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One of the flaws of GDP is that it
A) includes only transactions that take place in formal businesses.
B) ignores transactions that do not take place in organized markets.
C) includes measures of the underground economy.
D) includes measures of changes of quality of life associated with producing output.
When supply increases and the supply curve shifts to the right, equilibrium price
________ and equilibrium quantity ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
Recall the Application about the effect of global warming on economic growth to
answer the following question(s).
According to this Application, over time, as economies adapt to higher temperatures,
A) approximately half the decline in per capita income disappears.
B) approximately half the increase in per capita income disappears.
C) per capita income does not seem to change.
D) real income begins to increase and per capita income begins to decrease.
The price of a bond is equal to:
A) past value / (1 + interest rate).
B) future payment / (1 + interest rate).
C) future payment / (1 - interest rate).
D) past value / (1 - interest rate).
Assume that the consumption function is C = 200 + 0.8Y. When Y equals $200, then C
equals ________.
A) $160
B) $200
C) $360
D) $400
Daily Output of Scotland and Poland
Table 18.1 Refer to Table 18.1. Possible terms of trade
between Scotland and Poland are:
A) 1 accordion for 1/4 bagpipe.
B) 1 bagpipe for 2 accordions.
C) 1 bagpipe for 1/3 accordion.
D) 1 accordion for 1 bagpipe.
Daily Output of Japan and U.S.
Table 18.2 Refer to Table 18.2. The nation with a
comparative advantage in tractors is:
A) both the U.S. and Japan.
B) neither the U.S. nor Japan.
C) the U.S.
D) Japan.
An open economy has ________ included in the GDP.
A) unemployment
B) net exports
C) salary increases
D) taxation factors
If the law of supply holds, then the supply curve can never:
A) slope downwards.
B) be concave.
C) shift to the right.
D) shift to the left.
Suppose that a technological advancement substantially reduces the cost of producing
cheese. We would predict that the equilibrium quantity of cheese will ________ and the
equilibrium price of cheese will ________.
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall
Recall Application 3, "The Broken Window Fallacy and Keynesian Economics," to
answer the following questions:
In the Application, in what scenario would Hazlitt's assertion that government spending
completely crowds out private spending hold true?
A) when the economy is at full employment
B) always
C) never
D) when the economy is in a recession
In the late 1970s, nominal interest rates were high and inflation rates were also very
high and were even higher than the nominal interest rate on some years. During this
period, real interest rates were:
A) also very high.
B) low in some years and negative in others.
C) always equal to zero.
D) none of the above.
If the marginal propensity to save is 0.3, the tax multiplier is:
A) -2.5.
B) -1.67.
C) -1.5.
D) -2.33.
The traditional definition of a recession is a decline in real GDP lasting for:
A) at least one month.
B) at least two consecutive quarters.
C) at least one year.
D) at least two consecutive years.
Spending on goods from a country will ________ as the value of its currency gets
cheaper against the U.S. dollar.
A) decrease
B) increase
C) reverse
D) go to other countries
Suppose the United States produces only two goods, textiles and computer chips. If the
United States has a comparative advantage in computer chips, a move toward free trade
will:
A) benefit computer chip workers, harm textile workers, but benefit the nation as a
whole.
B) harm computer chip workers, benefit textile workers, but benefit the nation as a
whole.
C) harm computer chip workers, harm textile workers, but benefit the nation as a whole.
D) benefit computer chip workers, harm textile workers, but harm the nation as a
whole.
If you remove resources from factory production, the quantity of factory goods will:
A) increase.
B) decrease.
C) remain the same but their price will decrease.
D) be diverted to other production.
Diversification ________ the risks of investing in the stock market.
A) increases
B) eliminates
C) can reduce but not eliminate
D) is unrelated to
Figure 18.3
Refer to Figure 18.3. With a tariff or quota, the equilibrium price is:
A) $2.
B) $12.
C) $8.
D) $10.
Figure 8.3
Refer to Figure 8.3. Compared to point A, being at point B implies:
A) a higher income level.
B) a higher level of investment.
C) a higher level of capital.
D) all of the above
