A likely effect of government policies that redistribute income and wealth from the
wealthy to the poor is that those policies
a. enhance equality.
b. reduce efficiency.
c. reduce the reward for working hard.
d. All of the above are correct.
A country has $20 billion of domestic investment and net capital outflow of $10 billion.
What is saving?
a. $10 billion
b. $30 billion
c. -$20 billion
d. -$30 billion
Table 7-11
Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If
the price is $4 but only 6 units are bought and sold, producer surplus will be
a. $16.
b. $18.
c. $24.
d. $26.
Which of the following is not included in GDP?
a. carrots grown in your garden and eaten by your family
b. carrots purchased at a farmer’s market and eaten by your family
c. carrots purchased at a grocery store and eaten by your family
d. None of the above are included in GDP.
Cyclical unemployment is caused by
a. frictional and structural unemployment
b. frictional but not structural unemployment
c. structural but not frictional unemployment
d. neither frictional nor structural unemployment
Critics of stabilization policy argue that
a. there is a lag between the time policy is passed and the time policy has an impact on
the economy.
b. the impact of policy may last longer than the problem it was designed to offset.
c. policy can be a source of, instead of a cure for, economic fluctuations.
d. All of the above are correct.
If a country’s budget deficit increases, then in the foreign exchange market,
a. the supply of its currency shifts right, so the exchange rate falls.
b. the demand for its currency shifts right, so the exchange rate rises.
c. the supply of its currency shifts left, so the exchange rate rises.
d. the demand for its currency shifts left.so the exchange rate falls.
A bank’s reserve ratio is 6.5 percent and the bank has $1,950 in reserve. Its deposits
amount to
a. $62.25.
b. $126.75.
c. $22,500.00
d. $30,000.00.
Figure 7-18
Refer to Figure 7-18. If 110 units of the good are being bought and sold, then
a. the marginal cost to sellers is equal to the marginal value to buyers.
b. the marginal value to buyers is greater than the marginal cost to sellers.
c. the marginal cost to sellers is greater than the marginal value to buyers.
d. producer surplus is greater than consumer surplus.
Which of the following statements is correct?
a. Few economic models incorporate assumptions.
b. Different economic models employ different sets of assumptions.
c. Good economic models attempt to mimic reality as closely as possible.
d. Economic models, to be accepted, must be tested by conducting experiments.
The term market failure refers to
a. a situation in which the market on its own fails to allocate resources efficiently.
b. an unsuccessful advertising campaign which reduces demand for a product.
c. a situation in which competition among firms becomes ruthless.
d. a firm which is forced out of business because of losses.
The slope of the supply of loanable funds curve represents the
a. positive relation between the real interest rate and investment.
b. positive relation between the real interest rate and saving.
c. negative relation between the real interest rate and investment.
d. negative relation between the real interest rate and saving.
Suppose a tax of $5 per unit is imposed on a good. The supply curve is a typical
upward-sloping straight line, and the demand curve is a typical downward-sloping
straight line. The tax decreases consumer surplus by $10,000 and decreases producer
surplus by $15,000. The deadweight loss of the tax is $2,500. The tax decreased the
equilibrium quantity of the good from
a. 6,500 to 5,500.
b. 5,500 to 4,500.
c. 5,000 to 3,000.
d. 6,000 to 4,000.
The highest form of competition is called
a. absolute competition.
b. cutthroat competition.
c. perfect competition.
d. market competition.
Scenario 9-1
The before-trade domestic price of peaches in the United States is $40 per bushel. The
world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for
peaches.
Refer to Scenario 9-1. If trade in peaches is allowed, the price of peaches in the United
States
a. will be greater than the world price.
b. will be equal to the world price.
c. will be less than the world price.
d. could be greater than, equal to, or less than the world price; this cannot be
determined.
A decrease in the price of domestically produced industrial robots will be reflected in
a. both the GDP deflator and the consumer price index.
b. neither the GDP deflator nor the consumer price index.
c. the GDP deflator but not in the consumer price index.
d. the consumer price index but not in the GDP deflator.
Table 10-5
A hypothetical country of Lahland produces only movies and popcorn. Quantities and
prices of these goods for the last several years are shown below. The base year is 2009.
Prices and Quantities
Refer to Table 10-5 What was this country’s real GDP in 2010?
a. $8,800
b. $10,500
c. $10,600
d. $12,200
Brenda is an excellent baker and Floyd has a plentiful farm. If Floyd trades eggs and
butter to Brenda for some of Brenda’s bread and pastries,
a. only Floyd is made better off by trade.
b. only Brenda is made better off by trade.
c. both Floyd and Brenda are made better off by trade.
d. neither Floyd nor Brenda are made better off by trade.
In the open-economy macroeconomic model, the supply of loanable funds comes from
a. national saving. Demand comes from only domestic investment.
b. national saving. Demand comes from domestic investment and net capital outflow.
c. Only net capital outflow. Demand for loanable funds comes from national saving.
d. domestic investment and net capital outflow. Demand for loanable funds comes from
national saving.
