If a country produces only two goods, it is possible to have an absolute advantage in the
production of both those goods.
On average, people in the United States spend a smaller percentage of their income on
health care than do people in most other countries.
In the market for gasoline, an increase in the federal excise tax on gasoline would shift
the supply curve up.
If consumption is defined as C = 1,350 + 0.6Y, then the marginal propensity to consume
is 0.6.
One reason a country does not specialize completely in production is that production of
most goods involves increasing opportunity costs.
As the number of firms in a market decreases, the supply curve will shift to the left and
the equilibrium price will fall.
If inflation falls from 11% to 5%, there is deflation.
College education tends to result in a positive externality because the recipient receives
the full benefit of the education.
An decrease in supply is caused by a decrease in the price of the product.
Your income will increase if the Federal Reserve buys a Treasury bill from you and
pays you with a check from the Fed.
If you purchase a share of stock from your friend who initially purchased the stock
three years ago, your purchase of the stock represents a transaction in the secondary
financial market.
The saving and investment equation holds only when the federal budget is balanced.
An decrease in the price level in the United States will shift the aggregate expenditure
line downward.
Increased foreign direct investment in India has contributed to its recent economic
growth.
The budget deficit is defined as
A) T – (G + TR), and this is negative.
B) T – (G + TR), and this is positive.
C) T + (G – TR), and this is negative.
D) T + (G + TR), and this is negative.
If you are considering buying either an Apple iPhone or a Samsung Galaxy, and you
choose the Samsung only because the price is lower, then you consider
A) the iPhone and the Galaxy to be complements.
B) the iPhone and the Galaxy to be substitutes.
C) the iPhone to be a normal good and the Galaxy to be an inferior good.
D) the iPhone to be an inferior good and Galaxy to be a normal good.
Suppose in the United States, the opportunity cost of producing a motor engine is 4 auto
bodies. In Canada, the opportunity cost of producing a motor engine is 2 auto bodies.
a. What is the opportunity cost of producing an auto body for the United States?
b. What is the opportunity cost of producing an auto body for Canada?
c. Which country has a comparative advantage in the production of auto bodies?
d. Which country has a comparative advantage in the production of motor engines?
In a competitive market when there is no deadweight loss,
A) consumer surplus is minimized.
B) producer surplus is minimized.
C) consumer surplus plus producer surplus is minimized.
D) consumer surplus plus producer surplus is maximized.
Table 8-5
Consider the table above showing three stages of production of an automobile.
Refer to Table 8-5.The value of each automobile in gross domestic product equals
A) $7,000.
B) $15,000.
C) $18,000.
D) $25,000.
Figure 19-5
Refer to Figure 19-5. The Chinese government pegs the yuan to the dollar, at one of the
specified exchange rates on the graph, such that it undervalues its currency. Using the
figure above, this would generate
A) a shortage of yuan equal to 400 million.
B) a shortage of yuan equal to 200 million.
C) a surplus of yuan equal to 200 million.
D) a surplus of yuan equal to 400 million.
E) a surplus of yuan equal to 300 million.
The demand for durable goods
A) has decreased over time.
B) declines by a greater percentage than does GDP during a recession.
C) declines by a smaller percentage than does GDP during a recession.
D) rises by a greater percentage than does GDP during a recession.
If GDP per capita rises by 2% between 2013 and 2014, which of the following is
necessarily true?
A) Real GDP has risen by more than 2%.
B) The population has decreased.
C) The population has increased, but by less than 2%.
D) None of the above is necessarily true.
Labor unions cause unemployment because the union contract wage is set
A) below the market wage, causing a shortage of labor.
B) below the market wage, causing a surplus of labor.
C) above the market wage, causing a surplus of labor.
D) above the market wage, causing a shortage of labor.
An efficiency wage
A) is higher than the market wage and tends to increase productivity.
B) is lower than the market wage and tends to increase productivity.
C) is higher than the market wage and tends to decrease productivity.
D) is lower than the market wage and tends to decrease productivity.
Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry
and have eight children. Bob stops working for Mary in order to care for the children.
What will be the effect on GDP?
A) GDP will decrease.
B) GDP will increase.
C) GDP will not change.
D) GDP may increase or may decrease depending on inflation.
________ is defined as national income + transfers – taxes.
A) Gross private domestic investment
B) GDP
C) Personal income
D) Disposable income
What actions should the Fed take if it believes the economy is about to fall into
recession?
In countries that have experienced hyperinflation, what role have large government
budget deficits played in causing the very high inflation rates?
If expectations are adaptive, how will the economy adjust to a new long-run
equilibrium in response to expansionary monetary policy? Support your answer with a
graph of the Phillips curve.
How were exchange rates determined under the gold standard? How did the Bretton
Woods system differ from the gold standard?
How can a corporation’s board of directors and its managers try to reduce the
principal-agent problem?
Explain how market economies are generally better able to achieve technological
progress than are centrally planned economies.
What is the connection between the gold held at the Fort Knox Bullion Depository in
Kentucky and the U.S. money supply?
Suppose you obtain a fixed rate mortgage during a period of relatively high inflation.
During the next ten years, inflation falls. Are you a winner or a loser due to inflation?
Explain why.
C = 3,600 + (MPC)Y
I = 1,200
G = 1,400
NX = -200
If the equilibrium level of GDP is $30,000, using the equations for C, I, G, and NX
shown above, find the value of the marginal propensity to consume.