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Suppose that the salary range for recent college graduates with a bachelor's degree in
economics is $30,000 to $50,000, with 25% of jobs offering $30,000 per year, 50%
offering $40,000 per year and 25% offering $50,000 per year and that in all other
respects, the jobs are equally satisfying. Assume that in this market, a job offer remains
open for only a short time so that continuing to search requires an applicant to reject
any current job offer.
The expected starting salary for economics majors' is _______.
A. $30,000
B. $40,000
C. $45,000
D. $50,000
Kyle works for a perfectly competitive firm where he receives a wage rate of $15. One
can infer that
A. Kyle's marginal product is at least $15.
B. the price of the firm's output is at least $15.
C. Kyle's reservation wage is exactly $15.
D. Kyle's value of marginal product is at least $15.
At the national level, higher saving rates lead to ______ and higher standards of living.
A. greater current consumption
B. slower growth
C. greater investment
D. crowding out
When the price of lettuce rises, the demand for salad dressing _______ because these
two goods are complements.
A. increases
B. decreases
C. remains the same
D. becomes more inelastic
According to the quantity equation, if velocity and real GDP are constant, and the
Federal Reserve increases the money supply by 5 percent, then the price level:
A. decreases by 5 percent.
B. decreases by more than 5 percent.
C. increases by more than 5 percent.
D. increases by 5 percent.
Suppose a person makes a choice that seems inconsistent with the cost-benefit
principle. Which of the following statements represents the most reasonable conclusion
to draw?
A. The person (explicitly or implicitly) over-estimated the benefits or under-estimated
the costs or both.
B. The cost-benefit principle is rarely true.
C. The person does not grasp how decisions should be made.
D. The person is simply irrational.
A currency depreciation is a(n):
A. increase in the value of a currency relative to other currencies.
B. decrease in the value of a currency relative to other currencies.
C. reduction in the official value of a currency in a fixed-exchange-rate system.
D. increase in the official value of a currency in a fixed-exchange-rate system.
In 2010, Janice Quinn sells a five-year-old car to Used Car, Inc. for $3,000. In the same
year, Used Car, Inc. resells the car to Hilda Quinn Goner for $3,500. What is the
contribution of these transactions to GDP in the year 2010?
A. $0
B. $500
C. $3,000
D. $6,500
In Macroland, autonomous consumption equals 100, the marginal propensity to
consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50,
government purchases are fixed at 150, and net exports are fixed at 20. Short-run
equilibrium output in this economy equals:
A. 1,000.
B. 1,160.
C. 1,280.
D. 1,440.
Shares of stock are:
A. legal promises to repay a debt.
B. claims to partial ownership of a firm.
C. regular payments made to owners of a firm.
D. legal promises to make regular payments to the stockholder.
When the Federal Reserve lends reserves to commercial banks, this is an example of:
A. a change in reserve requirements.
B. an open-market sale.
C. an open-market purchase.
D. discount window lending.
Decentralized market-based financial systems improve the allocation of saving by:
A. insuring capital gains exceed dividend payments.
B. eliminating the need for commercial banks or other financial intermediaries.
C. matching net capital inflows to net capital outflows.
D. providing information and risk-sharing services.
The aggregate supply curve will shift downward in response to:
A. an increase in the expected rate of inflation.
B. a decrease in the expected rate of inflation.
C. an increase in potential GDP.
D. a decrease in potential GDP.
Since 1925, the longest recession in the United States lasted:
A. 10 years.
B. 24 months.
C. 43 months.
D. 5 years.
A decision tree is used when modeling:
A. any type of game.
B. simultaneous decisions.
C. a prisoner's dilemma.
D. games in which timing matters.
Supply and Demand Curve for Jeans in Gallania Mall. Refer to the figure above.
Suppose that jeans initially sell for $60 each. If the seller lowers the price to $40 each, it
would create an extra ____ of economic surplus. Thus, selling jeans for $60 each is
_______.
A. $160; inefficient
B. $80; efficient
C. $80; the equilibrium price
D. $160; efficient
The United States has a comparative advantage in producing books and movies
because:
A. New York and Hollywood are the historic centers of book publishing and movie
production.
