A pharmaceutical company unexpectedly announces that it just developed an important
new drug. This news should
a. raise the price of the corporation’s stock; if it does not the stock is overvalued.
b. raise the price of the corporation’s stock; if it does not the stock is undervalued.
c. reduce the price of the corporation’s stock; if it does not the stock is overvalued.
d. reduce the price of the corporation’s stock; if it does not the stock is undervalued.
Table 5-2
Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the
price elasticity of demand is
a. zero.
b. unit elastic.
c. inelastic.
d. elastic.
If the government currently has a budget deficit, then
a. it does not necessarily have a debt.
b. its debt is increasing.
c. government expenditures are greater than taxes.
d. All of the above are correct.
A bond that never matures is known as a
a. perpetuity.
b. an intermediary bond.
c. an indexed bond.
d. a junk bond.
The law of supply and demand asserts that
a. demand curves and supply curves tend to shift to the right as time goes by.
b. the price of a good will eventually rise in response to an excess demand for that
good.
c. when the supply curve for a good shifts, the demand curve for that good shifts in
response.
d. the equilibrium price of a good will be rising more often than it will be falling.
The market for ice cream is a
a. monopolistic market.
b. highly competitive market.
c. highly organized market.
d. Both b) and c) are correct.
Table 3-10
Juanita and Shantala run a business that programs and tests cellular phones. Assume
that Juanita and Shantala can switch between programming and testing cellular phones
at a constant rate. The following table applies.
Minutes Needed to Number of Cellular Phones
Programmed or Tested in a
40-Hour Week
Program 1
Cellular Phone Test 1
Cellular Phone Cellular Phones
Programmed Cellular Phones
Refer to Table 3-10. Juanita has an absolute advantage in
a. programming cellular phones and a comparative advantage in programming cellular
phones.
b. programming cellular phones and a comparative advantage in testing cellular phones.
c. testing cellular phones and a comparative advantage in programming cellular phones.
d. testing cellular phones and a comparative advantage in testing cellular phones.
Figure 3-2
Peru’s Production Possibilities Frontier
Refer to Figure 3-2. Suppose Peru decides to increase its production of emeralds by 2.
What is the opportunity cost of this decision?
a. 30 rubies
b. 40 rubies
c. 60 rubies
d. 120 rubies
Which of the following is correct?
a. Real GDP is the variable most commonly used to measure short-run economic
fluctuations. These fluctuations can be predicted with some accuracy.
b. Real GDP is the variable most commonly used to measure short-run economic
fluctuations. It is almost impossible to predict these fluctuations with much accuracy.
c. Nominal GDP is the variable most commonly used to measure short-run economic
fluctuations. These fluctuations can be predicted with some accuracy.
d. Nominal GDP is the variable most commonly used to measure short-run economic
fluctuations. It is almost impossible to predict these fluctuations with much accuracy.
Which of the following statements is correct?
a. In order to calculate the inflation rate for the year 2011, we need to know the values
of the consumer price index for the years 2009, 2010, and 2011.
b. Changes in the consumer price index are often thought to be useful in predicting
changes in the producer price index.
c. Despite its name, the “consumer price index” really measures the overall cost of the
goods and services bought by consumers, business firms, and units of government.
d. If the prices of all goods and services changed proportionately over time, then the
consumer price index would reflect no substitution bias.
According to the loanable funds model, which of the following events would result in
higher interest rates and greater saving?
a. Firms become pessimistic about the future and, as a result, they cut back on their
plans to buy new equipment and build new factories.
b. The government goes from running a budget deficit to running a budget surplus.
c. Congress passes a reform of the tax laws that encourages greater saving.
d. Congress passes a reform of the tax laws that encourages greater investment.
Suppose an apartment complex converts to a condominium, so that the former renters
are now owners of their housing units. Suppose further that a current estimate of the
value of the condominium owners’ housing services is the same as the rent they
previously paid. What happens to GDP as a result of this conversion?
a. GDP necessarily increases.
b. GDP necessarily decreases.
c. GDP is unaffected because neither the rent nor the estimate of the value
owner-occupied housing services is included in GDP.
d. GDP is unaffected because previously the rent payments were included in GDP and
now the rent payments are replaced in GDP by the estimate of the value of owner
occupied housing services.
Table 5-2
Refer to Table 5-2. Using the midpoint method, if the price falls from $60 to $40, the
price elasticity of demand is
a. zero.
b. inelastic.
c. unit elastic.
d. elastic.
On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and
another point is (quantity supplied = 250, price = $4.50). Using the midpoint method,
the price elasticity of supply is about
a. 0.22.
b. 0.53.
c. 1.00.
d. 1.89.
A transfer payment is a payment made by
a. consumers, but not in exchange for a tangible product.
b. firms, but not in exchange for capital equipment.
c. foreigners, but not in exchange for a domestically-produced good or service.
d. government, but not in exchange for a currently produced good or service.
