A shift to a more expansionary monetary policy will have its greatest effect on
a. the interest rate on a 30-year fixed-rate mortgage.
b. the interest rate on 10-year government bonds.
c. short-term interest rates.
d. the 15-year corporate bond interest rate.
International trade and competition from abroad
a. provide domestic producers with a strong incentive to improve the quality of their
products and keep their costs low.
b. will make it more difficult for domestic producers to realize fully the potential gains
from economies of scale in production.
c. will make it more difficult for domestic consumers in small countries to purchase
from large scale producers.
d. do all of the above.
e. do none of the above.
Nations will attract investment and its citizens will engage in productive activities when
the institutions and policies of that country
a. encourage market exchange.
b. reward innovation.
c. protect people and their property.
d. all of the above.
If a country allows trade and, for a certain good, the domestic price without trade is
lower than the world price,
a. the country will be an exporter of the good.
b. the country will be an importer of the good.
c. the country will be neither an exporter nor an importer of the good.
d. Additional information is needed about demand to determine whether the country
will be an exporter of the good, an importer of the good, or neither.
Figure 17-10
Refer to Figure 17-10. The amount of government revenue created by the tariff is
a. B.
b. E.
c. D + F.
d. B + D + E + F.
Which of the following would be classified as employed?
a. a full-time college student
b. a construction worker on layoff due to cold weather
c. a parent who works 50 to 60 hours per week caring for family members
d. a worker who is in the midst of a two-week vacation from his regular job
An increase in the required reserve ratio would be
a. a restrictive policy because it lowers the amount of total reserves in the banking
system.
b. a restrictive policy because it lowers the amount of excess reserves in the banking
system.
c. an expansionary policy because it raises the amount of total reserves in the banking
system.
d. an expansionary policy because it raises the amount of excess reserves in the banking
system.
e. an expansionary policy because it raises the amount of required reserves in the
banking system.
Elizabeth is the owner of a small business, and she is 35 years old. She doesn’t smoke
cigarettes, and she often spends her weekends with her family camping at the local state
park. According to public choice theory, which of the following four politicians for a
public office would Elizabeth be most likely to vote for in the upcoming election?
a. Politician A proposes increasing the tax on small businesses and using the money to
provide additional benefits for the elderly.
b. Politician B proposes increasing the tax on small businesses and using the money to
improve the camping facilities at the state park.
c. Politician C proposes increasing the excise tax on cigarettes and using the money to
improve the camping facilities at the state park.
d. Politician D proposes increasing the excise tax on cigarettes and using the money to
provide additional benefits for the elderly.
Which of the following would most likely cause a nation’s currency to depreciate?
a. an increase in exports coupled with a decline in imports
b. a slower inflation rate than those of its trading partners
c. lower domestic real interest rates
d. lower real interest rates abroad
Which of the following is correct?
a. An increase in the tariff on foreign-produced automobiles will benefit U.S.
consumers of domestic cars.
b. An ongoing result of the North American Free Trade Agreement is that producers in
both countries will benefit at the expense of consumers.
c. The wages of U.S. workers would sharply decline if we traded freely with low-wage
countries like India and China.
d. Exports provide a nation with its primary source of purchasing power used to buy
imported goods.
Suppose that the producers of copper are permitted to emit harmful pollutants, free of
charge, into the air. How will the price and output of copper products in a competitive
market compare with their values under conditions of ideal economic efficiency?
a. The price will be too high, and the output will be too large.
b. The price will be too low, and the output will be too large.
c. The price will be too low, and the output will be too small.
d. The price will be too high, and the output will be too small.
The overall federal tax structure is
a. regressive because the average tax rate of those with low incomes is higher than the
rate imposed on those with higher incomes.
b. progressive because the average tax rate of those with high incomes is greater than
the rate imposed on those with lower incomes.
c. flat because the average tax rate is approximately constant across all income brackets.
d. progressive for income levels up to approximately $100,000 but regressive for
income levels above this figure.
Figure 3-22
Refer to Figure 3-22. Which of the four graphs represents the market for pizza delivery
in a college town as we go from summer to the beginning of the fall semester?
a. A
b. B
c. C
d. D
Use the figure below to answer the following question(s).
Figure 4-7
Refer to Figure 4-7. The supply curve S1 and the demand curve D indicate initial
conditions in the market for gasoline. A $.60-per-gallon excise tax on gasoline is levied.
How much revenue does the $.60-per-gallon tax generate for the government?
a. $40 billion
b. $48 billion
c. $50 billion
d. $60 billion
Suppose there was a country with an adult (age 16 and over) population of 1,000, of
which 100 were unemployed and 700 were employed. Which of the following is true?
a. The employment population ratio is 87.5 percent.
b. The labor force participation rate is 70 percent.
c. The unemployment rate is 12.5 percent.
d. There are 700 individuals in this country’s labor force.
Which of the following correctly indicates a potential path for the transmission of
expansionary monetary policy to the goods and services market?
a. Higher real interest rates will lead to a decrease in both business investment and
consumer purchases of durable items, causing a decrease in aggregate demand.
b. Lower interest rates lead to a depreciation in the foreign exchange value of the dollar,
an increase in net exports, and an expansion in aggregate demand.
c. Higher interest rates will tend to increase asset prices, leading to a decrease in wealth
that will decrease consumer spending and aggregate demand.
d. A reduction in the general level of prices will increase the disposable income of
households and aggregate demand.
