If, at some interest rate, the quantity of money supplied is greater than the quantity of
money demanded, people will desire to
a. sell interest-bearing assets, causing the interest rate to decrease.
b. sell interest-bearing assets, causing the interest rate to increase.
c. buy interest-bearing assets, causing the interest rate to decrease.
d. buy interest-bearing assets, causing the interest rate to increase.
A person who takes a prescription drug to control high cholesterol most likely has a
demand for that drug that is
a. inelastic.
b. unit elastic.
c. elastic.
d. highly responsive to changes in income.
If Research in Motion, Inc. sells a bond it is
a. borrowing directly from the public.
b. borrowing indirectly from the public.
c. lending directly to the public.
d. lending indirectly to the public.
Economists at the Department of Justice
a. track the behavior of the nation’s money supply.
b. advise Congress on economic matters.
c. help enforce the nation’s antitrust laws.
d. prepare the federal budget.
From the standpoint of the economy as a whole, the role of insurance is
a. to entice risk-loving people to become risk averse.
b. to promote the phenomenon of adverse selection.
c. not to eliminate the risks inherent in life, but to spread them around more efficiently.
d. not to spread risks, but to eliminate them for individual policy holders.
Figure 6-6
Refer to Figure 6-6. Which of the following statements is correct?
a. A price ceiling set at $12 would be binding, but a price ceiling set at $8 would not be
binding.
b. A price floor set at $8 would be binding, but a price ceiling set at $8 would not be
binding.
c. A price ceiling set at $9 would result in a surplus.
d. A price floor set at $11 would result in a surplus.
Figure 9-18. On the diagram below, Q represents the quantity of peaches and P
represents the price of peaches. The domestic country is Isoland.
Refer to Figure 9-18. If Isoland allows international trade and the world price of
peaches is $5, then
a. producer surplus will be smaller than it would be if Isoland banned trade.
b. consumer surplus will be smaller than it would be if Isoland banned trade.
c. the domestic quantity of peaches demanded will exceed the domestic quantity of
peaches supplied.
d. Isoland will be an importer of peaches.
Higher inflation makes relative prices
a. more variable, making it more likely that resources will be allocated to their best use.
b. more variable, making it less likely that resources will be allocated to their best use.
c. less variable, making it more likely that resources will be allocated to their best use.
d. less variable, making it less likely that resources will be allocated to their best use.
The mayor of Workerville proposes a local payroll tax to fund a new water park for the
city. The mayor proposes to collect half the tax from workers and half the tax from
firms. Workers will bear
a. an equal share of the tax in comparison to firms.
b. a greater share of the tax in comparison to firms.
c. a smaller share of the tax in comparison to firms.
d. All of the above are possible.
Figure 15-1
Refer to Figure 15-1. If the government imposes a minimum wage of $4, then how
many workers will be unemployed?
a. 0
b. 3000
c. 4000
d. 7000
The Fed increases reserves if it conducts open market
a. purchases or auctions term credit.
b. purchases but not if it auctions term credit
c. sales or auctions term credit
d. sales but not if it auctions term credit
Based on the available evidence, which of the following groups benefits most from
mandatory seat belt laws?
a. automakers
b. pedestrians
c. drivers
d. owners of collision-repair shops
Figure 5-10
Refer to Figure 5-10. An increase in price from $20 to $30 would
a. increase total revenue by $2,000.
b. decrease total revenue by $2,000.
c. increase total revenue by $1,000.
d. decrease total revenue by $1,000.
Table 12-1.
Athens and Troy both produce only ribs and baked potatoes.
Refer to Table 12-1. Which of the following is correct?
a. Both productivity and the standard of living are higher in Athens than Troy.
b. Productivity is higher in Athens while the standard of living is higher in Troy
c. Productivity is higher in Troy while the standard of living is higher in Athens.
d. Both productivity and the standard of living are higher in Troy than Athens.
The inflation tax
a. transfers wealth from the government to households.
b. is the increase in real income taxes due to lack of indexation in income tax rules.
c. is a tax on everyone who holds money.
d. All of the above are correct.
Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases
the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6
million pounds. Using the midpoint method, what is the approximate value of the price
elasticity of supply?
a. 0.67
b. 0.89
c. 1.00
d. 1.13
When the money market is drawn with the value of money on the vertical axis, if
money demand shifts leftward, then initially there is an
a. excess demand for money which causes the price level to rise.
b. excess demand for money which causes the price level to fall.
c. excess supply of money which causes the price level to rise.
d. excess supply of money which causes the price level to fall.
Consumer 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.
Table 10-6
The table below contains data for the country of Batterland, which produces only
waffles and pancakes. The base year is 2009.
Prices and Quantities
Refer to Table 10-6. In 2010, this country’s GDP deflator was
a. 77.8.
b. 100.
c. 128.6.
d. 150.
In 2001, Congress and President Bush instituted tax cuts. According to the short-run
Phillips curve, in the short run this change should have
a. reduced inflation and unemployment.
b. raised inflation and unemployment.
c. reduce inflation and raised unemployment.
d. raised inflation and reduced unemployment.
If the exchange rate is 3 units of Peruvian currency per dollar and a hotel room in Lima
costs 300 units of Peruvian currency, then how many dollars do you need to get a room?
a. 900 and your purchase will increase Peru’s net exports.
b. 100 and your purchase will increase Peru’s net exports.
c. 900 and your purchase will have no effect on Peru’s net exports.
d. 100 and your purchase will have no effect on Peru’s net exports.
