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Which of the following would help control the future growth of healthcare prices and
expenditures?
a. an increase in the share of healthcare costs paid for either directly or from personal
medical savings accounts
b. the substitution of catastrophic (high deductibility) health insurance for low
co-payment plans
c. more reliance on expansion in the supply of medical services rather than stimulation
of demand
d. all of the above
Oligopolies would like to act like a
a. duopoly, but self-interest often drives them closer to the competitive outcome.
b. competitive firm, but self-interest often drives them closer to the duopoly outcome.
c. monopoly, but self-interest often drives them closer to the duopoly outcome.
d. monopoly, but self-interest often drives them closer to the competitive outcome.
Figure 4-22
Refer to Figure 4-22. The amount of the tax per unit is
a. $1.00.
b. $1.50.
c. $2.50.
d. $3.50.
The money multiplier will be
a. larger if banks hold on to excess reserves but smaller if private citizens hold on to
cash.
b. smaller if banks hold on to excess reserves but larger if private citizens hold on to
cash.
c. smaller if either banks hold on to excess reserves or private citizens hold on to cash.
d. larger if either banks hold on to excess reserves or private citizens hold on to cash.
e. constant whether or not banks and citizens try to alter their holdings of excess
reserves and cash.
Use the figure below to answer the following question(s).
Figure 3-3
In Figure 3-3, if the initial demand for margarine were D1, the impact of a decrease in
the price of butter, a substitute good for margarine, would be illustrated as
a. a shift in the demand curve to D2.
b. a shift in the demand curve to D3.
c. a movement downward to the right along the original demand curve D1.
d. none of the above.
Ricardian Equivalence maintains that an increase in government spending financed by
debt will result in a corresponding increase in
a. savings, in anticipation of future taxes.
b. output and consumption, stimulated by the additional government spending.
c. consumer spending, in anticipation of lower future taxes.
d. aggregate demand, because the additional spending was financed by borrowing rather
than current taxation.
From 1990 to the year 2000, real federal spending rose about 21 percent, while from
2000 to 2010, real federal spending rose by about
a. 17 percent.
b. 30 percent.
c. 59 percent.
d. 112 percent.
When the Fed unexpectedly decreases the money supply,
a. real interest rates will tend to decline.
b. the exchange rate value of the dollar will tend to appreciate.
c. aggregate demand will tend to increase.
d. there is generally no impact on the economy.
If the GDP deflator in 2011 was 130 compared to a value of 100 during the 2005 base
year, this would indicate that
a. the inflation rate during 2011 was 30 percent.
b. the general level of prices during 2011 was 30 percent higher than during 2005.
c. the inflation rate during 2011 was 130 percent.
d. nominal GDP grew by 30 percent during 2011.
e. real GDP was 30 percent higher in 2011 than 2005.
In a country that is experiencing economic growth at 7 percent per year, per capita
income will double in approximately
a. seven years.
b. ten years.
c. fourteen years.
d. twenty-one years.
During the quarter of a century prior to 2000, between 66 percent and 71 percent of
Americans age 18 and older paid personal income taxes. What happened to the share of
adult Americans with a personal income tax liability between 2000 and 2009?
a. It rose to nearly 90 percent.
b. It rose to approximately 80 percent.
c. It was virtually constant at approximately 70 percent.
d. It fell to 51 percent.
If the supply of health-care services is highly inelastic and larger government subsidies
lead to an increase in the demand for the services,
a. the prices of health-care services will rise by only a small amount, but the quantity
supplied will increase substantially.
b. the prices of health-care services will rise substantially, but the quantity supplied will
increase by only a small amount.
c. both health-care prices and the quantity of the services supplied will increase
substantially.
d. the prices of health-care services will decline, but there will be only a small change
in the quantity supplied.
Which of the following is an argument for tax cuts rather than government spending as
a way to promote recovery from a recession?
a. Tax cuts are better suited to direct resources into projects that consumers value more
highly than the resources required for their production.
b. 100 percent of a tax cut will stimulate aggregate demand, but this will not be the case
for an increase in government expenditures.
c. Tax cuts will encourage rent seeking; increases in government spending will not.
d. Tax cuts will change the structure of aggregate demand more than increases in
government spending.
An increase in the demand for automobiles will increase the demand for labor used to
produce the automobiles due to
a. an increase in the marginal revenue product of labor.
b. a decrease in the marginal revenue product of labor.
c. an increase in the marginal revenue product of automobiles.
d. a decrease in the marginal revenue product of automobiles.
e. a decrease in the price of automobiles.
Which of the following is true?
a. An increase in the interest rate will tend to increase stock prices.
b. A reduction in the interest rate will tend to increase stock prices.
c. An increase in the inflation rate will tend to increase stock prices.
d. There is no reason to believe that changes in interest rates will influence stock prices.