B. wages for workers who print books and make movies are lower in the United States
than elsewhere.
C. the English language is understood by many people all over the world.
D. the United States gives generous tax breaks to publishers and movie producers.
Refer to the figure above. Based on the figure, if the economy is in short-run
equilibrium with output equal to 16,000, then there is a(n) ______ gap and a ______ in
autonomous expenditures could return the economy to potential output (Y*).
A. expansionary; decrease of 1,000
B. expansionary; decrease of 4,000
C. recessionary; increase of 1,000
D. recessionary; increase of 4,000
Changes in planned spending that shift the aggregate demand curve are those:
A. caused by changes in output.
B. caused by changes in the inflation rate.
C. caused by changes in output and changes in the real interest rate.
D. not caused by changes in output or changes in the inflation rate.
Many successful professionals, e.g., attorneys and accountants, wear very expensive
clothing. This is because
A. they wish to differentiate themselves from other successful professionals.
B. expensive clothes are a costly-to-fake signal of wealth.
C. they have exhausted their spending on what people need to live.
D. expensive clothes are a costly-to-fake signal of ability.
When a person decides to pursue an activity as long as the extra benefits are at least
equal to the extra costs, that person is:
A. violating the cost-benefit principle.
B. following the scarcity principle.
C. following the cost-benefit principle.
D. pursuing the activity too long.
The ______ is the interest rate commercial banks pay to the Fed; the ______ is the
interest rate commercial banks charge each other for short-term loans.
A. federal funds rate; discount rate
B. discount rate; federal funds rate
C. nominal interest rate; real interest rate
D. nominal interest rate; prime rate of interest
Congestion of the work space and fixed factors of production at the firm:
A. explain high employee turnover.
B. cause increased workspace violence.
C. lead to diminishing marginal returns.
D. result in increased self-employment.
Lower taxes on interest income
A. permanently lower growth rates by encouraging saving rather than consuming.
B. increase growth rates by increasing consumption rates.
C. increase growth rates by increasing saving and thus investment.
D. lower growth rates by reducing government expenditures.
Wealth is the same as:
A. net worth.
B. assets.
C. capital gains.
D. savings.
All of the following central banks have announced numerical targets for inflation
EXCEPT the:
A. United States Federal Reserve System.
B. Bank of Canada.
C. Bank of England.
D. Central Bank of Brazil.
One reason for the ________ slope of the demand curve is that as prices fall ________.
A. upward; people expect goods to be of lower quality.
B. upward; more people purchase the good.
C. downward; more people find that the price is less than their reservation price.
D. downward; fewer people find that the price equals their reservation price.
Refer to the figure above. The market demand curve indicates that at a price of $2.50,
_______ lbs. will be demanded.
A. 3
B. 6
C. 10
D. 16
Workers in durable-goods industries are ______ workers in service industries to lose
their jobs during a recession.
A. much less likely than
B. more likely than
C. less likely than
D. equally likely as
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.
The first apartment Alex visits rents for $700. What is the expected value of visiting a
second apartment?
A. $20
B. $30
C. $40
D. $50
You need a TV, DVD player, and CD player. The sale flyer from a store downtown
shows that the TV that you want to buy is on sale for 10% off of the regular price this
week. DVD and CD players are both on sale for 20% off next week. Last week you
drove downtown to save $30 on some concert tickets, a 15% savings. The regular prices
for TVs, DVD players, and CD players are given in the table below.
Suppose instead that the DVD player is on sale for 20% off and the CD player is on sale
for 5% off regular price. Should you drive downtown to buy the DVD and the CD
player?
A. Yes, because you will save $24.
B. Yes, because you will save $34.
C. Yes, because you will save $64.
D. Yes, because it is always worth it to drive downtown to earn a 20% discount.
