Figure 4-22
Panel (a) Panel (b)
Panel (c) Panel (d)
Refer to Figure 4-22 Which of the four panels represents the market for winter coats as
we progress from winter to spring?
a. Panel (a)
b. Panel (b)
c. Panel (c)
d. Panel (d)
If sellers expect higher basket prices in the near future, the current
a. supply of baskets will increase.
b. supply of baskets will decrease.
c. supply of baskets will be unaffected.
d. demand for baskets will decrease.
Which of the following pairs of values of the consumer price index (CPI) is consistent
with an inflation rate of 14 percent for 2011?
a. CPI in 2011 = 150; CPI in 2012 = 164
b. CPI in 2011 = 150; CPI in 2012 = 171
c. CPI in 2010 = 150; CPI in 2011 = 164
d. CPI in 2010 = 150; CPI in 2011 = 171
If a price ceiling is not binding, then
a. there will be a surplus in the market.
b. there will be a shortage in the market.
c. the market will be less efficient than it would be without the price ceiling.
d. there will be no effect on the market price or quantity sold.
Other things the same, if the price level falls, people
a. increase foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange increases.
b. increase foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange decreases.
c. decrease foreign bond purchases, so the supply of dollars in market for
foreign-currency exchange increases.
d. decrease foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange decreases.
Greg’s Ice Cream produces 1120 gallons of ice cream per day. Each employed works
seven hours and has productivity of 20 gallons an hour. How many employees does
Greg’s employ?
a. 160
b. 56
c. 8
d. None of the above is correct.
We can say that the allocation of resources is efficient if
a. producer surplus is maximized.
b. consumer surplus is maximized.
c. total surplus is maximized.
d. sellers’ costs are minimized.
From the end of 2003 to the end of 2004, the United States ran a deficit of about $121
billion. The debt at the start of this period was about $3,924 billion. Which of the
following combinations of inflation and real GDP would have allowed the government
to run a deficit and kept the ratio of real GDP to the deficit about the same?
a. about 1% inflation and about 1% real GDP growth
b. about 1% inflation and about 3% real GDP growth
c. about 2% inflation and about 1% real GDP growth
d. about 2% inflation and about 2% real GDP growth
Figure 6-3
Panel (a) Panel (b)
Refer to Figure 6-3. In panel (a), there will be
a. a shortage of wheat.
b. equilibrium in the market.
c. a surplus of wheat.
d. lines of people waiting to buy wheat.
More flexible labor markets will shift
a. both the long-run Phillips curve and the long-run aggregate supply curve to the right.
b. both the long-run Phillips curve and the long-run aggregate supply curve to the left.
c. the long-run Phillips curve to the right and the long-run aggregate supply curve to the
left.
d. the long-run Phillips curve to the left and the long-run aggregate supply curve to the
right.
The value of the housing services provided by the economy’s owner-occupied houses is
a. included in GDP, and the estimated rental values of the houses are used to place a
value on these housing services.
b. included in GDP, and the actual mortgage payments made on the houses are used to
estimate the value of these rental services.
c. excluded from GDP since these services are not sold in any market.
d. excluded from GDP since the value of these housing services cannot be estimated
with any degree of precision.
An example of positive analysis is studying
a. how market forces produce equilibrium.
b. whether equilibrium outcomes are fair.
c. whether equilibrium outcomes are socially desirable.
d. if income distributions are fair.
Tax incidence
a. depends on the legislated burden.
b. is entirely random.
c. depends on the elasticities of supply and demand.
d. falls entirely on buyers or entirely on sellers.
Unemployment insurance
a. reduces the hardship of unemployment, but it also increases the amount of
unemployment.
b. reduces the incentive for the unemployed to find and take new jobs.
c. causes workers to be less likely to seek guarantees of job security when they
negotiate with employers over the terms of employment.
d. All of the above are correct.
Which of the following can lead to market failure?
a. externalities and market power
b. externalities but not market power
c. market power but not externalities
d. neither externalities nor market power
If the budget deficit increases, then
a. U.S. residents will want to purchase more foreign assets and foreign residents will
want to purchase more U.S. assets
b. U.S. residents will want to purchase more foreign assets and foreign residents will
want to purchase fewer U.S. assets
c. U.S. residents will want to purchase fewer foreign assets and foreign residents will
want to purchase more U.S. assets
d. U.S. residents will want to purchase fewer foreign assets and foreign residents will
want to purchase fewer U.S. assets
As the price level rises, the exchange rate
a. falls, so exports rise and imports fall.
b. falls, so exports fall and imports rise.
c. rises, so exports rise and imports fall.
d. rises, so exports fall and imports rise.
