Which of the following is most likely to increase the money wages that will be required
to attract a given number of workers into a job category?
a. the job is widely viewed as prestigious.
b. the employer provides child care on the premises.
c. the employer does not discriminate.
d. the work is widely viewed as being stressful and dangerous.
People will spend more if the price level
a. rises because rising prices increase the real value of the fixed quantity of money.
b. rises because rising prices decrease the real value of a dollar.
c. falls because falling prices increase the real value of a dollar.
d. falls because falling prices decrease the real value of a dollar.
When the Fed purchases more bonds and, thereby, increases the money supply, the
initial effects of the more expansionary monetary policy will often be weakened as a
result of
a. lower nominal interest rates and a decline in the velocity of money.
b. higher nominal interest rates and a decline in the velocity of money.
c. higher nominal interest rates and an increase in the velocity of money.
d. lower real interest rates and an increase in the velocity of money.
Figure 3-18
Refer to Figure 3-18. When the price falls from P1 to P2, which area represents the
increase in consumer surplus to existing buyers?
a. ABD
b. ACF
c. BCED
d. DEF
A natural monopoly is defined as an industry in which one firm
a. can produce the entire industry output at a lower average cost than a larger number of
firms could.
b. can produce the entire industry output at a lower marginal cost than a larger number
of firms could.
c. is very large relative to other firms that could enter the industry.
d. can earn higher profits if it is the only firm in the industry rather than if other firms
also enter the industry.
After a particular loan has been paid off, neither the borrower nor the lender has lost
purchasing power. Therefore, it must be true that actual inflation was
a. greater than expected inflation.
b. equal to expected inflation.
c. less than expected inflation.
d. greater than the nominal rate of interest.
Firms will be much more willing to consent to significant wage increases when
a. right-to-work laws are present.
b. the demand for the final product is weak.
c. the firm has low product inventory.
d. the demand for the final product is elastic.
A sudden increase in the demand for newly built homes will
a. decrease the demand for lumber, bricks, and steel.
b. decrease the demand for construction workers and architects.
c. increase the marginal product of workers in the construction industry.
d. increase the demand for construction workers and architects.
Double counting in the resource cost-income approach to GDP statistics is avoided by
a. correct accounting of the values of exports and imports
b. choosing only one method to calculate GDP–either the income or the expenditures
method
c. counting only the value added at each stage of a good’s production process
d. counting the value of final and intermediate goods and services
e. subtracting the total value of intermediate goods and services from the total value of
final goods and services
Which of the following lists two things that both increase the money supply?
a. raise the discount rate and make open market purchases
b. raise the discount rate and make open market sales
c. lower the discount rate and make open market purchases
d. lower the discount rate and make open market sales
Which of the following about economic freedom is true?
a. Low income countries that have adopted institutions and policies consistent with
economic freedom have grown rapidly.
b. Low-income countries that have adopted institutions and policies consistent with
economic freedom have failed to grow more rapidly than economies that are relatively
unfree.
c. Economic freedom appears to improve the performance of developed economies, but
not those that are less developed.
d. Economic freedom appears to improve the performance of less developed economies,
but not those that already have a high degree of development.
Which of the following would most likely cause the supply of wheat to increase?
a. a decrease in the price of corn, a substitute for wheat
b. a technological advance that lowers the cost of producing wheat
c. an increase in the cost of producing wheat
d. a change in consumer preferences, causing them to prefer plain white bread to
whole-wheat bread
An increase in demand will cause
a. an increase in supply.
b. a decrease in supply.
c. an increase in quantity supplied.
d. a decrease in quantity supplied.
e. a decrease in equilibrium price.
Which of the following would reduce the ability of the self-correcting mechanism to
direct an economy out of a recession quickly?
a. a decrease in the real rate of interest
b. resource prices that are inflexible in a downward direction
c. an increase in aggregate demand
d. a low level of savings
Which one of the following factors increases the likelihood that a cartel agreement will
lead to higher profit for cartel members?
a. free entry into the cartelized market
b. a small number of sellers involved in the cartel agreement
c. the cartel members produce a differentiated product
d. highly unstable demand for the product produced by the cartel
The crowding-out effect suggests that
a. expansionary fiscal policy causes inflation.
b. restrictive fiscal policy is an effective weapon against inflation.
c. a reduction in private spending that results from higher interest rates caused by a
budget deficit will largely offset the expansionary effects of the deficit.
d. a tax reduction financed by borrowing will increase the disposable income of
households and, thereby, lead to a strong expansion in aggregate demand, output, and
employment.
Critics of the Keynesian view argue that increases in government spending financed by
borrowing will hamper the recovery from a recession and slow long term growth
because
a. more spending and debt will lead to higher future taxes to cover the cost of
government and the interest on the debt.
b. government spending is directed by political forces, rather than efficient cost-revenue
comparisons.
c. more political spending will lead to more wasteful rent-seeking activities and less
production of goods and services that people value.
d. All of the above are true.
