Figure 14-4. The figure shows a utility function for Dexter.
Refer to Figure 14-4. Suppose Dexter begins with $1,300 in wealth. Starting from
there,
a. the pain of losing $500 of his wealth would equal the pleasure of adding $500 to his
wealth.
b. the pain of losing $500 of his wealth would exceed the pleasure of adding $500 to his
wealth.
c. the pleasure of adding $500 to his wealth would exceed the pain of losing $500 of his
wealth.
d. This cannot be determined from the graph.
Table 6-3
The following table contains the demand schedule and supply schedule for a market for
a particular good. Suppose sellers of the good successfully lobby Congress to impose a
price floor $2 above the equilibrium price in this market.
Refer to Table 6-3. How many units of the good are sold after the imposition of the
price floor?
a. 5
b. 9
c. 10
d. 15
Paper money
a. has a high intrinsic value.
b. is the primary medium of exchange in a barter economy.
c. is valuable because it is generally accepted in trade.
d. is valuable only because of the legal tender requirement.
Figure 6-20
Refer to Figure 6-20. Which of the following statements is correct?
a. The amount of the tax per unit is $6.
b. The tax leaves the size of the market unchanged.
c. The tax is levied on buyers of the good, rather than on sellers.
d. All of the above are correct.
The sum of all the individual demand curves for a product is called
a. income demand.
b. equilibrium demand.
c. complementary demand.
d. market demand.
Other things the same, a decrease in the price level causes the interest rate to
a. increase, the dollar to appreciate, and net exports to increase.
b. increase, the dollar to depreciate, and net exports to decrease.
c. decrease, the dollar to depreciate, and net exports to increase.
d. decrease, the dollar to appreciate, and net exports to decrease.
The nominal exchange rate is the
a. nominal interest rate in one country divided by the nominal interest rate in the other
country.
b. the ratio of a foreign country’s interest rate to the domestic interest rate.
c. rate at which a person can trade the currency of one country for another.
d. the real exchange rate minus the inflation rate.
Figure 4-6
Refer to Figure 4-6. If the demand curve shifts from D to D”, then
a. firms would be willing to supply less of the good than before at each possible price.
b. people are willing to buy less of the good than before at each possible price.
c. people’s incomes must have decreased.
d. the price of the product has increased, causing consumers to buy less of the product.
Figure 7-19
Refer to Figure 7-19. If the price were P1, producer surplus would be represented by
the area
a. F.
b. F+G.
c. D+H+F.
d. D+H+F+G+I.
Other things the same, an increase in the interest rate
a. would shift the demand for loanable funds to the right.
b. would shift the demand for loanable funds to the left.
c. would increase the quantity of loanable funds demanded.
d. would decrease the quantity of loanable funds demanded.
John Maynard Keynes referred to economics as an easy subject,
a. at which very few excel.
b. but not as easy as philosophy or the pure sciences.
c. which very few can enjoy.
d. which deals primarily with common sense.
One surprising thing about the U.S. money stock is that
a. banks hold so much currency relative to the public.
b. the public holds so much currency relative to banks.
c. there is so little currency per person.
d. there is so much currency per person.
The return to schooling for society is higher than the return to schooling for the
individual if
a. the concept of diminishing returns applies to education.
b. the concept of constant returns to scale applies to education.
c. human capital conveys positive externalities.
d. investment in human capital involves no opportunity costs.
When looking at a graph of nominal and real interest rates you notice the graph for
nominal rates and the graph for real rates cross each other many times. From this you
conclude
a. consumer prices sometimes rose and sometimes fell in the time frame represented on
the graph.
b. consumer prices were always rising in the time frame represented on the graph.
c. the economy never experienced a recession in the time frame represented on the
graph.
d. GDP was always increasing for the time frame represented on the graph.
If the interest rate is 7.5 percent, then what is the present value of $4,000 to be received
in 6 years?
a. $2,420.68
b. $2,591.85
c. $2,996.33
d. $3,040.63
Which of the following is correct?
a. Economic fluctuations are easily predicted by competent economists.
b. Recessions have never occurred very close together.
c. Spending, income, and production do not fluctuate closely with real GDP.
d. None of the above is correct.
Two goods are complements when a decrease in the price of one good
a. decreases the quantity demanded of the other good.
b. decreases the demand for the other good.
c. increases the quantity demanded of the other good.
d. increases the demand for the other good.
If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs
400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami
sells for $45 dollars, then
a. the real exchange rate is greater than one and arbitrageurs could profit by buying
oranges in the United States and selling them in Morocco.
b. the real exchange rate is greater than one and arbitrageurs could profit by buying
oranges in Morocco and selling them in the United States.
c. the real exchange rate is less than one and arbitrageurs could profit by buying
oranges in the United States and selling them in Morocco.
d. the real exchange rate is less than one and arbitrageurs could profit by buying
oranges in Morocco and selling them in the United States.
The position of the long-run Phillips curve and the long-run aggregate supply curve
both depend on
a. the natural rate of unemployment and monetary growth.
b. the natural rate of unemployment, but not monetary growth.
c. monetary growth, but not the natural rate of unemployment.
d. neither monetary growth nor the natural rate of unemployment.
