Figure 6-7
Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20
units of the good?
a. a price ceiling set at $4
b. a price ceiling set at $5
c. a price floor set at $7
d. a price floor set at $8
Changes in the interest rate
a. shift aggregate demand whether they are caused by changes in the price level or by
changes in fiscal or monetary policy.
b. shift aggregate demand if they are caused by changes in the price level, but not if
they are caused by changes in fiscal or monetary policy.
c. shift aggregate demand if they are caused by fiscal or monetary policy, but not if they
are caused by changes in the price level.
d. do not shift aggregate demand.
Table 15-2
2009 Labor Data for Baltivia
Refer to Table 15-2. How many people were unemployed in Baltivia in 2009?
a. 1,400
b. 1,600
c. 2,000
d. 2,780
Which of the following statements about mutual funds is correct?
a. A mutual fund is not a financial intermediary.
b. A disadvantage of buying mutual funds is a lack of diversification
c. People who buy shares from a mutual fund are guaranteed a minimum return.
d. On average index funds outperform managed funds.
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to
a. increase from $600 to $800.
b. decrease from $800 to $300.
c. decrease from $600 to $300.
d. remain unchanged at $600.
Figure 7-20
Refer to Figure 7-20. If 4 units of the good are produced and sold, then
a. the cost to sellers exceeds the value to buyers.
b. producer surplus is maximized.
c. total surplus is minimized.
d. the allocation of resources is inefficient.
Studies have shown significant spending changes arise from interest rate changes after
a. a few days.
b. a few weeks.
c. a few months.
d. a few years.
When the money market is drawn with the value of money on the vertical axis, if the
price level is above the equilibrium level, there is an
a. excess demand for money, so the price level will rise.
b. excess demand for money, so the price level will fall.
c. excess supply of money, so the price level will rise.
d. excess supply of money, so the price level will fall.
Which of the following raises the interest rate?
a. an increase in government expenditures and an increase in the money supply
b. an increase in government expenditures and a decrease in the money supply
c. a decrease in government expenditures and an increase in the money supply
d. a decrease in government expenditures and a decrease in the money supply
If the labor supply curve is nearly vertical, a tax on labor
a. has a large deadweight loss.
b. raises a small amount of tax revenue.
c. has little impact on the amount of work that workers are willing to do.
d. results in a large tax burden on the firms that hire labor.
A larger budget surplus
a. raises the interest rate and investment.
b. reduces the interest rate and investment.
c. raises the interest rate and reduces investment.
d. reduces the interest rate and raises investment.
Table 10-4
The country of Caspir produces only cereal and milk. Quantities and prices of these
goods for the last several years are shown below. The base year is 2008.
Prices and Quantities
Refer to Table 10-4. This country’s output grew
a. 29.9% from 2008 to 2009.
b. 33.3% from 2009 to 2010.
c. 24.3% from 2009 to 2010.
d. 15.4% from 2010 to 2011.
Which of the following is correct?
a. In unionized industries wages are above the level that would prevail in competitive
markets.
b. The introduction of a union in some industry reduces the quantity of labor demanded
in that industry, causes some workers in that industry to be unemployed, and reduces
wages in the rest of the economy.
c. Critics argue that the allocation of labor resulting from unions is both inefficient and
inequitable.
d. All of the above are correct.
Which government entity computes U.S. GDP every three months?
a. the Council of Economic Advisers
b. the Department of Commerce
c. the Department of Treasury
d. the Federal Reserve
Caroline eats two bananas during a particular day. The marginal benefit she enjoys from
eating the second banana
a. can be thought of as the total benefit Caroline enjoys by eating two bananas minus
the total benefit she would have enjoyed by eating just the first banana.
b. determines Caroline’s marginal cost of the first and second bananas.
c. does not depend on how many bananas Caroline has already eaten.
d. All of the above are correct.
If it took as many dollars to buy goods in the United States as it did to buy enough
currency to buy the same goods in India, the real exchange rate would be computed as
how many Indian goods per U.S. goods?
a. one
b. the number of dollars needed to buy U.S. goods divided by the number of rupees
needed to buy Indian goods
c. the number of rupees needed to buy Indian goods divided by the number of dollars
needed to buy U.S. goods
d. None of the above is correct.
In the equation Y = C + I + G + NX,
a. Y represents the economy’s total expenditure.
b. C represents household expenditures on services and durable goods.
c. all of the variables are always positive numbers.
d. All of the above are correct.
Figure 22-2
Use the pair of diagrams below to answer the following questions.
Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, an
increase in the money supply growth rate moves the economy to
a. A and 1
b. B and 2
c. C and 3
d. None of the above is correct.
When we measure and record economic value, we use money as the
a. liquid asset.
b. medium of exchange.
c. unit of account.
d. store of value.
U.S. corporation Well’s Petroleum borrows money to build an oil well in Texas and to
build another in Venezuela. Borrowing for which well is included in the demand for
loanable funds in the U.S.?
a. The U.S. and Venezuela.
b. The U.S. only.
c. Venezuela only.
d. Neither the U.S. or Venezuela.
