uniform distribution of those benefits.
c. equality refers to everyone facing identical tradeoffs and efficiency refers to the
opportunity cost of the benefits.
d. equality refers to the opportunity cost of the benefits and efficiency refers to
everyone facing identical tradeoffs.
Part of the explanation for why the aggregate-demand curve slopes downward is that a
decrease in the price level
a. decreases the real value of money.
b. increases the real value of the dollar in foreign exchange markets.
c. decreases the interest rate.
d. All of the above are correct.
Other things the same, an increase in the budget deficit
a. shifts the demand for loanable funds right, so the interest rate rises.
b. shifts the demand for loanable funds left, so the interest rate falls.
c. shifts the supply of loanable funds right, so the interest rate falls.
d. shifts the supply of loanable funds left, so the interest rate rises.
Sample Population
Refer to Sample Population. How many in the sample are in the labor force?
a. 10
b. 9
c. 8
d. None of the above is correct.