Refer to the above graphs, in which the numbers in parentheses near the AD1, AD2, and
AD3 labels indicate the level of investment spending associated with each curve,
respectively. All numbers are in billions of dollars. The level of investment spending in
the economy is $90 billion. What should the monetary authorities do to achieve the
long-run goal of a noninflationary full-employment output Qf in the economy?
A. Increase the interest rate from 6 to 8 percent.
B. Decrease the interest rate from 8 to 6 percent.
C. Decrease the interest rate from 6 to 4 percent.
D. Make no change in the interest rate.
The full-employment rate of unemployment is also called the:
A. potential rate of unemployment.
B. cyclical rate of unemployment.
C. frictional rate of unemployment.
D. natural rate of unemployment.
In considering euros and dollars, the rates of exchange for the euro and the dollar:
A. are directly related.
B. are inversely related.
C. are unrelated.
D. move in the same direction.
In pure competition, marginal revenue is:
A. equal to total revenue.
B. equal to product price.
C. less than product price.
D. greater than product price.
Which of the following is not correct?
A. Where marginal product is greater than average product, average product is rising.
B. Where total product is at a maximum, average product is also at a maximum.
C. Where marginal product is zero, total product is at a maximum.
D. Marginal product becomes negative before average product becomes negative.
Refer to the figure above. What is the price elasticity of supply between points A and B
above?
A. -1
B. 1/3
C. 1
D. 2
Which is a valid counterargument to the call for higher tariffs to save U.S. jobs?
A. Nations adversely affected by such tariffs are likely to retaliate, causing a costly
trade barrier war.
B. U.S. firms and workers must be shielded from the competitive practices of foreign
businesses.
C. Strategic trade policy calls for trading nations to erect trade barriers so that they will
have the same competitive conditions.
D. They are needed to protect U.S. workers from poor enforcement of labor standards
in other nations.
Refer to the above diagram, in which Qf is the full-employment output. An
expansionary fiscal policy would be most appropriate if the economy’s present
aggregate demand curve were at:
A. AD0.
B. AD2.
C. AD3.
D. None of these.
An example of a final good in national income accounts would be a new:
A. automobile purchased by a travel agency.
B. tractor purchased by a construction company.
C. microcomputer purchased by an executive for personal use.
D. microcomputer purchased by an executive for business use.
The law of diminishing returns results in:
A. an eventually rising marginal product curve.
B. a total product curve that eventually increases at a decreasing rate.
C. an eventually falling marginal cost curve.
D. a total product curve that rises indefinitely.
Refer to the above data. Over which price range is the price elasticity of demand
elastic?
A. $4-$6
B. $6-$8
C. $10-$12
D. $12-$14
Supporters of the World Trade Organization contend that it:
A. imposes safeguards for worker safety in member nations.
B. weakens the environmental laws in member nations.
C. undermines minimum wage laws in member nations.
D. liberalizes trade among member nations.
If the U.S. dollar appreciates relative to the British pound, then:
A. the pound will appreciate relative to the U.S. dollar.
B. the pound will depreciate relative to the U.S. dollar.
C. British goods will be more expensive for Americans.
D. American goods will be less expensive for the British.
Answer the next question based on the following payoff matrix for a duopoly. The
numbers indicate the profit in thousands of dollars for a high-price or a low-price
strategy
Refer to the above payoff matrix. If both firms collude to maximize joint profits, the
total profits for the two firms will be:
A. $800,000.
B. $1,200,000.
C. $1,250,000.
D. $1,400,000.
Suppose that real domestic output in an economy is 300 units, the quantity of inputs is
50, and the price of each input is $9. The level of productivity in this economy is:
A. 5.
B. 6.
C. 9.
D. 50.
Shares of ownership in corporations are referred to as:
A. limited liability.
B. collateral.
C. stocks.
D. bonds.
Which is an example of barter?
A. A person trading a desk for a box of tools.
B. A person buying clothes at a used clothing store.
C. A gift of tuition money from parents to their children.
D. The purchase of stock on the New York Stock Exchange.
A change in aggregate supply would be caused by a change in:
A. the price level.
B. aggregate demand.
C. an aggregate supply determinant.
D. the quantity of real output supplied.
Disinvestment occurs when:
A. businesses sell machinery and equipment to one another.
B. the prices of investment goods rise faster than the prices of consumer goods.
C. businesses have larger inventories at the end of the year than they had at the start.
D. the consumption of private fixed capital exceeds private domestic investment.
The M1 money supply is composed of:
A. money market mutual funds held by individuals.
B. money market mutual funds held by businesses.
C. savings deposits and time deposits.
D. checkable deposits and currency.
The aggregate demand curve shows the:
A. inverse relationship between the price level and real GDP purchased.
B. direct relationship between the price level and real GDP produced.
C. inverse relationship between interest rates and real GDP produced.
D. direct relationship between real balances and real GDP purchased.
Refer to the above graphs. What will happen in the long run to industry supply and the
equilibrium price of the product?
A. S will decrease, P will decrease.
B. S will increase, P will decrease.
C. S will decrease, P will increase.
D. S will increase, P will increase.
In general, in the short run, the supply curve of a purely competitive firm is:
A. identical to the marginal-cost curve.
B. a horizontal line equal to the market price.
C. the rising portion of the average-total-cost (ATC) curve.
D. the rising portion of the marginal-cost curve above the AVC curve.
The following diagram is a flexible exchange market for foreign currency:
Other things equal, a leftward shift of the demand curve would:
A. depreciate the dollar.
B. appreciate the euro.
C. reduce the equilibrium quantity of euros.
D. cause a shortage of euros.
Ticket scalping:
A. imposes economic losses on both buyers and sellers.
B. creates economic gains for both buyers and sellers.
C. imposes losses on buyers but creates gains for sellers.
D. imposes losses on sellers but creates gains for buyers.
Refer to the above graph. The selection of which point on the production possibilities
curve is most like to result in the largest increase in economic growth over time?
A. A
B. B
C. C
D. D
Generally, which pairs of variables could be positively or negatively related depending
on the characteristic of the product?
A. The income of consumers and the demand for a product
B. The price of a product and the quantity of that product demanded
C. The price of a product and the demand for a complementary product
D. The supply of a product and the cost of resources required to make it
Real income can be determined by:
A. dividing the price level by nominal income.
B. inflating nominal income for inflation.
C. dividing the annual rate of inflation by the number “70.”
D. deflating nominal income for inflation.
The following is budget information for a hypothetical economy. All data are in billions
of dollars.
Refer to the above data. In which year is there a budget surplus?
A. Year 1
B. Year 2
C. Year 4
D. Year 5
Which characteristic would best be associated with pure competition?
A. Few sellers
B. Price taker
C. Nonprice competition
D. Product differentiation