The misery index is calculated as the
a. inflation rate plus the unemployment rate.
b. unemployment rate minus the inflation rate.
c. actual inflation rate minus the expected inflation rate.
d. natural unemployment rate times the inflation rate
When the government goes from running a balanced budget to running a budget
surplus,
a. national saving decreases, the interest rate rises, and the economy’s long-run growth
rate is likely to decrease.
b. national saving increases, the interest rate falls, and the economy’s long-run growth
rate is likely to decrease.
c. national saving decreases, the interest rate rises, and the economy’s long-run growth
rate is likely to increase.
d. national saving increases, the interest rate falls, and the economy’s long-run growth
rate is likely to increase.
In the United States in 2009, government purchases of goods and services were
a. larger than consumption, but smaller than investment.
b. larger than investment, but smaller than consumption.
c. smaller than both consumption and investment.
d. larger than both consumption and investment.
If a tax is levied on the buyers of a product, then there will be a(n)
a. downward shift of the supply curve.
b. upward shift of the supply curve.
c. movement up and to the right along the supply curve.
d. movement down and to the left along the supply curve.
The deadweight loss from a $3 tax will be largest in a market with
a. inelastic supply and elastic demand.
b. inelastic supply and inelastic demand.
c. elastic supply and elastic demand.
d. elastic supply and inelastic demand.
Assume that for good X the supply curve for a good is a typical, upward-sloping
straight line, and the demand curve is a typical downward-sloping straight line. If the
good is taxed, and the tax is doubled, the
a. base of the triangle that represents the deadweight loss quadruples.
b. height of the triangle that represents the deadweight loss doubles.
c. deadweight loss of the tax doubles.
d. All of the above are correct.
When the money market is drawn with the value of money on the vertical axis, the price
level increases if
a. money demand shifts right and decreases if money supply shifts right.
b. money demand shifts right and decreases if money supply shifts left.
c. money demand shifts left and decreases if money supply shifts right.
d. money demand shifts left and decreases if money supply shifts left.
Which of the following would cause stagflation?
a. aggregate demand shifts right
b. aggregate demand shifts left
c. aggregate supply shifts right
d. aggregate supply shifts left
Figure 13-4. On the horizontal axis of the graph, L represents the quantity of loanable
funds in billions of dollars.
Refer to Figure 13-4. If the equilibrium quantity of loanable funds is $56 billion and if
the rate of inflation is 4 percent, then the equilibrium real interest rate is
a. lower than 6 percent..
b. 6 percent.
c. between 6 percent and 8 percent.
d. higher than 8 percent.
Figure 7-1
Refer to Figure 7-1. If the price of the good is $150, then consumer surplus amounts to
a. $150.
b. $200.
c. $250.
d. $300.
When the money market is drawn with the value of money on the vertical axis, an
increase in the money supply shifts the money supply curve to the
a. right, lowering the price level.
b. right, raising the price level.
c. left, raising the price level.
d. left, lowering the price level.
In some countries it is time consuming and costly to establish ownership of property.
Reforms to reduce these costs would likely
a. have no affect on either real GDP nor productivity
b. raise real GDP and productivity.
c. raise real GDP but not productivity.
d. raise productivity but not real GDP.
The consumer price index tires to measure how much consumer incomes must rise in
order to maintain a constant
a. level of real GDP.
b. ratio of consumption to GDP.
c. ratio of net exports to GDP.
d. standard of living.
Holding all other forces constant, if increasing the price of a good leads to an increase
in total revenue, then the demand for the good must be
a. unit elastic.
b. inelastic.
c. elastic.
d. None of the above is correct because a price increase always leads to an increase in
total revenue.
Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the right-hand diagram, “Inf Rate” means
“Inflation Rate.”
Refer to Figure 22-8. The shift of the aggregate-supply curve from AS1 to AS2 could
be a consequence of
a. an increase in the money supply.
b. an adverse supply shock.
c. a decrease of output from Y1 to Y2.
d. a slow adjustment of people’s expectation of the inflation rate.
Economists who are primarily responsible for advising Congress on economic matters
work in which agency?
a. the Federal Reserve
b. the Congressional Budget Office
c. the Department of the Treasury
d. the Department of Commerce
According to liquidity preference theory, the money-supply curve is
a. upward sloping.
b. downward sloping.
c. vertical.
d. horizontal.
Figure 7-9
Refer to Figure 7-9. If the supply curve is S and the demand curve shifts from D to D”,
what is the change in producer surplus?
a. Producer surplus increases by $3,125.
b. Producer surplus increases by $5,625.
c. Producer surplus decreases by $3,125.
d. Producer surplus decreases by $5,625.
From the standpoint of the economy as a whole, the role of
a. the interest rate is to make sure that the price of bonds increases over time.
b. diversification is to eliminate market risk.
c. insurance is to reduce the risks inherent in life.
d. insurance is to spread risks around more efficiently.