When a country experiences capital flight, the interest rate
a. falls because the demand for loanable funds shifts left.
b. falls because the supply for loanable funds shifts right.
c. rises because the demand for loanable funds shifts right.
d. rises because the supply for loanable funds shifts left.
Sophia puts money in the bank and earns a 5 percent nominal interest rate. If the
inflation rate is 2 percent, then after one year,
a. Sophia will have 3 percent more money, which will purchase 5 percent more goods.
b. Sophia will have 3 percent more money, which will purchase 7 percent more goods.
c. Sophia will have 5 percent more money, which will purchase 3 percent more goods.
d. Sophia will have 5 percent more money, which will purchase 7 percent more goods.
Which of the following is not an expression for the sum of all the individual demand
curves for a product?
a. total demand
b. market demand
c. equilibrium demand
d. aggregate demand
Table 3-3
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Machine Minutes
Needed to Make 1
Refer to Table 3-3. Which of the following represents Zimbabwe’s and Portugal’s
production possibilities frontiers when each country has 60 minutes of machine time
available?
a. Zimbabwe Portugal
b. Zimbabwe Portugal
c. Zimbabwe Portugal
d. Zimbabwe Portugal
Table 4-4
Refer to Table 4-4. If these are the only four sellers in the market, then when the price
increases from $6 to $8, the market quantity supplied
a. increases by 0.5 units.
b. increases by 2 units.
c. decreases by 4 units.
d. increases by 42 units.
The steps involved in calculating the consumer price index and the inflation rate, in
order, are as follows:
a. Choose a base year, update the basket, find the prices, estimate the basket’s cost,
compute the index, and compute the inflation rate.
b. Choose a base year, fix the basket, find the prices, compute the inflation rate,
compute the basket’s cost, and compute the index.
c. Fix the basket, find the prices, compute the basket’s cost, choose a base year and
compute the index, and compute the inflation rate.
d. Fix the basket, find the prices, compute the inflation rate, compute the basket’s cost,
and choose a base year and compute the index.
Suppose a basket of goods and services has been selected to calculate the CPI and 2002
has been chosen as the base year. In 2002, the basket’s cost was $75.00; in 2004, the
basket’s cost was $79.50; and in 2006, the basket’s cost was $85.86. The value of the
CPI was
a. 100 in 2002.
b. 106 in 2004.
c. 114.48 in 2006.
d. All of the above are correct.
According to purchasing power parity, if the Federal Reserve increased the money
supply
a. U.S. prices would rise and the nominal exchange rate would rise.
b. U.S. prices would rise and the nominal exchange rate would fall.
c. U.S. prices would fall and the nominal exchange rate would rise.
d. U.S. prices and the nominal exchange rate would fall.
Figure 9-11
Refer to Figure 9-11. Producer surplus plus consumer surplus in this market after trade
is
a. A + B.
b. A + B + C.
c. B + C + D.
d. A + B + C + D.
Sellers of a product will bear the larger part of the tax burden, and buyers will bear a
smaller part of the tax burden, when the
a. tax is placed on the sellers of the product.
b. tax is placed on the buyers of the product.
c. supply of the product is more elastic than the demand for the product.
d. demand for the product is more elastic than the supply of the product.
Table 11-2
The table below pertains to Iowan, an economy in which the typical consumer’s basket
consists of 3 pounds of pork and 4 bushels of corn.
Refer to Table 11-2. If 2008 is the base year, then the CPI for 2009 was
a. 73.5.
b. 100.
c. 136.1.
d. 147.
OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily
due to
a. an inelastic demand for oil and a reduction in the amount of oil supplied.
b. a reduction in the amount of oil supplied and a world-wide oil embargo.
c. a world-wide oil embargo and an elastic demand for oil.
d. a reduction in the amount of oil supplied and an elastic demand for oil.
Figure 9-13
Refer to Figure 9-13. With trade, producer surplus is
a. $900.
b. $1,100.
c. $1,500.
d. $2,000.
Aggregate demand shifts right if
a. taxes rise and shifts left if stock prices rise.
b. taxes rise and shifts left if stock prices fall.
c. taxes fall and shifts left if stock prices rise.
d. taxes fall and shifts left is stock prices fall.
Which of the following statements best represents economists’ beliefs about the bias in
the CPI as a measure of the cost of living?
a. Economists agree that the bias in the CPI is a very serious problem.
b. Economists agree that the bias in the CPI is not a serious problem.
c. Economists agree on the severity of the CPI bias, but there is still debate on what to
do about it.
d. There is still debate among economists on the severity of the CPI bias and what to do
about it.
Table 5-2
Refer to Table 5-2. Using the midpoint method, if the price falls from $40 to $20, the
absolute value of the price elasticity of demand is
a. 20.
b. 10.
c. 2.33.
d. 0.43.
