If an excise tax is imposed on steak,
a. the government’s tax revenue will decrease
b. the government’s tax revenue will increase
c. the amount of steak produced and sold will increase
d. the market price of steak will decrease
e. the market price will rise but the market quantity will be unaffected
If Japan could produce more steel in a year than the United States using the same
amount of resources, then
a. Japan must have an absolute advantage in producing steel
b. the United States must have a comparative advantage in producing steel
c. Japan must have a comparative advantage in producing steel
d. neither the United States nor Japan will have a comparative advantage in producing
steel
e. there would be no gains from specialization
If businesses become very pessimistic and reduce spending, which of the following is
the most likely in the short run?
a. An increase in output, an increase in money demand and an increase in the interest
rate.
b. A decrease in output, an increase in money demand and an increase in the interest
rate.
c. A decrease in output, a decrease in money demand and a decrease in the interest rate.
d. An increase in output, a decrease in money demand and a decrease in the interest
rate.
e. A decrease in output, a decrease in money demand and an increase in the interest rate.
Under a market system of resource allocation, the most important limitations on
individual freedom of action are imposed by
a. tradition
b. the government
c. the scarcity of resources
d. the stagnation of the economy
e. the rigidity of the economy’s rules
All of the following except one are reasons the demand deposit multiplier may be
smaller in practice than in theory. Which one is not a valid reason?
a. Banks do not want to hold excess reserves.
b. Some of the currency generated when bonds are purchased ends up outside of the
banking system.
c. Banks sometimes hold more than their required reserves.
d. An open market operation may change the public’s holding of cash.
e. All of the above are not valid reasons.
The classical model does not do a good job of explaining short-run fluctuations in the
level of economic activity.
In an expansion, tax payments tend to increase and transfer payments tend to decrease.
The term that refers to the price level rising at a low rate is
a. hidden inflation
b. creeping inflation
c. repressed inflation
d. disinflation
e. deflation
In 2008, the nominal GDP of the United States was approximately
a. $11.0 trillion
b. $14.4 trillion
c. $10.1 trillion
d. $12.0 trillion
e. $7.5 trillion
According to Say’s Law,
a. demand creates its own supply
b. interest rates never change
c. there is never too much or too little spending
d. prices never change
e. the market for loanable funds is always in equilibrium
If the Ford Motor Company decides to use more robots in its manufacturing plants, the
company is addressing the question of
a. which goods and services should be produced with society’s scarce resources
b. what production methods should be used to produce goods and services
c. how will output be allocated among the individuals in the society
d. what prices will be charged for goods and services
e. the optimal degree of central planning
A country can attempt to increase its capital stock by
a. shifting resources away from capital goods toward consumer goods
b. shifting resources away from human capital goods toward physical capital goods
c. shifting resources away from consumer goods toward capital goods
d. shifting resources away from physical capital goods toward human capital goods
e. shifting resources away from consuming tomorrow toward consuming today
Which of the following is true? The federal government’s budget
a. was always in surplus until the 1980s
b. is in deficit now but has been in surplus in most of the past 40 years
c. has been virtually perfectly balanced for the past 5 years
d. deficit has averaged around zero for the last several decades
e. switched from deficits to surpluses in the late 1990s
In any monetary system, the means of payment must be the same as the unit of value.
If a supply curve shifts rightward along a downward sloping demand curve
a. the quantity supplied will increase
b. the quantity supplied will decrease
c. it makes no sense to talk about a change in quantity supplied
d. the quantity demanded will decrease
e. the price will increase
A substitute good is one that
a. appeals to a wide spectrum of consumers
b. is used together with another good
c. is exchanged on the black market
d. is produced by the same firm as another good
e. can be used in place of another good, fulfilling the same basic purpose
If the government thinks the price that a consumer has to pay for a good is too low, then
which of the following would solve this problem?
a. a price ceiling or an excise tax
b. a price floor or an excise tax
c. a price ceiling or a subsidy
d. a price floor or a subsidy
e. none of the above will lower the price a consumer has to pay for a good