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Explanations for the high saving rate in Japan consistent with the life-cycle reason for
saving include:
A. long life expectancies and large down payments required for home purchases.
B. lifetime employment.
C. the desire to leave resources to children who provide support and attention to parents
in their old age.
D. low unemployment rates in Japan.
Which of the following is an example of an intermediate good?
A. A new car sold to a family
B. A metal-stamping machine used to produce cars sold to an automaker
C. A new CD player sold to an automaker for installation in a car
D. A new CD player sold to a teenager
The saving of the government sector is called ______ saving.
A. private
B. public
C. national
D. aggregate
Individuals have ____ control over the human capital that they bring to the labor market
because
A. no; human capital is innate.
B. complete; human capital formation is the result of hard work.
C. partial; some human capital is innate and some is the result of hard work.
D. no; human capital is largely a matter of luck.
Starting from full employment at the initial target inflation rate, if there is an adverse
inflation shock, then the Federal Reserve must _____ in order to keep inflation at the
initial target level.
A. increase the target inflation rate.
B. decrease the target inflation rate.
C. maintain the initial target inflation rate.
D. shift the short-run aggregate supply curve up.
Perfectly competitive firms maximize profit when:
A. average costs are minimized.
B. total costs are minimized.
C. average costs equal price.
D. marginal costs equal price.
Refer to the figure above. After the price ceiling at price G is imposed, consumer
surplus _ is represented by the area _______.
A. BJEH
B. BAEH
C. JAE
D. GAEF
Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the
price of a jar of peanut butter is $3.
Suppose that at the original income of $30 the price of a loaf of bread increased to
$3.00 and the price of a jar of peanut butter decreased to $2. Dusty can buy a maximum
of _____ loaves of bread or a maximum of _____ jars of peanut butter.
A. 10, 15
B. 15, 10
C. 20, 15
D. 15, 20
The sum of the value added by all firms equals total:
A. profits.
B. spending on capital goods.
C. investment spending.
D. value of final goods and services.
According to the textbook, Aid to Families with Dependent Children encouraged
A. women to have an excessive number of children.
B. men and women to stay together to raise children.
C. men to return home to the mother and children.
D. the breakup of families since the presence of a man terminated benefits.
Which of the following would cause supply to shift to the right?
A. The number of firms in the industry falls.
B. Demand for the good increases.
C. The production technology improves.
D. The price of the good increases.
Barry owns a clothing store in the mall and has asked two economic consultants to
develop models of consumer behavior that he can use to increase sales. Barry should
choose the model that:
A. does not include simplifying assumptions.
B. is the most detailed and complex.
C. assumes that consumers apply the cost-benefit principle.
D. predicts that consumers will always prefer Barry's store to the competing stores.
Holding other factors constant, a technological improvement that increases the marginal
product of capital will:
A. increase national saving.
B. decrease national saving.
C. increase investment.
D. decrease investment.
As consumers' incomes decrease, the demand curve for bologna sandwiches shifts to
the right. Therefore bologna sandwiches are:
A. normal goods.
B. complement goods.
C. substitute goods.
D. inferior goods.
P-TV and QRS-TV are planning their fall line-up. Suppose that sit-coms are more
popular than reality shows, and so generate more advertising revenue than do reality
shows, but they are more expensive to produce since real actors must be hired. In the
following decision tree, QRS-TV announces its decision first and P-TV observes that
choice before it decides whether to air a sit-com in the same time slot or a reality show.
Both stations know all of the information shown in this diagram when they make their
decisions.
Refer to the information above. Suppose QRS-TV enters into an agreement with P-TV
that gives QRS-TV the exclusive right to air a reality show during this time slot.
QRS-TV would have to pay P-TV _____ in order to persuade P-TV to enter into this
agreement.
A. at least $10 million
B. nothing
C. at least $5 million
D. more than zero, but less than $5 million
Assume the consumer is correctly applying the rational spending rule for goods jeans
and t-shirts. If the price of jeans falls, purchases of jeans and t-shirts rise because
A. the marginal utility of jeans increases.
B. the marginal utility of t-shirts increases.
C. the marginal utility of jeans decreases.
D. combinations of jeans and t-shirts that could not be considered before now become
available.
