Whether prices or real GDP exhibit the greater response to increased aggregate demand
depends on the degree of capacity utilization in the economy.
a. True
b. False
One of the key factors in the economic success of South Korea was
a. an increase in years of schooling.
b. a reduction in the amount of imports.
c. the creation of new technology.
d. all of the above.
The expenditure schedule will shift upward when
a. net exports decrease.
b. net exports increase.
c. total imports increase.
d. total exports decrease.
When a few rival groups spend money in competition for a license that grants them a
monopoly for the provision of cable TV for an area, economists label this activity
a. perfect competition.
b. oligopoly.
c. monopolistic competition.
d. rent seeking.
International capital flows in an open economy have the effect of
a. reducing the power of monetary policy.
b. increasing the power of monetary policy.
c. increasing the power of monetary policy in an expansion and reducing it in a
contraction.
d. reducing the power of monetary policy in an expansion and increasing it in a
contraction.
Define the following terms and explain their importance in the study of
macroeconomics:
a. consumer expenditures
b. investment spending
c. national income
d. transfer payments
A recession is a period of time in which the total output of the economy falls.
a. True
b. False
In assessing the difference between monopoly performance and that of perfect
competition, the best approach is to
a. measure the output of the monopolist and the output of the perfectly competitive
firm.
b. measure the output of the monopolist and the output of the perfectly competitive
industry.
c. measure the output purchased by consumers from the monopolist and from the
perfectly competitive firm.
d. calculate the marginal cost of the monopolist and of the perfectly competitive firm.
A main cause of the cost disease of personal services is
a. the change from an agrarian to an industrial society.
b. labor-saving innovations in the service industries.
c. the unevenness in growth of productivity in the economy.
d. massive increases in industrial production at the expense of consumer goods
production.
When something happens to the economy, monetarists ask two questions:
a. What does this do to government spending, and what does it do to tax revenues?
b. What does this do to real GDP, and what does it do to the price level?
c. What does this do to investment spending, and what does it do to net exports?
d. What does this do to the money supply, and what does it do to velocity?
Demand for an input is derived from the demand for the final product.
a. True
b. False
Monopolies may be the only firms large enough to commercially produce a
significantly innovative new product.
a. True
b. False
In comparison to the U.S., Germany has a relatively low percentage of union
membership.
a. True
b. False
Which of the following best describes the concept of “derived demand?”
a. The price of corn land determines the price of corn.
b. The price of corn land has nothing to do with the price of corn.
c. The price of corn determines the price of the land on which corn is grown.
d. Cheap labor means cheap corn.
Direct taxes are levied directly on people or corporations.
a. True
b. False
Figure 20-7
In Figure 20-7, there are three aggregate expenditure functions (C + I + G + X − IM)
for an open economy. Which of the following would cause a movement from B to A?
a. a recession in Southeast Asia
b. an economic expansion in Japan
c. a depreciation of the dollar
d. an increase in the interest rate
Figure 22-9
In Figure 22-9, hostilities break out between Pastaland and Pestoland after Pestoland
violates the Treaty of Basil. Consequently, trade stops and the price of pasta
a. rises to OJ in both countries.
b. falls to OC in both countries.
c. falls to OC in Pastaland and rises to OJ in Pestoland.
d. rises to OJ in Pastaland and falls to OC in Pestoland.
For the two industries with market shares listed below, which of the following would be
true?
Table 13-1
a. The concentration ratio would be the same for both industries but the HHI would be
higher for Industry A.
b. The concentration ratio would be the same for both industries but the HHI would be
higher for Industry B.
c. The HHI would be the same for both industries but the concentration ratio would be
higher for Industry B.
d. Both the concentration ratio and the HHI would be the same for both industries.
The special privileges and obligations of corporations are defined by law
a. True
b. False
The difference in prices for first-class and coach airline tickets exemplifies price
discrimination.
a. True
b. False
If savers do not have fixed savings goals, the supply curve of loanable funds will
generally be
a. horizontal.
b. downward sloping.
c. vertical.
d. upward sloping.
How do legal controls on prices lead to corruption?
a. Persons who benefit from the controls are willing to bribe officials to keep the
controls in place.
b. Persons who make the laws may favor certain groups at the expense of others.
c. Selling in the black market is very profitable, and persons therefore willingly break
the law.
d. Discrimination may occur as a means to limit buying or selling select groups.
e. All of the above are correct.
Demand and quantity demanded are the same thing.
a. True
b. False
The U.S. distribution of income was more unequal in 1990 and 1980 than in 1970.
a. True
b. False
Many industries are regulated in the United States, from railroads and electric utilities
to cable TV.
a. True
b. False
If the Fed wants to reduce banks’ reserves, it can
a. buy securities in the open market.
b. lower the reserve ratio.
c. lower the federal funds rate.
d. raise the discount rate.
In 2001, the Argentine peso was overvalued relative to the U.S. dollar.
a. True
b. False
Changes in the size of an industry may cause supply to shift.
a. True
b. False
Government often finds it difficult to cope with externalities because
a. costs and benefits are difficult to assess in monetary terms.
b. taxes and subsidies are ineffective in equating MSC and MSB.
c. government has no authority to impose fines for air and water pollution.
d. marginal private cost curves cannot be shifted.
A firm will shut down in the short run if
a. P < AVC.
b. P > AVC.
c. AVC > AFC.
d. TR > TC.
Dissatisfaction with public school education has led many parents to try home
schooling for their children. If parents cut back on their jobs outside the home in order
to spend time teaching their children at home, how will this affect GDP?
a. GDP will increase.
b. Real GDP will increase and nominal GDP will decrease.
c. Both real and nominal GDP will increase.
d. GDP will decrease.
Unemployment rates differ widely among various groups in the population.
a. True
b. False