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In a single day, Sarah can produce 10 hamburgers, and Abe can produce 5 hamburgers.
Therefore, _____ has a(n) _____ advantage in making hamburgers.
A) Sarah; comparative
B) Sarah; absolute
C) Abe; comparative
D) Abe; absolute
If the exchange rate is $1.50 per euro, the U.S. price level is 180, and the eurozone
price level is 120, then the real exchange rate per euro is:
A) $1.
B) $1.50.
C) $2.40.
D) $1.20.
Physical capital consists of man-made resources like machines and buildings.
A) True
B) False
Assuming that prices remain constant, suppose that consumer assets and wealth lose
value. The aggregate demand curve will undergo a:
A) shift to the left.
B) movement upward.
C) shift to the right.
D) movement downward.
The increased availability of automatic teller machines has decreased the shoe-leather
costs of high inflation.
A) True
B) False
Specialization and trade usually lead to:
A) lower economic growth.
B) the exchange of goods and services in markets.
C) lower living standards.
D) higher prices.
The main reason that speculators bought houses in Ft. Myers in the early 2000s was:
A) to profit by reselling them at much higher prices.
B) to live in them.
C) to demolish them and build a shopping mall.
D) to rent them to students.
For which of the following decisions would marginal analysis be most relevant?
A) Should I go to college or work after graduating from high school?
B) Should I eat another doughnut?
C) Should I use $20,000 as a down payment on a house or to buy a car?
D) Should I get married?
Someone who has to decide whether to receive $100 now or $100 one year from now
will probably choose _____, since there is a(n) _____ in waiting to use money.
A) one year from now; benefit
B) now; opportunity cost
C) one year from now; opportunity cost
D) now; benefit
In 1999 many European countries signed a stability pact in which they agreed to accept
the dollar as their common currency.
A) True
B) False
Real GDP per capita, growing at a constant rate over a 35-year period, has doubled at
the end of that period. What must the annual growth rate of real GDP per capita be for
this economy?
A) 1%
B) 2%
C) 4%
D) 15%
Which one of the following events will NOT decrease the demand for money?
A) an increase in the aggregate price level
B) the advent of ATMs
C) the ability of the stores to process credit cards
D) a fall in real GDP
_____ illustrates a positive relationship between price and quantity.
A) A demand curve
B) A supply curve
C) A production possibility frontier
D) Equilibrium
When government spending is less than net taxes:
A) there is a budget deficit.
B) government savings is negative.
C) there is budget surplus.
D) the economy is moving toward a balanced budget.
When the dollar value of the Swiss franc was very high following the financial crisis in
2008:
A) Swiss exports were more expensive in the United States.
B) Swiss exports were less expensive in the United States.
C) the Swiss National Bank sold Swiss francs to increase its value.
D) the Swiss National Bank bought francs to decrease its value.
When an economy is expanding, unemployment tends to _____ and overall prices tend
to _____.
A) fall; rise
B) fall; fall
C) rise; fall
D) rise; rise
After the Bretton Woods agreement broke down in 1971, the U.S. and most
industrialized countries adopted:
A) the euro.
B) the bitcoin.
C) a system of fixed exchange rates.
D) a system of floating exchange rates.
Suppose the Federal Reserve buys Treasury bills. We can expect this transaction to
_____ the money supply, _____ Treasury bill prices, and _____ interest rates.
A) reduce; increase; lower
B) increase; lower; lower
C) increase; raise; lower
D) reduce; reduce; raise
Figure: The Production Possibilities for Two Countries
Look at the figure The Production Possibilities for Two Countries. Indonesia has a
comparative advantage in producing _____, while Malaysia has a comparative
advantage in producing _____.
A) both radios and tires; neither good
B) neither good; both radios and tires
C) radios; tires
D) tires; radios
When short-run aggregate supply increases, it means that the short-run aggregate
supply curve shifts to the _____ and the quantity of aggregate output that producers are
willing to supply _____.
A) right; decreases
B) right; increases
C) left; decreases
D) left; increases
An inflation tax is:
A) the reduction in purchasing power due to inflation.
B) a tax on businesses for raising prices.
C) a tax on people with inflated incomes.
D) an excise tax on new automobile tires.
Figure: The Domestic Supply and Demand for SUVs in the United States
Look at the figure The Domestic Supply and Demand for SUVs in the United States.
Suppose the world price equals $50,000 and there is free trade. The United States would
_____ SUVs.
A) import 6 million
B) export 6 million
C) export 2 million
D) import 2 million
Expansionary monetary policy causes _____ in interest rates in the short run and _____
in interest rates in the long run.
A) a fall; no change
B) a fall; a fall
C) no change; a fall
D) no change; no change
Britain must give up the production of 75 hats to produce 25 additional sweaters. The
opportunity cost of producing 4 sweaters is _____ hats.
A) 4
B) 12
C) 71
D) 79
Which of the following is NOT a reason banking crises usually lead to recessions?
A) low unemployment rates and high inflation rates
B) credit crunches
C) debt overhang
D) loss of effectiveness of monetary policy
If the Federal Open Market Committee decides to decrease the federal funds target rate,
it will:
A) perform an open market purchase.
B) perform an open market sale.
C) increase the demand for money.
D) offer tax breaks to specific businesses.
Disinflation:
A) entails eliminating inflation in an economy.
B) policy is likely to plunge the economy into a major recession.
C) occurs as a result of policy makers' attempts to correct a major recession.
D) results in a fall in the unemployment rate.
If the economy is in a recession and real GDP decreases, the demand for money will
shift to the left.
A) True
B) False
For a student who owns his or her own home and doesn't plan to live in the dorm, the
cost of going to college is:
A) tuition and the cost of housing.
B) tuition, the cost of housing, and the cost of books.
C) tuition, the cost of books, and forgone income.
D) forgone income only.
An increase in the number of discouraged workers in the economy tends to:
A) raise the official unemployment rate.
B) lower the official unemployment rate.
C) lower the number of people who are frictionally unemployed.
D) increase the number of people who are structurally unemployed.
To expand the money supply, the Federal Reserve would have to:
A) make an open purchase of Treasury bills.
B) have an open sale of Treasury bills.
C) raise interest rates.
D) get approval from Congress.
Which of the following statements is NOT true?
A) Resource scarcity is a major economic concern in the rich countries of the world.
B) Most opportunity costs are zero.
C) An economic situation is in equilibrium when no individual would be better off
taking a different action.
D) Some very talented, skilled individuals who can do some things better than most
people should specialize in doing that one thing.
