Melody decides to spend three hours working overtime rather than going to the park
with her friends. She earns $20 per hour for overtime work. Her opportunity cost of
working is
a. the $60 she earns working.
b. the $60 minus the enjoyment she would have received from going to the park.
c. the enjoyment she would have received had she gone to the park.
d. nothing, since she would have received less than $60 worth of enjoyment from going
to the park.
The series of bank failures in 1907 occurred despite the creation of the Federal Reserve
many years earlier.
a. True
b. False
Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of
wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of
wheat per year. Each nation has 10 workers. For many years the two countries traded,
each completely specializing according to their respective comparative advantages.
Now, however, war has broken out between them and all trade has stopped. Without
trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per
year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. The war
has caused the combined yearly output of the two countries to decline by
a. 10 units of corn and 10 units of wheat.
b. 20 units of corn and 20 units of wheat.
c. 30 units of corn and 30 units of wheat.
d. 40 units of corn and 40 units of wheat.
A Texas ranch sells beef to a U.S. company that sells it to a grocery chain in Japan.
These sales
a. decrease U.S. exports but increase U.S. net exports.
b. decrease both U.S. exports and U.S. net exports.
c. increase both U.S. exports and U.S. net exports.
d. increase U.S. exports but decrease U.S. net exports.
An American worker who becomes unemployed typically receives 100% of her former
salary during the first six months she is unemployed.
a. True
b. False
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.
At one time, people in a certain country had no access to banks; they relied exclusively
on currency. Then, a fractional-reserve banking system was created. As a result, the
money supply
a. increased. The central bank could have reduced the size of this increase by buying
bonds.
b. increased. The central bank could have reduced the size of this increase by selling
bonds.
c. decreased. The central bank could have reduced the size of this decrease by buying
bonds.
d. decreased. The central bank could have reduced the size of this decrease by selling
bonds.
Human capital is the
a. knowledge and skills that workers acquire through education, training, and
experience.
b. stock of equipment and structures that is used to produce goods and services.
c. total number of hours worked in an economy.
d. same thing as technological knowledge.
According to the short-run Phillips curve, if the central bank increases the money
supply, then
a. inflation and unemployment will both fall.
b. inflation and unemployment will both rise.
c. inflation will fall and unemployment will rise.
d. inflation will rise and unemployment will fall.
There is only one explanation for why economists give conflicting advice on policy
issues, and it is that they have different values about what policy should try to
accomplish.
a. True
b. False
Even though the difference in labor-force participation rates of U.S. males and females
has narrowed, the labor- force participation rate of males remains higher than that of
females.
a. True
b. False
If the multiplier is 6, then the MPCis
a. 0.16.
b. 0.83.
c. 0.71.
d. 0.86.
In 1936, John Maynard Keynes published a book, TheGeneralTheory, which attempted
to explain
a. stagflation.
b. the classical dichotomy.
c. short-run economic fluctuations.
d. how changes in the money supply had created the Great Depression.
What would happen in the market for loanable funds if the government were to
decrease the tax rate on interest income?
a. The supply of loanable funds would shift rightward and investment would increase.
b. The supply of loanable funds would shift leftward and investment would decrease.
c. The demand for loanable funds would shift rightward and investment would increase.
d. The demand for loanable funds would shift leftward and investment would decrease.
If the Mexican nominal exchange rate does not change, but prices rise faster in Mexico
than in all other countries, then the Mexican real exchange rate
a. does not change.
b. rises.
c. declines.
d. There is not enough information to answer the question
Atlas Corporation is in sound financial condition. It sells a long-term bond. Which of
the following make the interest rate on this bond lower than otherwise?
a. Both Altas’ sound finances and the long term of the bond.
b. Atlas’ sound finances but not the long term of the bond.
c. The long term of the bond but not Atlas’ sound finances.
d. Neither Atlas’ sound finances nor the long term of the bond.
Table 3-36
RefertoTable3-36.Antigua has a comparative advantage in the production of
a. towels and Barbuda has a comparative advantage in the production of umbrellas.
b. umbrellas and Barbuda has a comparative advantage in the production of towels.
c. both goods and Barbuda has a comparative advantage in the production of neither
good.
d. neither good and Barbuda has a comparative advantage in the production of both
goods.
The slope of a horizontal line is infinite, and the slope of a vertical line is zero.
a. True
b. False
A farmer sells $25,000 worth of apples to individuals who take them home to eat,
$50,000 worth of apples to a company that uses them all to produce cider, and $75,000
worth of apples to a grocery store that will sell them to households. How much of the
farmer’s sales will be included as apples in GDP?
a. $25,000
b. $150,000
c. $100,000
d. $125,000
Country A experienced a growth rate of real GDP per person of 2.5 percent per year
throughout the 1900’s. In view of other countries’ experiences during this time country
A’s growth was
a. exceptionally high.
b. moderately high.
c. moderately low.
d. exceptionally low.
In United States history there were long periods when most prices fell.
a. True
b. False
In the long run, an increase in the money supply growth rate
a. raises expected inflation so the short-run Phillips curve shifts right.
b. raises expected inflation so the short-run Phillips curve shifts left.
c. reduces expected inflation so the short-run Phillips curve shifts left.
d. None of the above is correct.
Which of the following headlines is more closely related to what microeconomists
study than to what macroeconomists study?
a. Unemployment rate falls from 7.5 percent to 7.3 percent.
b. Real GDP falls by 0.4 percent in the third quarter.
c. Inflation was 2.4 percent last year.
d. The price of gasoline rises due to rising oil prices.
An increase in the money supply might indicate that the Fed had
a. purchased bonds in an attempt to increase the federal funds rate.
b. purchased bonds in an attempt to reduce the federal funds rate.
c. sold bonds in an attempt to increase the federal funds rate.
d. sold bonds in an attempt to reduce the federal funds rate.
Unions contribute to
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.
Speculative bubbles may arise in part because the value of the stock to a stockholder
depends on the final sale price.
a. True
b. False
Which of the following is notincluded in GDP?
a. carrots grown in your garden and eaten by your family
b. carrots purchased at a farmer’s market and eaten by your family
c. carrots purchased at a grocery store and eaten by your family
d. None of the above are included in GDP.
On a given short-run Phillips curve which of the following is held constant?
a. the level of GDP
b. the unemployment rate
c. expected inflation
d. employment
A company that produces baseball gloves is considering buying some new equipment
that it expects will increase future profits. If the interest rate rises, then the present value
of these future profits
a. rises. The company is more likely to buy the equipment.
b. rises. The company is less likely to buy the equipment.
c. falls. The company is more likely to buy the equipment.
d. falls. The company is less likely to buy the equipment.
Table 3-24
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
RefertoTable3-24. The opportunity cost of 1 unit of bread for Spain is
a. 1/2 unit of cheese.
b. 1/2 hour of labor.
c. 2 units of cheese.
d. 8 hours of labor.
During a certain year, the consumer price index increased from 120 to 132 and the
purchasing power of a person’s bank account increased by 4 percent. For that year,
a. the nominal interest rate was 6 percent.
b. the nominal interest rate was 14 percent.
c. the inflation rate was 12 percent.
d. the inflation rate was 9 percent.
Which of the following is notcorrect?
a. Unions are exempt from U.S. antitrust laws.
b. The Wagner Act of 1935 prevents U.S. employers from interfering when workers try
to organize unions.
c. The National Labor Relations Board is the U.S. government agency that enforces
workers’ right to unionize.
d. Right-to-work laws prevent firms from hiring permanent replacements for workers
who are on strike.