If government removes two people from a prisoner’s dilemma setting (and, in the
process, requires that the two persons pay taxes for the service that government
provides), it holds that on net
a. each of the two persons is better off.
b. each of the two persons is worse off.
c. one person is better off and the other person is worse off.
d. a, b, or c
e. none of the above
What do Keynesians mean when they say that “you can’t push on a string”?
a. An increase in the supply of goods does not really create its own demand.
b. If the government reduces taxes in an attempt to increase household consumption, it
will not always work.
c. An increase in the money supply will not always stimulate the economy.
d. If the government wants to get something done, the best way is not to force the issue,
but to offer incentives.
e. If the government puts too much expansionary pressure on the economy, it will
probably “overheat.”
Bonds that are rated in the D category are of higher quality than bonds that are rated in
the A category.
a. True
b. False
Research by Harvard economists Barro and McCleary revealed that church attendance
and economic growth have a(n) _______________ relationship.They also found that
specific religious beliefs (in heaven, hell, and afterlife) and economic growth have a(n)
___________ relationship.
a. inverse; inverse
b. direct; direct
c. inverse; direct
d. direct; inverse
Which of the following situations is used as a justification for government?
a. negative externalities
b. removal from the prisoner€s dilemma
c. nonexcludable goods
d. positive externalities
e. all of the above
Exhibit 3-6
If an increase in income causes the demand for good X to shift from D1 to D3, then
good X is
a. a normal good.
b. an inferior good.
c. a substitute good.
d. a complementary good.
e. a neutral good.
Exhibit 4-4
Which of the following is false?
a. Graph (1): There is a shortage when price is P3.
b. Graph (2): As supply increases, equilibrium quantity remains constant.
c. Graph (3): As demand increases, equilibrium price remains constant.
d. Graph (4): As supply changes, equilibrium price stays the same.
Exhibit 39-4
At a target price of $4 per bushel, how many bushels of wheat are produced?
a. 900
b. 800
c. 700
d. 600
According to the textbook (based upon 2011 data), if the bottom half of all U.S. income
tax payers were allowed to stop paying the income tax entirely and the top 50%
continued to pay as they do now, tax revenues to the government would drop by about
a. 2.9 percent.
b. 15.7percent.
c. 23.9 percent.
d. 33.3 percent.
e. 50.8 percent
According to Milton Friedman, there are two Phillips curves, a short-run one and a
long-run one.
a. True
b. False
Exhibit 34-5
Country 1 has a comparative advantage in the production of __________, and country 2
has a comparative advantage in the production of __________.
a. good A; good B
b. good B; good A
c. both goods; neither good
d. neither good; both goods
e. neither good; neither good
Depreciation refers to a decrease in the value of a good caused by
a. an increase in the price level.
b. a decrease in the price level.
c. “wear and tear” of capital goods over time.
d. the depreciation allowance.
e. a decrease in purchasing power.
Exhibit 1-3
Based on the data provided in this table,what type of relationship exists between
variables X and Y?
a. inverse
b. direct
c. independent
d. There is no relationship between variables X and Y.
Tiffany gives $50 to Jeremy for his birthday.This is an example of a(n)
a. involuntary transfer.
b. involuntary-voluntary transfer.
c. voluntary transfer.
d. gift.
e. c and d
€We lose more by letting the company fail than by having the government save it.€This
was most likely said by an economist who believes that
a. crowding out is complete.
b. bailouts are sometimes necessary.
c. the tax multiplier is larger than the government spending multiplier.
d. the AS curve is vertical.
e. the AS curve is upward-sloping.
The short-run aggregate supply curve is ________ and the long-run aggregate supply
curve is _________.
a. upward sloping; horizontal
b. vertical; upward sloping
c. vertical; horizontal
d. upward sloping; vertical
e. none of the above
Exhibit 8-1
If we assume that the unemployment rate and Real GDP are inversely related, which of
the points on this graph is most likely representative of the lowest unemployment rate?
a. A
b. B
c. C
d. D