If the price of a good has risen over time,
a. it must have become more scarce.
b. it must have become less scarce.
c. it has become more scarce only if the price adjusted for inflation has risen.
d. it has become less scarce only if the price adjusted for inflation has risen.
Financial intermediaries are
a. the same as financial markets.
b. individuals who make profits by buying a stock low and selling it high.
c. a more general name for financial assets such as stocks, bonds, and checking
accounts.
d. financial institutions through which savers can indirectly provide funds to borrowers.
Which of the following is correct?
a. Rent control and the minimum wage are both examples of price ceilings.
b. Rent control is an example of a price ceiling, and the minimum wage is an example
of a price floor.
c. Rent control is an example of a price floor, and the minimum wage is an example of a
price ceiling.
d. Rent control and the minimum wage are both examples of price floors.
One way to characterize the difference between compounding and discounting is to say
that
a. compounding involves the assumption that the interest rate is zero, whereas
discounting does not involve that assumption.
b. discounting involves the assumption that the interest rate is zero, whereas
compounding does not involve that assumption.
c. the process of compounding produces a future value, whereas the process of
discounting produces a present value.
d. the process of compounding produces a present value, whereas the process of
discounting produces a future value.
The unique point at which the supply and demand curves intersect is called
a. market harmony.
b. coincidence.
c. equivalence.
d. equilibrium.
Which of the following statements regarding GDP is correct?
a. GDP includes factory production, but not any harm that may be inflicted on the
environment.
b. GDP accounts for all activities taking place outside markets.
c. GDP provides detailed information about the distribution of income.
d. GDP is a good measure of economic well-being for all purposes.
If at a given real interest rate desired national saving were $50 billion, domestic
investment were $40 billion, and net capital outflow were $20 billion, then at that real
interest rate in the loanable funds market there would be a
a. surplus. The real interest rate would rise.
b. surplus. The real interest rate would fall.
c. shortage. The real interest rate would rise.
d. shortage. The interest rate would fall.
In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes,
furs, jewelry, and expensive cars. The goal of the tax was to
a. raise revenue from the wealthy.
b. prevent wealthy people from buying luxuries.
c. force producers of luxury goods to reduce employment.
d. limit exports of luxury goods to other countries.
Total surplus in a market will increase when the government
a. imposes a binding price floor or a binding price ceiling on that market.
b. imposes a tax on that market.
c. Both a and b are correct.
d. Neither a nor b is correct.
Which of the following equations will always represent GDP in an open economy?
a. S = I – G
b. I = Y – C + G
c. Y = C + I + G
d. Y = C + I + G + NX
Tom and Lilly rented a house for $12,000 last year. At the start of the year they bought
the house they had been renting directly from the owner for $250,000. They believe
they could rent it for $12,000 this year, but stay in the house. How much does Tom and
Lilly’s decision to buy the house change GDP?
a. it reduces GDP by $12,000
b. it does not change GDP
c. it raises GDP by $238,000
d. it raises GDP by $250,000
Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P
represents the price of crude oil.
Refer to Figure 9-14. When the country for which the figure is drawn allows
international trade in crude oil,
a. consumer surplus changes from the area A + B + D to the area A.
b. producer surplus changes from the area C to the area B + C + D.
c. total surplus decreases by the area D.
d. All of the above are correct.
Suppose you put $350 into a bank account today. Interest is paid annually and the
annual interest rate is 6 percent. The future value of the $350 after 4 years is
a. $414.09.
b. $434.00.
c. $441.87.
d. $481.24.
If the demand for donuts is elastic, then a decrease in the price of donuts will
a. increase total revenue of donut sellers.
b. decrease total revenue of donut sellers.
c. not change total revenue of donut sellers.
d. There is not enough information to answer this question.
Writing in the Wall Street Journal in 2009, economist Jeremy Siegel argued that, in the
years leading up to the financial crisis of 2008″2009,
a. financial firms acted in too risky a fashion.
b. the Federal Reserves’s efforts to rein in the risky behavior of certain financial firms
were inadequate.
c. falling house prices “crashed the banks and the economy.”
d. All of the above are correct.
In 2008, the average American earned about $47,000 while the average Nigerian earned
about $1,400. Which of the following statements is likely?
a. The average American purchases more televisions than the average Nigerian.
b. The average American has better nutrition and healthcare than the average Nigerian.
c. The average American has a longer life expectancy than the average Nigerian.
d. All of the above are correct.
