Sirius has just finished high school and started looking for his first job, but has not yet
found one. Other things the same, the unemployment rate
a. and the labor-force participation rate both increase.
b. increases, and the labor-force participation rate is unaffected.
c. is unaffected, and the labor-force participation rate increases.
d. and the labor-force participation rate are both unaffected.
Efficiency wages create a
a. shortage of labor and so reduce unemployment.
b. shortage of labor and so raise unemployment.
c. surplus of labor and so reduce unemployment.
d. surplus of labor and so raise unemployment.
When the government implements programs such as progressive income tax rates,
which of the following is likely to occur?
a. equality is increased and efficiency is increased.
b. equality is increased and efficiency is decreased.
c. equality is decreased and efficiency is increased.
d. equality is decreased and efficiency is decreased.
Figure 3-6
Refer to Figure3-6. If the production possibilities frontiers shown are each for one day
of work, then which of the following combinations of pies and tarts could Maxine and
Daisy together notmake in a given day?
a. 2 pies and 25 tarts
b. 10 pies and 22 tarts
c. 12 pies and 15 tarts
d. 15 pies and 16 tarts
Table 24-6
The table below pertains to Napandsnack, an economy in which the typical consumer’s
basket consists of 2 pillows and 15 hotdogs.
RefertoTable24-6.If the base year is 2011, then the CPI
a. increased from 2009 to 2010 and increased from 2010 to 2011.
b. increased from 2009 to 2010 and decreased from 2010 to 2011.
c. decreased from 2009 to 2010 and increased from 2010 to 2011.
d. decreased from 2009 to 2010 and decreased from 2010 to 2011.
Other things the same, a higher interest rate induces people to
a. save more, so the supply of loanable funds slopes upward.
b. save less, so the supply of loanable funds slopes downward.
c. invest more, so the supply of loanable funds slopes upward.
d. invest less, so the supply of loanable funds slopes downward.
When an economist points out that you and millions of other people are interdependent,
he or she is referring to the fact that we all
a. rely upon the government to provide us with the basic necessities of life.
b. rely upon one another for the goods and services we consume.
c. have similar tastes and abilities.
d. are concerned about one another’s wellbeing.
Short-run outcomes in the economy can be expressed in terms of output and the price
level, or in terms of unemployment and inflation.
a. True
b. False
Figure 4-15
RefertoFigure4-15.Which of the following would cause the supply curve to shift from
Supply A to Supply C in the market for beach towels?
a. an increase in the price of beach towels
b. an expectation by firms that the price of beach towels will increase in the very near
future
c. a decrease in the price of cotton
d. a decrease in the number of firms selling beach towels
Efficiency
a. and equality both refer to how much a society can produce with its resources.
b. and equality both refer to how fairly the benefits from using resources are distributed
between members of a society.
c. refers to how much a society can produce with its resources. Equality refers to how
evenly the benefits from using resources are distributed among members of society.
d. refers to how evenly the benefits from using resources are distributed between
members of society. Equality refers to how much a society can produce with its
resources
Jackie, a Canadian citizen, works only in the United States. The value of the output she
produces is
a. included in both U.S. GDP and U.S. GNP.
b. included in U.S. GDP, but it is not included in U.S. GNP.
c. included in U.S. GNP, but it is not included in U.S. GDP.
d. included in neither U.S. GDP nor U.S. GNP.
When inflation causes relative-price variability,
a. consumer decisions are distorted and the ability of markets to efficiently allocate
factors of production is impaired.
b. consumer decisions are distorted, but markets are still able to efficiently allocate
factors of production.
c. consumer decisions are not distorted, but the ability of markets to efficiently allocate
factors of production is impaired.
d. consumer decisions are not distorted and markets are still able to efficiently allocate
factors of production.
Instead of conducting laboratory experiments to generate data to test their theories,
economists often
a. ask winners of the Nobel Prize in Economics to evaluate their theories.
b. argue that data is impossible to collect in economics.
c. gather data from historical episodes of economic change.
d. assume that data would support their theories.
Suppose a gardener produces both tomatoes and squash in his garden. If he must give
up 8 bushels of squash to get 5 bushels of tomatoes, then his opportunity cost of 1
bushel of tomatoes is
a. 0.63 bushels of squash.
b. 1.6 bushels of squash.
c. 3 bushels of squash.
d. 5 bushels of squash.
Fortunade Corporation stock has a price of $100 per share, a dividend of $1.60 per
share, and retained earnings of $2.00 per share. The dividend yield on this stock is
a. 2.8 percent.
b. 2.0 percent.
c. 1.6 percent.
d. 0.4 percent.
