Assets of the commercial banking system include:
A. reserves and loans.
B. deposits.
C. reserves and deposits.
D. loans and deposits.
If the exchange rate moves from 10 Mexican pesos per U.S. dollar to 8 Mexican pesos
per U.S. dollar, then the Mexican peso has ______ and the U.S. dollar has _____.
A. appreciated; appreciated
B. appreciated; depreciated
C. depreciated; appreciated
D. depreciated; depreciated
If planned aggregate spending in an economy can be written as PAE = 15,000 + 0.6Y –
20,000r, and potential output equals 36,000, what real interest rate must the Federal
Reserve set to bring the economy to full employment?
A. 2 percent
B. 3 percent
C. 4 percent
D. 5 percent
If household saving decreases by $4 million, business saving increases by $4 million,
and the government budget deficit decreases by $4 million, then private saving ______
and public saving ______.
A. increases; increases
B. increases; decreases
C. does not change; increases
D. does not change; decreases
Your classmates from the University of Chicago are planning to go to Miami for spring
break, and you are undecided about whether you should go with them. The round-trip
airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use
to pay part of the airfare. All other costs for the vacation are exactly $900. The most
you would be willing to pay for the trip is $1400. Your only alternative use for your
frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your
sister’s graduation, which your parents are forcing you to attend. The Chicago-Atlanta
round-trip airfares are $450. Should you use the frequent flyer coupon to go to Miami?
A. Yes, your benefit is more than your cost.
B. No, your benefit is less than your cost.
C. Yes, your benefit is equal to your cost.
D. No, because there are no benefits in the trip.
Unemployment insurance contributes to structural unemployment by:
A. keeping wages above the market-clearing level.
B. keeping wages below the market-clearing level.
C. allowing unemployed workers to search longer or less intensively for jobs.
D. forcing unemployed workers to take the first job offered to them.
The ______ combination of goods is combination that yields the highest total utility
given a consumer’s income.
A. affordable
B. economical
C. utility satiating
D. optimal
Refer to the figure below. The socially optimal level of output could be achieved by
imposing a tax on each unit equal to the distance ______.
A. EG
B. AC
C. EF
D. BC
When the coupon rate on newly issued bonds decreases from 6% to 5%, the prices of
existing bonds:
A. increase.
B. decrease.
C. remain unchanged.
D. decrease only if the coupon rate is less than 5%.
At her current level of consumption, Jess gets half as much marginal utility from an
additional bagel as from an additional muffin. If the price of muffin is $2 each, then
Jess is maximizing her utility if the price of a bagel is:
A. $1.00
B. $1.50
C. $2.00
D. $4.00
Refer to the figure below. If this firm is a price taker and the price of each unit of output
is $10, then this firm should:
A. produce 45 units of output.
B. shut down in the short run.
C. raise its price to increase its revenue.
D. lower its output to decrease its marginal cost.
The payoff matrix below shows the daily profit for two firms, Row Restaurant and
Column Cafe, for two different strategies, publishing coupons in the student paper and
not publishing coupons in the student paper.
If Row Restaurant publishes coupons, Column Cafe would earn the highest profit if it:
A. did not publish coupons.
B. also published coupons.
C. chooses either strategy because Column Cafe will have the same profit in either case.
D. only offered coupons half of the time.
Shares of stock are:
A. legal promises to repay a debt.
B. claims to partial ownership of a firm.
C. regular payments made to owners of a firm.
D. legal promises to make regular payments to the stockholder.
Jen is offered a job answering the phone in the State U economics department during
lunchtime, from noon to 1 p.m., Tuesdays and Thursdays. Her reservation wage for this
job is $15 per hour. If the department chair offers Jen $150 per week, will Jen accept
this job?
A. There’s not enough information to determine what Jen would do.
B. Yes, accepting the job means a positive economic surplus for Jen.
C. No, accepting the job means a negative economic surplus for Jen.
D. Yes, although accepting the job means a negative economic surplus for Jen, still it’s
better than having no job.
