Real GDP per person in rich countries, such as Germany, is sometimes more than 10
times that of poor countries like India.
A U.S. firm produces sweatshirts in the first quarter of 2010 and adds them to its
inventory. In the second quarter of 2010 the firm sells the sweatshirts to consumers. In
which quarter(s) does(do) these transactions raise consumption?
a. the first and the second
b. the first but not the second
c. the second but not the first
d. neither the first nor the second
Scenario 11-1
The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in
2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
Refer to Scenario 11-1. In 1975 dollars, a 1975 tennis ball cost $0.10 and a 2005 tennis
ball cost
a. $0.27, so tennis balls were cheaper in 1975.
b. $0.27, so tennis balls were cheaper in 2005.
c. $3.66, so tennis balls were cheaper in 1975.
d. $3.66, so tennis balls were cheaper in 2005.
Which of the following shifts aggregate demand to the right?
a. an increase in the price level
b. an increase in the money supply
c. a decrease in the price level
d. a decrease in the money supply
At which interest rate is the present value of $79.50 one year from today equal to $75
today?
a. 4 percent
b. 5 percent
c. 6 percent
d. 7 percent
Both The Wealth of Nations and the Declaration of Independence share the point of
view that
a. every person is entitled to life, liberty, and the pursuit of happiness.
b. individuals are best left to their own devices without the government guiding their
actions.
c. the government plays a central role in organizing a market economy.
d. because of human nature a strong legal system is necessary for a market system to
survive.
Relative-price variability is “automatic” when
a. firms change prices only once in a while.
b. firms change prices often.
c. people increase the frequency of their trips to the bank.
d. people decrease the frequency of their trips to the bank.
Table 16-5.
Bank of Pleasantville
Refer to Table 16-5. If the Fed’s reserve requirement is 9 percent, then what quantity of
excess reserves does the Bank of Pleasantville now hold?
a. $200
b. $250
c. $400
d. $1,000
Figure 7-16
Refer to Figure 7-16. Total surplus can be measured as the area
a. JNK.
b. JNML.
c. JRL.
d. JNL.
Which of the following best illustrates diversification?
a. A company that produces many different products decides to produce fewer.
b. After selling stock, corporate management spends funds on projects with greater risks
than shareholders had anticipated.
c. Instead of holding only the stocks of companies engaged in the banking business, a
person decides to hold stock in a number of different companies producing different
goods and services.
d. A person decides to purchase only stocks that have paid high dividends in the past.
From 1970 to 1998 the U.S. dollar
a. gained value compared to the Italian lira because inflation was higher in the U.S.
b. gained value compared to the Italian lira because inflation was lower in the U.S.
c. lost value compared to the Italian lira because inflation was higher in the U.S.
d. lost value compared to the Italian lira because inflation was lower in the U.S.
Table 3-9
Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim
can switch between setting up and testing computers at a constant rate. The following
table applies.
Minutes Needed to Number of Computers
Set Up or Tested in a
40-Hour Week
Refer to Table 3-9. Which of the following points would not be on Barb’s production
possibilities frontier, based on a 40-hour week?
a. (0 computers set up, 40 computers tested)
b. (8 computers set up, 32 computers tested)
c. (25 computers set up, 20 computers tested)
d. (30 computers set up, 16 computers tested)
Figure 7-4
Refer to Figure 7-4. If the price of the good is $12, then consumer surplus is
a. $9.
b. $11.
c. $13.
d. $16.
Producer surplus equals the
a. value to buyers minus the amount paid by buyers.
b. value to buyers minus the cost to sellers.
c. amount received by sellers minus the cost to sellers.
d. amount received by sellers minus the amount paid by buyers.
When a country takes a unilateral approach to free trade, it
a. removes trade restrictions on its own.
b. reduces its trade restrictions while other countries do the same.
c. does not remove trade restrictions no matter what other countries do.
d. is willing to trade with multiple countries at once.
In the economy of Ukzten in 2010, consumption was $2000, exports were $800, GDP
was $4800, government purchases were $840, and investment was $1400. What were
Ukzten’s imports in 2010?
a. -$560
b. -$240
c. $240
d. $560
The analysis of Friedman and Phelps can be summarized in the following equation
where a is positive number:
a. Unemployment Rate = Natural Rate of Unemployment – a(Actual Inflation –
Expected Inflation).
b. Unemployment Rate = Natural Rate of Unemployment – a(Expected Inflation –
Actual Inflation).
c. Unemployment Rate = Expected Rate of Inflation – a(Actual Inflation – Expected
Inflation).
d. Unemployment Rate = Actual Rate of Inflation – a(Actual Unemployment – Expected
Unemployment).
Which of the following can explain the upward slope of the short-run aggregate supply
curve?
a. nominal wages are slow to adjust to changing economic conditions
b. as the price level falls, the exchange rate falls
c. an increase in the money supply lowers the interest rate
d. an increase in the interest rate increases investment spending
The supply of oil is likely to be
a. inelastic in both the short run and long run.
b. elastic in both the short run and long run.
c. elastic in the short run and inelastic in the long run.
d. inelastic in the short run and elastic in the long run.
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-7. As a result of the tax, consumer surplus decreases by
a. $65, producer surplus decreases by $85, tax revenue is $120, and deadweight loss is
$30.
b. $75, producer surplus decreases by $75, tax revenue is $120, and deadweight loss is
$30.
c. $80, producer surplus decreases by $80, tax revenue is $120, and deadweight loss is
$40.
d. $120, producer surplus decreases by $120, tax revenue is $200, and deadweight loss
is $40.
