Table24-12.Will’s expenditures on food for three consecutive years, along with other
values, are presented in the table below.
RefertoTable24-12.To the nearest dollar, Will’s 2010 food expenditures in 2009 dollars
amount to
a. $5,236.
b. $5,431.
c. $5,524.
d. $5,608.
Which of the following is the correct expression for finding the present value of a $500
payment two years from today if the interest rate is 6 percent?
a. $500/(1.06)2
b. $500 – 500(1.06)2
c. $500/(1.02)6
d. None of the above is correct.
Trade makes costs
a. higher and reduces the variety of goods and services available.
b. higher but raises the variety of goods and services available.
c. lower but reduces the variety of goods and services available.
d. lower and raises the variety of goods and services available.
Figure27-5. The figure shows a utility function for Dexter.
RefertoFigure27-5. From the appearance of the graph, we know that
a. Dexter’s level of satisfaction increases by more when his wealth increases from
$1,001 to $1,002 than it
does when his wealth increases from $1,000 to $1,001.
b. Dexter’s level of satisfaction increases by less when his wealth increases from $1,001
to $1,002 than it does
when his wealth increases from $1,000 to $1,001.
c. Dexter’s level of satisfaction increases by the same amount when his wealth increases
from $1,001 to
$1,002 as it does when his wealth increases from $1,000 to $1,001.
d. None of the above answers can be inferred from the appearance of the utility
function.
In a market economy, supply and demand determine
a. both the quantity of each good produced and the price at which it is sold.
b. the quantity of each good produced but not the price at which it is sold.
c. the price at which each good is sold but not the quantity of each good produced.
d. neither the quantity of each good produced nor the price at which it is sold.
If the government cut expenditures during an expansion
a. it would have to raise the tax rate
b. it would tend to stabilize the economy
c. both a and b
d. neither a nor b
Monetary Policy in Mokania
Mokania has had inflation of 15% for many years. Mokania establishes a new central
bank, the Bank of Mokania, with the hopes of reducing the inflation rate.
Refer to MonetaryPolicyinMokania. The Bank of Mokania reduced inflation to its
announced goal of 5%. However its efforts made the unemployment rate rise by 10
percentage points for a year while output fell by 30 percent for a year. Which of the
following is correct?
a. Initially people’s inflation expectations had been higher than 5%. The sacrifice ratio
was 3.
b. Initially people’s inflation expectations had been higher than 5%. The sacrifice ratio
was 1.
c. Initially people’s inflation expectations had been lower than 5%. The sacrifice ratio
was 3.
d. Initially people’s inflation expectations had been lower than 5%. The sacrifice ratio
was 1.
Rupert is collecting unemployment insurance benefits. To continue to receive his
benefits, he must be looking for work. Because he”d like to continue collecting benefits
rather than take a job, he applies at places that are unlikely to hire him. People like
Rupert make the reported unemployment rate less than it would otherwise be.
a. True
b. False
Figure 3-22
Alice and Betty’s Production Possibilities in one 8hour day.
RefertoFigure3-22.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.
The supply of loanable funds slopes
a. upward because an increase in the interest rate induces people to save more.
b. downward because an increase in the interest rate induces people to save less.
c. downward because an increase in the interest rate induces people to invest less.
d. upward because an increase in the interest rate induces people to invest more.
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.
Economists work both inside and outside the administrative branch of the U.S.
government.
a. True
b. False
Suppose that the real return from operating factories in Canada rises relative to the real
rate of return in the United States. Other things the same,
a. this will increases U.S. net capital outflow and decrease Canadian net capital outflow.
b. this will decreases U.S. net capital outflow and increase Canadian net capital outflow.
c. this will only increase U.S. net capital outflow.
d. this will only increase Canadian net capital outflow.
If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it
receives a new deposit of $10, then this bank
a. must increase its required reserves by $10.
b. will initially see its total reserves increase by $10.50.
c. will be able to make new loans up to a maximum of $9.50.
d. All of the above are correct.
Table 2-3
ProductionPossibilitiesforFootville
Refer to Table2-3. What is the opportunity cost to Footville of increasing the
production of shoes from 400 to 600?
a. 400 socks
b. 300 socks
c. 200 socks
d. 100 socks
The quantity theory of money
a. is a fairly recent addition to economic theory.
b. can explain both moderate inflation and hyperinflation.
c. argues that inflation is caused by too little money in the economy.
d. All of the above are correct.
