Moving from the late 1960s to 1970-1973,
a. inflation remained high while the unemployment rate was lower than in the late
1960s.
b. inflation remained high while the unemployment rate was higher than in the late
1960s.
c. inflation remained low while the unemployment rate was lower than in the late
1960s.
d. inflation remained low while the unemployment rate was higher than in the late
1960s.
If the government of Peru increased its budget deficit, then domestic investment
a. and net exports would rise.
b. would rise and net exports would fall.
c. would fall and net exports would rise.
d. and net exports would fall.
Which of the following statements are positive and which are normative?
a. The minimum wage creates unemployment among young and unskilled workers.
b. The minimum wage ought to be abolished.
c. If the price of a product in a market decreases, then, other things equal, quantity
demanded will increase.
d. A little bit of inflation is worse for society than a little bit of unemployment.
e. There is a tradeoff between inflation and unemployment in the short run.
f. If consumer income increases, then, other things equal, the demand for automobiles
will increase.
g. The U.S. income distribution is not fair.
h. U.S. workers deserve more liberal unemployment benefits.
i. If interest rates increase, then investment will decrease.
j. If welfare benefits were reduced, then the country would be better off.
What would happen in the market for loanable funds if the government were to increase
the tax on interest income?
a. The supply of loanable funds would shift right.
b. The demand for loanable funds would shift right.
c. The supply of loanable funds would shift left.
d. The demand for loanable funds would shift left.
In 2001, the U.S. agreed to support China’s entry into the World Trade Organization.
Under a special ‘safeguard provision” of that agreement, American companies or
workers harmed by imports from China can ask the government for protection by
demonstrating that
a. imports from China pose a hazard to the health of American citizens.
b. China is competing unfairly or selling its products at less than their true cost.
c. products that are allegedly “made in China” are actually made in a different country.
d. American producers have suffered a “market disruption” or a ‘surge” in imports from
China.
A low price-earnings ratio indicates that either the stock is
a. undervalued or people are relatively optimistic about the corporation’s prospects.
b. overvalued or people are relatively optimistic about the corporation’s prospects.
c. overvalued or people are relatively pessimistic about the corporation’s prospects.
d. undervalued or people are relatively pessimistic about the corporation’s prospects.
A ton of scrap iron sells for $150 in the U.S. and 1400 yuan in China. The nominal
exchange rate is 6.7 yuan per dollar.
a. A profit could be made by buying scrap iron in China and selling it in the U.S. This
would tend to drive down the price of U.S. scrap iron.
b. A profit could be made by buying scrap iron in China and selling it in the U.S. This
would tend to drive down the price of Chinese scrap iron.
c. A profit could be made by buying scrap iron in the U.S. and selling it in China. This
would tend to drive down the price of U.S. scrap iron.
d. A profit could be made by buying scrap iron in the U.S. and selling it in China. This
would tend to drive down the price of Chinese scrap iron.
If in a closed economy Y = $11 trillion, which of the following combinations would be
consistent with national saving of $2.5 trillion?
a. C = $8 trillion, G = $.5 trillion
b. C = $6.5 trillion, G = $3 trillion
c. C = $8.5 trillion, G = $2 trillion
d. C = $9 trillion, G = $.5 trillion
When a society cannot produce all the goods and services people wish to have, it is said
that the economy is experiencing
a. scarcity.
b. surpluses.
c. inefficiencies.
d. inequalities.
If the minimum wage were currently above the equilibrium wage, then a decrease in the
minimum wage that kept it above the equilibrium wage would
a. increase the surplus of labor.
b. reduce the surplus of labor.
c. increase the shortage of labor.
d. reduce the shortage of labor,
Figure 2-17
Relationship Between Years of Education and Annual Income
Refer to Figure 2-17. According to the graph, the correlation between years of
education and annual income is
a. positive
b. negative
c. inverse
d. normative
What would happen to the equilibrium price and quantity of lattés if coffee shops began
using a machine that reduced the amount of labor necessary to produce them?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.
Figure 19-5
Refer to Figure 19-5. The initial effect of an increase in the budget deficit in the
loanable funds market is illustrated as a move from
a. a to b.
b. a to c.
c. c to b.
d. c to d.
Figure 21-6. On the left-hand graph, MS represents the supply of money and MD
represents the demand for money; on the right-hand graph, AD represents aggregate
demand. The usual quantities are measured along the axes of both graphs.
Refer to Figure 21-6. Suppose the multiplier is 5 and the government increases its
purchases by $10 billion. Also, suppose the AD curve would shift from AD1 to AD2 if
there were no crowding out; the AD curve actually shifts from AD1 to AD3with
crowding out. Also, suppose the horizontal distance between the curves AD1 and AD3 is
$20 billion. The extent of crowding out, for any particular level of the price level, is
a. the horizontal distance between the curves MD1 and MD2.
b. $40 billion.
c. $30 billion.
d. $20 billion.
A simultaneous decrease in both the demand for MP3 players and the supply of MP3
players would imply that
a. both the value of MP3 players to consumers and the cost of producing MP3 players
has increased.
b. both the value of MP3 players to consumers and the cost of producing MP3 players
has decreased.
c. the value of MP3 players to consumers has decreased, and the cost of producing MP3
players has increased.
d. the value of MP3 players to consumers has increased, and the cost of producing MP3
players has decreased.
