The aggregate supply curve shows the relationship between ____ and ____, holding all
other factors constant.
a. price level; quantity of real GDP supplied
b. price level; supply of nominal GDP
c. nominal GDP; price level of real GDP
d. price level; amount of nominal GDP supplied
A stockholder’s investment is usually riskier than a bondholder’s.
a. True
b. False
For about the last 45 years, state and local taxes have remained relatively constant as a
percentage of GDP.
a. True
b. False
Any increase in efficiency increases only profits of producers, with no increase in
output.
a. True
b. False
Which of the following would be counted in the U.S. GDP for 2015?
a. a Ford Fiesta made in Mexico
b. the $5,000 an investor used to purchase stock in Home Depot
c. Ford buying tires from Goodyear for new Ford Mustangs
d. none of the above
Oligopoly occurs when
a. a few firms sell many different products.
b. a few firms sell to a few large buyers.
c. many firms dominate a single market.
d. a few firms dominate a single market.
High price and low total utility indicate
a. low marginal utility.
b. large quantities are sold.
c. high marginal utility.
d. a high price/marginal utility ratio.
One major effect of the Great Depression was
a. it reaffirmed everyone’s faith that capitalism was a self-correcting system.
b. it encouraged voters to limit the role of government.
c. the creation of the rational expectations school of economic theory.
d. a decreased faith in the ability of economies to automatically correct major problems.
In terms of efficiency, any point on a production possibilities frontier is as good another.
a. True
b. False
Usury laws that set maximum interest rates
a. are designed to protect the consumer.
b. interfere with the market allocation process.
c. have an effect only if the market rate is higher than the legal maximum.
d. All of the above are correct.
Microsoft is accused of which anti-competitive practice?
a. interlocking directorates
b. illegal “bundling” of products
c. exclusive contracts
d. predatory pricing
The demand curve can be derived from indifference curves by varying the price of the
commodity in question.
a. True
b. False
A principal disadvantage of conventional checking accounts compared to money market
mutual funds is that checking accounts
a. are less liquid.
b. often do not pay interest.
c. cannot be used as a store of value.
d. are not insured by deposit insurance.
The key difference between oligopoly and other market structures is the
interdependence among producers.
a. True
b. False
Why does unemployment tend to change when the level of output changes?
a. Persons wish to buy things, and if output falls, people need to work less to earn the
income to buy the smaller output.
b. Labor is an input, and if output falls, employers need fewer workers to make it, so the
employment falls.
c. When output rises, persons are more interested in buying, and will work more to earn
the income to buy things.
d. Persons face the option of buying or working, so that when they do more of one, the
other necessarily falls.
e. When companies replace workers with machines, output rises, and people take time
off from work to buy before returning to employment.
We observed that the price of a good rises and the quantity purchased also rises.
Everything else being equal, it is consistent that
a. the price of a substitute good fell.
b. the price of a complement rose.
c. income rose.
d. costs of inputs increased.
If actual inflation differs from expected inflation, what is the slope of the Phillips
curve?
a. It is horizontal in the short and long run.
b. It is upward sloping in the short run and vertical in the long run.
c. It is vertical in the short run and upward sloping in the long run.
d. It is downward sloping in the short run and vertical in the long run.
The major difference between a closed economy and an open economy is that a(n)
a. closed economy balances budget, while an open economy does not.
b. open economy is a market economy, while a closed economy relies on planning.
c. open economy interacts with the rest of the world, while a closed economy does not.
d. closed economy keeps political affairs secret, while an open economy does not.
Possible causes of an upward-sloping demand curve are:
a. consumers judge the quality of a product based on quality
b. consumers judge the quality of a product based on price
c. consumers purchase a product based on snob appeal
d. a and b are true
e. b and c are true
Business firms are prohibited by law from borrowing money from banks.
a. True
b. False
After Hurricane Katrina, construction wages in New Orleans rose partly becauseof the
loss of a workingpopulation.
a. True
b. False
If price rises, what happens to quantity demanded for a product?
a. It increases.
b. It decreases.
c. It does not change.
d. Uncertain-economic theory has no answer to this question.
The price of leisure is the
a. wage rate.
b. interest rate.
c. discount rate.
d. rate of return on investment.
In actual practice, does the Fed monetize the debt?
a. No, it did not do so even with large deficits in the 1980s and early 2000s.
b. No longer, although it monetized much of the deficit in the 1980s.
c. Yes, although it monetizes less now than in the 1980s.
d. Yes, it has monetized the deficit steadily since the early 1970s.
Prices that maximize the public interest will always allow reasonable profits for firms.
a. True
b. False
If velocity is a constant, then the equation of exchange is an economic model.
a. True
b. False
A currency depreciation is usually inflationary.
a. True
b. False
Following mergers that raised the market shares of two airlines to 79 and 82 percent,
respectively, of traffic in their hub cities, prices of service rose and the quantities of
service fell, even though in most other markets prices fell and quantities increased. The
result suggests that these markets
a. were contestable.
b. were monopolized.
c. become more competitive due to oligopolistic rivalries.
d. had no barriers to entry.
How does a tax cut affect the expenditure schedule?
a. It causes movement to the left along the schedule.
b. It causes the schedule to shift upward.
c. It causes movement to the right along the schedule.
d. It causes the schedule to shift downward.
Lana spent $5 to see a movie. We know
a. the movie was worth 500 utils.
b. Lana’s total utility from movies was $5.
c. the movie was worth at least $5 worth of other goods.
d. the movie increased marginal utility.
Government purchases are included in national product.
a. True
b. False
If significant economies of scale are present, large firms will be much more efficient
producers than small firms.
a. True
b. False
Heavy advertising expenditures usually indicate
a. oligopoly.
b. pure competition or monopolistic competition.
c. oligopoly or monopoly.
d. differentiated pure competition or monopoly.