A U.S. firm produces nail guns in the first quarter of 2010 and adds them to its
inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S.
construction company. In which quarter(s) does(do) these transactions raise investment?
a. the first and the second
b. the first but not the second
c. the second but not the first
d. neither the first nor the second
Table 11-12. Will’s expenditures on food for three consecutive years, along with other
values, are presented in the table below.
Refer to Table 11-12. To the nearest dollar, Will’s 2010 food expenditures in 2009
dollars amount to
a. $5,236.
b. $5,431.
c. $5,524.
d. $5,608.
A movement to the right along a given short-run Phillips curve could be caused by
a. an increase in the natural rate of unemployment or expansionary monetary policy.
b. expansionary monetary policy, but not an increase in the natural rate of
unemployment.
c. an increase in the natural rate of unemployment or a contractionary monetary policy.
d. contractionary monetary policy, but not an increase in the natural rate of
unemployment.
In which of the following instances would the deadweight loss of the tax on airline
tickets increase by a factor of 9?
a. The tax on airline tickets increases from $20 per ticket to $60 per ticket.
b. The tax on airline tickets increases from $20 per ticket to $90 per ticket.
c. The tax on airline tickets increases from $15 per ticket to $60 per ticket.
d. The tax on airline tickets increases from $15 per ticket to $135 per ticket.
Figure 6-13
Refer to Figure 6-13. In this market, a minimum wage of $7.25 creates a labor
a. shortage of 2,250 workers.
b. shortage of 4,500 workers.
c. surplus of 2,250 workers.
d. surplus of 4,500 workers.
Figure 3-8
Chile’s Production Possibilities Frontier Colombia’s Production Possibilities
Frontier
Refer to Figure 3-8. Chile has a comparative advantage in the production of
a. coffee and Colombia has a comparative advantage in the production of soybeans.
b. soybeans and Colombia has a comparative advantage in the production of coffee.
c. both goods and Colombia has a comparative advantage in the production of neither
good.
d. neither good and Colombia has a comparative advantage in the production of both
goods.
According to liquidity preference theory, investment spending would rise if the price
level
a. fell, making the interest rate rise.
b. fell, making the interest rate fall.
c. rose, making the interest rate rise.
d. rose, making the interest rate fall.
Suppose that the government imposes a tax on dairy products. The deadweight loss
from this tax will likely be greater in the
a. first year after it is imposed than in the fifth year after it is imposed because demand
and supply will be more elastic in the first year than in the fifth year.
b. first year after it is imposed than in the fifth year after it is imposed because demand
and supply will be less elastic in the first year than in the fifth year.
c. fifth year after it is imposed than in the first year after it is imposed because demand
and supply will be more elastic in the first year than in the fifth year.
d. fifth year after it is imposed than in the first year after it is imposed because demand
and supply will be less elastic in the first year than in the fifth year.
Which of the following causes the price paid by buyers to be different than the price
received by sellers?
a. a binding price floor
b. a binding price ceiling
c. a tax on the good
d. All of the above are correct.
Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase
U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens
to U.S. net exports and U.S. net capital outflows?
a. both U.S. net exports and U.S. net capital outflow rise
b. both U.S. net exports and U.S. net capital outflow fall
c. U.S. net exports rise and U.S. net capital outflow fall
d. U.S. net exports fall and U.S. net capita outflow rise
When the Fed makes open-market sales bank
a. withdrawals and lending increase.
b. withdrawals increase and lending decreases.
c. deposits and lending increase.
d. deposits increase and lending decreases.
The Fed can directly protect a bank during a bank run by
a. increasing reserve requirements.
b. selling government bonds to the bank.
c. lending reserves to the bank.
d. doing any of the above.
Table 16-6.
Bank of Springfield
Refer to Table 16-6. If the Fed requires a reserve ratio of 6 percent, then what quantity
of excess reserves does the Bank of Springfield now hold?
a. $1,200
b. $2,400
c. $2,880
d. $4,800
A tax on buyers will shift the
a. demand curve upward by the amount of the tax.
b. demand curve downward by the amount of the tax.
c. supply curve upward by the amount of the tax.
d. supply curve downward by the amount of the tax.
Figure 21-2. On the left-hand graph, MS represents the supply of money and MD
represents the demand for money; on the right-hand graph, AD represents aggregate
demand. The usual quantities are measured along the axes of both graphs.
Refer to Figure 21-2. A decrease in Y from Y1 to Y2 is explained as follows:
a. The Federal Reserve increases the money supply, causing the money-demand curve
to shift from MD1 to MD2; this shift of MD causes r to increase from r1 to r2; and this
increase in r causes Y to decrease from Y1 to Y2.
b. An increase in P from P1 to P2 causes the money-demand curve to shift from MD1 to
MD2; this shift of MD causes r to increase from r1 to r2; and this increase in r causes Y
to decrease from Y1 to Y2.
c. A decrease in P from P2 to P1 causes the money-demand curve to shift from MD1 to
MD2; this shift of MD causes r to increase from r1 to r2; and this increase in r causes Y
to decrease from Y1 to Y2.
d. An increase in the price level causes the money-demand curve to shift from MD2 to
MD1; this shift of MD causes r to decrease from r2 to r1; and this decrease in r causes Y
to decrease from Y1 to Y2.
