Most economists view the United States’ experience with trade as
a. one from which no firm conclusions about the virtues of free trade can be reached,
due to the relatively short history of international trade in the U.S.
b. one from which no firm conclusions about the virtues of free trade can be reached,
due to the lack of trade within the U.S. throughout most of the early history of the U.S.
c. an ongoing experiment that confirms the virtues of free trade.
d. an ongoing experiment that calls into serious question the notion that free trade
enhances the economic well-being of a nation.
Risk
a. can be reduced by placing a large number of small bets rather than a small number of
large bets.
b. can be reduced by increasing the number of stocks in a portfolio.
c. Both A and B are correct.
d. Neither A nor B are correct.
Senator Bright, who understands economic principles, is trying to convince workers in
her district that trade with other countries is beneficial. Senator Bright should argue that
trade can be beneficial
a. only if it allows us to obtain things that we couldn’t make for ourselves.
b. because it allows specialization, which increases total output.
c. to us if we can gain and the others involved in the trade lose.
d. in only a limited number of circumstances because others are typically
self-interested.
Money
a. is a perfect store of value.
b. is the most liquid asset.
c. has intrinsic value, regardless of which form it takes.
d. All of the above are correct.
Which of the following properly describes the interest-rate effect that helps explain the
slope of the aggregate-demand curve?
a. As the money supply increases, the interest rate falls, so spending rises.
b. As the money supply increases, the interest rate rises, so spending falls.
c. As the price level increases, the interest rate falls, so spending rises.
d. As the price level increases, the interest rate rises, so spending falls.
Figure 8-4
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-4. The equilibrium price before the tax is imposed is
a. $12, and the equilibrium quantity is 70.
b. $8, and the equilibrium quantity is 100.
c. $5, and the equilibrium quantity is 70.
d. $5, and the equilibrium quantity is 100.
If the real exchange rate is less than 1, then the
a. nominal exchange rate x U.S. price > foreign price. The dollars required to purchase
a good in the U.S. would buy more then enough foreign currency to buy the same good
overseas.
b. nominal exchange rate x U.S. price > foreign price. The dollars required to purchase
a good in the U.S. would not buy enough foregoing currency to buy the same good
overseas.
c. nominal exchange rate x U.S. price < foreign price. The dollars required to purchase
a good in the U.S. would buy more then enough foreign currency to buy the same good
overseas.
d. nominal exchange rate x U.S. price < foreign price. The dollars required to purchase
a good in the U.S. would not buy enough foreign currency to buy the same good
overseas.
The Board of Governors
a. is chaired by the U.S. Secretary of the Treasury.
b. members are elected by the U.S. public.
c. has 7 members.
d. All of the above are correct.
Using the graph shown, answer the following questions.
a. What was the equilibrium price in this market before the tax?
b. What is the amount of the tax?
c. How much of the tax will the buyers pay?
d. How much of the tax will the sellers pay?
e. How much will the buyer pay for the product after the tax is imposed?
f. How much will the seller receive after the tax is imposed?
g. As a result of the tax, what has happened to the level of market activity?
An example of a perfectly competitive market would be the market for
a. tennis racquets.
b. pizza.
c. garbage collection.
d. wheat.
Who of the following is counted as unemployed by the BLS?
a. someone working without pay for a family member’s business
b. someone who is absent from their job due to illness
c. someone on temporary layoff
d. All of the above are correct.
If the long-run Phillips curve shifts to the right, then for any given rate of money
growth and inflation the economy has
a. higher unemployment and lower output.
b. higher unemployment and higher output.
c. lower unemployment and lower output.
d. lower unemployment and higher output.
In the economy of Ukzten in 2010, consumption was $1000, exports were $100,
government purchases were $450, imports were $150, and investment was $350. What
was Ukzten’s GDP in 2010?
a. $1750
b. $1850
c. $1900
d. $2050
IRA, 401(k), 403(b), and Keogh plans
a. impose added taxes on those who save.
b. place no limits on the amount people can deposit into these programs.
c. impose penalties for withdrawals except under certain circumstances.
d. None of the above is correct.
Economists normally
a. do not try to explain people’s tastes, but they do try to explain what happens when
tastes change.
b. believe that they must be able to explain people’s tastes in order to explain what
happens when tastes change.
c. do not believe that people’s tastes determine demand, so they ignore the subject of
tastes.
d. incorporate tastes into economic models only to the extent that tastes determine
whether pairs of goods are substitutes or complements.
A measure of the volatility of a variable is its
a. present value.
b. future value.
c. return.
d. standard deviation.
