The labor-force participation rate measures the percentage of the
a. total adult population that is in the labor force.
b. total adult population that is employed.
c. labor force that is employed.
d. labor force that is either employed or unemployed.
In 2009 and 2010, the federal government’s budget deficit was about
a. 5 percent of GDP, and this was the highest debt-GDP ratio in U.S history.
b. 10 percent of GDP, and this was the highest debt-GDP ratio in U.S history.
c. 5 percent of GDP, and this was the highest debt-GDP ratio since World War II.
d. 10 percent of GDP, and this was the highest debt-GDP ratio since World War II.
If a country increases its saving rate in the long run
a. K/L and productivity will be higher.
b. K/L will be higher but productivity will not be higher.
c. K/L will not be higher but productivity will be higher.
d. neither K/L nor productivity will be higher.
Liquidity refers to
a. the ease with which an asset is converted to the medium of exchange.
b. the measurement of the intrinsic value of commodity money.
c. the measurment of the durability of a good.
d. how many time a dollar circulates in a given year.
Which of the following is correct?
a. The BLS uses data collected from those applying for unemployment insurance to
compute the unemployment rate.
b. The labor force includes all adults who are able to work.
c. Unpaid homemakers are counted as employed by the BLS.
d. People working part time are counted as employed by the BLS.
A policy that induces people to save more shifts
a. the supply of loanable funds and raises interest rates.
b. the supply of loanable funds and reduces interest rates.
c. the demand for loanable funds and raises interest rates.
d. the demand for loanable funds and reduces interest rates.
Mary Beth is risk averse and has $1,000 with which to make a financial investment. She
has three options. Option A is a risk-free government bond that pays 5 percent interest
each year for two years. Option B is a low-risk stock that analysts expect to be worth
about $1,102.50 in two years. Option C is a high-risk stock that is expected to be worth
about $1,200 in four years. Mary Beth should choose
a. option A.
b. option B.
c. option C.
d. either A or B because they are the same to her.
The price paid by buyers in a market will increase if the government
a. decreases a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. decreases a tax on the good sold in that market.
d. imposes a binding price ceiling in that market.
Which of the following does not affect an individual’s demand curve?
a. expectations
b. income
c. prices of related goods
d. the number of buyers
Suppose that appliance factory workers and furniture factory workers are not unionized.
If the furniture factory workers unionize, then
a. the wages of appliance factory workers will rise and the wages of furniture factory
workers will fall.
b. the wages of furniture factory workers will rise and the wages of appliance factory
workers will fall.
c. the wages of both appliance factory workers and furniture factory workers will rise.
d. the wages of both appliance factory workers and furniture factory workers will fall.
Which of the following changes in the price index produces the greatest rate of
inflation: 80 to 100, 100 to 120, or 150 to 170?
a. 80 to 100
b. 100 to 120
c. 150 to 170
d. All of these changes produce the same rate of inflation.
a. Given the table below, graph the demand and supply curves for flashlights. Make
certain to label the equilibrium price and equilibrium quantity.
Price Quantity Demanded
Per Month Quantity Supplied
Per Month
$5 6,000 10,000
$4 8,000 8,000
$3 10,000 6,000
$2 12,000 4,000
$1 14,000 2,000
b. What is the equilibrium price and the equilibrium quantity?
c. Suppose the price is currently $5. What problem would exist in the market? What
would you expect to happen to price? Show this on your graph.
d. Suppose the price is currently $2. What problem would exist in the market? What
would you expect to happen to price? Show this on your graph.
When the price of a good is lower than the equilibrium price,
a. a surplus will exist.
b. buyers desire to purchase more than is produced.
c. sellers desire to produce and sell more than buyers wish to purchase.
d. quantity supplied exceeds quantity demanded.
Country A and country B are the same except country A has a capital stock of 5,000 a
population of 12,000 and employment of 10,000. Country B has a capital stock of 8,000
and a population of 24,000 and employment of 20,000.
a. Country A has a higher standard of living and country B will not catch up.
b. Country A has a higher standard of living but country B will catch up.
c. Country B has a higher standard of living and country A will not catch up.
d. Country B has a higher standard of living but country A will catch up.
Figure 22-5
Use the graph below to answer the following questions.
Refer to Figure 22-5. If the economy starts at C and the money supply growth rate
increases, in the long run the economy
a. stays at C.
b. moves to B.
c. moves to F.
d. None of the above is consistent wit an increase in the money supply growth rate.
If the MPC is 0.75 and there are no crowding-out or accelerator effects, then an initial
increase in aggregate demand of $100 billion will eventually shift the aggregate
demand curve to the right by
a. $80 billion.
b. $125 billion.
c. $400 billion.
d. $500 billion.
Figure 4-22
Panel (a) Panel (b)
Panel (c) Panel (d)
Refer to Figure 4-22. Panel (d) shows which of the following?
a. a decrease in demand and a decrease in quantity supplied
b. a decrease in demand and a decrease in supply
c. a decrease in quantity demanded and a decrease in quantity supplied
d. a decrease in quantity demanded and a decrease in supply
Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents
the price of cars.
Refer to Figure 9-8. When the country for which the figure is drawn allows
international trade in cars,
a. consumer surplus increases by the area B.
b. producer surplus decreases by the area B + D.
c. total surplus increases by the area D.
d. All of the above are correct.
A candidate for political office announces the following policies which, he says,
economics clearly demonstrates will lead to higher output in the long run: 1. reduce
immigration from abroad 2. make trade more open between the US and other countries:
a. 1 and 2 both shift long-run aggregate supply right.
b. 1 and 2 both shift long-run aggregate supply left.
c. 1 shifts long-run aggregate supply right, 2 shifts long-run aggregate supply left.
d. 1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right.
