Table 7-2
This table refers to five possible buyers’ willingness to pay for a case of Vanilla Coke.
Refer to Table 7-2. Which of the following is not true?
a. At a price of $9.00, no buyer is willing to purchase Vanilla Coke.
b. At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and
not buying one.
c. At a price of $4.00, total consumer surplus in the market will be $9.00.
d. All of the above are correct.
If the Fed reduces inflation 1 percentage point and this makes output fall 5 percentage
points and unemployment rises 2 percentage points for one year, the sacrifice ratio is
a. 1/5.
b. 2.
c. 5/2.
d. 5.
Congress intended that
a. the entire FICA tax be paid by workers.
b. the entire FICA tax be paid by firms.
c. one-quarter of the FICA tax be paid by workers, and three-quarters be paid by firms.
d. half the FICA tax be paid by workers, and half be paid by firms.
Social Security payments are indexed for inflation using
a. the CPI.
b. the PPI.
c. the GDP deflator.
d. real interest rates.
For a good that is taxed, the area on the relevant supply-and-demand graph that
represents government’s tax revenue is a
a. triangle.
b. rectangle.
c. trapezoid.
d. None of the above is correct; government’s tax revenue is the area between the
supply and demand curves, above the horizontal axis, and below the effective price to
buyers.
When a tax is levied on buyers of tea,
a. buyers of tea and sellers of tea both are made worse off.
b. buyers of tea are made worse off, and the well-being of sellers is unaffected.
c. buyers of tea are made worse off, and sellers of tea are made better off.
d. the well-being of both buyers of tea and sellers of tea is unaffected.
Figure 3-2
Peru’s Production Possibilities Frontier
Refer to Figure 3-2. If the production possibilities frontier shown is for 40 hours of
production, then how long does it take Peru to make one ruby?
a. 1/6 hour
b. 1/5 hour
c. 5 hours
d. 6 hours
Which of the following items is included in M2?
a. credit cards
b. money market mutual funds
c. corporate bonds
d. large time deposits
When the France trades with Russia,
a. both countries are likely made better off.
b. only Russia benefits since France can produce all goods at a higher level of quality
than Russia.
c. only France benefits since Russia’s low wages guarantee profitable firms in Russia
regardless of trade.
d. neither country will benefit since France is more efficient than Russia at producing
all goods.
Figure 14-2. The figure shows a utility function for Mary Ann.
Refer to Figure 14-2. From the appearance of the utility function, we know that
a. if Mary Ann owns a house, she would not consider buying fire insurance.
b. Mary Ann would prefer to hold a portfolio of stocks with an average return of 8
percent and a standard deviation of 2 percent to a portfolio of stocks with an average
return of 8 percent and a standard deviation of 5 percent.
c. Mary Ann would prefer to hold a portfolio of stocks with an average return of 8
percent and a standard deviation of 5 percent to a portfolio of stocks with an average
return of 6 percent and a standard deviation of 3 percent.
d. All of the above are correct.
Which of the following might explain a decrease in national saving when the tax rate on
savings is reduced?
a. its income effect on saving and its effect on the government budget
b. its income effect on saving but not its effect on the government budget
c. its effect on the government budget but not its income effect on saving
d. neither its income effect on saving nor its effect on the government budget
Figure 21-3.
Refer to Figure 21-3. Which of the following sequences (numbered arrows) shows the
logic of the interest-rate effect?
a. 1, 2, 3, 4
b. 1, 4, 3, 2
c. 3, 4, 2, 1
d. 3, 2, 1, 4
Figure 21-4. On the figure, MS represents money supply and MD represents money
demand.
Refer to Figure 21-4. Suppose the money-demand curve is currently MD2. If the
current interest rate is r2, then
a. in response, the money-demand curve will shift downward from its current position
to establish equilibrium in the money market.
b. people will respond by selling interest-bearing bonds or by withdrawing money from
interest-bearing bank accounts.
c. bond issuers and banks will respond by lowering the interest rates they offer.
d. there is a surplus of money.
If wages are sticky, then a greater than expected increase in the price level
a. raises the real costs of production, so the short-run aggregate supply curve shifts left.
b. raises the real costs of production, so the aggregate quantity of goods and services
declines.
c. reduces the real costs of production, so the short-run aggregate supply curve shifts
right.
d. reduces the real costs of production, so the aggregate quantity of good and services
rises.
Which of the following is not a determinant of the demand for a particular good?
a. the prices of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good
Which of the following is a financial intermediary?
a. a mutual fund
b. the stock market
c. a U.S. government bond
d. a wealthy individual who regularly buys and holds large quantities of government
bonds
Wages in excess of their equilibrium level help explain
a. structural unemployment but not the natural rate of unemployment.
b. the natural rate of unemployment but not structural unemployment.
c. both structural unemployment and the natural rate of unemployment.
d. neither structural unemployment nor the natural rate of unemployment.
Figure 3-10
Alice and Betty’s Production Possibilities in one 8-hour day.
