Other things the same, as the price level rises,
a. the dollar depreciates.
b. the interest rate falls.
c. people feel less wealthy.
d. All of the above are correct.
Figure 3-4
Perry’s Production Possibilities Frontier Jordan’s Production Possibilities Frontier
Refer to Figure 3-4. If Perry and Jordan both spend all of their time writing poems,
then total production is
a. 3 poems.
b. 6 poems.
c. 12 poems.
d. 24 poems.
Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5
empty rooms for tonight. If the marginal cost of operating one room for one night is
$40, the hotel manager should rent one of the empty rooms only if a customer is willing
to pay
a. more than $40, as the average benefit will exceed the marginal cost.
b. more than $40, as the marginal benefit will exceed the marginal cost.
c. more than $80, as the average benefit will exceed the marginal cost.
d. more than $80, as the marginal benefit will exceed the marginal cost.
If the multiplier is 5, then the MPC is
a. 0.05.
b. 0.5.
c. 0.6.
d. 0.8.
Figure 8-11
Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then,
when the tax is imposed,
a. consumer surplus decreases by $13.
b. producer surplus decreases by $13.
c. the deadweight loss amounts to $6.
d. the amount of the good that is sold remains unchanged.
Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle
made there. His purchase is included in
a. both Mexican GDP and U.S. GDP.
b. Mexican GDP, but it is not included in U.S. GDP.
c. U.S. GDP, but it is not included in Mexican GDP.
d. neither Mexican GDP nor U.S. GDP.
Figure 4-15
Refer to Figure 4-15. At a price of $20, there would be a(n)
a. shortage. The law of supply and demand predicts that the price will fall from $20 to a
lower price.
b. surplus. The law of supply and demand predicts that the price will rise from $20 to a
higher price.
c. excess demand. The law of supply and demand predicts that the price will rise from
$20 to a higher price.
d. excess supply. The law of supply and demand predicts that the price will fall from
$20 to a lower price.
The bowed shape of the production possibilities frontier can be explained by the fact
that
a. all resources are scarce.
b. economic growth is always occurring.
c. the opportunity cost of one good in terms of the other depends on how much of each
good the economy is producing.
d. the only way to get more of one good is to get less of the other.
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 economy’s inflation rate in 2010
is
a. 8 percent.
b. 10 percent.
c. 10.91 percent.
d. 11.11 percent.
Which of the following statements is correct?
a. Buyers determine supply, and sellers determine demand.
b. Buyers determine demand, and sellers determine supply.
c. Buyers determine both demand and supply.
d. Sellers determine both demand and supply.
Suppose the city of Des Moines has a high credit rating, and so when Des Moines
borrows funds by selling bonds,
a. the city’s high credit rating and the tax status of municipal bonds both contribute to a
lower interest rate than would otherwise apply.
b. the city’s high credit rating and the tax status of municipal bonds both contribute to a
higher interest rate than would otherwise apply.
c. the city’s high credit rating contributes to a lower interest rate than would otherwise
apply, while the tax status of municipal bonds contributes to a higher interest rate than
would otherwise apply.
d. the city’s high credit rating contributes to a higher interest rate than would otherwise
apply, while the tax status of municipal bonds contributes to a lower interest rate than
would otherwise apply.
Which of the following shifts the long-run Phillips curve left?
a. both an increase in the inflation rate and a decrease in the minimum wage rate
b. an increase in the inflation rate, but not a decrease in the minimum wage rate
c. a decrease in the minimum wage rate, but not an increase in the inflation rate
d. neither a decrease in the minimum wage rate nor an increase in the inflation rate
If the price elasticity of supply for a good is equal to infinity, then the
a. supply curve is vertical.
b. supply curve is horizontal.
c. supply curve also has a slope equal to infinity.
d. quantity supplied is constant regardless of the price.
Samuelson and Solow argued that when unemployment is high, there is
a. upward pressures on wages and prices.
b. upward pressures on wages and downward pressures on prices.
c. upward pressures on prices and downward pressures on wages.
d. downward pressures on wages and prices.
If you put $1,000 in the bank today at an interest rate of 6% what is its value in two
years?
a. $2,000(1.06)
b. $1,000 + $(1.06)2
c. $1,000(1.06)2
d. None of the above are correct.
Figure 9-6
Refer to Figure 9-6. When the tariff is imposed, domestic consumers
a. lose by $500.
b. lose by $900.
c. gain by $500.
d. gain by $900.
