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Figure 3-15
Refer to Figure 3-15. When the price rises from P1 to P2, which area represents the
increase in producer surplus to existing producers?
a. BCE
b. ACF
c. DEF
d. ABED
Interest rates in the loanable funds market vary with respect to
a. your rate of time preference.
b. risk.
c. expected inflation.
d. all of the above.
e. both b and c above.
From mid-year 2006 to year-end 2008, housing prices
a. fell by approximately 30 percent, leading to a sharp reduction in aggregate demand.
b. increased by approximately 30 percent leading to a sharp increase in aggregate
demand.
c. declined by a smaller about than in previous recessions.
d. were unchanged, but a sharp decline in stock prices reduced aggregate demand.
Long-run economies of scale exist when the long-run average cost curve
a. rises.
b. remains constant.
c. falls.
d. does not exist.
The crowding-out effect implies that a
a. budget surplus will be highly effective against inflation.
b. budget deficit is likely to stimulate aggregate demand and cause inflation.
c. budget deficit will increase real interest rates and, thereby, retard private spending.
d. budget surplus will retard aggregate demand and throw the economy into a
downward spiral.
During an economic boom period, the actual rate of unemployment will be
a. less than the natural rate of unemployment.
b. greater than the natural rate of unemployment.
c. equal to the natural rate of unemployment.
d. unaffected by the economic expansion.
During 1980-2005, the developing countries that moved most rapidly toward economic
freedom
a. achieved higher rates of economic growth, but the reductions in their poverty rates
were smaller than those for countries that were less free.
b. grew less rapidly, but the reductions in the poverty rates were greater than those
achieved in countries that were less free.
c. experienced both slower rates of economic growth and smaller reductions in poverty
rates than countries that were less free.
d. experienced both more rapid rates of economic growth and larger reductions in
poverty rates than countries that were less free.
A good is considered nonrival-in-consumption if
a. many individuals can share in the consumption of the same unit of the good.
b. the consumption of the good by one individual lowers the amount available for
others.
c. even nonpaying customers can receive the full benefit from the good.
d. its production is financed through tax revenue rather than market prices.
If it is impossible or very costly to exclude nonpaying customers from receiving a good,
the good is considered to be
a. freeware.
b. nonexcludable.
c. a common good.
d. a receiving good.
Which of the following is true?
a. Real federal spending per person was approximately 50 times higher in 1900 than
1800.
b. Real federal spending per person grew more rapidly during the 19th century than
during the 20th century.
c. Real federal spending per person was approximately 60 times greater in 1990 than in
1916.
d. Real federal spending per person has decreased significantly since 1964.
If the U.S. demand for British pounds increases,
a. the dollar price of a British pound will increase
b. the dollar price of a British pound will decrease
c. the exchange rate between dollars and pounds will be out of equilibrium
d. the pound will fall in value against the dollar
e. there will be no change in either the value of the dollar or the pound
Which of the following will most likely occur during the contractionary phase of a
business cycle?
a. Real GDP rises, and the unemployment rate falls.
b. Real GDP declines, and the rate of inflation rises.
c. The sales of most businesses decline, and the unemployment rate rises.
d. Inflation rises, and employment/population ratio falls.
Table 3-1
Refer to Table 3-1. If the table represents the willingness to pay of four buyers and the
price of the product is $30, then their total consumer surplus is
a. $10.
b. $6.
c. $20.
d. $30.
Other things the same, an increase in the price level makes the dollars people hold
worth
a. more, so they are willing to spend more.
b. more, so they are willing to spend less.
c. less, so they are willing to spend more.
d. less, so they are willing to spend less.
If net exports are positive, then
a. net capital outflow is positive (indicating an inflow of capital), so foreign assets
bought by Americans are greater than American assets bought by foreigners.
b. net capital outflow is positive (indicating an inflow of capital), so American assets
bought by foreigners are greater than foreign assets bought by Americans.
c. net capital outflow is negative (indicating an outflow of capital), so foreign assets
bought by Americans are greater than American assets bought by foreigners.
d. net capital outflow is negative (indicating an outflow of capital), so American assets
bought by foreigners are greater than foreign assets bought by Americans.
Within the aggregate demand/aggregate supply framework, the quantity produced and
purchased in the goods and services market represents
a. nominal output or nominal GDP.
b. the interest rate.
c. real output or real GDP.
d. the consumer price index.
The additional amount a person is willing to pay to obtain a good or resource now
rather than later is called the
a. interest rate.
b. nominal price of future goods.
c. inflationary premium.
d. risk premium.
