When a tax is placed on the buyers of lemonade, the
a. sellers bear the entire burden of the tax.
b. buyers bear the entire burden of the tax.
c. burden of the tax will be always be equally divided between the buyers and the
sellers.
d. burden of the tax will be shared by the buyers and the sellers, but the division of the
burden is not always equal.
Productivity is the amount of goods and services
a. an economy produces. It is not linked to a nation’s economic policies.
b. an economy produces. It is linked to a nation’s economic policies.
c. produced for each hour of a worker’s time. It is not linked to a nation’s economic
policies.
d. produced for each hour of a worker’s time. It is linked to a nation’s economic
policies.
When Chile experiences investment from abroad, it experiences, as a result,
a. an increase in productivity.
b. a decrease in Gross National Product (GNP).
c. lower wages for Chilean workers.
d. None of the above is correct.
Ellie decides to spend two hours taking a nap rather than attending her classes. Her
opportunity cost of napping is
a. the value of the knowledge she would have received had she attended class.
b. the $24 she could have earned if she had worked at her job for those two hours.
c. the value of her nap less the value of attending class.
d. nothing, since she valued sleep more than attendance at class.
National saving
a. is the total income in the economy that remains after paying for consumption.
b. is the total income in the economy that remains after paying for consumption and
government purchases.
c. is always greater than investment for a closed economy.
d. is equal to private saving minus public saving.
For purposes of calculating the CPI, the housing category of consumer spending
includes the cost of
a. shelter.
b. fuel and other utilities.
c. household furnishings and operation.
d. All of the above are correct.
Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are
2,000. What value of government purchases would make national savings equal to
1,000 and at that value would the government have a deficit or surplus?
a. 2,500, deficit
b. 2,500, surplus
c. 1,000, deficit
d. 1,000, surplus
In the late 1960’s, Milton Friedman and Edmund Phelps argued that a tradeoff between
inflation and unemployment
a. existed in the long run and the short run.
b. existed in the long run but not the short run.
c. existed in the short run but not the long run.
d. did not exist.
Suppose the incomes of buyers in a market for a particular normal good decrease and
there is also a reduction in input prices. What would we expect to occur in this market?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which
of the following is implied by purchasing-power parity?
a. P = e/P*
b. 1 = e/P*
c. e = P*/P
d. None of the above is correct.
Amanda talks with several different brokers at a social gathering. She hears the
following advice from brokers A, B, and C. Which broker, if any, gave her incorrect
advice?
a. Broker A: “There are risks in holding stocks, even in a highly diversified portfolio.”
b. Broker B: “Portfolios with smaller standard deviations have lower risk.”
c. Broker C: “Stocks with greater risks offer lower average returns.”
d. They all gave her correct advice.
Figure 21-2. On the left-hand graph, MS represents the supply of money and MD
represents the demand for money; on the right-hand graph, AD represents aggregate
demand. The usual quantities are measured along the axes of both graphs.
.
Refer to Figure 21-2. What does Y represent on the horizontal axis of the right-hand
graph?
a. the quantity of money
b. the rate of inflation
c. real output
d. nominal output
In the short run, which of the following rates of growth in the money supply is likely to
lead to the highest level of unemployment in the economy?
a. 1 percent per year
b. 2 percent per year
c. 3 percent per year
d. 4 percent per year
Which of the following illustrates how the investment accelerator works?
a. An increase in government expenditures increases the interest rate so that the
Burgerville chain of restaurants decides to build fewer new restaurants.
b. An increase in government expenditures increases aggregate spending so that
Burgerville finds it profitable to build more new restaurants.
c. An increase in government expenditures increases the interest rate so that the demand
for stocks and bonds issued by Burgerville increases.
d. An increase in government expenditures decreases the interest rate so that Burgerville
decides to build more new restaurants.
A decrease in government spending
a. increases the interest rate and so investment spending increases.
b. increases the interest rate and so decreases investment spending decreases.
c. decreases the interest rate and so investment spending increases.
d. decreases the interest rate and so investment spending decreases.
If a person is risk averse, then she has
a. diminishing marginal utility of wealth, implying that her utility function gets flatter
as wealth increases.
b. diminishing marginal utility of wealth, implying that her utility function gets steeper
as wealth increases.
c. increasing marginal utility of wealth, implying that her utility function gets flatter as
wealth increases.
d. increasing marginal utility of wealth, implying that her utility function gets steeper as
wealth increases.
Which of the following is correct?
a. Labor force = number of employed.
b. Labor force = population – number of unemployed.
c. Unemployment Rate = number of unemployed +(number of employed + number of
unemployed) X
d. Unemployment Rate = number of unemployed +adult population X
Scenario 9-1
The before-trade domestic price of peaches in the United States is $40 per bushel. The
world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for
peaches.
Refer to Scenario 9-1. If trade in peaches is allowed, the price of peaches in the United
States
a. will increase, and this will cause consumer surplus to decrease.
b. will decrease, and this will cause consumer surplus to increase.
c. will be unaffected, and consumer surplus will be unaffected as well.
d. could increase or decrease or be unaffected; this cannot be determined.
