An increase in the price of a good would
a. increase the supply of the good.
b. increase the amount purchased by buyers.
c. give producers an incentive to produce more.
d. decrease both the quantity demanded of the good and the quantity supplied of the
good.
How would a decrease in the natural rate of unemployment affect the long-run Phillips
curve?
a. It would shift the long-run Phillips curve right.
b. It would shift the long-run Phillips curve left.
c. There would be an upward movement along a given long-run Phillips curve.
d. There would be a downward movement along a given long-run Philips curve.
Dollar bills, rare paintings, and emerald necklaces are all
a. media of exchange.
b. units of account.
c. stores of value.
d. All of the above are correct.
In the markets for goods and services in the circular-flow diagram,
a. households and firms are both buyers.
b. households and firms are both sellers.
c. households are buyers and firms are sellers.
d. households are sellers and firms are buyers.
Figure 7-13
Refer to Figure 7-13. If the price of the good is $300, then producer surplus amounts to
a. $100.
b. $200.
c. $300.
d. $400.
There is an increase in government expenditures financed by taxes and its overall
short-run effect on output is larger than the change in government spending. Which of
the following is correct?
a. By themselves, both the change in output and the change in the interest rate increase
desired investment.
b. By themselves, both the change in output and the change in the interest rate decrease
desired investment.
c. By itself, the change in output increases desired investment spending and by itself the
change in the interest rate decreases desired investment spending.
d. By itself, the change in output decreases desired investment spending and by itself
the change in the interest rate increases desired investment spending.
Figure 22-2
Use the pair of diagrams below to answer the following questions.
Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, a decrease
in government expenditures moves the economy to
a. D and 2
b. D and 3.
c. E and 3.
d. None of the above is correct.
Table 5-5
Refer to Table 5-5. Which of the three supply curves represents the most elastic
supply?
a. supply curve A
b. supply curve B
c. supply curve C
d. There is no difference in the elasticity of the three supply curves.
A market demand curve shows how the total quantity demanded of a good varies as
a. income varies.
b. price varies.
c. price of the nearest substitute good varies.
d. supply varies.
In a market economy, who makes the decisions that guide most economic activity?
a. firms only
b. households only
c. firms and households
d. government
Which of the following is correct?
a. No forms of capital income are taxed twice.
b. The tax code cannot be rewritten to provide greater incentive to save.
c. Means-tested benefits increase the incentive to save.
d. There is a correlation between national savings rates and measures of economic
well-being.
Which of the following statements is correct regarding the imposition of a tax on
gasoline?
a. The incidence of the tax depends upon whether the buyers or the sellers are required
to remit tax payments to the government.
b. The incidence of the tax depends upon the price elasticities of demand and supply.
c. The amount of tax revenue raised by the tax depends upon whether the buyers or the
sellers are required to remit tax payments to the government.
d. The amount of tax revenue raised by the tax does not depend upon the amount of the
tax per unit.
Table 15-2
2009 Labor Data for Baltivia
Refer to Table 15-2. How many people were in Baltivia’s labor force in 2009?
a. 11,000
b. 12,600
c. 13,380
d. 20,000
Suppose that the adult population is 6 million, the number of employed is 3.8 million,
and the labor-force participation rate is 70%. What is the unemployment rate?
a. 6.7%
b. 9.5%
c. 10.5%
d. 28%
Bert put $75 into an account and one year later had $100. What interest rate was paid on
Bert’s deposit?
a. 20 percent
b. 25 percent
c. 28 percent
d. None of the above is correct.
If the price elasticity of supply is zero, then
a. supply is more elastic than it is in any other case.
b. the supply curve is horizontal.
c. the quantity supplied is the same, regardless of price.
d. a change in demand will cause a relatively small change in the equilibrium price.
People might deposit more money into interest-bearing accounts,
a. making the interest rate fall, if there is a surplus in the money market.
b. making the interest rate rise, if there is a surplus in the money market.
c. making the interest rate fall, if there is a shortage in the money market.
d. making the interest rate rise, if there is a shortage in the money market.
Ryan lives in an apartment where he pays $7,000 a year in rent. Alexis lives in a house
that could be rented for $14,000 a year. How much do these housing services contribute
to GDP?
a. $21,000
b. $14,000
c. $7,000
d. $0
In the simple circular-flow diagram, households
a. are the only decision makers.
b. own the factors of production.
c. are buyers of inputs.
d. consume only some of the goods and services that firms produce.
If the government passes a law requiring buyers of college textbooks to send $5 to the
government for every textbook they buy, then
a. the demand curve for textbooks shifts downward by $5.
b. buyers of textbooks pay $5 more per textbook than they were paying before the tax.
c. sellers of textbooks are unaffected by the tax.
d. All of the above are correct.
