Compared to workers in poor countries, workers in richer countries have
a. lower productivity but higher wages.
b. higher productivity and higher wages.
c. higher productivity but lower wages.
d. the same productivity but higher wages.
Given the economy’s existing resources and technology, the only way to enjoy more
consumer goods today is to
a. devote more resources to investment goods today.
b. accumulate more capital today.
c. have a slower economic growth rate in the future.
d. devote more resources to consumer goods in the future.
As long as the market sets prices above marginal costs, production will be efficient.
a. True
b. False
Policies that preclude the deliberate creation of monopoly and undesirable practices are
called
a. antitrust policies.
b. anti-monopoly policies.
c. anti-competitive policies.
d. socialism.
The MPC in the U.S. economy has been estimated to be near 0.95. If this is an accurate
measure, then the numerical value for the multiplier would be
a. 0.9.
b. 1.8.
c. 9.5.
d. 10.0.
e. 20.0.
If the demand curve shifts outward and the supply curve remains the same, price will
fall.
a. True
b. False
If wealthy U.S. consumers save most of their tax cut, this means that, compared to
government spending changes,
a. tax changes would have a higher multiplier effect.
b. tax changes would have a weaker multiplier effect.
c. government spending would have a weaker multiplier effect.
d. U.S. consumers would spend all of their tax cut.
In 2007-2009, the Fed cut interest rates to limit the international financial crisis. What is
the effect of this on velocity?
a. It will decrease.
b. It will increase.
c. It will remain constant.
d. Velocity is unrelated to interest rates.
If the self-correcting mechanism operates quickly,
a. direct intervention is less necessary to close a recessionary gap.
b. fiscal stimulus is far more useful in closing a recessionary gap than monetary policy.
c. monetary policy is far more useful in closing a recessionary gap than fiscal policy.
d. fiscal stimulus is ineffective and inflation will occur.
It is relatively easy for a firm to enter a perfectly competitive market.
a. True
b. False
To analyze policy options, economists are forced to deal with:
a. politicians
b. business people
c. rotating statistical values
d. things that have not occurred
e. None of these is correct.
Which of the following events create an outward shift of the production possibilities
curve?
a. The United States moves resources from the production of goods for domestic
production to the production of goods for export.
b. Tax reductions reduce the cost and increase the volume of investment in factories,
machinery, and research and development.
c. There is an exodus of young people to another country where there is more political
freedom.
d. The unemployment rate falls from 33 percent to 12 percent.
The marginal cost of an airline ticket is the total cost of flying the plane divided by the
number of passengers.
a. True
b. False
One of the factors contributing to the existence of frictional unemployment is
a. automation.
b. labor union strikes.
c. occupational mobility.
d. falling real GDP.
A good is most likely to be inefficiently priced if
a. some of the resources used in its production are scarce.
b. the good is private property.
c. some of the resources used in its production are free.
d. a corporation produces the good.
Debt is to deficit as
a. money is to income.
b. flow is to stock.
c. rent is to dividend.
d. property is to wealth.
The growth rate of potential GDP is the sum of two other growth rates. These other
growth rates are
a. population and resource base.
b. goods output and services output.
c. labor input and labor hours worked.
d. labor input and labor productivity.
Exhibit 10-1
A perfectly competitive producer has the following short-run average cost curve and
marginal cost curve:
SR AC = 2Q + 3
MC = 4Q + 3
where costs are measured in dollars and Q represents the firm’s output in units.
The firm whose short-run cost curves are given in Exhibit 10-1 has a long-run fixed
cost of
a. $0.
b. $2.
c. $3.
d. $4.
Macroeconomics stresses
a. resource allocation and income distribution.
b. inflation and unemployment.
c. resource allocation and inflation.
d. unemployment and income distribution.
Which of the following would tend to decrease velocity?
a. an increase in interest rates
b. more frequent paychecks
c. expected decreases in inflation
d. more efficient payment systems
Which of the following must cope with scarcity?
a. individuals
b. companies
c. governments
d. families
e. All of the above are correct.
A rightward shift in the demand curve for a product will ordinarily result from
a. a decrease in the advertising budget.
b. a decrease in the price of a competing product.
c. an increase in consumer income.
d. an increase in the price of a complementary good.
To fight recession, the government may
a. decrease aggregate demand, which will also lead to lower unemployment rates.
b. increase aggregate demand, which will also lead to higher price levels.
c. increase aggregate demand, which will also lead to lower price levels.
d. decrease aggregate demand, which will also lead to higher unemployment rates.
Table 8-1
At optimal output, the firm described in Table 8-1 earns a profit of
a. $1 per unit of output.
b. $2 per unit of output.
c. $1 total.
d. $2 total.
Inflation accounting for the debt argues the following:
a. The change in the value of the debt when inflation occurs complicates income tax
codes, and is the reason for the tax changes of 2003.
b. The portion of interest payments that compensate lenders for inflation should be
considered repayment of debt rather than interest expense.
c. The debt represents an inflationary problem, and grows more rapidly when people
fear inflation.
d. The portion of the deficit dedicated to repayment of interest on the debt should not be
considered part of the deficit, because it is a transfer.
Is the call for protection on the basis of national defense valid?
a. No, because protection has no place in national defense.
b. No, protection is always improper.
c. Uncertain, economic theory has no answer to this question.
d. Yes, although it can be overstated and abused.
GDP equals hours of work times
a. labor force.
b. output per hour.
c. population.
d. capital stock.
If a government enacts a rent control to protect apartment tenants, the result is likely
going to be
a. an increase in rents with a surplus of apartments.
b. an increase in rents with a shortage of apartments.
c. a decrease in rents with a surplus of apartments.
d. a decrease in rents with a shortage of apartments.
Advocates of active stabilization policies, in defense of their views, argue that
a. stabilization is less necessary than is commonly advocated by monetarists.
b. discretionary policy in not necessary because automatic stabilizers are sufficient.
c. perfect stabilization is not possible, but moderate improvements in economic
performance are possible, such as the response to the events of September 11, 2001.
d. All of the above are correct.
Assume a simple macroeconomic model. When inventories rise unexpectedly,
a. income is above its equilibrium value.
b. income will rise until it reaches its equilibrium value.
c. total spending is higher than total output.
d. All of the above.
In the fifteenth and sixteenth centuries, most towns prohibited individuals from
accumulating stocks of grain. Since such individuals sold the grain and profited greatly
during food shortages, they were considered to be exploiting people in need. The result
of this prohibition was
a. wilder fluctuation in the price of grain.
b. more grain shortages.
c. losses to farmers in a good crop year.
d. All of the above are correct.
A country, such as Argentina in 2002, that is buying its own currency to maintain a
given exchange rate
a. has a balance of payments surplus.
b. has an undervalued currency.
c. has an overvalued currency.
d. need not fear a “run” on its currency.