The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by
a. unstable economic conditions in Eastern Europe.
b. increased competition from abroad.
c. a decline in the rate of increase in U.S. productivity.
d. a strong U.S. dollar abroad, hurting U.S. exports.
Table 4-1
Refer to Table 4-1. If the market consists of Michelle, Laura, and Hillary and the price
falls by $1, the quantity demanded in the market increases by
a. 2 units.
b. 3 units.
c. 4 units.
d. 5 units.
Figure 6-7
Refer to Figure 6-7. Suppose a price floor of $7 is imposed on this market. As a result,
a. buyers’ total expenditure on the good decreases by $20.
b. the supply curve shifts to the left so as to now pass through the point (quantity = 40,
price = $7).
c. the quantity of the good demanded decreases by 20 units.
d. the price of the good continues to serve as the rationing mechanism.
Each day Sonja works 8 hours and produces 8 units of goods and services. Emma
works 10 hours each day and produces 9 units of goods and services. It follows that
a. Sonja’s productivity is higher than Emma’s.
b. Emma’s productivity is higher than Sonja’s.
c. Emma’s income per hour will be higher than Sonja’s.
d. Sonja’s income per day will be higher than Emma’s.
U.S. laws requiring that drivers wear seat belts have resulted in
a. a reduction in both driver deaths and pedestrian deaths.
b. fewer accidents and fewer deaths per accident.
c. fewer driver deaths, fewer accidents and fewer pedestrian deaths.
d. little change in the number of driver deaths, but more accidents and more pedestrian
deaths.
Which of the following combinations of real interest rates and inflation implies a
nominal interest rate of 7 percent?
a. a real interest rate of 2.5 percent and an inflation rate of 2 percent
b. a real interest rate of 4 percent and an inflation rate of 11 percent
c. a real interest rate of 6 percent and an inflation rate of 1 percent
d. a real interest rate of 5.5 percent and an inflation rate of 3 percent
Which of the following statements is not true?
a. All U.S. government budget deficits were due to war or recession.
b. The U.S. federal debt in 2009 was about $7.6 trillion.
c. Government debt represents about 1 percent of a typical worker’s lifetime resources.
d. Forward looking parents can reverse adverse effects of government debt.
Scenario 5-2
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both
goods are considered to be normal goods by a majority of consumers. Suppose that a
large income tax increase decreases the demand for both goods by 10%.
Refer to Scenario 5-2. Total consumer spending on aged cheddar cheese will
a. increase, and total consumer spending on bread will increase.
b. increase, and total consumer spending on bread will decrease.
c. decrease, and total consumer spending on bread will increase.
d. decrease, and total consumer spending on bread will decrease.
Suppose the government has imposed a price floor on the market for soybeans. Which
of the following events could transform the price floor from one that is not binding into
one that is binding?
a. Farmers use improved, draught-resistant seeds, which lowers the cost of growing
soybeans.
b. The number of farmers selling soybeans decreases.
c. Consumers’ income increases, and soybeans are a normal good.
d. The number of consumers buying soybeans increases.
Figure 7-10
Refer to Figure 7-10. If the equilibrium price rises from $50 to $200, what is the
producer surplus to new producers?
a. $625
b. $3,750
c. $5,625
d. $10,000
Over the past several decades, the difference between the labor-force participation rates
of men and women in the U.S. has
a. gradually increased.
b. remained constant.
c. gradually decreased.
d. been eliminated.
If the multiplier is 6 and if there is no crowding-out effect, then a $60 billion increase in
government expenditures causes aggregate demand to
a. increase by $250 billion.
b. increase by $333 billion.
c. increase by $360 billion.
d. None of the above are correct.
Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.
Refer to Figure 8-8. The tax causes producer surplus to decrease by the area
a. D+F.
b. D+F+G.
c. D+F+J.
d. D+F+G+H.