Suppose that during the Great Depression long-run aggregate supply shifted left. To be
consistent with what happened to the price level and output, what would have had to
happen to aggregate demand?
a. It would have to have shifted left by less than aggregate supply.
b. It would have to have shifted left by more than aggregate supply.
c. It would have to have shifted right by less than aggregate supply.
d. It would have to have shifted right by more than aggregate supply.
Assuming diminishing returns,
a. the increase in output growth from an increase in the saving rate rises over time, and
that, other things the same, rich countries should grow faster than poor ones.
b. the increase in output growth from an increase in the saving rate falls over time, and
that, other things the same, rich countries should grow faster than poor ones.
c. the increase in output growth from an increase in the saving rate rises over time, and
that, other things the same, poor countries should grow faster than rich ones.
d. the increase in output growth from an increase in the saving rate falls over time, and
that, other things the same, poor countries should grow faster than rich ones.
Assume the money market is initially in equilibrium. If the price level decreases, then
according to liquidity preference theory there is an excess
a. supply of money until the interest rate increases.
b. supply of money until the interest rate decreases.
c. demand for money until the interest rate increases.
d. demand for money until the interest rate decreases.
A movement to the right along a given short-run Phillips curve could be caused by
a. an increase in the natural rate of unemployment or expansionary monetary policy.
b. expansionary monetary policy, but not an increase in the natural rate of
unemployment.
c. an increase in the natural rate of unemployment or a contractionary monetary policy.
d. contractionary monetary policy, but not an increase in the natural rate of
unemployment.
The unemployment rate reported by the Bureau of Labor Statistics clearly understates
the true unemployment rate.
a. True
b. False
Index funds are usually outperformed by mutual funds that are actively managed by
professional money managers.
a. True
b. False
Economics deals primarily with the concept of
a. scarcity.
b. money.
c. poverty.
d. banking.
Which of the following is notincluded in GDP?
a. a can of bug spray
b. the services of an exterminator
c. the honey produced and sold by a beekeeper
d. All of the above are included in GDP.
If the reserve ratio is 12 percent, then the money multiplier is
a. 9.3.
b. 8.3.
c. 7.3.
d. 12.
Tax cuts shift aggregate demand
a. right as do increases in government spending.
b. right while increases in government spending shift aggregate demand left.
c. left as do increases in government spending.
d. left while increases in government spending shift aggregate demand right.
Most spells of unemployment are short, and most unemployment observed at any given
time is short-term.
a. True
b. False
During the tough economic times from 2008-2012,
a. investment fell but saving rose, so net capital outflow rose.
b. investment fell by more than saving fell, so net capital outflow rose
c. investment fell by less than saving fell, so net capital outflow fell.
d. investment and saving both fell by about the same percent.
Figure 3-2
Brazil’sProductionPossibilitiesFrontier
Referto Figure 3-2. If the production possibilities frontier shown is for 24 hours of
production, then how long does it take Brazil to make one cashew?
a. 1/10 hour
b. 1/3 hour
c. 3 hours
d. 10 hours
A U.S. mutual fund buys stocks issued by a Columbian company. This purchase is an
example of
a. U.S. foreign direct investment. It increases Columbia’s net capital outflow.
b. U.S. foreign direct investment. It decreases Columbia’s net capital outflow.
c. U.S. foreign portfolio investment. It decreases Columbia’s net capital outflow.
d. U.S. foreign portfolio investment. It increases Columbia’s net capital outflow.
Table 3-31
RefertoTable3-31.For the farmer, the opportunity cost of 1 pound of potatoes is
a. 0.625 pound of meat.
b. 1.0 pounds of meat.
c. 1.6 pounds of meat.
d. 3.2 pounds of meat.
The catch-up effect refers to the idea that
a. saving will always catch-up with investment spending.
b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor.
c. population eventually catches-up with increased output.
d. if investment spending is low, increased saving will help investment to “catch-up.”
If the spending multiplier is 8, then the marginal propensity to consume must be 7/8.
a. True
b. False
Table 2-3
ProductionPossibilitiesforFootville
RefertoTable2-3. Which of the following statements is correct?
a. The opportunity cost of an additional 200 shoes is constant at 200 socks.
b. The opportunity cost of an additional 200 shoes is constant at 300 socks.
c. Footville’s production possibilities frontier is a straight, downwardsloping line.
d. The opportunity cost of an additional 200 shoes increases as more socks are
produced.
Monetary policy affects employment
a. only in the long run.
b. only in the short run.
c. in both the long run and the short run.
d. in neither the long run nor the short run.