Figure 9-2
Refer to Figure 9-2. As a result of trade, total surplus increases by
a. $80.
b. $97.50.
c. $162.50.
d. $495.50.
Table 3-12
Labor Hours Needed to
Make 1 Pound of: Amount
Produced in 40 hours
Refer to Table 3-12. Which of the following combinations of meat and potatoes could
the farmer produce in 40 hours?
a. 1 pound of meat and 7 pounds of potatoes.
b. 2 pounds of meat and 5 pounds of potatoes.
c. 3 pounds of meat and 3 pounds of potatoes.
d. 4 pounds of meat and 2 pounds of potatoes.
Monetary policy
a. must be described in terms of interest-rate targets.
b. must be described in terms of money-supply targets.
c. can be described either in terms of the money supply or in terms of the interest rate.
d. cannot be accurately described in terms of the interest rate or in terms of the money
supply.
Real GDP
a. is the current dollar value of all goods produced by the citizens of an economy within
a given time.
b. measures economic activity and income.
c. is used primarily to measure long-run changes rather than short-run fluctuations.
d. All of the above are correct.
Deadweight loss measures the loss
a. in a market to buyers and sellers that is not offset by an increase in government
revenue.
b. in revenue to the government when buyers choose to buy less of the product because
of the tax.
c. of equality in a market due to government intervention.
d. of total revenue to business firms due to the price wedge caused by the tax.
Figure 5-12
Refer to Figure 5-12. Total revenue when the price is P1 is represented by the area(s)
a. B + D.
b. A + B.
c. C + D.
d. D.
Figure 8-5
Suppose that the government imposes a tax of P3 – P1.
Refer to Figure 8-5. Consumer surplus before the tax was levied is represented by area
a. A.
b. A+B+C.
c. D+H+F.
d. F.
An identity is an equation that
a. describes an equilibrium.
b. pertains to macroeconomics, not to microeconomics.
c. must be true because of how the variables in the equation are defined.
d. involves final goods, not intermediate goods.
Which of the following is most likely to result if foreigners decide to withdraw the
funds that they have loaned to the United States?
a. U.S. net exports will rise
b. U.S. net capital outflow will fall.
c. U.S. domestic investment will rise
d. the dollar will appreciate
A survey of professional economists revealed that more than three-fourths of them
agreed with a number of statements, including which of the following?
a. Tariffs and import quotas usually reduce general economic welfare.
b. A large federal budget deficit has an adverse effect on the economy.
c. Minimum wage increases unemployment among young and unskilled workers.
d. All of the above are correct.
If a good is normal, then an increase in income will result in a(n)
a. increase in the demand for the good.
b. decrease in the demand for the good.
c. movement down and to the right along the demand curve for the good.
d. movement up and to the left along the demand curve for the good.
A U.S. firm exchanges dollars for yen and then uses them to buy Japanese goods.
Overall as a result of these transactions
a. both U.S. net capital outflow and U.S. net exports rise.
b. both U.S. net capital outflow and U.S. net exports fall.
c. U.S. net capital outflow rises and U.S. net exports fall.
d. U.S. net capital outflow falls and U.S. net exports rise.
The price index was 128.96 in 2006, and the inflation rate was 24 percent between 2005
and 2006. The price index in 2005 was
a. 104.
b. 104.96.
c. 152.96.
d. 159.91.
Which of the following best illustrates the concept of a store of value?
a. You are a precious-metals dealer, and you are always aware of how many ounces of
platinum trade for an ounce of gold.
b. You sell items on eBay, and your prices are stated in terms of dollars.
c. You keep 6 ounces of gold in your safe-deposit box at the bank for emergencies.
d. None of the above is correct.
Which types of models are built with assumptions?
a. economic models, but not models in other disciplines such as physics and biology
b. economic models as well as models in other disciplines such as physics and biology
c. models that are built for teaching purposes but not for research purposes
d. bad models
The amount of currency per person in the United States is about
a. $125.
b. $300.
c. $2,500.
d. $3,700.
If the government raises government expenditures, then in the short run prices
a. rise and unemployment falls.
b. fall and unemployment rises.
c. and unemployment rise.
d. and unemployment fall.