If the U.S. price level is increasing by 3 percent annually and the Swiss price level is
increasing by 2 percent annually, by about what percent would the price of a dollar in
terms of Swiss francs need to change according to purchasing power parity?
a. decrease by 5 percent
b. decrease by 1 percent
c. increase by 5 percent
d. increase by 1 percent
On the Internet you find the following offers for opening an online account. Which of
them is the best offer if you have $5,000 to save for two years?
a. an interest rate of 5 percent, with the bank charging you a $50 processing fee at the
time you open your account
b. an interest rate of 4 percent, with the bank giving you a $65 bonus at the time you
open your account
c. an interest rate of 3.5 percent, with the bank giving you a $100 bonus to open your
account
d. an interest rate of 4.5 percent, with no processing fee and no bonus
Making rational decisions “at the margin” means that people
a. make those decisions that do not impose a marginal cost.
b. evaluate how easily a decision can be reversed if problems arise.
c. compare the marginal costs and marginal benefits of each decision.
d. always calculate the dollar costs for each decision.
Which of the following is not correct?
a. Some states in the U.S. mandate minimum wages above the federal level.
b. Most European nations have minimum-wage laws.
c. The U.S. minimum wage is significantly higher than the minimum wages in France
and the United Kingdom.
d. The U.S. Congress first instituted a minimum wage with the Fair Labor Standards
Act.
When a country allows international trade and becomes an importer of a good,
a. domestic producers of the good become better off.
b. domestic consumers of the good become better off.
c. the gains of the winners fall short of the losses of the losers.
d. All of the above are correct.
Table 11-6. The table below applies to an economy with only two goods hamburgers
and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.
Refer to Table 11-6. If the base year is 2010, then the consumer price index is
a. 100 in 2009, 109 in 2010, and 115 in 2011.
b. 95.90 in 2009, 100 in 2010, and 107.44 in 2011.
c. 90.91 in 2009, 100 in 2010, and 106.36 in 2011.
d. 88.82 in 2009, 100 in 2010, and 107.44 in 2011.
When the U.S. real interest rate falls, owning U.S. assets becomes
a. more attractive to both U.S. and foreign residents.
b. more attractive to U.S. residents and less attractive to foreign residents.
c. less attractive to U.S. residents and more attractive to foreign residents.
d. less attractive to both U.S. residents and foreign residents.
When a tax is levied on a good,
a. neither buyers nor sellers are made worse off.
b. only sellers are made worse off.
c. only buyers are made worse off.
d. both buyers and sellers are made worse off.
Which of the following rises during recessions?
a. layoffs and consumer spending
b. layoffs but not consumer spending
c. consumer spending but not layoffs
d. neither layoffs nor consumer spending
In the open-economy macroeconomic model, if for some reason foreign citizens want to
purchase more U.S. goods and services at each exchange rate, then
a. the demand for dollars in the market for foreign-currency exchange shifts right.
b. the demand for dollars in the market for foreign-currency exchange shifts left.
c. the supply of dollars in the market for foreign-currency exchange shifts right.
d. the supply of dollars in the market for foreign-currency exchange shifts left.
Figure 8-14
Refer to Figure 8-14. Panel (a) and Panel (b) each illustrate a $2 tax placed on a
market. In comparison to Panel (a), Panel (b) illustrates which of the following
statements?
a. When demand is relatively inelastic, the deadweight loss of a tax is smaller than
when demand is relatively elastic.
b. When demand is relatively elastic, the deadweight loss of a tax is larger than when
demand is relatively inelastic.
c. When supply is relatively inelastic, the deadweight loss of a tax is smaller than when
supply is relatively elastic.
d. When supply is relatively elastic, the deadweight loss of a tax is larger than when
supply is relatively inelastic.
Figure 7-9
Refer to Figure 7-9. If the demand curve is D and the supply curve shifts from S” to S,
what is the change in producer surplus?
a. Producer surplus increases by $625.
b. Producer surplus increases by $1,875.
c. Producer surplus decreases by $625.
d. Producer surplus decreases by $1,875.
If a price ceiling is a binding constraint on a market, then
a. the equilibrium price must be below the price ceiling.
b. the quantity supplied must exceed the quantity demanded.
c. sellers cannot sell all they want to sell at the price ceiling.
d. buyers cannot buy all they want to buy at the price ceiling.
The demand for potted plants is more elastic than the demand for wallpaper. Suppose
the government levies an equivalent tax on potted plants and wallpaper. The deadweight
loss would be larger in the market for
a. potted plants than in the market for wallpaper because the quantity of potted plants
would fall by more than the quantity of wallpaper.
b. potted plants than in the market for wallpaper because the quantity of wallpaper
would fall by more than the quantity of potted plants.
c. wallpaper than in the market for potted plants because the quantity of potted plants
would fall by more than the quantity of wallpaper.
d. wallpaper than in the market for potted plants because the quantity of wallpaper
would fall by more than the quantity of potted plants.