The federal government began issuing inflation-indexed Treasury bonds in
a. 1913.
b. 1989.
c. 1997.
d. 2001.
Which of the following best describes how the international trade effect works?
a. The price level in the U.S. falls relative to foreign price levels, U.S. goods become
relatively less expensive than foreign goods, and both Americans and foreigners buy
more U.S. goods.
b. The price level in the U.S. falls relative to foreign price levels, U.S. goods become
relatively more expensive than foreign goods, and both Americans and foreigners buy
more U.S. goods.
c. The price level in the U.S. rises relative to foreign price levels, U.S. goods become
relatively more expensive than foreign goods, and both Americans and foreigners buy
fewer U.S. goods.
d. The price level in the U.S. rises relative to foreign price levels, U.S. goods become
relatively more expensive than foreign goods, and both Americans and foreigners buy
more U.S. goods.
e. a and c
When a positive externality exists, _______________________ and thus
_______________ intervention may be needed to achieve efficiency.
a. external costs are necessarily greater than private costs; government
b. social costs equal private costs; no government
c. social costs are less than private costs; government
d. social costs are greater than private costs; government
e. none of the above
Economist C believes that if tax rates are cut, tax revenue is likely to remain
constant.This economist most likely believes that the percentage decrease in tax rates
will ______________________________ percentage rise in the tax base.
a. be larger than the resulting
b. be equal to the resulting
c. be smaller than the resulting
d. occur long after the
e. a and d
Which of the following statements is false?
a. Some prices in an economy adjust faster than other prices.
b. Aggregate demand curves slope downward.
c. Firms may not adjust their prices immediately because they may be unable to figure
out whether a decline in demand is temporary or permanent.
d. The absolute price of a good is the dollar or money price of the good.
e. none of the above
According to public choice theorists, people in the market sector and people in the
public sector behave differently because
a. people in the two sectors have different motives.
b. the two sectors have different institutional arrangements.
c. government employees do not act in their own self-interest.
d. there are economies of scale in the market sector.
Exhibit 3-4
A price of $4 in the market will result in a
a. shortage of 10 units.
b. surplus of 10 units.
c. surplus of 5 units.
d. shortage of 5 units.
e. none of the above
Supply curves are ________________ upward sloping.
a. always
b. usually
c. rarely
d. never
Which of the following best describes how the real balance effect works?
a. The price level falls, purchasing power rises, a person’s monetary wealth rises, and
the person buys fewer goods and services.
b. The price level rises, purchasing power rises, a person’s monetary wealth decreases,
and the person buys more goods and services.
c. The price level rises, purchasing power falls, a person’s monetary wealth falls, and
the person buys fewer goods and services.
d. The price level falls, purchasing power rises, a person’s monetary wealth falls, and
the person buys fewer goods and services.
e. none of the above
Simple majority rule can generate inefficient outcomes because
a. it does not register the intensity of voters’ preferences.
b. it cannot adjust for special interest lobbying efforts.
c. it does not adjust for the costs of rational ignorance.
d. people are often misinformed on what it is they are voting on.
e. none of the above