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Figure 9-11
Refer to Figure 9-11. The change in total surplus in this market because of trade is
a. A, and this area represents a loss of total surplus.
b. B, and this area represents a gain in total surplus.
c. C, and this area represents a loss of total surplus.
d. D, and this area represents a gain in total surplus.
Your accountant tells you that if you can continue to earn the current interest rate on
your balance of $500 for ten years, you will have about $983.58. If your accountant is
correct, what is the current rate of interest?
a. 5 percent
b. 6 percent
c. 7 percent
d. 8 percent
Under rent control, tenants can expect
a. lower rent and higher quality housing.
b. lower rent and lower quality housing.
c. higher rent and a shortage of rental housing.
d. higher rent and a surplus of rental housing.
Figure 3-7
Bintu's Production Possibilities Frontier Juba's Production Possibilities Frontier
Refer to Figure 3-7. Bintu has an absolute advantage in the production of
a. bowls and Juba has an absolute advantage in the production of cups.
b. cups and Juba has an absolute advantage in the production of bowls.
c. both goods and Juba has an absolute advantage in the production of neither good.
d. neither good and Juba has an absolute advantage in the production of both goods.
In a market economy, the real, or inflation-adjusted, price of a resource measures its
a. contribution to revenue.
b. relative scarcity.
c. productivity.
d. contribution to efficiency.
According to 2009 data on the U.S. population which of the following was correct?
a. Adults had higher labor-force participation rates and higher rates of unemployment
compared to teenagers.
b. Adults had higher labor-force participation rates and lower rates of unemployment
compared to teenagers.
c. Adults had lower labor-force participation rates and lower rates of unemployment
compared to teenagers.
d. Adults had lower labor-force participation rates and higher rates of unemployment
compared to teenagers.
The table below uses data for the year 2003 provided by the Bureau of Labor Statistics
and adjusted to be comparable to U.S. data. All values are in thousands. Fill in the blank
entries in the table.
Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal,
international tensions, and loss of confidence in policymakers, people become
pessimistic regarding the future and retain that level of pessimism for some time.
Refer to Pessimism. Which curve shifts and in which direction?
a. aggregate demand shifts right
b. aggregate demand shifts left
c. aggregate supply shifts right.
d. aggregate supply shifts left.
To which of the problems in the construction of the CPI is the invention of pocket-sized
computers most relevant?
a. substitution bias
b. introduction of new goods
c. unmeasured quality change
d. income bias
A decrease in government spending initially and primarily shifts
a. aggregate demand to the right.
b. aggregate demand to the left.
c. aggregate supply to the right.
d. neither aggregate demand nor aggregate supply.
Which of the following tools and concepts is useful in the analysis of international
trade?
a. total surplus
b. domestic supply
c. equilibrium price
d. All of the above are correct.
Suppose that demand for a good increases and, at the same time, supply of the good
decreases. What would happen in the market for the good?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
In 2009 Congress and President Obama approved tax cuts and increased government
spending. According to the short-run Phillips curve these policies should have
a. raised unemployment and inflation.
b. raised unemployment and reduced inflation.
c. reduced unemployment and raised inflation.
d. reduced unemployment and inflation.
Figure 8-2
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-2. Total surplus without the tax is
a. $10, and total surplus with the tax is $2.50.
b. $10, and total surplus with the tax is $7.50.
c. $20, and total surplus with the tax is $2.50.
d. $20, and total surplus with the tax is $7.50.
When the money market is drawn with the value of money on the vertical axis, an
increase in the price level causes a
a. shift to the right of the money demand curve.
b. shift to the left of the money demand curve.
c. movement to the left along the money demand curve.
d. movement to the right along the money demand curve.
A decrease in the interest rate could have been caused by the money-demand curve
shifting
a. leftward because the price level fell.
b. leftward because the price level rose
c. rightward because the price level fell.
d. rightward because the price level rose.
Figure 2-10
Refer to Figure 2-10. The shift of the production possibilities frontier from A to B
illustrates
a. simultaneous technological advances in the book and DVD industries.
b. a reallocation of resources away from the production of DVDs and toward the
production of books.
c. economic growth.
d. All of the above are correct.
Which of the following events would cause a movement upward and to the left along
the demand curve for olives?
a. The number of people who purchase olives decreases.
b. Consumer income decreases, and olives are a normal good.
c. The price of pickles decreases, and pickles are a substitute for olives.
d. The price of olives rises.
If the U.S. imposes a quota on cotton, then
a. both exports and imports of other goods will rise.
b. exports of other goods will rise and imports of other goods will fall.
c. exports of other goods will fall and imports of other goods will rise.
d. both imports and exports of other goods will fall.
