Figure 14-3. The figure shows a utility function for Rob.
Refer to Figure 14-3. If most people’s utility functions look like Rob’s utility function,
then it is easy to explain why
a. people buy various types of insurance.
b. we observe a trade-off between risk and return.
c. most people prefer to hold diversified portfolios of assets to undiversified portfolios
of assets.
d. None of the above are correct.
Kevin tunes pianos. If the demand for piano-tuning services is elastic, Kevin could
increase his total revenue by
a. increasing the price of his piano-tuning services.
b. decreasing the price of his piano-tuning services.
c. leaving the price of his piano-tuning services unchanged.
d. None of the above is correct.
Table 13-2
Refer to Table 13-2. Which company had the highest earnings per share?
a. Boeing Co.
b. Eli Lilly and Co.
c. H. J. Heinz and Co.
d. Kellog Co.
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 steamed milk,
which is used to make lattés, and scientists discovered that coffee prevents heart
attacks?
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 effect on equilibrium quantity would
be ambiguous.
d. The equilibrium quantity would increase, and the effect on equilibrium price would
be ambiguous.
Figure 5-14
Refer to Figure 5-14. Along which of these segments of the supply curve is supply
least elastic?
a. GH
b. CD
c. AC
d. AB
An open-market purchase
a. increases the number of dollars and the number of bonds in the hands of the public.
b. increases the number of dollars in the hands of the public and decreases the number
of bonds in the hands of the public.
c. decreases the number of dollars and the number of bonds in the hands of the public.
d. decreases the number of dollars in the hands of the public and increases the number
of bonds in the hands of the public.
Figure 9-17
Refer to Figure 9-17. Without trade, total surplus is
a. $600.
b. $1,200.
c. $1,800.
d. $2,250.
The term crowding-out effect refers to
a. the reduction in aggregate supply that results when a monetary expansion causes the
interest rate to decrease.
b. the reduction in aggregate demand that results when a monetary expansion causes the
interest rate to decrease.
c. the reduction in aggregate demand that results when a fiscal expansion causes the
interest rate to increase.
d. the reduction in aggregate demand that results when a decrease in government
spending or an increase in taxes causes the interest rate to increase.
Many economists believe that restrictions against ticket scalping result in each of the
following except
a. a smaller audience for cultural and sporting events.
b. shorter lines at cultural and sporting events.
c. less tax revenue for the state.
d. an increase in ticket prices.
Table 15-3
2010 Labor Data for Adults (age 16 and older) in Meditor
Refer to Table 15-3. What is the adult male unemployment rate in Meditor?
a. 3.7 percent
b. 5 percent
c. 5.6 percent
d. 5.9 percent
Ronald Reagan believed that reducing income tax rates would
a. do little, if anything, to encourage hard work.
b. result in large increases in deadweight losses.
c. raise economic well-being and perhaps even tax revenue.
d. lower economic well-being, even though tax revenue could possibly increase.
In 2009, based on concepts similar to those used to estimate U.S. employment figures,
the Japanese adult non-institutionalized population was 110.272 million, the labor force
was 362 million, and the number of people employed was 62.242 million. According to
these numbers, the Japanese labor-force participation rate and unemployment rate were
about
a. 56.4% and 2.8%.
b. 56.4% and 4.8%.
c. 59.3% and 2.8%.
d. 59.3% and 4.8%.
Which of the following increase when the Fed makes open market purchases?
a. currency and reserves
b. currency but not reserves
c. reserves but not currency
d. neither currency nor reserves
Samuelson and Solow argued that when unemployment is high,
a. aggregate demand is high, which puts upward pressure on wages and prices.
b. aggregate demand is high, which puts downward pressure on wages and prices.
c. aggregate demand is low, which puts upward pressure on wages and prices.
d. aggregate demand is low, which puts downward pressure on wages and prices.
To raise productivity, policymakers could
a. increase spending on education.
b. provide tax credits to firms for capital improvements.
c. fund research and development.
d. All of the above are correct.
As the price level decreases, the value of money
a. increases, so people want to hold more of it.
b. increases, so people want to hold less of it.
c. decreases, so people want to hold more of it.
d. decreases, so people want to hold less of it.
An increase in expected inflation shifts the
a. short-run Phillips curve right.
b. short-run Phillips curve left.
c. long-run Phillips curve right.
d. long-run Phillips curve left.
Figure 6-13
Refer to Figure 6-13. In this market, a minimum wage of $7.25 is
a. binding and creates a labor shortage.
b. binding and creates unemployment.
c. nonbinding and creates a labor shortage.
d. nonbinding and creates neither a labor shortage nor unemployment.
The price elasticity of demand measures
a. buyers’ responsiveness to a change in the price of a good.
b. the extent to which demand increases as additional buyers enter the market.
c. how much more of a good consumers will demand when incomes rise.
d. the movement along a supply curve when there is a change in demand.
Table 11-4
The table below pertains to Wrexington, an economy in which the typical consumer’s
basket consists of 20 pounds of meat and 10 toys.
Refer to Table 11-4. If the base year is 2004, then the inflation rate in 2006 was
a. 44.4%.
b. 50%.
c. 62.5%.
d. 80%.