Alex, who is risk-neutral, is looking for an apartment. The distribution of apartments of
equal quality is as follows: 70% rent for $700 per month, 20% rent for $600 per month,
and 10% rent for $500 per month. Alex's costs of searching rise by $10 with each
search.
Alex signed a 6-month lease for an apartment that provides for a monthly rent of $600.
Shortly after signing the lease, Lou asks Alex to share an apartment, splitting the rent at
$300 per person. The lease Alex signed
A. creates a commitment problem.
B. is a commitment device.
C. prevents Alex from free riding on Lou.
D. is unenforceable because it reduces economic freedom.
After subsistence levels of food, shelter, and clothing are provided,
A. all other goods and services are "needs".
B. many goods and services are "needs".
C. all other goods and services are "wants".
D. all other goods and services are "luxuries".
Assume that the union wage already exceeds the market-clearing wage. If the union
wage is increased, holding other factors constant, then the number unemployed ______
and the number employed _____.
A. increase; increases
B. increases; decreases
C. increases; does not change
D. decreases; increases
By international standards, the household saving rate of the United States:
A. has not ever really been high.
B. was extremely high until the 1980s.
C. has always been very high.
D. was low through the 1970s and 1980s, but increased throughout the 1990s to become
one of the highest.
When the inflation rate increases, PAE ______, which in turn causes Y to ______
because of ______.
A. falls; fall; the income-expenditure multiplier
B. falls; rise; the income-expenditure multiplier
C. rises; rise; the wealth effect
D. rises; fall; the wealth effect
Taken together, factors like education, training, experience, intelligence, and work
habits are known as
A. statistical discrimination factors.
B. human capital.
C. productivity factors.
D. learned behaviors.
J.R.'s business requires a steady supply of oil. After interviewing several suppliers, J.R.
decided to buy his oil from Dub, who agreed to sell J.R. all the oil he needs at $50 a
barrel for a period of one year. Suppose that the current oil price is $50 a barrel but that
price tends to fluctuate widely over the course of a year.
If J.R. and Dub enter into a binding contract
A. J.R. will have less incentive to search for a cheaper source of oil.
B. J.R. and Dub will be faced with a commitment problem.
C. Dub will be certain to lose money, but will gain a steady customer.
D. J.R. will have an incentive to use more oil than necessary.
Purchasing power parity is the theory that nominal exchange rates are determined:
A. by the forces of supply and demand.
B. by real exchange rates.
C. as necessary to achieve the fundamental value of the exchange rate.
D. as necessary for the law of one price to hold.
In a market, the demanders are the _______, and the suppliers are the ______.
A. bosses; workers
B. poor; wealthy
C. buyers; sellers
D. sellers; buyers
Of the following, the best example of a pure public good is
A. cable TV.
B. a national park.
C. national defense.
D. education.
Which of the following is NOT true of a demand curve?
A. It has negative slope.
B. It shows the amount consumers are willing and able to purchase at various prices,
holding other factors constant.
C. It relates the price of an item to the quantity demanded of that item.
D. It shows how an increase in price leads to an increase in quantity demanded of a
good.
A firm that doubles its use of inputs to produce ______ output has constant returns to
scale.
A. twice as much
B. three times as much
C. 50% more
D. half the original
In Macroland there is $10,000,000 in currency. The public holds half of the currency
and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 10%,
deposits in Macroland equal ______ and the money supply equals _______.
A. $50,000,000; $60,000,000
B. $55,000,000; $55,000,000
C. $50,000,000; $55,000,000
D. $100,000,000; $100,000,000
The first time Michel tasted coffee, he thought it was bitter and bad-tasting. The second
time Michel had coffee, he thought that it was barely tolerable. Eventually, Michel
started to enjoy coffee, and within a few months he was drinking several cups a day. In
fact, if he did not drink several cups a day, he was miserable. This suggests that, for
Michel,
A. demand for coffee has increased.
B. coffee is a need, not a want.
C. diminishing marginal utility does not apply to coffee consumption.
D. economic models cannot be applied to habit-forming substances.
Based on the table below and the principle of diminishing returns to capital, then total
packages wrapped when a fourth machine is installed must be less than ______
packages.
A. 3,000
B. 4,000
C. 12,000
D. 15,000
