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Figure 9-10. The figure applies to Mexico and the good is rifles.
Refer to Figure 9-10. Mexico's gains from trade are represented by the area that is
bounded by the points
a. (0, P0), (Q0, P0), (Q2, P1), and (0, P1).
b. (0, P1), (0, P2), (Q0, P0), and (Q1, P1).
c. (Q0, P0), (Q2, P1), and (Q1, P1).
d. (0, P0), (0, P2), and (Q0, P0).
In the case of perfectly inelastic demand,
a. the change in quantity demanded equals the change in price.
b. the percentage change in quantity demanded equals the percentage change in price.
c. infinitely-large changes in quantity demanded result from very small changes in the
price.
d. quantity demanded stays the same whenever price changes.
All of the following are arguments against stabilization policy except
a. Economic forecasting is highly imprecise.
b. Long lags may cause stabilization policies to in fact destabilize the economy.
c. Monetary policy affects aggregate demand by changing interest rates.
d. Fiscal policy must go through a long political process.
A key determinant of the price elasticity of supply is the time period under
consideration. Which of the following statements best explains this fact?
a. Supply curves are steeper over long periods of time than over short periods of time.
b. Buyers of goods tend to be more responsive to price changes over long periods of
time than over short periods of time.
c. The number of firms in a market tends to be more variable over long periods of time
than over short periods of time.
d. Firms prefer to change their prices in the short run rather than in the long run.
Suppose a country repealed its investment tax credit. The effects of this are represented
by shifting the
a. demand for and the supply of loanable funds to the right.
b. demand for and the supply of loanable funds to the left.
c. supply of loanable funds to the right and the demand for loanable funds to the left.
d. None of the above is correct.
Caitlin is an unpaid worker in her family's bakery. The Bureau of Labor Statistics
counts Caitlin as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. employed and not in the labor force.
Which of the following will cause no change in producer surplus?
a. the imposition of a nonbinding price ceiling in the market
b. buyers expect the price of a good to be higher next month
c. the price of a substitute increases
d. income increases and buyers consider the good to be inferior
Figure 8-6
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-6. When the tax is imposed in this market, producer surplus is
a. $450.
b. $600.
c. $900.
d. $1,500.
Other things the same, as the real interest rate falls
a. domestic investment and net capital outflow both rise.
b. domestic investment and net capital outflow both fall.
c. domestic investment rises and net capital outflow falls.
d. domestic investment falls and net capital outflow rises.
Table 3-7
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Hours Needed
to Make 1 Quantity Produced
in 2400 Hours
Refer to Table 3-7. Suppose Korea decides to increase its production of cars by 18.
What is the opportunity cost of this decision?
a. 3 airplanes
b. 6 airplanes
c. 16 airplanes
d. 150 airplanes
The information for 2008 in millions in the table below was reported by the World
Bank. On the basis of this information, which list below contains the correct ordering of
real GDP per person from highest to lowest?
a. Japan, Germany, United States
b. Japan, United States, Germany
c. Germany, United States, Japan
d. United States, Japan, Germany
A haircut costs 200 pesos in Mexico and $20 in the U.S. The exchange rate is 12.5
pesos per dollar. The real exchange rate is
a. less than one. Haircuts in Mexico are cheaper than in the U.S.
b. less than one. Haircuts in Mexico are more expensive than in the U.S.
c. greater than one. Haircuts in Mexico are cheaper than in the U.S.
d. greater than one. Haircuts in Mexico are more expensive than in the U.S.
Jai Li just lost her job, and she hasn"t yet started looking for a new one. The Bureau of
Labor Statistics counts Jai Li as
a. unemployed and in the labor force.
b. unemployed, but not in the labor force.
c. in the labor force, but not unemployed.
d. neither in the labor force nor unemployed.
The rule of 70 can be stated as follows: A variable with a growth rate of X percent per
year
a. doubles every 70/X years.
b. doubles every 70(1 - 1/X) years.
c. doubles every 70/X2 years.
d. doubles every 70/(1 - X) years.
U.S.-based John Deere sells machinery to residents of South Africa who pay with South
African currency (the rand).
a. This increases U.S. net capital outflow because the U.S. acquires foreign assets.
b. This decreases U.S. net capital outflow because the U.S. acquires foreign assets.
c. This increases U.S. net capital outflow because the U.S. sells capital goods.
d. This decreases U.S. net capital outflow because the U.S. sells capital goods.
In the open-economy macroeconomic model, if net capital outflow increases then
a. the demand for dollars in the market for foreign-currency exchange shifts right.
b. the demand for dollars in the market for foreign-currency exchange shifts left.
c. the supply of dollars in the market for foreign-currency exchange shifts right.
d. the supply of dollars in the market for foreign-currency exchange shifts left.