Which of the following provides the strongest argument for young people making
regular payments into a retirement program that invests these funds in a diverse set of
stocks?
a. The prices of stocks tend to fluctuate more than the prices of bonds.
b. Over short periods of time, variation in the real rate of return of stocks is greater than
bonds.
c. When held over lengthy periods like 30 or 40 years, historically, the rate of return on
stocks has been both higher and less variable than that of bonds.
d. Lower interest rates will lead to higher bond prices.
Countries with more economic freedom have levels of economic growth that
a. are generally higher than those of nations with less economic freedom.
b. are similar to those of nations with less economic freedom since the level of
investment, not economic freedom, determines the growth rate.
c. cannot continue at high levels because too little government planning is being done.
d. are generally lower than the growth rates of countries with less economic freedom.
If price falls, what happens to the demand for a product?
a. It increases.
b. It decreases.
c. It does not change.
d. Uncertain--economic theory has no answer to this question.
A black market is
a. a market that operates outside the legal system, either by selling illegal goods or by
selling goods at illegal prices.
b. a market where goods and services can be obtained at lower prices.
c. a government-mandated market where controls are placed on prices.
d. a market where exchanges are made using bartering.
If import restrictions prohibit foreigners from selling various goods in the U.S. market,
a. the United States will be able to export more goods abroad.
b. foreigners will have fewer U.S. dollars with which to buy goods from Americans.
c. the United States will be able to produce a larger output than would otherwise be the
case.
d. the domestic producers in the protected industries will supply goods to U.S.
consumers at lower prices than would otherwise be the case.
The figure below illustrates a tariff. On the graph, Q represents quantity and P
represents price.
Figure 17-11
Refer to Figure 17-11. The deadweight loss created by the tariff is represented by the
area
a. B.
b. D + F.
c. D + E + F.
d. B + D + E + F.
Figure 11-18
The firm in Figure 11-18, a monopolist that maximizes profit by charging all customers
the same price, is making a profit of
a. $0
b. $234
c. $482
d. $960
e. $468
Figure 17-9
Refer to Figure 17-9. The size of the tariff on carnations is
a. $8 per dozen.
b. $6 per dozen.
c. $4 per dozen.
d. $2 per dozen.
Suppose you transfer $1,000 from your checking account to your savings account. How
does this action affect the M1 and M2 money supplies?
a. M1 and M2 are both unchanged.
b. M1 falls by $1,000, and M2 rises by $1,000.
c. M1 is unchanged, and M2 rises by $1,000.
d. M1 falls by $1,000, and M2 is unchanged.
During the financial crisis of 2008-2010, the Fed
a. increased its purchases of securities and other financial assets and extended more
loans, which expanded the monetary base.
b. increased its purchases of securities and other financial assets and extended more
loans, which reduced the monetary base.
c. reduced its purchases of securities and other financial assets and extended fewer
loans, which expanded the monetary base.
d. reduced its purchases of securities and other financial assets and extended fewer
loans, which caused the monetary base to decline.
If the Fed wanted to expand the money supply as part of an antirecession strategy, it
could
a. increase the interest rate paid on excess reserves encouraging banks to extend more
loans.
b. decrease the interest rate paid on excess reserves encouraging banks to extend more
loans.
c. decrease the interest rate paid on excess reserves encouraging banks to hold excess
reserves rather than extend more loans.
d. increase the interest rate paid on excess reserves encouraging banks to hold excess
reserves rather than extend more loans.
A firm purchases $600,000 worth of raw materials and pays wages and salaries of
$100,000 and dividends of $200,000. If the firm sells its output for $1 million, the
firm's value added to GDP is
a. $300,000.
b. $400,000.
c. $900,000.
d. $1,000,000.
Suppose housing construction is a price-searcher market with low barriers to entry.
Which of the following will be true for this market?
a. The output of the housing construction firms will be produced inefficiently.
b. Consumers would be better off if there were fewer firms and less variety in the
housing market.
c. If firms produced larger quantities but less variety, they could reduce the per-unit
costs.
d. Consumers do not have to pay for variety in the housing construction market.
A firm in competitive price-taker market is maximizing profit at Q = 3,000. Then its
fixed cost increases. The profit-maximizing output is now
a. greater than 3,000 and profit decreases
b. less than 3,000 and profit decreases
c. greater than 3,000 and profit is unchanged
d. equal to 3,000 and profit decreases
e. equal to 3,000 and profit increases
Within the AD/AS model, an unanticipated increase in short-run aggregate supply will
cause real output to
a. increase and the general level of prices to fall.
b. decrease and the general level of prices to rise.
c. increase and the general level of prices to rise.
d. decrease and the general level of prices to fall.