When quantity supplied decreases at every possible price, we know that the supply
curve has
a. shifted to the left.
b. shifted to the right.
c. not shifted; rather, we have moved along the supply curve to a new point on the same
curve.
d. not shifted; rather, the supply curve has become flatter.
The CPI differs from the GDP deflator in that
a. the CPI is an inflation index, while the GDP deflator is a price index.
b. substitution bias is not a problem with the CPI, but it is a problem with the GDP
deflator.
c. increases in the prices of foreign produced goods that are sold to U.S. consumers
show up in the GDP deflator but not in the CPI.
d. increases in the prices of domestically produced goods that are sold to the U.S.
government show up in the GDP deflator but not in the CPI.
Suppose that there is an increase in the costs of production that shifts the short-run
aggregate supply curve left. If there is no policy response, then eventually
a. because unemployment is low wages will be bid up and short-run aggregate supply
will shift right.
b. because unemployment is low wages will be bid down and short-run aggregate
supply will shift right.
c. because unemployment is high wages will be bid up and short-run aggregate supply
will shift right.
d. because unemployment is high wages will be bid down and short-run aggregate
supply will shift right.
The available evidence indicates that
a. about one-half of all managers of active mutual funds consistently outperform index
funds.
b. outperforming the market on a consistent basis is extremely difficult to do.
c. there is little truth to the notion that there is a trade-off between risk and return.
d. there is little truth to the efficient markets hypothesis.
Figure 22-2
Use the pair of diagrams below to answer the following questions.
Refer to Figure 22-2. If the economy starts at C and 1, then in the short run, an
increase in taxes moves the economy to
a. B and 2.
b. D and 3.
c. E and 2.
d. None of the above is correct.
According to liquidity preference theory, the money-supply curve would shift rightward
a. if the money demand curve shifted right.
b. if the Federal Reserve chose to increase the money supply.
c. if the interest rate increased.
d. All of the above are correct.
Figure 4-17
Refer to Figure 4-17. If the price is $10, then there would be a
a. shortage of 400 units, and price would rise.
b. surplus of 400 units, and price would rise.
c. shortage of 600 units, and price would rise.
d. surplus of 600 units, and price would rise.
A good will have a more elastic demand, the
a. greater the availability of close substitutes.
b. more broad the definition of the market.
c. shorter the period of time.
d. more it is regarded as a necessity.
Other things the same, a country that increases its saving rate increases
a. its future productivity and future real GDP.
b. neither its future productivity nor future real GDP.
c. its future productivity, but not its future real GDP.
d. its future real GDP, but not its future productivity.
Figure 6-24
Suppose the government imposes a $2 on this market.
Refer to Figure 6-24. Suppose D1 represents the demand curve for gasoline in both the
short run and long run, S1 represents the supply curve for gasoline in the short run, and
S2 represents the supply curve for gasoline in the long run. After the imposition of the
$2,
a. buyers bear a higher burden of the tax in the short run than in the long run.
b. sellers bear a higher burden of the tax in the short run than in the long run.
c. buyers and sellers bear an equal burden of the tax in both the short run and long run.
d. buyers and sellers bear an equal burden of the tax in the short run, but buyers bear a
higher burden of the tax in the long run.
At a given price level, an increase in which of the following shifts aggregate demand to
the right?
a. consumption
b. investment
c. government expenditures
d. All of the above are correct.
If Freedonia changes its laws to allow international trade in software and the world
price is lower than its domestic price, then it must be the case that
a. both consumer surplus and producer surplus increase.
b. consumer surplus increases and producer surplus decreases.
c. consumer surplus decreases and producer surplus increases.
d. both consumer surplus and producer surplus decrease.
Suppose Turkey increases its saving rate. In the long run
a. the growth rates of productivity and real GDP per person increase.
b. productivity and real GDP per person increase.
c. the growth rate of productivity increases, and real GDP per person increases.
d. productivity increases, and the growth rate of real GDP per person increases.
Just after World War II, the labor-force participation rate of men was
a. about 33 percent, and in 2009, it was about 50 percent.
b. about 50 percent, and in 2009, it was about 60 percent.
c. about 65 percent, and in 2009, it was about 60 percent.
d. about 87 percent, and in 2009, it was about 72 percent.
If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the
real interest rate is
a. -5 percent.
b. 1.67 percent.
c. 5 percent.
d. 11 percent.
Suppose an economy produces only burgers and bags of fries. In 2010, 4000 burgers are
sold at $3 each and 6000 bags of fires are sold at $1.50 each. In 2008, the base year,
burgers sold for $2.50 each and bags of fries sold for $2 each.
a. nominal GDP is $22,000 real GDP is $21,000, and the GDP deflator is 95.45.
b. nominal GDP is $22,000, real GDP is $21,000, and the GDP deflator is 104.77.
c. nominal GDP is $21,000, real GDP is $22,000, and the GDP deflator is 95.45.
d. nominal GDP is $21,00, real GDP is $22,000, and the GDP deflator is 104.77.