Potential output is the
a. maximum rate of output that can ever be achieved.
b. highest rate of output that has ever been achieved in the past.
c. maximum sustainable output level consistent with the economy’s resource base and
current institutions.
d. the rate of output present when the general level of prices is unstable.
In the petroleum industry, proved reserves are
a. evidence that uncertainty is not a problem in the industry.
b. inevitably growing smaller over time.
c. the same thing as the current supply of petroleum.
d. resources recoverable at current prices and technology.
From the viewpoint of the entire economy, the cost of government is
a. equal to the amount of taxes collected.
b. greater than the amount of taxes collected.
c. less than the amount of taxes collected.
d. equal to the level of government expenditures.
For most students attending state universities, the largest cost component of going to
college is
a. the cost of books and supplies.
b. the cost of room and board.
c. tuition.
d. the opportunity cost in terms of forgone current income from the time spent attending
college.
Which of the following is true?
a. The FDIC sets the reserve requirements for commercial banks.
b. The Federal Reserve System guarantees the deposits in almost all banks up to a
$250,000 limit per account.
c. Since the Federal Reserve System was established in 1913, bank failures due to panic
withdrawals have been virtually eliminated.
d. If a bank should fail, the FDIC guarantees that depositors can get their funds up to a
$250,000 limit per account.
Use the figure to answer the following question(s).
Figure 12-2
If an unanticipated increase in demand in Figure 12-2 shifts the demand for accountants
from D1 to D2, how will the higher level of demand influence the wages of accountants
in the short run and the long run?
a. In the short run, wages will increase to W2, but the wage increase will be smaller in
the long run.
b. In the short run, wages will be less than W2, but in the long run, they will rise to W2.
c. In the short run, wages will increase to W2, and in the long run, they will be even
higher than W2.
d. Employment will increase, but the higher level of demand will not alter the wages of
accountants.
What are the three basic questions faced by every economy?
a. What, how, and for whom will goods be produced?
b. When, where, and how much will be produced?
c. Why, where, and when will goods be produced?
d. How, how much, and why will goods be produced?
In the orange market, what impact would an increase in the price of oil that orange
growers burn to keep oranges from freezing in the winter have on the market?
a. It would shift the supply curve to the right.
b. It would shift the supply curve to the left.
c. It would shift the demand curve to the left.
d. It would shift the demand curve to the right.
Monopolists may be able to earn profit, even in the long run, as the result of
a. consumer ignorance.
b. an inelastic demand for its product.
c. product differentiation.
d. high barriers to entry.
When a competitive price-searcher market is in long-run equilibrium, the firms will
a. earn economic profit.
b. operate at an output level that minimizes long-run average total cost.
c. charge a price that is equal to average total cost.
d. operate at an output level where price is equal to marginal cost.
Over the last few decades, Americans have chosen to cook less at home and eat more at
restaurants. This change in behavior, by itself, has
a. reduced measured GDP.
b. not affected measured GDP.
c. increased measured GDP only to the extent that the value of the restaurant meals
exceeded the value of meals previously cooked at home.
d. increased measured GDP by the full value of the restaurant meals.
In 1960, more than half (52 percent) of federal expenditures were for national defense.
In 2003, national defense accounted for approximately
a. 60 percent of the federal budget.
b. 44 percent of the federal budget.
c. 29 percent of the federal budget.
d. 21 percent of the federal budget.
Figure 9-2
Figure 9-2 illustrates a firm
a. capable of earning economic profit.
b. that is only able to break even when it maximizes profit.
c. taking economic losses.
d. that should shut down immediately.
If the amount of money in circulation is $400 billion and the nominal GDP is $800
billion, the velocity of money is
a. 0.5.
b. 2.
c. 4.
d. 8.
At a given output level, a monopolist earns a profit only if the
a. slope of its TR curve exceeds the slope of his TC curve.
b. height of its MR curve exceeds the height of his MC curve.
c. height of its demand curve exceeds the height of his MR curve.
d. height of its demand curve exceeds the height of his ATC curve.
Which of the following is most likely to reduce the market wage rate in a job category?
a. The job requires substantial out-of-town travel.
b. Employees have considerable flexibility in choosing their work hours.
c. The job is widely viewed as dangerous.
d. The job requires employees to move from city to city quite often.
Figure 4-21
Refer to Figure 4-21. How much tax revenue does this tax produce for the government?
a. $480
b. $600
c. $800
d. $1,080
From the standpoint of economic efficiency, which of the following is a major
advantage of medical savings accounts?
a. They encourage healthcare consumers to purchase low-deductible, low co-payment
medical insurance plans.
b. They guarantee that no American will ever have to pay another medical bill.
c. They encourage healthcare consumers to economize.
d. They will force employers to pay a larger share of the medical expenses of their
employees.