Sheamous loses his job and decides to sit on the beach rather than look for work during
the next few months. Other things the same, the unemployment rate
a. increases and the labor-force participation rate decreases.
b. increases and the labor-force participation rate is unaffected.
c. is unaffected and the labor-force participation rate decreases.
d. and the labor-force participation rate are both unaffected.
As an economist working for a U.S. government agency you determine that a particular
country has a sacrifice ratio of 3. Policy-makers in that country are thinking of lowering
the inflation rate from 10% to 4%. Is this sacrifice ratio higher or lower than the typical
estimate? From your numbers, what is the amount of output that will be lost for this
country to reduce its inflation rate?
a. The sacrifice ratio is higher than the typical estimate. It will cost 30% of annual
output to reach the new inflation target.
b. The sacrifice ratio is higher than the typical estimate. It will cost 18% of annual
output to reach the new inflation target.
c. The sacrifice ratio is lower than the typical estimate. It will cost 30% of annual output
to reach the new inflation target.
d. The sacrifice ratio is lower than the typical estimate. It will cost 18% of annual
output to reach the new inflation target.
Suppose some country had an adult population of about 50 million, a labor-force
participation rate of 60 percent, and an unemployment rate of 5 percent. How many
people were employed?
a. 1.5 million
b. 28.5 million
c. 30 million
d. 47.5 million
Tom tunes pianos in his spare time for extra income. Buyers of his service are willing to
pay $155 per tuning. One particular week, Tom is willing to tune the first piano for
$120, the second piano for $125, the third piano for $140, and the fourth piano for
$160. Assume Tom is rational in deciding how many pianos to tune. His producer
surplus is
a. $95.
b. $80.
c. $75.
d. $60.
The manager of the bank where you work tells you that your bank has $5 million in
excess reserves. She also tells you that the bank has $300 million in deposits and $255
million dollars in loans. Given this information you find that the reserve requirement
must be
a. 50/255.
b. 40/255.
c. 50/300.
d. 40/300.
Scenario 13-1. Assume the following information for an imaginary, closed
economy.
GDP = $120,000; consumption = $70,000; private saving = $9,000;
national saving = $12,000.
Refer to Scenario 13-1. For this economy, government purchases amount to
a. $12,000.
b. $18,000.
c. $28,000.
d. $38,000.
Using the graph below, answer the following questions about hammers.
a. What is the equilibrium price of hammers before trade?
b. What is the equilibrium quantity of hammers before trade?
c. What is the price of hammers after trade is allowed?
d. What is the quantity of hammers imported after trade is allowed?
e. What is the amount of consumer surplus before trade?
f. What is the amount of consumer surplus after trade?
g. What is the amount of producer surplus before trade?
h. What is the amount of producer surplus after trade?
i. What is the amount of total surplus before trade?
j. What is the amount of total surplus after trade?
k. What is the change in total surplus because of trade?
When a country removes trade barriers and imports appliances and exports engineering
services,
a. its growth slows.
b. its productivity decreases.
c. it is essentially transforming engineering services into appliances.
d. its economic well-being decreases while that of the country that sells appliances
increases.
A favorable supply shock will cause inflation to
a. rise and shift the short-run Phillips curve right.
b. rise and shift the short-run Phillips curve left.
c. fall and shift the short-run Phillips curve right.
d. fall and shift the short-run Phillips curve left.
In which of the following cases can we be certain that a natural resource has become
scarcer?
a. both the demand for the resource and the supply of the resource have increased.
b. both the demand for the resource and the supply of the resource have decreased.
c. the demand for the resource has increased and the supply has decreased.
d. the demand for the resource has decreased and the supply has increased.
If the price level increased from 120 to 150, then what was the inflation rate?
a. 30 percent
b. 25 percent
c. 20 percent
d. None of the above is correct.
Monetary policy
a. can be implemented quickly and most of its impact on aggregate demand occurs very
soon after policy is implemented.
b. can be implemented quickly, but most of its impact on aggregate demand occurs
months after policy is implemented.
c. cannot be implemented quickly, but once implemented most of its impact on
aggregate demand occurs very soon afterward.
d. cannot be implemented quickly and most of its impact on aggregate demand occurs
months after policy is implemented.
Table 3-2
Assume that Aruba and Iceland can switch between producing coolers and producing
radios at a constant rate.
Labor Hours
Needed to Make 1
Refer to Table 3-2. Which of the following represents Aruba’s production possibilities
frontier when 100 labor hours are available?
a. c.
b. d.
Figure 2-5
Refer to Figure 2-5. If this economy devotes one-half of its available resources to the
production of soccer balls and the other half to the production of sweaters, it could
produce
a. 150 sweaters and 100 soccer balls.
b. 150 sweaters and 150 soccer balls.
c. 300 sweaters and 200 soccer balls.
d. We would have to know the details of this economy’s technology in order to
determine this.
In order to simplify the equation for the multiplier to its familiar, relatively simple form,
we make use of the
a. assumption that increases in government purchases have no effect on consumer
spending.
b. assumption that the feedback effects associated with changes in government
purchases become negligible after two or three rounds of spending have occurred.
c. empirical evidence that points to a value of about for the MPC.
d. fact that the multiplier effect is represented by an infinite geometric series.
