Suppose the world had only two countries and domestic residents of country A
purchased $50 billion of assets from country B and country B purchased $30 billion of
assets from country A. What would the net capital outflows of both countries be?
a. $50 billion for country A and $30 billion for country B
b. $30 billion for country A and $50 billion for country B
c. $20 billion for country A and -$20 billion for country B
d. -$20 billion for country A and $20 billion for country B
A tax on the sellers of coffee will increase the price of coffee paid by buyers,
a. increase the effective price of coffee received by sellers, and increase the equilibrium
quantity of coffee.
b. increase the effective price of coffee received by sellers, and decrease the equilibrium
quantity of coffee.
c. decrease the effective price of coffee received by sellers, and increase the equilibrium
quantity of coffee.
d. decrease the effective price of coffee received by sellers, and decrease the
equilibrium quantity of coffee.
The ability of an individual to own and exercise control over scarce resources is called
a. market failure.
b. property rights.
c. externality.
d. market power.
Figure 14-2. The figure shows a utility function for Mary Ann.
Refer to Figure 14-2. Suppose the vertical distance between the points (0, A) and (0,
B) is 5. If her wealth increased from $1,050 to $1,350, then
a. Mary Ann’s subjective measure of her well-being would increase by less than 5 units.
b. Mary Ann’s subjective measure of her well-being would increase by more than 5
units.
c. Mary Ann would change from being a risk-averse person into a person who is not
risk averse.
d. Mary Ann would change from being a person who is not risk averse into a risk-averse
person.
Figure 8-13
Refer to Figure 8-13. Panel (a) and Panel (b) each illustrate a $4 tax placed on a
market. In comparison to Panel (b), Panel (a) illustrates which of the following
statements?
a. When demand is relatively inelastic, the deadweight loss of a tax is smaller than
when demand is relatively elastic.
b. When demand is relatively elastic, the deadweight loss of a tax is larger than when
demand is relatively inelastic.
c. When supply is relatively inelastic, the deadweight loss of a tax is smaller than when
supply is relatively elastic.
d. When supply is relatively elastic, the deadweight loss of a tax is larger than when
supply is relatively inelastic.
Which of the following would be considered physical capital?
a. the refrigerators at Uncle Bob’s restaurant
b. rivers on which goods are transported
c. the skills and knowledge of a lawyer
d. All of the above are correct.
Table 7-8
The only four producers in a market have the following costs:
Refer to Table 7-8. If Evan, Selena, Angie, and Kris sell the good, and the resulting
producer surplus is $700, then the price must have been
a. $200.
b. $300.
c. $500.
d. $700.
Table 3-2
Assume that Aruba and Iceland can switch between producing coolers and producing
radios at a constant rate.
Labor Hours
Needed to Make 1
Refer to Table 3-2. Assume that Aruba and Iceland each has 80 labor hours available.
If each country divides its time equally between the production of coolers and radios,
then total production is
a. 28 coolers and 50 radios.
b. 30 coolers and 9 radios.
c. 60 coolers and 18 radios.
d. 120 coolers and 36 radios.
Which of the following concepts cannot be illustrated by the production possibilities
frontier?
a. efficiency
b. opportunity cost
c. equality
d. trade-offs
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The per-unit burden of the tax on buyers is
a. $20.
b. $200.
c. $300.
d. $500.
In a certain economy, when income is $400, consumer spending is $350. The value of
the multiplier for this economy is 3.125. It follows that, when income is $450,
consumer spending is
a. $384. For this economy, an initial impulse of $50 in consumer spending translates
into a $146.67 increase in aggregate demand.
b. $384. For this economy, an initial impulse of $50 in consumer spending translates
into a $156.25 increase in aggregate demand.
c. $389.38. For this economy, an initial impulse of $50 in consumer spending translates
into a $146.67 increase in aggregate demand.
d. $389.38. For this economy, an initial impulse of $50 in consumer spending translates
into a $156.25 increase in aggregate demand.
If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied
would
a. increase by 4.2%.
b. increase by 6%.
c. decrease by 4.2%.
d. decrease by 6%.
JR sells RV’s. In 2010 she added $400,000 to her inventory. $100,000 of this addition
was from used RV’s she purchased while the remaining $300,000 was from her
purchases of newly manufactured RV’s. How much of JR’s inventory is included in
2010 GDP?
a. $0
b. $100,000
c. $300,000
d. $400,000
At one time, people in a certain country had no access to banks; they relied exclusively
on currency. Then, a fractional-reserve banking system was created. As a result, the
money supply
a. increased. The central bank could have reduced the size of this increase by buying
bonds.
b. increased. The central bank could have reduced the size of this increase by selling
bonds.
c. decreased. The central bank could have reduced the size of this decrease by buying
bonds.
d. decreased. The central bank could have reduced the size of this decrease by selling
bonds.
The nominal exchange rate is .80 euros per U.S. dollar and a basket of goods in France
costs 1,000 euros while the same basket costs $800 in the U.S. The nominal exchange
rate is 2 Australian dollars per U.S. dollar and a basket of goods in Australia costs 960
Australian dollars while the same basket costs $800 in the U.S.. Which country has
purchasing-power parity with the U.S.?
a. both France and Australia
b. France but not Australia
c. Australia but not France
d. neither France nor Australia
Three years ago Heidi put $1,200 into an account paying 2 percent interest. How much
is the account worth today?
a. $1,225.38
b. $1,248.48
c. $1,264.72
d. $1,273.45
Figure 4-1
Refer to Figure 4-1. The movement from point A to point B on the graph shows
a. a decrease in demand.
b. an increase in demand.
c. a decrease in quantity demanded.
d. an increase in quantity demanded.
