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If the supply of a good decreased, what would be the effect on the equilibrium price and
quantity?
a. Price would increase, and quantity would decrease.
b. Price would decrease, and quantity would decrease.
c. Price would increase, and quantity would increase.
d. Price would decrease, and quantity would increase.
If there is a shortage of loanable funds, then
a. the quantity of loanable funds demanded is greater than the quantity of loanable
funds supplied and the interest rate is above equilibrium.
b. the quantity of loanable funds demanded is greater than the quantity of loanable
funds supplied and the interest rate is below equilibrium.
c. the quantity of loanable funds supplied is greater than the quantity of loanable funds
demanded and the interest rate is above equilibrium.
d. the quantity of loanable funds supplied is greater than the quantity of loanable funds
demanded and the interest rate is below equilibrium.
Which of the following is true regarding economic fluctuations in the United States?
a. Prior to World War II, economic ups and downs were more moderate than after the
war.
b. Prior to World War II, annual increases in real GDP of more than 5 percent were
unheard of.
c. Real GDP grew rapidly during the 1930s.
d. The 1930s was a period of prolonged economic stagnation and high unemployment.
The net present value of $1,000 received one year from now will
a. increase with the interest rate.
b. exceed $1,000 as long as the interest rate is positive.
c. exceed the net present value of $1,000 to be received two years from now.
d. equal $1,100 if the current interest (discount) rate is 10 percent.
Answer the following questions:
Which of the following would increase GDP?
a. buying a used car
b. buying a newly constructed house
c. buying an imported rug
d. giving a domestically produced rug to charity
In 2012, more than 60% of the privately held national debt was held by
a. foreign investors.
b. Federal Reserve banks.
c. large corporations.
d. government trust funds.
When the actual rate of unemployment is less than the natural rate of unemployment,
the economy
a. operates at an output greater than its long-run potential.
b. operates at its maximum sustainable output.
c. must also be experiencing stable prices (zero inflation).
d. operates at an output less than its long-run potential.
How would an increase in the price of paper influence the market for college
textbooks?
a. The supply of textbooks would increase causing the price of textbooks to fall.
b. The supply of textbooks would increase causing the price of textbooks to rise.
c. The supply of textbooks would decrease causing the price of textbooks to fall.
d. The supply of textbooks would decrease causing the price of textbooks to rise.
Figure 2-7
If an economy operates at point A on the production possibilities curve shown in Figure
2-7,
a. to produce more food, it would have to reduce its production of clothing.
b. to produce more clothing, it would have to reduce the production of food.
c. it is operating efficiently.
d. all of the above would be correct.
If for some reason Americans wished to purchase more foreign assets, then other things
the same
a. both the real exchange rate and the quantity of dollars exchanged in the market for
foreign-currency exchange would fall.
b. both the real exchange rate and the quantity of dollars exchanged in the market for
foreign-currency would rise.
c. the real exchange rate would rise and the quantity of dollars exchanged in the market
for foreign-currency would fall.
d. the real exchange rate would fall and the quantity of dollars exchanged in the market
for foreign-currency would rise.
What would be the effect of a decrease in the real interest rate and an increase in the
expected inflation rate?
a. Both changes would decrease aggregate demand.
b. Both changes would increase aggregate demand.
c. Both changes would increase short-run aggregate supply.
d. Both changes would increase long-run aggregate supply.
Which of the following is true?
a. All types of environmental problems can be solved simply by the enforcement of
individual property rights.
b. Environmental regulation cannot improve environmental quality.
c. Regulation nearly always leads to economically efficient outcomes.
d. Government regulation is subject to the same problems caused by lack of information
and lack of incentives for economic efficiency that plagued centrally planned
economies.
Which of the following generalizations about the benefit of a subsidy is correct?
a. The more inelastic the supply of a product, the larger the portion of the benefit will be
to buyers.
b. The more inelastic the demand for a product, the larger the portion of the benefit will
be to buyers.
c. The more elastic the supply of a product, the smaller the portion of the benefit will be
to buyers.
d. The distribution of the benefit of a subsidy is not affected by the elasticity of the
supply and demand for the product for which the subsidy is granted.
When would sunk costs be irrelevant for current decision making?
a. when the sunk costs are computed using accounting methods
b. when the sunk costs are greater than variable costs
c. when the sunk costs have been incurred only a short time ago
d. Sunk cost are always irrelevant when making current decisions.