Figure 3-22
Refer to Figure 3-22. Which of the four graphs represents the market for cars as a result
of the adoption of new technology on assembly lines?
a. A
b. B
c. C
d. D
What role do losses play in a competitive price-searcher market?
a. They penalize a firm for producing a differentiated product.
b. They signal that more resources are needed in a particular market.
c. They show firms that barriers to entry are high.
d. They send a message that more value would be created if the resources were used to
produce other goods.
If there is an increase in market demand in a competitive price-taker market, then in the
short run
a. there will be no change in the demand curves faced by individual firms in the market.
b. the demand curves for firms will shift downward.
c. the demand curves for firms will become more elastic.
d. profits will rise.
Which of the following groups is most highly unionized?
a. private wage and salary workers
b. government employees
c. technical, sales, and service workers
d. women
Suppose the Fed sells $100 million of U.S. securities to the public. If the reserve
requirement is 20 percent, the currency holdings of the public are unchanged, and banks
have zero excess reserves both before and after the transaction, the total impact on the
money supply will be a
a. $100 million decrease.
b. $500 million increase.
c. $500 million decrease.
d. $100 million increase.
The marginal propensity to consume (MPC) is
a. consumption expenditures divided by saving.
b. consumption expenditures divided by disposable income.
c. consumption expenditures divided by personal income.
d. additional consumption expenditures divided by additional disposable income.
Which of the following is inconsistent with the view that Fed monetary policy was
excessively expansionary during 2010-2013?
a. Short-term interest rates that were near zero throughout these years.
b. A rapid increase in the monetary base throughout these years.
c. A tripling of Fed asset holdings from less than $1 trillion in 2008 to approximately $3
trillion in 2012.
d. Growth of nominal GDP during 2010-2012 at a rate similar to that of recent decades.
Public choice analysis suggests that the primary motivating factor for politicians will be
finding the policies that are most likely to
a. get them reelected.
b. improve economic efficiency.
c. improve the welfare of society as a whole.
d. anger the interest groups that provide substantial contributions to their campaigns.
The share of the personal income tax paid by the bottom half of earners
a. rose to an all-time high in 2010.
b. was substantially higher in 2010 than during the 1960s and 1970s.
c. was substantially lower in 2010 than during the 1960s and 1970s.
d. has been relatively constant during the last four decades.
The demand curve for a good is very unlikely to be perfectly vertical because
a. scarcity and limited income restrict the ability of consumers to afford goods as they
become very expensive.
b. as the price of a good rises to high enough levels, the incentive for other suppliers to
invent new substitutes for the good increases.
c. consumers generally do not care about the price of the goods they consume.
d. both a and b are true.
Which one of the following was a secondary effect of the stock market crash of 1929?
a. an increase in the money supply in the early 1930s
b. a decline in consumption expenditures because of the reduction in the wealth of
stockholders
c. an increase in the supply of loanable funds as people transferred funds from the stock
market into savings accounts
d. an increase in tax revenues as the sellers of stocks paid the capital gains tax on stocks
that had appreciated during the 1920s
Keynesian economists argue that during a recession
a. private sector spending will rise and therefore government spending should be
reduced in order to help maintain aggregate demand at or near the full employment
level.
b. private sector spending will decline, and therefore government spending should
increase in order to help maintain a high level of aggregate demand.
c. private sector spending will decline, and therefore government spending should be
reduced in order to avoid the crowding out of still more private sector spending.
d. private sector spending will rise and therefore government spending should be
increased in order to provide more stimulus for the economy.
The more elastic the supply of a product, the more likely it is that the
a. burden of a tax on the product will fall on sellers.
b. burden of a tax on the product will fall on buyers.
c. burden of a tax on the product will fall equally on both buyers and sellers.
d. deadweight loss of the tax will be smaller.
When comparisons are made between the earnings of whites and minorities with the
same age, quantity of schooling, marital status, sector of employment, union and
industry status, regional location, and annual hours worked, recent studies indicate that
a. the corrected earnings of minority men are about two-thirds the earnings of white
men.
b. earnings differentials between whites and minorities are due almost exclusively to
employment discrimination.
c. the corrected earnings of Mexican-Americans, Asian-Americans, and American
Indians were between 7 and 9 percent less than the earnings of similar white men.
d. most minority men now have higher earnings than white men.
The per capita incomes of countries in the quartile with the most economic freedom
during 1980-2010 were
a. slightly lower than those of the quartile of countries with the least economic freedom.
b. about the same as the quartile of countries with the least economic freedom.
c. about twice those of the countries with the least economic freedom.
d. about eight times those of the quartile of countries with the least economic freedom.
The notion that specialization in goods that one can produce at a low opportunity cost
will make it possible for trading partners to produce a larger joint output is called
a. the law of absolute advantage.
b. the law of comparative advantage.
c. the law of production possibilities.
d. the exchange maximum principle.
An increase in capital formation that expands long-run aggregate supply will
a. increase output and decrease prices.
b. increase both output and prices.
c. decrease both output and prices.
d. decrease output and increase prices.
Producers are willing to offer greater quantities for sale at higher prices because
a. they have the incentive to pay the increasing opportunity cost of resources necessary
to attract them from alternative uses
b. they will decrease their profits by expanding production at higher prices
c. the government orders them to do so
d. lower prices attract new firms, which have higher costs of production
e. they hire superior quality, higher-priced resources as production expands