Recall Application 1, “Falling Home Prices, the Wealth Effect, and Decreased
Consumer Spending,” to answer the following questions:
According to the application, from 1997-2006, the nationwide increase in home values
averaged:
A) 90 percent.
B) 80 percent.
C) 150 percent.
D) 200 percent.
The term “classical economics” was first used by ________ to refer to economic
literature developed in the ________.
A) Keynes; 18th and 19th centuries.
B) Paul Samuelson; 19th and early 20th centuries.
C) Adam Smith; 16th and 17th centuries.
D) David Ricardo; 17th and 18th centuries.
Table 2.2 Julianne runs a business and needs to
decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying
open for each additional hour. Suppose that Julianne’s marginal benefit of staying open
per hour is $16. If she is following the marginal principle, how many hours should
Julianne stay open?
A) 3 hours
B) 4 hours
C) 5 hours
D) 7 hours
Recall Application 3, “Is a VAT in our Future?” to answer the following questions.
According to the application, what does VAT stand for?
A) value-added tax
B) vigorously administered tax
C) very annoying tax
D) veto any tax
Which of the following would not cause an increase in output?
A) an increase in labor
B) an increase in the capital stock
C) an increase in productivity
D) All of the above would cause an increase in output.
If producers have an expectation of higher future prices, the supply of the good that is
currently available
A) will be all that is produced.
B) will increase.
C) will decrease.
D) will not change.
Which of the following is not included in the U.S. financial account?
A) change in private U.S. assets held abroad
B) change in foreign private assets held in the United States
C) exports of U.S. made goods to Japan
D) change in foreign government assets held in the United States
Figure 18.3
Refer to Figure 18.3. With an import ban, the equilibrium quantity is:
A) 80.
B) 100.
C) 60.
D) 40.
Suppose Kaylee withdraws $4,000 from her bank. If the reserve ratio is 25 percent, then
this will lead to a decrease in M1 of
A) $1,000.
B) $4,000.
C) $8,000.
D) $12,000.
One possible explanation for the existence of unemployment is:
A) that the wage does not adjust immediately to changes in labor demand.
B) the quantity of labor is sticky downward and does not adjust to an increase in wages.
C) labor supply always shifts in such a way as to lead to unemployment.
D) the labor market is perfectly competitive.
Financial intermediaries
A) increase the risks associated with investment.
B) increase the costs associated with investment.
C) allow for a greater volume of investment in the economy.
D) only provide services for the wealthy.
Figure 19.2
Refer to Figure 19.2. The demand and supply of euros (¬) is and . If fewer
investors from Germany want to invest in U.S. dollar denominated Treasury Bonds,
then:
A) the supply of euros decreases and the new exchange rate is $1/¬.
B) the supply of euros increases and the new exchange rate is $1/¬.
C) the demand for euros increases and the new exchange rate is $0.3/¬.
D) the supply of euros increases and the new exchange rate is $0.3/¬.
Suppose your bank pays you 6% interest per year on your savings account, so that $100
grows to $106 over a one-year period. If prices increase by 3% per year over that time,
approximately how much real value do you gain by keeping $100 in the bank for a
year?
A) $0
B) $1
C) $3
D) $4
When the government develops policies to stabilize the economy
A) these policies are unaffected by the multiplier effect.
B) only expansionary fiscal policy is impacted by the multiplier effect.
C) it needs to consider the multiplier effect for all fiscal policies.
D) only contractionary fiscal policy is impacted by the multiplier effect.
Mike makes excellent cheesecake and Sue is very good at changing the oil in a car. Sue
agrees to change the oil in Mike’s car if he makes her a cheesecake. This is an example
of:
A) legal tender.
B) barter.
C) commodity money.
D) fiat money.
Figure 7.2 Refer to Figure 7.2. The equilibrium wage rate is $ ________ and the
equilibrium number of people employed is ________ million people.
A) 12; 200
B) 8; 150
C) 8; 140
D) 7; 140
According to the infant industry argument for trade protectionism,
A) trade barriers must be used to protect domestic workers.
B) new industries need to be shielded from competition in the early stages of learning
by doing.
C) tariffs imposed to aid new industries should never be removed.
D) new industries are capable of competing with established rivals.