The introduction of a union into an industry
a. raises wages and employment in that industry.
b. lowers wages and employment in that industry.
c. lowers wages and raises employment in that industry.
d. raises wages and lowers employment in that industry.
Figure 8-2
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-2. The imposition of the tax causes the price paid by buyers to
a. decrease by $2.
b. increase by $3.
c. decrease by $4.
d. increase by $5.
Consider five individuals with different occupations.
Which of the following pairs of individuals has a double coincidence of wants?
a. Mary and Clark
b. Clark and Nathan
c. Nathan and Polly
d. Polly and Paul
The theory of purchasing-power parity primarily explains
a. why trade deficits tend to move to zero over time.
b. how foreign prices affect domestic prices.
c. the determination of the real exchange rate.
d. why a change in the real exchange rate changes a country’s net exports.
Table 4-5
Refer to Table 4-5. If these are the only four sellers in the market, then when the price
decreases from $10 to $8, the market quantity supplied decreases by
a. 2.5 units.
b. 4 units.
c. 10 units.
d. 50 units.
Which of the following is not correct?
a. In the short run, policymakers face a tradeoff between inflation and unemployment.
b. Events that shift the long-run Phillips curve right shift the long-run aggregate supply
curve left.
c. Unemployment can be changed only by the use of government policy.
d. The decrease in output associated with reducing inflation is less if the policy change
is announced ahead of time and is credible.
If a market is allowed to adjust freely to its equilibrium price and quantity, then an
increase in demand will
a. increase producer surplus.
b. reduce producer surplus.
c. not affect producer surplus.
d. Any of the above are possible.
If the price level falls, then
a. the interest rate falls and spending on goods and services falls.
b. the interest rate falls and spending on goods and services rises.
c. the interest rate rises and spending on goods and services falls.
d. the interest rate rises and spending on goods and services rises.
Which of the following is not correct?
a. Unions are exempt from U.S. antitrust laws.
b. The Wagner Act of 1935 prevents U.S. employers from interfering when workers try
to organize unions.
c. The National Labor Relations Board is the U.S. government agency that enforces
workers’ right to unionize.
d. Right-to-work laws prevent firms from hiring permanent replacements for workers
who are on strike.
Other things the same, if the central bank decreases the rate at which it increases the
money supply, then
a. unemployment and inflation rise in the short run.
b. unemployment rises and inflation falls in the short run.
c. unemployment falls and inflation rises in the short run.
d. unemployment and inflation fall in the short run.
Figure 17-1
Refer to Figure 17-1. If the money supply is MS2 and the value of money is 2, then
there is an excess
a. demand for money that is represented by the distance between points A and C.
b. demand for money that is represented by the distance between points A and B.
c. supply of money that is represented by the distance between points A and C.
d. supply of money that is represented by the distance between points A and B.
Figure 21-4. On the figure, MS represents money supply and MD represents money
demand.
Refer to Figure 21-4. Suppose the money-demand curve is currently MD1. If the
current interest rate is r2, then
a. the quantity of money that people want to hold is less than the quantity of money that
the Federal Reserve has supplied.
b. people will respond by selling interest-bearing bonds or by withdrawing money from
interest-bearing bank accounts.
c. bond issuers and banks will respond by raising the interest rates they offer.
d. in response, the money-demand curve will shift upward from its current position to
establish equilibrium in the money market.
Table 3-11
Assume that Falda and Varick can switch between producing wheat and producing cloth
at a constant rate.
Quantity Produced in 1 Hour
Refer to Table 3-11. Varick has a comparative advantage in the production of
a. wheat.
b. cloth.
c. both goods.
d. neither good.
Table 10-3
The table below reports nominal and real GDP for the U.S. from 1929 to 1932.
Refer to Table 10-3. If prices had remained constant between 1929 and 1930, GDP
would have decreased
a. 8.62%.
b. 9.43%.
c. 11.97%.
d. 13.6%.
Other things the same, an increase in the U.S. real interest rate induces
a. Americans to buy more foreign assets, which increases U.S. net capital outflow.
b. Americans to buy more foreign assets, which reduces U.S. net capital outflow.
c. foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
d. foreigners to buy more U.S. assets, which increases U.S. net capital outflow.
According to 2009 data on the U.S. population which of the following was correct for
people ages 20 and over?
a. Blacks had higher rates of labor-force participation and lower rates of unemployment
compared to whites.
b. Blacks had higher rates of labor-force participation and higher rates of
unemployment compared to whites.
c. Blacks had similar rates of labor-force participation and lower rates of unemployment
compared to whites.
d. Blacks had similar rates of labor-force participation and higher rates of
unemployment compared to whites.
For purposes of analyzing the money stock and its relationship to relevant economic
variables, money is best thought of as
a. those items that can be readily accessed and used to buy goods and services.
b. currency only.
c. currency plus all bank accounts.
d. currency plus all bank accounts plus bonds.
