Sometimes On Time (SOT) Airlines is considering buying a new jet. SOT would be
more likely to buy a new jet if there were either
a. a decrease in the price of a new jet or a decrease in the interest rate.
b. a decrease in the price of a new jet or an increase in the interest rate.
c. an increase in the price of a new jet or a decrease in the interest rate.
d. an increase in the price of a new jet or an increase in the interest rate.
Typical estimates of the sacrifice ratio suggest that a one-percentage-point reduction in
the inflation rate requires
a. a sacrifice of 5 percent of annual output.
b. a sacrifice of 5 percent of government spending.
c. an increase in the unemployment rate of 5 percentage points.
d. a 5 percent increase in the government budget deficit.
While in college, John and Bethany each buy five packages of mac-n-cheese per week.
After they graduate and have full-time jobs, John buys six packages per week, but
Bethany buys only two packages per week. When looking at income elasticity of
demand for mac-n-cheese, John’s
a. is negative, and Bethany’s is positive.
b. is positive, and Bethany’s is negative.
c. is zero, and Bethany’s approaches infinity.
d. approaches infinity, and Bethany’s is zero.
Spots, Inc. produces ink and sells it to Write on Target, which makes pens. The ink
produced by Spots, Inc. is called
a. an inventory good.
b. a transitory good.
c. a final good.
d. an intermediate good.
If people decide to hold less currency relative to deposits, the money supply
a. falls. The Fed could lessen the impact of this by buying Treasury bonds.
b. falls. The Fed could lessen the impact of this by selling Treasury bonds.
c. rises. The Fed could lessen the impact of this by buying Treasury bonds.
d. rises. The Fed could lessen the impact of this by selling Treasury bonds.
Fiscal policy refers to the idea that aggregate demand is affected by changes in
a. the money supply.
b. government spending and taxes.
c. trade policy.
d. All of the above are correct.
Table 5-5
Refer to Table 5-5. Along which of the supply curves does quantity supplied move
proportionately more than the price?
a. along supply curve B only
b. along supply curves B and C
c. along all three supply curves
d. None. Quantity supplied moves proportionately less than the price along all of the
three supply curves.
Table 4-9
The demand schedule below pertains to sandwiches demanded per week.
Refer to Table 4-9. Suppose Harry, Darby, and Jake are the only demanders of
sandwiches. Also suppose x = 2. Then
a. the slope of Jake’s demand curve is -1/2, and the slope of the market demand curve is
-5/2.
b. the slope of Jake’s demand curve is -1/2, and the slope of the market demand curve is
-2/5.
c. the slope of Jake’s demand curve is -2, and the slope of the market demand curve is
-5/2.
d. the slope of Jake’s demand curve is -2, and the slope of the market demand curve is
-2/5.
In the context of aggregate demand and aggregate supply, the wealth effect refers to the
idea that, when the price level decreases, the real wealth of households
a. increases and as a result consumption spending increases. This effect contributes to
the downward slope of the aggregate-demand curve.
b. decreases and as a result consumption spending increases. This effect contributes to
the upward slope of the aggregate-supply curve.
c. increases and as a result households increase their money holdings; in turn, interest
rates increase and investment spending decreases. This effect contributes to the
downward slope of the aggregate-demand curve.
d. decreases and as a result households increase their money holdings; in turn, interest
rates increase and investment spending decreases. This effect contributes to the upward
slope of the aggregate-supply curve.
Table 10-6
The table below contains data for the country of Batterland, which produces only
waffles and pancakes. The base year is 2009.
Prices and Quantities
Refer to Table 10-6. In 2008, this country’s real GDP was
a. $300.
b. $390.
c. $400.
d. $540.
The slope of a line is equal to
a. rise divided by run.
b. run divided by rise.
c. rise minus run.
d. rise plus run.
Which of the following restrictions implies that investment exceeds private saving for a
closed economy?
a. The economy has no government.
b. The economy’s government is running a budget deficit.
c. The economy’s government is running a budget surplus.
d. No restriction is necessary; investment and private saving are equal for all closed
economies.
Suppose government expenditures on goods and services and net taxes both decrease,
and expenditures fall by more than net taxes. The effects of these changes on the budget
deficit cause
a. both the equilibrium interest rate and the equilibrium quantity of loanable funds to
fall.
b. both the equilibrium interest rate and the equilibrium quantity of loanable funds to
rise.
c. the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to
fall.
d. the equilibrium interest rate to fall and the equilibrium quantity of loanable funds to
rise.
For a good that is a necessity,
a. quantity demanded tends to respond substantially to a change in price.
b. demand tends to be inelastic.
c. the law of demand does not apply.
d. All of the above are correct.
