Which of the following is not correct?
a. When a union is present in a labor market, wages are not determined by the
equilibrium of supply and demand.
b. Like any cartel, a union is a group of sellers acting together in the hope of exerting
their joint market power.
c. The process by which unions and firms agree on the terms of employment is called a
strike.
d. Most workers in the U.S. economy are not members of a union.
Historical evidence for the U.S. economy indicates that
a. recessions have occurred roughly once every six years since the 1960s.
b. the unemployment rate usually decreases during a recession and increases shortly
after the recession ends.
c. real GDP usually remains roughly constant during a recession and decreases shortly
after the recession ends.
d. changes in real GDP over the business cycle are largely attributable to changes in
investment over the business cycle.
Estimates of the values of which of the following non-market goods or services are
included in GDP?
a. the value of unpaid housework
b. the value of services provided by major household appliances purchased in a
previous period
c. the estimated rental value of owner-occupied homes
d. All of the above are included in GDP.
Figure 6-17
Refer to Figure 6-17. Suppose buyers, rather than sellers, were required to pay this tax
(in the same amount per unit as shown in the graph). Relative to the tax on sellers, the
tax on buyers would result in
a. buyers bearing a larger share of the tax burden.
b. sellers bearing a smaller share of the tax burden.
c. the same amount of tax revenue for the government.
d. Both a) and b) are correct.
In the special case of the 100 percent-reserve banking the money multiplier is
a. 1 and banks create money.
b. 1 and banks do not create money.
c. 2 and banks create money
d. 2 and banks do not create money.
Figure 9-3. The domestic country is China.
Refer to Figure 9-3. With trade, China will
a. import 100 pencil sharpeners.
b. import 250 pencil sharpeners.
c. export 150 pencil sharpeners.
d. export 250 pencil sharpeners.
Welfare economics is the study of
a. taxes and subsidies.
b. how technology is best put to use in the production of goods and services.
c. government welfare programs for needy people.
d. how the allocation of resources affects economic well-being.
Inward-oriented policies
a. are generally supported by economists.
b. are primarily concerned with the development of human capital.
c. in some ways are like prohibiting the use of certain technologies.
d. All of the above are correct.
Table 3-12
Labor Hours Needed to
Make 1 Pound of: Amount
Produced in 40 hours
Refer to Table 3-12. In 10 hours,
a. the rancher could produce 2.5 pounds of meat and 1.0 pound of potatoes.
b. the rancher could produce 1.0 pound of meat and 1.0 pound of potatoes.
c. the farmer could produce 0.25 pounds of meat and 1.6 pounds of potatoes.
d. the farmer could produce 0.75 pounds of meat and 1.25 pounds of potatoes.
At which interest rate is the present value of $35.00 two years from today equal to
about $30.00 today?
a. 5 percent
b. 6 percent
c. 7 percent
d. 8 percent
Which of the following statements about the price elasticity of demand is correct?
a. The price elasticity of demand for a good measures the willingness of buyers of the
good to buy less of the good as its price increases.
b. Price elasticity of demand reflects the many economic, psychological, and social
forces that shape consumer tastes.
c. Other things equal, if good x has close substitutes and good y does not have close
substitutes, then the demand for good x will be more elastic than the demand for good y.
d. All of the above are correct.
Other things the same, if there is an increase in the money supply growth rate that is
larger than expected, then in the short run
a. the natural rate of unemployment rises.
b. the natural rate of unemployment falls.
c. the unemployment rate will be above its natural rate.
d. the unemployment rate will be below its natural rate.
A bank has $200,000 in deposits and $190,000 in loans. It has loaned out all it can. It
has a reserve ratio of
a. 2.5 percent.
b. 5 percent.
c. 9.5 percent.
d. 10 percent.
From 1980-1987, U.S. net capital outflow as a percent of GDP became a
a. larger positive number.
b. smaller positive number.
c. larger negative number.
d. smaller negative number.
If at a given real interest rate desired national saving were $140 billion, domestic
investment were $90 billion, and net capital outflow were $40 billion, then at that real
interest rate in the loanable funds market there would be a
a. surplus; the real interest rate would rise.
b. surplus; the real interest rate would fall.
c. shortage; the real interest rate would rise.
d. shortage; the real interest rate would fall.
If the nominal interest rate is 1.5 percent and the rate of inflation is -0.5 percent, then
the real interest rate is
a. -4 percent.
b. -2 percent.
c. 1 percent.
d. 2 percent.
Which of the following is not an advantage of a multilateral approach to free trade over
a unilateral approach?
a. A multilateral approach can reduce trade restrictions abroad as well as at home.
b. A multilateral approach has the potential to result in freer trade.
c. A multilateral approach requires the agreement of two or more nations.
d. A multilateral approach may have political advantages.
Suppose you put $500 into a bank account today. Interest is paid annually and the
annual interest rate is 5.5 percent. The future value of the $500 is
a. $637.50 after 5 years and $822.09 after 10 years.
b. $637.50 after 5 years and $775.00 after 10 years.
c. $653.48 after 5 years and $854.07 after 10 years.
d. $688.36 after 5 years and $915.56 after 10 years.
