Expansionary fiscal policy crowds out both domestic investment and net exports.
Economists assume people’s tastes are identical.
An increase in the tax wedge associated with a given economic activity will decrease
the level of that activity.
The application of economic analysis to human resources issues is called personnel
economics.
Government spending on transfer payments is included in government purchases when
calculating GDP because it results in the production of new goods and services.
A person’s wealth is the same as his income.
Ceteris paribus, an increase in the money supply will lower short-term interest rates.
While labor unions tend to negotiate above-equilibrium wage rates for their members,
they also tend to reduce the quantity of labor hired.
The nominal interest rate plus the inflation rate equals the real interest rate.
If, for a given output level, a perfectly competitive firm’s price is less than its average
variable cost, the firm
A) is earning a profit.
B) should shut down.
C) should increase output.
D) should increase price.
The statement “This Dell laptop costs $1,200” illustrates which function of money?
A) medium of exchange
B) unit of account
C) store of value
D) standard of deferred payment
Which of the following statements best describes the economic short run?
A) It is a period of one year or less.
B) It is a period during which firms are free to vary all of their inputs.
C) It is a period during which at least one of the firm’s inputs is fixed.
D) It is a period during which fixed inputs become variable inputs because of
depreciation.
The present value of $300 received 5 years in the future would be calculated as which
of the following when the interest rate is 5%?
A) 300/(1.5)5
B) 300/(1.05)5
C) 300 1.5 5
D) 5.05/300
Studies show that the income elasticity of demand for wine is approximately five. What
does this mean?
A) A 1 percent decrease in the price of wine leads to a 5 percent increase in wine
consumption.
B) A 1 percent increase in income leads to a 5 percent increase in wine consumption.
C) A 5 percent increase in income leads to a 1 percent increase in wine consumption.
D) Wine is a relatively elastic good.
Because the copyright on the L. Frank Baum book The Wonderful Wizard of Oz expired
many years ago, the actual written words from the book are in the public domain.
Publishers who now choose to sell their own versions of the book
A) can claim copyright of Baum’s words if they are the first to publish the book after
the original copyright expired.
B) can claim copyright of Baum’s words no matter how many versions are published,
since the original is in the public domain.
C) can not claim copyright of Baum’s words since they are in the public domain, but
can claim copyright on any new design or illustrations created for the book.
D) can not claim copyright of Baum’s words, or on any new design or illustrations
created for the book, since the original written words are in the public domain.
When consumers are less confident about their jobs or incomes, they are more likely to
A) reduce purchases of durable goods than nondurable goods.
B) reduce purchases of nondurable goods and increase purchases of durable goods.
C) increase investment spending and decrease consumption spending.
D) increase consumption spending and decrease investment spending.
Figure 3-7
Assume that the graphs in this figure represent the demand and supply curves for
mustard and that bratwurst and mustard are complements. What panel describes what
happens in this market when the price of bratwurst falls?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
An increase in the purchasing power of money would not, on average, result in an
increase in the purchasing power of people’s income because a ________ price level
would likely mean ________ wages and salaries.
A) rising; falling
B) rising; rising
C) falling; falling
D) falling; rising
If aggregate demand just increased, which of the following may have caused the
increase?
A) an increase in government purchases
B) an increase in the interest rate
C) an increase in the price level
D) an increase in imports
Carolyn spends her income on popular magazines and music CDs. If the price of a CD
is four times the price of a magazine and if Carolyn is maximizing her utility, she buys
A) both goods until the marginal utility of the last CD purchased is four times the
marginal utility of the last magazine purchased.
B) both goods until the marginal utility of the last magazine purchased is four times the
marginal utility of the last CD purchased.
C) four times as much magazines as CDs.
D) four times as much CDs as magazines.
All of the following are part of the “individual mandate” provision of the Patient
Protection and Affordable Care Act (ACA) except
A) individuals are allowed to opt out of the insurance program if they can prove they
have no serious health issues and do so before the act fully takes effect in the year 2014.