Ultimately, the change in unemployment associated with a change in inflation is due to
a. the shape of the long-run aggregate supply curve.
b. unanticipated inflation, not inflation per se.
c. anticipated inflation, not inflation per se.
d. a change in the natural rate of unemployment.
Figure 5-11
Refer to Figure 5-11. Using the midpoint method, the price elasticity of demand
between point C and point D is about
a. 0.29.
b. 0.54.
c. 1.86.
d. 2.0.
Other things the same, if the Swedish real interest rate were to decrease, Swedish net
capital outflow
a. and net capital outflow of other countries would rise.
b. and net capital outflow of other countries would fall.
c. would rise, while net capital outflow of other countries would fall.
d. would fall, while net capital outflow of other countries would rise.
Scenario 11-2
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005
read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
Refer to Scenario 11-2. In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf
ball cost
a. $0.55, so golf balls were cheaper in 1975.
b. $0.55, so golf balls were cheaper in 2005.
c. $7.32, so golf balls were cheaper in 1975.
d. $7.32, so golf balls were cheaper in 2005.
If a central bank reduced inflation by 2 percentage points and that made output fall by 1
percentage points for 2 years and the unemployment rate rise from 3 percent to 5
percent for 2 years, the sacrifice ratio is
a. 1/2.
b. 1.
c. 2.
d. 4.
Which of the following statements about real and nominal interest rates is correct?
a. Real interest rates can be either positive or negative, but nominal interest rates must
be positive.
b. Real interest rates and nominal interest rates must be positive.
c. Real interest rates must be positive, but nominal interest rates can be either positive
or negative.
d. Real interest rates and nominal interest rates can be either positive or negative.
The amount of deadweight loss that results from a tax of a given size is determined by
a. whether the tax is levied on buyers or sellers.
b. the number of buyers in the market relative to the number of sellers.
c. the price elasticities of demand and supply.
d. the ratio of the tax per unit to the effective price received by sellers.
The before-trade price of fish in Denmark is $10.00 per pound. The world price of fish
is $6.00 per pound. Denmark is a price-taker in the fish market. If Denmark begins to
allow trade in fish, its consumers of fish will become
a. better off, its producers of fish will become better off, and on balance the citizens of
Denmark will become better off.
b. worse off, its producers of fish will become better off, and on balance the citizens of
Denmark will become worse off.
c. worse off, its producers of fish will become better off, and on balance the citizens of
Denmark will become worse off.
d. better off, its producers of fish will become worse off, and on balance the citizens of
Denmark will become better off.
A country experiencing a growth rate of 8% per year can go from being one of the
poorest to one of the richest in how many generations?
a. one
b. two
c. three
d. four
Which of the following people purchased the correct asset to meet his or her objective?
a. Michelle wanted to be a part owner of Mamma Rosa’s Pizza, so she purchased a bond
issued by Mamma Rosa’s Pizza.
b. Tim wanted a high return, even if it meant taking some risk, so he purchased stock
issued by Specific Electric instead of bonds issued by Specific Electric.
c. Jennifer wanted to buy equity in Honda, so she purchased bonds sold by Honda.
d. All of the above are correct.
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. What is measured along the horizontal axis of the right-hand
graph?
a. time
b. the unemployment rate
c. real GDP
d. the growth rate of real GDP
Those who desire that policymakers stabilize the economy would advocate which of the
following when aggregate demand is insufficient to ensure full employment?
a. Decrease the money supply.
b. Decrease taxes.
c. Decrease government expenditures.
d. Do nothing and let markets correct themselves.
Figure 3-9
Uzbekistan’s Production Possibilities Frontier Azerbaijan’s Production
Possibilities Frontier
Refer to Figure 3-9. Azerbaijan’s opportunity cost of one bolt is
a. 1/4 nail and Uzbekistan’s opportunity cost of one bolt is 1/2 nail.
b. 1/4 nail and Uzbekistan’s opportunity cost of one bolt is 2 nails.
c. 4 nails and Uzbekistan’s opportunity cost of one bolt is 1/2 nail.
d. 4 nails and Uzbekistan’s opportunity cost of one bolt is 2 nails.
Table 3-12
Labor Hours Needed to
Make 1 Pound of: Amount
Produced in 40 hours
Refer to Table 3-12. For the rancher, the opportunity cost of 16 pounds of meat is
a. 4.0 pounds of potatoes.
b. 5.2 pounds of potatoes.
c. 6.4 pounds of potatoes.
d. 9.6 pounds of potatoes.
In the circular-flow diagram, in the markets for
a. goods and services, households and firms are both sellers.
b. goods and services, households are buyers and firms are sellers.
c. the factors of production, households are buyers and firms are sellers.
d. the factors of production, households and firms are both buyers.
When deciding how much to save, people care most about
a. after-tax nominal interest rates.
b. after-tax real interest rates.
c. before-tax real interest rates.
d. before-tax nominal interest rates.
Figure 5-9
Refer to Figure 5-9. If price increases from $10 to $15, total revenue will
a. increase by $20, so demand must be inelastic in this price range.
b. increase by $5, so demand must be inelastic in this price range.
c. decrease by $20, so demand must be elastic in this price range.
d. decrease by $10, so demand must be elastic in this price range.
In addition to
a. performing financial intermediation, banks are important in that they help create a
medium of exchange.
b. serving as financial markets, mutual funds are important in that they help create a
store of value.
c. serving as stores of value, stocks and bonds also serve as media of exchange.
d. All of the above are correct.