The real wages of workers will tend to be high when
a. output per worker is high.
b. capital is scarce.
c. industries are automating at a slow rate.
d. profits are low.
The actual rate of unemployment will generally
a. increase as an economy enters an economic boom period.
b. decrease as an economy enters an economic boom period.
c. exceed the natural rate of unemployment during an economic boom period.
d. do both a and c.
Figure 3-10
Figure 3-10 illustrates the conditions of demand and supply in the market for compact
discs. Indicate the equilibrium price and quantity.
a. price, $20; quantity, 2,000
b. price, $15; quantity, 3,000
c. price, $10; quantity, 2,000
d. price, $10; quantity, 4,000
Someone notices that sunspot activity is high just prior to recessions and concludes that
sunspots cause recessions. This person has
a. confused association and causation.
b. misunderstood the ceteris paribus assumption.
c. used normative economics to answer a positive question.
d. built an untestable model.
Which of the following about trade is true?
a. Trade does not produce anything new; therefore, it cannot create value.
b. The value of a good is determined by the cost of the material resources required for
its production.
c. The value of a good generally depends on who uses it and circumstances such as
when and where it is used.
d. All of the above are true.
When the actual GDP equals the full-employment level of GDP, the
a. economy is in long-run equilibrium.
b. price level must be rising.
c. expected inflation must be zero.
d. aggregate supply curve is not constrained by the scarcity of resources.
If the economy is in a recession, and the government raises taxes in an effort to balance
the budget, the Keynesian model indicates the likely effect will be to
a. counteract the recession.
b. prolong the recession and increase its severity.
c. end the recession sooner.
d. increase the level of real GDP.
Which of the following has contributed to China’s economic growth since 1980?
a. the rapid growth of foreign aid from European countries
b. nationalization of many private industries
c. increased restrictions on international trade
d. increased privatization of the agricultural and small-business sectors
Figure 3-16
Refer to Figure 3-16. When the price is P2, producer surplus is
a. A.
b. A + C.
c. A + B + C.
d. D + E.
Suppose a country had $3.5 billion of net exports and bought $6.8 billion of goods and
services from foreign countries. This country would have
a. $10.3 billion of exports and $6.8 billion of imports.
b. $10.3 billion of imports and $6.8 billion of exports.
c. $6.8 billion of exports and $3.5 billion of imports.
d. $6.8 billion of imports and $3.5 billion of exports.
Figure 4-20
Refer to Figure 4-20. The price that sellers receive after the tax is imposed is
a. $8.
b. $6.
c. $5.
d. $3.
When the foreign exchange market is in equilibrium, which of the following will be
true?
a. imports + exports = net capital inflow
b. imports exports = net capital inflow
c. imports budget deficit = net savings
d. imports + investment = exports + savings
Suppose the demand curve for aluminum cans is downward sloping, and the cans are
produced in a constant cost industry where the firms are price takers. A $.25-per-can tax
is levied on aluminum cans. How much will the price of aluminum cans increase in the
short run and the long run?
a. short run, $.25; long run, more than $.25
b. short run, less than $.25; long run, $.25
c. short run, less than $.25; long run, more than $.25
d. short run, $.25; long run, less than $.25
If an individual or family began at age 25 paying funds into a tax-free investment
account or pension earning a 7 percent real return, how much would they have to save
annually in order for the funds to be worth a million dollars (measured in the
purchasing power of today’s dollar) when they reach age 65?
a. approximately $5,000 annually
b. approximately $10,000 annually
c. approximately $20,000 annually
d. approximately $50,000 annually
Politicians often instruct households to spend in order to help the economy. This advice
overlooks the fact that
a. increases in consumption will make it easier for households to deal with
unanticipated future expenses.
b. increases in consumption will provide more loanable funds for investment.
c. you cannot have a strong economy if all or most households are spending just about
everything they earn.
d. consumer spending is less than two-thirds of GDP.
When an economy is in a recession,
a. strong demand for investment funds will push interest rates upward.
b. strong demand for resources will push the prices of resources upward.
c. the real interest rate will tend to rise.
d. the unemployment rate will rise above its natural rate.