Which of the following is an example of a positive, as opposed to normative,
statement?
a. Income tax rates should not have been cut as they were a few years ago.
b. The quantity of money has grown too slowly in recent years.
c. When the quantity of money grows rapidly, inflation is a predictable consequence.
d. All of the above are positive statements.
From the early 1980’s through the 1990’s, the nominal interest rate
a. fell because the Fed got inflation under control.
b. fell because the Fed let inflation get out of control.
c. rose because the Fed got inflation under control.
d. rose because the Fed let inflation get out of control.
In determining living standards, productivity plays a key role
a. for individuals, but not for nations.
b. for nations, but not for individuals.
c. for both nations and individuals.
d. for neither nations nor individuals.
In the economy of Ukzten in 2010, consumption was $6000, exports were $1000, GDP
was $10,000, government purchases were $2000, and imports were $600. What was
Ukzten’s investment in 2010?
a. $1400
b. $1600
c. $2400
d. $3600
Trade raises the economic well-being of a nation in the sense that
a. the gains of the winners exceed the losses of the losers.
b. everyone in an economy gains from trade.
c. since countries can choose what products to trade, they will pick those products that
are most beneficial to society.
d. the nation joins the international community when it begins to engage in trade.
Figure 6-20
Refer to Figure 6-20. Andrew is a buyer of the good. Taking the tax into account, how
much does Andrew effectively pay to acquire one unit of the good?
a. $16
b. $18
c. $24
d. $26
Other things the same, if the interest rate falls, then
a. firms will want to borrow more, which increases the quantity of loanable funds
demanded.
b. firms will want to borrow less, which decreases the quantity of loanable funds
demanded.
c. firms will want to borrow more, which increase the quantity of loanable funds
supplied.
d. firms will want to borrow less, which decreases the quantity of loanable funds
supplied.
Figure 8-10
Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity
sold in the market after the tax to Q2. Without the tax, the producer surplus is
a. (P5-0) x Q5.
b. x (P5-0) x Q5.
c. (P8-0) x Q2.
d. x (P8-0) x Q2.
One advantage market economies have over centrally-planned economies is that market
economies
a. provide an equal distribution of goods and services to households.
b. establish a significant role for government in the allocation of resources.
c. solve the problem of scarcity.
d. are more efficient.
It is claimed that a secondary advantage of mutual funds is that
a. an investor can avoid investment charges and fees.
b. they give ordinary people access to loanable funds for investing.
c. they usually outperform stock market indexes.
d. they give ordinary people access to the skills of professional money managers.
Aggregate demand shifts left if
a. taxes rise and shifts left if stock prices rise.
b. taxes rise and shifts left if stock prices fall.
c. taxes fall and shifts left if stock prices rise.
d. taxes fall and shifts left is stock prices fall.
Table 5-5
The following table shows a portion of the demand schedule for a particular good at
various levels of income.
Refer to Table 5-5. Using the midpoint method, when income equals $7,500, what is
the price elasticity of demand between $16 and $20?
a. 0.56
b. 0.75
c. 1.33
d. 1.80
A shock increases the costs of production. Given the effects of this shock, if the central
bank wants to return the unemployment rate towards its previous level it would
a. increase the rate at which the money supply increases. This will also move inflation
closer to its previous rate..
b. increase the rate at which the money supply increases. However, this will make
inflation higher than its previous rate
c. decrease the rate at which the money supply increases. This will also move inflation
closer to its original rate
d. decrease the rate at which the money supply increases. However, this will make
higher than its previous rate.
Stock in Tasty Greens Restaurants is selling at $80 per share with 1 million shares
outstanding. Last year, Tasty Greens earned $5 million, of which it retained $1 million
for future investments. The dividend yield on the stock is
a. 1 percent.
b. 2 percent.
c. 4 percent.
d. 5 percent.
If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will be
14 pesos, then the forecast is given in
a. real terms and implies the dollar will appreciate.
b. real terms and implies the dollar will depreciate.
c. nominal terms and implies the dollar will appreciate.
d. nominal terms and implies the dollar will depreciate.
Figure 2-2
Refer to Figure 2-2. If Box A of this circular-flow diagram represents firms, then
which box represents households?
a. Box B
b. Box C
c. Box D
d. Any one of the other boxes (B, C, or D) could represent households.
Table 16-4.
The First Bank of Roswell
Refer to Table 16-4. If the bank faces a reserve requirement of 20 percent, then it
a. has $10,000 of excess reserves.
b. needs $10,000 more reserves to meet its reserve requirements.
c. needs $5,000 more reserves to meet its reserve requirements.
d. just meets its reserve requirement.
Figure 9-15
Refer to Figure 9-15. Consumer surplus with the tariff is
a. A.
b. A + B.
c. A + C + G.
d. A + B + C + D +E + F.
According to the classical dichotomy, when the money supply doubles, which of the
following also doubles?
a. the price level
b. nominal wages
c. nominal GDP
d. All of the above are correct.
Some persons are counted as out of the labor force because they have made no serious
or recent effort to look for work. However, some of these individuals may want to work
even though they are too discouraged to make a serious effort to look for work. If these
individuals were counted as unemployed instead of out of the labor force, then
a. both the unemployment rate and labor-force participation rate would be higher.
b. the unemployment rate would be higher and the labor-force participation rate would
be lower.
c. the unemployment rate would be lower and the labor-force participation rate would
be higher.
d. both the unemployment rate and labor-force participation rate would be lower.