When taxes decrease, consumption
a. increases, so aggregate demand shifts right.
b. increases, so aggregate supply shifts right.
c. decreases, so aggregate demand shifts left.
d. decreases, so aggregate supply shifts left.
The value of money falls as the price level
a. rises, because the number of dollars needed to buy a representative basket of goods
rises.
b. rises, because the number of dollars needed to buy a representative basket of goods
falls.
c. falls, because the number of dollars needed to buy a representative basket of goods
rises.
d. falls, because the number of dollars needed to buy a representative basket of goods
falls.
If the central bank increases the money supply, then in the short run prices
a. rise and unemployment falls.
b. fall and unemployment rises.
c. and unemployment rise.
d. and unemployment fall.
When a production possibilities frontier is bowed outward, the opportunity cost of
producing an additional unit of a good
a. increases as more of the good is produced.
b. decreases as more of the good is produced.
c. does not change as more of the good is produced.
d. may increase, decrease, or not change as more of the good is produced.
Which of the following could reduce economic efficiency?
a. laws that encourage lawsuits
b. policies that redistribute income
c. policies that impose significant restrictions on international trade
d. All of the above are correct
Table 16-4.
The First Bank of Roswell
Refer to Table 16-4. If the bank faces a reserve requirement of 10 percent, then the
bank
a. is in a position to make a new loan of $10,000.
b. has fewer reserves than are required.
c. has excess reserves of $12,500.
d. None of the above is correct.
The aggregate quantity of goods and services demanded changes as the price level rises
because
a. real wealth falls, interest rates rise, and the dollar appreciates.
b. real wealth falls, interest rates rise, and the dollar depreciates.
c. real wealth rises, interest rates fall, and the dollar appreciates.
d. real wealth rises, interest rates fall, and the dollar depreciates.
Which of the following is a function of money?
a. a unit of account
b. a store of value
c. medium of exchange
d. All of the above are correct.
When a binding price floor is imposed on a market,
a. price no longer serves as a rationing device.
b. the quantity supplied at the price floor exceeds the quantity that would have been
supplied without the price floor.
c. only some sellers benefit.
d. All of the above are correct.
When Ghana sells chocolate to the United States, U.S. net exports
a. increase, and U.S. net capital outflow increases.
b. increase, and U.S. net capital outflow decreases.
c. decrease, and U.S. net capital outflow increases.
d. decrease, and U.S. net capital outflow decreases.
Table 5-5
The following table shows a portion of the demand schedule for a particular good at
various levels of income.
Refer to Table 5-5. Using the midpoint method, when income equals $5,000, what is
the price elasticity of demand between $8 and $12?
a. 0.56
b. 0.75
c. 1.33
d. 1.80
When the price of a good is higher than the equilibrium price,
a. a shortage will exist.
b. buyers desire to purchase more than is produced.
c. sellers desire to produce and sell more than buyers wish to purchase.
d. quantity demanded exceeds quantity supplied.
When the U.S. real exchange rate appreciates, U.S. goods become
a. more attractive to consumers in the U.S. and abroad.
b. more attractive to consumers in the U.S. and less attractive to consumers abroad.
c. less attractive to consumers in the U.S. and abroad.
d. less attractive to consumers in the U.S. and more attractive to consumers abroad.
Net exports equal
a. exports plus imports.
b. exports minus imports.
c. imports minus exports.
d. GDP minus imports.
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The total surplus without the tax is
a. $8,000.
b. $12,000.
c. $20,000.
d. $40,000.
Price controls are usually enacted
a. as a means of raising revenue for public purposes.
b. when policymakers believe that the market price of a good or service is unfair to
buyers or sellers.
c. when policymakers detect inefficiencies in a market.
d. All of the above are correct.
Other things the same, if the long-run aggregate supply curve shifts right, prices
a. and output both increase.
b. and output both decrease.
c. increase and output decreases.
d. decrease and output increases.
A professor at a university finds a way to reduce the costs of producing automobile
glass. The method is very easy for anyone to copy. A company develops a substance
which prevents eyeglasses from smudging. It receives a patent on the formula. Which
of these are common technological knowledge?
a. the method to reduce costs of producing automobile glass, and the formula for the
substance that prevents smudging
b. the method to reduce costs of producing automobile glass, but not the formula for the
substance that prevents smudging
c. the formula for the substance that prevents smudging, but not the method to reduce
costs of producing automobile glass
d. neither the method to reduce costs of producing automobile glass nor the formula for
the substance that prevents smudging
If demand is price inelastic, then
a. buyers do not respond much to a change in price.
b. buyers respond substantially to a change in price, but the response is very slow.
c. buyers do not alter their quantities demanded much in response to advertising, fads,
or general changes in tastes.
d. the demand curve is very flat.