Assume the analysis of Friedman and Phelps is correct, so that the following equation is
valid:
Unemployment rate = Natural rate of unemployment – a ctual inflation – x).
In this equation,
a. a is a parameter that measures how much actual inflation responds to expected
inflation.
b. a = 0 at the point of intersection of the short-run and long-run Phillips curves.
c. x is the expected rate of inflation.
d. All of the above are correct.
The K-Nine dog food company is considering the purchase of additional canning
equipment. They expect that adding the equipment will yield $200,000 at the end of the
first year and $250,000 at the end of the second year and then nothing after that. At
which of the following prices and interest rates would K-Nine buy the equipment?
a. $415,000 if the interest rate is 5%
b. $419,000 if the interest rate is 4%
c. K-Nine would buy the equipment in both cases.
d. K-Nine would not buy the equipment in either case.
When a country allows trade and becomes an importer of a good,
a. domestic producers become better off, and domestic consumers become worse off.
b. domestic producers become worse off, and domestic consumers become better off.
c. domestic consumers become better off, but the effect on the well-being of domestic
producers is ambiguous.
d. domestic producers become worse off, but the effect on the well-being of domestic
consumers is ambiguous.
In economics, the cost of something is
a. the dollar amount of obtaining it.
b. always measured in units of time given up to get it.
c. what you give up to get it.
d. often impossible to quantify, even in principle.
Figure 3-3
Arturo’s Production Possibilities Frontier Dina’s Production Possibilities Frontier
Refer to Figure 3-3. If the production possibilities frontiers shown are each for one day
of production, then which of the following combinations of tacos and burritos could
Arturo and Dina together produce in a given day?
a. 400 tacos and 350 burritos
b. 500 tacos and 250 burritos
c. 600 tacos and 150 burritos
d. 700 tacos and 100 burritos
Table 3-12
Labor Hours Needed to
Make 1 Pound of: Amount
Produced in 40 hours
Refer to Table 3-12. For the farmer, the opportunity cost of 1 pound of meat is
a. 0.625 pound of potatoes.
b. 1.6 pounds of potatoes.
c. 5 pounds of potatoes.
d. 8 pounds of potatoes.
Table 11-1
The table below pertains to Pieway, an economy in which the typical consumer’s basket
consists of 10 bushels of peaches and 15 bushels of pecans.
Refer to Table 11-1. If 2005 is the base year, then the inflation rate in 2006 was
a. 16.7 percent.
b. 20 percent.
c. 40 percent.
d. 44.1 percent.
The primary advantage of mutual funds is that they
a. always make a return that “beats the market.”
b. allow people with small amounts of money to diversify.
c. provide customers with a medium of exchange.
d. All of the above are correct.
When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an
importer of a particular good,
a. producer surplus increases and total surplus increases in the market for that good.
b. producer surplus increases and total surplus decreases in the market for that good.
c. producer surplus decreases and total surplus increases in the market for that good.
d. producer surplus decreases and total surplus decreases in the market for that good.
Which list contains two periods when the U.S. unemployment rate was below the
natural rate of unemployment?
a. 1965-1968, 1981-1984
b. 1965-1968, 1997-2000
c. 1981-1984, 1991-1994
d. 1991-1994, 1997-2000
According to liquidity preference theory, an increase in the price level shifts the
a. money demand curve rightward, so the interest rate increases.
b. money demand curve rightward, so the interest rate decreases.
c. money demand curve leftward, so the interest rate decreases.
d. money demand curve leftward, so the interest rate increases.
Which of the following events would cause a movement upward and to the right along
the supply curve for mangos?
a. The number of sellers of mangos increases.
b. There is an advance in technology that reduces the cost of producing mangos.
c. The price of fertilizer decreases, and fertilizer is an input in the production of
mangos.
d. The price of mangos rises.
The inflation rate is defined as the
a. price level in an economy.
b. change in the price level from one period to the next.
c. percentage change in the price level from the previous period.
d. price level minus the price level from the previous period.