Suppose the opportunity cost is a constant 500 TV sets for 1 car in Canada and 1,000
TV sets for 8 cars in Mexico. Then, if both countries specialize in accordance with their
comparative advantage, the production of 1,000 extra TV sets in one country and 1,000
fewer TV sets in the other would imply that the world as a whole can have
a. 2 more cars
b. 6 more cars
c. 8 more cars
d. 125 more cars
e. 500 more cars
Pollution is a form of market failure called a public externality.
If the price of used automobiles increased dramatically relative to all other prices, and
the demand for all goods remained the same, which of the following would most likely
occur?
a. The GDP price index would decrease less than the CPI.
b. Both the GDP price index and the CPI would decrease.
c. The GDP price index would increase more than the CPI.
d. The CPI would increase more than the GDP price index.
e. Both the GDP price index and the CPI would increase by the same amount.
Maximizing output by following the principle of comparative advantage requires
Refer to Figure 7-1. Based on the figure,
a. since 1990, the price level has fallen
b. the price level was the highest in 1980
c. since 1965, the price level has risen sometimes and fallen other times
d. since 1965, the price level has risen every year
e. cannot tell what has happened to the price level since 1965
If the interest rate increased, which of the following would occur?
a. Nothing would occur.
b. The consumption-income line would shift downward.
c. The consumption-income line would shifts upward.
d. There would be an rightward movement along the consumption-income line.
e. There would be a leftward movement along the consumption-income line.
Which concept springs to mind when thinking of the classical model?.
a. Inflation.
b. Population growth.
c. Markets clear.
d. The microeconomy.
e. Money supply.
Which of the following is counted as money?
a. Bonds
b. Credit card payments
c. Credit card limits
d. Currency
e. Corporate stock
Using the following information on a hypothetical economy in equilibrium, calculate
total output for 2008.
If exports are exactly equal to imports, total output for 2008 is
a. $5.2 trillion
b. $5.7 trillion
c. $8.4 trillion
d. $8.7 trillion
e. $13.9 trillion
All of the following are examples of demand shocks, except one. Which is the
exception?
a. A spontaneous decrease in money demand
b. A tax increase
c. A contraction of the money supply by the Fed
d. An increase in the price level
e. A reduction in government spending
The expansion of 2002 and beyond was due, at least in part to
a. interest rate increases.
b. increases in housing wealth.
c. increases in investment spending.
d. large reductions in federal spending.
e. increases in taxes.
All types of unemployment are harmful to the economy.
Each point along the market demand curve shows
The presence of diminishing marginal returns to labor leads to decreasing marginal
revenue product of labor and a downward-sloping demand for labor curve.
In the classical model, the supply of funds to the loanable funds market comes from
a. household saving and the government’s budget surplus, if any
b. net taxes
c. household saving and the government budget deficit, if any
d. planned investment
e. total income
Diminishing marginal returns are the reason why some industries have
positively-sloped long-run average cost curves.
Henry decides to quit his job (earning $50,000 per year), take his $60,000 in savings,
and open a dry cleaning store. Figure 8-1 shows the revenues and expenditures for his
first year of operation. If Henry could have earned $3,000 in interest on the money used
to open the store, his economic profit would have been
Each of the following, except one, might be a barrier to entry into a labor market.
Which is the exception?
Which of the following is a possible impetus for a banking panic?
a. An individual bank fails.
b. A large, very important bank fails.
c. Congress increases the amount of demand deposits that are protected by insurance.
d. Banking rules change to make it harder for banks to make bad loans.
e. Changes in the discount rate.