Between 2013 and 2014, if an economy’s exports rise by $8 billion and its imports fall
by $8 billion, by how much will GDP change between the two years, all else equal?
A) Net exports will increase GDP by $8 billion.
B) The increase in exports is offset by the decrease in imports, so there is no change in
net exports and no effect on GDP.
C) Net exports will increase GDP by $16 billion.
D) Net exports will decrease GDP by $8 billion.
The substitution effect of a price change refers to
A) the change in quantity demanded that results from a change in price making a good
more or less expensive relative to other goods that are substitutes.
B) the shift of a demand curve when the price of a substitute good changes.
C) the movement along the demand curve due to a change in purchasing power brought
about by the price change.
D) the shift in the demand curve due to a change in purchasing power brought about by
the price change.
High-income countries have ________ and ________ as compared to developing
countries.
A) low rates of savings; high rates of growth
B) low rates of savings; low rates of growth
C) high rates of savings; high rates of growth
D) high rates of savings; low rates of growth
If a corporation earns a profit, how do owners of the firm share in the profit?
A) through coupon payments on that firm’s bonds
B) through dividend payments on shares of that firm’s stock
C) by selling any bonds or stocks owned and realizing a capital gain
D) by raising the interest rate on bonds
The unemployment rate is
A) the percentage of the labor force that is employed.
B) the percentage of the number employed that is unemployed.
C) the percentage of the working-age population that is unemployed.
D) the percentage of the labor force that is unemployed.
E) the percentage of the working-age population that is employed.
If the consumption function is defined as C = 7,250 + 0.8Y, what is the multiplier?
A) 0.2
B) 0.8
C) 1.25
D) 5
The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on
average, the cost of goods and services is
A) 5% higher in year 2 than in year 1.
B) 105% higher in year 2 than in year 1.
C) 5% higher in year 1 than in year 2.
D) 105% higher in year 1 than in year 2.
Twenty-seven countries in Europe have formed the European Union (EU). After the EU
was formed it
A) eliminated all tariffs among its member countries.
B) completed a trade treaty (NAFTA) that reduced tariff rates between the EU and
North American countries.
C) greatly decreased imports and exports among its member countries.
D) barred imports of 747 jumbo jets by its member countries; all EU countries must
now buy jets from Airbus, a European company.
If the personal assets of the owners cannot be claimed if the business is bankrupt, the
owners are said to have
A) unlimited liability.
B) a proprietorship type of business.
C) limited liability.
D) a partnership type of business.
The Federal Reserve cut the federal funds rate seven times between September 2007
and March 2008. What event led the Fed to make these reductions in the federal funds
rate?
A) It was in response to reductions in the discount rate, which was also lowered seven
times over the same time period.
B) The chairman of the Federal Reserve System persuaded members of the Federal
Open Market Committee to lower interest rates in order to reduce the price of oil in
international markets.
C) During this period there was a substantial reduction in the demand for housing.
D) Several large investment banks failed during this time period.
The popularity of digital cameras has enticed large discount stores like Wal-Mart and
Costco to offer digital photo printing services. How does this affect the digital photo
printing market?
A) The demand curve for digital photo printing services shifts to the right.
B) The demand curve for digital photo printing services shifts to the left.
C) The supply curve for digital photo printing services shifts to the right.
D) The supply curve for digital photo printing services shifts to the left.
Figure 4-5
Figure 4-5 shows the market for apartments in Bay City. Recently, the government
imposed a rent ceiling at R0.
Refer to Figure 4-5. Suppose that instead of a price ceiling, the government imposed a
price floor of R1. What is the area representing consumer surplus after the imposition of
the price floor?
A) A
B) A+ B + D
C) C + E
D) B + C + D + E
People who lost their jobs as hand-drawn animators because of the popularity of
computer-generated 3D animation are examples of persons who are suffering
A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) seasonal unemployment.
E) unnatural unemployment.