Right-to-work laws
a. guarantee workers the right to form unions.
b. give workers in a unionized firm the right to choose whether to join the union.
c. prevent employers from hiring permanent replacements for workers who are on
strike.
d. prevent workers from being fired because of increases in wages brought about by
collective bargaining.
Suppose the price of a gallon of ice cream rises from $4 to $5 and the price of a can of
coffee rises from $2 to $2.50. If the CPI rises from 150 to 177, then people likely will
buy
a. more ice cream and more coffee.
b. more ice cream and less coffee.
c. less ice cream and more coffee.
d. less ice cream and less coffee.
A 1977 amendment to the Federal Reserve Act of 1913
a. requires the Federal Reserve to place more weight on promoting price stability than
on promoting maximum employment.
b. requires the Federal Reserve to place more weight on promoting maximum
employment than on promoting price stability.
c. requires the Federal Reserve to place equal weight on promoting price stability and
maximum employment.
d. says the Federal Reserve should promote price stability and maximum employment,
but does not specify how the Federal Reserve should weight these goals.
Suppose the price of potato chips decreases from $1.45 to $1.25 and, as a result, the
quantity of potato chips demanded increases from 2,000 to 2,200. Using the midpoint
method, the price elasticity of demand for potato chips in the given price range is
a. 2.00.
b. 1.55.
c. 1.00.
d. 0.64.
An increase in the interest rate causes investment to
a. rise and the exchange rate to appreciate.
b. fall and the exchange rate to depreciate.
c. rise and the exchange rate to depreciate.
d. fall and the exchange rate to appreciate.
The circular-flow diagram is a
a. visual model of the economy.
b. visual model of the relationships among money, prices, and businesses.
c. model that shows the effects of government on the economy.
d. mathematical model of how the economy works.
The idea of insurance
a. would not appeal to a risk-averse person.
b. is, other things the same, to reduce the probability of a fire, accident, or death.
c. is to share risk.
d. is to provide a sure thing, not a gamble.
Robert put $15,000 into an account with a fixed interest rate two years ago and now the
account balance is $16,695.38. What rate of interest did Robert earn?
a. 4.5 percent
b. 5.5 percent
c. 6.5 percent
d. 8.0 percent
Welfare economics explains which of the following in the market for DVDs?
a. The government sets the price of DVDs; firms respond to the price by producing a
specific level of output.
b. The government sets the quantity of DVDs; firms respond to the quantity by charging
a specific price.
c. The market equilibrium price for DVDs maximizes the total welfare to DVD buyers
and sellers.
d. The market equilibrium price for DVDs maximizes consumer welfare but minimizes
producer welfare.
In a market economy, supply and demand determine
a. both the quantity of each good produced and the price at which it is sold.
b. the quantity of each good produced but not the price at which it is sold.
c. the price at which each good is sold but not the quantity of each good produced.
d. neither the quantity of each good produced nor the price at which it is sold.
Efficiency wages, minimum-wage laws, and unions all
a. keep wages below the equilibrium level, causing a shortage of labor.
b. keep wages below the equilibrium level, causing a surplus of labor.
c. keep wages above the equilibrium level, causing a shortage of labor.
d. keep wages above the equilibrium level, causing a surplus of labor.
Which of the following is not a characteristic of a bond?
a. its tax treatment
b. its credit risk
c. its term
d. its dividend yield
Table 3-9
Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim
can switch between setting up and testing computers at a constant rate. The following
table applies.
Minutes Needed to Number of Computers
Set Up or Tested in a
40-Hour Week
Refer to Table 3-9. Barb’s opportunity cost of testing one computer is setting up
a. 4/5 computer and Jim’s opportunity cost of testing one computer is setting up 3/4
computer.
b. 4/5 computer and Jim’s opportunity cost of testing one computer is setting up 4/3
computers.
c. 5/4 computers and Jim’s opportunity cost of testing one computer is setting up 3/4
computer.
d. 5/4 computers and Jim’s opportunity cost of testing one computer is setting up 4/3
computers.
For a given real interest rate, a decrease in the inflation rate would
a. decrease the after-tax real interest rate and so decrease saving.
b. decrease the after-tax real interest rate and so increase saving.
c. increase the after-tax real interest rate and so decrease saving.
d. increase the after-tax real interest rate and so increase saving.
If Japan’s national saving exceeds its domestic investment, then Japan has
a. positive net capital outflows and negative net exports.
b. positive net capital outflows and positive net exports.
c. negative net capital outflows and negative net exports.
d. negative net capital outflows and positive net exports.
When the price of a good or service changes,
a. the demand curve shifts in the opposite direction.
b. the supply curve shifts in the opposite direction.
c. the supply curve shifts in the same direction.
d. there is a movement along a given supply curve.
