In effect, a consumption tax would put all saving automatically into a tax-advantaged
savings account similar to an Individual Retirement Account (IRA).
a. True
b. False
In the circular-flow diagram, in the markets for
a. goods and services, households and firms are both sellers.
b. goods and services, households are buyers and firms are sellers.
c. the factors of production, households are buyers and firms are sellers.
d. the factors of production, households and firms are both buyers.
Differences in scientific judgement between economists are similar to all of the
following except
a. astronomers debating whether the sun or earth was at the center of the solar system.
b. meteorologists debating the existence of global warming.
c. two politicians arguing about the fairness of the tax code.
d. explorers debating whether or not the earth was flat before the time of Christopher
Columbus.
Figure 35-2
Use the pair of diagrams below to answer the following questions.
RefertoFigure35-2. If the economy starts at C and 1, then in the short run, a decrease
in aggregate demand moves the economy to
a. A and 2.
b. D and 3.
c. E and 3.
d. None of the above is correct.
Figure 3-19
Refer to Figure3-19. At which of the following prices would both Chile and Colombia
gain from trade with each other?
a. 6 pounds of soybeans for 9 pounds of coffee
b. 8 pounds of soybeans for 20 pounds of coffee
c. 11 pounds of soybeans for 33 pounds of coffee
d. Chile and Colombia could not both gain from trade with each other at any price.
Figure 3-5
Refer to Figure3-5. If Hosne and Merve each divides her time equally between making
purses and making wallets, then total production is
a. 4 purses and 8 wallets.
b. 7 purses and 7 wallets.
c. 10 purses and 6 wallets.
d. 14 purses and 14 wallets.
Henri earned a salary of $50,000 in 2001 and $60,000 in 2012. The consumer price
index was 177 in 2001 and 225 in 2012. Henri’s 2001 salary in 2012 dollars is
a. $39,333.33.
b. $74,000.00.
c. $89,333.33.
d. $63,559.32.
Since 1980 U.S. net capital outflow has been
a. negative, meaning that foreigners were buying more capital assets from the United
States than Americans were buying abroad.
b. negative, meaning that Americans were buying more capital assets abroad than
foreigners were buying from the United States.
c. positive, meaning that foreigners were buying more capital assets from the United
States than Americans were buying abroad.
d. positive, meaning that Americans were buying more capital assets abroad than
foreigners were buying from the United States.
The following table contains a supply schedule for a good.
If the law of supply applies to this good, then Q1 could be
a. 0.
b. 50.
c. 100.
d. 150.
Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10
empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby
passenger is willing to pay $300, the airline should
a. sell the ticket because the marginal benefit exceeds the marginal cost.
b. sell the ticket because the marginal benefit exceeds the average cost.
c. not sell the ticket because the marginal benefit is less than the marginal cost.
d. not sell the ticket because the marginal benefit is less than the average cost.
Table 28-6
RefetoTable28-6. What is the U-1 measure of labor underutilization?
a. 1.6%
b. 3.1%
c. 6.2%
d. 7.0%
Gross domestic product includes all
a. legal and illegal final goods, but it excludes all legal and illegal final services.
b. legal and illegal final goods and all legal and illegal final services.
c. legal final goods and services, but it excludes illegal final goods and services.
d. legal and illegal final goods and legal final services, but it excludes illegal final
services.
Table24-11.Megan’s salary for three consecutive years, along with other values, are
presented in the table below.
RefertoTable24-11. The nominal interest rate for 2012 is
a. 0.93 percent.
b. 6.70 percent.
c. 4.44 percent.
d. 4.47 percent.
Some economists argue that since inflation
a. raises the real value of fixed nominal wages, a little inflation may make it easier for
labor markets to adjust.
b. raises the real value of fixed nominal wages, a little inflation may make it harder for
labor markets to adjust.
c. reduces the real value of fixed nominal wages, a little inflation may make it easier for
labor markets to adjust.
d. reduces the real value of fixed nominal wages, a little inflation may make it harder
for labor markets to adjust.
Figure 3-7
Refer to Figure3-7. If Bintu and Juba each divides her time equally between making
bowls and making cups, then total production is
a. 2 bowls and 6 cups.
b. 3 bowls and 7 cups.
c. 4 bowls and 8 cups.
d. 6 bowls and 14 cups.
Trade can make everyone better off except in the case where one person is better at
doing everything.
a. True
b. False
Which of the following correctly explains the crowding-out effect?
a. An increase in government expenditures decreases the interest rate and so increases
investment spending.
b. An increase in government expenditures increases the interest rate and so reduces
investment spending.
c. A decrease in government expenditures increases the interest rate and so increases
investment spending.
d. A decrease in government expenditures decreases the interest rate and so reduces
investment spending.
Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a
new mp3 player to listen to music while working out. Both the amplifier and the mp3
player cost $120, so she can only buy one. This illustrates the basic concept that
a. trade can make everyone better off.
b. people face trade-offs.
c. rational people think at the margin.
d. decisions made at the margin are not particularly important.
Considering a plot of the inflation rate and the unemployment rate, one might
conjecture that the short run Phillips curve was further to the right in the first part of the
2000’s than it was in the last part of the 1990s and 2000.
a. If so, this might have been the result of a negative supply shock or an increase in
expected inflation.
b. If so, this might been the result of a negative supply shock, or a decrease in expected
inflation.
c. If so, this might have been the result of a positive supply shock, or an increase in
expected inflation.
d. If so, this might have been the result of a positive supply shock, or a decrease in
expected inflation.
If there is excess money supply, people will
a. deposit more into interest-bearing accounts, and the interest rate will fall.
b. deposit more into interest-bearing accounts, and the interest rate will rise.
c. withdraw money from interest-bearing accounts, and the interest rate will fall.
d. withdraw money from interest-bearing accounts, and the interest rate will rise.
Compute how much each of the following items is worth in terms of today’s dollars
using 177 as the price index for today.
a. In 1926, the CPI was 17.7 and the price of a movie ticket was $0.25.
b. In 1932, the CPI was 13.1 and a cook earned $15.00 a week.
c. In 1943, the CPI was 17.4 and a gallon of gas cost $0.19.
Table 24-8
The table below relates to the economy of Mainland, where the typical consumer’s
market basket consists of 2 televisions and 300 hamburgers.
RefertoTable24-8. If the base year is 2013, then the economy’s inflation rate in 2014 is
a. 11.1 percent.
b. 200 percent.
c. 10 percent.
d. 90 percent.
According to the theory of liquidity preference,
a. if the interest rate is below the equilibrium level, then the quantity of money people
want to hold is less than the quantity of money the Fed has created.
b. if the interest rate is above the equilibrium level, then the quantity of money people
want to hold is greater than the quantity of money the Fed has created.
c. the demand for money is represented by a downward-sloping line on a
supply-and-demand graph.
d. All of the above are correct.
Suppose over some period of time the money supply tripled, velocity doubled, and real
GDP doubled. According to the quantity equation the price level is now
a. 6 times its old value.
b. 3 times its old value.
c. 1.5 times its old value.
d. 0.75 times its old value.
In the equation Y = C+ I+ G+ NX,
a. Yrepresents the economy’s total expenditure.
b. Crepresents household expenditures on services and durable goods.
c. all of the variables are always positive numbers.
d. All of the above are correct.
High and unexpected inflation has a greater cost
a. for those who save than for those who borrow.
b. for those who hold a little money than for those who hold a lot of money.
c. for those whose wages increase by as much as inflation than those who are paid a
fixed nominal wage.
d. for savers in low income tax brackets than for savers in high income tax brackets.
In the U.S. a box of tea costs $5. The same box of tea in Uganda costs 10,000 schillings
(the currency of Uganda). If the real exchange rate is 5/4, what is the nominal exchange
rate? Show your work.
When two variables have a positive correlation,
a. they tend to move in opposite directions.
b. they tend to move in the same direction.
c. one variable will move while the other remains constant.
d. the variables’ values are never negative.
Candice is planning her activities for a hot summer day. She would like to go to the
local swimming pool and see the latest blockbuster movie, but because she can only get
tickets to the movie for the same time that the pool is open she can only choose one
activity. This illustrates the basic principle that
a. people respond to incentives.
b. rational people think at the margin.
c. people face tradeoffs.
d. improvements in efficiency sometimes come at the expense of equality.
The English word that comes from the Greek word for “one who manages a household”
is
a. market.
b. consumer.
c. producer.
d. economy.
When Mexico suffered from capital flight in 1994, Mexico’s net capital outflow
a. and net exports decreased.
b. and net exports increased.
c. increased while net exports decreased.
d. decreased while net exports increased.
Which of the following is not correct?
a. When developing economic theories, graphs offer a way to visually express ideas that
might be less clear if described with equations or words.
b. Graphs are one way of expressing the relationships among variables.
c. When studying the relationship between two economic variables, graphs allow
economists to draw indisputable conclusions about causes and effects.
d. When analyzing economic data, graphs provide a powerful way of finding and
interpreting patterns.
A high price-earnings ratio for a stock indicates that either the stock is
a. undervalued or people are relatively optimistic about the corporation’s prospects.
b. overvalued or people are relatively optimistic about the corporation’s prospects.
c. overvalued or people are relatively pessimistic about the corporation’s prospects.
d. undervalued or people are relatively pessimistic about the corporation’s prospects.