Article Summary. For only the second time in the previous 10 quarters, China’s
GDP grew at a faster rate than from the same period a year earlier. From July
through September 2013, China’s GDP increased 7.8 percent, but a decline in
exports, growing inflation, and slowing growth in factory production all suggest
that growth will be slowing down. China has recently been attempting to
restructure its economy by moving toward increasing consumption and relying
less on exports and investments as a means to achieving more sustainable
economic growth. In the first nine months of 2013, 46 percent of growth was due to
consumption, 56 percent was due to investment, and exports accounted for
negative 1.7 percent. Source: Aileen Wang and Kevin Yao, “China’s third-quarter
GDP growth fastest this year, but outlook dim,” Reuters, October 18, 2013.
In China, ________ is (are) the main driver of economic growth, while in the United
States, ________ is the main driver of economic growth.
A) consumption; investment
B) net exports; government purchases
C) investment; consumption
D) consumption; net exports
Which of the following pairs of goods is likely to have a negative cross-price elasticity
of demand?
A) pancakes and syrup
B) hot dogs and hamburgers
C) orange juice and grapefruit juice
D) peanuts and cat food
If a monopolistically competitive firm is producing 50 units of output where marginal
cost equals marginal revenue, total cost is $1,674 and total revenue is $2,000, its
average profit is
A) $326.
B) $40.
C) $6.52.
D) impossible to determine without additional information.
Compare the effect on the price level and real GDP of a decrease in tax rates assuming a
supply-side effect versus no supply-side effect. Compared to no supply-side effect,
including a supply-side effect for the decrease in tax rates will cause the price level to
increase ________ and real GDP to increase ________.
A) less; less
B) less; more
C) more; less
D) more; more
Figure 4-10 Figure 4-10 shows the
market for apartments in Bay City. Recently, the government imposed a rent ceiling at
R0. With rent control, the quantity supplied is Q1. Suppose apartment owners ignore the
law and rent this quantity for the highest rent they can get. What is the highest rent they
can get?
A) RXOA
B) R1
C) R0
D) more than R1
Which of the following does not take place in the direct finance market?
A) Ownership in corporations is sold in the form of common stock.
B) Deposits from savers are accumulated and loans made to borrowers.
C) Ownership in corporations is sold in the form of preferred stock.
D) Corporate bonds are sold to savers.
A decrease in the price level results in a(n) ________ in household consumption
spending and a(n) ________ in investment spending.
A) increase; decrease
B) increase; increase
C) decrease; decrease
D) decrease; increase
The complexity of the U.S. federal income tax system results in significant annual
deadweight losses. The opportunity cost of the hours taxpayers spend on record keeping
and completing their tax returns amounts to billions of dollars.
a. If the tax system was simplified, how would this benefit the economy?
b. Why hasn’t the tax system been simplified?
Markets promote
A) equity and competition.
B) voluntary exchange and equality.
C) equity and equality.
D) competition and voluntary exchange.
Consider the following methods of taxing a corporation’s income:
a. A flat tax, as opposed to a progressive tax, is levied on corporate profits.
b. A system whereby a corporation calculates its annual profit and notifies each
shareholder of her portion of the profits. The shareholder would then be required to
include this amount as taxable income for her personal income tax. The corporation
does not pay a tax.
c. A system where the federal government continues to tax corporate income through
the corporate income tax but allows individual taxpayers to receive, tax free, corporate
dividends and capital gains. Which of the methods above would avoid double taxation?
A) a, b, and c
B) a and b only
C) a and c only
D) b and c only
Using the market for loanable funds, which of the following has the potential to raise
the real interest rate?
A) an increase in the demand for loanable funds
B) an increase in the quantity of loanable funds demanded
C) an increase in the supply of loanable funds
D) an increase in the quantity of loanable funds supplied
Based on the following information, what is the balance on the current account?
Exports of goods and services = $5 billion
Imports of goods and services= $3 billion
Net income on investments = -$2 billion
Net transfers = -$2 billion
Increase in foreign holdings of assets in the United States = $4 billion
Increase in U.S. holdings of assets in foreign countries = -$1 billion A) -$2 billion
B) $1 billion
C) $3 billion
D) $4 billion
Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production
and consumption quantities without trade, and the production numbers with trade. If the
actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded, how many hats
will Denmark gain compared to the “without trade” numbers?
A) -150
B) 0
C) 150
D) 1,050
The impact of Hurricane Katrina on consumers in the economy was to make them very
pessimistic about their future incomes. How does this increased pessimism affect the
aggregate demand curve?
A) This will move the economy up along a stationary aggregate demand curve.
B) This will move the economy down along a stationary aggregate demand curve.
C) This will shift the aggregate demand curve to the left.
D) This will shift the aggregate demand curve to the right.
The profit-maximizing level of output and the profit-maximizing price for an
oligopolist cannot be calculated when we don’t know
A) what the concentration ratio for the oligopolist’s industry is.
B) what the minimum efficient scale in the oligopolist’s industry is.
C) the demand curve and the marginal revenue curve of the oligopolist.
D) the type of barrier to entry that exists in the oligopolist’s industry.
Into which category of aggregate expenditure would each of the following transactions
fall?
a. Sandra MacMillian purchases a new Ford Focus.
b. The city of Richardson buys 5 new garbage trucks.
c. Adrian Garcia buys a newly constructed townhome.
d. A consumer in Latvia orders an iPhone from Apple.
e. Ford Motor Company buys 300 new iPhones from Apple.
One implication of compensating differentials is that laws passed to protect the health
and safety of workers may not make workers better off than they were prior to the
passages of the laws. Why is this so?
A) Workers may suffer from cognitive dissonance, which means that the perception
workers have that their jobs are hazardous is not true.
B) If the laws make the work environment safer, there is no reason to pay workers a
compensating differential for the risk associated with their jobs.
C) The principal-agent problem that exists in the workplace may cause workers to shirk
more after the work environment becomes safer.
D) In non-competitive markets, workers are unlikely to receive a compensating
differential to compensate for jobs with extra risk. As a result, after the laws are passed
their wages will not change.