A successful market economy requires well defined property rights and
A) balanced supplies of all factors of production.
B) an independent court system to adjudicate disputes based on the law.
C) detailed government regulations.
D) a safety net to ensure that those who cannot participate in the market economy can
earn an income.
The balance of trade includes trade in
A) goods only.
B) services only.
C) both goods and services.
D) neither goods nor services.
The year in which euro coins and paper currency were introduced and participating
“euro zone” countries withdrew old domestic currencies from circulation was
A) 2007
B) 2002
C) 1999
D) 1995
Figure 17-2
Refer to Figure 17-2. Suppose the economy is at point C. If the Fed decreases the
money supply so that inflation falls, the economy will ________ in the long run,
holding all else constant.
A) eventually move to point A
B) eventually move to point B
C) stay at point C
D) move to point A and then back to point B
Table 1-3
Ivan runs a custom jewelry shop in Sparkle City. He is debating whether he should
extend his hours of operation. Ivan figures that his sales revenue will depend on the
number of hours the jewelry shop is open as shown in the table above. He would have
to hire a worker for those hours at a wage rate of $25 per hour.
Refer to Table 1-3. Using marginal analysis, determine how many hours should Ivan
extend his hours of operations?
A) 2 hours
B) 3 hours
C) 4 hours
D) 5 hours
E) 6 hours
The money market model is concerned with ________ and the loanable funds market
model is concerned with ________.
A) short-term real interest rates; long-term nominal interest rates
B) short-term nominal interest rates; long-term nominal interest rates
C) short-term real interest rates; long-term real interest rates
D) short-term nominal interest rates; long-term real interest rates
Decreasing government spending ________ the price level and ________ equilibrium
real GDP.
A) decreases; increases
B) increases; decreases
C) increases; increases
D) decreases; decreases
Short-run macroeconomic equilibrium occurs when
A) aggregate demand and short-run aggregate supply intersect.
B) the equilibrium lies on the long-run aggregate supply curve.
C) structural and frictional unemployment equal zero.
D) A and B
To reduce the bias in the consumer price index, the Bureau of Labor Statistics
A) updates the market basket every two years, rather than every 10 years.
B) updates the market basket every 10 years, rather than every two years.
C) incorporates substitutions by consumers when prices of specific products rise
rapidly.
D) incorporates substitutions by consumers when prices of specific products fall
rapidly.
The purchase of a new house is included in
A) consumption expenditures.
B) investment expenditures.
C) government purchases.
D) net exports.
Suppose Mexico and the United States are on the gold standard. If there is a half an
ounce of gold in the dollar, and one quarter an ounce of gold in the peso, then the
exchange rate is
A) $1 = 2 pesos.
B) $1 = 4 pesos.
C) $1 = 1/2 peso.
D) $1 = 1/4 peso.
E) $0.50 = 1/2 peso.
If planned aggregate expenditure is above potential GDP and planned aggregate
expenditure equals GDP, then
A) actual inventory investment will be less than planned inventory investment.
B) actual inventory investment will be greater than planned inventory investment.
C) the economy is in an expansion.
D) the economy is at full employment.
Figure 3-2
Refer to Figure 3-2. A decrease in the price of inputs would be represented by a
movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.