A decrease in the dollar price of foreign currency would cause
a. the nation’s imports to increase and exports to decline.
b. the nation’s exports to increase and imports to decline.
c. both imports and exports to decline.
d. both imports and exports to rise.
During the second half of 2008 the monetary base was growing far more rapidly than
the money supply because
a. banks were using most of their excess reserves to extend loans and make
investments.
b. the Fed quickly shifted from expansionary monetary policy to restrictive monetary
policy.
c. banks were using their excess reserves to make foreign investments.
d. banks were maintaining huge excess reserves.
When the government borrows funds in order to pay for its current expenditures,
a. the government will have to repay the borrowed funds within five years.
b. the government can spend without having to increase taxes, either now or in the
future.
c. future taxes will have to be higher in order to pay the interest on the borrowed funds.
d. the cost imposed on the private sector is virtually eliminated because taxes can
remain constant.
The demand for unionized labor will generally be more elastic, and it will be more
difficult for the union to achieve above-equilibrium wages when
a. there are many close substitutes for the unionized workers.
b. trade barriers limit the importation of the product produced by the unionized workers.
c. the cost of employing the unionized workers is a small part of the total cost of
product that they produce.
d. the demand for the product produced by the unionized workers is highly inelastic.
Use the figure below to answer the following question(s).
Figure 10-2
At which point in Figure 10-2 is the economy at long-run equilibrium?
a. J
b. F
c. G
d. H
Under the adaptive expectations hypothesis, how will a shift to a more expansionary
monetary policy affect the economy?
a. In the short run, the real rate of output will be unaffected, but in the long run, it will
increase.
b. In the short run, the real rate of output will increase, but in the long run, it will be
unchanged.
c. There will be a permanent increase in the real rate of output, but the inflation rate will
also be a little higher.
d. In the short run, the impact on the real rate of output is uncertain, but in the long run,
output will increase.
Use the figure below illustrating the impact of an excise tax to answer the following
question(s).
Figure 4-6
Refer to Figure 4-6. The amount of the actual tax burden paid by consumers and
producers is
a. $1.00 for consumers and $.50 for producers
b. $1.00 for consumers and $1.00 for producers.
c. $.25 for consumers and $.75 for producers.
d. $.50 for consumers and $.50 for producers.
The current demand for automobiles would decrease if
a. the price of gasoline fell.
b. consumer income rose.
c. consumers suddenly believed the price of automobiles would be sharply lower in the
near future.
d. consumers suddenly believed the price of automobiles would be sharply higher in the
near future.
“He [the producer] intends only his gain, and he is in this, as in many other cases, led
by an invisible hand to promote an end which was no part of his intention.” What is the
“invisible hand” referred to in this statement?
a. the elasticity of the market demand curve
b. the power of government when decisions are made democratically
c. the guidelines and regulations set for his industry by the government
d. the incentive structure accompanying market prices
If the actual price level is lower than the expected price level reflected in long-term
contracts,
a. the actual rate of unemployment will be less than the natural rate of unemployment.
b. the actual rate of unemployment will exceed the natural rate of unemployment.
c. the natural rate of unemployment will rise.
d. the natural rate of unemployment will fall.
In some industries where firms experience declining average total costs over the full
range of output that consumers are willing to buy,
a. a smaller firm will always have lower per-unit costs.
b. many firms will tend to emerge from the competitive process.
c. a single large firm will develop, and it will have cost advantages that protect it from
potential rivals.
d. a single large firm will develop, and it will buy out any smaller rival firms to avoid
the small firms’ production at a lower per-unit cost.
The unemployment rate will increase whenever there is
a. an increase in the number of persons classified as unemployed.
b. an increase in the number of unemployed persons relative to the size of the labor
force.
c. an increase in the size of the U.S. population and there is no change in the number of
persons classified as employed.
d. a reduction in the size of the labor force while the number of unemployed decreases.
The actual incidence (or burden) of a tax refers to
a. the governmental agency responsible for collecting the tax.
b. who actually bears the burden of a tax once changes in market prices are taken into
account.
c. the degree of progressiveness in the rate structure of the tax.
d. who the tax is legally or statutorily imposed on.
If the Fed fears an economic downturn, it would be most likely to
a. encourage banks to provide loans by lowering the discount rate.
b. encourage banks to provide loans by raising the discount rate.
c. restrict bank lending by lowering the discount rate.
d. restrict bank lending by raising the discount rate.
e. restrict bank lending by lowering the federal funds rate.
Other things constant, an increase in the expected inflation rate will
a. decrease the inflationary premium.
b. increase money (nominal) interest rates.
c. increase the supply of loanable funds.
d. decrease the money interest rate.
Which of the following contributed to the increase in income inequality among families
in the United States during the 1980s and 1990s?
a. an increase in the highest marginal tax rates that forced high income earners to work
more in order to maintain their income
b. an increase in the proportion of both single-parent and dual-earner families
c. a decrease in the size of the earnings differential between college graduates and high
school graduates
d. all of the above
If the dollar price of the English pound goes from $1.50 to $1.75, the dollar has
a. appreciated, and Americans will find English goods cheaper.
b. appreciated, and Americans will find English goods more expensive.
c. depreciated, and Americans will find English goods cheaper.
d. depreciated, and Americans will find English goods more expensive.