You know an economist has crossed the line from scientist to policy adviser when he or
she
a. claims that the problem at hand is widely misunderstood by non-economists.
b. talks about the evidence.
c. makes normative statements.
d. makes a claim about how the world is.
Suppose that during World War II the long-run aggregate supply curve shifted right. In
order for price and output to have changed in the direction they did, what would have to
have happened to aggregate demand?
a. It would have to have shifted left by less than aggregate supply shifted
b. It would have to have to shifted left by more than aggregate supply shifted.
c. It would have to have shifted right by less than aggregate supply shifted
d. It would have to have to shifted right by more than aggregate supply shifted.
A tax imposed on the buyers of a good will raise the
a. price paid by buyers and lower the equilibrium quantity.
b. price paid by buyers and raise the equilibrium quantity.
c. effective price received by sellers and lower the equilibrium quantity.
d. effective price received by sellers and raise the equilibrium quantity.
An increase in the number of college scholarships issued by private foundations would
a. increase the supply of education.
b. decrease the supply of education.
c. increase the demand for education.
d. decrease the demand for education.
A recession has traditionally been defined as a period during which
a. nominal GDP declines for two consecutive quarters.
b. nominal GDP declines for four consecutive quarters.
c. real GDP declines for two consecutive quarters.
d. real GDP declines for four consecutive quarters.
If the price level falls, the real value of a dollar
a. rises, so people will want to buy more.
b. rises, so people will want to buy less.
c. falls, so people will want to buy more.
d. falls, so people will want to buy less.
Given a nominal interest rate of 8 percent, in which of the following cases would you
earn the highest after-tax real rate of interest?
a. Inflation is 3 percent; the tax rate is 25 percent.
b. Inflation is 2 percent; the tax rate is 50 percent.
c. Inflation is 1 percent; the tax rate is 75 percent.
d. The after-tax real interest rate is the same for all of the above.
Figure 8-1
Refer to Figure 8-1. Suppose the government imposes a tax of P’ – P”’. The producer
surplus before the tax is measured by the area
a. I+J+K.
b. I+Y.
c. L+M+Y.
d. M.
Of means tested programs and IRA’s, which lower the rate of return on saving?
a. Both means-tested programs and IRA’s.
b. Means-tested programs, but not IRA’s.
c. IRA’s but not means-tested programs.
d. Neither means-tested program, or IRA’s.
Figure 7-13
Refer to Figure 7-13. Producer surplus amounts to $300 if the price of the good is
a. $300.
b. $350.
c. $400.
d. $450.
Figure 9-1
The figure illustrates the market for wool in Scotland.
Refer to Figure 9-1. Relative to the no-trade situation, trade with the rest of the world
results in
a. Scotland consumers paying a higher price for wool.
b. a decrease in producer surplus in Scotland.
c. a decrease in total surplus in Scotland.
d. All of the above are correct.
Recessions are not associated with which of the following?
a. increased bankruptcies
b. falling profits
c. falling incomes
d. falling unemployment
Figure 4-20
The graph below pertains to the supply of paper to colleges and universities.
Refer to Figure 4-20. All else equal, an increase in the price of the pulp used in the
paper production process would cause a move from
a. x to y.
b. y to x.
c. SA to SB.
d. SB to SA.
A nonbinding price ceiling
(i) causes a surplus.
(ii) causes a shortage.
(iii) is set at a price above the equilibrium price.
(iv) is set at a price below the equilibrium price.
a. (i) only
b. (iii) only
c. (i) and (iii) only
d. (ii) and (iv) only
The discount rate is
a. the rate at which public banks lend to other public banks.
b. the rate at which the Fed lends to banks.
c. the percentage difference between the face value of a Treasury bond and what the Fed
pays for it.
d. the percentage of deposits banks hold as excess reserves.
A pie chart is a way to display information regarding two variables.
For both parties to gain from trade, the price at which they trade must lie exactly in the
middle of the two opportunity costs.
Supply refers to the position of the supply curve, whereas the quantity supplied refers to
the amount suppliers wish to sell.
An adverse supply shock shifts the short-run Phillips curve to the left.
If a country sells more goods and services abroad than it purchases abroad, it has
positive net exports and a trade surplus.
The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic
salt and onion salt are substitutes.
The labor-force participation rate equals the percentage of the labor force that is
employed.
In recent years Venezuela and Ukraine have had much higher nominal interest rates
than the United States while Japan has had lower nominal interest rates. What would
you predict is true about money growth in these other countries? Why?
A surplus is the same as an excess demand.
The conventions of national income accounting imply that saving and investment are
equal for the economy as a whole and for individual households and firms.
If Rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175, the
price of the tickets is $625.
A decrease in taxes on interest income would increase the interest rate.
If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real
interest rate is 7 percent.
A tax on buyers usually causes buyers to pay more for the good and sellers to receive
less for the good than they did before the tax was levied.
If the demand for a good falls when income falls, then the good is called an inferior
good.
Both foreign direct investment and foreign portfolio investment by U.S. residents
increase U.S. net capital outflow.