If the cross-price elasticity of demand for two goods is 1.25, then
a. the two goods are luxuries.
b. the two goods are substitutes.
c. one of the goods is normal and the other good is inferior.
d. the demand for one of the goods conforms to the law of demand, but the demand for
the other good violates the law of demand.
Table 15-1
Labor Data for Aridia
Refer to Table 15-1. The labor-force participation rate of Aridia in 2011 was
a. 43.3%.
b. 54.2%.
c. 63.3%.
d. 68.4%.
For purposes of calculating the CPI, the transportation category of consumer spending
includes the cost of
a. subways.
b. gasoline.
c. both subways and gasoline.
d. neither subways nor gasoline.
When the Fed decreases the discount rate, banks will
a. borrow more from the Fed and lend more to the public. The money supply increases.
b. borrow more from the Fed and lend less to the public. The money supply decreases.
c. borrow less from the Fed and lend more to the public. The money supply increases.
d. borrow less from the Fed and lend less to the public. The money supply decreases.
Consider the market for watermelons. Buyers
a. and sellers would lobby for a price ceiling.
b. and sellers would lobby for a price floor.
c. would lobby for a price ceiling, whereas sellers would lobby for a price floor.
d. would lobby for a price floor, whereas sellers would lobby for a price ceiling.
Which of the following is an example of something economists study?
a. Kate chooses to work overtime to earn extra income for her family.
b. Ryan sells his economics textbook from last semester to his roommate for half the
price of a new textbook.
c. The unemployment rate in the United States is at its highest level in over fifty years.
d. All of the above are correct.
Approximately what percentage of the world’s economies experience scarcity?
a. 10%
b. 40%
c. 85%
d. 100%
In competitive markets, which of the following is not correct?
a. Firms produce identical products.
b. No individual buyer can influence the market price.
c. Some sellers can set prices.
d. Buyers are price takers.
Which of the following is correct?
a. Well designed tax cuts can increase investment which fluctuates more than
consumption over the business cycle.
b. Well designed tax cuts can increase investment but it fluctuates less than
consumption over the business cycle.
c. Tax cuts have little effect on investment which fluctuate more than consumption over
the business cycle.
d. Tax cuts have little effect on investment but it fluctuates less than consumption over
the business cycle
Patterns of trade among nations are primarily determined by
a. cultural considerations.
b. political considerations.
c. comparative advantage.
d. differences in the income elasticity of demand among nations.
Which of the following countries benefited significantly from the catch-up effect in the
last half of the twentieth century?
a. Ethiopia
b. the United States
c. Canada
d. South Korea
Which of the following statements is not correct about a market in equilibrium?
a. The price determines which buyers and which sellers participate in the market.
b. Those buyers who value the good more than the price choose to buy the good.
c. Those sellers whose costs are less than the price choose to produce and sell the good.
d. Consumer surplus will be equal to producer surplus.
The word “economy” comes from the Greek word oikonomos, which means
a. “environment.”
b. “production.”
c. “one who manages a household.”
d. “one who makes decisions.”
Figure 8-19. The figure represents the relationship between the size of a tax and the tax
revenue raised by that tax.
Refer to Figure 8-19. According to a recent research paper published by the European
Central Bank, the U.S.
a. is more likely at a point such as point A rather than point B if the tax in question is
the tax on capital income.
b. is more likely at a point such as point B rather than point A if the tax in question is
the tax on labor income.
c. could increase tax revenues more by raising taxes on capital income than by raising
taxes on labor income.
d. All of the above are correct.
You receive money as payment for babysitting your neighbors’ children. This best
illustrates which function of money?
a. medium of exchange
b. unit of account
c. store of value
d. liquidity
If purchasing-power parity holds, a dollar will buy
a. one unit of each foreign currency.
b. foreign currency equal to the U.S. price level divided by the foreign country’s price
level.
c. enough foreign currency to buy as many goods as it does in the United States.
d. None of the above is implied by purchasing-power parity.
Figure 9-15
Refer to Figure 9-15. With the tariff, the quantity of saddles imported is
a. Q3 – Q1.
b. Q3 – Q2.
c. Q4 – Q1.
d. Q4 – Q2.
Macroeconomics is the study of economy-wide phenomena.
Most economists believe that monetary neutrality provides
a. a good description of both the long run and the short run.
b. a good description of neither the long run nor the short run.
c. a good description of the short run, but not the long run.
d. a good description of the long run, but not the short run.