When it comes to people’s tastes, economists generally believe that
a. tastes are based on forces that are well within the realm of economics.
b. tastes are based on historical and psychological forces that are beyond the realm of
economics.
c. tastes can only be studied through well-constructed, real-life models.
d. because tastes do not directly affect demand, there is little need to explain people’s
tastes.
Figure 3-3
Arturo’s Production Possibilities Frontier Dina’s Production Possibilities Frontier
Refer to Figure 3-3. Arturo would incur an opportunity cost of 36 burritos if he
increased his production of tacos by
a. 27.
b. 48.
c. 108.
d. 144.
If a consumer places a value of $20 on a particular good and if the price of the good is
$25, then the
a. consumer has consumer surplus of $5 if he buys the good.
b. consumer does not purchase the good.
c. price of the good will rise due to market forces.
d. market is out of equilibrium.
Figure 8-6
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-6. What happens to total surplus in this market when the tax is
imposed?
a. Total surplus increases by $1,500.
b. Total surplus increases by $3,000.
c. Total surplus decreases by $1,500.
d. Total surplus decreases by $,3000.
In a particular production process, if the quantities of all inputs used are increased by 60
percent, then the quantity of output increases by 60 percent as well. This means that
a. the production process cannot be enhanced by technological advances.
b. no mathematical representation of the relevant production function can be
formulated.
c. the relevant production function has the limits-to-growth property.
d. the relevant production function has the constant-returns-to-scale property.
Suppose the economy is in long-run equilibrium. Concerns about pollution cause the
government to significantly restrict the production of electricity. At the same time, the
value of the dollar falls. In the short-run
a. real GDP will rise and the price level might rise, fall, or stay the same.
b. real GDP will fall and the price level might rise, fall, or stay the same.
c. the price level will rise, and real GDP might rise, fall, or stay the same.
d. the price level will fall, and real GDP might rise, fall, or stay the same.
Suppose Japanese-based Toshiba Corporation builds and operates a new computer
factory in the United States. Future production from such an investment would
a. increase U.S. GNP more than it would increase U.S. GDP.
b. increase U.S. GDP more than it would increase U.S. GNP.
c. not affect U.S. GNP, but would increase U.S. GDP.
d. have no affect on U.S. GNP or GDP.
You are staying in London over the summer and you have a number of dollars with you.
If the dollar depreciates relative to the British pound, then other things the same,
a. the dollar would buy more pounds. The depreciation would discourage you from
buying as many British goods and services.
b. the dollar would buy more pounds. The depreciation would encourage you to buy
more British goods and services.
c. the dollar would buy fewer pounds. The depreciation would discourage you from
buying as many British goods and services.
d. the dollar would buy fewer pounds. The depreciation would encourage you to buy
more British goods and services.
If the supply of loanable funds shifts to the right, then the equilibrium interest rate
a. and quantity of loanable funds rise.
b. and quantity of loanable funds fall.
c. rises and the quantity of loanable funds falls.
d. falls and the quantity of loanable funds rises.
Sandy has graduated from college and is devoting her time to searching for a job. She
has seen plenty of openings, but has not yet been offered one that best suits her tastes
and skills. Sandy is
a. structurally unemployed. Structural unemployment exists even in the long run.
b. structurally unemployed. There is no structural unemployment in the long run.
c. frictionally unemployed. Frictional unemployment exists even in the long run.
d. frictionally unemployed. There is no frictional unemployment in the long run.
The short-run effects of an increase in the expected price level include
a. a lower level of output and a lower price level.
b. a lower level of output and a higher price level.
c. a higher level of output and a lower price level.
d. a higher level of output and a higher price level.
The business cycle is the
a. relationship between unemployment and inflation.
b. irregular fluctuations in economic activity.
c. positive relationship between the quantity of money in an economy and inflation.
d. predictable changes in economic activity due to changes in government spending and
taxes.
Aggregate demand shifts to the left if the money supply increases.
The Federal Reserve was created in 1913 after a series of bank failures in 1907.
“Trade raises the economic well-being of a nation in the sense that the gains of the
winners exceed the losses of the losers.” This statement is correct for a nation that
exports manufactured goods, but it is not correct for a nation that imports manufactured
goods.
In order to conclude that markets are efficient, we assume that they are perfectly
competitive.
The Bureau of Labor Statistics’ U-3 measure of joblessness is the official
unemployment rate.
If you wish to rely on fundamental analysis to choose a portfolio of stocks, then you
have no choice but to do all the necessary research yourself.
Policymakers use taxes to raise revenue for public purposes and to influence market
outcomes.
Right-to-work laws give workers in a unionized firm the right to choose whether to join
the union.
Since 1870 Canadian and U.S real GDP per person grew from below to above that in
the United Kingdom. The explanation for this is likely that productivity grew faster in
Canada and the U.S. than in the United Kingdom.
If banks hold any amount of their deposits in reserve, then they do not have the ability
to influence the money supply.
List the factors that might influence a country’s exports, imports, and trade balance.
Moral hazard is illustrated by people who take greater risks after they purchase
insurance.
The natural rate of unemployment is the same as the socially optimal rate of
unemployment.
Trade can benefit everyone in society because it allows people to specialize in activities
in which they have a comparative advantage.
At the equilibrium price, buyers have bought all they want to buy, but sellers have not
sold all they want to sell.
Within the U.S., teenagers have lower rates of labor-force participation than older
workers.
Data from the Bureau of Labor Statistics show that the largest category of consumer
spending is housing.
What do most economists believe concerning the relation between the price level and
real output?
In the open-economy macroeconomic model, net exports equal the quantity of dollars
demanded in the foreign-currency exchange market.