Al’s Aluminum Company sells $1 million worth of aluminum to Shiny Foil Company,
which uses the aluminum to make aluminum foil. Shiny Foil Company sells $4 million
worth of aluminum foil to households. The transactions just described contribute how
much to GDP?
a. $1 million
b. $3 million
c. $4 million
d. $5 million
Suppose a country experiences capital flight. Of the demand for loanable funds and the
supply of currency in the market for foreign-currency exchange, which shifts right?
a. only the demand for loanable funds
b. only the supply of its currency in the market for foreign-currency exchange
c. both curves shift right
d. neither curve shifts right
Which of the following is an example of a nonrenewable resource?
a. coal
b. honey
c. livestock
d. All of the above are correct.
Scenario 11-3
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh
Holloway, is an accountant today and he earned $210,000 in 2008. The price index was
17.6 in 1944 and 184 in 2008.
Refer to Scenario 11-3. In real terms, Sue Holloway’s income amounts to about what
percentage of Josh Holloway’s income?
a. 5.71 percent
b. 9.6 percent
c. 59.7 percent
d. 67.4 percent
Over the past five decades, the U.S. economy has become
a. more closed.
b. more open.
c. less trade-oriented.
d. more self-sufficient.
From 2007 to 2009 the U.S. trade balance
a. rose as investment rose.
b. rose as investment fell.
c. fell as investment rose.
d. fell while investment fell.
Figure 8-1
Refer to Figure 8-1. Suppose the government imposes a tax of P’ – P”’. The area
measured by I+Y represents the
a. deadweight loss due to the tax.
b. loss in consumer surplus due to the tax.
c. loss in producer surplus due to the tax.
d. total surplus before the tax.
The slope of a line passing through the points (12, 8) and (16, 5) is
a. -3/4.
b. 3/4.
c. -4/3.
d. 4/3.
The CPI is calculated
a. monthly by the Department of Commerce.
b. monthly by the Bureau of Labor Statistics.
c. quarterly by the Department of Commerce.
d. quarterly by the Bureau of Labor Statistics.
In the circular-flow diagram, which of the following items flows from households to
firms through the markets for goods and services?
a. goods and services
b. dollars paid to land, labor, and capital
c. dollars spent on goods and services
d. wages, rent, and profit
The two loops in the circular-flow diagram represent
a. the flow of goods and the flow of services.
b. the flow of dollars and the flow of financial assets.
c. the flow of inputs into production processes and the flow of outputs from production
processes.
d. the flows of inputs and outputs and the flow of dollars.
Answer each of the following questions about demand and consumer surplus.
a. What is consumer surplus, and how is it measured?
b. What is the relationship between the demand curve and the willingness to pay?
c. Other things equal, what happens to consumer surplus if the price of a good falls?
Why? Illustrate using a demand curve.
d. In what way does the demand curve represent the benefit consumers receive from
participating in a market? In addition to the demand curve, what else must be
considered to determine consumer surplus?
If the price elasticity of demand for a good is 4, then a 12 percent decrease in price
results in a
a. 0.33 percent increase in the quantity demanded.
b. 3 percent increase in the quantity demanded.
c. 30 percent increase in the quantity demanded.
d. 48 percent increase in the quantity demanded.
Adam Smith
a. and David Ricardo both opposed free trade.
b. opposed free trade, but David Ricardo supported it.
c. supported free trade, but David Ricardo opposed it.
d. and David Ricardo both supported free trade.
When demand is inelastic, a decrease in price will cause
a. an increase in total revenue.
b. a decrease in total revenue.
c. no change in total revenue but an increase in quantity demanded.
d. no change in total revenue but a decrease in quantity demanded.
When a union bargains successfully with employers, in that industry,
a. wages and unemployment increase.
b. wages increase and unemployment decreases.
c. wages decrease and unemployment increases.
d. wages and unemployment decrease.
As we move downward and to the right along a linear, downward-sloping demand
curve,
a. both slope and elasticity remain constant.
b. slope changes but elasticity remains constant.
c. both slope and elasticity change.
d. slope remains constant but elasticity changes.
A movement downward and to the right along a demand curve is called a(n)
a. increase in demand.
b. decrease in demand.
c. decrease in quantity demanded.
d. increase in quantity demanded.