The basic activity of a firm is
A) to set the prices of its products as high as possible.
B) to compete with other firms that produce similar products.
C) to provide jobs for its employees.
D) to use inputs to produce outputs of goods and services.
If the Fed pursues expansionary monetary policy,
A) aggregate demand will rise, and the price level will rise.
B) aggregate demand will fall, and the price level will fall.
C) aggregate demand will rise, and the price level will fall.
D) aggregate demand will fall, and the price level will rise.
Suppose the U.S. Congress is successful in enacting tariffs large enough to eliminate the
current account deficit. What would happen to the level of domestic investment?
A) It would not change.
B) It would rise and exceed national saving.
C) It would rise to a level equal to net foreign investment.
D) It would fall to a level equal to national saving.
Why do corporations want to keep the price of their stock high?
A) A higher stock price increases the funds the firm can raise when it sells a given
amount of stock.
B) Corporations can pay their managers lower salaries and avoid principal-agent
problems when stock prices are higher.
C) Higher stock prices are correlated with lower expected profitability.
D) All of the above provide incentive for corporations to keep the price of their stock
high.
Which of the following describes what the Fed would do to pursue an expansionary
monetary policy?
A) use open market operations to buy Treasury bills
B) use open market operations to sell Treasury bills
C) use discount policy to raise the discount rate
D) raise the reserve requirement
The law of diminishing marginal returns
A) sets in because not all workers are equally productive.
B) applies only in the short run.
C) holds even when there are no fixed factors.
D) ultimately explains why production displays diseconomies of scale.
Voluntary exchange increases economic efficiency
A) because neither the buyer nor the seller would agree to a trade unless they both
benefit.
B) because voluntary exchange only takes place with government permission.
C) because it is free and consequently does not cost anything.
D) because it allows wealthy individuals to act altruistically and give to the poor.
In 2011, the dividend yield on Microsoft (MSFT) stock rose from 1.97% to 3.10%.
Which of the following would have generated that result?
A) The closing price of Microsoft stock rose.
B) Microsoft announced an increase in the dividend it would pay per share.
C) The price-earnings ratio rose.
D) Microsoft issued bonds with a coupon rate equal to 3.10%.
________ a nation’s production possibilities frontier represents economic growth.
A) An outward shift of
B) An inward shift of
C) Moving up along
D) Moving down along
Although based in the United States, McDonald’s is a global company with more than
________ of its sales coming from outside of the United States.
A) one-fourth
B) one-third
C) one-half
D) two-thirds
If the GDP deflator in the United States is 114, and the GDP deflator in Ukraine is 142,
which of the following exchange rates would the theory of purchasing power parity
predict in the long run? (The Ukrainian currency is the hryvnia.)
A) 0.80 hryvnias per dollar
B) 1.25 hryvnias per dollar
C) 2.80 hryvnias per dollar
D) 28 hryvnias per dollar
If there is currently a surplus of dollars, which of the following would you expect to see
in the foreign exchange market?
A) The dollar will appreciate.
B) The dollar will depreciate.
C) There will be a decrease in the demand for dollars.
D) There will be a decrease in the supply of dollars.
You have a bond that pays $60 per year in coupon payments. Which of the following
would result in a decrease in the price of your bond?
A) Coupon payments on newly-issued bonds fall to $40 per year.
B) The likelihood that the firm issuing your bond will default on debt decreases.
C) The price of a share of stock in the company rises.
D) Coupon payments on newly-issued bonds rise to $75 per year.
Which of the following statements is true about the price elasticity of demand along a
downward sloping linear demand curve?
A) It is inelastic at high prices and elastic at low prices.
B) It is unit-elastic throughout the demand curve.
C) It is elastic at high prices and inelastic at low prices.
D) It is perfectly elastic at very high prices and perfectly inelastic at very low prices.
If a corporate bond with a face value of $2,000 pays yearly coupon payments of $50,
what is the coupon rate?
A) 2.5%
B) 4%
C) 25%
D) 40%
According to economists Robert Lucas and Thomas Sargent, the apparent short-run
trade-off between unemployment and inflation in the 1950s and 1960s was the result of
A) unexpected changes in monetary policy.
B) expected changes in monetary policy.
C) unexpected changes in fiscal policy.
D) expected changes in fiscal policy.
Which of the following is a positive economic statement?
A) The standard of living in the United States should be higher.
B) If the price of iPhones falls, a larger quantity of iPhones will be purchased.
C) The government should revamp the health care system.
D) The U.S. government should not have bailed out U.S. auto manufacturers.
The United States is a leading exporter of wheat. What explains the comparative
advantage of the United States in wheat production?
A) positive externalities
B) investment by multinational firms such as Archer-Daniels-Midland and the Tyson
Foods Inc.
C) climate and soil conditions in the United States which are well-suited for wheat
production
D) a large supply of unskilled labor