Corporations have the disadvantage of (i) double taxation; (ii) unlimited liability.
a. i and ii
b. i not ii
c. ii not i
d. neither i nor ii
Productivity increases, brought about by increased education and training, may shift the
aggregate supply curve outward.
a. True
b. False
Where should a producer stop devoting more of his spending on labor if initially the
MRP of the additional dollar spent on labor is higher than the MRP of the additional
unit spent on tools?
a. MRP/$ of additional labor falls below MRP/$ of additional tools.
b. MRP/$ of additional capital increases above MRP/$ of additional tools.
c. MRP/$ of additional labor becomes equal to MRP/$ of additional tools.
d. MRP/$ of the additional labor falls to zero.
If long-term investments are increasing,
a. current consumption must be increasing.
b. interest rates must be relatively low.
c. interest rates must be relatively high.
d. the people must be experiencing a “defective telescopic faculty.”
An increase in a consumer’s income will always increase the demand for a good.
a. True
b. False
If aggregate demand is $2,000 billion and aggregate supply is $2,300 billion, the price
level will rise.
a. True
b. False
Which of the following observations is true?
a. Tax changes have no impact on the consumption schedule.
b. Tax reduction shifts the consumption schedule upward.
c. Changes in taxes have a multiplier effect on equilibrium GDP on the supply side.
d. Tax increases increase equilibrium GDP.
Amazon.com, an Internet retailer of books, buys a shipment of economics textbooks
from a publisher. Is this included in GDP?
a. Yes
b. No
c. It depends on how the payment is made
d. Yes, in real but not nominal GDP
e. Yes, in nominal but not real GDP
According to Baumol and Blinder, from the demand side an increase in the price level
causes aggregate expenditures to
a. fall, resulting in a lower level of equilibrium income.
b. fall, resulting in a higher level of equilibrium income.
c. rise, resulting in a higher level of equilibrium income.
d. rise, resulting in a lower level of equilibrium income.
Which of the following are reasons that banks are so heavily regulated?
a. Governments are concerned about the safety of deposits.
b. The industry is a principal determinant of aggregate demand.
c. Bank failures are contagious.
d. All of the above are correct.
Figure 6-1
In Figure 6-1,
a. D1 is more elastic than D2 below P2 and less elastic above P2.
b. D1 is less elastic than D2 at all prices.
c. D2 is less elastic than D1 at all prices.
d. D2 is more elastic than D2 above P2 but less elastic below P2.
Economic profit of a decision in question equals
a. accounting profit of the decision in question + its opportunity cost.
b. accounting profit of the decision in question − accounting profit of the best available
alternative.
c. accounting profit of the decision in question + its opportunity cost + overheads.
d. its opportunity cost + accounting profit of the best available alternative.
In an economist’s view, a cartel usually offers to society
a. all the cost benefits of large-scale production and none of the allocative inefficiencies
of monopoly.
b. all the cost benefits of large-scale production and all of the allocative inefficiencies of
monopoly.
c. none of the cost benefits of large-scale production and none of the allocative
inefficiencies of monopoly.
d. none of the cost benefits of large-scale production and all of the allocative
inefficiencies of monopoly.
One of the key factors that determine an economy’s real GDP is labor productivity,
which is a measure of
a. output per hour of work.
b. labor force per hour.
c. input per hour worked.
d. total hours worked.
An inflationary gap exists when consumers
a. are saving more than businesses are investing.
b. and businesses are purchasing less than the economy is capable of producing.
c. and businesses are demanding more than the economy is capable of producing.
d. and businesses are demanding less than the full employment level of output.
An open market purchase of T-bonds by the Fed causes the money supply to
a. fall and bond prices to fall.
b. rise and bond prices to fall.
c. rise and bond prices to rise.
d. fall and bond prices to rise.
The burden of a tax is
a. the amount of revenue that the government raises from the tax.
b. what it would cost in alternative tax revenue to provide the same level of service.
c. greater as the total revenue from the tax decreases.
d. the amount the taxpayer would have to be given to be just as well off in the presence
of the tax as in its absence.
The aggregate demand curve has an upward slope due to the positive relationship
between the price level and aggregate quantity demanded.
a. True
b. False
If Japanese tourists visit Yellowstone Park, what is the effect in the foreign exchange
market?
a. It will increase demand for Japanese yen.
b. It will decrease demand for Japanese yen.
c. It will increase supply of Japanese yen.
d. It will decrease supply of Japanese yen.
An unregulated market economy provides material wealth, but does not generate
effective control of environmental damage.
a. True
b. False
Figure 10-8
In the short run, the firm in Figure 10-8 will shut down if the price falls below
a. $8.
b. $6.
c. $5.
d. $1.
GDP does not measure the economic well-being of a nation because:
a. some things which contribute to well-being have no price tag
b. GDP places no value on leisure
c. ecological costs are not netted out of GDP
d. All of the above are correct.
For most goods and most people, marginal utility probably
a. continues to increase as larger quantities are purchased.
b. plummets after the first few units but soon begins to rise.
c. declines as consumption increases.
d. is negative after the first unit of a good is purchased.
e. is positive and rising for most goods.
Corporate profits are taxed twice.
a. True
b. False
Is increased capital spending the only way for an economy to expand its production
possibilities frontier?
a. No, an economy can also expand by invention and innovation.
b. No, an economy can also grow by investment instead of capital spending.
c. Yes, more capital is the only way to expand its production possibilities frontier.
d. Yes, although more capital clearly has a high opportunity cost.
e. Yes, because capital is the only constraining resource that limits growth.
When economists refer to the economy’s self-correcting mechanism, they are referring
to the fact that the
a. economy will react automatically to a recessionary gap through inflation.
b. economy will react automatically to an inflationary gap through deflation.
c. economy will react automatically to an inflationary gap through inflation.
d. simple multiplier is greater than the complex multiplier.
The value of intermediate goods is not included in the calculation of GDP to avoid the
problem of
a. depreciation.
b. inflation.
c. double counting.
d. transfer payments.
The nominal interest rate is the sum of the
a. real interest rate and the historic rate of inflation.
b. real interest rate and the expected rate of inflation.
c. historic rate of inflation and the expected rate of inflation.
d. expected rate of inflation and the rate of price level increase.
Borrowed funds are used in financing every component of GDP.
a. True
b. False
In 2007, which U.S. firm showed the first indication of significant problems in the
financial sector?
a. AIG
b. Bear Stearns
c. J.P. Morgan Chase
d. Lehman Brothers