Table 3-4
Assume that the farmer and the rancher can switch between producing meat and
producing potatoes at a constant rate.
Labor Hours Needed
to Make 1 Pound of Pounds Produced
in 24 Hours
Refer to Table 3-4. Assume that the farmer and the rancher each has 24 labor hours
available. If each person divides his time equally between the production of meat and
potatoes, then total production is
a. 3 pounds of meat and 12 pounds of potatoes.
b. 5.5 pounds of meat and 8 pounds of potatoes.
c. 8 pounds of meat and 4 pounds of potatoes.
d. 11 pounds of meat and 16 pounds of potatoes.
If the demand for textbooks is inelastic, then a decrease in the price of textbooks will
a. increase total revenue of textbook sellers.
b. decrease total revenue of textbook sellers.
c. not change total revenue of textbook sellers.
d. There is not enough information to answer this question.
For a particular good, a 12 percent increase in price causes a 3 percent decrease in
quantity demanded. Which of the following statements is most likely applicable to this
good?
a. There are many substitutes for this good.
b. The good is a necessity.
c. The market for the good is narrowly defined.
d. The relevant time horizon is long.
Which of the following items is included in GDP?
a. the sale of stocks and bonds
b. the sale of used goods
c. the sale of services such as those performed by a doctor
d. All of the above are included in GDP.
Figure 17-2. On the graph, MS represents the money supply and MD represents money
demand. The usual quantities are measured along the axes.
Refer to Figure 17-2. Which of the following events could explain a shift of the
money-demand curve from MD1 to MD2?
a. an increase in the value of money
b. a decrease in the price level
c. an open-market purchase of bonds by the Federal Reserve
d. None of the above is correct.
Fundamental analysis shows that Moonlight Company is fairly valued. Then Moonlight
Company unexpectedly improves its production techniques and unexpectedly hires a
new CEO away from another very successful tea producer. Suppose this has no effect
on the price of the stock of Moonlight Company.
a. Fundamental analysis would now show the corporation is overvalued. The fact that
the price was unchanged is consistent with the efficient markets hypothesis.
b. Fundamental analysis would now show the corporation is overvalued. The fact that
the price was unchanged is not consistent with the efficient markets hypothesis.
c. Fundamental analysis would now show the corporation is undervalued. The fact that
the price was unchanged is consistent with the efficient markets hypothesis.
d. Fundamental analysis would now show the corporation is undervalued. The fact that
the price was unchanged is not consistent with the efficient markets hypothesis.
Table 4-7
Refer to Table 4-7. The equilibrium price and quantity, respectively, are
a. $2 and 50 units.
b. $6 and 30 units.
c. $6 and 60 units.
d. $12 and 30 units.
If purchasing power parity holds, the price level in the U.S. is 120, and the price level in
Canada is 140, which of the following is true?
a. the real exchange rate is 120/140.
b. the real exchange rate is 140/120.
c. the nominal exchange rate is 120/140
d. the nominal exchange rate is 140/120
A competitive marketis a market in which
a. an auctioneer helps set prices and arrange sales.
b. there are only a few sellers.
c. the forces of supply and demand do not apply.
d. no individual buyer or seller has any significant impact on the market price.
If the government provides an investment tax credit and increases income taxes,
a. real GDP rises, and the price level could rise, fall, or stay the same.
b. real GDP falls, and the price level could rise, fall, or stay the same.
c. the price level rises and real GDP could rise, fall or stay the same
d. None of the above are necessarily correct.
Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses
is $30 per dozen. We would expect a
a. shortage to exist and the market price of roses to increase.
b. shortage to exist and the market price of roses to decrease.
c. surplus to exist and the market price of roses to increase.
d. surplus to exist and the market price of roses to decrease.
The proliferation of Internet usage serves as an example of a favorable supply shock.
The natural rate of unemployment is impervious to economic policy.
Suppose the nominal interest rate is 5 percent, the tax rate on interest income is 30
percent, and the after-tax real interest rate is 0.8 percent. Then the inflation rate is 2.7
percent.
The labor-force participation rate equals the percentage of the total adult population that
is in the labor force.
Most economists agree that eliminating unemployment insurance would increase the
nation’s overall level of well-being.
Are the effects of an increase in aggregate demand in the aggregate demand and
aggregate supply model consistent with the Phillips curve? Explain.
With the resources it has, an economy can produce at any point on or outside the
production possibilities frontier, but it cannot produce at points inside the frontier.
The efficiency-wage theory of worker health is more relevant for explaining
unemployment in less developed countries than in rich countries.
List three different ways that a risk-averse person can reduce financial risk.
When a production possibilities frontier is bowed outward, the opportunity cost of one
good in terms of the other depends on how much of each good is being produced.
Explain why the demand for loanable funds slopes downward and why the supply of
loanable funds slopes upward.
Typically in countries with lower levels of real GDP person, a smaller percentage of the
population is literate.
Studies have shown that the design of the unemployment insurance system reduces the
job search effort of the unemployed.
If they could increase their growth rates slightly, countries with low income would
catch up with rich countries in about ten years.
The demand for loanable funds comes from saving and the supply of loanable funds
comes from investment.
Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods
become more attractive to U.S. residents, but less attractive to foreign residents.
Baseballs and baseball bats are substitute goods.
The demand for soap is more elastic than the demand for Dove soap.