Mario was laid off two months ago. He has not searched for other work because he is
expecting to be recalled to work. In the U.S. labor force statistics Mario is counted as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. not in the labor force.
The decisions of buyers and sellers that affect people who are not participants in the
market create
a. market power.
b. externalities.
c. profiteering.
d. market equilibrium.
Figure 6-9
Refer to Figure 6-9. A price ceiling set at
a. $4 will be binding and will result in a shortage of 3 units.
b. $4 will be binding and will result in a shortage of 6 units.
c. $7 will be binding and will result in a surplus of 6 units.
d. $7 will be binding and will result in a surplus of 12 units.
Net exports of a country are the value of
a. goods and services imported minus the value of goods and services exported.
b. goods and services exported minus the value of goods and services imported.
c. goods exported minus the value of goods imported.
d. goods imported minus the value of goods exported.
Which of the following is a good gauge of economic progress?
a. the level of real GDP per person, but not the growth rate of real GDP per person
b. the level of real GDP per person and the growth rate of real GDP per person
c. the growth rate of real GDP per person, but not the level of real GDP per person
d. neither the level nor the growth rate of real GDP per person
Which of the following statements about U.S. inflation is not correct?
a. Low inflation was viewed as a triumph of President Carter’s economic policy.
b. There were long periods in the nineteenth century during which prices fell.
c. The U.S. public has viewed inflation rates of even 7 percent as a major economic
problem.
d. The U.S. inflation rate has varied over time, but international data show even more
variation.
In a system of 100-percent-reserve banking,
a. banks do not make loans.
b. currency is the only form of money.
c. deposits are banks’ only assets.
d. All of the above are correct.
Changes in real GDP reflect
a. only changes in prices.
b. only changes in the amounts being produced.
c. both changes in prices and changes in the amounts being produced.
d. neither changes in prices nor changes in the amounts being produced.
If the public correctly perceives that the central bank will reduce inflation, then
a. the short-run Phillips curve shifts right, and the sacrifice ratio will be higher.
b. the short-run Phillips curve shifts right, and the sacrifice ratio will be lower.
c. the short-run Phillips curve shifts left, and the sacrifice ratio will be higher.
d. the short-run Phillips curve shifts left, and the sacrifice ratio will be lower.
Tom Brady should probably not mow his own lawn because
a. his opportunity cost of mowing his lawn is higher than the cost of paying someone to
mow it for him.
b. he has a comparative advantage in mowing his lawn relative to a landscaping service.
c. he has an absolute advantage in mowing his lawn relative to a landscaping service.
d. he might sprain his ankle.
Assuming no crowding-out, investment-accelerator, or multiplier effects, a $100 billion
increase in government expenditures shifts aggregate demand
a. right by more than $100 billion.
b. right by $100 billion.
c. left by more than $100 billion.
d. left by $100 billion.
If the government allowed a free market for transplant organs such as kidneys to exist,
critics argue that such a market would
a. not reduce the shortage of organs.
b. benefit rich people but not poor people.
c. be inefficient because markets are not good at allocating scarce resources.
d. be inferior to a plan imposed by a benevolent dictator.
Stimulus spending in 2009 was used for
a. building roads and bridges.
b. providing aid to local and state governments.
c. making payments to the unemployed.
d. All of the above are correct.
If the central bank raises the rate at which it increases the money supply, then in the
short run unemployment is
a. above its natural rate. The short-run Phillips curve shifts right as the economy moves
back to its natural rate of unemployment.
b. above its natural rate. The long-run Phillips curve shifts left as the economy moves
back to its natural rate of unemployment.
c. below its natural rate. The short-run Phillips curve shifts right as the economy moves
back to its natural rate of unemployment.
d. below its natural rate. The long-run Phillips curve shifts left as the economy moves
back to its natural rate of unemployment.
In 1983, one could buy a model radio-controlled airplane for $11.50 each. Those same
planes are available today and the price increased at exactly the rate of inflation. If the
CPI today is 220.5 and in 1983 was 105, what is the price of the airplane today?
a. $24.15
b. $11.50
c. $5.48
d. $2.10
Other things the same, if a country saves less, then
a. net capital outflow rises, so net exports rise.
b. net capital outflow rises, so net exports fall.
c. net capital outflow falls, so net exports rise.
d. net capital outflow falls, so net exports fall.