The four key markets that coordinate the circular flow of income are
a. goods and services, resources, loanable funds, and foreign exchange.
b. consumption, investment, stock, and government.
c. government, household goods, bond, and business.
d. financial, corporate, stock, and loanable funds.
When market conditions in a price-taker market are such that firms cannot cover their
production costs,
a. the firms will suffer long-run economic losses.
b. the firms will suffer short-run economic losses that will be exactly offset by long-run
economic profits.
c. some firms will go out of business, causing prices to rise until the remaining firms
can cover their production costs.
d. all firms will go out of business, since consumers will not pay prices that enable
firms to cover their production costs.
The unemployment rate will decrease whenever there is
a. an increase in the number of persons classified as unemployed.
b. a decrease in the number of unemployed relative to the size of the labor force.
c. a decrease in the size of the population and there is no change in the number of
persons classified as employed.
d. a reduction in the size of the labor force.
e. a decrease in the number of unemployed and the population does not change.
If an economy were experiencing a high rate of unemployment as the result of weak
aggregate demand, a Keynesian economist would be most likely to recommend
a. a reduction in taxes coupled with a reduction in government expenditures of equal
size.
b. an increase in government expenditures coupled with an increase in taxes of equal
size.
c. a reduction in taxes, without any offsetting reduction in government expenditures.
d. maintenance of a balanced budget.
Other things the same, when the interest rate rises
a. people would want to lend more, making the supply of loanable funds increase.
b. people would want to lend less, making the supply of loanable funds decrease.
c. people would want to lend more, making the quantity of loanable funds supplied
increase.
d. people would want to lend less, making the quantity of loanable funds supplied
decrease.
Figure 17-2
In Figure 17-2, in the absence of trade, the domestic price of shoes is Pn. Since many
foreign countries have a comparative advantage in the production of shoes, when the
United States begins to trade, the domestic price will fall to the world price. When this
happens, what does the quantity Qcthrough Qprepresent?
a. the quantity of shoes that the United States imports
b. an increase in the world consumption of shoes
c. the quantity of shoes that the United States exports
d. a reduction in the world consumption of shoes
Suppose Thelma and Louise both sell fried green tomatoes in a competitive price-taker
market. If Louise increases her output,
a. Thelma must reduce output
b. the price Thelma can charge falls
c. the price Thelma can charge rises
d. the price Thelma can charge is unaffected
e. Thelma’s profits must fall
Figure 17-10
Refer to Figure 17-10. Consumer surplus with the tariff is
a. A.
b. A + B.
c. A + C + G.
d. A + B + C + D +E + F.
Which one of the following is most likely to reduce the mobility of labor between jobs?
a. an increase in the minimum wage
b. legislation relaxing licensing requirements for entry into many occupations
c. the taxation of unemployment compensation in the same manner as income from
other sources
d. both b and c above
If Congress votes to increase government purchases and at the same time decrease
personal income taxes, they
a. have decided to balance the federal budget.
b. have voted for the proper policy to counteract a recession.
c. have voted for the proper policy to counteract inflation and an economic boom.
d. are trying to achieve a federal budget surplus.
If people suddenly anticipate that inflation will rise during the next year, which of the
following is most likely?
a. Nominal interest rates will rise.
b. Nominal interest rates will decline.
c. The demand for goods and services will decline.
d. Both the real and nominal interest rates will decline.
If occupational safety laws were changed so that firms no longer had to take expensive
steps to meet regulatory requirements, we would expect
a. the demand for the products of this industry to increase.
b. the market price of the products of this industry to decrease in the short run but not in
the long run.
c. the firms in the industry to make long-run economic profit.
d. competition to force producers to pass the lower production costs on to consumers in
the long run.
Which of the following would increase the price of fitness equipment?
a. a reduction in consumer income
b. a major study indicating that a 30-minute workout each day improved health more
than was previously thought to be the case
c. a decrease in the price of steel used to produce the equipment
d. all of the above
A price ceiling set below an equilibrium price tends to cause persistent imbalances in
the market because
a. Quantity demanded exceeds quantity supplied but price cannot rise to remove the
shortage.
b. Quantity demanded exceeds quantity supplied but price cannot fall to remove the
surplus.
c. Quantity supplied exceeds quantity demanded but price cannot rise to remove the
shortage.
d. Quantity supplied exceeds quantity demanded but price cannot fall to remove the
surplus.
Which of the following individuals would be considered unemployed by the official
government definition?
a. Alexander, a mathematician, who returned to graduate school after failing to find a
job the last four months.
b. Abigail, a medical student, who is still in college and is not working.
c. Elizabeth, who is employed part-time but desires a full-time job.
d. Darius, an auto worker vacationing in Florida during a layoff at a General Motors
plant.