Which of the following will most likely result from an unanticipated decrease in
aggregate supply due to unfavorable weather conditions in agricultural areas?
a. a decrease in inflation
b. a decrease in unemployment
c. a decrease in the general level of prices
d. an increase in the general level of prices
The consumer price index is
a. a measure of the increase in the average price of all of the goods that are included in
the calculation of GDP.
b. a comparison of the cost of buying a typical bundle of goods during a given period
with the cost of buying the same bundle during an earlier base period.
c. the ratio of the average price of a typical market basket of goods compared to the cost
of producing those goods during the previous year.
d. a comparison of the cost of the typical bundle of goods consumed in period 1 with
the cost of a different bundle of goods typically consumed in period 2.
If Thailand fixes the foreign exchange value of its currency and follows a highly
expansionary monetary policy,
a. Thailand will be unable to maintain both the fixed-exchange rate and the full
convertibility of its currency
b. Thailand will experience rapid economic growth.
c. it will be easier for Thailand to engage in international trade.
d. Thailand will have relatively low rates of inflation.
If high-level executives of a company award themselves sizable bonuses even though
the firm they manage is making losses and performing poorly, this event is most likely
to arise because of
a. the law of diminishing marginal returns.
b. competition among business firms for high-level executives.
c. economies of scale.
d. the principal-agent problem.
Which of the following goods are available at highly economical prices because the use
of mass production techniques substantially reduces their per unit production costs?
a. automobiles
b. DVD players
c. microwave ovens
d. all of the above
Under a flexible exchange rate system, which of the following will be most likely to
cause an appreciation in the exchange rate of the dollar relative to the English pound?
a. an economic boom in England, inducing English consumers to buy more
American-made automobiles, trucks, and computer products
b. higher real interest rates in England
c. inflation in the United States while prices are stable in England
d. attractive investment opportunities in England, inducing U.S. investors to buy stock
in English firms
An apple orchard currently hires 10 workers. The owner estimates that hiring an
additional worker would increase apple yields by 20 bushels per day. The price of
apples is $15 per bushel. The owner should hire the extra worker if the wage rate is no
greater than
a. $50 per day.
b. $150 per day.
c. $200 per day.
d. $300 per day.
Accurate measurement of GDP is important to business decision-makers because this
information will help them better determine the
a. general happiness of a country’s citizens.
b. course of the economy and the direction of demand for their products.
c. economic well-being of a particular group within a country.
d. amount of leisure time available and the quality of life in a country.
A decrease in the price of a resource would cause
a. producers to substitute other inputs for the resource.
b. the cost of products made from the resource to fall.
c. producers to use more of the resource.
d. none of the above.
e. both b and c above.
Which of the following is most likely to reduce the incidence of employee shirking?
a. use of the corporate business structure, rather than an individual proprietorship
b. closely relating the pay of workers to their productive contribution
c. payment of identical wage rates to all workers
d. providing workers with a year-end bonus if the business firm loses money during the
year
Suppose a new law requires all piercing studios to pass tougher licensing tests and to
begin using more costly sterilization methods. Other things constant, this law would
cause
a. an increase in the supply of piercings and a lower price for piercings.
b. an increase in the supply of piercings and a higher price for piercings.
c. a decrease in the supply of piercings and a higher price for piercings.
d. a decrease in the supply of piercings and a lower price for piercings.
If the GDP deflator in 2009 was 120 compared to a value of 100 during the 2004 base
year, this would indicate that
a. the inflation rate during 2009 was 20 percent.
b. the general level of prices during 2009 was 20 percent higher than during 2004.
c. the inflation rate during 2009 was 120 percent.
d. real GDP was 20 percent higher in 2009 than 2004.
If complete equality of income were legislated, which of the following would
economics predict?
a. People would become richer.
b. Society would gain utility from the extra goods produced.
c. Individuals would willingly work longer hours and thus produce more.
d. The incentive to produce and perform efficiently would be virtually eliminated.
The aggregate supply curve indicates the
a. relationship between prices and the aggregate quantity of goods and services
purchased by consumers, investors, governments, and foreigners (net exports).
b. relationship between prices and the natural rate of unemployment.
c. relationship between the real wage rate and the quantity of labor supplied by
households.
d. quantity of goods and services producers will supply at different price levels.
