An appreciation of the Japanese yen relative to the U.S. dollar will
a. increase aggregate demand in the United States.
b. increase aggregate supply in the United States.
c. increase aggregate demand in Japan.
d. decrease aggregate supply in Japan.
Rising prices of resources leads to inefficient resource use by industry.
a. True
b. False
A rise in net exports shifts the aggregate
a. demand curve inward.
b. demand curve outward.
c. supply curve outward.
d. supply curve inward.
If society produces at a point inside the production possibilities frontier, it is
characterized by full employment of resources.
a. True
b. False
Which of the following is characteristic of indifference curves?
a. They are negatively sloped.
b. They never intersect.
c. They are convex toward the origin.
d. All of the above are correct.
John Maynard Keynes wrote The General Theory of Employment, Interest, and Money
(1936) to
a. improve the gold supply balances of the British government.
b. prove that the punitive nature of the Treaty of Versailles would ultimately lead to
recession in Europe.
c. prove that active government policy would produce unemployment and high rates of
inflation.
d. demonstrate that pessimistic consumers and businesspersons could reduce their
spending and condemn the economy to long-run stagnation.
Suppose that the Fed decides to increase the growth rate of the money supply in the
United States. What is most likely to happen to the U.S. trade deficit and to GDP?
a. The trade deficit will fall; GDP will fall.
b. The trade deficit will rise; GDP will rise.
c. The trade deficit will fall; GDP will rise.
d. The trade deficit will rise; GDP will fall.
Free markets produce relatively high levels of efficiency but low rates of growth.
a. True
b. False
According to Robert Reich, secretary of Labor in the Clinton administration,
a. the identity of American companies is clear, and laws should be written accordingly.
b. foreign companies are clearly different from American companies.
c. multinational companies have clear bases of operations, which form their identity.
d. it is almost impossible to define the nationality of a multinational company.
e. identifying the country of origin of a product is almost impossible, but essential for
proper regulation.
If the price of one input changes, the firm will change its use of that input only.
a. True
b. False
Which of the following is most likely to lead to demand-side inflation?
a. an increase in government spending
b. a decrease in taxes
c. an increase in the money supply
d. All of the above are correct.
Which of the following is a valid effect of monopoly power?
a. Desirable effects on the distribution of wealth.
b. Efficient resource allocation.
c. Fostering of innovation.
d. Obstacle to efficiency.
In 1984, the South Carolina State Supreme Court ruled that a 20 percent admission tax
on X-rated movies was unconstitutional. When the affected cinemas sought a refund of
collected taxes, they were denied on the grounds that the tax, although collected by the
theater, was indeed paid by the theatergoers. The Supreme Court apparently believed
a. the supply of X-rated movies was perfectly elastic.
b. the demand for X-rated movies was perfectly inelastic.
c. the legislation intended that the theatergoers pay the tax.
d. the burden fell on the theatergoers-there are no excess burdens on the theater.
Rent control is usually justified on the grounds that it protects moderate- to low-income
families from the burden of rapidly rising rents and from eviction if they are unable to
pay. It also prevents landlords from reaping windfalls as property values rise.
Opponents note that rent controls usually lead to a reduced supply of rental housing and
shortages. The proponents of rent controls support them primarily on the grounds of
a. efficiency.
b. equality.
c. externalities.
d. cost disease of services.
If MRP > P, a firm should use less of that input.
a. True
b. False
A monopoly firm always devotes some of its profits to research.
a. True
b. False
If a country tries to stimulate the economy with fiscal policy, the effects will be
exchange rate
a. depreciation, lower interest rates, and a small increase in aggregate demand.
b. depreciation, higher interest rates, and a small decrease in aggregate demand.
c. appreciation, lower interest rates, and a small increase in aggregate demand.
d. appreciation, higher interest rates, and a small increase in aggregate demand.
The basic idea behind the multiplier is that an increase in
a. GDP brings about an additional, larger increase in GDP.
b. consumer spending causes a larger increase in investment spending.
c. government spending causes a larger increase in tax revenues.
d. spending will cause an even larger increase in equilibrium GDP.
The major incentive for cost minimization is the
a. power of shareholders in the company.
b. fear of top management by workers.
c. discipline imposed by the market system.
d. impact on U.S. corporations of taxing by the government.
No tax can lead the economy to higher levels of efficiency.
a. True
b. False
Loopholes increase the efficiency of the tax system by making taxpayers better off.
a. True
b. False
Which of the following groups would have the highest unemployment rates?
a. married men
b. white workers
c. college graduates
d. teenagers
Opportunity cost is the highest possible price you can receive when you sell an object.
a. True
b. False
The assumption that firms attempt to maximize profits will yield good predictions even
if firms sometimes pursue other goals.
a. True
b. False
Suppose that because of climatic conditions, the smog levels in Los Angeles suddenly
soar to dangerous levels. The most successful policy in this case would be
a. direct controls to limit driving.
b. taxes on drivers at rush hours.
c. voluntary cooperation to reduce driving.
d. removal of autos with excessive emissions.
Following the sharp increases in oil prices in the United States caused by the OPEC oil
embargo of 1973-1974, U.S. automakers started building smaller, more fuel-efficient
cars. This development caused the
a. demand curve for oil to shift out.
b. demand curve for oil to shift in.
c. supply curve of oil to shift out.
d. supply curve of oil to shift in.
Economists are still puzzled why growth rates in the United States fell from 1973 to
1995.
a. True
b. False
The sale of new stocks by a corporation is one source of investment funds.
a. True
b. False
Which of the following will most likely have the greatest effect on an individual’s
consumption function?
a. winning a small amount in the lottery
b. a one-time tuition grant
c. a week of high overtime pay
d. an inheritance paying a modest annual dividend
For given inputs of labor and capital, if technology is more primitive, labor productivity
will be
a. higher.
b. lower.
c. unchanged.
d. characterized by increasing returns to scale.
In an open economy, the government deficit is 600 and saving exceeds investment by
500, so in equilibrium the trade deficit (IM − X) must be
a. 100.
b. 200.
c. 300.
d. 700.