President Bush imposed temporary tariffs on imported steel in 2002. The reasons for
this trade restriction is most consistent with the
a. national-security argument.
b. infant-industry argument.
c. unfair competition argument.
d. protection-as-a-bargaining chip-argument.
The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons
of milk, 2 shirts, and 2 pairs of pants. In 2005, bread cost $1.00 per loaf, milk cost
$1.50 per gallon, shirts cost $6.00 each, and pants cost $10.00 per pair. In 2006, bread
cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each, and pants cost
$12.00 per pair. Using 2005 as the base year, what was Aquilonia’s inflation rate in
2006?
a. 4 percent
b. 11 percent
c. 19.6 percent
d. 24.4 percent
A.W. Phillips’s discovery of a particular relationship between unemployment and
inflation for the United Kingdom
a. could not be extended to other countries, despite many researchers’ attempts to
provide that extension.
b. was quickly extended to other countries by researchers.
c. was extended to only one other country the United States.
d. was harshly criticized by the American economists Paul Samuelson and Robert
Solow on the grounds that Phillips’s study was fundamentally flawed.
The country of Yokovia does not trade with any other country. Its GDP is $20 billion.
Its government collects $4 billion in taxes and pays out $3 billion to households in the
form of transfer payments. Consumption equals $15 billion and investment equals $2
billion. What is public saving in Yokovia, and what is the value of the goods and
services purchased by the government of Yokovia?
a. -$2 billion and $3 billion
b. $1 billion and $3 billion
c. -$1 billion and $4 billion
d. There is not enough information to answer the question.
Which of the following shifts the long-run aggregate supply curve to the left?
a. either an increase in the price of imported natural resources or opening up
international trade
b. neither an increase in the price of imported natural resources or opening up
international trade
c. an increase in the price of imported natural resources, but not opening up
international trade
d. opening up international trade, but not an increase in the price of imported natural
resources
Which of the following statements about the term of a bond is correct?
a. Term refers to the various characteristics of a bond, including its interest rate and tax
treatment.
b. The term of a bond is determined entirely by its credit risk.
c. The term of a bond is determined entirely by how much sales charge the buyer of the
bond pays when he or she purchases the bond.
d. Interest rates on long-term bonds are usually higher than interest rates on short-term
bonds.
Between 1950 and today there was a
a. 20 percent drop in the number of farmers, but farm output more than tripled.
b. 30 percent drop in the number of farmers, but farm output more than tripled.
c. 50 percent drop in the number of farmers, but farm output more than doubled.
d. 70 percent drop in the number of farmers, but farm output more than doubled.
When each person specializes in producing the good in which he or she has a
comparative advantage, total production in the economy
a. falls.
b. stays the same.
c. rises.
d. may fall, rise, or stay the same.
Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.
Refer to Figure 8-8. One effect of the tax is to
a. reduce consumer surplus by $108.
b. reduce producer surplus by $72.
c. create a deadweight loss of $60.
d. All of the above are correct.
From 2001 to 2004, the U.S. government went from a budget surplus to a budget
deficit. According to the open-economy macroeconomic model, this should have
decreased
a. both the supply of loanable funds and the supply of dollars in the market for
foreign-currency exchange.
b. neither the supply of loanable funds nor the supply of dollars in the market for
foreign-currency exchange.
c. the supply of loanable funds but not the supply of dollars in the market for
foreign-currency exchange.
d. the supply of dollars in the market for foreign-currency exchange, but not the supply
of loanable funds.
Given the following information, what are the values of M1 and M2?
a. M1 = $800 billion, M2 = $4,950 billion.
b. M1 = $250 billion, M2 = $6,050 billion.
c. M1 = $850 billion, M2 = $4, 900 billion.
d. M1 = $850 billion, M2 = $6,100 billion.
Which of the following would cause prices and real GDP to rise in the short run?
a. short-run aggregate supply shifts right
b. short-run aggregate supply shifts left
c. aggregate demand shifts right
d. aggregate demand shifts left
Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Alex, Barb, and Carlos are the only three
buyers of oranges, and only three oranges can be supplied per day.
Refer to Table 7-5. Who experiences the largest loss of consumer surplus when the
price of an orange increases from $0.70 to $1.40?
a. Allison
b. Bob
c. Charisse
d. All three individuals experience the same loss of consumer surplus.
One of President Obama’s first policy initiatives was a stimulus bill that included large
increases in government spending.
Even though federal law mandates that workers and firms each pay half of the total
FICA tax, the tax burden may not fall equally on workers and firms.
As long as two people have different opportunity costs, each can gain from trade with
the other, since trade allows each person to obtain a good at a price lower than his or her
opportunity cost.
A recession has no benefit to society-it represents a sheer waste of resources.
International data on real GDP per person gives us a sense of how standards of living
vary across countries.
A person received 4% nominal interest. The inflation rate was -2% and the tax rate was
25%. This person received an after-tax real interest rate of 5%.
A debit card is more similar to a credit card than to a check.
If the government imposes a binding price floor in a market, then the consumer surplus
in that market will increase.
Write the rule of 70. Suppose that your great-great-grandmother put $50 in a savings
account 100 years ago and the account is now worth $1,600. Use the rule of 70 to
determine about what interest rate she earned.
Employment can rise in one region of the country while it falls in another.
The Bureau of Labor Statistics’ U-4 measure of joblessness includes discouraged
workers.
Suppose the Fed sells government bonds. Use a graph of the money market to show
what this does to the value of money.
At the equilibrium price, quantity demanded is equal to quantity supplied.
In the 1990s, several stocks had very, very high price to earnings ratios. These stocks
appeared overvalued to many observers. What might the people who bought them have
been thinking?
If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour, then a
shortage of labor will exist.