Figure 21-2. On the left-hand graph, MS represents the supply of money and MD
represents the demand for money; on the right-hand graph, AD represents aggregate
demand. The usual quantities are measured along the axes of both graphs.
.
Refer to Figure 21-2. What is measured along the horizontal axis of the left-hand
graph?
a. nominal output
b. real output
c. the opportunity cost of holding money
d. the quantity of money
Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline
tickets are required to pay the tax to the government. If the tax is reduced from $50 per
ticket to $30 per ticket, then the
a. demand curve will shift upward by $20, and the effective price received by sellers
will increase by $20.
b. demand curve will shift upward by $20, and the effective price received by sellers
will increase by less than $20.
c. supply curve will shift downward by $20, and the price paid by buyers will decrease
by $20.
d. supply curve will shift downward by $20, and the price paid by buyers will decrease
by less than $20.
Scenario 9-2
For a small country called Boxland, the equation of the domestic demand curve for
cardboard is
,
where represents the domestic quantity of cardboard demanded, in tons, and
represents the price of a ton of cardboard.
For Boxland, the equation of the domestic supply curve for cardboard is
,
where represents the domestic quantity of cardboard supplied, in tons, and again
represents the price of a ton of cardboard.
Refer to Scenario 9-2. If Boxland prohibits international trade in cardboard, then the
equilibrium price of a ton of cardboard is
a. $36 and the equilibrium quantity of cardboard is 74 tons.
b. $44 and the equilibrium quantity of cardboard is 88 tons.
c. $52 and the equilibrium quantity of cardboard is 96 tons.
d. $60 and the equilibrium quantity of cardboard is 100 tons.
In the long run, an increase in the money supply growth rate
a. raises expected inflation so the short-run Phillips curve shifts right.
b. raises expected inflation so the short-run Phillips curve shifts left.
c. reduces expected inflation so the short-run Phillips curve shifts left.
d. None of the above is correct.
In the U.S., taxes on capital gains are computed using
a. nominal gains. This is one way by which higher inflation discourages saving.
b. nominal gains. This is one way by which higher inflation encourages saving.
c. real gains. This is one way by which higher inflation discourages saving.
d. real gains. This is one way by which higher inflation encourages saving.
From 2008 to 2009, the CPI for medical care increased from 150.8 to 164.4. What was
the inflation rate for medical care?
a. 4.4 percent
b. 7.6 percent
c. 9.0 percent
d. 12.1 percent
The multiplier for changes in government spending is calculated as
a. MPC.
b. 1 – MPC.
c. 1/MPC.
d. 1/(1 – MPC).
Samuelson and Solow reasoned that when aggregate demand was low, unemployment
was
a. high, so there was upward pressure on wages and prices.
b. high, so there was downward pressure on wages and prices.
c. low, so there was upward pressure on wages and prices.
d. low, so there was downward pressure on wages and prices.
In the short run, policy that changes aggregate demand changes
a. both unemployment and the price level.
b. neither unemployment nor the price level.
c. only unemployment.
d. only the price level.
Economists who are skeptical about the relevance of “liquidity traps” argue that
a. a central bank continues to have tools to stimulate the economy, even after its interest
rate target hits its lower bound of zero.
b. a central bank continues to have the option of committing itself to future monetary
contraction, even after its interest rate target hits its lower bound of zero.
c. a central bank can greatly reduce the likelihood of a liquidity trap by setting the target
rate of inflation at zero.
d. while the concept of a liquidity trap is theoretically possible, nothing resembling a
liquidity trap ever has been observed in the real world.
Trade between the United States and India
a. benefits both the United States and India.
b. is a losing proposition for the United States because India has cheaper labor.
c. is a losing proposition for India because capital is much more abundant in the U.S.
than in India.
d. is a losing proposition for India because U.S. workers are more productive.
Table 3-7
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Hours Needed
to Make 1 Quantity Produced
in 2400 Hours
Refer to Table 3-7. We could use the information in the table to draw a production
possibilities frontier for Japan and a second production possibilities frontier for Korea.
