The supply curve for a good is a line that relates
a. profit and quantity supplied.
b. quantity supplied and quantity demanded.
c. price and quantity supplied.
d. price and profit.
Figure 5-12
Refer to Figure 5-12. Total revenue when the price is P2 is represented by the area(s)
a. B + D.
b. A + B.
c. C + D.
d. D.
Which of the following shifts aggregate demand to the right?
a. a decrease in the money supply
b. increases in the profitability of capital due perhaps to technological progress.
c. the repeal of an investment tax credit
d. a decrease in the price level
Which of the following is not correct?
a. If you buy a bond from a corporation, you can sell the bond to someone else before it
matures.
b. Term refers to the scheduling of periodic interest rate payments on a bond.
c. A bond is an IOU.
d. There are millions of different bonds in the U.S. economy.
According to the classical dichotomy, which of the following is influenced by monetary
factors?
a. the real wage
b. the real interest rate
c. the nominal wage
d. All of the above are correct.
Figure 6-17
Refer to Figure 6-17. The price that buyers pay after the tax is imposed is
a. $8.00.
b. $9.00.
c. $10.50.
d. $12.00.
At an annual interest rate of 14 percent, about how many years will it take $100 to
double in value?
a. 3
b. 4
c. 5
d. 7
If people decide that some country is now a more risky place to keep their saving, then
at the original interest rate in that country there is a
a. surplus of loanable funds, so the interest rate increases.
b. surplus of loanable funds, so the interest rate decreases.
c. shortage of loanable funds, so the interest rate increases.
d. shortage of loanable funds, so the interest rate decreases.
Which of the following statements about the circular-flow diagram is correct?
a. One must imagine that the economy operates without money in order to make sense
of the diagram.
b. The diagram leaves out details that are not essential for understanding the economic
transactions that occur between households and firms.
c. The government cannot be excluded as a decision maker in a circular-flow diagram.
d. All of the above are correct.
Katarina puts money into an account. One year later she sees that she has 6 percent
more dollars and that her money will buy 2 percent more goods.
a. The nominal interest rate was 8 percent and the inflation rate was 6 percent.
b. The nominal interest rate was 6 percent and the inflation rate was 4 percent.
c. The nominal interest rate was 4 percent and the inflation rate was 2 percent.
d. None of the above is correct.
Table 10-6
The table below contains data for the country of Batterland, which produces only
waffles and pancakes. The base year is 2009.
Prices and Quantities
Refer to Table 10-6. From 2010 to 2011, this country’s output grew
a. 12.5%.
b. 14.3%.
c. 48.1%.
d. 155.6%.
Other things the same, if a country increased its saving rate, in 40 years or so it would
likely have
a. higher productivity, and a higher growth rate of real GDP.
b. higher productivity, but not a higher growth rate of real GDP.
c. the same productivity and growth of real GDP it began with.
d. None of the above is correct.
Table 11-5
The table below pertains to Napandsnack, an economy in which the typical consumer’s
basket consists of 2 pillows and 15 hotdogs.
Refer to Table 11-5. If the base year is 2009, then the economy’s inflation rate in 2010
is
a. 20 percent.
b. 25 percent.
c. 30 percent.
d. 120 percent.
The loss in total surplus resulting from a tax is called
a. a deficit.
b. economic loss.
c. deadweight loss.
d. inefficiency.
A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself
this transaction
a. increases U.S. imports and decreases U.S. net exports.
b. increases U.S. imports and increases U.S. net exports.
c. increases U.S. exports and decreases U.S. net exports.
d. increases U.S. exports and increases U.S. net exports.
The most obvious benefit of specialization and trade is that they allow us to
a. work more hours per week than we otherwise would be able to work.
b. consume more goods than we otherwise would be able to consume.
c. spend more money on goods that are beneficial to society, and less money on goods
that are harmful to society.
d. consume more goods by forcing people in other countries to consume fewer goods.
Expenditures on a nation’s domestic production
a. are less than its domestic production.
b. are equal to its domestic production.
c. are greater than its domestic production.
d. could be less than, equal to, or greater than its domestic production.
Assume the supply curve for cigars is a typical, upward-sloping straight line, and the
demand curve for cigars is a typical, downward-sloping straight line. Suppose the
equilibrium quantity in the market for cigars is 1,000 per month when there is no tax.
Then a tax of $0.50 per cigar is imposed. The effective price paid by buyers increases
from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40.
The government’s tax revenue amounts to $475 per month. Which of the following
statements is correct?
a. The demand for cigars is less elastic than the supply of cigars.
b. The tax causes a decrease in consumer surplus of $390 and a decrease in producer
surplus of $97.50.
c. The deadweight loss of the tax is $12.50.
d. All of the above are correct.
Table 11-6. The table below applies to an economy with only two goods hamburgers
and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.
Refer to Table 11-6. If the base year is 2009, then the consumer price index is
a. 100 in 2009, 109 in 2010, and 115 in 2011.
b. 100 in 2009, 110 in 2010, and 117 in 2011.
c. 110 in 2009, 121 in 2010, and 128.26 in 2011.
d. 44 in 2009, 48.4 in 2010, and 51.48 in 2011.