If most businesses in an industry are earning a 13 percent rate of return on their assets,
but your firm is earning 23 percent, your rate of economic profit is
a. zero.
b. 10 percent.
c. 23 percent.
d. 36 percent.
Since 1802, the average annual compound return for stock holdings, adjusted for
inflation, has been approximately
a. 2 percent.
b. 7 percent.
c. 15 percent.
d. 30 percent.
Which of the following about economic freedom is true?
a. In 1960, the per capita income levels of Hong Kong and Singapore were greater than
those of the United States and Canada.
b. The economies of Hong Kong and Singapore have grown slowly in recent decades.
c. Economic freedom ratings indicate that both Hong Kong and Singapore rank among
the world’s freest economies.
d. Economic freedom ratings indicate that Nigeria and Venezuela rank among the
world’s freest economies.
If Jayla’s tax liability increases from $10,000 to $16,000 when her income increases
from $30,000 to $40,000, her marginal tax rate is
a. 33 percent.
b. 35 percent.
c. 50 percent.
d. 60 percent.
Suppose the Fed purchases $40,000 of U.S. Treasury bonds from Benjamin, who
deposits the money with First National Bank. If the required reserve ratio is 20 percent,
this transaction will increase the excess reserves of First National Bank by
a. $8,000.
b. $32,000.
c. $40,000.
d. $200,000.
Jamal buys a new jacket for $50. If his willingness to pay is ____, he receives consumer
surplus of $15 on his purchase
a. $15.
b. $35.
c. $50.
d. $65.
The actual burden of a tax
a. falls most heavily on the side of the market that is more elastic.
b. falls most heavily on the side of the market that is more inelastic.
c. falls most heavily on the side of the market that is closest to unitary elasticity.
d. is distributed independently of relative elasticities of supply and demand.
In 2006, the American Association of Retired Persons (AARP) spent over $70 million
on lobbying-related expenses in an attempt to get policies enacted that would benefit
retirees. In economics, the term used to describe such activity is
a. logrolling.
b. rent seeking.
c. influence peddling.
d. redistribution searching.
Which of the following would count as an investment expenditure in national income
accounting?
a. General Motors hires 10 electrical engineers.
b. Boeing purchases a new metal stretching machine used to produce airplane wings.
c. Ms. Quantum buys 100 shares of Microsoft stock.
d. A large corporation spends $10,000 per month on long-distance phone charges.
Persistently expansionary monetary policy that stimulates aggregate demand and leads
to inflation will
a. lead to higher rates of real output in the long run.
b. fail to increase real output once decision makers fully anticipate the inflation.
c. lead to lower nominal interest rates once decision makers fully anticipate the
inflation.
d. permanently reduce the rate of unemployment below its natural rate.
Figure 17-10
Refer to Figure 17-10. With the tariff, the quantity of saddles imported is
a. Q3 Q1.
b. Q3 Q2.
c. Q4 Q1.
d. Q4 Q2.
A local restaurant offers an “all you can eat” barbeque special. You pay $9.00, and then
you can eat as many servings as you desire at no additional cost. It would follow that
you will stop eating when
a. your marginal utility (or value) derived from eating another serving is zero.
b. your total utility (or value) derived from all of the servings consumed just equals
$9.00.
c. your marginal utility (or value) derived from another serving equals $9.00.
d. it is physically impossible for you to eat any more.
During a recession, which of the following will be true?
a. The actual rate of unemployment will be lower than the natural rate.
b. Actual GDP will be lower than potential GDP.
c. The employment/population ratio will increase substantially.
d. Actual inflation will be higher than was anticipated.
Suppose that competitive price-searcher firms are experiencing losses. In the transition
from this initial situation to a long-run equilibrium,
a. the number of firms in the market decreases.
b. each existing firm experiences a decrease in demand for its product.
c. each firm experiences an upward shift to its marginal cost and average total cost
curves.
d. each existing firm’s average total cost falls to bring economic profit back to zero.