Ralph pays someone to mow his lawn, while Mike mows his own lawn. Regarding
these two practices, which of the following statements is correct?
a. Only Ralph’s payments are included in GDP.
b. Ralph’s payments as well as the estimated value of Mike’s mowing services are
included in GDP.
c. Neither Ralph’s payments nor the estimated value of Mike’s mowing services is
included in GDP.
d. Ralph’s payments are included in GDP, while the estimated value of Mike’s mowing
services is included in GDP only if Mike voluntarily provides his estimate of that value
to the government.
Figure 9-3. The domestic country is China.
Refer to Figure 9-3. The increase in total surplus in China when trade is allowed is
a. $400.
b. $500.
c. $600.
d. $750.
The data on hyperinflation show a clear link between the quantity of money and
a. the price level.
b. growth rate of GDP.
c. unemployment rate.
d. velocity.
Imagine that someone offers you $100 today or $200 in 10 years. You would prefer to
take the $100 today if the interest rate is
a. 4 percent.
b. 5 percent.
c. 6 percent.
d. None of the above are correct.
A country’s human capital increases
a. if its workers become better educated or healthier.
b. only if its workers become better educated.
c. only if its workers become healthier.
d. None of the above is correct.
Suppose the government imposes a 20-cent tax on the sellers of iced tea. Which of the
following is not correct? The tax would
a. shift the supply curve upward by 20 cents.
b. raise the equilibrium price by 20 cents.
c. reduce the equilibrium quantity.
d. discourage market activity.
Which of the following do unions not cause?
a. frictional unemployment
b. the wage to rise above the equilibrium level
c. conflict between insiders who benefit from high union wages and outsiders who do
not get the union jobs
d. reduced wages in industries without unions
Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If
the federal government increases the minimum wage by $1.00 per hour, then it is likely
that the
a. demand for bicycle assembly workers will increase.
b. supply of bicycles will shift to the right.
c. supply of bicycles will shift to the left.
d. firm must increase output to maintain profit levels.
Which of the following is a decision that economists study?
a. how much people work
b. what people buy
c. how much money people save
d. All of the above are correct.
Suppose Ashley needs a dog sitter so that she can travel to her sister’s wedding. Ashley
values dog sitting for the weekend at $200. Cami is willing to dog sit for Ashley so long
as she receives at least $175. Ashley and Cami agree on a price of $185. Suppose the
government imposes a tax of $30 on dog sitting. The tax has made Ashley and Cami
worse off by a total of
a. $30.
b. $25.
c. $10.
d. $5.
Which of the following would not be considered physical capital?
a. a new factory building
b. a computer used to help Mercury Delivery Service keep track of its orders
c. on-the-job training
d. a desk used in an accountant’s office
An outcome that can result from either a price ceiling or a price floor is
a. a surplus in the market.
b. a shortage in the market.
c. a nonbinding price control.
d. long lines of frustrated buyers.
Which of the following is most commonly used to monitor short-run changes in
economic activity?
a. the inflation rate
b. real GDP
c. aggregate demand
d. aggregate supply
Figure 4-10
Refer to Figure 4-10. Which of the following would cause the supply curve to shift
from Supply A to Supply C in the market for winter coats?
a. an increase in the price of winter coats
b. a decrease in the number of firms selling winter coats
c. a decrease in the price of zippers and snaps
d. a decrease in the price of winter hats and gloves
The president of Suldinia, a developing country, proposes that his country needs to help
domestic firms by reducing trade restrictions.
a. These are outward-oriented policies and most economists believe they would have
beneficial effects on growth in Suldinia.
b. These are outward-oriented policies and most economists believe they would have
adverse effects on growth in Suldinia.
c. These are inward-oriented policies and most economists believe they would have
beneficial effects on growth in Suldinia.
d. These are inward-oriented policies and most economists believe they would have
adverse effects on growth in Suldinia.
You wear either shorts or sweatpants every day. You notice that sweatpants have gone
on sale, so your demand for
a. sweatpants will increase.
b. sweatpants will decrease.
c. shorts will increase.
d. shorts will decrease.
A consumer buys toys made in China. The value of the toys is included only in the net
exports component of GDP.
Chile is an importer of computer chips, taking the world price of $12 per chip as given.
Suppose Chile imposes a $7 tariff on chips. Which of the following outcomes is
possible?
a. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips
decreases; and the quantity of chips imported by Chile decreases.
b. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips
increases; and the quantity of chips imported by Chile decreases.
c. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips
increases; and the quantity of chips imported by Chile decreases.
d. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips
increases; and the quantity of chips imported by Chile does not change.
A nation’s standard of living is best measured by its
a. real GDP.
b. real GDP per person.
c. nominal GDP.
d. nominal GDP per person.
High and unexpected inflation has a greater cost
a. for those who borrow than for those who save.
b. for those who hold a little money than for those who hold a lot of money.
c. for those whose wages increase by as much as inflation than for those who are paid a
fixed nominal wage.
d. for savers in high income tax brackets than for savers in low income tax brackets.