According to the theory of efficiency wages, it may be profitable for firms to keep
wages high even in the presence of a surplus of labor.
a. True
b. False
When two variables have a negative correlation,
a. when the x-variable decreases, the y-variable decreases.
b. when the x-variable decreases, the y-variable increases.
c. when the x-variable increases, the y-variable increases.
d. More than one of the above is correct.
The primary reason people hold money is
a. to keep wealth in a less liquid form.
b. to use it as a medium of exchange.
c. to use it for investment.
d. to earn interest.
Table 3-16
The following table contains some production possibilities for an economy for a given
month.
RefertoTable3-16.If the production possibilities frontier is a straight line, then “?” must
be
a. 200.
b. 300.
c. 400.
d. 500.
Which of the following events could explain an increase in interest rates together with
an increase in investment?
a. The government runs a larger deficit.
b. The government institutes an investment tax credit.
c. The government replaces the income tax with a consumption tax.
d. None of the above is correct.
Figure 4-5
RefertoFigure4-5.Which of the following would cause the demand curve to shift from
Demand A to Demand B in the market for golf balls in the United States?
a. a decrease in the price of golf balls
b. an increase in the price of green fees
c. an expectation by buyers that their incomes will increase in the very near future
d. a change in consumer tastes away from golf and toward tennis
A bank loans Greg’s Ice Cream $250,000 to remodel a building near campus to use as a
new store. On their respective balance sheets, this loan is
a. a liability for the bank and an asset for Greg’s Ice Cream. The loan increases the
money supply.
b. a liability for the bank and an asset for Greg’s Ice Cream. The loan does not increase
the money supply.
c. an asset for the bank and a liability for Greg’s Ice Cream. The loan increases the
money supply.
d. an asset for the bank and a liability for Greg’s Ice Cream. The loan does not increase
the money supply.
Susan switches from going to Speedy Lube for an oil change to changing the oil in her
car herself. Which of the following is correct? The value of changing the oil is
a. included in GDP whether Susan pays Speedy Lube to change it or changes it herself.
b. included in GDP if Susan pays Speedy Lube to change it but not if she changes it
herself.
c. included in GDP if Susan changes it herself, but not if she pays Speedy Lube to
change it.
d. not included in GDP whether Susan pays Speedy lube to change it or she changes it
herself.
Figure 2-14
Consider the production possibilities curve for a country that can produce sweaters,
apples (in bushels), or a combination of the two.
RefertoFigure2-14.If this society moves from point U to point V,
a. it gives up 40 bushels of apples to get 80 sweaters.
b. it gives up 140 bushels of apples to get 80 sweaters.
c. it gives up 80 sweaters to get 140 bushels of apples.
d. it gives up 80 sweaters to get 40 bushels of apples.
Figure 4-23
RefertoFigure4-23.In this market for sunscreen, there is a decrease in the price of zinc
oxide, an input into sunscreen, and more producers enter the market. The equilibrium
price
a. increases and the equilibrium quantity decreases.
b. decreases and the equilibrium quantity increases.
c. is ambiguous and the equilibrium quantity increases.
d. decreases and the equilibrium quantity is ambiguous.
When the Federal Reserve decreases the Federal Funds target rate, the lower rate is
achieved through
a. sales of government bonds, which reduces interest rates and causes people to hold
less money.
b. purchases of government bonds, which reduces interest rates and causes people to
hold less money.
c. purchases of government bonds, which reduces interest rates and causes people to
hold more money.
d. sales of government bonds, which reduces interest rates and causes people to hold
more money.
According to the theory of efficiency wages, if a firm stoppaying efficiency wages it is
likely to see a(n)
a. increase in the number of job applicants and an increase in how long workers stay on
the job.
b. increase in the number of job applicants and a decrease in how long workers stay on
the job.
c. decrease in the number of job applicants and an increase in how long workers stay on
the job.
d. decrease in the number of job applicants and a decrease in how long workers stay on
the job.
The inflation rate is the
a. absolute change in real GDP from one period to another.
b. percentage change in real GDP from one period to another.
c. absolute change in the price level from one period to another.
d. percentage change in the price level from one period to another.
Figure26-3.The figure shows two demand-for-loanable-funds curves and two
supply-of-loanable-funds curves.
RefertoFigure26-3.A shift of the demand curve from D1to D2is called
a. an increase in the demand for loanable funds, and that increase would originate from
people who had some extra income they wanted to lend.
b. an increase in the demand for loanable funds, and that increase would originate from
households and firms who wish to borrow to make investments.
c. a decrease in the demand for loanable funds, and that decrease would originate from
people who had some extra income they wanted to lend.
d. a decrease in the demand for loanable funds, and that decrease would originate from
households and firms who wish to borrow to make investments.
Suppose fundamental analysis indicates that XYZ Corporation’s stock is undervalued.
a. This means its present value is less than its price. You should consider adding the
stock to your portfolio.
b. This means its present value is less than its price. You shouldn”t consider adding the
stock to your portfolio.
c. This means its present value is more than its price. You should consider adding the
stock to your portfolio.
d. This means its present value is more than its price. You shouldn”t consider adding the
stock to your portfolio.
