As the dollar exchange rate, e, increases, the quantity of dollars supplied in the foreign
exchange market ____, and the quantity of dollars demanded in the foreign exchange
market ____.
A. increases; increases
B. increases; decreases
C. decreases; increases
D. decreases; decreases
Announced numerical inflation targets are advocated for all of the following reasons
EXCEPT that inflation targets:
A. reduce inflation uncertainty.
B. anchor inflationary expectations.
C. enhance central bank credibility.
D. eliminate the tradeoff between maintaining output or inflation in the event of adverse
inflationary shocks.
Following an adverse supply shock, people with anchored inflation expectations believe
the Fed will:
A. raise it target inflation rate.
B. lower its target inflation rate.
C. keep its target inflation rate unchanged.
D. accommodate the shock.
Moe’s reservation price for his economics textbook is $100. The week before the
semester began, Moe found a copy of the required text online for $75. Moe’s consumer
surplus is
A. $125
B. $100
C. $75
D. $25
Refer to the figure above. Suppose all the sellers in this market started out charging a
price of $45 per unit. What is the most likely result?
A. They would all make a large profit because $45 is more than the equilibrium price.
B. They would all just break even because $45 is their reservation price.
C. They would feel pressure to lower their prices because at $45 there would be excess
supply.
D. They would be forced to lower their prices because at $45 there would be excess
demand.
Taylor lives in a residential neighborhood that prides itself on well-groomed lawns.
Taylor’s neighbors find that the collective marginal benefit of someone else’s
well-groomed lawn is $10. Taylor, however, dislikes yard work and receives zero net
benefit from an unkempt lawn and a net benefit of -$1 for a well-groomed lawn; the
cost of maintaining the lawn is a dollar more than the benefit of having a well-groomed
lawn.
Refer to the information given above. Taylor would be willing to keep a well-groomed
lawn if the neighbors paid him:
A. less than $1.
B. at least $1.
C. at least $5.
D. at least $10.
In the market for used cars, the lemons model predicts that
A. sellers will always overstate the condition of their cars.
B. buyers will always overstate their reservation price.
C. sellers are more likely to sell low quality than high quality cars.
D. sellers will always understate the condition of their cars.
A firm is most likely to experience economies of scale if it has _____ start up costs and
______ variable costs.
A. high; increasing
B. high; low
C. high; high
D. low; decreasing
The following table provides nominal exchange rates for the U.S. dollar.
Based on these data, the nominal exchange rate equals approximately ______ zloty per
South African rand or, equivalently, ______ rand per Polish zloty.
A. 1.590; 0.629
B. 0.629; 1.590
C. 0.021; 47.640
D. 47.640; 0.021
Autonomous expenditure is the portion of planned aggregate expenditure that:
A. equals aggregate output.
B. equals planned spending.
C. equals induced expenditure.
D. is independent of output.
Which of the following is a real quantity?
A. the current wages paid to factory workers
B. the cost of a new car
C. the number of tons of steel produced in 2005
D. the current price of a barrel of oil
Price-setters face:
A. perfectly elastic demand.
B. more than perfectly elastic demand.
C. perfectly inelastic demand.
D. less than perfectly elastic demand.
As coffee becomes more expensive, Joe starts drinking tea, and therefore quantity
demanded for coffee decreases. This is called:
A. the income effect.
B. the change in equilibrium.
C. the substitution effect.
D. a shift in the demand curve.
In the Keynesian cross diagram, the 45° line represents the short-run equilibrium
condition that:
A. Y = PAE.
B. PAE = C+Ip+G+NX.
C. I≠Ip.
D. Y* = Y.
Refer to the figure above. It is efficient for this farmer to:
A. grow 500 bushels of wheat and 500 bushels of corn.
B. grow 250 bushels of wheat and 500 bushels of corn.
C. grow 500 bushels of wheat and 250 bushels of corn.
D. grow 1000 bushels of wheat and 500 bushels of corn.
A consumer expenditure survey reports the following information on entertainment
spending:
Using 2005 as the base year, by how much does a “cost of entertainment” index
increase between 2005 and 2006?
A. 3.86%
B. 8.65%
C. 13.43%
D. 29.41%
A decrease in the nominal exchange rate, e, defined as the number of units of the
foreign currency that one unit of the domestic currency will buy, indicates that the
domestic currency has ______ relative to the foreign currency.
A. appreciated
B. depreciated
C. become overvalued
D. become undervalued
If all firms in a perfectly competitive industry are experiencing economic losses, then
firms will:
A. exit the industry, until economic profits are positive.
B. exit the industry, until accounting profits equal zero.
C. continue in the industry, hoping for better times.
D. exit the industry, until economic profits equal zero.
Assume that Joe is willing to produce another hamburger that costs $1 to make. Mary is
hungry and is willing to buy a hamburger for $3. According to the No Cash on the
Table Principle, Joe and Mary:
A. will make a trade.
B. will only make a trade if Joe can get Mary to spend more than $3 for the hamburger.
C. will only make a trade if Mary can get Joe to charge less than $1 for the hamburger.
D. will never trade; they will look for better deals.
______ is/are the market value of final goods and services produced within a country
during a given period of time.
A. GDP
B. Consumption
C. Value added
D. Transfer payments
In the basic Keynesian model, a decrease in transfer payments:
A. reduces short-run equilibrium output.
B. increases short-run equilibrium output.
C. reduces potential output.
D. increases potential output.
Lou and Alex live together and share household chores. They like to cook some meals
ahead of time and eat leftovers. Suppose that in one hour Lou and Alex can do the
following:
For Alex, the opportunity cost of cleaning one room is ____ meal(s); for Lou the
opportunity cost of cleaning one room is _____ meal(s).
A. 4; 4
B. 1; 4/5
C. 1; 5/4
D. 3; 5
In a competitive labor market, it is observed that the equilibrium wage rate and
employment level have both risen. One can infer that
A. the supply of labor has increased.
B. the demand for labor has fallen.
C. the demand for labor has increased.
D. the supply of labor has decreased.
Each of the following would decrease the supply of U.S. dollars, shifting the supply
curve for dollars to the left, EXCEPT:
A. a decreased preference for foreign-made goods.
B. a decrease in U.S. real GDP.
C. a decrease in the real interest rate on foreign assets.
D. a depreciation of the U.S. dollar relative to other currencies.
If the demand curve facing the monopolist is Price = 70 – 14 × Q, then the slope of its
marginal revenue curve is:
A. -28.
B. -14.
C. -7.
D. -1.
______ is the additional utility gained from consuming an additional unit of a good.
A. Total utility
B. Marginal Utility
C. Utility
D. Utils
Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your
accountant has estimated that your firm’s total costs can be expressed by the function
TC = 300 + 10 × Q, where Q represents the number of t-shirts you make.
Refer to the information given above. If you make 1,000 t-shirts, your average total cost
is _______.
A. $3
B. $3.10
C. $10.30
D. $1.03
Small differences in annual growth rates of real GDP generate large differences in real
GDP over time because of the:
A. importance of average labor productivity.
B. power of compound interest.
C. diminishing returns to capital.
D. limits of economic growth.
Because the Fed determines the money supply, the:
A. money supply curve is downward sloping.
B. money supply curve is upward sloping.
C. money supply curve is vertical.
D. money supply curve is horizontal.
Which of the following would be expected to increase the demand for money in the
U.S.?
A. Financial investors become concerned about increasing riskiness of stocks.
B. The economy enters a recession.
C. Political instability decreases dramatically in developing nations.
D. On-line banking allows customers to transfer funds between checking and stock
mutual funds 24 hours a day.