The case of perfectly elastic demand is illustrated by a demand curve that is
a. vertical.
b. horizontal.
c. downward-sloping but relatively steep.
d. downward-sloping but relatively flat.
Which of the following statements is correct for the long run?
a. Output is determined by the amount of capital, labor, and technology; the interest rate
adjusts to balance the supply and demand for money; the price level adjusts to balance
the supply and demand for loanable funds.
b. Output is determined by the amount of capital, labor, and technology; the interest rate
adjusts to balance the supply and demand for loanable funds; the price level adjusts to
balance the supply and demand for money.
c. Output is determined by the amount of capital, labor, and technology; the interest rate
adjusts to balance the supply and demand for loanable funds; the price level is relatively
slow to adjust.
d. Output responds to the aggregate demand for goods and services; the interest rate
adjusts to balance the supply and demand for loanable funds; the price level adjusts to
balance the supply and demand for money.
Figure 3-8
Chile’s Production Possibilities Frontier Colombia’s Production Possibilities
Frontier
Refer to Figure 3-8. If the production possibilities frontiers shown are each for one day
of production, then which of the following combinations of pounds of coffee and
pounds of soybeans could Chile and Colombia together not make in a given day?
a. 4 pounds of coffee and 17 pounds of soybeans
b. 8 pounds of coffee and 14 pounds of soybeans
c. 16 pounds of coffee and 9 pounds of soybeans
d. 24 pounds of coffee and 3 pounds of soybeans
Which of the following shifts short-run aggregate supply right?
a. an increase in the price level
b. an increase in the minimum wage
c. a decrease in the price of oil
d. more people migrate abroad than immigrate from abroad
Economists generally agree that the most important tax in the U.S. economy is the
a. investment tax.
b. sales tax.
c. property tax.
d. labor tax.
The minimum wage is an example of a
a. price ceiling.
b. price floor.
c. wage subsidy.
d. tax.
The quantity supplied of a good is the amount that
a. buyers are willing and able to purchase.
b. sellers are able to produce.
c. buyers and sellers agree will be brought to market.
d. sellers are willing and able to sell.
If there is an adverse supply shock and the Federal Reserve responds by increasing the
growth rate of the money supply, then in the short run the Federal Reserve’s action
a. lowers both inflation and unemployment.
b. lowers inflation but raises unemployment.
c. raises inflation but lowers unemployment.
d. raises both inflation and unemployment.
Hardwood Furniture Store considered building a store in a new location. The owners
and their accountants decided that this was the profitable thing to do. However, soon
after they made this decision, both the interest rate and the cost of building the store
changed. In which case do these changes both make it less likely that they will now
build the store?
a. Interest rates rise and the cost of building the store rises.
b. Interest rates rise and the cost of building the store falls.
c. Interest rates fall and the cost of building the store rises.
d. Interest rates fall and the cost of building the store falls.
Which of these statements about economic models is correct?
a. For economists, economic models provide insights about the world.
b. Economic models are built with assumptions.
c. Economic models are often composed of equations and diagrams.
d. All of the above are correct.
If a country has a trade deficit then
a. S > I and Y > C + I + G.
b. S > I and Y < C + I + G.
c. S < I and Y > C + I + G.
d. S < I and Y < C + I + G.
In the long run an increase in the money supply growth rate affects
a. the inflation rate and the natural rate of unemployment.
b. the inflation rate, but not the natural rate of unemployment.
c. neither the inflation rate nor the natural rate of unemployment.
d. the natural rate of unemployment, but not the inflation rate.
Of Social Security benefits and federal income tax brackets, which is indexed?
a. Both are indexed.
b. Only Social Security benefits are indexed.
c. Only federal income tax brackets are indexed.
d. Neither is indexed.
Suppose there were a large decline in net exports. If the Fed wanted to stabilize output,
it could
a. buy bonds to raise interest rates.
b. buy bonds to lower interest rates.
c. sell bonds to raise interest rates.
d. sell bonds to lower interest rates.
Figure 7-12
Refer to Figure 7-12. When the price rises from P1 to P2, what area represents the
increase in producer surplus?
a. A
b. A+B
c. A+B+C
d. G
The federal government is concerned about obesity in the United States. Congress is
considering two plans. One will ban the production and sale of “junk food.” The other
will increase nutrition-education programs and include substantial advertising
campaigns to encourage healthy eating habits. The junk-food ban program
a. and the education program will reduce the quantity of junk food sold and raise the
price.
b. and the education program will reduce the quantity of junk food sold and lower the
price.
c. will reduce the quantity of junk food sold and raise the price. The education program
will reduce the quantity of junk food sold and lower the price.
d. will reduce the quantity of junk food sold and lower the price. The education
program will reduce the quantity of junk food sold and raise the price.
