Market failure is the ability of a single person to have a substantial influence on market
prices.
a. True
b. False
Table 3-20
Assume that Brad and Theresa can switch between producing wheat and producing beef
at a constant rate.
RefertoTable3-20.Brad has a comparative advantage in the production of
a. wheat and Theresa has a comparative advantage in the production of beef.
b. beef and Theresa has a comparative advantage in the production of wheat.
c. both goods and Theresa has a comparative advantage in the production of neither
good.
d. neither good and Theresa has a comparative advantage in the production of both
goods.
Inflation is problematic if
a. it is less than the percentage increase in nominal income.
b. it is less than the nominal return on saving.
c. it equals the growth rate of real GDP in the long run.
d. it distorts relative prices, causing a misallocation of resources.
Using the liquidity-preference model, when the Federal Reserve decreases the money
supply,
a. the equilibrium interest rate increases.
b. the aggregate-demand curve shifts to the right.
c. the quantity of goods and services demanded is unchanged for a given price level.
d. the short-run aggregate-supply curve shifts to the left.
In a closed economy, if taxes fall and consumption rises, then private saving must fall.
a. True
b. False
An increase in the price of dairy products produced domestically will be reflected in
a. both the GDP deflator and the consumer price index.
b. neither the GDP deflator nor the consumer price index.
c. the GDP deflator but not in the consumer price index.
d. the consumer price index but not in the GDP deflator.
Country A and country B both increase their capital stock by one unit. Output in
country A increases by 12 while output in country B increases by 15. Other things the
same, diminishing returns implies that country A is
a. richer than Country B. If Country A adds another unit of capital, output will increase
by more than 12 units.
b. richer than Country B. If Country A adds another unit of capital, output will increase
by less than 12 units.
c. poorer than Country B. If Country A adds another unit of capital, output will increase
by more than 12 units.
d. poorer than Country B. If Country A adds another unit of capital, output will increase
by less than 12 units.
According to liquidity preference theory, the slope of the money demand curve is
explained as follows:
a. Interest rates rise as the Fed reduces the quantity of money demanded.
b. Interest rates fall as the Fed reduces the supply of money.
c. People will want to hold less money as the cost of holding it falls.
d. People will want to hold more money as the cost of holding it falls.
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
Table 26-1
RefertoTable26-1. In dollar terms, which company paid the highest dividend per share?
a. GenMills
b. Microsoft
c. Graco
d. Hershey
A tax cut shifts the aggregate demand curve the farthest if
a. the MPCis large and if the tax cut is permanent.
b. the MPCis large and if the tax cut is temporary.
c. the MPCis small and if the tax cut is permanent.
d. the MPCis small and if the tax cut is temporary.
Between 1929 and 1933, NNP measured in current prices fell from $96 billion to $48
billion. Over the same period, the relevant price index fell from 100 to 75.
a. What was the percentage decline in nominal NNP from 1929 to1933?
b. What was the percentage decline in real NNP from 1929 to 1933? Show your work.
Other things the same, if the interest rate falls, then
a. firms will want to borrow more, which increases the quantity of loanable funds
demanded.
b. firms will want to borrow less, which decreases the quantity of loanable funds
demanded.
c. firms will want to borrow more, which increase the quantity of loanable funds
supplied.
d. firms will want to borrow less, which decreases the quantity of loanable funds
supplied.
If in some year nominal GDP was $10 trillion and real GDP was $4 trillion, what was
the GDP deflator?
a. 25.
b. 40.
c. 250.
d. 400.
Which of the following is included in the aggregate demand for goods and services?
a. consumption demand
b. investment demand
c. net exports
d. All of the above are correct.
Which of the following would shift the supply of Packers football jerseys to the right?
a. The Packers make it to the Super Bowl.
b. The price of the jerseys increases by $15.
c. The cost to distribute the jerseys increases.
d. The cost of the fabric used to make the jerseys decreases.
Proprietary technology is technology that is
a. widely used because it is easy to learn.
b. widely used because the government subsidizes its use.
c. not widely used because people could, but have not, taken the time to learn how to
apply it.
d. not widely used because it is known or controlled only by the company that
discovered it.