Table 3-31
RefertoTable3-31.For the farmer, the opportunity cost of 15 pounds of meat is
a. 12 pounds of potatoes.
b. 16 pounds of potatoes.
c. 20 pounds of potatoes.
d. 24 pounds of potatoes.
Suppose a central bank announced that it was going to make a serious effort to fight
inflation. A few years later the inflation rate is lower, but there had been a serious
recession. We could conclude with certainty that
a. the rational expectations hypothesis is false.
b. the rational expectations hypothesis is true.
c. the policymakers lacked credibility.
d. None of the above is certain.
Sage decides to cash in all his savings to open a recording studio. He has three accounts
to cash in. The first earned 9 percent for two years. The second earned 6 percent for
three years. And the last earned 3 percent for six years. Supposing he started with
$5,000 in each account, from which account will he get the most cash?
a. the two-year account at 9 percent
b. the three-year account at 6 percent
c. the six-year account at 3 percent
d. The accounts are all worth the same.
In 1975 tuition at Wattsomata University was $2,500 and the consumer price index was
80. In 2011 tuition was $12,000 and the price index was 320. Which of the following is
correct?
a. Nominal and real tuition were both higher in 1975.
b. Nominal and real tuition were both higher in 2011.
c. Nominal tuition was higher in 1975, real tuition was higher in 2011.
d. Nominal tuition was higher in 2011, real tuition was higher in 1975.
Which of the following is notan automatic stabilizer?
a. the minimum wage
b. the unemployment compensation system
c. the federal income tax
d. the welfare system
Other things the same, as the price level rises,
a. the dollar depreciates.
b. the interest rate falls.
c. people feel less wealthy.
d. All of the above are correct.
Which of the following is an example of human capital?
a. textbooks
b. hand held power tools
c. knowing how to repair cars
d. All of the above are correct.
Table 24-4
The table below pertains to Studious, an economy in which the typical consumer’s
basket consists of 5 books and 10 calculators.
RefertoTable 24-4.If 2014 is the base year, then the consumer price index was
a. 75 in 2012, 92.8 in 2013, and 100 in 2014.
b. 75 in 2012, 93.2 in 2013, and 100 in 2014.
c. 247.5 in 2012, 307.5 in 2013, and 330 in 2014.
d. 210 in 2012, 260 in 2013, and 280 in 2014.
Real GDP is a better gauge of economic well-being than is nominal GDP.
a. True
b. False
A Japanese flour mill buys wheat from the United States and pays for it with yen. Other
things the same, Japanese
a. net exports increase, and U.S. net capital outflow increases.
b. net exports increase, and U.S. net capital outflow decreases.
c. net exports decrease, and U.S. net capital outflow increases.
d. net exports decrease, and U.S. net capital outflow decreases.
Dee is an accomplished actress and a homeowner who pays a landscaper to maintain
her lawn rather than do it herself. Dee has determined that she can earn more in the
hour it would take her to work on her lawn than she must pay her landscaper. This
scenario is an example of which principle of economics?
a. Trade can make everyone better off.
b. Markets are usually a good way to organize economic activity.
c. Governments can sometimes improve market outcomes.
d. Prices rise when the government prints too much money.
Suppose that demand for a good decreases and, at the same time, supply of the good
decreases. What would happen in the market for the good?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
In the open-economy macroeconomic model, net capital outflow links the markets for
loanable funds and foreign- currency exchange.
a. True
b. False
A decrease in the price of domestically produced nuclear reactors will be reflected in
a. both the GDP deflator and the consumer price index.
b. neither the GDP deflator nor the consumer price index.
c. the GDP deflator but not in the consumer price index.
d. the consumer price index but not in the GDP deflator.
Which of the following best illustrates diversification?
a. A company that produces many different products decides to produce fewer.
b. After selling stock, corporate management spends funds on projects with greater risks
than shareholders had anticipated.
c. Instead of holding only the stocks of companies engaged in the banking business, a
person decides to hold stock in a number of different companies producing different
goods and services.
d. A person decides to purchase only stocks that have paid high dividends in the past.
Ken and Traci are two woodworkers who both make tables and chairs. In one month,
Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs.
Given this, we know that
a. Ken has an absolute advantage in chairs.
b. Ken has a comparative advantage in tables.
c. Traci has an absolute advantage in chairs.
d. Traci has a comparative advantage in chairs.
Figure34-4.On the figure, MSrepresents money supply and MDrepresents money
demand.
RefertoFigure34-4. Suppose the money-demand curve is currently MD2. If the current
interest rate is 2, then
a. in response, the money-demand curve will shift rightward from its current position to
establish equilibrium in the money market.
b. people will respond by selling interest-bearing bonds or by withdrawing money from
interest-bearing bank accounts.
c. bond issuers and banks will respond by lowering the interest rates they offer.
d. there is a shortage of money.
A significant lag for monetary policy is the time it takes to for a change in the money
supply to change the economy. A significant lag for fiscal policy is the time it takes to
pass legislation authorizing it.
a. True
b. False
People go to the bank more frequently to reduce currency holdings when inflation is
high. The sacrifice of time and convenience that is involved in doing that is referred to
as
a. inflation-induced tax distortion.
b. relative-price-variability cost.
c. shoeleather cost.
d. menu cost.