Exhibit 1A-6 Straight line
Straight line A-D in Exhibit 1A-6 shows that:
a. increasing value for X will increase the value of Y.
b. increasing value for X will decrease the value of Y.
c. increasing values for X does not affect the value of Y.
d. all of these.
A decrease in aggregate supply can result in:
a. unemployment.
b. demand-pull inflation.
c. prosperity.
d. cost-push inflation.
e. a recession.
According to supply-side economists, lowering corporate income taxes:
a. results in wage hikes for employees but no economic growth.
b. moves society toward greater income equality.
c. checks the expansion of real GDP and employment.
d. stimulates investment and economic growth.
e. does not create enough incentive for producers to increase production.
A company in the process of liquidation meets the requirements under the going
concern assumption.
a. True
b. False
Which of the following purchases would be counted as a final good in the GDP
calculation?
a. A family’s purchase of a used car.
b. A speculator’s purchase of 100 shares of Apple Computer stock.
c. A deli’s purchase of bread for making its sandwiches.
d. A business’s purchase of new office equipment.
If consumers switch away from eating margarine at the same time that the number of
margarine suppliers increases, then:
a. these two effects cancel each other out and there is no change in the margarine
market equilibrium.
b. the demand curve shifts left and the supply curve shifts right.
c. there is a margarine price increase.
d. there is an excess demand for margarine.
e. the equilibrium quantity of margarine must increase.
Currently, the national debt is approximately:
a. 10 percent of GDP.
b. 60 percent of GDP.
c. 80 percent of GDP.
d. 120 percent of GDP.
Exhibit 18-3 Potatoes and wheat output (tons per day) Country PotatoesWheat
United States 4 2
Ireland 3 1 In Exhibit 18-3, Ireland’s opportunity cost of producing one unit of wheat is:
a. 1/3 ton of potatoes.
b. 3 tons of potatoes.
c. either a or b.
d. neither a nor b.
Tariff rates on products imported into the United States:
a. were prohibited by the Constitution.
b. have dropped substantially over the past 50 years.
c. reached an all time high in 1996.
d. have steadily increased since 1920.
e. have never played a big part in U.S. trade policy.
In the consumption function, consumption is caused by changes in the:
a. price level.
b. level of disposable income.
c. interest rate.
d. level of investment.
e. level of real assets.
Which of the following best describes the term “assets”?
a. The amount of total profits earned by a business since it began operations.
b. The amount of interest or claim that the owners have in the business.
c. The economic resources of a business entity.
d. The cumulative profits earned by a business less any dividends distributed.
The infant-industry argument about tariffs argues that:
a. it is unfair to levy tariffs on items intended for use by infants.
b. tariffs should be levied on foreign products that compete with new domestic
industries only in the short run.
c. if a newly established domestic industry can survive in the short run, a tariff should
be levied to protect it from foreign competition in the long run.
d. permanent tariffs should be levied on foreign products that compete with those
produced by newly established domestic industries.
Which of the following would be a private cost to a cigarette manufacturer?
a. Price of leaf tobacco.
b. Cost to the government of the hospital expenses of indigent smokers.
c. Increased risk of cancer to the nonsmoking passengers in the smoker’s carpool.
d. Price of a pack of cigarettes.
e. The loss in utility received because the smoker must stand outside her office building
in the winter to smoke.
The theory of comparative advantage suggests that nations should produce a good if
they:
a. have the lowest opportunity cost.
b. have the lowest wages.
c. have the most resources.
d. can produce more of the good than any other nation.
If, for a given disposable income level, the disposable income line lies below the
consumption curve, saving:
a. equals consumption.
b. equals disposable income.
c. is less than zero.
d. is equal to zero.
e. is greater than zero.
Other things constant, an increase in resource prices will:
a. increase aggregate demand.
b. decrease aggregate demand.
c. decrease aggregate supply.
d. increase aggregate supply.
One way the consumer price index (CPI) differs from the GDP chain price index is that
it:
a. includes only purchases of items bought by typical urban consumers.
b. uses only current year quantities.
c. is based on all final goods and services.
d. includes only services.
When OPEC raised the price of oil, it created a:
a. demand-pull inflation.
b. cost-push inflation.
c. demand-push inflation.
d. cost-pull inflation.
e. cost-push deflation.