Alice’s Production Possibilities Frontier Betty’s Production Possibilities Frontier
Refer to Figure 3-10. What are Alice and Betty’s opportunity costs of 1 pizza?
a. Alice’s opportunity cost of 1 pizza is 1/2 of a pitcher of lemonade and Betty’s
opportunity cost of 1 pizza is 2/3 of a pitcher of lemonade.
b. Alice’s opportunity cost of 1 pizza is 1 pitcher of lemonade and Betty’s opportunity
cost of 1 pizza is 3 pitchers of lemonade.
c. Alice’s opportunity cost of 1 pizza is 2 pitchers of lemonade and Betty’s opportunity
cost of 1 pizza is 1.5 pitchers of lemonade.
d. Alice’s opportunity cost of 1 pizza is 400 pitchers of lemonade and Betty’s
opportunity cost of 1 pizza is 450 pitchers of lemonade.
Which of the following is not a reason people choose to depend on others for goods and
services?
a. to improve their lives
b. to allow them to enjoy a greater variety of goods and services
c. to consume more of each good without working any more hours
d. to allow people to produce outside their production possibilities frontiers
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. Which of the following scenarios is consistent with this statement?
“The cost of living increased by 25 percent between 2009 and “
a. The price of a hot dog was $2.24 rather than $3.00 in 2009, with other prices in the
table remaining fixed.
b. The price of a hot dog was $4.07 rather than $3.63 in 2011, with other prices in the
table remaining fixed..
c. The price of a hamburger was $4.24 rather than $5.00 in 2009, with other prices in
the table remaining fixed.
d. The price of a hamburger was $5.96 rather than $5.61 in 2011, with other prices in
the table remaining fixed.
Suppose the market demand curve for a good passes through the point (quantity
demanded = 100, price = $25). If there are five buyers in the market, then
a. the marginal buyer’s willingness to pay for the 100th unit of the good is $25.
b. the sum of the five buyers’ willingness to pay for the 100th unit of the good is $25.
c. the average of the five buyers’ willingness to pay for the 100th unit of the good is $25.
d. all of the five buyers are willing to pay at least $25 for the 100th unit of the good.
Which of the following support the idea that monetary policy should be made by a rule?
a. the political business cycle and the time-inconsistency problem
b. the political business cycle but not the time-inconsistency problem
c. the time-inconsistency problem, but not the political business cycle
d. neither the political business cycle nor the time-inconsistency problem
Table 15-2
2009 Labor Data for Baltivia
Refer to Table 15-2. How many people were employed in Baltivia in 2009?
a. 9,600
b. 10,600
c. 11,000
d. 11,200
Economists view the fact that Florida grows oranges, Texas pumps oil, and California
makes wine as
a. confirmation of the virtues of free trade.
b. confirmation of the infant-industry argument.
c. confirmation that free trade agreements are not necessary.
d. confirmation that specialization in absolute advantage works.
The President receives economic policy advice from economists at each of the
following except
a. the Council of Economic Advisors.
b. the Department of the Treasury.
c. the Congressional Budget office.
d. the Department of Labor.
People who are unemployed because of job search are best classified as
a. cyclically unemployed.
b. structurally unemployed.
c. frictionally unemployed.
d. discouraged workers.
The exchange-rate effect is based, in part, on the idea that
a. a decrease in the price level reduces the interest rate.
b. an increase in the price level causes investors to move some of their funds overseas.
c. an increase in the price level causes domestic goods to become less expensive
relative to foreign goods.
d. a decrease in the price level reduces spending on net exports.
Use the (hypothetical) information in the following table to answer the following
questions.
Table 18-2
Refer to Table 18-2. Which currency(ies) is(are) more valuable than predicted by the
doctrine of purchasing-power parity?
a. boloviano and dinar
b. yen, kroner, and baht
c. yen and kroner
d. baht
A decrease in expected inflation shifts
a. the long-run Phillips curve left.
b. the short-run Phillips curve left.
c. neither the short-run nor long-run Phillips curve left.
d. both the short-run and long-run Phillips curve left.
Given the following information, what are the values of M1 and M2?
a. M1 = $400 billion, M2 = $2,475 billion.
b. M1 = $125 billion, M2 = $3,025 billion.
c. M1 = $425 billion, M2 = $2, 450 billion.
d. M1 = $425 billion, M2 = $1,875 billion.
Which of the following claims is consistent with the views of mainstream economists?
a. If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will temporarily fall.
b. If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will temporarily rise.
c. If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will permanently fall.
d. If we increase the rate of inflation from 3 percent to 6 percent, then the rate of
unemployment will permanently rise.
You have responsibility for economic policy in the country of Freedonia. Recently, the
neighboring country of Sylvania has cut off all exports of oranges to Freedonia. Harpo,
who is one of your advisors, suggests that you should impose a binding price ceiling in
order to avoid a shortage of oranges. Chico, another one of your advisors, argues that
without a binding price floor, a shortage will certainly develop. Zeppo, a third advisor,
says that the best way to avoid a shortage of oranges is to take no action at all. Which of
your three advisors is most likely to have studied economics?
a. Harpo
b. Chico
c. Zeppo
d. Apparently, all three advisors have studied economics, but their views on positive
economics are different.