Assume that coffee and tea are substitutes. When the price of coffee increases
A) the demand for tea decreases.
B) the demand for tea increases.
C) the supply of tea increases.
D) the supply of tea decreases.
The GDP equation is
A) Y = C + I + G + NX.
B) Y = C – I – G – NX.
C) C + I = G + NX.
D) C + I = Y + G + NX.
Mark quit his job as a salesman where he made $43,000 per year to start his own t-shirt
making business. His business expenses are $6,000 per year on rent, $12,000 per year
on supplies, and $4,000 per year on part-time help. As for his personal expenses, his
apartment costs him $4,800 per year and his personal bills are an extra $1,200 per year.
What is Mark’s opportunity cost of running the business?
A) $65,000
B) $57,000
C) $71,000
D) $43,000
Budget deficits can lead to inflation if:
A) crowding out occurs.
B) the government monetizes the deficit.
C) the debt to GDP rises.
D) government borrowing pushes up interest rates.
Let “C = + by” define the consumption function. The term “by” is
A) autonomous consumption.
B) current income.
C) the marginal propensity to consume.
D) consumption that depends on income.
Table 3.3
Consider two individuals, Nigel and Mia, who produce hair pins and bandanas. Nigel’s
and Mia’s hourly productivity are shown in Table 3.3. Mia’s opportunity cost of
producing one hair pin is
A) 1/3 of a bandana.
B) 2.5 bandanas.
C) 3 bandanas.
D) 10 bandanas.
Among the factors that have a negative impact on savings in the United States is the
A) tax system.
B) structure of our welfare programs.
C) fact that colleges give less in financial aid to students whose families have savings.
D) all of the above
If you remove resources from factory production, the quantity of factory goods will
A) increase.
B) decrease.
C) remain the same but their price will decrease.
D) be diverted to other production.
If labor union leaders believe that the Fed is more inclined to fight unemployment than
keep inflation in check, then they are more likely to:
A) demand a wage hike.
B) demand a wage decrease.
C) not demand a wage hike.
D) demand an increase in the number of work days for the same wage.
As a whole, nations are better off after trade and specialization because:
A) nations can consume along their consumption possibilities curve, which is above of
their production possibilities curve.
B) nations can consume along their consumption possibilities curve, which is below of
their production possibilities curve.
C) nations can consume along their production possibilities curve, which is above of
their consumption possibilities curve.
D) nations experience an outward shift of their production possibilities curve.
Figure 19.1
Referring to Figure 19.1, the peso is likely to depreciate if the exchange rate is either
________ or ________ pesos to the dollar.
A) 10; 11
B) 11; 12
C) 12; 13
D) 13; 14
The doctrine that states that ‘supply creates its own demand” is called ________ law.
A) Keynes’s
B) Smith’s
C) Say’s
D) Malthus’s
________ unemployment is most closely associated with periods of falling GDP.
A) Structural
B) Cyclical
C) Frictional
D) Voluntary
Based on the model of the money market, when real GDP increases, the equilibrium
interest rate should
A) stay the same.
B) increase.
C) decrease.
D) increase to the same extent that the supply of money increases.
Table 3.3
Consider two individuals, Nigel and Mia, who produce hair pins and bandanas. Nigel’s
and Mia’s hourly productivity are shown in Table 3.3. Which of the following is true?
A) Nigel has both an absolute and comparative advantage in hair pin production.
B) Nigel has both an absolute and comparative advantage in bandana production.
C) Nigel has neither an absolute nor comparative advantage in hair pin production.
D) Nigel has neither an absolute nor a comparative advantage in bandana production.
Recall Application 3, “Sources of Growth in China and India,” to answer the following
questions:
According to the application, the source of growth for India and China were:
A) increased physical capital stock.
B) increased human capital stock.
C) both A and B are correct.
D) neither A nor B is correct.
Suppose a product suddenly loses popularity and the firms producing the product begin
to realize large losses. In response, entrepreneurs would:
A) enter the market and increase production.
B) enter the market and decrease production.
C) exit the market and decrease production.
D) exit the market and increase production.
Unanticipated inflation arbitrarily redistributes income because:
A) nominal interest rates fall below real interest rates.
B) actual tax revenue decreases and so do government subsidies.
C) medical costs rise faster than health insurance premiums.
D) people forecast relative prices incorrectly and either gain or lose purchasing power.
If the capital-labor ratio of an economy decreases, ceteris paribus:
A) output increases.
B) output may increase even without improvements in technology.
C) output decreases because of diminishing marginal returns.
D) output per person stays the same.