A price index is:
A) a measurement showing how the average price of a bundle of goods changes over
time.
B) a measurement showing the cost of a bundle of goods at a point in time.
C) a sustained increase in the overall price level.
D) a decrease in the overall price level.
In the expanded circular flow diagram, the rest of the world interacts directly with
A) households.
B) firms.
C) product markets.
D) factor markets.
One of the necessary conditions for the classical model to be true is that
A) wages and prices are fully flexible.
B) wages and prices are partly flexible.
C) wages and prices will not change.
D) wages were flexible and prices are fixed.
An increase in the nominal GDP, holding all else constant will cause:
A) a decrease in the velocity of money.
B) an increase in the money supply.
C) an increase in the velocity of money.
D) a decrease in the money supply.
Recall the Application about the time involved in including cell phones in the
calculation of the CPI to answer the following question.
According to the Application, as new products are constantly invented and introduced
on the market,
A) the bias in the CPI can be large.
B) the bias in the CPI tends to become smaller.
C) the bias in the CPI will eventually disappear.
D) the bias in the CPI will remain virtually unchanged.
The example of the VCRs from Korea illustrates dumping due to
A) predatory pricing.
B) avoidance of environmental laws.
C) price discrimination.
D) retaliatory trade practices.
Recall Application 4, “Trade, Consumption and Inequality,” to answer the following
questions:
According to the application, the goods that lower income individuals consume tend to
be:
A) non-durable goods.
B) durable goods.
C) non-tradeable goods.
D) services.
Table 2.4
Refer to Table 2.4. Increasing the tanks of fertilizer from 4 to 5 will
A) increase truckloads of potatoes.
B) decrease truckloads of potatoes.
C) have no effect on truckloads of potatoes.
D) require more acres of land.
The concept of “market clearing” is adopted and defended by:
A) Keynesian economists.
B) classical economists.
C) fine-tuning economists.
D) demand-side economists.
Resource Inputs and Total Output
Table 8.3
Refer to Table 8.3. Diminishing returns to capital most obviously occur between periods
________ and ________.
A) 1; 2
B) 2; 3
C) 3; 4
D) all periods
Suppose the United States is experiencing a balance of payments deficit. To prevent the
exchange rate from depreciating, the U.S. Treasury must
A) sell foreign currency and buy dollars.
B) sell dollars and buy foreign currency.
C) sell both dollars and foreign currency.
D) buy both dollars and foreign currency.
One school of thought that emphasizes the role that taxes play in an economy’s supply
of output is known as
A) demand-pull economics.
B) classical economics.
C) tax-and-spend economics.
D) supply-side economics.
In order for the long-run neutrality of money to hold, an increase in money supply must
cause:
A) the money demand curve to shift up to keep the interest rate constant.
B) the money demand curve to shift down to keep the interest rate constant.
C) the money demand curve to shift upwards enough to raise the interest rate.
D) the money demand curve to shift downwards enough to lower the interest rate.
If labor union leaders are successful in demanding a wage increase, then their actions
will cause:
A) AD to increase.
B) AS to decrease.
C) AS to increase.
D) AD to decrease.
The aggregate supply curve depicts the relationship between:
A) the unemployment rate and the total quantity of goods and services that firms
supply.
B) the cost of labor and the total quantity of goods and services that firms supply.
C) the cost of inputs and the total quantity of goods and services that firms supply.
D) the level of prices and the total quantity of goods and services that firms supply.
The standard way to measure the effects of debt in an economy is to look at the stock of
debt relative to
A) total government spending.
B) federal tax revenue.
C) GDP.
D) the total budget.
Which of the following is not an example of a question answered by positive analysis?
A) How will an increase in the price of gasoline affect taxi drivers?
B) What fraction of an income-tax cut will be spent on consumer goods?
C) How will an increase in interest rates affect investment in factories?
D) Should the government increase the minimum wage?
Figure 18.2
Refer to Figure 18.2. Macadamia has a comparative advantage in the production of
A) fishing poles.
B) spears.
C) both spears and fishing poles.
D) neither spears nor fishing poles.
Table 3.4
Consider two individuals, Artie and Deena, who produce wind chimes and sun dials.
Artie’s and Deena’s weekly productivity are shown in Table 3.4. Which of the following
is true?
A) Artie has a comparative advantage in producing wind chimes but not sun dials.
B) Artie has a comparative advantage in producing sun dials but not wind chimes.
C) Artie has a comparative advantage in producing both goods.
D) Artie does not have a comparative advantage in producing either good.
As the Vietnam War began and the economy started to overheat from the large military
spending, policymakers:
A) became concerned about deflation.
B) were concerned about the rapidly increasing unemployment.
C) decided to reduce spending on other federal programs.
D) enacted a temporary tax surcharge.