Figure 4-13
Refer to Figure 4-13. The shift from S to S” is called a(n)
a. decrease in supply.
b. decrease in quantity supplied.
c. increase in supply.
d. increase in quantity supplied.
We depart from the assumptions of classical economics when we focus on the
relationship between
a. the quantity of output and the price level.
b. the quantity of output and the unemployment rate.
c. the price level and the inflation rate.
d. inflation and the nominal interest rate.
Table 7-11
Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If 6
units are bought and sold, then total surplus is
a. $18 lower than it would be if the equilibrium number of units were bought and sold.
b. $22 lower than it would be if the equilibrium number of units were bought and sold.
c. $26 lower than it would be if the equilibrium number of units were bought and sold.
d. $6 higher than it would be if the equilibrium number of units were bought and sold.
When the money market is drawn with the value of money on the vertical axis, as the
price level decreases, the value of money
a. increases, so the quantity of money demanded increases.
b. increases, so the quantity of money demanded decreases.
c. decreases, so the quantity of money demanded decreases.
d. decreases, so the quantity of money demanded increases.
The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in
Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is
a. 9/5
b. 5/4
c. 4/5
d. None of the above are correct.
Figure 6-18
Refer to Figure 6-18. Suppose the same supply and demand curves apply, and a tax of
the same amount per unit as shown here is imposed. Now, however, the buyers of the
good, rather than the sellers, are required to pay the tax to the government. After the
buyers pay the tax, relative to the case depicted in the figure, the burden on buyers will
be
a. larger, and the burden on sellers will be smaller.
b. smaller, and the burden on sellers will be larger.
c. the same, and the burden on sellers will be the same.
d. The relative burdens in the two cases cannot be determined without further
information.
In the open economy macroeconomic model, the price that balances supply and demand
in the market for foreign-currency exchange model is the
a. nominal exchange rate.
b. nominal interest rate.
c. real exchange rate.
d. real interest rate.
GDP does not reflect
a. the value of leisure.
b. the value of goods and services produced at home.
c. the quality of the environment.
d. All of the above are correct.
What happens to the total surplus in a market when the government imposes a tax?
a. Total surplus increases by the amount of the tax.
b. Total surplus increases but by less than the amount of the tax.
c. Total surplus decreases.
d. Total surplus is unaffected by the tax.
Which of the following both make the interest rate on a bond higher than otherwise?
a. the interest it pays is taxed and it was issued by a financially strong corporation
b. the interest it pays is taxed and it was issued by a financially weak corporation
c. the interest it pays is tax exempt and it was issued by a financially strong corporation
d. the interest it pays is tax exempt and it was issued by a financially weak corporation
Which of the following includes everyone in the adult population that the Bureau of
Labor Statistics counts as unemployed?
a. anyone who is not employed
b. anyone who is not employed, is available for work, and has looked for work in the
past 4 weeks
c. anyone who is not employed, is available for work, has looked for work in the past 4
weeks, and anyone who is waiting to be recalled from a job from which they have been
laid off
d. anyone who is not employed, is available for work, has looked for work in the past 4
weeks, anyone who is waiting to be recalled from a job from which they have been laid
off, and anyone who is employed part time and has searched for full time employment
in the past 4 weeks
Your company discovers a better way to produce mousetraps, but your better methods
are not apparent from the mousetraps themselves. Your knowledge of how to more
efficiently produce mousetraps is
a. common technological knowledge.
b. common, but not technological, knowledge.
c. proprietary technological knowledge.
d. proprietary, but not technological, knowledge.
The quantity sold in a market will increase if the government
a. decreases a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. decreases a tax on the good sold in that market.
d. More than one of the above is correct.
Which of the following is included in the demand for dollars in the market for
foreign-currency exchange in the open-economy macroeconomic model?
a. A German bank desires to purchase U.S. Treasury securities
b. A firm in Canada wants to buy rice from a U.S. company.
c. An U.S. citizen wants to buy a bond issued by a Swedish corporation.
d. All of the above are correct.
Figure 3-7
Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier
Refer to Figure 3-7. If Bintu and Juba each divides her time equally between making
bowls and making cups, then total production is
a. 2 bowls and 6 cups.
b. 3 bowls and 7 cups.
c. 4 bowls and 8 cups.
d. 6 bowls and 14 cups.
Queen City Sausage stock is selling at $40 per share, it has retained earnings of $2.00
per share and dividends of $.50 per share. What is the price-earnings ratio and what is
the dividend yield?
a. 20, 1.25 percent
b. 20, 6.25 percent
c. 16, 1.25 percent
d. None of the above is correct.