When a new firm enters a competitive price-searcher market, the demand curves faced
by all existing firms in that market will
a. shift to the left.
b. shift to the right.
c. shift in a direction that is unpredictable without further information.
d. remain unchanged. It is the supply curve that will shift.
The forces of supply and demand assure that
a. demand curves and supply curves tend to shift to the right as time goes by.
b. the price of a good will eventually rise in response to an excess demand for that
good.
c. when the supply curve for a good shifts, the demand curve for that good shifts in
response.
d. the equilibrium price of a good will be rising more often than it will be falling.
Which of the following will most likely accompany an unanticipated increase in
short-run aggregate supply?
a. an increase in real GDP
b. an increase in the general level of prices
c. an increase in the actual rate of unemployment
d. an increase in the natural rate of unemployment
Which of the following will most likely occur as the result of an unanticipated increase
in aggregate demand that pushes output beyond long-run capacity?
a. an increase in the natural rate of unemployment
b. an increase in the real interest rate
c. a decrease in the real interest rate
d. a decrease in the general level of prices
If the foreign exchange market is in equilibrium and attractive domestic investment
opportunities result in a net inflow of capital,
a. the nation will experience a trade deficit.
b. the nation will experience a trade surplus.
c. interest rates will rise in the loanable funds market.
d. the actual rate of unemployment must exceed the natural rate of unemployment.
Demand deposits are
a. deposits held by individuals at one of the twelve Federal Reserve District Banks.
b. interest-earning savings deposits held by individuals at a banking institution.
c. deposits of commercial banks at one of the twelve Federal Reserve District Banks.
d. deposits of individuals that can either be withdrawn or made payable on demand to a
third party by a check.
Which of the following factors will make it easier for a labor union to increase the
wages of its members?
a. a highly inelastic demand for the products produced by the union labor
b. a readily available supply of similar products produced by nonunion labor
c. low tariffs and strong competition from foreign firms producing the products
supplied by the union labor
d. a reduction in the demand for the products produced by the union labor
Other things constant, which of the following job characteristics would be most likely
to result in a higher pay rate for the job?
a. The employer provides low cost child-care services on the premises.
b. The job is widely viewed as prestigious.
c. The job requires substantial amounts of stressful out-of-town travel.
d. The job involves working in pleasant surroundings.
Both Keynesians and non-Keynesians now recognize
a. the limitations of automatic stabilizers as a stabilization tool.
b. the adverse effects of high marginal tax rates on economic growth.
c. the difficulties involved in timing discretionary changes in fiscal policy in a
stabilizing manner.
d. the highly expansionary impact of budget deficits.
The price-taker firm should discontinue production immediately if
a. the market price exceeds the firm's average total costs.
b. the market price is less than the firm's average variable costs.
c. the market price is less than the firm's average total costs but greater than its average
variable cost.
d. its accounting statement indicates that it is suffering losses.
The ability of price-taker firms to freely expand or contract their businesses and to enter
or exit the market means that
a. prices will always be high enough to generate positive economic profit.
b. resources that would be more valuable elsewhere will be trapped, unproductively, in
a particular industry.
c. resource owners cannot move their resources to other areas where they would be
more highly valued.
d. resources that would be more valuable elsewhere will not be trapped, unproductively,
in a particular industry.
Compared to the no-trade situation, if the United States imports video games,
a. the price of video games will decline in the domestic market.
b. domestic video game producers will be able to charge higher prices.
c. domestic video game producers will expand both output and employment.
d. U.S. consumers will be harmed.
If the dollar price of the English pound increases from $1.50 to $1.75, the dollar has
a. appreciated relative to the pound, and English goods have become less expensive to
U.S. consumers.
b. depreciated relative to the pound, and English goods have become less expensive to
U.S. consumers.
c. appreciated relative to the pound, and English goods have become more expensive to
U.S. consumers.
d. depreciated relative to the pound, and English goods have become more expensive to
U.S. consumers.
Based on the experience of the Great Depression and the New Deal, which one of the
following strategies would be most likely to stimulate recovery from a serious
economic recession?
a. increase trade restrictions and tariffs to save jobs and enhance tax revenue
b. a reduction in the money supply in order to strengthen the dollar and combat inflation
c. keep taxes low in order to stimulate production and minimize the decline in personal
and business income
d. institute frequent policy changes in order to search for and find the policy
combination that would be most effective
When individuals and businesses are permitted to trade freely over a larger market area,
a. wages will decline to the level of the poorest country in the region.
b. the monopoly power of business firms will increase.
c. they will be able to produce a larger output and consume a more diverse bundle of
goods.
d. businesses will be able to earn higher profits, but the income levels of individuals
will decline.
