According to the Congressional Budget Office, over the past twenty years, the natural
rate of unemployment in the United States has:
A. increased.
B. remained constant.
C. fallen.
D. fallen to zero, and is now becoming negative.
An example of a government policy to increase human capital formation is:
A. the construction of an interstate highway system.
B. the provision of publicly-funded education.
C. government support for basic research.
D. maintaining a well-functioning legal system.
A positive demand shock will shift the ______ curve to the ______.
A. AD; left
B. AD; right
C. AS; left
D. AS; right
When the price of a good is below its equilibrium value:
A. consumers will bid the price up.
B. excess supply will occur.
C. it will tend to stay below the equilibrium value.
D. suppliers will notice their inventories are growing.
Refer to the figure above. The net effect of the subsidy program is that total economic
surplus has ______ by _____.
A. increased; $6,500
B. decreased; $6,500
C. increased; $500
D. decreased; $500
For entry into a particular perfectly competitive industry to occur, which of the
following must be true?
A. Accounting profits are equal to zero
B. Accounting profits equal economic profits
C. Economic profits are greater than zero
D. Economic profits are equal to zero
Refer to the figure above. Based on the figure, which interval represents a business
cycle recession?
A. A to B
B. B to C
C. A to B to C
D. B to C to D
In a competitive labor market, the equilibrium wage rate is determined by
A. government regulation.
B. employers.
C. the intersection of labor demand and labor supply.
D. employees.
Which of the following would be expected to decrease the demand for money in the
U.S.?
A. Grocery stores begin to accept credit cards in payment.
B. The economy enters a boom period.
C. Political instability increases dramatically in developing nations.
D. Households fear increasing computer glitches will severely limit their ability to use
ATMs.
In order to achieve a socially optimal level of output, production that generates positive
externalities should be:
A. required.
B. subsidized.
C. conducted by the government.
D. deregulated.
The study of individual choices and group behavior in individual markets defines:
A. microeconomics.
B. economics.
C. the scarcity principle.
D. macroeconomics.
Refer to the figure above. Suppose a price ceiling is imposed at $4. The value of the
producer surplus is:
A. $24.
B. $16.
C. $2.
D. $4.
Assume consumers eat either rice or pasta for dinner every night. If the price of rice
increases, in the pasta market one would expect to see:
A. an increase in the quantity of pasta demanded.
B. an increase in the demand for pasta.
C. a decrease in the quantity of pasta demanded.
D. a decrease in the demand for pasta.
In general, it is true that:
A. more specialization is always better.
B. less specialization is always better.
C. specialization imposes costs as well as benefits.
D. more specialization is always worse.
As the rate of inflation increases, the increased cost to a consumer of more frequent
trips to the bank to make cash withdrawals represents an increase in the:
A. shoe leather costs of inflation.
B. erosion of the purchasing power of cash.
C. tax distortion generated by inflation.
D. “noise” in the price system.
Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood
that anyone will get this flu decreases as more people receive the vaccine. One of the
demand curves in the diagram reflects private benefits and the other reflects social
benefits.
Refer to the figure above. The dollar value of the external ______ is _____ per vaccine.
A. benefit; $30
B. cost; $20
C. benefit; $20
D. benefit; $75
Lower nominal interest rates ______ the amount of money demanded and lower real
income ______ the amount of money demanded.
A. increase; increases
B. increase; decreases
C. increase; does not change
D. decrease; decreases
A pizza shop observes that when it raises the price of the large pizza, total revenue from
pizza decreases and when they lower the price of the large pizza, total revenue
increases. This suggests that:
A. pizza lovers act irrationally.
B. the demand for large pizza must be elastic.
C. there are few good substitutes for large pizza.
D. the demand for large pizza must be inelastic.
Refer to the figure above. From this graph, you can infer that paper production:
A. generates no externalities at quantities less than 300 tons per day.
B. generates negative externalities equal to between $25 and $50 per ton per day.
C. generates negative externalities equal to between $0 and $25 per ton per day.
D. should be prohibited.
Consumption expenditures include spending by households on:
A. exports.
B. inventories.
C. residential housing.
D. services.
If the quantity supplied of money is less than the quantity demanded of money, people
will ______ bonds which will cause bond prices to ______ and the nominal interest rate
to ______ until the quantity demanded and quantity supplied of money are equal.
A. sell; fall; rise
B. sell; fall; fall
C. sell; rise; fall
D. buy; fall; rise
In a situation in which there exists a commitment problem, commitment devices:
A. increase efficiency.
B. decrease efficiency.
C. create a situation that is ‘smart for one but dumb for all”.
D. create a situation that leaves money on the table.
Three equivalent ways to measure GDP are total _____, total _____, and total ______.
A. profits; production; saving
B. expenditure; income; profits
C. investment; consumption; saving
D. production; income; expenditure
For a given nominal exchange rate and foreign price level, a decrease in the domestic
price level ______ the real exchange rate.
A. increases
B. decreases
C. may either increase or decrease
D. offsets any change in
Suppose that the salary range for recent college graduates with a bachelor’s degree in
economics is $30,000 to $50,000, with 25% of jobs offering $30,000 per year, 50%
offering $40,000 per year and 25% offering $50,000 per year and that in all other
respects, the jobs are equally satisfying. Assume that in this market, a job offer remains
open for only a short time so that continuing to search requires an applicant to reject
any current job offer.
Who will accept an offer of $30,000?
A. Graduates who have been searching the longest
B. Graduates who enjoy taking risks
C. Graduates who are either risk-neutral or risk-averse
D. Only graduates who are risk-averse
The market value of all domestically produced final goods and services is also equal to
the total amount spent by ______________ less spending on imported goods and
services.
A. households and firms
B. households, firms, and governments
C. households, firms, and the foreign sector
D. households, firms, governments, and the foreign sector
According to Okun’s Law, when the output gap is positive, cyclical unemployment:
A. equals structural unemployment.
B. equals frictional unemployment.
C. equals zero.
D. is negative.
Lakeville is a small community that completely surrounds a scenic lake up north.
Lakeville’s zoning regulations require that residential lots have at least one hundred feet
of frontage, or shoreline, on the lake. The total shoreline of the lake is 5,000 feet.
Suppose there are currently 50 homes on the lake, each with one hundred feet of
shoreline. If demand for lakefront homes increased,
A. there would be excess demand for lakefront homes that the market could not correct.
B. a new equilibrium would be established at a quantity greater than 50 and at a higher
price.
C. a new equilibrium would be established at a quantity equal to 50 and at a higher
price.
D. no new residents would be able to purchase a home on the lake because all of the
lots are taken.
Other things equal, the combination of a ______ saving rate and a ______ real interest
rate will result in the largest accumulation of wealth over time.
A. high; high
B. high; low
C. high; zero
D. low; high
Refer to the table above. The total value of donations raised by three employees is:
A. $43,899.
B. $45,000.
C. $48,911.
D. $51,963.
According to the textbook, after adjusting for differences in human capital stocks
between union and nonunion workers, the union wage premium is approximately
A. 40%.
B. 30%.
C. 20%.
D. 10%.
If the price of a good increases by 20% and that leads to a decrease in quantity
demanded by 60%, what is the price elasticity of demand for that good?
A. 30.
B. 3.
C. 1/3.
D. 1/6.
Public saving is positive when:
A. there is a government budget surplus.
B. after-tax income of households and businesses is less than consumption
expenditures.
C. the government’s budget is balanced.
D. after-tax income of households and businesses is greater than consumption
expenditures.