Which of the following is correct?
a. Over the business cycle investment fluctuates more than consumption.
b. Economic fluctuations are easy to predict.
c. During recessions employment rises.
d. Because of government policy the U.S. had zero recessions in the last 25 years.
Which of the following increase when the Fed makes open market purchases?
a. currency and reserves
b. currency but not reserves
c. reserves but not currency
d. neither currency nor reserves
In 2013, XYZ Corporation had total earnings of $500 million and XYZ retained 20
percent of its earnings for future investments. If the price of a share of XYZ stock is
$70 and if 100 million shares of its stock is outstanding, then what is the price-earnings
ratio?
a. 6.25
b. 11.2
c. 14.0
d. 17.5
The Get-There-Safe Bus company incurs an average cost of $45 for each passenger it
carries on its trip from Atlanta to Chattanooga. In advance of a particular trip, four seats
remain unsold. The bus company could increase its profit only if it
a. charged any ticket price above $0 for the four remaining seats.
b. charged at least $11.25 for each of the four remaining seats.
c. charged at least $45 for each of the four remaining seats.
d. paid four people to occupy the four remaining seats.
If nominal GDP doubles and the GDP deflator doubles, then real GDP
a. remains constant.
b. doubles.
c. triples.
d. quadruples.
Which of the following games might a risk-averse person play?
a. a game where she has a 70 percent chance of winning $1 and a 30 percent chance of
losing $1
b. a game where she has a 60 percent chance of winning $100 and a 40 percent chance
of losing $100
c. a game where she has a 60 percent chance of winning $2 and a 40 percent chance of
losing $1
d. All of the above are correct.
The phenomenon of scarcity stems from the fact that
a. most economies’ production methods are not very good.
b. in most economies, wealthy people consume disproportionate quantities of goods and
services.
c. governments restrict production of too many goods and services.
d. resources are limited.
Suppose a tax cut affects aggregate demand and aggregate supply. Which of the shifts
raise real GDP?
a. both the shift of aggregate demand and the shift of aggregate supply
b. the shift of aggregate demand, but not the shift of aggregate supply
c. the shift of aggregate supply, but not the shift of aggregate demand
d. neither the shift of aggregate demand nor the shift of aggregate supply
In the economy of Talikastan in 2015, consumption was $6000, exports were $1000,
GDP was $10,000, government purchases were $1800, and imports were $1200. What
was Talikastan’s investment in 2015?
a. $0
b. $1200
c. $2400
d. $5600
Both the production of goods and services and the unemployment rate are used to
measure
a. the business cycle.
b. productivity.
c. the interest rate.
d. inflation.
If the interest rate is 2.49 percent, then what is the present value of $5,000 to be
received in 4 years?
a. $4,531.52
b. $4,878.52
c. $5,124.50
d. $5,516.91
Economists use the word equality to describe a situation in which
a. each member of society has the same income.
b. each member of society has access to abundant quantities of goods and services,
regardless of his or her income.
c. society is getting the maximum benefits from its scarce resources.
d. society’s resources are used efficiently.
The manager of the bank where you work tells you that your bank has $6 million in
excess reserves. She also tells you that the bank has $400 million in deposits and $362
million dollars in loans. Given this information you find that the reserve requirement
must be
a. 44/400.
b. 6/362.
c. 38/400.
d. 32/400.
Table24-12.Will’s expenditures on food for three consecutive years, along with other
values, are presented in the table below.
RefertoTable24-12.Suppose the consumer price index is 15.5 percent higher in 2011
than in 2009. Then Will’s food expenditures for 2010 in 2011 dollars amount to
a. $6,352.
b. $6,380.
c. $6,426.
d. $6,651.
It is possible for a country to have domestic investment that exceeds national saving.
a. True
b. False
Net exports measures the difference between a country’s
a. income and expenditures.
b. sale of goods and services abroad and purchase of foreign goods and services.
c. sale of domestic assets abroad and purchase of foreign assets.
d. All of the above are correct.