Figure 8-18
Refer to Figure 8-18. Which graph correctly illustrates the relationship between the
size of a tax and the size of the deadweight loss associated with the tax?
a. Panel (a)
b. Panel (b)
c. Panel (c)
d. Panel (d)
Suppose a gardener produces both green beans and corn in her garden. If she must give
up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1
bushel of green beans is
a. 0.36 bushel of corn.
b. 2.8 bushels of corn.
c. 14 bushels of corn.
d. 70 bushels of corn.
If the British government raised its budget deficit, then the pound (Britain’s currency)
would
a. depreciate and British net exports would rise.
b. depreciate and British net exports would fall.
c. appreciate and British net exports would rise.
d. appreciate and British net exports would fall.
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to
decrease by
a. $20.
b. $200.
c. $300.
d. $500.
Greg, a U.S. citizen, opens an ice cream store in Bermuda. His expenditures are U.S.
a. foreign portfolio investment that increase U.S. net capital outflow.
b. foreign portfolio investment that decrease U.S. net capital outflow.
c. foreign direct investment that increase U.S. net capital outflow.
d. foreign direct investment that decrease U.S. net capital outflow.
In the U.S., people are required to pay taxes on
a. nominal interest earnings, irrespective of their real interest earnings.
b. real interest earnings, irrespective of their nominal interest earnings.
c. real capital gains, irrespective of their nominal capital gains.
d. All of the above are correct.
Table 4-3
Refer to Table 4-3. If these are the only four buyers in the market, then the market
quantity demanded at a price of $1 is
a. 4 units.
b. 7.75 units.
c. 14 units.
d. 31 units.
When constructing the consumer price index, the Bureau of Labor Statistics does not do
which of the following?
a. Try to include all the goods and services that the typical consumer buys.
b. Try to weight the goods and services that the typical consumer buys according to
how much consumers buy of each item.
c. Survey consumers to determine what the typical consumer buys.
d. Survey sellers to determine what the typical consumer buys.
The source of the supply of loanable funds
a. is saving and the source of demand for loanable funds is investment.
b. is investment and the source of demand for loanable funds is saving.
c. and the demand for loanable funds is saving.
d. and the demand for loanable funds is investment.
Assume the MPC is 0.75. Assuming only the multiplier effect matters, a decrease in
government purchases of $100 billion will shift the aggregate demand curve to the
a. left by $200 billion.
b. left by $400 billion.
c. right by $800 billion.
d. None of the above is correct.
A policy intended to reduce unemployment by taking advantage of a tradeoff between
inflation and unemployment leads to
a. both higher inflation and higher unemployment in the long run.
b. higher inflation and no change in unemployment in the long run.
c. the same inflation rate and lower unemployment in the long run.
d. higher inflation and lower unemployment in the long run
Consider five individuals with different occupations.
In a barter system which of the following pairs has a double coincidence of wants?
a. Allen and Eric
b. Diedre and Calvin
c. Both A and B are correct.
d. None of the above are correct.
Which of the following is an example of U.S. foreign direct investment?
a. A Greek company opens a cheese factory in the U.S.
b. A German mutual fund buys stock issued by a U.S. corporation.
c. A U.S. beverage company opens a bottling plant in Russia.
d. A U.S. bank buys bonds issued by an Argentinean company.
Figure 4-18
Refer to Figure 4-18. What is the equilibrium price in this market?
a. $0
b. $5
c. $7.50
d. $10
If a person chooses self-sufficiency, then she can only consume what she produces.
It is not possible for demand and supply to shift at the same time.
A binding price floor may not help all sellers, but it does not hurt any sellers.
The price level is determined by the supply of, and demand for, money.
Suppose there is an increase in supply that reduces market price. Consumer surplus
increases because (1) consumer surplus received by existing buyers increases and (2)
new buyers enter the market.
An increase in a country’s saving rate permanently raises its productivity.
If the government imposes a $3 tax in a market, the buyers and sellers will share an
equal burden of the tax.
An increase in the price of blue pens will increase both the equilibrium price and
quantity in the market for black pens.
Figure 2-14
Refer to Figure 2-14. Unemployment could cause this economy to produce at point B.
Explain how an attempt by the government to lower inflation could cause
unemployment to increase in the short-run.
All else equal, an increase in demand will cause an increase in producer surplus.
How are the identities S = NCO + I and NCO = NX related to the foreign currency
exchange market and the loanable funds market?
Capital flight reduces a country’s real exchange rate.
Many studies indicate changes in monetary policy have most of their effect on
aggregate demand about six months after the change is made.
It is only among the least skilled and least experienced members of the labor force that
minimum-wage laws cause unemployment.
Suppose that consumers become pessimistic about the future health of the economy.
What will happen to aggregate demand and to output? What might the president and
Congress have to do to keep output stable?
Both the standard of living and the growth of real GDP per person vary widely across
countries.
If the equilibrium price of an airline ticket is $400 and the government imposes a price
floor of $500 on airline tickets, then fewer airline tickets will be sold than at the market
equilibrium.
Most U.S. workers have wages well above the legal minimum, so minimum-wage laws
do not prevent the wage from adjusting to balance supply and demand.