All else equal, what happens to consumer surplus if the price of a good decreases?
a. Consumer surplus increases.
b. Consumer surplus decreases.
c. Consumer surplus is unchanged.
d. Consumer surplus may increase, decrease, or remain unchanged.
In the early 1970s, OPEC’s goal was to
a. decrease the world-wide price of oil so that the quantity demanded increased, thus
raising total revenues for OPEC members.
b. increase the world-wide price of oil by reducing the quantity of oil supplied.
c. increase the world-wide price of oil by increasing the quantity of oil supplied, thus
raising total revenues for OPEC members.
d. decrease the world-wide price of oil so that quantity demanded increased.
In the long run, the level of output
a. depends on the money supply.
b. depends on the price level.
c. is determined by supply-side factors.
d. All of the above are correct.
Table 5-3
The following table shows the demand schedule for a particular good.
Refer to Table 5-3. Using the midpoint method, when price rises from $6 to $9, the
price elasticity of demand is
a. 0.43
b. 0.67
c. 1.00
d. 1.5
Scenario 9-2
For a small country called Boxland, the equation of the domestic demand curve for
cardboard is
,
where represents the domestic quantity of cardboard demanded, in tons, and
represents the price of a ton of cardboard.
For Boxland, the equation of the domestic supply curve for cardboard is
,
where represents the domestic quantity of cardboard supplied, in tons, and again
represents the price of a ton of cardboard.
Refer to Scenario 9-2. Suppose the world price of cardboard is $60 and international
trade is allowed. Then Boxland’s consumers demand
a. 110 tons of cardboard and Boxland’s producers supply 120 tons of cardboard.
b. 96 tons of cardboard and Boxland’s producers supply 96 tons of cardboard.
c. 96 tons of cardboard and Boxland’s producers supply 115 tons of cardboard.
d. 80 tons of cardboard and Boxland’s producers supply 120 tons of cardboard.
Which of the following is considered part of the supply of U.S. dollars in the market for
foreign-currency exchange in the open-economy macroeconomic model?
a. both a U.S. retail chain wanting to build a store in France and a U.S. retail chain
wanting to buy dresses produced in Italy
b. a U.S. retail chain wanting to build a store in France but not a U.S. retail chain
wanting to buy dresses produced in Italy
c. a U.S. retail chain wanting to buy dresses produced in Italy, but not a U.S. retail chain
wanting to build a store in France
d. neither a U.S. retail chain wanting to build a store in France nor a U.S. retail chain
wanting to buy dresses produced in Italy
A German company exchanges euros for dollars from U.S. residents and then uses the
dollars to buy U.S. products to sell in Germany. U.S. residents who exchanged their
dollars for euros use the euros to buy bonds issued by Spanish corporations. At this
point
a. both U.S. net exports and U.S. net capital outflows have risen.
b. both U.S. net exports and U.S. net capital outflow have fallen.
c. U.S. net exports have risen and U.S. net capital outflow have fallen.
d. U.S. net exports have fallen and U.S. net capital outflow have risen.
Figure 8-3
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 8-3. The amount of the tax on each unit of the good is
a. P3 – P1.
b. P3 – P2.
c. P2 – P1.
d. P4 – P3.
Unemployment that results because it takes time for workers to search for the jobs that
best suit their tastes and skills is called
a. the natural rate of unemployment.
b. cyclical unemployment.
c. structural unemployment.
d. frictional unemployment.
A country has $1.5 billion dollars of domestic investment and net exports of $2 billion.
What is its saving?
a. -$.5 billion
b. $5 billion
c. $1.5 billion
d. $3.5 billion
The consumer price index was 225 in 2008 and 232.2 in 2009. The nominal interest rate
during this period was 6.5 percent. What was the real interest rate during this period?
a. 1.6 percent
b. 3.3 percent
c. 5.1 percent
d. 7.4 percent
A government reduces its budget deficit, but at the same time people become concerned
that the outlook for future government expenditures and revenues increase the chance it
will default. Which of the following is correct.
a. The reduced budget deficit will raise interest rates in general. The increased risk of
default will raise interest rates on government bonds.
b. The reduced budget deficit will raise interest rates in general. The increased risk of
default will reduce interest rates on government bonds.
c. The reduced budget deficit will reduce interest rates in general. The increased risk of
default will raise interest rates on government bonds.
d. The reduced budget deficit will reduce interest rates in general. The increased risk of
default will reduce interest rates on government bonds.
