Figure 18-3
Figure 18-3 displays the international currency market for yen in terms of dollars and
dollars in terms of yen. The supply curve in graph (B) is comprised of
a. U.S. citizens attempting to purchase Japanese-made goods.
b. Japanese attempting to purchase U.S.-made goods.
c. U.S. businesses attempting to sell to the Japanese.
d. Japanese businesses attempting to sell to the U.S.
e. the U.S. government attempting to unload dollars to the international market.
Many economists believe a general sales tax (particularly on items such as food) takes a
larger proportion of income from low-income households than from high-income
households. If this is true, a general sales tax is a
a. regressive tax.
b. proportional tax.
c. neutral tax.
d. progressive tax.
Which of the following about inflation is true?
a. High and variable rates of inflation will be easy for decision makers to forecast
accurately.
b. Unanticipated inflation is an increase in the general level of prices that was not
expected by most decision makers.
c. In contrast with unanticipated inflation, anticipated inflation implies that the increase
in the general level of prices was expected by borrowers but not lenders.
d. Inflation will increase the prices of goods and services that households purchase but
not the wage rates of workers.
New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue
to increase by the same amount. The taxi commission believed taxi demand was
a. unit elastic.
b. somewhat elastic.
c. perfectly elastic.
d. perfectly inelastic.
e. somewhat inelastic
Samantha values the utility of her first cup of coffee at $1.00; a second cup, $0.75; and
a third cup, $0.50. If Samantha drinks three cups of coffee for breakfast, her marginal
utility is equal to
a. $0.50, the value of her last cup of coffee.
b. $1.00, the value of her first cup of coffee.
c. $2.25.
d. $1.50.
The law of diminishing returns
a. explains why marginal cost eventually increases as output expands.
b. implies that average fixed cost will remain unchanged as output expands.
c. is true for physical production activities but not for activities such as studying.
d. applies to a capitalist economy but would be irrelevant if the means of production
were owned by the state.
Which of the following is a positive effect of job search and the unemployment that
often accompanies it?
a. It keeps wages and income levels low.
b. It permits individuals to better match their skills and preferences with the
requirements of a job.
c. It reduces the wage gap between high skill workers and those with few skills.
d. It creates political pressure for an increase in the minimum wage, which will reduce
the rate of unemployment in the long run.
Suppose a professor gives up her teaching job to devote her time to writing textbooks.
If salaries of professors rise,
a. her accounting profit will rise.
b. her accounting profit will fall.
c. her explicit costs will rise.
d. her economic profit from textbooks will fall.
e. her economic profit from textbooks will rise.
Which of the following would be most appropriate for the measurement of differences
in the average standard of living of people at different points in time?
a. nominal GDP
b. real GDP
c. nominal GDP per capita
d. real GDP per capita
A point on the production possibilities curve represents a combination of goods that is
a. inefficient.
b. efficient.
c. unattainable.
d. attainable.
The expansionary phase of the business cycle is characterized by
a. decreasing real output and increasing unemployment.
b. decreasing real output and declining unemployment.
c. increasing real output and increasing unemployment.
d. increasing real output and declining unemployment.
The fact that some people will work hard to earn a lot of money while others will be
content with much less income indicates that
a. worker preferences are an important source of earning differentials.
b. economics ranks one set of worker preferences as more desirable than another.
c. some people can be paid less for doing hard work while others have to be paid a
premium for doing a similar task.
d. skill levels of laborers are a minor consideration in wage rate determination.
Expansionary fiscal policy during a recession is most effective when it
a. creates jobs, even if they are on unproductive projects.
b. directs the economy to full employment and resources into productive projects.
c. substantially changes the composition of aggregate demand.
d. provides members of Congress with large political contributions.
In 2012, approximately what percent of the national debt was held by federal
government agencies?
a. 1 percent
b. 19 percent
c. 29 percent
d. a little more than 80 percent
If the dollar price of the English pound goes from $1.30 to $1.10, the dollar has
a. appreciated, and the English will find U.S. goods cheaper.
b. appreciated, and the English will find U.S. goods more expensive.
c. depreciated, and the English will find U.S. goods cheaper.
d. depreciated, and the English will find U.S. goods more expensive.
Doomsday forecasts about running out of natural resources, with dire consequences,
a. have occurred at least as far back in time as the 16th century.
b. have generally been correct, and resources today are nearly all rising in price.
c. seldom are taken seriously enough by the public.
d. began to be heard for the first time after Earth Day of 1970.