After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring
Break destination this year. However, Spring Break is still months away, and you may
reverse this decision. Which of the following events would prompt you to reverse this
decision?
a. The marginal benefit of going to Cancun increases.
b. The marginal cost of going to Cancun decreases.
c. The marginal benefit of going to Ft. Lauderdale decreases.
d. The marginal cost of going to Ft. Lauderdale decreases.
Over the last century, U.S. real GDP per person grew at a rate of about
a. 2 percent per year, so that it is now 2 times as high as it was a century ago.
b. 2 percent per year, so that it is now 8 times as high as it was a century ago.
c. 4 percent per year, so that it is now 2 times as high as it was a century ago.
d. 4 percent per year, so that it is now 8 times as high as it was a century ago.
The government of Murkland considers two policies. Policy A would shift AD right by
300 units while policy B would shift AD right by 200 units. According to the short-run
Phillips curve, policy A will lead
a. to a lower unemployment rate and a lower inflation rate than policy B.
b. to a lower unemployment rate and a higher inflation rate than policy B.
c. to a higher unemployment rate and lower inflation rate than policy B.
d. to a higher unemployment rate and higher inflation rate than policy B.
Financial Crisis
Suppose that banks are less able to raise funds and so lend less. Consequently, because
people and households are less able to borrow, they spend less at any given price level
than they would otherwise. The crisis is persistent so lending should remain depressed
for some time.
Refer to Financial Crisis. In the long run, if the Fed does not respond, the change in
price expectations created by the crisis shifts
a. aggregate demand right.
b. aggregate demand left.
c. short-run aggregate supply right.
d. short-run aggregate supply left.
Tara deposits money into an account with a nominal interest rate of 6 percent. She
expects inflation to be 2 percent. Her tax rate is 20 percent. Tara's after-tax real rate of
interest
a. will be 2.8 percent if inflation turns out to be 2 percent; it will be higher if inflation
turns out to be higher than 2 percent.
b. will be 2.8 percent if inflation turns out to be 2 percent; it will be lower if inflation
turns out to be higher than 2 percent.
c. will be 3.2 percent if inflation turns out to be 2 percent; it will be higher if inflation
turns out to be higher than 2 percent.
d. will be 3.2 percent if inflation turns out to be 2 percent; it will be lower if inflation
turns out to be higher than 2 percent.
Suppose a closed economy had public saving of $2 trillion and private saving of $4
trillion. What are national saving and investment for this country?
a. $6 trillion, $6 trillion
b. $6 trillion, $2 trillion
c. $1 trillion, $4 trillion
d. $2 trillion, $2 trillion
If a government increases its budget deficit, then the real exchange rate
a. and domestic investment rise.
b. and domestic investment fall.
c. rises and domestic investment falls.
d. falls and domestic investment rises.
Several arguments for restricting trade have been advanced. Those arguments do not
include
a. the jobs argument.
b. the protection-as-a-bargaining-chip argument.
c. the no-deadweight-loss argument.
d. the infant-industry argument.
Figure 7-19
Refer to Figure 7-19. At equilibrium, total surplus is represented by the area
a. A+B+C.
b. A+B+D+F.
c. A+B+C+D+H+F.
d. A+B+C+D+H+F+G+I.
If a tax shifts the demand curve upward (or to the right), we can infer that the tax was
levied on
a. buyers of the good.
b. sellers of the good.
c. both buyers and sellers of the good.
d. We cannot infer anything because the shift described is not consistent with a tax.
Figure 2-8
Panel (a) Panel (b)
Refer to Figure 2-8, Panel (a). In order to gain 2 donuts by moving from point L to
point M, society must sacrifice
a. efficiency.
b. employment.
c. 4 cups of coffee.
d. More than one of the above is correct.
Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his
producer surplus per ton is
a. $150.
b. $200.
c. $350.
d. $550.
Table 11-12. Will's expenditures on food for three consecutive years, along with other
values, are presented in the table below.
Refer to Table 11-12. If the nominal interest rate was 8 percent in 2010, then
a. the real interest rate in 2010 was 3 percent.
b. the real interest rate in 2010 was 4 percent.
c. Will's 2009 food expenditures in 2010 dollars amount to $5,800.
d. Will's 2009 food expenditures in 2011 dollars amount to $6,200.
In a closed economy, if Y is 10,000, T is 1,000, G is 3,000, and C is 5,000, then
a. the government has a budget surplus and investment is 1,000
b. the government has a budget surplus and investment is 2,000
c. the government has a budget deficit and investment is 1,000
d. the government has a budget deficit and investment is 2,000
Evidence shows that other things the same, poor countries grow
a. faster than rich countries. However, no country that was poor in 1870 is now rich.
b. faster than rich countries. In fact, some countries that were poor in 1870 are now
rich.
c. slower than rich countries. In fact, no country that was poor in 1870 is now rich.
d. slower than rich countries. However, some countries that were poor in 1870 are now
rich.