Figure 2-8
Panel (a) Panel (b)
Refer to Figure 2-8, Panel (a) and Panel (b). A shift of the economy’s production
possibilities frontier from Panel (a) to Panel (b) could be caused by
a. unemployment.
b. an improvement in donut production technology.
c. an improvement in coffee production technology.
d. an improvement in both donut and coffee production technology.
If the current allocation of resources in the market for wallpaper is efficient, then it must
be the case that
a. producer surplus equals consumer surplus in the market for wallpaper.
b. the market for wallpaper is in equilibrium.
c. on the last unit of wallpaper that was produced and sold, the value to buyers
exceeded the cost to sellers.
d. All of the above are correct.
Figure 7-17
Refer to Figure 7-17. When the price is P1, area B+C represents
a. total surplus.
b. producer surplus.
c. consumer surplus.
d. None of the above is correct.
Scott Adams, creator of the comic strip Dilbert, has a theory that you should
a. buy stock in the companies you love the most.
b. buy stock in the companies you hate the most.
c. make use of technical analysis when you are deciding which stocks to buy.
d. examine companies’ track records when you are deciding which stocks to buy.
Figure 7-18
Refer to Figure 7-18. Assume demand increases and as a result, equilibrium price
increases to $22 and equilibrium quantity increases to 110. The increase in producer
surplus to producers already in the market would be
a. $90.
b. $210.
c. $360.
d. $480.
Figure 6-11
Refer to Figure 6-11. If the government imposes a price floor at $9, it would be
a. binding if market demand is Demand A or Demand B.
b. non-binding if market demand is Demand A or Demand B.
c. binding if market demand is Demand A and non-binding if market demand is
Demand B.
d. non-binding if market demand is Demand A and binding if market demand is
Demand B.
If the marginal propensity to consume is 5/6, and there is no investment accelerator or
crowding out, a $20 billion increase in government expenditures would shift the
aggregate demand curve right by
a. $60 billion, but the effect would be larger if there were an investment accelerator.
b. $60 billion, but the effect would be smaller if there were an investment accelerator.
c. $120 billion, but the effect would be larger if there were an investment accelerator.
d. $120 billion, but the effect would be smaller if there were an investment accelerator.
The confidence you have that a retailer will accept dollars in exchange for goods is
based primarily on money
a. being a unit of account.
b. being a medium of exchange.
c. serving as a store of value.
d. having intrinsic value.
Suppose consumer income increases. If grass seed is a normal good, the equilibrium
price of grass seed will
a. decrease, and producer surplus in the industry will decrease.
b. increase, and producer surplus in the industry will increase.
c. decrease, and producer surplus in the industry will increase.
d. increase, and producer surplus in the industry will decrease.
Over-the-Rhine Cheese Corporation had a P/E ratio of 20, retained earnings of $1.70
per share and a dividend of $0.80. What was its dividend yield?
a. 1.25%
b. 1.60%
c. 3.33%
d. 7.50%
Which of the following contains a list only of things that increase when the budget
deficit of the U.S. decreases?
a. U.S. supply of loanable funds, U.S. net capital outflow, U.S. domestic investment
b. U.S. supply of loanable funds, U.S. exports, the real exchange rate of the dollar
c. U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment
d. the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exports
All else equal, when people become more optimistic about a company’s future, the
a. supply of the stock and the price will both rise.
b. supply of the stock and the price will both fall.
c. demand for the stock and the price will both rise.
d. demand for the stock and the price will both fall.
Government policies resulting in reduced efficiency include
(i) the welfare system
(ii) unemployment insurance
(iii) progressive income tax
a. (i) only
b. (ii) only
c. (i) and (ii) only
d. (i), (ii), and (iii)
Figure 7-22
Refer to Figure 7-22. At the quantity Q3,
a. the market is in equilibrium.
b. consumer surplus is maximized.
c. the sum of consumer surplus and producer surplus is maximized.
d. the marginal value to buyers is less than the marginal cost to sellers.
Which of the following newspaper headlines is more closely related to what
microeconomists study than to what macroeconomists study?
a. Unemployment rate rises from 5 percent to 5.5 percent.
b. Real GDP grows by 3.1 percent in the third quarter.
c. Retail sales at stores show large gains.
d. The price of oranges rises after an early frost.
A model that shows how dollars flow through markets among households and firms is
called the
a. production possibilities frontier.
b. circular-flow diagram.
c. demand and supply diagram.
d. comparative advantage model.