How much does it cost to tax a dollar of revenue away from the private sector and
transfer it to the government to finance a government program?
a. one dollar
b. less than one dollar because the administration of and compliance with the tax laws
creates jobs for people
c. more than a dollar because collection of the taxes requires resources that would
otherwise be available for private sector production
d. more than a dollar because of the excess burden resulting from the elimination of
productive exchanges by the taxes
e. Both c and d are correct.
Crowding out refers to the situation in which
a. borrowing by the federal government raises interest rates and causes firms to invest
less.
b. foreigners sell their bonds and purchase U.S. goods and services.
c. borrowing by the federal government causes state and local governments to lower
their taxes.
d. increased federal taxes to balance the budget causes interest rates to increase and
consumer credit to decrease.
Suppliers recognize there is a shortage in the market for their product when they notice
that
a. the quantity supplied exceeds the quantity demanded.
b. the quantity demanded is falling.
c. inventories are falling.
d. production exceeds new orders for the product.
e. government economists announce a shortage exists.
Which of the following will be required for a country to move up the income ladder and
achieve high-income status?
a. rapid growth of the money supply.
b. restrictions limiting the import of goods from other nations, particularly low-wage
countries.
c. tax incentives that encourage consumption rather than investment
d. sustained economic growth
The most important implicit cost generally omitted from the accounting statement of a
firm is the
a. rental cost of machinery.
b. cost of compliance with government regulations.
c. opportunity cost of the equity capital invested by the owners.
d. accounting cost incurred as the result of tax compliance.
In contrast with nominal GDP, real GDP refers to nominal GDP
a. minus exports.
b. minus personal income taxes.
c. corrected for price changes.
d. corrected for depreciation.
Saving is
a. the sum of the funds people hold in their checking accounts.
b. after-tax income that is not spent on consumption.
c. always equal to consumption.
d. equal to disposable income plus consumption.
When a union successfully raises the wages of its members, it will also
a. increase total productivity, which must rise in proportion to the wage rate.
b. encourage employers to find a substitute for the union labor.
c. raise the wages of nonunion workers.
d. increase the share of income allocated to labor as opposed to capital.
If a family earned $10,000 and, as a consequence, sustained a reduction of $4,000 in
government benefits, the family’s implicit marginal tax rate would be
a. 10 percent.
b. 40 percent.
c. 60 percent.
d. 75 percent.
Suppose there are 25,000 employed and 5,000 unemployed persons.
When a government subsidy is granted to the buyers of a product, sellers can end up
capturing some of the benefit because
a. the market price of the product will fall in response to the subsidy.
b. the market price of the product will rise in response to the subsidy.
c. the market price of the product will not change in response to the subsidy.
d. producers will reduce the supply of the product.
Which of the following was a result of the many programs introduced as part of the
New Deal?
a. a business environment of uncertainty that reduced output and investment
b. a speeding up of the economic recovery process once these programs were enacted
c. an increase in trade, investment, and output within the business sector
d. a steady decline in the unemployment rate
Use the figure below to answer the following question(s).
Figure 15-2
According to the modern expectational Phillips curve illustrated in Figure 15-2,
unemployment will temporarily rise above the natural rate of unemployment when
a. inflation turns out to be lower than what people expected.
b. inflation turns out to be higher than what people expected.
c. inflation turns out to be equal to what people expected.
d. all of the above are true.
Economists refer to consumers’ desire for goods now rather than in the future as
a. a positive rate of time preference.
b. the rational expectations hypothesis.
c. roundabout methods of production.
d. the inflationary premium.
As the U.S. price level rises relative to price levels in other countries, what would
happen in the U.S.?
a. consumption and net exports would decline
b. consumption and net exports would increase
c. consumption would increase and net exports would decrease
d. consumption would decrease and net exports would increase
e. consumption and net exports would remain constant
Approximately three-fourths of all U.S. firms are
a. corporations.
b. proprietorships.
c. partnerships.
d. consumer cooperatives.