The restrictive monetary policy followed by the Fed in the early 1980s
a. reduced both unemployment and inflation.
b. reduced inflation significantly, but at the cost of a severe recession.
c. reduced unemployment significantly, but at the cost of higher inflation.
d. raised both unemployment and inflation.
When a country is on the downward-sloping side of the Laffer curves, a cut in the tax
rate will
a. decrease tax revenue and decrease the deadweight loss.
b. decrease tax revenue and increase the deadweight loss.
c. increase tax revenue and decrease the deadweight loss.
d. increase tax revenue and increase the deadweight loss.
Congressman Smith cites the “jobs argument” when he argues in favor of restrictions on
trade; he argues that everything can be produced at lower cost in other countries. The
likely flaw in Congressman Smith’s reasoning is that he ignores the fact that
a. there is no evidence that any worker ever lost his or her job because of free trade.
b. unemployment of labor is not a serious problem relative to other economic problems.
c. the gains from trade are based on comparative advantage.
d. the gains from trade are based on absolute advantage.
Suppose that an American opens and operates a recording studio in Poland. This is an
example of
a. foreign direct investment. American saving is used to finance Polish investment.
b. foreign direct investment. American saving is used to finance American investment.
c. foreign portfolio investment. American saving is used to finance Polish investment.
d. foreign portfolio investment. American saving is used to finance American
investment.
When an Egyptian firm purchases a cement mixer from Slovakia,
a. Egyptian investment does not change, Egyptian net exports decrease, Egyptian GDP
decreases, Slovakian net exports increase, and Slovakian GDP increases.
b. Egyptian investment increases, Egyptian net exports decrease, Egyptian GDP is
unaffected, Slovakian net exports increase, and Slovakian GDP increases.
c. Egyptian investment decreases, Egyptian net exports increase, Egyptian GDP is
unaffected, Slovakian net exports decrease, and Slovakian GDP decreases.
d. Egyptian investment increases, Egyptian net exports do not change, Egyptian GDP
increases, Slovakian net exports do not change, and Slovakian GDP is unaffected.
Other things the same, which of the following could explain an increase in
productivity?
a. either an increase in human capital or an increase in physical capital
b. an increase in human capital but not an increase in physical capital
c. an increase in physical capital but not an increase in human capital
d. neither an increase in human capital nor an increase in physical capital
The quantity of U.S. bonds foreigners want to buy is taken into account
a. in the U.S. supply of loanable funds and the supply of dollars in the market for
foreign-currency exchange.
b. in the U.S. supply of loanable funds and the demand for dollars in the market for
foreign-currency exchange.
c. in the U.S. demand for loanable funds and the supply of dollars in the market for
foreign-currency exchange.
d. in the U.S. demand for loanable funds and the demand for dollars in the market for
foreign-currency exchange.
Evidence concerning hyperinflation indicates a clear link between the money supply
and the price level for
a. Austria in the 1920’s.
b. Hungary in the 1920’s.
c. Poland in the 1920’s.
d. All of the above are correct.
In the early 19th century, the Russian government sent doctors to southern Russian
villages to provide assistance during a cholera epidemic. The villagers noticed that
wherever doctors appeared, people died. Therefore, many doctors were chased away
from villages, and some were even killed. This reaction to the correlation between
doctors and deaths is most likely a problem of
a. omitted variables.
b. reverse causality.
c. government propaganda.
d. medical incompetence.
Figure 2-8
Panel (a) Panel (b)
Refer to Figure 2-8, Panel (a). Production at point K is
a. possible and efficient.
b. possible but inefficient.
c. impossible but efficient.
d. impossible and inefficient.
Which of the following statements is (are) correct?
a. Relative to some other scientists, economists find it more difficult to conduct
experiments.
b. Theory and observation are important in economics as well as in other sciences.
c. To obtain data, economists often rely upon the natural experiments offered by history.
d. All of the above are correct.
