In the long run, increases in output per person arise primarily from:
A. increases in female labor force participation.
B. increases in male labor force participation.
C. an increasing proportion of the population retiring.
D. increases in average labor productivity.
A college graduate in 1972 found a job paying $7,200. The CPI was 0.418 in 1972. A
college graduate in 2005 found a job paying $30,000. The CPI was 1.68 in 2005. The
1972 graduate’s job paid ______ in nominal terms and ______ in real terms than the
2005 graduate’s job.
A. more; less
B. more; more
C. less; more
D. less, less
If planned aggregate expenditure (PAE) in an economy equals 2,000 + 0.8Y and
potential output (Y*) equals 11,000, then this economy has:
A. an expansionary gap.
B. a recessionary gap.
C. no output gap.
D. no autonomous expenditure.
Demographers predict that the average age of the population of the U.S. will increase.
One result will be an increase in the demand for nurses. Assume that the graph below
describes the current nursing labor market in a mid-sized city, and that the market is a
competitive one.
In the long run, if the nursing market is perfectly competitive, the demographic shift
that increases the demand for nurses is likely to
A. cause nurses’ wages to increase, providing a greater incentive to choose nursing as a
career.
B. cause the working conditions of nurses to worsen, providing a disincentive to choose
nursing as a career.
C. cause a persistent shortage of nurses because the market undervalues nurses.
D. shift back to the original demand as needs are unmet.
This graph shows one consumer’s demand for ice cream at the student union:
An increase in the number of students enrolled on this campus will
A. cause the demand curve shown above to shift to the right.
B. cause the demand curve shown above to shift to the left.
C. cause an increase in market demand by increasing the number of individual demand
curves.
D. not affect market demand, but increase quantity demanded by individuals.
Bank C promises to pay a compound annual interest rate of 6 percent, while Bank S
pays an 8 percent simple annual interest rate on deposits. If you deposit $1,000 in each
bank, after 10 years, your deposit in Bank C equals _____, while your deposit in Bank
S equals ______.
A. $1,060; $1,800
B. $1,600; $1,800
C. $1,600; $2,159
D. $1,791; $1,800
Suppose a market is in equilibrium. The area between the market price and the supply
curve is:
A. the surplus loss.
B. producer surplus.
C. consumer surplus.
D. total economic surplus.
Suppose one observes that when the price of peanut butter increases, the demand for
jelly increases. One must conclude that:
A. peanut butter and jelly are complements.
B. peanut butter and jelly are substitutes.
C. peanut butter and jelly are normal goods.
D. peanut butter and jelly are inferior goods.
If the demand for steak increases as income increases, this means that steak is a(n):
A. complementary good.
B. normal good.
C. inferior good.
D. substitute good.
If planned aggregate spending in an economy can be written as PAE = 15,000 + 0.6Y –
20,000r, and potential output equals 35,000, what real interest rate must the Federal
Reserve set to bring the economy to full employment?
A. 0.02
B. 0.03
C. 0.04
D. 0.05
Refer to the figure above. Suppose that retailers learn that a new Shrek movie will be
released next month. That news is likely to cause:
A. no immediate change in supply, but a decrease in the quantity supplied.
B. no immediate change in supply, since the only effect will involve demand.
C. an immediate shift in the supply curve to Supply B in anticipation of increased future
prices.
D. an immediate shift in the supply curve to Supply A in anticipation of increased future
prices.
You read online that, at current rates of production, the yearly world supply of food is
sufficient to feed the projected 2010 population of the earth, and that after 2010 there
will be massive starvation. One assumption behind this prediction is that:
A. food supply is infinitely elastic.
B. the long run elasticity of supply of food is inelastic.
C. prices will allocate food supplies to only wealthy countries.
D. short run supply elasticity is greater than long run supply elasticity.
Easy monetary policy reduces the real interest rate, which ______ the demand for
dollars, ______ the supply of dollars, and ______ the equilibrium value of the dollar.
A. increases; increases; increases
B. decreases; decreases; decreases
C. increases; decreases; increases
D. decreases; increases; decreases
The ______ combination of goods is the combination of goods that yields the highest
total utility given the consumer’s income.
A. affordable
B. economical
C. utility satiating
D. optimal
Stock prices increase when expected future dividends ____, interest rates _____, and/or
the risk premium ______.