B) by 2016, fines for not having health insurance will be the greater of $695 per person
or 2.5 percent of income.
C) beginning in 2014, individuals who do not acquire health insurance will be subject to
a fine.
D) with limited exceptions, every resident of the United States will be required to have
health insurance that meets certain basic requirements.
a. What is the difference between a horizontal merger and a vertical merger?
b. Give an example of each type of merger.
c. Could a horizontal merger be welfare improving?
Under what circumstances would the GDP deflator be less than 100 after the base year?
A) The GDP deflator will be less than 100 if there has been inflation relative to the base
year.
B) The GDP deflator will be less than 100 if there has been inflation of less than 2% per
year relative to the base year.
C) The GDP deflator will be less than 100 if there has been deflation relative to the base
year.
D) There are no circumstances under which the GDP deflator could be less than 100.
When aggregate expenditure is more than GDP, which of the following is true?
A) There was an unplanned decrease in inventories.
B) Firms spent less on capital goods than they planned.
C) Households bought fewer new homes than they planned.
D) All of the above must be true when aggregate expenditure is more than GDP.
The slope of an isocost line ________ and equals the negative of ________.
A) increases as we move down the line; the ratio of input prices
B) decreases as we move down the line; the ratio of the marginal products
C) is constant; the ratio of input prices
D) is constant; the ratio of the marginal products
Establishing a state employment agency that speeds up the process of matching
unemployed workers with unfilled jobs is an attempt to lower
A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) seasonal unemployment.
E) unnatural unemployment.
If the economy is currently in equilibrium at a level of GDP that is above potential
GDP, which of the following would move the economy back to potential GDP?
A) a decrease in wealth
B) a decrease in interest rates
C) an increase in business confidence
D) a decrease in the value of the dollar relative to other currencies
The recession of 2007-2009 decreased the demand for imports in Japan, which caused
the ________ curve for the yen to ________, increasing the exchange rate and the value
of the yen.
A) supply; right
B) supply; left
C) demand; right
D) demand; left
Assume that firms in a perfectly competitive market are earning economic profits.
Which of the following statements describes the change in market price and output as a
result of the entry of new firms into this market?
A) The market demand curve shifts to the right, causing price to rise and market output
to increase.
B) The market demand curve shifts to the left, causing price to fall and market output to
decrease.
C) The short-run market supply curve shifts to the right, causing price to fall and total
market output to increase.
D) The short-run market supply curve shifts to the left, causing price to rise and total
market output to decrease.
Suppose consumers pay less than the true cost of medical services because a third party,
such as an insurance company, pays most of the bill. Draw a graph showing the supply
and demand for medical services with and without a third-party payer. Identify the
market equilibrium without insurance, the market equilibrium with insurance, and the
area representing the deadweight loss. Be sure to label the efficient and the market
prices and quantities.
Are the costs of utilities always fixed, always variable, or can they be both? Briefly
explain.
A central concept in macroeconomics is the idea of the natural rate of unemployment.
Why does it make sense to define full employment to occur when the unemployment
rate equals the natural rate of unemployment, instead of when the unemployment rate
equals zero? Elaborate and explain carefully.
Table 12-2
Using the table above, compute aggregate expenditure and identify the macroeconomic
equilibrium.
Table 9-20
Salaries in major league baseball have soared over the last 30 to 40 years. Some of the
salary increase is due to inflation. The table above reports the consumer price index and
the median nominal salary of the New York Yankees for 1989 and 2009.
Source: USA Today Salaries Database,
asp.usatoday.com/sports/baseball/salaries/default.aspx
Calculate the real median salary of the New York Yankees in both 1982-1984 dollars
and 2009 dollars. Calculate the percentage increase in the median salary of the Yankees
from 1989 to 2009 in both nominal terms and in real terms.
What causes a production possibilities frontier to shift outward?