When a country that imports a particular good imposes an import quota on that good,
a. producer surplus increases and total surplus increases in the market for that good.
b. producer surplus increases and total surplus decreases in the market for that good.
c. producer surplus decreases and total surplus increases in the market for that good.
d. producer surplus decreases and total surplus decreases in the market for that good.
During the financial crisis it was proposed that firms be provided with a tax credit for
investment projects. Such a tax credit would
a. raise both the interest rate and the real exchange rate.
b. raise the interest rate and reduce the real exchange rate.
c. reduce the interest rate and raise the real exchange rate.
d. reduce both the interest rate and the real exchange rate.
When a country allows trade and becomes an exporter of a good,
a. domestic producers become better off, and domestic consumers become worse off.
b. domestic producers become worse off, and domestic consumers become better off.
c. domestic producers become better off, but the effect on the well-being of domestic
consumers is ambiguous.
d. domestic consumers become worse off, but the effect on the well-being of domestic
producers is ambiguous.
During the current quarter, a firm produces consumer goods and adds some of those
goods to its inventory rather than selling them. The value of the goods added to
inventory is
a. not included in the current quarter GDP.
b. included in the current quarter GDP as investment.
c. included in the current quarter GDP as consumption.
d. included in the current quarter GDP as a statistical discrepancy.
According to the theory of efficiency wages, if a firm stops paying efficiency wages it
is likely to see
a. an increase in the number of job applicants and an increase in how long workers stay
on the job
b. an increase in the number of job applicants and a decrease in how long workers stay
on the job
c. a decrease in the number of job applicants and an increase in how long workers stay
on the job
d. a decrease in the number of job applicants and a decrease in how long workers stay
on the job
Figure 7-20
Refer to Figure 7-20. At equilibrium, total surplus is measured by the area
a. ACG.
b. AFG.
c. KBG.
d. CFG.
Figure 4-21
Refer to Figure 4-21. Which of the following movements would illustrate the effect in
the market for orange juice of an announcement by the American Dental Association
that orange juice erodes tooth enamel?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
Which of the following is considered human capital? Knowledge acquired from
a. early childhood education programs
b. job training
c. on-the-job experience
d. All of the above are correct.
Which of the following items is counted as part of government purchases?
a. The federal government pays $2,000 in Social Security benefits to a retired person.
b. The city of Athens, Ohio pays $10,000 to a tree-trimming firm to trim trees along city
boulevards.
c. The state of Nebraska pays $1,000 to help a low-income family pay its medical bills.
d. All of the above are correct.
Table 6-2
Refer to Table 6-2. A price ceiling set at $5 will
a. be binding and will result in a shortage of 50 units.
b. be binding and will result in a shortage of 75 units.
c. be binding and will result in a shortage of 125 units.
d. not be binding.
A certain cowboy spends 10 hours per day mending fences and herding cattle. For the
cowboy, a graph that shows his various possible mixes of output (fences mended per
day and cattle herded per day) is called his
a. line of tastes.
b. trade-off curve.
c. production possibilities frontier.
d. consumption possibilities frontier.
Other things the same, if U.S. net capital outflow rises, so does U.S. saving.
Some countries have had relatively high inflation and relatively high unemployment for
long periods of time. Is this consistent with the Phillips curve? Defend your answer.
In the long run, an increase in the growth rate of the money supply leads to an increase
in the real interest rate, but no change in the nominal interest rate.
When the price of knee braces increased by 25 percent, the Brace Yourself Company
increased its quantity supplied of knee braces per week by 75 percent. BYC’s price
elasticity of supply of knee braces is 0.33.
The concept of slope can be used to answer questions about how much one variable
responds to changes in another variable.
Suppose that U.S. investors decide that investment opportunities in African countries
have improved. What happens to U.S. net capital outflow? What happens to the U.S.
real interest rate?
U.S. GDP includes estimates of the value of items that are produced and consumed at
home, such as housework and car maintenance.
Real GDP measures output of final goods and services in physical terms.
The term real GDP refers to a country’s actual GDP as opposed to its estimated GDP.
If a line passes through the points (20,5) and (10,10), then the slope of the line is -2.
The destruction of manufacturing jobs and workers leaving their jobs to find better ones
both contribute to structural unemployment.
Monetary neutrality means that while real variables may change in response to changes
in the money supply, nominal variables do not.
If the value of an economy’s imports exceeds the value of that economy’s exports, then
net exports is a negative number.
Economists work both inside and outside the administrative branch of the U.S.
government.
In a market economy, supply and demand determine both the quantity of each good
produced and the price at which it is sold.
The largest sector in the consumer price index market basket is food and beverage
purchases.