The Marginal Propensity to Consume (MPC) is defined as the change in
a. C over the change in DI.
b. income over the change in disposable income.
c. DI over the change in C.
d. total income over the change in net income.
The basic data source to track the number of unemployed comes from a calculation of
applications for new unemployment benefits.
a. True
b. False
Which of the following is an example of money serving as a medium of exchange?
a. Richard puts money into a piggy bank.
b. Ellen deposits cash into a money market account.
c. Sean puts a new $20 bill into his currency collection.
d. Marian buys a carbo-loaded drink before a marathon.
The most severe depression in the United States was the 30 percent decrease in real
GDP that occurred between
a. 1899 and 1913.
b. 1929 and 1933.
c. 1959 and 1963.
d. 1979 and 1983.
The typical total profit graphical presentation is shown as
a. a square.
b. a rectangle.
c. a hill, or mound.
d. an S curve.
A line that rises from left to right has a positive slope.
a. True
b. False
According to the purchasing power parity theory, which of the following is most likely
to affect exchange rates?
a. differences in inflation rates
b. differences in interest rates
c. differences in income levels
d. differences in real GDP growth rates
The monopolistically competitive firm in short-run equilibrium
a. faces a downward-sloping demand curve.
b. has a marginal revenue curve which lies below its demand curve.
c. maximizes profit where MR = MC.
d. All of the above are correct.
The risk of financing a project by issuing common stock is borne by
a. the issuing firm only.
b. the stockholders only.
c. both the issuing firm and the stockholders.
d. the government.
Figure 10-6
In Figure 10-6, which graph best illustrates an adverse supply shock accompanied by an
increase in government spending?
a. (1)
b. (2)
c. (3)
d. (4)
Figure 9-5
In Figure 9-5, if the second round effect of an increase in autonomous spending of
$100,000 is $75,000, then the multiplier is
a. 400,000.
b. 6.
c. 4.
d. 4/5.
What was suggested by Keynes to move the economy out of a depressed state?
a. The invisible hand
b. The price mechanism
c. Monetary and fiscal policy
d. Zero government intervention
An area in which the United States has had a sizable surplus in its balance of payments
is sales of ____ to foreigners.
a. goods
b. energy
c. assets
d. automobiles
Under laissez faire, output selection is determined by
a. consumer preferences.
b. production costs.
c. firms’ desires to make profits.
d. All of the above are correct.
Persons who have given up looking for work are classified as
a. unemployed.
b. discouraged workers.
c. in the labor force.
d. temporarily unemployed.
What is the “right” degree of abstraction necessary to analyze an economic problem?
a. simple abstraction of only minor details
b. simple abstraction of only irrelevant details
c. total abstraction of all variables
d. total abstraction of all irrelevant details
e. There is no “right” degree of abstraction to analyze an economic problem.
USX, a steel company, reduced the number of man-hours required to produce a ton of
steel from 10.8 in 1982 to 3.8 in 1990, thereby eliminating 55,000 jobs. Technically,
this rise in productivity means the
a. marginal product of labor increased.
b. average product of labor increased.
c. average product of capital fell.
d. marginal product of capital fell.
Innovation tends to be an extremely competitive activity that allows few opportunities
for firms to share information with one another.
a. True
b. False
One reason the oversimplified multiplier is incorrect is that inflation
a. increases the multiplier by increasing investment spending.
b. increases the multiplier by increasing consumer spending.
c. decreases the multiplier by increasing net exports.
d. decreases the multiplier by decreasing consumer spending.
Structural unemployment may be particularly severe for
a. younger workers
b. college graduates.
c. older workers.
d. workers with “high tech” skills.
Quebec is capable of producing 10,000 pallets of wood shingles or 8,000 barrels of
maple syrup. Vermont is capable of producing 12,000 pallets of wood shingles or
12,000 barrels of maple syrup.
a. Graph these production possibilities curves. Indicate from the slope, which has the
absolute advantage, which the comparative advantage, and whether there are gains from
trade.
b. Assume that Vermont and Quebec each specializes in the good in which they have a
comparative advantage. Suppose that Vermont and Quebec decide to trade 5,000 pallets
of shingles for 5,000 barrels of syrup. Indicate this on the graph. How does this affect
the well being of the two societies? Explain.
The Federal Open Market Committee consists of
a. the president and the Board of Governors.
b. Congresspeople, Senators, and the Board of Governors.
c. the Secretary of the Treasury and the Board of Governors.
d. the Board of Governors and five district bank presidents.
Economists might be willing to accept a policy that adversely affected distribution of
income if it
a. lessened income disparities.
b. diminished labor productivity by a large amount.
c. increased productivity by a large amount.
d. were favorable to the rich.
According to the simple quantity theory of money, a change in the money supply of 9.6
percent would lead to a
a. 9.6 percent change in velocity.
b. 9.6 percent change in real GDP.
c. 9.6 percent change in nominal GDP.
d. 9.6 percent change in aggregate supply.
One of the main reasons that people want to limit imports is the
a. fear that imports will decrease the income of Americans.
b. idea that cheap foreign labor destroys American jobs.
c. concept that if trade benefits another country, it must harm the United States.
d. All of the above are correct.
Economists believe that externalities can be cured by market methods.
a. True
b. False
If the economy is in an inflationary gap, which of the following is the least appropriate
policy mix?
a. a budget surplus and expansionary monetary policy
b. a budget deficit and expansionary monetary policy
c. a budget deficit and contractionary monetary policy
d. a budget surplus and contractionary monetary policy
Figure 1-2
If movement along a graph causes the value on the vertical axis to rise by 5 units and
the value on the horizontal axis to fall by 10 units, the slope of the function is
a. 5.
b. −.5.
c. −2.
d. −72.
International capital flows are purchases and sales of ____ across national borders.
a. goods
b. financial assets
c. services
d. commodities
Like the supply curve for individual goods and services, the aggregate supply curve
slopes upward and to the right.
a. True
b. False
In the short-run if TR < TC, a perfectly competitive firm will always shut down.
a. True
b. False
The fundamental goal of economics is to
a. allow everyone to have five yachts and two automobiles.
b. redistribute income and eliminate poverty.
c. reduce unemployment so that lower welfare payments are necessary.
d. learn to cope with the scarcity of virtually all resources.
Figure 5-6
A shift in the budget line in Figure 5-6 from AB to AC indicates
a. the price of wine coolers has risen.
b. income has increased.
c. the price of beer has fallen.
d. the price of wine coolers has fallen.
e. All of the above are correct.
Government spending is an injection in the sense that it
a. increases the amount of total spending.
b. increases the size of the federal deficit.
c. decreases the amount of household saving.
d. decreases the amount of taxes paid.
Monopolistic competition is common in
a. retail selling.
b. farming.
c. basic manufacturing.
d. electric power generation.