The CPI is more commonly used as a gauge of inflation than the GDP deflator is
because
a. the CPI is easier to measure.
b. the CPI is calculated more often than the GDP deflator is.
c. the CPI better reflects the goods and services bought by consumers.
d. the GDP deflator cannot be used to gauge inflation.
Proprietary technology is technology that is
a. widely used because it is easy to learn.
b. widely used because the government subsidizes its use.
c. not widely used because people could, but have not, taken the time to learn how to
apply it.
d. not widely used because it is known or controlled only by the company that
discovered it.
U.S. tax laws allow taxpayers, in computing the amount of tax they owe, to use the real
value, as opposed to the nominal value, of
a. both interest income and capital gains.
b. interest income but not capital gains.
c. capital gains but not interest income.
d. neither interest income nor capital gains.
Between October 2001 and October 2002, the CPI in Canada rose from 116.5 to 119.8
and the CPI in Mexico rose from 93.2 to 102.3. What were the inflation rates for
Canada and Mexico over this one-year period?
a. 2.8 percent for Canada and 9.1 percent for Mexico
b. 2.8 percent for Canada and 9.8 percent for Mexico
c. 3.3 percent for Canada and 9.1 percent for Mexico
d. 3.3 percent for Canada and 9.8 percent for Mexico
Suppose you make jewelry. If the price of gold falls, then we would expect you to
a. be willing and able to produce less jewelry than before at each possible price.
b. be willing and able to produce more jewelry than before at each possible price.
c. face a greater demand for your jewelry.
d. face a weaker demand for your jewelry.
A U.S. company wants to buy yen in order to buy Japanese bonds. In the open-economy
macroeconomic model, this transaction would be part of
a. the supply of currency in the foreign exchange market, and part of the supply of
loanable funds.
b. the demand for currency in the foreign exchange market, and part of the supply of
loanable funds.
c. the supply of currency in the foreign exchange market, and part of the demand for
loanable funds.
d. the demand for currency in the foreign exchange market, and part of the demand for
loanable funds.
Assume the MPC is 0.625. Assuming only the multiplier effect matters, a decrease in
government purchases of $10 billion will shift the aggregate demand curve to the
a. left by about $13.3 billion.
b. left by about $26.7 billion.
c. right by about $36.7 billion.
d. None of the above is correct.
Table 16-3.
The First Bank of Fairfield
Refer to Table 16-3. Starting from the situation as depicted by the T-account, if
someone deposits $500 into the First Bank of Fairfield, and if the bank makes new
loans so as to keep its reserve ratio unchanged, then the amount of new loans that it
makes will be
a. $320.
b. $400.
c. $680.
d. $750.
Figure 9-9
Refer to Figure 9-9. Consumer surplus in this market after trade is
a. A.
b. A + B.
c. A + B + D.
d. C.
Which of the following examples of production of goods and services would be
included in U.S. GDP?
a. Samantha, a Canadian citizen, grows sweet corn in Minnesota and sells it to a
grocery store in Canada.
b. Ian, an American citizen, grows peaches for his family in the back yard of their
Atlanta home.
c. Leo, an American citizen, grows marijuana in his Seattle home and sells it to his
friends and neighbors.
d. None of the above examples of production would be included in U.S. GDP.
Suppose demand is perfectly elastic, and the supply of the good in question decreases.
As a result,
a. the equilibrium quantity decreases, and the equilibrium price is unchanged.
b. the equilibrium price increases, and the equilibrium quantity is unchanged.
c. the equilibrium quantity and the equilibrium price both are unchanged.
d. buyers’ total expenditure on the good is unchanged.
Suppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a
price of $80. Katie’s willingness to pay was $100, Kendra’s willingness to pay was $95,
and Kristen’s willingness to pay was $80. Which of the following statements is correct?
a. For the three individuals together, consumer surplus amounts to $35.
b. Having bought the cell phone, Kristen is better off than she would have been had she
not bought it.
c. Had the price of the cell phone been $95 rather than $80, Katie and Kendra definitely
would have been buyers and Kristen definitely would not have been a buyer.
d. The fact that all three individuals paid $80 for the same type of cell phone indicates
that each one placed the same value on that cell phone.
The country of Aceland produces two goods, televisions and computers. Last year, it
produced 200 televisions and 500 computers. This year, it produced 250 televisions and
600 computers. Given no other information, which of the following events could not
explain this change?
a. Aceland experienced a reduction in unemployment.
b. Aceland experienced an improvement in computer-making technology.
c. Aceland acquired more resources.
d. Any of these events could, in fact, explain the change.
In June 2009 the BLS reported a U.S. foreign-born population of 3 million. Of these,
22.7 million were employed and 1.4 million were unemployed. Based on these numbers
what were the unemployment rate and the labor-force participation rate of the
foreign-born U.S. population?
a. 1.4/35.3 and 22.7/35.3
b. 1.4/35.3 and 24.1/35.3
c. 1.4/24.1 and 22.7/24.1
d. None of the above are correct.