A. increase; increase; increases
B. increase; increase; decreases
C. decrease; decrease; increases
D. increase; decrease; decreases
The Federal Reserve System first began operations in:
A. 1789.
B. 1865.
C. 1914.
D. 1934.
The implementation of new production methods by managers, such as the “just-in-time”
inventory system, increases:
A. average labor productivity.
B. the share of the population employed.
C. the unemployment rate.
D. the quantity of human capital.
The percentage change in quantity demanded that results from the percentage change in
price is known as the:
A. price elasticity of supply.
B. price elasticity of demand.
C. income elasticity of demand.
D. cross-price elasticity of demand.
Which of the following workers is most likely to lose his/her job during a recession?
A. construction worker
B. baker
C. farmer
D. barber
Based on the purchasing power parity theory, in the long run, currencies of countries
with significant inflation will tend to:
A. be flexible.
B. have nominal exchange rates.
C. depreciate.
D. appreciate.
The price of gold is 300 U.S. dollars per ounce in New York and 435 Canadian dollars
per ounce in Toronto, Canada. If the law of one price holds for gold, the nominal
exchange rate is ______ Canadian dollars per U.S. dollar.
A. 0.333
B. 0.690
C. 1
D. 1.45
If the natural rate of unemployment equals 6 percent and the actual rate of
unemployment equals 5 percent, then cyclical unemployment equals:
A. -1 percent.
B. 1 percent.
C. 3 percent.
D. 11 percent.
Current income minus spending on current needs equals:
A. saving.
B. wealth.
C. transfers.
D. investment.
One thousand adults live in Milltown. All of them leave work at 4:30 p.m. every day
and arrive home at exactly 5:00. They all go to bed at 9 p.m. Three fundraisers, Alpha,
Beta, and Charlie, have targeted Milltown’s population. Because the charities raising the
funds are identical, the first to call a willing donor will get the donation.
Refer to the information given above. To an economic naturalist, this scenario would
explain why:
A. fundraisers form cartels.
B. so many fundraising phone calls seem to be at dinnertime.
C. fundraising has been outsourced to Asian countries.
D. fundraisers use the mail to solicit donations.
Suppose when you are 21 years old, you deposit $1,000 into a bank account that pays
annual compound interest, and you do not withdraw from the account until your
retirement at the age of 65, 44 years later. How much more will be in your account if
the interest rate is 6 percent rather than 4 percent?
A. $880
B. $2,390
C. $5,617
D. $7,368
Cory gets 18, 23, and 25 units worth of total utility from consuming 10, 11, and 12 raw
oysters, respectively, and the price per oyster is 25 cents. Thus, one can infer that Cory
A. is not utility maximizing.
B. is experiencing diminishing marginal utility.
C. should NOT consume any more oysters.
D. has consumed too many oysters.
For an economy starting at potential output, an increase in autonomous expenditure in
the short run results in a(n):
A. expansionary output gap.
B. recessionary output gap.
C. increase in potential output.
D. decrease in potential output.
The sum of the economic surpluses accruing to buyers and sellers is:
A. producer surplus.
B. equal to profit.
C. total economics surplus.
D. consumer surplus.
Where Y is GDP, C is consumption, I is investment, G is government spending, T is net
taxes, and there is no international trade, private saving equals:
A. C + I + G – T.
B. Y – T – C.
C. Y – T – G.
D. Y – C – I.
Real GDP per person equals average labor productivity:
A. times one minus the unemployment rate.
B. minus the share of population employed.
C. times the labor force participation rate.
D. times the share of population employed.
Higher nominal interest rates ______ the amount of money demanded and a higher
price level ______ the amount of money demanded.
A. increase; increases
B. increase; decreases
C. decrease; increases
D. decrease; decreases
The value of goods produced, but unsold, in the current period is:
A. excluded from GDP.
B. counted in GDP as inventory investment.
C. counted in GDP as consumption spending.
D. allocated to GDP in future periods when the goods are sold.
The Federal Reserve can increase the money supply by:
A. reducing reserve requirements.
B. increasing the discount rate.
C. eliminating deposit insurance.
D. conducting open market sales.
Refer to the figure above. Suppose S2 is the industry supply curve. At the profit
maximizing quantity price will ______ the opportunity cost of the resources required to
enter the market and firms will _____.
A. be less than; exit the market
B. exceed; exit the market
C. exceed; enter market
D. be less than; enter the market
The increase in unemployment during a recession is associated with which type of
unemployment?
A. Frictional unemployment
B. Cyclical unemployment
C. Structural unemployment
D. Nominal unemployment