Figure 2-2
Figure 2-2 above shows the production possibilities frontier for Vidalia, a nation that
produces two goods, roses and orchids.
Refer to Figure 2-2. If Vidalia chooses to produce 40 dozen orchids, how many roses
can it produce to maximize production?
A) 30 dozen roses
B) 50 dozen roses
C) 100 dozen roses
D) 150 dozen roses
A major source of inefficiency in barter economies is that they require
A) a standard of deferred payment to make trade possible.
B) a double coincidence of wants in exchange.
C) more liquid stores of value than do monetary economies.
D) All of the above are correct.
When we graph consumption as a function of national income rather than as a function
of ________, the slope of this consumption function is the ________.
A) disposable income; MPC
B) personal income; MPC
C) disposable income; MPS
D) personal income; MPS
Workers in high-income countries have ________ to work with than do workers in
low-income countries.
A) less physical capital
B) more physical capital
C) more labor
D) more labor and less physical capital
Organizing a successful firm in a market economy has become ________ over the last
century.
A) legally impossible
B) politically impossible
C) less difficult
D) more difficult
The largest component of spending in GDP is
A) consumption spending.
B) investment spending.
C) government spending.
D) net export spending.
Assuming the United States is the “domestic” country, if the real exchange rate between
the United States and France increases from 1.5 to 1.8,
A) the prices of U.S. goods and services have increased by 53% relative to France.
B) the prices of U.S. goods and services have increased by 3% relative to France.
C) the prices of U.S. goods and services have decreased by 16% relative to France.
D) the prices of U.S. goods and services have increased by 20% relative to France.
To increase the money supply, the Federal Reserve could
A) lower the discount rate.
B) decrease income taxes.
C) raise the required reserve ratio.
D) conduct an open market sale of Treasury securities.
In the long run, a country will experience an increasing standard of living only if it
experiences
A) a high rate of consumption.
B) continuous technological change.
C) a high rate of labor force growth.
D) a slow rate of population growth.
If firms are more pessimistic and believe that future profits will fall and remain weak
for the next few years, then
A) investment spending will fall.
B) investment spending will rise.
C) investment spending will remain unaffected.
D) investment spending will rise and then fall.
Increases in real GDP would understate the well-being of a country over time if, over
that time period, the
A) crime rate increased.
B) percentage of people addicted to illegal drugs increased.
C) amount of pollution decreased.
D) average hours worked per week decreased.
Which of the following transactions represents the purchase of a final good?
A) Starbucks purchases coffee beans.
B) Delta buys a new European-made jetliner.
C) Apple computer buys computer processors from Intel.
D) Your father buys a new John Deere riding lawn mower.
By 2013, ________ members of the European Union were using the euro as their
currency.
A) 12
B) 17
C) 28
D) 57
Pegging a country’s exchange rate to the dollar can be advantageous in all of the
following situations except
A) if the country has extensive trade with the United States.
B) if investors believe the dollar to be more stable than the domestic country’s currency.
C) if a country wishes to conduct independent monetary policy.
D) if imports are a significant fraction of the goods the country’s consumers buy.
In which of the following countries does health insurance not pay for most preventive
care procedures?
A) Canada
B) Japan
C) the United Kingdom
D) the United States
What is one difference between stocks and bonds?
A) Bonds earn a higher rate of return than stocks.
B) Stocks earn a higher rate of return than bonds.
C) Bonds are purchased at a bank, while stocks are purchased through the federal
government.
D) Stocks represent partial ownership in a firm, while bonds do not.
If nominal GDP rises we can say that
A) production has risen and prices remain constant.
B) prices have risen and production remains constant.
C) production has risen or prices have risen or both have risen.
D) production has fallen and prices have risen.
Which of the following information about fiat money is false? Fiat money
A) is backed by gold.
B) serves as a medium of exchange.
C) has little to no value except as money.
D) is authorized by a central bank or governmental body.
Between 1990 and 2012, which of these leading industrial countries of the world had
the highest average annual growth rate in GDP per capita?
A) the United States
B) Germany
C) Japan
D) Canada
What is shown on a firm’s income statement?
A) costs
B) profits
C) revenues
D) All of these are shown on a firm’s income statement.