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Inflation is a rise in:
A. the general level of prices over time.
B. the standard of living over time.
C. industrial production.
D. real GDP.
Refer to the above graph, which shows four different Lorenz curves (I, II, III, and IV).
The movement from point b to point e in the graph would indicate that:
A. 80 percent of households now receive 40 percent of income instead of 60 percent of
households.
B. 80 percent of income goes to 40 percent of households instead of 60 percent of
households.
C. 40 percent of income goes to 60 percent of households instead of 80 percent of
households.
D. 60 percent of households now receive 20 percent instead of 60 percent of income.
Answer the next question on the basis of the following five schedules, all of which
represent income tax schedules for an economy. All figures are in billions of dollars.
Which of the above schedules represent(s) a proportional tax?
A. II and IV
B. III and V
C. IV only
D. I only
Network effects are:
A. increases in the value of a product to each user, including existing users, as the total
number of users rises.
B. reductions in per-unit production cost as firms learn by doing.
C. increases in demand resulting from products being mentioned positively in a
television program.
D. the change in real GDP resulting from a change in investment or government
spending.
Refer to the above diagram. A shift from AD1 to AD2 would be consistent with what
economic event in U.S. history?
A. Demand-pull inflation in the late 1960s.
B. Cost-push inflation in the mid-1970s.
C. Full-employment in the late 1990s.
D. Recession in 2001.
Refer to the above graphs. Which pairs of budget constraints represent only a decrease
in income, but no change in the price of X and Y?
A. Graph A
B. Graph B
C. Graph C
D. Graph D
The earned income tax credit (EITC) is, in essence:
A. a tax credit for corporate contributions to charity.
B. a tax break for businesses that invest in community programs.
C. an income payment to those individuals who are not able to work.
D. a wage subsidy for low-income workers to offset Social Security taxes.
Which of the following is a consequence of rent controls established to keep housing
affordable for the poor?
A. Less rental housing is available as prospective landlords find it unprofitable to rent at
restricted prices.
B. The quality of rental housing declines as landlords lack the funds and incentive to
maintain properties.
C. Apartment buildings are torn down in favor of office buildings, shopping malls, and
other buildings where rents are not controlled.
D. All of these are consequences of rent controls.
A government subsidy to the producers of a product:
A. reduces product supply.
B. increases product supply.
C. reduces product demand.
D. increases product demand.
Suppose that Teresa Thomas obtains 12 units of utility from the last dollar of income
she receives, while Richard Voote obtains 7 units of utility from the last dollar of his
income. Both have identical marginal-utility-of-income-curves. Those who:
A. favor an equal distribution of income would advocate redistributing income from
Richard to Teresa.
B. favor an equal distribution of income would advocate redistributing income from
Teresa to Richard.
C. favor an equal distribution of income would be content with the distribution of
income between Teresa and Richard.
D. do not favor an equal distribution of income would argue that any redistribution
between Teresa and Richard would increase total utility.
About what percentage of Hispanics lived in poverty in 2009?
A. 9 percent
B. 18 percent
C. 25 percent
D. 44 percent
The percentage of total before-tax income received by the lowest 20 percent of
households in 2009 was about:
A. 1.8 percent.
B. 3.4 percent.
C. 8.7 percent.
D. 22.9 percent.
If the secular trend of labor productivity rises from 2 percent per year to 4 percent, the
number of years that it will take for the standard of living to double will decline by
about:
A. 5 years.
B. 10 years.
C. 17 years.
D. 23 years.
Suppose a monopolist calculates that at present output and sales levels, marginal
revenue is $1.00 and marginal cost is $2.00. He could maximize profits (or minimize
losses) by:
A. decreasing price and increasing output.
B. increasing price and decreasing output.
C. decreasing price and leaving output unchanged.
D. decreasing output and leaving price unchanged.
The following economy produces two products.
Refer to the above table. The total opportunity cost of the three units of tanks is:
A. 200 units of autos.
B. 350 units of autos.
C. 650 units of autos.
D. 1000 units of autos.
Refer to the above diagram, in which S1 and D1 represent the original supply and
demand curves and S2 and D2 the new curves. In this market:
A. the equilibrium position has shifted from M to K.
B. an increase in demand has been more than offset by an increase in supply.
C. the new equilibrium price and quantity are both greater than they were originally.
D. point M shows the new equilibrium position.
X-inefficiency is said to occur when a firm's:
A. average costs of producing any output are greater than the minimum possible
average costs.
B. marginal costs of producing any output are greater than the minimum possible total
costs.
C. total costs of producing any output are greater than the minimum possible average
costs.
D. short-run costs of producing any output are greater than the long-run costs.
Answer the next question based on the following balance sheet for the First National
Bank. Assume the reserve ratio is 15 percent.
Refer to the above data. This bank can make new loans of up to:
A. $50,000.
B. $41,000.
C. $32,000.
D. $27,000.
The above diagram suggests that:
A. when marginal product is zero, total product is at a minimum.
B. when marginal product lies above average product, average product is rising.
C. when marginal product lies below average product, average product is rising.
D. when total product is at a maximum, so are marginal product and average product.
The best example of a land-intensive commodity is:
A. tractors.
B. DVD players.
C. wheat.
D. chemicals.
Refer to the above diagram. Assume that G and T1 are the relevant curves, the economy
is currently at B, and the full-employment GDP is A. This economy has a(n):
A. cyclically adjusted budget surplus.
B. actual budget deficit.
C. cyclically adjusted budget deficit.
D. actual budget surplus.
By requiring car producers to install emission control devices on cars, the government
forces these producers to internalize some of the external costs of auto pollution. This
will lead to the equilibrium price of cars:
A.decreasing and the quantity increasing.
B.decreasing and the quantity decreasing.
C.increasing and the quantity increasing.
D.increasing and the quantity decreasing.
Refer to the above diagram. All data are for the short run. Which of the following
statements is correct?
A. Production is profitable only when price is at P2.
B. Average fixed cost is P1P3 at output Q1.
C. The firm will produce an output of Q1 when price is P1.
D. At price P1, the firm will close down.
A commercial bank has actual reserves of $1 million and checkable-deposit liabilities of
$9 million, while the required reserve ratio is 10 percent. The excess reserves of the
bank are:
A. $50,000.
B. $100,000.
C. $900,000.
D. $1 million.
Checkable deposits are money because they are:
A. legal tender.
B. fiat money.
C. acceptable in exchange.
D. token money.
The key concept that serves as the basis for the study of economics is:
A. opportunity cost.
B. unemployment.
C. money.
D. scarcity.
Autos and chemicals are in units of one million
Refer to the above tables. If Germany and the United States engage in trade, the terms
of trade will be between:
A. 3 and 4 units of autos for 1 unit of chemicals.
B. 2 and 4 units of autos for 1 unit of chemicals.
C. 2 and 4 units of chemicals for 1 unit of autos.
D. .33 and .5 unit of autos for 1 unit of chemicals.
In the labor market shown above, if a minimum wage level is set at Wm, it will cause:
A. employment to increase from A to B.
B. employment to decrease from C to B.
C. employment to decrease from B to A.
D. BC workers to be hired.
Which factor leads to wage differentials?
A. Homogeneous workers.
B. Purely competitive labor markets.
C. Investments in human capital by some workers.
D. Workers who are indifferent about which jobs they might hold.
An increase in the real value of stock prices, which is independent of a change in the
price level, would affect aggregate demand due to the:
A. foreign purchases effect.
B. real-balances effect.
C. interest-rate effect.
D. wealth effect.