U.S. Financial Crisis
Suppose that foreigners had reduced confidence in U.S. financial institutions and
believed that privately issued U.S. bonds were more likely to be defaulted on.
Refer to U.S. Financial Crisis. What would happen in the market for foreign-currency
exchange?
a. the supply of dollars would shift right and the exchange rate would rise.
b. the supply of dollars would shift right and the exchange rate would fall.
c. the supply of dollars would shift left and the exchange rate would rise.
d. None of the above is correct.
Identify each of the following acts as representing either saving or investment.
a. Fred uses some of his income to buy government bonds.
b. Julie takes some of her income and buys mutual funds.
c. Alex purchases a new truck for his delivery business using borrowed funds.
d. Elaine uses some of her income to buy stock in a major corporation.
e. Henrietta hires a builder to construct a new building for her bicycle shop.
Which of the following will both make people buy more?
a. wealth and interest rates rise.
b. wealth rises and interest rates fall.
c. wealth falls and interest rates rise.
d. wealth falls and interest rates fall.
For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $3
trillion and the government runs a surplus of $1 trillion. What are private saving and
national saving?
a. $4 trillion and $1 trillion, respectively
b. $4 trillion and $5 trillion, respectively
c. $1 trillion and $2 trillion, respectively
d. $1 trillion and $1 trillion, respectively
Inward-oriented policies
a. include imposing tariffs and other trade restrictions.
b. have generally increased productivity and growth in the countries that pursued them.
c. promote the production of goods and services that the country produces most
efficiently.
d. All of the above are correct.
Which of the following is consistent with moving from a shortage to equilibrium in the
market for foreign currency exchange?
a. the exchange rate falls so foreign residents want to buy more U.S. goods and services
b. the exchange rate falls so foreign residents want to buy fewer U.S. goods and
services
c. the exchange rate rises so foreign residents want to buy more U.S. goods and services
d. the exchange rate rises so foreign residents want to buy fewer U.S. goods and
services
Figure 8-3
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 8-3. The per unit burden of the tax on buyers is
a. P3 – P1.
b. P3 – P2.
c. P2 – P1.
d. P4 – P3.
Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price
index was 177 in 2001 and 25 in 2006. Ruben’s 2001 salary in 2006 dollars is
a. $75,000; thus, Ruben’s purchasing power increased between 2001 and
b. $75,000; thus, Ruben’s purchasing power decreased between 2001 and
c. $85,000; thus, Ruben’s purchasing power increased between 2001 and
d. $85,000; thus, Ruben’s purchasing power decreased between 2001 and
Which of the following is correct?
a. The Fed can control the money supply precisely.
b. The amount of money in the economy does not depend on the behavior of depositors.
c. The amount of money in the economy depends in part on the behavior of banks.
d. None of the above is correct.
Figure 9-15
Refer to Figure 9-15. With trade and without a tariff, the price and domestic quantity
demanded are
a. P1 and Q1.
b. P1 and Q4.
c. P2 and Q2.
d. P2 and Q3.
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. Assume that Zimbabwe and Portugal each has 180 machine
minutes available. If each country divides its time equally between the production of
toothbrushes and hairbrushes, then total production is
a. 24 toothbrushes and 12 hairbrushes.
b. 48 toothbrushes and 24 hairbrushes.
c. 96 toothbrushes and 48 hairbrushes.
d. 720 toothbrushes and 1440 hairbrushes.
Figure 8-17
The vertical distance between points A and B represents the original tax.
Refer to Figure 8-17. If the government changed the per-unit tax from $5.00 to $7.50,
then the price paid by buyers would be $10.50, the price received by sellers would be
$3, and the quantity sold in the market would be 0.5 units. Compared to the original tax
rate, this higher tax rate would
a. increase government revenue and increase the deadweight loss from the tax.
b. increase government revenue and decrease the deadweight loss from the tax.
c. decrease government revenue and increase the deadweight loss from the tax.
d. decrease government revenue and decrease the deadweight loss from the tax.
Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Refer to Table 3-1. What is Zardia’s opportunity cost of producing one bushel of
wheat?
a. 2/3 pound of beef
b. 3/4 pound of beef
c. 5/6 pound of beef
d. 3/2 pounds of beef
If a county has 25 billion euros of imports, 15 billion euros of exports, and sells 20
billion euros of assets to foreigners, how many foreign assets do domestic residents
purchase?
a. 5 billion euros
b. 10 billion euros
c. 30 billion euros
d. None of the above are correct.
According to the assumptions of the quantity theory of money, if the money supply
increases by 5 percent, then
a. nominal and real GDP would rise by 5 percent.
b. nominal GDP would rise by 5 percent; real GDP would be unchanged.
c. nominal GDP would be unchanged; real GDP would rise by 5 percent.
d. neither nominal GDP nor real GDP would change.