Money market mutual funds are ______ the M1 measure of money and ______ the M2
measure of money.
A. included in; excluded from
B. included in; included in
C. excluded from; excluded from
D. excluded from; included in
The Smart for One, Dumb for All principle indicates that:
A. pursuing selfish interests always promotes social welfare.
B. if everyone is doing it, you should not.
C. pursuing selfish interests always lessens social welfare.
D. pursuing selfish interests sometimes conflicts with social welfare.
The AS curve slopes upward because:
A. all firms will increase their prices in response to an increase in aggregate demand,
but some will increase their output and other will decrease their output.
B. all firms will increase their prices, but not their output in response to an increase in
aggregate demand.
C. some firms will increase their prices and their output in response to an increase in
aggregate demand.
D. all firms will increase their prices and their output in response to an increase in
aggregate demand.
Refer to the figure above. If supply were to shift to the left, and demand were to also
shift to the left, in the new equilibrium:
A. both price and quantity would be lower.
B. both price and quantity would be higher.
C. price would be higher and quantity would be lower.
D. quantity would be lower, but the direction of the price change cannot be determined.
If the equilibrium quantity is equal to the socially optimal quantity, one can infer that:
A. the supply curve for the activity is below the socially optimal supply curve.
B. there is no externality associated with this good.
C. there is a positive externality associated with this good.
D. there is a negative externality associated with this good.
The proposition that each extra percentage point of cyclical unemployment is associated
with about a 2 percentage point increase in the output gap, measured in relation to
potential output, is known as:
A. the recessionary gap.
B. the expansionary gap.
C. the Fisher effect.
D. Okun’s law.
Insurance companies practice statistical discrimination because
A. men are willing to pay more for insurance than women.
B. the demand for insurance is very inelastic.
C. it provides the best information available about the likelihood of a claim.
D. it provides perfect information about the likelihood of a claim.
Shifts in ______ can return the economy to long-run equilibrium.
A. the AD curve only
B. the AS curve only
C. either the AD curve or the AS curve
D. the PAE line only
A variable factor of production:
A. is fixed in the long run but variable in the short run.
B. plays no role in the law of diminishing marginal returns.
C. is variable in both the short run and the long run.
D. is variable only in the short run.
Refer to the figure above. When the price increases from $0.75 to $1.00, quantity
demanded in the market will ______ by _____ cans.
A. decrease, 20
B. increase, 20
C. decrease, 40
D. increase, 40
Recessions tend to be ______ by ______ in the rate of inflation.
A. followed; an increase
B. followed; a decline
C. preceded; a decline
D. preceded immediately; a stabilization
Refer to the figure above. Suppose that during the summer Becky can sell more sandals
than she can clogs. If she had been producing at point x in the winter, during the
summer she will produce at:
A. point w.
B. point z.
C. point u.
D. point t.
The table below shows the payoff matrix in the form of short term profits for two firms,
A and B, for two different strategies, investing in new capital or not investing in new
capital. Payoffs are in millions of dollars.
Refer to the figure above. The game is an example of a:
A. cartel.
B. credible promise.
C. prisoner’s dilemma.
D. multiple equilibria game.
Refer to the figure above. Given the cost functions shown, at an output of 100
doughnuts, average cost would be
A. less than 20 cents per doughnut.
B. exactly 20 cents per doughnut.
C. less than marginal cost.
D. greater than marginal cost.
Two countries, Alpha and Beta, have the same levels of nominal and real GDP. Each
dollar in Alpha is used more frequently than each dollar in Beta. Therefore, it must be
the case that ______ in Alpha than in Beta.
A. the rate of inflation is greater
B. the money stock is smaller
C. the price level is greater
D. the velocity is lower
Pareto efficiency is a situation in which:
A. no one is made better off.
B. trades remain that would make some better off without harming others.
C. trades have benefited some and harmed others.
D. any further trades will harm someone.
Which of the following is an example of an investment in human capital?
A. A firm replaces manually controlled production with a computer controlled
procedure.
B. A firm pays for workers to take college classes.
C. A chemical firm supports research to develop new chemicals.
D. A firm purchases new equipment for a manufacturing process.
The invisible hand will lead to _______ information than is socially optimal because of
________.
A. more; free riders
B. less; a prisoner’s dilemma
C. more; external benefits
D. less; free riders
The probability that Mo will like a particular movie is 90% and has a value of $40. Not
liking the movie has a value of -$10. The expected value of going to that movie is
A. $40.
B. $36.
C. $35.
D. $30.
Catherine and Nancy both own homes with lawns of similar size. Catherine mows her
own lawn while Nancy hires someone to mow hers. Assume both women are rational
decision makers. Which is the best explanation of the different decisions they make?
A. The opportunity cost of Nancy’s time is higher than the cost to her of hiring someone
to mow the lawn.
B. Nancy can get her lawn mowed for less than Catherine.
C. Nancy doesn’t own a lawnmower.
D. Nancy earns more than Catherine does.
If all prices, including the price of beef, increase by 3%, then the relative price of beef
has ______ and inflation _____.
A. increased; has occurred
B. increased; has not occurred
C. remained constant; has occurred
D. remained constant; has not occurred
Frictional unemployment is:
A. the unemployment that results when people retire or leave the labor force.
B. the additional unemployment not captured in official statistics resulting from
discouraged workers and involuntary part-time workers.
C. the extra unemployment that occurs during periods of recession.
D. short-term unemployment that is associated with the process of matching workers
with jobs.
In the Keynesian cross diagram, the ______ line relates planned aggregate expenditure
to output and the ______ line represents the condition that planned aggregate
expenditure equals short-run equilibrium output.
A. consumption function; 45°
B. 45°; consumption function
C. expenditure; 45°
D. 45°; expenditure