New technological advancements, such as robots are
a. harmful because they put people out of work.
b. helpful because they improve worker productivity.
c. harmful because robots are likely to have electrical problems which could cause
injuries to people.
d. both a and c above.
A shift to a more expansionary monetary policy will
a. increase the long-term growth rate of the economy.
b. reduce the future rate of inflation.
c. Stimulate output and employment almost immediately.
d. Stimulate output and employment, but only after a time lag that is generally long and
variable.
The price of dishwashers increases dramatically, causing a 1 percent increase in the
CPI. The price increase will most likely cause the GDP deflator to increase by
a. more than 1 percent.
b. less than 1 percent.
c. 1 percent.
d. None of the above is correct; this particular price increase will not affect the GDP
deflator.
The purchasing power parity (PPP) method
a. calculates the cost of purchasing a specific bundle of goods and services in each
country and uses this measure to convert the incomes of different countries to a
common currency.
b. calculates how much the general price level has increased within one specific country
through time.
c. calculates how much the average standard of living across all countries has changed
through time.
d. is used when one wants to compare dollar values from today with those from more
than 100 years ago.
Economic efficiency requires that
a. individuals produce at their maximum level.
b. only long-lasting, high-quality products be produced without regard to cost.
c. income be distributed equally among consumers.
d. all economic activity generating more benefits than costs be undertaken.
Which of the following is an implication of the random walk theory?
a. Experts will be able to make money by picking and choosing the best stocks.
b. There is a systematic pattern to the movement of prices in the stock market.
c. Stock market investors can expect to earn a fairly steady real rate of return of about 7
percent annually.
d. Even experts will be unable to predict the future movement of stock prices with any
degree of accuracy.
As inflation drives up prices, people attempt to find substitutes and adjust what they
buy. The resulting substitution bias problem causes the CPI to
a. overstate the impact of higher prices on consumers.
b. consistently underestimate the true inflation rate.
c. omit the benefits of product quality improvements.
d. have larger fluctuations than other price indexes.
An issue that generates substantial benefits to a small group of individuals while
imposing a small cost on many others is called a
a. special-interest issue.
b. minority application.
c. commons policy.
d. national service.
If you deposit $100 of currency into a demand deposit at a bank, this action by itself
a. does not change the money supply.
b. increases the money supply.
c. decreases the money supply.
d. has an indeterminate effect on the money supply.
In Europe during the 14th century, the Black Plague killed 24 million people or close to
37 percent of the population. How would this affect the production possibilities curves
for the countries of Europe at that time?
a. The production possibilities curves for these countries would have shifted outward.
b. The production possibilities curves for these countries would have shifted inward.
c. The production possibilities curves for these countries would have been unaffected.
d. This would have been illustrated by a movement along the production possibilities
curves for these countries, but it would not have shifted them.
The U.S. Treasury both pays and receives almost all of the interest on that portion of the
national debt that is held by
a. domestic investors.
b. foreign investors.
c. government agencies and the Federal Reserve system.
d. commercial banks.
Use the figure to answer the following question(s).
Figure 11-10
Given the cost and revenue curves illustrated in Figure 11-10, what price will a
profit-maximizing monopolist charge?
a. P1
b. P2
c. P3
d. P4
In the case of a private good, which of the following forms of economic organization
will result in the strongest incentive for consumers and producers to economize?
a. The good is produced privately and taxes are used to provide it to consumers free of
charge.
b. The good is produced privately and consumers purchase it with their own money.
c. The good is produced by government enterprises and the cost of its production is
covered by taxes.
d. The good is produced by government enterprises and consumers purchase it with
their own money.
Computer forecasting models are most accurate at predicting the economy when
a. inflation is accelerating.
b. there is a turn in the business cycle.
c. economic conditions are relatively stable.
d. supply shocks impact the economy.
Providing citizens with enforceable property rights to resources
a. increases resource conservation and decreases wasteful resource use.
b. promotes economic prosperity and thus increases demand for environmental quality.
c. provides people with a strong incentive not to damage the privately owned resources
of others.
d. does all of the above.
Which of the following is true of home mortgage loans since the late 1990s?
a. Government regulations required homebuyers to make larger down payments in order
to obtain a mortgage.
b. Traditional fixed-rate, long-term mortgages grew in popularity.
c. There was a substantial increase in the volume of mortgage loans extended with little
or no down payment.
d. High interest rates made it less attractive to lock in to a fixed-rate, long-term loan.