Table 7-7
The following table represents the costs of five possible sellers.
Refer to Table 7-7. If the price is $775, who would be willing to supply the product?
a. Abby and Bobby
b. Abby, Bobby, and Carlos
c. Carlos, Dianne, and Evalina
d. Dianne and Evalina
Economists
a. agree that the costs of moderate inflation are small. The increase in unemployment
from reducing inflation will be smaller if inflation expectations remain high.
b. agree that the costs of moderate inflation are small. The increase in unemployment
from reducing inflation will be larger if inflation expectations remain high.
c. disagree about the costs of moderate inflation. The increase in unemployment from
reducing inflation will be smaller if inflation expectations remain high.
d. disagree about the costs of moderate inflation. The increase in unemployment from
reducing inflation will be larger if inflation expectations remain high.
Sample Population
Refer to Sample Population. How many in the sample are unemployed?
a. 5
b. 4
c. 3
d. None of the above is correct.
An increase in quantity demanded
a. results in a movement downward and to the right along a demand curve.
b. results in a movement upward and to the left along a demand curve.
c. shifts the demand curve to the left.
d. shifts the demand curve to the right.
Demand is said to be price elastic if
a. the price of the good responds substantially to changes in demand.
b. demand shifts substantially when income or the expected future price of the good
changes.
c. buyers do not respond much to changes in the price of the good.
d. buyers respond substantially to changes in the price of the good.
Economists face an obstacle that many other scientists do not face. What is that
obstacle?
a. It is often difficult to formulate theories in economics.
b. It is often difficult and sometimes impossible to perform experiments in economics.
c. Economics cannot be addressed objectively; it must be addressed subjectively.
d. The scientific method cannot be applied to the study of economics.
People hold $400 million of bank deposits but no currency. Banks have made $380
million dollars of loans and only hold enough reserves to satisfy reserve requirements.
Because of uncertainty, banks choose to hold $10 million more in reserves. The Fed
takes no action. What happens to bank loans?
a. they fall $220 million
b. they fall $200 million
c. they rise $200 million
d. they rise $220 million
Producer surplus is the area
a. under the supply curve.
b. between the supply and demand curves.
c. below the price and above the supply curve.
d. under the demand curve and above the price.
Table 10-2
The table below contains data for the country of Crete for the year 2010.
Refer to Table 10-2. What was Crete’s consumption in 2010?
a. $1810
b. $2013
c. $2315
d. $3131
Suppose that grocery clerks and nurses are not unionized. If the nurses unionize, then
a. the wages of both grocery clerks and nurses will rise.
b. the wages of both grocery clerks and nurses will fall.
c. the wages of grocery clerks will rise and the wages of nurses will fall.
d. the wages of nurses will rise and the wages of grocery clerks will fall.
In 2009, U.S. net exports were
a. positive and about 3 percent the size of GDP.
b. positive and about 6 percent the size of GDP.
c. negative and about 3 percent the size of GDP.
d. negative and about 6 percent the size of GDP.
A country reported nominal GDP of $100 billion in 2010 and $75 billion in 2009. It
also reported a GDP deflator of 125 in 2010 and 120 in 2009. Between 2009 and 2010,
a. real output and the price level both rose.
b. real output rose and the price level fell.
c. real output fell and the price level rose.
d. real output and the price level both fell.
Turkey is an importer of wheat. The world price of a bushel of wheat is $7. Turkey
imposes a $3-per-bushel tariff on wheat. Turkey is a price-taker in the wheat market. As
a result of the tariff,
a. Turkish consumers of wheat become worse off and Turkish producers of wheat
become worse off.
b. Turkish consumers of wheat become worse off and Turkish producers of wheat
become better off.
c. Turkish consumers of wheat become better off and Turkish producers of wheat
become worse off.
d. Turkish consumers of wheat become better off and Turkish producers of wheat
become better off.
Which of the following statements is correct?
a. Buyers always want to pay less and sellers always want to be paid more.
b. Buyers always want to pay less and sellers always want to be paid less.
c. Buyers always want to pay more and sellers always want to be paid more.
d. Buyers always want to pay more and sellers always want to be paid less.
Jason works part-time as a babysitter. The Bureau of Labor Statistics counts Jason as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. employed and not in the labor force.