Other things the same, if the price level rises, people
a. increase foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange increases.
b. increase foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange decreases.
c. decrease foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange increases.
d. decrease foreign bond purchases, so the supply of dollars in the market for
foreign-currency exchange decreases.
Canada and the U.S. both produce wheat and computer software. Canada is said to have
the comparative advantage in producing wheat if
a. Canada requires fewer resources than the U.S. to produce a bushel of wheat.
b. the opportunity cost of producing a bushel of wheat is lower for Canada than it is for
the U.S.
c. the opportunity cost of producing a bushel of wheat is lower for the U.S. than it is for
Canada.
d. the U.S. has an absolute advantage over Canada in producing computer software.
Figure 9-5
Refer to Figure 9-5. Bearing in mind that this country is ‘small,” what would happen if
there were a decrease in the price of horses within this country, given that wagons and
horses are complements?
a. The quantity of wagons that this country imports would increase.
b. The quantity of wagons that this country imports would decrease, but the country
would still be an importer of wagons.
c. This country would switch from being an importer of wagons to an exporter of
wagons.
d. The domestic price without trade would move closer to the world price.
A production possibilities frontier is bowed outward when
a. the more resources the economy uses to produce one good, the fewer resources it has
available to produce the other good.
b. an economy is self-sufficient instead of interdependent and engaged in trade.
c. the rate of tradeoff between the two goods being produced is constant.
d. the rate of tradeoff between the two goods being produced depends on how much of
each good is being produced.
Which of the following policies would be advocated by someone who wants the
government to follow an active stabilization policy when the economy is experiencing
severe unemployment?
a. decrease the money supply
b. increase government expenditures
c. increase taxes
d. All of the above are correct.
Municipal bonds pay a relatively
a. low rate of interest because of their high default risk and because the interest they pay
is subject to federal income tax.
b. low rate of interest because of their low default risk and because the interest they pay
is not subject to federal income tax.
c. high rate of interest because of their high default risk and because federal taxes must
be paid on the interest they pay.
d. high rate of interest because of their low default risk and because the interest they
pay is not subject to federal income tax.
If the government allowed a free market in organs for transplant there would be
a. a decrease in the shortage of organs for transplant.
b. a decrease in producer surplus.
c. an decrease in consumer surplus
d. an increase in the waiting period for transplant organs.
Which of the following is not included in M1?
a. a $5 bill in your wallet
b. $100 in your checking account
c. $500 in your savings account
d. All of the above are included in M1.
Sam, an American citizen, prepares meals for his family at home. Ellen, a Canadian
citizen, commutes to the U.S. to help prepare meals at a restaurant in Idaho. Whose
value of services preparing meals is included in U.S. GDP?
a. Sam’s and Ellen’s.
b. Sam’s but not Ellen’s.
c. Ellen’s but not Sam’s.
d. Nether Sam’s nor Ellen’s.
Economist Joseph Schumpeter coined the phrase “creative destruction” to describe the
process by which
a. the government destroys the failing markets that caused an economic crisis.
b. innovation and enterpreneurial initiative have great power to drive economic growth.
c. economists destroy long-held beliefs about how markets function.
d. free markets need government intervention to create economic growth.
If the U.S. government reports that GDP in the third quarter was $14 trillion at an
annual rate, then the amount of income and expenditure during quarter three was $4
trillion.
In a competitive market, sales go to those producers who are willing to supply the
product at the lowest price.
Advocates of stabilization policy argue that when there is a recession, the government
should increase the money supply and increase government expenditures.
Adam Smith was the author of the 1776 book An Inquiry into the Nature and Causes of
the Wealth of Nations.
Frictional unemployment is often thought to explain relatively short spells of
unemployment.
The amount of unemployment that a country typically experiences is a determinant of
its standard of living.
According to the classical dichotomy, what changes nominal variables? What changes
real variables?
As the price level falls, the value of money falls.
When the government imposes a binding price ceiling on a competitive market, a
surplus of the good arises, and sellers must ration the scarce goods among the large
number of potential buyers.
Only paid workers are included in the Bureau of Labor Statistics’ “employed” category.
Depending on the size of the multiplier and crowding-out effects, the rightward shift in
aggregate demand from a tax cut could be larger or smaller than the tax cut.
An individual deciding how to allocate her limited time is dealing with both scarcity
and trade-offs.
Wendy is willing to pay $50 for a concert ticket and Bruce would like to receive $25. If
the market price is $40 for this transaction, then the total surplus would be $15.
Risk aversion simply means that people dislike bad things to happen.
Points inside the production possibilities frontier represent inefficient levels of
production.
Public saving is T – G, while private saving is Y – T – C.
When an increase in the price of one good lowers the demand for another good, the two
goods are called complements.