A price ceiling is
a. often imposed on markets in which “cutthroat competition” would prevail without a
price ceiling.
b. a legal maximum on the price at which a good can be sold.
c. often imposed when sellers of a good are successful in their attempts to convince the
government that the market outcome is unfair without a price ceiling.
d. All of the above are correct.
If, at the current price, there is a shortage of a good, then
a. sellers are producing more than buyers wish to buy.
b. the market must be in equilibrium.
c. the price is below the equilibrium price.
d. quantity demanded equals quantity supplied.
Figure 8-4
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-4. The tax results in a loss of producer surplus that amounts to
a. $45.
b. $90.
c. $210.
d. $255.
Which of the following leads to an increase in net exports in the long run?
a. either a decrease in the budget deficit or imposing an import quota
b. a decrease in the budget deficit but not imposing an import quota
c. imposing an import quota but not a decrease in the budget deficit
d. neither a decrease in the budget deficit nor imposing an import quota
M1 includes
a. currency.
b. demand deposits.
c. traveler’s checks.
d. All of the above are correct.
According to the aggregate demand and aggregate supply model, in the long run an
increase in the money supply leads to
a. increases in both the price level and real GDP.
b. an increase in real GDP but does not change the price level.
c. an increase in the price level but does not change real GDP.
d. no change in either the price level or real GDP.
If a country has Y > C + I + G, then
a. S > I and it has a trade surplus.
b. S > I and it has a trade deficit.
c. S < I and it has a trade surplus.
d. S < I and it has a trade deficit.
Figure 3-8
Chile’s Production Possibilities Frontier Colombia’s Production Possibilities
Frontier
Refer to Figure 3-8. Colombia should specialize in the production of
a. coffee and import soybeans.
b. soybeans and import coffee.
c. both goods and import neither good.
d. neither good and import both goods.
If the supply of a product decreases, then we would expect equilibrium price
a. to increase and equilibrium quantity to decrease.
b. to decrease and equilibrium quantity to increase.
c. and equilibrium quantity to both increase.
d. and equilibrium quantity to both decrease.
If the demand for a product decreases, then we would expect equilibrium price
a. to increase and equilibrium quantity to decrease.
b. to decrease and equilibrium quantity to increase.
c. and equilibrium quantity to both increase.
d. and equilibrium quantity to both decrease.
If Max experiences a decrease in his income, then we would expect Max’s demand for
a. each good he purchases to remain unchanged.
b. normal goods to decrease.
c. luxury goods to increase.
d. inferior goods to decrease.
For a good that is taxed, the area on the relevant supply-and-demand graph that
represents government’s tax revenue is
a. smaller than the area that represents the loss of consumer surplus and producer
surplus caused by the tax.
b. bounded by the supply curve, the demand curve, the effective price paid by buyers,
and the effective price received by sellers.
c. a right triangle.
d. a triangle, but not necessarily a right triangle.
Figure 6-25
Panel (a) Panel (b)
Panel (c)
Refer to Figure 6-25. In which market will the majority of the tax burden fall on
buyers?
a. market (a)
b. market (b)
c. market (c)
d. All of the above are correct.
In 2009 Buckeye Brewing produced 1,000 bottles of ginger ale each day. It employed
10 workers each working 8 hours a day. In 2010 it produced 960 bottles of ginger ale
each day employing 8 workers who worked 8 hours each day. Productivity at Buckeye
Brewing
a. increased by 20%.
b. increased by 16.67%.
c. decreased by 1.67%.
d. decreased by 40%.
Stock prices often rise when the Fed raises interest rates.
If inflation is higher than expected, then borrowers make nominal interest payments that
are less than they expected.
If a union and a firm cannot reach an agreement on the terms of employment, then the
union can organize a withdrawal of labor from the firm, called a strike.
The amount of unemployment varies little over time and across countries.
If consumption is $4000, exports are $300, government purchases are $1000, imports
are $400, and investment is $800, then GDP is $5700.
A price floor is a legal minimum on the price at which a good or service can be sold.
Explain how inflation affects savings.
Import quotas and tariffs both cause the quantity of imports to fall.
Total surplus in a market is consumer surplus minus producer surplus.
When the value of money is on the vertical axis, the money supply curve slopes upward
because an increase in the value of money induces banks to create more money.
Monetary policy and fiscal policy are the only factors that influence aggregate demand.
All scientific models, including economic models, simplify reality in order to improve
our understanding of it.
An increase in nominal U.S. GDP necessarily implies that the United States is
producing a larger output of goods and services.
Total surplus = Value to buyers – Costs to sellers.
What is the difference between commodity money and fiat money? Why do people
accept fiat money in trade for goods and services?
Table 15-5
2010 Labor Data for Tajnia
Refer to Table 15-5. The labor-force participation rate of Tajnia in 2010 is about 40.8
percent.