The demand for a good is elastic if the price elasticity of demand is:
A. equal to one.
B. greater than one.
C. less than one.
D. equal to zero.
Suppose a perfectly competitive firm is producing 1,000 units of output and the
marginal cost of the 1,000th unit is $7. If the firm can sell each unit of output for $7 and
the firm’s revenue is sufficient to cover its variable cost, the firm should:
A. leave production unchanged.
B. increase price to increase profits.
C. increase production to increase profits.
D. decrease production to lower losses.
Inga and Ron both work for the same firm on the same career ladder. Each has the same
stock of human capital except for one difference: Inga has worked at the firm for 10
continuous years but Ron has had two leaves of absence mixed in with his 10 years of
experience with the firm. One should expect:
A. Inga and Ron to earn the same income.
B. Ron to earn more than Inga.
C. Inga to earn twice as much as Ron.
D. Inga to earn more than Ron.
The fact that the average price of a gallon of gasoline is much higher in England than in
the U.S. leads to which of the following predictions?
A. Drivers in England will buy cars with poorer gas mileage than will drivers in the
U.S.
B. Drivers in England will drive a greater number of miles than will drivers in the U.S.
C. Drivers in the U.S. will take fewer trips than will drivers in England.
D. Large cars with poor gas mileage will be less popular in England than in the U.S.
At the national level, higher saving rates lead to ______ and higher standards of living.
A. greater current consumption
B. slower growth
C. greater investment
D. crowding out
Net exports equal:
A. the value added of exports.
B. exports plus imports.
C. exports minus imports.
D. exports minus depreciation.
If the Federal Reserve is currently paying 0.75% interest on bank reserves, but then
increases that interest rate to 1%, banks may decide to hold ______ reserves, and the
money supply may _____.
A. more; increase
B. more; decrease
C. fewer; increase
D. fewer; decrease
The small city of Pleasantville is considering building a public swimming pool that
costs $1,000. Each resident’s marginal benefit of the swimming pool is shown below. It
takes a 4/5 majority to pass any tax measure, and all residents must vote.
If Fran proposes that the city build the pool and finance it with a $200 tax on each
resident, then ______ residents will vote in favor of the proposal and ______ will vote
against, so the proposal will ______.
A. 5; 1; pass
B. 4; 1; pass
C. 2; 3; fail
D. 3; 2; fail
Intermediate goods and services are ______ production and ______ counted in GDP.
A. the end products of; are
B. the end products of; are not
C. used up in the process of; are
D. used up in the process of; are not
All else equal, the price elasticity of demand for a good tends to be lower:
A. if the good has few close substitutes.
B. if the good represents a large share of a consumer’s budget.
C. in the long run.
D. if the good has many close substitutes.
The emergence of English as the de facto world language has _____ a comparative
advantage in the production of books, movies and popular music:
A. given English-speaking countries
B. given non-English-speaking countries
C. had no effect on which country has
D. given all countries
A decrease in the value of a currency relative to other currencies is called a(n):
A. revaluation.
B. devaluation.
C. appreciation.
D. depreciation.
The two parts of planned aggregate expenditure are ______ expenditures and ______
expenditures.
A. real; nominal
B. inflated; deflated
C. autonomous; induced
D. positive; normative
Barriers to entry are forces that:
A. limit consumers from purchasing new products.
B. limit new firms from joining an industry.
C. promote a more efficient allocation of resources across the economy.
D. limit the government from intervening in markets.
Airlines that charge higher prices for seats in the first class cabin are:
A. not price discriminating because the product is not the same.
B. price discriminating because all passengers on the plane are traveling the same route.
C. perfect price discriminators.
D. using the hurdle method of price discrimination.
One trend in labor markets is:
A. a decrease in average real wages in the United States and other industrial countries.
B. increasing wage inequality in the United States.
C. weak rates of job creation in the United States since 1980.
D. an increase in the rate of real wage growth since the early 1970s.
Dent ‘n’ Scratch Used Cars and Trucks employs 3 salesmen. Data for their sales last
month are shown in this table:
Based on last month’s data, Ralph’s opportunity cost of selling a truck is selling:
A. 4 cars.
B. 1/3 of a car.
C. 3 cars.
D. 1/4 of a car.
Suppose Erie Textiles can dispose of its waste “for free” by dumping it into a nearby
river. While the firm benefits from dumping waste into the river, the waste reduces fish
and bird reproduction. This causes damage to local fishermen and bird watchers. At a
cost, Erie Textiles can filter out the toxins, in which case local fishermen and bird
watchers will not suffer any damage. The relevant gains and losses (in thousands of
dollars) for the three parties are listed below.
The cost (in thousands of dollars) of the filter to Erie Textiles is ______, and the net
benefit (in thousands of dollars) of the filter to the fishermen and bird watchers is
_______.
A. $400; $310
B. $310; $200
C. $200; $75
D. $200; $235