Which of the following is trueof the interaction of supply and demand?
a. As the price increases, the quantity demanded and the quantity supplied will increase.
b. As the price increases, the quantity demanded and the quantity supplied will
decrease.
c. As the price increases, the quantity demanded increases and the quantity supplied will
decrease.
d. As the price increases, the quantity demanded will decrease and the quantity supplied
will increase.
e. As the price increases, neither the quantity demanded nor quantity supplied will
change.
Demand will be more elastic when
a. the time the consumer has to adjust to price changes is short.
b. the price of the good is low.
c. the number of good substitutes is large.
d. the consumption of the good is essential.
When competition is present and property rights protected and enforced, market prices
will
a. discourage profit-seeking business firms from producing efficiently.
b. direct entrepreneurs toward production of goods that are inferior in quality.
c. encourage self-interested individuals to develop skills that are expected to be
valuable in the future.
d. always decrease.
Use the figure below to answer the following question(s).
Figure 15-1
In Figure 15-1, AD1 and SRAS1 indicate initial conditions in the goods and services
market. In the short run, which of the following will most likely result from a shift to a
more expansionary monetary policy under the rational expectations hypothesis?
a. price level P1 and output Y1
b. price level P2 and output Y2
c. price level P3 and output Y1
d. price level P1 and output Y2
The statutory incidence (or burden) of a tax refers to
a. the governmental agency responsible for collecting the tax.
b. who actually bears the burden of a tax once changes in market prices are taken into
account.
c. the degree of progressiveness in the rate structure of the tax.
d. who the tax is legally or statutorily imposed on.
Figure 11-20
The production level that will maximize the profit for the monopoly in Figure 11-20 is
a. 0
b. 22
c. 17
d. 12
e. more than 22
If the quantity of cookies purchased decreases by 30 percent as the result of a 15
percent increase in the price of oranges, the absolute value of the price elasticity of
demand for cookies is
a. 0.25.
b. 0.50.
c. 1.25.
d. 2.0.
Real (adjusted for inflation) federal spending per person in the United States
a. has increased by approximately 10 percent per decade during the last 225 years.
b. increased more rapidly during the nineteenth century than during the twentieth
century.
c. in 2012 was approximately 80 times the level of 1916.
d. increased rapidly during the first half of the twentieth century but has changed very
little since 1950.
If an unanticipated increase in aggregate demand results in an output beyond the
economy’s long-run capacity, long-run equilibrium will eventually be restored by
a. an increase in the economy’s productive capacity (LRAS shifts to the right).
b. higher resource prices, an increase in SRAS, and a decrease in the general level of
prices.
c. higher resource prices, a decrease in SRAS, and an increase in the general level of
prices.
d. a decrease in the natural rate of unemployment.
Use the figure below to answer the following question(s).
Figure 9-2
The economy depicted in Figure 9-2 is experiencing
a. an abnormally high rate of unemployment.
b. an abnormally low rate of unemployment.
c. its natural rate of unemployment.
d. an output that cannot be sustained.
“Market power” is an expression used to indicate that a firm has
a. no rivals.
b. the power to sell a given output at whatever price it chooses.
c. some freedom from the rigors of intense competition.
d. a monopoly over the product it produces.
Real GDP equals nominal GDP
a. minus exports.
b. corrected for changes in the price level.
c. minus personal income taxes.
d. minus retail sales taxes.
Which one of the following states a central element of the economic way of thinking?
a. Scarce goods are priceless.
b. Incentives matter–human choice is influenced in predictable ways by changes in
personal costs and benefits.
c. The realism of the assumptions is the best test of an economic theory.
d. When deciding how to allocate time, the concept of opportunity cost is meaningless.
Government regulation is
a. subject to the same problems of lack of information and lack of incentives for
economic efficiency as centrally planned economies.
b. the only reliable way to improve environmental quality.
c. not subject to political concerns when it comes to environmental quality.
d. the most economically efficient way to reduce greenhouse gases.
During the last two centuries, after adjustment for inflation,
a. corporate bonds have yielded a real return of approximately 7 percent annually,
compared to a real return of about 3 percent for corporate stocks.
b. corporate stocks have yielded a real return of approximately 7 percent annually,
compared to a real return of about 3 percent for bonds.
c. both corporate stocks and bonds have yielded a real rate of return of about 3 percent.
d. both corporate stocks and bonds have yielded a real rate of return of about 7 percent.