The laws that created the Fed give it some specific recommendations about what goals
it should pursue so it has little discretion in making policy.
a. True
b. False
From fiscal year 2012 to fiscal year 2013 China’s budget deficit rose 50%. Other things
the same, we would expect this to have
a. decreased interest rates and investment.
b. decreased interest rates and increased investment.
c. increased interest rates and investment.
d. increased interest rates and decreased investment.
Table 3-9
Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
Refer to Table3-9. We could use the information in the table to draw a production
possibilities frontier for Maya and a second production possibilities frontier for Miguel.
If we were to do this, measuring toasters along the horizontal axis, then
a. the slope of Maya’s production possibilities frontier would be 2 and the slope of
Miguel’s production possibilities frontier would be -2.
b. the slope of Maya’s production possibilities frontier would be 0.5 and the slope of
Miguel’s production possibilities frontier would be -0.5.
c. the slope of Maya’s production possibilities frontier would be 1.67 and the slope of
Miguel’s production possibilities frontier would be -1.67.
d. the slope of Maya’s production possibilities frontier would be 0.6 and the slope of
Miguel’s production possibilities frontier would be -0.6.
Table 3-36
RefertoTable3-36.What is Antigua’s opportunity cost of one umbrella?
a. 3/5 towels
b. 2/3 towels
c. 3/2 towels
d. 5/3 towels
It is best to view the official unemployment rate as a useful but imperfect measure of
joblessness.
a. True
b. False
When there are two people and each is capable of producing two goods, it is possible
for one person to have a comparative advantage over the other in both goods.
a. True
b. False
Cleo promises to pay Jacques $1,000 two years from today. If the interest rate is 4
percent, then how much is this future payment worth today?
a. $924.56
b. $931.44
c. $937.87
d. None of the above are correct to the nearest cent.
If the U.S. imposed an import quota on farm machinery, then sales of U.S. farm
machinery equipment producers would
a. rise and the exports of other U.S. industries would rise.
b. rise and the exports of other U.S. industries would fall.
c. fall and the exports of other U.S. industries would rise.
d. fall and the exports of other U.S. industries would fall.
The CPI does not reflect the increase in the value of the dollar that arises from the
introduction of new goods.
a. True
b. False
Perry accumulated a lot of mathematical skills while in high school, college, and
graduate school. Economists
include these skills as part of Perry’s
a. proprietary knowledge.
b. technological knowledge.
c. human capital.
d. physical capital.
An increase in the money supply will
a. increase interest rates, decreasing investment and aggregate demand.
b. reduce interest rates, increasing investment and aggregate demand.
c. reduce interest rates, decreasing investment and increasing aggregate demand.
d. increase interest rates, increasing investment and aggregate demand.
In which of the following cases is the after-tax real interest rate highest?
a. inflation is 6%, the pre-tax real interest rate is 3%, and the tax rate is 20%.
b. inflation is 6%, the pre-tax real interest rate is 3%, and the tax rate is 25%.
c. inflation is 4%, the pre-tax real interest rate is 2%, and the tax rate is 20%.
d. inflation is 4%, the pre-tax real interest rate is 2%, and the tax rate is 25%.
During the past century the average growth rate of U.S. real GDP per person implies
that it doubled, on average, about every
a. 100 years.
b. 70 years.
c. 35 years.
d. 25 years.
Which of the following is a determinant of the market supply curve but nota
determinant of an individual seller’s supply?
a. production technology
b. expectations
c. input prices
d. the number of sellers
Suppose the government deficit increases, but the interest rate remains the same. Which
of the following things might have happened simultaneously to keep interest rates the
same?
a. The government reduces the amount that people may put into savings accounts on
which the interest is tax exempt.
b. Because they are optimistic about the future of the economy, firms desire to borrow
more to purchase physical capital.
c. Consumers decide to decrease consumption and work more.
d. All of the above could explain why the interest rate would be unchanged.
The two words economists use most often are
a. inflation and trade.
b. supply and demand.
c. competition and prices.
d. markets and equilibrium.
Which of the following statements is correct about the roles of economists?
a. Economists are best viewed as policy advisers.
b. Economists are best viewed as scientists.
c. In trying to explain the world, economists are policy advisers; in trying to improve
the world, they are scientists.
d. In trying to explain the world, economists are scientists; in trying to improve the
world, they are policy advisers.
For international trade to benefit a country, it must benefit all citizens of that country.
a. True
b. False