Environmental damage
a. cannot be reduced to zero.
b. is inevitable where humans exist.
c. tends to increase as long as benefits outweigh the costs to the damagers.
d. All of the above are correct.
Explain why it makes a difference if consumers consider a tax cut temporary rather than
permanent. What does this explanation tell us about the importance of government
credibility? Put this in the context of the 2008 and 2009 tax cuts favored by President
Bush and President Obama.
By purchasing large amounts of mortgage-backed securities (MBS) in 2009, the Federal
Reserve’s goal was to
a. raise the price of MBS and raise their yields.
b. raise the price of MBS and lower their yields.
c. lower the price of MBS and raise their yields.
d. lower the price of MBS and lower their yields.
Brokerage houses may differ in the
a. fees they charge.
b. services they provide.
c. stock exchanges on which they hold seats.
d. All of the above are correct.
The derived demand for borrowed funds has the characteristic negative slope of any
demand curve.
a. True
b. False
If stock exchanges did not exist,
a. the risk to the investor of buying stocks would be much greater.
b. the economy’s resources could be more efficiently allocated among firms.
c. there would be no organized way for firms to issue stock.
d. investment banks would no longer play a role in handling stocks.
The demand for computers has risen dramatically at the same time that the unit cost of
production has decreased. As a result, we can expect
a. a decrease in price and no predictable impact on output.
b. a definite decrease in price and increase in output.
c. an increase in output with no predictable change in price.
d. no predictable changes in either price or output.
The case for government stabilization policy is made more compelling if the
a. self-correcting mechanism works very slowly.
b. self-correcting mechanism works too fast.
c. value of the multiplier is very small.
d. aggregate supply curve is very flat.
In the early 1800s, there was a smallpox outbreak in a remote part of Russia. The
government sent in a large group of army doctors, but they were too late to stop the
epidemic. Thirty years later, there was another smallpox scare. A local statistician
cautioned the government against a similar response, noting the increased mortality and
high number of army doctors during the earlier epidemic. Was the statistician providing
good advice?
Entrepreneurship is
a. restricted to perfect competition.
b. occurs only in well-functioning markets.
c. the process of planting new crops.
d. the process of taking business risks.
The market for a perfectly competitive industry clears at a price of $3, and the
minimum average cost for all firms is $2.50. In the long run, we would expect an
increase in
a. each firm’s output.
b. the number of firms.
c. each firm’s profit.
d. each firm’s average cost.
Which of the following can be said about a monopoly?
a. Monopolies are always inefficient and are therefore the least desirable form of
market.
b. They can cause a shift in the demand curve to benefit society.
c. They may aid in innovation.
d. All of the above are correct.
Regulation began in the United States in the 1950s.
a. True
b. False
As individuals hold more of their financial assets in the form of money market accounts
and mutual funds, the velocity of money will decrease.
a. True
b. False
The increased use of PayPal will decrease the velocity of money.
a. True
b. False
In the United States, the wage premium for college education has been
a. decreasing since 1980.
b. increasing since 1980.
c. higher for males.
d. decreasing since 1990.
Stagflation is the conjunction of
a. stagnation and recession.
b. inflation and stagnation.
c. depression and inflation.
d. stagnation and deflation.
An expenditure schedule model with no government sector shows the relationship
between
a. C and national product.
b. C and disposable income.
c. C + I and national income.
d. GDP and disposable income.
State and local governments receive money from sales taxes, property taxes, and the
federal government.
a. True
b. False
If policy makers do nothing in response to a recessionary gap, what will happen?
a. a rapid movement toward lower unemployment and higher inflation
b. a rapid movement toward lower unemployment and lower inflation
c. a slow movement toward lower unemployment and higher inflation
d. a slow movement toward lower unemployment and lower inflation
One protection that encouraged entrepreneurs in the U.S. was the enforceability of
contracts by the courts.
a. True
b. False
Total revenue cannot be derived from the demand curve or a demand schedule.
a. True
b. False
Among the following, which would not be considered part of the investment component
of GDP?
a. manufacturers’ equipment
b. buying corporate stock
c. new houses
d. business structures
The Fed is unlike other central banks in that it
a. has 12 branches.
b. is completely centralized.
c. has no real powers.
d. also has control over fiscal policy.
One of the determinants of real GDP is output per hour of labor. This statistic is called
labor
a. force growth.
b. productivity.
c. force participation.
d. force input.
The law of demand holds that as prices of goods decrease, people are willing to buy
more.
a. True
b. False
Which of the following is least likely to be an example of peak/off-peak pricing?
a. breakfast cereals
b. hotels
c. wireless service
d. electricity
If resource prices are fixed and the selling price rises, then
a. profits will decrease.
b. profits will increase.
c. profits will remain constant.
d. both profits and output will decrease.
Market economies are likely to suffer from recessions and inflation because the
government plans all economic activity.
a. True
b. False
When money wages rise, the most significant effect on the aggregate supply curve is
that it
a. shifts outward.
b. shifts inward.
c. becomes flatter.
d. becomes steeper.