All of the following are examples of capital except:
a. the robot used to help produce your car.
b. a computer used by your professor to write this exam.
c. the factory that produces the costume jewelry you buy.
d. the inventory of unsold goods at your local hardware store.
e. an uncut diamond that you discover in your backyard.
The term “balance of trade” refers to a nation’s:
a. goods exports minus imports.
b. current account balance.
c. capital account balance.
d. net balance of all international transactions.
Compared to IACs, LDCs are often characterized by:
a. lower life expectancy.
b. lower adult literacy.
c. lower per capita energy consumption.
d. All of these.
If your income increases from $30,000 to $35,000 and your consumption increases
from $11,000 to $12,000, your marginal propensity to consume (MPC) is:
a. 0.2.
b. 0.4.
c. 0.5.
d. 0.8.
e. 1.0.
Exhibit 4-4 Supply and demand curves for good X
Which of the graphs in Exhibit 4-4 illustrates an increase in buyers’ income, assuming
that good X is a normal good?
a. Graph A.
b. Graph B.
c. Graph C.
d. None of these.
Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss
As shown in Exhibit 3A-2, if the market price
falls from P2 to P3, then area ____ appears.
a. ABEFD
b. ABEC
c. EGF
d. BEF
If the required reserve ratio is a uniform 25 percent on all deposits, the money
multiplier will be:
a. 4.00.
b. 2.50.
c. 0.40.
d. 0.25.
A shift in the consumption function:
a. is based on the marginal propensity to consume.
b. can be caused by a change in the price level.
c. can be caused by a change in GDP.
d. None of these.
An increase in the number of producers will:
a. increase the market supply, because the price will rise.
b. increase the market supply only when market demand increases too.
c. increase the market supply, because market supply is the sum of all individual supply
curves.
d. increase the market supply only if each supplier has an identical supply curve.
e. decrease the market supply, because firms compete with each other and each firm
will supply more.
A normal good is defined by economists to be a good:
a. with a negatively-sloped demand curve.
b. that is purchased by at least 75 percent of the population.
c. that is bought by consumers with normal tastes.
d. whose demand increases when incomes increase.
e. whose demand decreases when incomes increase.
Variables that change before real GDP changes are measured by the:
a. personal income index.
b. real GDP index.
c. forecasting gauge.
d. index of leading indicators.
If the government imposes a price ceiling below the market equilibrium price, then:
a. c and d.
b. there will be excess supply.
c. there will be excess demand.
d. the intent is to benefit consumers.
e. the intent is to benefit producers.
One reason that a poor nation remains poor over time is that even though total national
real GDP grows,
a. c and e.
b. c, d, and e.
c. it is too small to begin with.
d. the growth rate is smaller than the growth rate of industrialized nations.
e. it does not grow faster than population.
The interest rate effect predicts that higher prices:
a. make it more expensive to borrow, leading to higher interest rates and less
investment.
b. make people worse off by reducing the value of their wealth, leading them to save
more and spend less.
c. decrease borrowing, leading to higher interest rates and less investment.
d. decrease borrowing, leading to lower interest rates and more investment.
e. increase borrowing, leading to higher interest rates and less investment.
Exhibit 2-13 Production possibilities curve
In Exhibit 2-13, point H is:
a. achievable with today’s resource base.
b. not achievable today because the economy has not achieved full employment.
c. not achievable today because the economy is not at its maximum point of efficiency.
d. not achievable today because of waste.
e. not achievable today because of inadequate production capacity.
Adam Smith’s basic economic philosophy stated in The Wealth of Nations can be stated
as:
a. laissez faire.
b. allow to act.
c. the least government is best.
d. all of these.
Which of the graphs in Exhibit 3-3 depicts the effect of an increase in income on the
demand for pork and beans (an inferior good)?
a. Graph A.
b. Graph B.
c. Graph C.
d. Graph D.
A progressive income tax means the percentage of income paid in taxes decreases as
income increases.
If the investment curve is relatively flat, the Keynesian conclusion is that the
transmission mechanism has little effect on the economy.
Barter is a system of exchange that does not depend on a coincidence of wants.
If the price of good X increases and this causes an increase in the demand for good Y,
then goods X and Y are substitute goods.
A country’s balance on current account will always equal its balance on capital account.
What are market failures? Discuss examples of market failures. What can government
do to improve the results of market failures?