XDF Corporation had a P/E ratio of 25, earnings per share of $4, and retained earnings
per share of $3. What was its dividend yield?
a. 4%
b. 3%
c. 1%
d. None of the above is correct.
Which of the following isnot correct?
a. Government debt can continue to rise forever.
b. If the government uses funds to pay for investment programs, on net the debt need
not burden future generations.
c. Social Security does not transfer wealth from younger generations to older
generations.
d. The average U.S. citizens’ share of the government debt represents about 1 percent of
her lifetime income.
What word do economists use to refer to the purchase of goods that will be used in the
future to produce more goods and services?
a. capital
b. consumption
c. investment
d. costs
Table 3-5
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Labor Hours Needed
to Make 1 Unit of Number of Units
Produced in 40 Hours
Refer to Table 3-5. Which of the following combinations of cheese and bread could
Spain produce in 40 hours?
a. 2.25 units of cheese and 4 units of bread.
b. 5.5 units of cheese and 3 units of bread.
c. 7 units of cheese and 1.5 units of bread.
d. 10 units of cheese and 5 units of bread.
Figure 9-5
Refer to Figure 9-5. With trade, consumer surplus is
a. $245.
b. $362.50.
c. $367.50.
d. $607.50.
When policymakers set prices by legal decree, they
a. are usually following the advice of mainstream economists.
b. improve the organization of economic activity.
c. obscure the signals that normally guide the allocation of society’s resources.
d. are demonstrating a willingness to sacrifice fairness for the sake of a gain in
efficiency.
Figure 3-7
Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier
Refer to Figure 3-7. If the production possibilities frontiers shown are each for 4 hours
of work, then which of the following combinations of bowls and cups could Bintu and
Juba together make in a given 4-hour production period?
a. 1 bowl and 14 cups
b. 2 bowls and 11 cups
c. 3 bowls and 10 cups
d. 5 bowls and 5 cups
If the federal funds rate were below the level the Federal Reserve had targeted, the Fed
could move the rate back towards its target by
a. buying bonds. This buying would increase the money supply.
b. buying bonds. This buying would reduce the money supply.
c. selling bonds. This selling would increase the money supply.
d. selling bonds. This selling would reduce the money supply.
The tax incidence
a. is the manner in which the burden of a tax is shared among participants in a market.
b. can be shifted to the buyer by imposing the tax on the buyers of a product in a
market.
c. can be shifted to the seller by imposing the tax on the sellers of a product in a market.
d. All of the above are correct.
A steel company sells some steel to a bicycle company for $150. The bicycle company
uses the steel to produce a bicycle, which it sells for $250. Taken together, these two
transactions contribute
a. $150 to GDP.
b. $250 to GDP.
c. between $250 and $400 to GDP, depending on the profit earned by the bicycle
company when it sold the bicycle.
d. $400 to GDP.
If the unemployment rate is below the natural rate, then
a. inflation is less than expected. As inflation expectations are revised the short-run
Phillips curve will shift right.
b. inflation is less than expected. As inflation expectations are revised the short-run
Phillips curve will shift left.
c. inflation is greater than expected. As inflation expectations are revised the short-run
Phillips curve will shift left.
d. inflation is greater than expected. As inflation expectations are revised the short-run
Phillips curve will shift right.
If there is an increase in the money supply, in the short run
a. the interest rises. It takes several weeks for spending to fully respond to this change.
b. the interest rises. It takes several months for spending to fully respond to this change.
c. the interest falls. It takes several weeks for spending to fully respond to this change.
d. the interest falls. It takes several months for spending to fully respond to this change.
Figure 4-5
Refer to Figure 4-5. Suppose that the federal government is concerned about obesity in
the United States. Congress is considering two plans. One would require “junk food”
producers to include warning labels on all junk food. The other would impose a tax on
all products considered to be junk food. We could illustrate the tax as producing a
movement from
a. Point A to Point B in Panel 1.
b. Point B to Point A in Panel 1.
c. Point A to Point C in Panel 2.
d. Point C to Point A in Panel 2.
Figure 9-5
Refer to Figure 9-5. The increase in total surplus resulting from trade is
a. $60, since producer surplus increases by $180 and consumer surplus falls by $240.
b. $60, since consumer surplus increases by $180 and producer surplus falls by $240.
c. $75, since consumer surplus increases by $240 and producer surplus falls by $165.
d. $75, since consumer surplus increases by $300 and producer surplus falls by $225.
Which of the following restrictions implies that private saving and investment are equal
for a closed economy?
a. Consumption and private saving are equal.
b. The economy’s government is running neither a surplus nor a deficit.
c. Private saving and public saving are both zero.
d. No restriction is necessary; private saving and investment are equal for all closed
economies.