A “trade deficit” occurs when
A) we sell more to other countries than we buy from them.
B) we buy more from other countries than we sell to them.
C) we sell more to one country than another.
D) we sell less to one country than another.
Markets perform all of the following functions except:
A) determining the prices of goods and services.
B) helping firms decide what to produce.
C) helping firms decide how to produce.
D) determining why a firm chooses to produce a certain product.
Adam Smith is:
A) considered the founder of economics.
B) responsible for a branch of economics bearing his name.
C) responsible for refining the model of supply and demand.
D) the author of this text.
The financial account is defined as
A) the sum of net exports, net income received from investments abroad, and net
transfers abroad.
B) the sum of gross income received from investments abroad and as net transfers
abroad.
C) the value of the country’s net sales of assets.
D) net transfers abroad.
When real GDP falls for two consecutive quarters the economy is in a
A) depression.
B) recession.
C) peak.
D) trough.
Recall Application 5, “The Role of Political Factors in Economic Growth,” to answer
the following questions:
According to the application, can technological growth exist in authoritarian institutions
like the one experienced in China today?
A) No.
B) Yes, but it may not be sustained.
C) Yes, and the growth is expected to be sustained.
D) Yes, but only if authoritarian regimes prevent change.
The WTO and GATT promote trade by
A) reducing tariffs.
B) eliminating quotas.
C) reducing agricultural subsidies.
D) all of the above.
Suppose that the flat tax is 20 percent. A worker who earns $1000 before taxes and puts
all of the income net of taxes into a bond that earns 10 percent per annum will earn an
additional ________ in one year.
A) $80
B) $8
C) $800
D) $880
A variable is:
A) something that always has the same value.
B) something that can take on different values.
C) something that cannot be measured.
D) something that varies over time.
If net investment in 2012 is $400 billion and gross investment in 2012 is $440 billion,
depreciation in 2012 is:
A) $40 billion.
B) $400 billion.
C) $440 billion.
D) $840 billion.
Creative Destruction, the notion that innovation is promoted by the competitive desire
to break production monopolies, can be traced back to:
A) Joseph Schumpeter.
B) John Maynard Keynes.
C) Adam Smith.
D) David Ricardo.
Suppose that you own a house. What is the opportunity cost of living in the house?
A) There is no opportunity cost because you own the house.
B) There is no opportunity cost unless you could set up a business in the house.
C) The opportunity cost is the rent you could have received from a tenant if you didn’t
live there.
D) The opportunity cost is the cost of your monthly mortgage payment plus bills.
Peaches and cream are complements. When the price of peaches falls and the price of
raw milk (used to make cream) rises:
A) the equilibrium price of cream rises and the equilibrium quantity of cream might rise
or fall.
B) the equilibrium price of cream falls and the equilibrium quantity of cream might rise
or fall.
C) the equilibrium price of cream falls and the equilibrium quantity of cream falls.
D) the equilibrium price of cream falls and the equilibrium quantity of cream rises.
A change in the quantity demanded of a product cannot be the result of a change in:
A) the buyer’s preference.
B) the price of related goods.
C) consumer income.
D) All of the above are correct.