If the purchasing power of a dollar is greater than the purchasing power of the yen,
purchasing power parity would predict that
A) in the short run, exchange rates will move to equalize the purchasing power of the
dollar and the yen.
B) in the long run, exchange rates will move to equalize the purchasing power of the
dollar and the yen.
C) in the long run, interest rates will move to equalize the purchasing power of the
dollar and the yen.
D) in the short run, interest rates will move to equalize the purchasing power of the
dollar and the yen.
M1 includes
A) currency in circulation, checking account deposits in banks, and holdings of
traveler’s checks.
B) currency in circulation, savings account balances, and checking account deposits in
banks.
C) currency in circulation, savings account balances, checking account deposits in
banks, and holdings of traveler’s checks.
D) coins, savings account balances, traveler’s checks.
All of the following are part of an economic model except
A) assumptions.
B) hypotheses.
C) data.
D) opinions.
Consider the collectors’ market for first editions of two popular children’s books, Harry
Potter and the Order of the Phoenix by J. K. Rowling and Ruby in the Smoke by Philip
Pullman. Sales of the Harry Potter novel are much greater than sales of Ruby in the
Smoke yet the price of the Harry Potter novel is much lower than the price of Pullman’s
novel. a. On one large diagram, draw a demand and supply graph for first editions of
Harry Potter and the Order of the Phoenix and another demand and supply graph for
first editions of Ruby in the Smoke.
b. Show how it is possible for the price of the Harry Potter novel to be much lower than
the price of Pullman’s novel, even though the demand for the Harry Potter novel is
much greater than the demand for Ruby in the Smoke.
c. Provide a written explanation to accompany your graphical illustration.
Table 4-3
The table above lists the marginal cost of polo shirts by Marko’s, a firm that specializes
in producing men’s clothing. If the price of polo shirts decreases from $15 to $10
A) consumers will buy no polo shirts.
B) the marginal cost of producing the third polo shirt will increase to $25.
C) producer surplus will fall from $13 to $3.
D) there will be a shortage of polo shirts.
If, during a deposit expansion, not all money gets redeposited into the banking system
and some leaks out as currency, then the real world multiplier is
A) smaller than 1/RR.
B) larger than 1/RR.
C) equal to 1/RR.
D) not related to 1/RR.
The most profitable price for a monopolist is
A) the highest price a consumer is willing to pay for the monopolist’s product.
B) the price at which demand is unit-elastic.
C) a price that maximizes the quantity sold.
D) the price for which marginal revenue equals marginal cost.
Which of the following is a problem inherent in centrally planned economies?
A) Households and firms make poor decisions in choosing how resources are allocated.
B) There is too little production of low-cost, high-quality goods and services.
C) Production managers are more concerned with satisfying consumer wants than with
satisfying government’s orders.
D) Exports tend to exceed imports.
Figure 28-2
Suppose the economy is at point A. The Fed uses expansionary monetary policy to
lower the unemployment rate permanently below the level associated with A. Which of
the following will occur?
A) Inflation will accelerate in the long run.
B) Inflationary expectations will decline.
C) Unemployment will rise above the natural rate.
D) Unemployment will accelerate in the long run.
Figure 7-2 Suppose the U.S. government
imposes a $0.75 per pound tariff on coffee imports. Figure 7-2 shows the impact of this
tariff. With the tariff in place, the United States
A) imports 20 million pounds of coffee.
B) imports 12 million pounds of coffee.
C) imports 18 million pounds of coffee.
D) exports 38 million pounds of coffee.
In recent years unemployment rates in several European countries have been higher
than unemployment rates in the United States. Many economists believe that European
unemployment rates have been higher because
A) of the different methods used to measure unemployment. If similar methods were
used, unemployment rates in Europe and the United States would be about the same.
B) European firms hire many seasonal workers from other countries, and this tends to
inflate unemployment rates in their countries.
C) unemployment benefits are more generous in Europe than in the United States.
D) the size of the military is much higher in the United States and all military personnel
are classified as employed.
Because of the positive externality of vaccinations, economic efficiency would be
improved
A) if fewer people were vaccinated.
B) if more people were vaccinated.
C) only if all people were vaccinated.
D) only if no people were vaccinated.
Which of the following is not a major function of the Federal Reserve System?
A) lender of last resort
B) clearing checks between banks
C) setting income tax rates
D) controlling the money supply
Which of the following is a normative economic statement?
A) The price of wheat is too low.
B) The current low price of wheat is the result of increased worldwide supply.
C) When the price of wheat falls, the quantity of wheat purchased rises.
D) When the price of wheat falls, the cost of wheat-based products falls.
In periods when prices are falling, on average,
A) real GDP will grow slower than nominal GDP.
B) real GDP will grow faster than nominal GDP.
C) real GDP will grow as fast as nominal GDP.
D) one cannot calculate real GDP.
Economies of scale occur when
A) a firm’s long-run average total costs fall as it increases the quantity of output it
produces.
B) the marginal product of labor is greater than the average product of labor.
C) short-run marginal cost falls.
D) the demand for a firm’s output increases.
Figure 9-3
Since 1953 the United States
has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of
the quota. If there was no quota, how many pounds of peanuts would be imported?
A) 16 million
B) 24 million
C) 30 million
D) 40 million
A decrease in United States net foreign direct investment would occur if
A) U.S. citizens have decreased the value of foreign stocks and bonds they own.
B) U.S. citizens have decreased their building or purchasing of facilities in foreign
countries.
C) net foreign investment decreases.
D) net capital flows increase.
Table 19-18
A very simple economy produces three goods: cameras, legal services, and books. The
quantities produced and their corresponding prices for 2008 and 2013 are shown in the
table above. What is real GDP in 2013, using 2013 as the base year?
A) $28,885
B) $11,790
C) $11,200
D) $10,275
All of the following would be considered explicit costs of operating a business except
A) rent paid to a landlord.
B) bonuses paid to employees.
C) a normal rate of return for investors.
D) corporate income taxes.