If the price elasticity of demand is 1.5, regardless of which two points on the demand
curve are used to compute the elasticity, then demand is
a. perfectly inelastic, and the demand curve is vertical.
b. elastic, and the demand curve is a straight, downward-sloping line.
c. perfectly elastic, and the demand curve is horizontal.
d. elastic, and the demand curve is something other than a straight, downward-sloping
line.
When the money market is drawn with the value of money on the vertical axis, as the
price level decreases the quantity of money
a. demanded increases.
b. demanded decreases.
c. supplied increases.
d. supplied decreases.
Risk-averse people will choose different asset portfolios than people who are not risk
averse. Over a long period of time, we would expect that
a. every risk-averse person will earn a higher rate of return than every non-risk-averse
person.
b. every risk-averse person will earn a lower rate of return than every non-risk-averse
person.
c. the average risk-averse person will earn a higher rate of return than the average
non-risk-averse person.
d. the average risk-averse person will earn a lower rate of return than the average
non-risk-averse person.
The large increase in oil prices in the 1970s was caused primarily by a(n)
a. increase in demand for oil.
b. decrease in demand for oil.
c. decrease in the supply of oil.
d. increase in the supply of oil.
When money is neutral, which of the following increases when the money supply
growth rate increases?
a. real output growth
b. real interest rates
c. nominal interest rates
d. the money supply divided by the price level
Figure 8-10
Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity
sold in the market after the tax to Q2. Without the tax, the total surplus is
a. [ x (P0-P5) x Q5] + [ x (P5-0) x Q5].
b. [ x (P0-P2) x Q2] +[(P2-P8) x Q2] + [ x (P8-0) x Q2].
c. (P2-P8) x Q2.
d. x (P2-P8) x (Q5-Q2).
According to the quantity theory of money, a 3 percent increase in the money supply
a. causes the price level to rise by 3 percent.
b. causes the price level to rise by less than 3 percent.
c. leaves the price level unchanged.
d. causes the price level to fall by 3 percent.
Sally purchases a classic 1964 car she saw for sale on someone’s lawn. She then
purchases some new parts and spends 120 hours refurbishing the car which she keeps.
Which of the following is included in GDP?
a. the amount she paid to buy the car
b. the amount she paid to buy new parts
c. the value of her time repairing the car
d. All of the above are included.
Figure 9-17
Refer to Figure 9-17. The amount of revenue collected by the government from the
tariff is
a. $32.
b. $288.
c. $368.
d. $720.
Which of the following equations is always correct in an open economy?
a. I = Y – C
b. I = S
c. I = S – NCO
d. I = S + NX
Use the (hypothetical) information in the following table to answer the following
questions.
Table 18-2
Refer to Table 18-2. For which country(ies) in the table does purchasing-power parity
hold?
a. Bolivia and Japan
b. Bolivia and Morocco
c. Japan and Morocco
d. Norway and Thailand
International trade
a. raises the standard of living in all trading countries.
b. lowers the standard of living in all trading countries.
c. leaves the standard of living unchanged.
d. raises the standard of living for importing countries and lowers it for exporting
countries.
Table 4-7
Refer to Table 4-7. If the price were $8, a
a. shortage of 20 units would exist, and price would tend to rise.
b. surplus of 25 units would exist, and price would tend to fall.
c. shortage of 25 units would exist, and price would tend to rise.
d. surplus of 45 units would exist, and price would tend to fall.
In response to a shortage caused by the imposition of a binding price ceiling on a
market,
a. price will no longer be the mechanism that rations scarce resources.
b. long lines of buyers may develop.
c. sellers could ration the good or service according to their own personal biases.
d. All of the above are correct.
Table 11-1
The table below pertains to Pieway, an economy in which the typical consumer’s basket
consists of 10 bushels of peaches and 15 bushels of pecans.
Refer to Table 11-1. The cost of the basket in 2005 was
a. $200.
b. $210.
c. $240.
d. $245.
A survey of professional economists revealed that more than three-fourths of them
agreed with fourteen economic propositions. Which of the following is not one of those
propositions?
a. The United States should not restrict employers from outsourcing work to foreign
countries.
b. The United States should withdraw from the North American Free Trade Agreement
(NAFTA).
c. The United States should eliminate agricultural subsidies.
d. Local and state governments should eliminate subsidies to professional sports
franchises.
If the Federal Reserve increases the money supply, then initially there is a
a. shortage in the money market, so people will want to sell bonds.
b. shortage in the money market, so people will want to buy bonds.
c. surplus in the money market, so people will want to sell bonds.
d. surplus in the money market, so people will want to buy bonds.
The multiplier effect is exemplified by the multiplied impact on
a. the money supply of a given increase in government purchases.
b. tax revenues of a given increase in government purchases.
c. investment of a given increase in interest rates.
d. aggregate demand of a given increase in government purchases.