If the government finances an increase in government purchases with an increase in
taxes, which of the following would you expect to see?
A) an increase in the exchange rate
B) a decrease in the interest rate
C) a decrease in aggregate demand
D) an increase in net exports
Assume the market for organic produce sold at farmers’ markets is perfectly
competitive. All else equal, as more farmers choose to produce and sell organic produce
at farmers’ markets, what is likely to happen to the equilibrium price of the produce and
profits of the organic farmers in the long run?
A) The equilibrium price is likely to increase and profits are likely to remain
unchanged.
B) The equilibrium price is likely to remain unchanged and profits are likely to
increase.
C) The equilibrium price is likely to decrease and profits are likely to decrease.
D) The equilibrium price is likely to increase and profits are likely to increase.
If inflation increases unexpectedly, then
A) borrowers pay a higher real interest rate than they expected.
B) lenders receive a lower real interest rate than they expected.
C) lenders gain and borrowers gain.
D) neither borrowers nor lenders lose.
Which of the following is a positive economic statement?
A) People should use public transportation more often.
B) The government should ban diesel engines in automobiles.
C) Due to a decrease in state funding, university tuition has risen.
D) Foreign citizens should not be allowed to work without a work visa.
A consequence of increasing marginal costs of producing digital music players in Japan
is
A) Japan will not export digital music players.
B) Japan will stop short of complete specialization in the production of digital music
players.
C) Japan will import digital music players from countries that don’t experience
increasing marginal costs.
D) Japan will likely impose trade restrictions on imported digital music players.
What does limited liability mean?
A) The owners of the business are personally responsible for paying expenses incurred
by the business.
B) Only employees can have a claim on the assets of the business.
C) The personal assets of the owners cannot be claimed if the business is bankrupt.
D) Anybody with a liability against a firm can claim only what their liability refers to.
In October 2008, Congress passed the Troubled Asset Relief Program (TARP), under
which the Treasury provided ________ to banks in exchange for ________.
A) bonds; cash
B) lines of credit; loan guarantees
C) funds; stock
D) financial advice; promises to expand mortgage lending
An oligopolist differs from a perfect competitor in that
A) there is cutthroat competition in perfect competition but little competition in
oligopoly because firms have significant market power.
B) firms in an oligopoly do not produce homogeneous products while firms in perfect
competition do.
C) the market demand curve for a perfectly competitive industry is perfectly elastic but
it is downward-sloping in an oligopolistic industry.
D) there are no entry barriers in perfect competition but there are entry barriers in
oligopoly.
A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that
the cost of the market basket
A) equaled $160 in 1996.
B) equaled $160 in 1983.
C) rose 160% from the cost of the market basket in the base year.
D) rose 60% from the cost of the market basket in the base year.
In an open economy, the government purchases multiplier will be larger the
A) smaller the marginal propensity to import.
B) smaller the marginal income tax rate.
C) larger the marginal propensity to consume.
D) All of the above are correct.
If the price of beef jerky rises, the substitution effect due to the price change will cause
A) an increase in the demand for beef jerky.
B) an increase in the demand for hot sauce, a complement for beef jerky.
C) an increase in the quantity of beef jerky demanded.
D) a decrease in the quantity of beef jerky demanded.
The distribution of income primarily determines which of the fundamental economic
questions?
A) What goods and services are to be produced?
B) How are the goods and services to be produced?
C) Who will receive the goods and services produced?
D) How should the economy be planned?
The year in which euro coins and paper currency were introduced and participating
“euro zone” countries withdrew old domestic currencies from circulation was
A) 2007.
B) 2002.
C) 1999.
D) 1995.
When considering changes in tax policy, economists usually focus on
A) the average tax rate.
B) the marginal tax rate.
C) people’s willingness to pay taxes.
D) people’s ability to pay taxes.
Figure 4-9
Figure 4-9 shows the demand and
supply curves for the almond market. The government believes that the equilibrium
price is too low and tries to help almond growers by setting a price floor at Pf. What
area represents consumer surplus after the imposition of the price floor?
A) A + B + E
B) A + B
C) A + B + E + F
D) A
The natural rate of unemployment will not change following an increase in ________
unemployment.
A) cyclical
B) frictional
C) structural
D) all of the above
Both presidents Kennedy and Reagan proposed significant cuts in income taxes because
A) at the time of their proposals the federal government was experiencing budget
surpluses; that is, tax revenue exceeded government expenditures.
B) they wanted to offset their proposals to increase other taxes.
C) state governments had increased their taxes and they believed the tax cuts they
proposed would result in most citizens paying about the same total state and federal
taxes.
D) they believed that the tax cuts would enhance economic efficiency.