If money is neutral and velocity is stable, an increase in the money supply creates a
proportional increase in
a. real output only.
b. nominal output only.
c. the price level only.
d. both the price level and nominal output.
Which of the following is the most likely explanation for the imposition of a price
ceiling on the market for milk?
a. Policymakers have studied the effects of the price ceiling carefully, and they
recognize that the price ceiling is advantageous for society as a whole.
b. Buyers of milk, recognizing that the price ceiling is good for them, have pressured
policymakers into imposing the price ceiling.
c. Sellers of milk, recognizing that the price ceiling is good for them, have pressured
policymakers into imposing the price ceiling.
d. Buyers and sellers of milk have agreed that the price ceiling is good for both of them
and have therefore pressured policymakers into imposing the price ceiling.
If the stock market crashes, then
a. aggregate demand increases, which the Fed could offset by increasing the money
supply.
b. aggregate demand increases, which the Fed could offset by decreasing the money
supply.
c. aggregate demand decreases, which the Fed could offset by increasing the money
supply.
d. aggregate demand decreases, which the Fed could offset by decreasing the money
supply.
Figure 4-16
Refer to Figure 4-16. If there is currently a shortage of 20 units of the good, then the
law of
a. demand predicts that the price will rise by $2 to eliminate the shortage.
b. supply predicts that the price will rise by $2 to eliminate the shortage.
c. supply and demand predicts that the price will rise by $2 to eliminate the shortage.
d. supply and demand predicts that the price will fall by $2 to eliminate the shortage.
Which of the following is not included in GDP?
a. a can of bug spray
b. the services of an exterminator
c. the honey produced and sold by a beekeeper
d. All of the above are included in GDP.
Indiadesh is a country that produces two goods, textiles and computers. Last year,
Indiadesh produced 500 textiles and 1300 computers. This year it produced 450 textiles
and 1100 computers. Given no further information, which of the following events could
explain this change?
a. Indiadesh decreased unemployment.
b. Indiadesh experienced an improvement in textile-making technology.
c. Indiadesh experienced an improvement in computer-making technology.
d. Indiadesh experienced a reduction in resources.
Production possibilities frontiers are usually bowed outward. This is because
a. the more resources a society uses to produce one good, the fewer resources it has
available to produce another good.
b. it reflects the fact that the opportunity cost of producing a good decreases as more
and more of that good is produced.
c. of the effects of technological change.
d. resources are specialized; that is, some are better at producing particular goods rather
than other goods.
Suppose the US and Mexico both produce semiconductors and auto parts and the US
has a comparative advantage in semiconductors while Mexico has a comparative
advantage in auto parts. Also suppose the US has an absolute advantage in the
production of both semiconductors and auto parts. The US should
a. not trade semiconductors and auto parts with Mexico.
b. import semiconductors from Mexico and export auto parts to Mexico.
c. export semiconductors to Mexico and import auto parts from Mexico.
d. export both semiconductors and auto parts to Mexico.
The assumption of a closed economy
a. applies to the world economy.
b. applies to most national economies.
c. requires us to assume that the government’s budget is always balanced.
d. All of the above are correct.
Figure 7-11
Refer to Figure 7-11. At the equilibrium price, producer surplus is
a. $200.
b. $400.
c. $450.
d. $900.
If the CPI was 110 this year and 100 last year, then
a. the cost of the CPI basket of goods and services increased by 10 percent this year.
b. the price level increased by 110 percent this year.
c. the inflation rate for this year was 10 percent higher than the inflation rate for last
year.
d. All of the above are correct.
Other things the same, an increase in the interest rate makes the quantity of loanable
funds demanded
a. rise, and investment spending rise.
b. rise, and investment spending fall.
c. fall, and investment spending rise.
d. fall, and investment spending fall.
The nation of Woodland forbids international trade. In Woodland, you can exchange 1
pound of chicken for 5 pounds of salt. In other countries, you can exchange 1 pound of
chicken for 7 pounds of salt. These facts indicate that
a. Woodland has a comparative advantage, relative to other countries, in producing
chicken.
b. other countries have an absolute advantage, relative to Woodland, in producing
chicken.
c. the price of chicken in Woodland exceeds the world price of chicken.
d. if Woodland were to allow trade, it would export salt.