Minimum wages create unemployment in markets where they create a
a. shortage of labor. Minimum wage laws are not the predominant reason for
unemployment in the U.S.
b. shortage of labor. Minimum wage laws are the predominant reason for
unemployment in the U.S.
c. surplus of labor. Minimum wage laws are not the predominant reason for
unemployment in the U.S.
d. surplus of labor. Minimum wage laws are the predominant reason for unemployment
in the U.S.
The labor-force participation rate is computed as
a. (Employed Adult Population) 100.
b. (Employed Labor Force) 100.
c. (Labor Force Adult Population) 100.
d. (Adult Population Labor Force) 100.
In a market economy, supply and demand determine both the quantity of each good
produced and the price at which it is sold.
a. True
b. False
Structural unemployment is often thought to explain relatively short spells of
unemployment.
a. True
b. False
A supply schedule is a table that shows the relationship between
a. price and quantity supplied.
b. input costs and quantity supplied.
c. quantity demanded and quantity supplied.
d. profit and quantity supplied.
A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should “promote”
which of the following goals?
a. only price stability
b. only maximum employment
c. only price stability and maximum employment
d. price stability, maximum employment, and moderate long-term interest rates
Minimum-wage laws are most likely to affect the wages paid to
a. teenagers.
b. people with advanced technical training.
c. people who are self-employed.
d. union members.
Harvey, a U.S. taxpayer, purchased 10 shares of MVC stock for $100 per share; one
year later he sold the 10 shares for $130 a share. Over the year, the price level increased
from 140.0 to 147.0. What is Harvey’s beforetax real capital gain?
a. $1,300 – $1,000(1.05) and this is the gain he is to report on his income tax
b. $1,300 – $1,000(1.05) but he is to report a $300 gain on his income tax
c. $1,300 – $1,000(1.07) and this is the gain he is to report on his income tax
d. $1,300 – $1,000(1.07) but he is to report a $300 gain on his income tax
When the interest rate decreases, the opportunity cost of holding money
a. increases, so the quantity of money demanded increases.
b. increases, so the quantity of money demanded decreases.
c. decreases, so the quantity of money demanded increases.
d. decreases, so the quantity of money demanded decreases.
The economy of Mainland uses gold as its money. If the government discovers a large
reserve of gold on their land
a. the supply of money decreases and the value of money rises.
b. the supply of money increases and the value of money falls.
c. the demand for money increases and the value of money rises.
d. the demand for money decreases and the value of money falls.
To counter the recession of 2008-2009 President Obama and congress created a large
increase in government expenditures.
a. True
b. False
In the 1990s, Fed Chair Alan Greenspan believed that the market was
a. undervalued, and evidence later showed that this was clearly correct.
b. undervalued, but whether it was remains debatable.
c. overvalued, and evidence later showed that this was clearly correct.
d. overvalued, but whether it was remains debatable.
If the wage is kept above the equilibrium level because of minimum-wage laws, then
the result is unemployment; if the wage is kept above the equilibrium level for some
other reason, the result need not be unemployment.
a. True
b. False
Figure 3-14
Refer to Figure3-14. Without trade, Arturo produced and consumed 240 tacos and 120
burritos and Dina produced and consumed 100 tacos and 150 burritos. Then, each
person agreed to specialize in the production of the good in which they have a
comparative advantage and trade 260 tacos for 156 burritos. As a result, Arturo gained
a. 20 tacos and 24 burritos and Dina gained 40 tacos and 6 burritos.
b. 20 tacos and 36 burritos and Dina gained 160 tacos and 6 burritos.
c. 260 tacos and 144 burritos and Dina gained 140 tacos and 156 burritos.
d. 260 tacos and 156 burritos and Dina gained 260 tacos and 156 burritos.
Which of the following statements is an example of a positive, as opposed to normative,
statement?
a. Americans deserve a cleaner environment.
b. Reducing emissions reduces days missed from school due to asthma.
c. All Americans are entitled to quality health care.
d. Economic policies should focus on improving equality.
Other things the same, a country that increases its savings rate will have
a. higher future capital and higher future real GDP per person.
b. higher future capital but not higher future real GDP per person.
c. higher future real GDP per person but not higher future capital.
d. neither higher future capital nor higher future real GDP per person.
An increase in the price level shifts the money demand curve to the left, causing interest
rates to increase.
a. True
b. False
Closely watched indicators such as the inflation rate and unemployment are released
each month by the
a. Bureau of the Budget.
b. Bureau of Labor Statistics.
c. Department of the Treasury.
d. President’s Council of Economic Advisors.
