Which of the following is “crowded out” by higher interest rates that can be the result of
expansionary fiscal policy?
A) consumption
B) private investment
C) net exports
D) All of the above are crowded out by higher interest rates.
A(n) ________ is represented by a leftward shift of the demand curve while a(n)
________ is represented by a movement along a given demand curve.
A) decrease in demand; increase in demand
B) decrease in demand; increase in quantity demanded
C) increase in demand; decrease in quantity demanded
D) decrease in quantity demanded; decrease in demand
Suppose you lend $1,000 at an interest rate of 10 percent over the next year. If the
expected real interest rate at the beginning of the loan contract is 4 percent, then what
rate of inflation over the upcoming year would be most beneficial to you as the lender?
An inflation rate
A) equal to 0 percent.
B) greater than 6 percent.
C) equal to 6 percent.
D) equal to 4 percent.
If you transfer all of your currency to your checking account, then initially, M1 will
________ and M2 will ________.
A) increase; not change
B) not change; increase
C) not change; not change
D) decrease; increase
National income equals gross domestic product
A) plus sales taxes.
B) plus government transfer payments.
C) minus the consumption of fixed capital.
D) minus government transfer payments.
Microsoft hires marketing and sales specialists to decide what prices it should set for its
products, whereas a wealthy corn farmer in Iowa, who sells his output in the world
commodity market, does not. Why is this so?
A) because Microsoft is large enough to hire the best people in the field
B) because Microsoft could potentially lose sales if it sets prices indiscriminately
C) because the wealthy corn farmer is a price taker who chooses his optimal output
independently of market price, but Microsoft’s optimal output depends on the price it
selects
D) because unlike Microsoft, the wealthy corn farmer is probably a monopolist
Figure 7-1 Figure 7-1 represents the
market for vaccinations. Vaccinations are considered a benefit to society, and the figure
shows both the marginal private benefit and the marginal social benefit from
vaccinations.
The market equilibrium quantity is ________ thousand vaccinations.
A) 100
B) 200
C) 300
D) >300
A new area of economics studies situations in which people appear to be making
choices that do not appear to be economically rational. This area is called
A) behavioral economics.
B) irrational economics.
C) social economics.
D) new wave economics.
Suppose the government spending multiplier is 2. The federal government cuts
spending by $40 billion. What is the change in GDP if the price level is not held
constant?
A) an increase of less than $80 billion
B) an increase equal to $80 billion
C) an increase of greater than $80 billion
D) a decrease of less than $80 billion
E) a decrease of more than $80 billion
Which of the following is the smallest portion of the market basket of goods that makes
up the CPI?
A) housing
B) food and beverages
C) transportation
D) apparel
Suppose the majority of the shares of British Airways stock were sold to a firm in the
United States. Assuming all else remains constant, this will
A) decrease the balance of the U.S. financial account.
B) decrease foreign direct investment in the United States.
C) decrease the balance of the U.S. current account.
D) increase net portfolio investment in the United States.
E) create a capital inflow in the United States.
Table 14-8
Two rival oligopolists in the athletic
supplements industry, the Power Fuel Company and the Brawny Juice Company, have
to decide on their pricing strategy. Each can choose either a high price or a low price.
Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn
depending on the pricing strategy it adopts. If the two firms collude, is there an
incentive for either to cheat on the collusion agreement?
A) No, neither firm can gain by cheating.
B) Yes, but only Brawny Juice is in a position to gain by cheating.
C) Yes, but only Power Fuel is in a position to gain by cheating.
D) Yes, either firm can gain if it alone cheats.
Contractionary fiscal policy to prevent real GDP from rising above potential real GDP
would cause the inflation rate to be ________ and real GDP to be ________.
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower
Rank these three items in terms of the elasticity of the demand for them at any given
price, from most elastic to least elastic: hot beverages, coffee and Peets’ Coffee.
A) hot beverages, coffee, Peets’ Coffee
B) Peets’ Coffee, coffee, hot beverages
C) coffee, Peets’ Coffee, hot beverages
D) coffee, hot beverages, Peets’ Coffee
Assume that both the demand curve and the supply curve for DVD players shift to the
left but the demand curve shifts more than the supply curve. As a result
A) both the equilibrium price and quantity of DVD players will decrease.
B) the equilibrium price of DVD players will decrease; the equilibrium quantity may
increase or decrease.
C) the equilibrium price of DVD players may increase or decrease; the equilibrium
quantity will decrease.
D) the equilibrium price of DVD players will increase; the equilibrium quantity may
increase or decrease.
Which of the following best explains why productivity growth in the United States has
been faster than in other leading industrialized nations?
A) There are fewer government regulations in the United States regarding the way firms
can hire and fire workers.
B) The financial systems of foreign countries are generally more efficient than those in
the United States.
C) European countries have more flexible policies regarding the number of hours
employees are permitted to work.
D) Job mobility in the United States is more restricted than it is in many foreign
countries.
Expansionary fiscal policy to prevent real GDP from falling below potential real GDP
would cause the inflation rate to be ________ and real GDP to be ________.
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower
In August 1979, President Jimmy Carter appointed ________ as chairman of the Board
of Governors of the Federal Reserve System.
A) Ben Bernanke
B) Alan Greenspan
C) G. William Miller
D) Paul Volcker
If property rights are not enforced in a country,
A) the market system will still work smoothly.
B) entrepreneurs are unlikely to risk their own funds investing in such an economy.
C) that country’s growth rate will not be affected.
D) that country will grow more rapidly because of the reduction of law suits.