Figure 21-5. On the figure, MS represents money supply and MD represents money
demand.
Refer to Figure 21-5. What is measured along the vertical axis of the graph?
a. the quantity of output
b. the amount of crowding out
c. the interest rate
d. the price level
The less freedom people are given to choose the date of their retirement, the
a. more elastic is the supply of labor.
b. less elastic is the supply of labor.
c. flatter is the labor supply curve.
d. smaller is the decrease in employment that will result from a tax on labor.
If the price of gasoline rises, when is the price elasticity of demand likely to be the
highest?
a. immediately after the price increases
b. one month after the price increase
c. three months after the price increase
d. one year after the price increase
An increase in the price of imported coffee shows up
a. in the consumer price index and in the GDP deflator.
b. in the consumer price index, but not in the GDP deflator.
c. in the GDP deflator, but not in the consumer price index.
d. in neither the consumer price index nor in the GDP deflator.
An individual would suffer higher losses from an unexpectedly higher inflation rate if
a. she held much currency and owned few bonds.
b. she held much currency and owned many bonds.
c. she held little currency and owned few bonds.
d. she held little currency and owned many bonds.
If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will
want to hold
a. fewer reserves, so the money multiplier will fall.
b. fewer reserves, so the money multiplier will rise.
c. more reserves, so the money multiplier will fall.
d. more reserves, so the money multiplier will rise.
In the long run, which of the following depends primarily on the growth rate of the
money supply?
a. the natural rate of unemployment and the inflation rate
b. the natural rate of unemployment but not the inflation rate
c. the inflation rate but not the natural rate of unemployment
d. neither the natural rate of unemployment nor the inflation rate
If a central bank were required to target inflation at zero, then when there was a
negative aggregate supply shock the central bank
a. would have to increase the money supply. This would move unemployment closer to
the natural rate.
b. would have to increase the money supply. This would move unemployment further
from the natural rate.
c. would have to decrease the money supply. This would move unemployment closer to
the natural rate.
d. would have to decrease the money supply. This would move unemployment further
from the natural rate.
Figure 6-11
Refer to Figure 6-11. If the government imposes a price ceiling at $3, it would be
a. binding if market demand is Demand A or Demand B.
b. non-binding if market demand is Demand A or Demand B.
c. binding if market demand is Demand A and non-binding if market demand is
Demand B.
d. non-binding if market demand is Demand A and binding if market demand is
Demand B.
Shannon is a full-time homemaker not currently searching for paid work. Noah is a
full-time student who is not looking for a job. Who is included in the labor force by the
Bureau of Labor Statistics?
a. only Shannon
b. only Noah
c. both Shannon and Noah
d. neither Shannon nor Noah
The dictionary defines equilibrium as a situation in which forces
a. are in balance.
b. are the same.
c. clash.
d. remain constant.
The political business cycle refers to
a. the fact that about every four years some politician advocates greater government
control of the Fed.
b. the potential for a central bank to increase the money supply and therefore real GDP
to help the incumbent get re-elected.
c. the part of the business cycle caused by the reluctance of politicians to smooth the
business cycle.
d. changes in output created by the monetary rule the Fed must follow.
After a certain nation changed its policy from one that banned international trade in
wheat to one that allowed international trade in wheat, the nation began importing
wheat. As a result, total surplus in the wheat market increased by $10 million. Which of
the following changes could have occurred as well?
a. The price of wheat in that nation increased with the adoption of the new policy.
b. The domestic quantity of wheat supplied increased with the adoption of the new
policy.
c. Consumer surplus in the wheat market increased by $7 million and producer surplus
in the wheat market increased by $3 million.
d. Consumer surplus in the wheat market increased by $15 million and producer surplus
in the wheat market decreased by $5 million.
An American hardware chain sells dollars to obtain Indian rupees. It then uses the
rupees to buy electrical generators manufactured by an Indian firm. This exchange
a. increases U.S. net capital outflow because Indians obtain U.S. assets.
b. decreases U.S. net capital outflow because Indians obtain U.S. assets.
c. increases U.S. net capital outflow because the U.S. buys capital goods.
d. decreases U.S. net capital outflow because the U.S. buys capital goods.
Table 11-5
The table below pertains to Napandsnack, an economy in which the typical consumer’s
basket consists of 2 pillows and 15 hotdogs.
Refer to Table 11-5. The cost of the basket
a. increased from 2009 to 2010 and increased from 2010 to 2011.
b. increased from 2009 to 2010 and decreased from 2010 to 2011.
c. decreased from 2009 to 2010 and increased from 2010 to 2011.
d. decreased from 2009 to 2010 and decreased from 2010 to 2011.
You put money in the bank. The increase in the dollar value of your savings
a. and the change in the number of goods you can buy with your savings are both
nominal variables.
b. and the change in the number of goods you can buy with your savings are both real
variables.
c. is a nominal variable, but the change in the number of goods you can buy with your
savings is a real variable.
d. is a real variable, but the change in the number of goods you buy with your savings is
a nominal variable.