Which of the following fall during a recession?
a. both retail sales and employment
b. retail sales but not employment
c. employment but not retail sales
d. neither employment nor retail sales
Suppose an economy’s marginal propensity to consume (MPC) is 0.6. Then
a. 1 + MPC+ MPC2+ MPC3= 1.844 and, if we continued adding up terms in this
geometric series, we would get closer and closer to the multiplier value of 1.96.
b. 1 + MPC+ MPC2+ MPC3= 1.844 and, if we continued adding up terms in this
geometric series, we would get closer and closer to the multiplier value of 3.
c. 1 + MPC+ MPC2+ MPC3= 2.176 and, if we continued adding up terms in this
geometric series, we would get closer and closer to the multiplier value of 3.
d. 1 + MPC+ MPC2+ MPC3= 2.176 and, if we continued adding up terms in this
geometric series, we would get closer and closer to the multiplier value of 2.5.
Monetary Policy in Mokania
Mokania has had inflation of 15% for many years. Mokania establishes a new central
bank, the Bank of Mokania, with the hopes of reducing the inflation rate.
Refer to MonetaryPolicyinMokania. The Bank of Mokania reduced inflation to its
announced goal of 5%. However, people were expecting inflation to fall to 7% and
there was a favorable supply shock. In the short run which of the following made
unemployment lower than otherwise?
a. both people expecting inflation to fall to 7% instead of 5%, and the favorable supply
shock
b. neither people expecting inflation to fall to 7% instead of 5%, and the favorable
supply shock
c. only the favorable supply shock
d. only people expecting inflation to fall to 7% instead of 5%
Over the past several decades in the United States, the labor-force participation rate of
women has
a. increased, and the labor-force participation rate of men has increased.
b. increased, and the labor-force participation rate of men has decreased.
c. decreased, and the labor-force participation rate of men has increased.
d. decreased, and the labor-force participation rate of men has decreased.
By about 1973, U.S. policymakers had learned that
a. there is no trade-off between inflation and unemployment in the short run.
b. there is no trade-off between inflation and unemployment in the long run.
c. Friedman’s analysis of inflation and unemployment had been correct, and Phelps’s
analysis of inflation and unemployment had been incorrect.
d. Phelps’s analysis of inflation and unemployment had been correct, and Friedman’s
analysis of inflation and unemployment had been incorrect.
Over the past several decades in the United States, the labor-force participation rate of
women has increased and the labor-force participation rate of men had decreased.
a. True
b. False
Figure 4-9
RefertoFigure4-9. The graphs show the demand for cigarettes. In Panel (b), the arrows
are consistent with which of the following events?
a. an increase in the price of cigarettes
b. placing a tax on cigarettes
c. the prohibition of cigarette advertisements on television
d. decreasing the price of marijuana, given that tobacco and marijuana are complements
Suppose you put $500 into a bank account today. Interest is paid annually and the
annual interest rate is 3%. The future value of the $500 in 5 years to the nearest cent is
a. $575.00
b. $578.81
c. $579.64
d. None of the above is correct.
For a risk averse person,
a. the pleasure of winning $1,000 on a bet exceeds the pain of losing $1,000 on a bet.
b. the pain of losing $1,000 on a bet exceeds the pleasure of winning $1,000 on a bet.
c. the utility function exhibits the property of increasing marginal utility.
d. the utility function gets steeper as wealth increases.
Which type of money has intrinsic value?
a. commodity money
b. fiat money
c. both commodity money and fiat money
d. neither commodity money nor fiat money
Suppose you will receive $800 in two years. If the interest rate is 5 percent, then the
present value of this future payment is
a. $725.62. It would be higher if the interest rate were higher.
b. $727.28. It would be higher if the interest rate were higher.
c. $725.62. It would be lower if the interest rate were higher.
d. $727.28. It would be lower if the interest rate were higher.
Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price
index was 177 in 2001 and 221.25 in 2006. Ruben’s 2006 salary in 2001 dollars is
a. $20,000; thus, Ruben’s purchasing power increased between 2001 and 2006.
b. $20,000; thus, Ruben’s purchasing power decreased between 2001 and 2006.
c. $64,000; thus, Ruben’s purchasing power increased between 2001 and 2006.
d. $64,000; thus, Ruben’s purchasing power decreased between 2001 and 2006.
The amount of unemployment that a country typically experiences is a determinant of
its standard of living.
a. True
b. False
Which of the following statements is correct?
a. Both liquidity preference theory and classical theory assume the interest rate adjusts
to bring the money market into equilibrium.
b. Both liquidity preference theory and classical theory assume the price level adjusts to
bring the money market into equilibrium.
c. Liquidity preference theory assumes the interest rate adjusts to bring the money
market into equilibrium; classical theory assumes the price level adjusts to bring the
money market into equilibrium.
d. Liquidity preference theory assumes the price level adjusts to bring the money
market into equilibrium; classical theory assumes the interest rate adjusts to bring the
money market into equilibrium.