It presently costs 50 Canadian dollars for a lift ticket at Whistler Ski Resort in British
Columbia. If the current value of the Canadian dollar is 0.68 U.S. dollars, how many
U.S. dollars does it cost to ski at Whistler?
a. $16.00
b. $34.00
c. $73.50
d. $156.25
Figure 20-9
In Figure 20-9, the C + I + G + (X − IM)1 line is flatter than the C + I + G + (X − IM)0
line because the
a. (X − IM)1 line indicates that net exports decline as GDP rises.
b. (X − IM)1 line indicates that net exports rise as GDP rises.
c. multiplier is greater for the (X − IM)1 line.
d. (X − IM)1 line indicates that tariffs, quotas, and other trade barriers are keeping net
exports below their full potential.
Figure 5-16
Figure 5-16 shows Adam’s purchases of bananas and apples when apples cost $5 each
and bananas $4 each. The information implies that Adam’s income
a. must be $9.
b. must be $20.
c. must be $40.
d. Adam’s income cannot be determined without further information.
Are forecasts of economic activity accurate enough to permit “fine-tuning” of the
economy?
a. No, forecasting is so inaccurate that it should be abandoned.
b. No, forecasts are not accurate enough for this.
c. Yes, forecasts are accurate and reliable enough for this.
d. Yes, at least most of the time.
Under perfect competition and monopolistic competition, profits are zero in long-run
equilibrium.
a. True
b. False
Which of the following is a drawback of FDIC insurance?
a. It leads to excess industry profits.
b. It has failed to arrest the trend of bank failures.
c. It leads to the problem of moral hazard.
d. It undercuts private insurance companies.
Define the following terms and explain their importance to the study of
macroeconomics:
a. structural budget deficit
b. monetize the deficit
c. crowding out
d. inflation accounting
e. mix of fiscal and monetary policy
Which of the following is true if the opportunity cost of producing a particular good is
less than its accounting profit?
a. Economic profit is zero.
b. Economic profit is negative.
c. Economic profit is positive.
d. Economic profit cannot be determined.
Which of the following equations defines marginal revenue product?
a. MRP = P times Q.
b. MRP = total cost.
c. MRP = total revenue minus total cost.
d. MRP = MPP times price of the product.
When will the difference between the actual deficit and the structural deficit be the
smallest?
a. in a major recession
b. in a major recession
c. at full employment
d. in an inflationary gap
Recessionary gaps usually lead to
a. structural unemployment.
b. cyclical unemployment.
c. seasonal unemployment.
d. frictional unemployment.
Supply-side economics concerns itself with the interaction between demand and supply,
the price level, and real GDP.
a. True
b. False
Which of the following is a good example of efficient specialization and voluntary
exchange?
a. A college professor hires someone to rototill a garden for spring planting.
b. A college professor works on the engine of a car for a neighbor who is a mechanic.
c. A lawyer decides to babysit his young child and agrees to do so for others for cash.
d. A physician agrees to help a neighbor work on her income tax return in exchange for
her bookkeeping services.
Banks will hold additional excess reserves when
a. loans to customers look safe and interest rates are high.
b. they anticipate a bank audit.
c. loans to customers look risky and interest rates are low.
d. the economy is booming and there is a large demand for loans.
If the U.S. government decides to increase military spending, one opportunity cost will
be lower spending on education.
a. True
b. False
Define the following terms and explain their importance to the study of
macroeconomics.
a. central bank
b. Federal Open Market Committee
c. supply of money
d. monetary policy
Explain briefly the following concepts:
(a) Increasing returns to scale.
(b) Decreasing returns to scale.
(c) Constant returns to scale.
Policy makers who believe that the costs of inflation are very high will tend to favor
which of the following during an inflationary gap?
a. moderate fiscal stimulus, no monetary stimulus
b. fiscal and monetary tightness
c. moderate monetary stimulus, fiscal tightness
d. strong fiscal and monetary stimulus
If the consumption function shifts downward, which of the following is the most likely
cause?
a. Consumers become more optimistic.
b. The price level increased.
c. Consumers’ incomes increase.
d. Real interest rates decrease.
The two basic reasons why a monopoly exists are barriers to entry and cost advantages.
a. True
b. False
To stimulate investment spending, Congress would most likely decrease
a. personal income taxes.
b. capital gains taxes.
c. property taxes.
d. real interest rates.
The principle of marginal productivity
a. is the same as the principle of marginal cost.
b. helps explain the demand for each input.
c. differs from industry to industry.
d. allows the world’s food to be grown in a flower pot.
Which of the following is usually a durable good?
a. a unit of labor
b. the interest rate
c. a depletable resource
d. a capital good
If an investor had a $100,000 long-term capital gain on a $100,000 investment from
1984 to 2010, her real rate of return was most likely
a. equal to the expected rate of inflation.
b. positive.
c. very near zero..
d. negative.
Since price tends to equal total utility, the price of water is low and the price of
diamonds is high.
a. True
b. False
Which of the following is expected to increase aggregate demand in the short run?
a. Deficit budget
b. Surplus budget
c. Zero based budget
d. Balanced budget
Marginal profit is the addition to a firm’s total profit from a
a. $1 change in its price.
b. one-unit change in its output.
c. reduction in total cost.
d. reduction in marginal cost.
Which of the following is considered by economists to be the most fundamentally
scarce?
a. money
b. ideas
c. needs
d. food
e. physical resources
One reason why the Phillips curve “broke down” is
a. most of the inflation of the 1970s was from the demand side.
b. most of the inflation of the 1970s was from the supply side.
c. the inflation of the 1970s was foreseen, unlike the inflation of the 1980s.
d. the inflation of the 1970s was purely random and could not be explained with
economic theory.
Higher interest rates in Iceland and the Baltic states in 2008-2009 were necessary to
protect the value of their currencies against capital flight.
a. True
b. False
The worst remedy for curing the U.S. trade deficit is to
a. increase U.S. personal saving.
b. reduce the budget deficit.
c. encourage all nations to lower trade barriers.
d. limit imports by imposing tariffs, quotas, and other trade restrictions.
The relatively low rate of inflation coupled with a low unemployment rate that occurred
in the 1990s represented a “normal” economic situation.
a. True
b. False
The term frictional unemployment refers to persons who are out of work
a. due to technological change.
b. due to strikes or lockouts.
c. and have given up looking for work.
d. because they are between jobs.