If we were to do this, measuring airplanes along the horizontal axis, then
a. the slope of Japan’s production possibilities frontier would be -5 and the slope of
Korea’s production possibilities frontier would be -3.
b. the slope of Japan’s production possibilities frontier would be -0.2 and the slope of
Korea’s production possibilities frontier would be -0.33.
c. the slope of Japan’s production possibilities frontier would be 0.2 and the slope of
Korea’s production possibilities frontier would be 0.33.
d. the slope of Japan’s production possibilities frontier would be 5 and the slope of
Korea’s production possibilities frontier would be 3.
Which of the following is not correct?
a. When a union is present in a labor market, wages are determined by the equilibrium
of supply and demand.
b. Like any cartel, a union is a group of sellers acting together in the hope of exerting
their joint market power.
c. The process by which unions and firms agree on the terms of employment is called
collective bargaining.
d. Most workers in the U.S. economy are not members of a union.
Who once said that taxes are the price we pay for a civilized society?
a. Aristotle
b. George Washington
c. Oliver Wendell Holmes, Jr.
d. Ronald Reagan
The second number in any ordered pair is
a. the x-coordinate.
b. the y-coordinate.
c. the horizontal location of the point.
d. the slope.
Workland has a population of 10,000, of whom 7,000 work 8 hours a day to produce a
total of 224,000 final goods. Laborland has a population of 5,000, of whom 4,000 work
12 hours a day to produce a total of 120,000 final goods.
a. Workland has higher productivity and higher real GDP per person than Laborland.
b. Workland has higher productivity but lower real GDP per person than Laborland.
c. Workland has lower productivity but higher real GDP per person than Laborland.
d. Workland has lower productivity and lower real GDP per person than Laborland.
In 2002, the United States imposed restrictions on the importation of steel into the
United States. The open-economy macroeconomic model shows that such a policy
would
a. lower the real exchange rate and increase net exports.
b. lower the real exchange rate and have no effect on net exports.
c. raise the real exchange rate and decrease net exports.
d. raise the real exchange rate and have no effect on net exports.
Other things the same, a decrease in the price level motivates people to hold
a. less money, so they lend less, and the interest rate rises.
b. less money, so they lend more, and the interest rate falls.
c. more money, so they lend more, and the interest rate rises.
d. more money, so they lend less, and the interest rate falls.
According to the efficient markets hypothesis, stocks follow a random walk so that
stocks that increase in price one year are more likely to increase than decrease in the
next year.
The income elasticity of demand is defined as the percentage change in quantity
demanded divided by the percentage change in price.
In the long run, import quotas increase net exports.
If something happens to alter the quantity demanded at any given price, then the
demand curve shifts.
The goal of the consumer price index is to gauge how much incomes must rise to
maintain a constant standard of living.
Suppose that when the price rises by 10% for a particular good, the quantity demanded
of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.
M1 includes savings deposits.
If the demand curve is very elastic and the supply curve is very inelastic in a market,
then the sellers will bear a greater burden of a tax imposed on the market, even if the
tax is imposed on the buyers.
Frictional unemployment is often the result of changes in the demand for labor among
different firms.
Figure 2-14
Refer to Figure 2-14. It is possible for this economy to produce 45 doghouses and 30
dishwashers.
U.S. prices rose at an average annual rate of about 4 percent over the last 70 years.
The cost of inflation reduction is less if people believe that the central bank will really
reduce inflation.
The equilibrium of supply and demand in a market maximizes the total benefits to
buyers and sellers of participating in that market.
In one month, Moira can knit 2 sweaters or 4 scarves. In one month, Tori can knit 1
sweater or 3 scarves. Moira’s opportunity cost of knitting scarves is lower than Tori’s
opportunity cost of knitting scarves.
Members of the Board of Governors are appointed by the president of the U.S. and
confirmed by the U.S. Senate.
By definition, government purchases and taxes are zero for a closed economy.
In order to calculate consumer surplus in a market, we need to know willingness to pay
and price.
Consumer surplus can be measured as the area between the demand curve and the
supply curve.