If Y and V are constant and M doubles, the quantity equation implies that the price level
a. more than doubles.
b. changes but less than doubles.
c. doubles.
d. does not change
Table 3-17
US and French Production Opportunities
Refer to Table 3-17 The opportunity costs for the US and France are as follows:
a. In the US 1 million gallons of wine costs 1/2 million pounds of cheese and in France
1 million gallons of wine costs 2 million pounds of cheese.
b. In the US 1 million gallons of wine costs 2 million pounds of cheese and in France 1
million gallons of wine costs 1/2 million pounds of cheese.
c. In the US 1 million pounds of cheese costs 1/2 million gallons of wine and in France
1 million pounds of cheese costs 2 million gallons of wine.
d. In the US 1 million pounds of cheese costs 16 million gallons of wine and in France
1 million pounds of cheese costs 8 million gallons of wine.
Suppose the economy is in long-run equilibrium. Senator A succeeds in getting taxes
raised. At the same time, Senator B succeeds in getting major new restrictions on
logging enacted. In the short run
a. real GDP will rise and the price level might rise, fall, or stay the same.
b. real GDP will fall and the price level might rise, fall, or stay the same.
c. the price level will rise, and real GDP might rise, fall, or stay the same.
d. the price level will fall, and real GDP might rise, fall, or stay the same.
Natasha put $275 in the bank one year ago and forgot about it. Today, the bank sent her
a notice indicating that she now has $291.50 in her account. What interest rate did she
earn?
a. 5 percent
b. 6 percent
c. 7 percent
d. 8 percent
If Cara's utility falls more by losing $600 than it rises by gaining $600, she has
a. increasing marginal utility of wealth and is risk averse.
b. increasing marginal utility of wealth but is not risk averse.
c. decreasing marginal utility of wealth and is risk averse.
d. decreasing marginal utility of wealth but is not risk averse.
Which of the following is correct?
a. An increase in the money supply causes the interest rate to decrease so that aggregate
demand shifts left.
b. An increase in stock prices reduces consumption spending so that aggregate demand
shifts left.
c. An increase in the price level causes the exchange rate to rise so that aggregate
demand shifts left.
d. A recession in other countries reduces U.S. net exports so that U.S. aggregate demand
shifts left.
Figure 8-2
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-2. The amount of tax revenue received by the government is
a. $2.50.
b. $4.
c. $5.
d. $9.
Consider the exhibit below for the following questions.
Figure 20-1
Refer to Figure 20-1. If the economy is at A and there is a fall in aggregate demand, in
the short run the economy
a. stays at A.
b. moves to B.
c. moves to C.
d. moves to D.
The inner loop of the circular-flow diagram represents the flows of inputs and outputs.
Which of the following does not appear on the inner loop?
a. Wages
b. Land
c. Capital
d. Goods and services sold
The CPI is calculated
a. weekly.
b. monthly.
c. quarterly.
d. yearly.
Figure 6-21
Refer to Figure 6-22. The price that buyers pay after the tax is imposed is
a. $5.
b. $6.
c. $7.
d. $8.
Figure 7-12
Refer to Figure 7-12. When the price falls from P2 to P1, producer surplus
a. decreases by an amount equal to C.
b. decreases by an amount equal to A+B.
c. decreases by an amount equal to A+C.
d. increases by an amount equal to A+B.
In the market for widgets, the supply curve is the typical upward-sloping straight line,
and the demand curve is the typical downward-sloping straight line. The equilibrium
quantity in the market for widgets is 200 per month when there is no tax. Then a tax of
$5 per widget is imposed. The price paid by buyers increases by $2 and the after-tax
price received by sellers falls by $3. The government is able to raise $750 per month in
revenue from the tax. The deadweight loss from the tax is
a. $250.
b. $125.
c. $75.
d. $50.
A perpetuity is distinguished from other bonds in that it
a. pays continuously compounded interest.
b. pays interest only when it matures.
c. never matures.
d. will be used to purchase another bond when it matures unless the owner specifies
otherwise.
Which of the following is correct?
a. The short-run, but not the long-run, aggregate supply curve is consistent with the idea
that nominal variables do not affect real variables.
b. The long-run, but not the short-run, aggregate supply curve is consistent with the idea
that nominal variables do not affect real variables.
c. The long-run and short-run supply curves are both consistent with the idea that
nominal variables affect real variables.
d. Neither the long-run nor the short-run aggregate supply curve is consistent with the
idea that nominal variables affect real variables.