A nation has a positive net capital outflow. Which of the following is correct?
a. Purchases of foreign assets by domestic residents exceed purchases of domestic
assets by foreigners
b. It has positive net exports.
c. Its savings exceeds its domestic investment.
d. All of the above are correct.
Which of the following principles is not one of the four principles of individual
decisionmaking?
a. People face tradeoffs.
b. Trade can make everyone better off.
c. People respond to incentives.
d. Rational people think at the margin.
Foreign citizens earn more income in Ireland than Irish citizens earn in foreign
countries.
a. Ireland’s net factor payments from abroad are positive, and its GDP is larger than its
GNP.
b. Ireland’s net factor payments from abroad are positive, and its GNP is larger than its
GDP.
c. Ireland’s net factor payments from abroad are negative, and its GDP is larger than its
GNP.
d. Ireland’s net factor payments from abroad are negative, and its GNP is larger than its
GDP.
Suppose that a U.S. dollar buys more gold in Australia than it buys in Russia. What
does purchasing-power parity imply should happen?
Figure 5-6
Refer to Figure 5-6. Which of the following price changes would result in no change in
sellers’ total revenue?
a. The price increases from $6 to $9.
b. The price increases from $9 to $15.
c. The price decreases from $12 to $9.
d. The price decreases from $9 to $5.
An index fund
a. holds only stocks and bonds that are indexed to inflation.
b. holds all the stocks in a given stock index.
c. guarantees a return that follows the index of leading economic indicators.
d. typically has a lower return than a managed fund.
Figure 7-18
Refer to Figure 7-18. Assume demand increases and as a result, equilibrium price
increases to $22 and equilibrium quantity increases to 110. The increase in producer
surplus would be
a. $210.
b. $360.
c. $480.
d. $570.
Factors of production are
a. used to produce goods and services.
b. also called output.
c. abundant in most economies.
d. assumed to be owned by firms in the circular-flow diagram.
Table 16-7
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
Metropolis National Bank
Refer to Balance Sheet of Metropolis National Bank. Metropolis National Bank is
holding 2% of its deposits as excess reserves. Assume that no banks in the economy
want to maintain holdings of excess reserves and that people only hold deposits and no
currency. The Fed makes open market purchases of $10,000. The person who sold
bonds to the Fed deposits all the funds in Metropolis National Bank. If the bank now
loans out all its excess reserves, by how much will the money supply increase?
a. $190,000
b. $200,000
c. $240,000
d. None of the above are correct.
Abby buys health insurance because she knows that she has health risks that wouldn”t
be obvious to an insurance company. Brad buys home owners insurance and then is less
careful to make sure he’s put out his cigarettes. The example with Abby
a. and the example with Brad illustrate adverse selection.
b. and the example with Brad illustrate moral hazard.
c. illustrates adverse selection; the example with Brad illustrates moral hazard.
d. illustrates moral hazard; the example with Brad illustrates adverse selection.
When conducting an open-market sale, the Fed
a. buys government bonds, and in so doing increases the money supply.
b. buys government bonds, and in so doing decreases the money supply.
c. sells government bonds, and in so doing increases the money supply.
d. sells government bonds, and in so doing decreases the money supply.
Analysis of data on workers and those looking for work is conducted by economists at
the
a. Office of Management and Budget.
b. Department of Labor.
c. Congressional Budget Office.
d. Department of the Treasury.
If the discount rate is lowered, banks borrow
a. less from the Fed so reserves increase.
b. less from the Fed so reserves decrease.
c. more from the Fed so reserves increase.
d. more from the Fed so reserves decrease.
Figure 4-18
Refer to Figure 4-18. At a price of $4, there is a
a. surplus of 3 units.
b. surplus of 6 units.
c. shortage of 3 units.
d. shortage of 6 units.
For a country producing two goods, the opportunity cost of one good will be the inverse
of the opportunity cost of the other good.
A tax on insulin is likely to cause a very large deadweight loss to society.
Taxes on labor tend to encourage second earners to stay at home rather than work in the
labor force.
Price is the rationing mechanism in a free, competitive market.
In the ordered pair (10,30), 10 is the y-coordinate and 30 is the z-coordinate.
A country must have a positive net outflow of capital if it has a trade deficit.
All else equal, a decrease in demand will cause an increase in producer surplus.
If we observe that when the price of chocolate increases by 10%, quantity demanded
falls by 5%, then the demand for chocolate is price inelastic.
We interpret the term loanable funds to mean the flow of resources available to fund
private investment.
Economists generally believe that inward-oriented policies are more likely to foster
growth than outward-oriented policies.
If Walmart buys $50 million worth of consumer goods from China and sells them in the
U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S.
net capital outflow both fall.
Disposable personal income is the income that households and noncorporate businesses
have left after satisfying all their obligations to the government.
Adverse selection is illustrated by people who take greater risks after they purchase
insurance.
Explain how it is possible for the government debt to grow forever.
Use sticky-wage theory to explain why an increase in the expected price level shifts the
aggregate supply curve.
Who bears the majority of a tax burden depends on the relative elasticity of supply and
demand.