In the following index, which year is most likely to be the base period: 2003 = 123.3;
2004 = 145.3; 2005 = 111.4; 2006 = 100; 2007 = 93?
a. 2003
b. 2004
c. 2005
d. 2006
e. 2007
The elasticity approach to measuring the sensitivity of quantity demanded to changes in
price differs from using the slope because the elasticity approach calculates the ratio of
the
If the interest rate rises, the
a. quantity of loanable funds demanded by firms decreases
b. quantity of loanable funds demanded by government decreases
c. quantity of loanable funds demanded by firms increases
d. quantity of loanable funds demanded by government increases
e. demand for loanable funds curve shifts to the right
Which of the following could lead to an inward shift of the production possibilities
frontier?
Figure 9-1 shows the marginal cost and average total cost curves for a perfectly
competitive firm. If the market price is $10, then
The chief economic cost associated with unemployment is
a. the benefits paid to the unemployed by the government
b. the foregone output that would have been produced if those individuals were
employed
c. the taxes that are passed along to individuals to pay for unemployment insurance
d. higher crime rates
e. the psychological costs associated with unemployment
A devaluation of a currency means that the exchange rate (price of that currency) has
changed to a lower fixed rate.
A Pareto improvement is
On a short-run macro model diagram, the impact of a decrease in government purchases
(G) is illustrated by
a. a downward shift of the aggregate expenditure line by the full amount of the change
in G
b. an upward shift of the aggregate expenditure line followed by an equal downward
shift of that line
c. a leftward shift of the money supply curve
d. a downward shift of the aggregate expenditure line by an amount less than the
change in G
e. the increase in real income
Inflation is harmful to society because it often
a. causes consumers’ purchasing power to decline
b. causes sellers’ costs to increase
c. causes nominal wages to fall
d. causes purchasing power to be redistributed in haphazard ways
e. has no effect at all on anyone’s purchasing power
In every economic system, scarcity imposes limitations on
Which of the following can occur simultaneously?
a. An increase in the national debt and a budget surplus
b. A decrease in the national debt and a balanced budget
c. An unchanged national debt and a budget deficit
d. Positive national debt and a budget surplus
e. A decreasing national debt and a budget deficit
Price floors and price ceilings
Each of the following conditions, except one, must be satisfied in a perfectly
competitive labor market. Which is the exception?
Firms in a monopolistically competitive market follow the same MR = MC profit
maximization rule used by firms in other market structures.
Say’s Law is the idea that
a. in the long run, the economy reaches full employment automatically
b. the aggregate production function, along with the labor market, determines the
economy’s level of output
c. total output will always exceed total spending
d. whenever a good or service is produced, an equal amount of income is created
e. markets always clear
Inventory changes (that is, goods produced but not sold) are important in calculating
GDP because
a. they are the least volatile component of investment
b. these changes mean the economy has extra goods available for purchase
c. they are an example of transfer payments
d. GDP includes all possible sources for goods and services
e. we want to measure all current production when computing GDP