Country A experienced a growth rate of real GDP per person of 4 percent per year
throughout the 1900’s. In view of other countries’ experiences during this time country
A’s growth was
a. exceptionally high.
b. moderately high.
c. moderately low.
d. exceptionally low.
Figure 2-9
Panel (a) Panel (b)
Refer to Figure 2-9, Panel (a). The movement from point C to point B could be caused
by
a. economic growth.
b. unemployment.
c. an improvement in efficiency.
d. an advance in production technology.
An economist would be more likely to argue against reducing inflation if she thought
that
a. the central bank lacked credibility and if bonds were usually not indexed for
inflation.
b. the central bank lacked credibility and if bonds were usually indexed for inflation.
c. the central bank had credibility and if bonds were usually not indexed for inflation.
d. the central bank had credibility and if bonds were usually indexed for inflation.
Thomas Malthus’s predictions turned out to be wrong due to
a. technological advances such as those during the Industrial Revolution.
b. smaller populations now than in the time of Malthus.
c. the effects of brain-drain.
d. unlimited natural resources.
The two basic reasons why economists often appear to give conflicting advice to
policymakers are differences in
a. opinions and education.
b. opinions and values.
c. scientific judgments and education.
d. scientific judgments and values.
Alpha Corporation has a price of $5 a share, outstanding shares of 2.5 million, retained
earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings
ratio which is
a. high, perhaps indicating that people expect future earnings to rise.
b. high, perhaps indicating that people expect future earnings to fall.
c. low, perhaps indicating that people expect future earnings to rise.
d. low, perhaps indicating that people expect future earnings to fall.
The ratio of debt to GDP in the United States
a. tends to fall during wars.
b. fell during the decade that began in 2000.
c. fell during the late 1990s.
d. None of the above is correct.
Which of the following expressions represents a cross-price elasticity of demand?
a. percentage change in quantity demanded of bread divided by percentage change in
quantity supplied of bread
b. percentage change in quantity demanded of bread divided by percentage change in
price of butter
c. percentage change in price of bread divided by percentage change in quantity
demanded of bread
d. percentage change in quantity demanded of bread divided by percentage change in
income
Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15.
Chuck values the dog show at
a. $5.
b. $15.
c. $20.
d. $35.
The consumer price index tries to gauge how much incomes must rise to maintain
a. an increasing standard of living.
b. a constant standard of living.
c. a decreasing standard of living.
d. the highest standard of living possible.
If speculators bid up the value of the U.S. dollar in the market for foreign exchange,
then
a. U.S. goods become more expensive relative to foreign goods so aggregate demand
shifts right.
b. U.S. goods become less expensive relative to foreign goods so aggregate demand
shifts right.
c. U.S. goods become more expensive relative to foreign goods so aggregate demand
shifts left.
d. U.S. goods become less expensive relative to foreign goods so aggregate demand
shifts left.
Household spending on education is included in
a. consumption, although it might be argued that it would fit better in investment.
b. investment, although it might be argued that it would fit better in consumption.
c. government spending, based on the fact that most higher-education students attend
publicly-supported colleges and universities.
d. None of the above is correct; in general, household spending on services is not
included in any component of GDP.
Figure 8-1
Refer to Figure 8-1. Suppose the government imposes a tax of P’ – P”’. The deadweight
loss due to the tax is measured by the area
a. J+K+L+M.
b. J+K+L+M+N.
c. I+Y.
d. I+Y+B.
The identity that shows that total income and total expenditure are equal is
a. GDP = Y.
b. Y = DI + T + NX.
c. GDP = GNP – NX.
d. Y = C + I + G + NX.
Suppose the market for loanable funds is in equilibrium. Given the numbers below,
determine the quantity of loanable funds demanded.
GDP $200 billion
Consumption $130 billion
Taxes Net of Transfers $30 billion
Government Spending $40 billion
a. $30 billion
b. $25 billion
c. $20 billion
d. $15 billion
When the interest rate is below the equilibrium level,
a. the quantity of money that the Federal Reserve has supplied exceeds the quantity of
money that people want to hold.
b. people respond by selling interest-bearing bonds or by withdrawing money from
interest-bearing bank accounts.
c. bond issuers and banks respond by lowering the interest rates they offer.
d. All of the above are correct.
In which of the following situations will total revenue increase?
a. Price elasticity of demand is 2, and the price of the good decreases.
b. Price elasticity of demand is 5, and the price of the good increases.
c. Price elasticity of demand is 0, and the price of the good decreases.
d. All of the above are correct.
Economic variables whose values are measured in monetary units are called
a. dichotomous variables.
b. nominal variables.
c. classical variables.
d. real variables.
Scenario 11-1
The price tag on a tennis ball in 1975 read $0.10, and the price tag on a tennis ball in
2005 read $1.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
Refer to Scenario 11-1. The price of a 1975 tennis ball in 2005 dollars is
a. $0.03.
b. $0.27.
c. $0.37.
d. $1.00.
One of the widely acknowledged problems with using the consumer price index as a
measure of the cost of living is that the CPI
a. fails to account for consumer spending on housing.
b. accounts only for consumer spending on food, clothing, and energy.
c. fails to account for the fact that consumers spend larger percentages of their incomes
on some goods and smaller percentages of their incomes on other goods.
d. fails to account for the introduction of new goods.
A dress manufacturer recently has come to expect higher prices for dresses in the near
future. We would expect
a. the dress manufacturer to supply more dresses now than it was supplying previously.
b. the dress manufacturer to supply fewer dresses now than it was supplying previously.
c. the demand for this manufacturer’s dresses to fall.
d. no change in the dress manufacturer’s current supply; instead, future supply will be
affected.
Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The
price elasticity of demand for this good is
a. inelastic and equal to 0.67.
b. elastic and equal to 0.67.
c. inelastic and equal to 1.50.
d. elastic and equal to 1.50.
John is a stockbroker. He has had several job offers, but he has turned them down
because he thinks he can find a firm that better matches his tastes and skills. Curtis has
looked for work as an accountant for some time. While the demand for accountants
doesn”t appear to be falling, there seems to be more people applying than jobs
available.
a. John and Curtis are both frictionally unemployed.
b. John and Curtis are both structurally unemployed.
c. John is frictionally unemployed, and Curtis is structurally unemployed.
d. John is structurally unemployed, and Curtis is frictionally unemployed.
Suppose that two supply curves pass through the same point. One is steep, and the other
is flat. Which of the following statements is correct?
a. The flatter supply curve represents a supply that is inelastic relative to the supply
represented by the steeper supply curve.
b. The steeper supply curve represents a supply that is inelastic relative to the supply
represented by the flatter supply curve.
c. Given two prices with which to calculate the price elasticity of supply, that elasticity
would be the same for both curves.
d. A decrease in demand will increase total revenue if the steeper supply curve is
relevant, while a decrease in demand will decrease total revenue if the flatter supply
cure is relevant.
Figure 14-4. The figure shows a utility function for Dexter.
Refer to Figure 14-4. From the appearance of the utility function, we know that
a. Dexter is risk averse.
b. Dexter gains less satisfaction when his wealth increases by X dollars than he loses in
satisfaction when his wealth decreases by X dollars.
c. the property of diminishing marginal utility does not apply to Dexter.
d. All of the above are correct.
Figure 7-12
Refer to Figure 7-12. Area A represents
a. producer surplus to new producers entering the market as the result of an increase in
price from P1 to P2.
b. the increase in consumer surplus that results from an upward-sloping supply curve.
c. the increase in total surplus when sellers are willing and able to increase supply from
Q1 to Q2.
d. the increase in producer surplus to those producers already in the market when the
price increases from P1 to P2.
In a particular production process, if the quantities of all inputs used double, then the
quantity of output doubles as well. This means that
a. the production process cannot be enhanced by technological advances.
b. no mathematical representation of the relevant production function can be
formulated.
c. the relevant production function has the limits-to-growth property.
d. the relevant production function has the constant-returns-to-scale property.
Which of the following words and phrases best captures the notion of equality?
a. minimum waste
b. maximum benefit
c. sameness
d. efficiency
Shoeleather costs arise when higher inflation rates induce people to
a. spend more time looking for bargains.
b. spend less time looking for bargains.
c. hold more money.
d. hold less money.
Some economists argue that
a. monetary policy should actively be used to stabilize the economy.
b. fiscal policy should actively be used to stabilize the economy.
c. fiscal policy can be used to shift the AD curve.
d. All of the above are correct.
In the economy of Ukzten in 2010, consumption was 60% of GDP, government
purchases were $212, imports were $67 and 67% of the value of exports, investment
was one-half of the value of consumption. What was Ukzten’s GDP in 2010?
a. $1450
b. $1790
c. $2450
d. $2790
The three problems with using the consumer price index as a measure of the cost of
living are
a. widely acknowledged and easy to solve.
b. widely acknowledged and difficult to solve.
c. nearly unacknowledged and easy to solve.
d. nearly unacknowledged and difficult to solve.
The price index was 150 in the first year, 160 in the second year, and 175 in the third
year. The inflation rate was about
a. 6.25 percent between the first and second years, and 8.6 percent between the second
and third years.
b. 6.7 percent between the first and second years, and 9.4 percent between the second
and third years.
c. 10 percent between the first and second years, and 15 percent between the second and
third years.
d. 60 percent between the first and second years, and 75 percent between the second
and third years.
A particular stock pays an annual dividend of $2 per share and the annual dividend
yield is 4 percent. The price of a share of this stock is
a. $2.08.
b. $5.00.
c. $8.00
d. $50.00.
Binding price floors benefit sellers because they allow sellers to sell all the goods they
want at a higher price.
If the real interest rate is 5 percent and the inflation rate is 2 percent, then the nominal
interest rate is 7 percent.
An essential piece of the liquidity preference theory is the demand for money.
Measuring unemployment is the job of the Bureau of Labor Statistics, which is part of
the U.S. Department of Commerce.
In the U.S., when the price of oil rises, the CPI rises by much more than does the GDP
deflator.
Which is likely to have the larger effect on the CPI, a 2 percent increase in the price of
food or a 3 percent increase in the price of diamond rings? Explain.
An increase in inflation expectations shifts the short-run Phillips curve right and has no
effect on the long-run Phillips curve.
The circular-flow diagram explains, in general terms, how the economy is organized
and how participants in the economy interact with one another.
If the number of people unemployed rose but the number of people employed and the
adult population stayed the same, then the labor force participation rate would rise.
Technological progress shifts the long-run aggregate supply curve to the right.
A tax on buyers decreases the quantity of the good sold in the market.
A tax on a good causes the size of the market to increase.
When a new good is introduced, consumers have more variety from which to choose,
and this in turn increases the cost of maintaining the same level of economic
well-being.
Like physical capital, human capital is a produced factor of production.
A marginal change is a small incremental adjustment to an existing plan of action.
Because the statistic called the standard deviation measures the volatility of a variable,
it is used to measure the return of a portfolio.
The OPEC oil cartel has difficulty maintaining high prices in the long run because the
supply of oil is more inelastic in the long run than in the short run.