How did the farm population in the United States change between 1950 and today?
a. It dropped from 10 million to fewer than 3 million people.
b. It dropped from 20 million to fewer than 5 million people.
c. It dropped from 30 million to just over 6 million people.
d. It increased from 10 million to almost 13 million people.
Assume there is a multiplier effect, some crowding out, and no accelerator effect. An
increase in government expenditures changes aggregate demand more,
a. the smaller the MPC and the stronger the influence of income on money demand.
b. the smaller the MPC and the weaker the influence of income on money demand.
c. the larger the MPC and the stronger the influence of income on money demand.
d. the larger the MPC and the weaker the influence of income on money demand.
As a result of a successful attempt by government to cut the economic pie into more
equal slices,
a. the pie gets larger, and there will be more pie overall.
b. the pie gets smaller, and there will be less pie overall.
c. it increases the reward for working hard, resulting in people producing more goods
and services.
d. those who earn more income pay less in taxes.
An important difference between the GDP deflator and the consumer price index is that
a. the GDP deflator reflects the prices of goods and services bought by producers,
whereas the consumer price index reflects the prices of goods and services bought by
consumers.
b. the GDP deflator reflects the prices of all final goods and services produced
domestically, whereas the consumer price index reflects the prices of goods and
services bought by consumers.
c. the GDP deflator reflects the prices of all final goods and services produced by a
nation’s citizens, whereas the consumer price index reflects the prices of all final goods
and services bought by consumers.
d. the GDP deflator reflects the prices of all final goods and services bought by
producers and consumers, whereas the consumer price index reflects the prices of all
final goods and services bought by consumers.
France has a higher natural rate of unemployment than the United States. This suggests
that
a. France is at a higher point on its long-run Phillips curve and so has higher inflation
than the United States.
b. France is at a lower point on its long-run Phillips curve and so has lower inflation
than the United States.
c. France’s Phillips curve is to the left of that of the United States, possibly because they
have higher inflation.
d. France’s Phillips curve is to the right of that of the United States, possibly because
they have more generous unemployment compensation.
You bought some shares of stock and, over the next year, the price per share increased
by 5 percent, as did the price level. Before taxes, you experienced
a. both a nominal gain and a real gain, and you paid taxes on the nominal gain.
b. both a nominal gain and a real gain, and you paid taxes only on the real gain.
c. a nominal gain, but no real gain, and you paid taxes on the nominal gain.
d. a nominal gain, but no real gain, and you paid no taxes on the transaction.
Short-term bonds are generally
a. less risky than long-term bonds and so they feature higher interest rates.
b. less risky than long-term bonds and so they feature lower interest rates.
c. more risky than long-term bonds and so they feature higher interest rates.
d. more risky than long-term bonds and so they feature lower interest rates.
When a tax is imposed on buyers, consumer surplus decreases but producer surplus
increases.
The process by which unions and firms agree on the terms of employment is called
collective bargaining.
When a variable that is not named on either axis of a graph changes, we read the change
as a movement along the curve.
The term tax incidence refers to how the burden of a tax is distributed among the
various people who make up the economy.
When a company from Germany builds an automobile factory in the United States, the
German firm has engaged in foreign direct investment.
Within the U.S., blacks have higher rates of unemployment than whites.
Suppose the demand for calendars increases in November. At the same time, the price
of the ink used in the production of calendars increases. In the market for calendars, if
the size of the shift of the demand curve is larger than the size of the shift of the supply
curve, then the equilibrium quantity rises.
The rules established under the General Agreement on Tariffs and Trade (GATT) are
enforced by an international body called the World Trade Organization (WTO).
If all workers and all jobs were the same such that all workers were equally well suited
for all jobs, then there would be no frictional unemployment.
Economic models are most often composed of diagrams and equations.
The slope of a horizontal line is infinite, and the slope of a vertical line is zero.
If the cross-price elasticity of demand for two goods is negative, then the two goods are
complements.
Assuming constant returns to scale, if two countries are otherwise the same, the one that
is poorer grows faster.
At a rummage sale, you buy two old books and an old rocking chair; your spending on
these items is not included in current GDP.
Because almost all economists oppose policies that restrict trade among nations,
policymakers do not restrict imports of certain goods.