Figure 27-9
Given that the economy has moved from A to B in the graph above, which of the
following would the appropriate fiscal policy to achieve potential GDP?
A) increase taxes
B) increase government spending
C) decrease the money supply
D) increase interest rates
Figure 9-1 Figure 9-1 shows the U.S. demand
and supply for leather footwear.
Suppose the government allows imports of leather footwear into the United States.
What will be the quantity of imports?
A) 5 units
B) 10units
C) 15 units
D) 20 units
A barter economy is an economy where
A) goods and services are exchanged for money.
B) money is exchanged for goods and services.
C) goods and services are exchanged for other goods and services.
D) goods and services are exchanged for liabilities.
Consider the stock of ocean tuna which is massively overfished. It is rational for an
individual to exploit the resource rather than to conserve the stock because
A) the private benefit of harvesting tuna is higher than the social benefit of harvesting
it.
B) the private benefit of harvesting tuna is lower than the social benefit of harvesting it.
C) the social cost of harvesting the fish is lower than the private cost.
D) the private cost of harvesting the fish is lower than the social cost.
The automatic mechanism ________ the price level in the case of ________ and
________ the price level in the case of ________.
A) raises; recession; lowers; expansion
B) raises; expansion raises; recession
C) lowers; expansion; lowers; recession
D) lowers; recession; raises; expansion
A decrease in the demand for eggs due to changes in consumer tastes, accompanied by
a decrease in the supply of eggs as a result of an outbreak of Avian flu, will result in
A) a decrease in the equilibrium quantity of eggs and no change in the equilibrium
price.
B) a decrease in the equilibrium price of eggs and no change in the equilibrium
quantity.
C) a decrease in the equilibrium price of eggs; the equilibrium quantity may increase or
decrease.
D) a decrease in the equilibrium quantity of eggs; the equilibrium price may increase or
decrease.
Bank panics have largely disappeared in the United States because
A) banks are now required to hold a larger fraction of deposits as reserves.
B) bank loans are more closely monitored by the Federal Reserve.
C) of low interest rates.
D) of deposit insurance.
In the first half of 2011, automobile sales in the United States were lower than they
were in the first half of 2010. The decrease in auto sales impacts GDP because new
automobiles are counted as ________ when purchased by households and ________
when purchased by businesses.
A) nondurable goods; durable goods
B) consumption; investment
C) investment; consumption
D) durable goods; nondurable goods
The idea that individuals should be taxed in proportion to the marginal benefits that
they receive from public goods is called
A) the ability-to-pay principle.
B) the horizontal-equity principle.
C) the vertical-equity principle.
D) the benefits-received principle.
Figure 3-2
An increase in the expected future price of the product would be represented by a
movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.
Figure 2-10
In the circular flow diagram, economic agents M represent
A) households.
B) product markets.
C) firms.
D) factor markets.
Figure 11-4
Within a country, the impact of wars and revolutions and their subsequent destruction of
capital is reflected in the per-worker production function in the figure above by a
movement from
A) A to C.
B) B to C.
C) B to A.
D) E to B.
Decision trees are commonly used to illustrate how firms make business decisions that
depend on the actions of rival firms. A decision tree has boxes that contain points that
represent when firms must make the decisions contained in the boxes. What are these
points called?
A) option points
B) decision nodes
C) either-or terminals
D) decision options
In general, a “big ticket item” such as a house or new car will
A) tend to have a more elastic demand than a lower priced good.
B) tend to have an inelastic demand because spending on the item takes up a large share
of the average consumer’s budget.
C) tend to have an inelastic demand because it has many substitutes.
D) tend to have a more inelastic demand the more time that passes.
Suppose in the United States, the opportunity cost of producing a motor engine is 4 auto
bodies. In Canada, the opportunity cost of producing a motor engine is 2 auto bodies.
a. What is the opportunity cost of producing an auto body for the United States?
b. What is the opportunity cost of producing an auto body for Canada?
c. Which country has a comparative advantage in the production of auto bodies?
d. Which country has a comparative advantage in the production of motor engines?
Which of the following describes the relative positions of the demand curve and the
average total cost (ATC) curve of a monopolistically competitive firm that earns a profit
in the short run?
A) In the short run, the firm’s demand curve will lie above its ATC curve. The demand
curve will be tangent to the ATC curve in the long run.
B) In the short run, the firm’s demand curve will lie below its ATC curve. The demand
curve will be tangent to the ATC curve in the long run.
C) In the short run, the firm’s demand curve will cross its ATC curve at the ATC curve’s
lowest point. The demand curve will be above the ATC curve in the long run.
D) In the short run, the firm’s ATC curve will cross the demand curve at the profit
maximizing level of output. The demand curve will be tangent to the ATC curve in the
long run.
Table 19-15
Consider the following data on nominal GDP and real GDP (values are in billions of
dollars): The GDP deflator for 2012 equals
A) 94.1.
B) 105.1.
C) 106.2.
D) 108.5.
On the long-run aggregate supply curve,
A) an increase in the price level increases the aggregate quantity of GDP supplied.
B) an increase in the price level reduces the aggregate quantity of GDP supplied.
C) an increase in the price level has no effect on the aggregate quantity of GDP
supplied.
D) an increase in the price level increases the level of potential GDP.