Suppose the real exchange rate is 1/2 gallon of Canadian gasoline per gallon of U.S.
gasoline, a gallon of U.S. gasoline costs $5.00 U.S., and a gallon of Canadian gas costs
8 Canadian dollars. What is the nominal exchange rate?
a. 0.80 Canadian dollars per U.S. dollar
b. 1.25 Canadian dollars per U.S. dollar
c. 1.60 Canadian dollars per U.S. dollar
d. None of the above is correct.
The market demand curve
a. is the sum of all individual demand curves.
b. is the demand curve for every product in an industry.
c. shows the average quantity demanded by individual demanders at each price.
d. is always flatter than an individual demand curve.
Suppose the economy is in long-run equilibrium. If there is a sharp increase in the
minimum wage as well as an increase in pessimism about future business conditions,
then we would expect that in the short-run,
a. real GDP will rise and the price level might rise, fall, or stay the same.
b. real GDP will fall and the price level might rise, fall, or stay the same.
c. the price level will rise, and real GDP might rise, fall, or stay the same.
d. the price level will fall, and real GDP might rise, fall, or stay the same.
A rise in the government budget deficit
a. increases the interest rate so in the market for foreign-currency exchange, supply
shifts right.
b. increases the interest rate so in the market for foreign-currency exchange,supply
shifts left.
c. decreases the interest rate so in the market for foreign-currency exchange, supply
shifts left.
d. decreases the interest rate so in the market for foreign-currency exchange supply
shifts right.
One determinant of the long-run average unemployment rate is the
a. market power of unions, while the inflation rate depends primarily upon government
spending.
b. minimum wage, while the inflation rate depends primarily upon the money supply
growth rate.
c. rate of growth of the money supply, while the inflation rate depends primarily upon
the market power of unions.
d. existence of efficiency wages, while the inflation rate depends primarily upon the
extent to which firms are competitive.
Which of the following equations represents GDP for a closed economy?
a. Y = C + I + G + T
b. S = I – G
c. I = Y – C + G
d. Y = C + I + G
Figure 22-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the
unemployment rate.
Refer to Figure 22-1. Assuming the price level in the previous year was 100, point G
on the right-hand graph corresponds to
a. point A on the left-hand graph.
b. point B on the left-hand graph.
c. point C on the left-hand graph.
d. point D on the left-hand graph.
A corporation’s earnings are the amount of revenue it receives for the sale of its
products
a. minus its cost of production as measured by its accountants. Earnings must be paid
out as dividends.
b. minus its cost of production as measured by its accountants. Earnings may be paid
out as dividends or retained by the corporation.
c. minus its direct and indirect costs as measured by its economists. Earnings must be
paid out as dividends.
d. minus its direct and indirect cost as measure by its economists. Earnings may be paid
out as dividends or retained by the corporation.
Scenario 13-2. Assume the following information for an imaginary, closed
economy.
GDP = $200,000; consumption = $120,000;
government purchases = $35,000; and taxes = $25,000.
Refer to Scenario 13-2. For this economy, investment amounts to
a. $25,000.
b. $30,000.
c. $35,000.
d. $45,000.
Table 15-1
Labor Data for Aridia
Refer to Table 15-1. The unemployment rate of Aridia in 2012 was
a. 6.25%.
b. 11.1%.
c. 12.5%.
d. 56.25%.
The minimum wage has its greatest impact on the market for
a. female labor.
b. older labor.
c. black labor.
d. teenage labor.
According to the theory of liquidity preference, which variable adjusts to balance the
supply and demand for money?
a. interest rate
b. money supply
c. quantity of output
d. price level
Suppose that a worker in Caninia can produce either 2 blankets or 8 meals per day, and
a worker in Felinia can produce either 5 blankets or 1 meal per day. Each nation has 10
workers. For many years, the two countries traded, each completely specializing
according to their respective comparative advantages. Now war has broken out between
them and all trade has stopped. Without trade, Caninia produces and consumes 10
blankets and 40 meals per day and Felinia produces and consumes 25 blankets and 5
meals per day. The war has caused the combined daily output of the two countries to
decline by
a. 15 blankets and 35 meals.
b. 25 blankets and 40 meals.
c. 35 blankets and 45 meals.
d. 50 blankets and 80 meals.
You find that your paycheck for the year is higher this year than last. Does that mean
that your real income has increased? Explain carefully.
The tax incidence depends on whether the tax is levied on buyers or sellers.
If the CPI today is 120 and the CPI five years ago was 80, then something that cost $1
five years ago would cost $1.50 in today’s prices.
Over the past several decades in the United States, the labor-force participation rate of
women has increased and the labor-force participation rate of men had remained steady.
A price ceiling set above the equilibrium price is not binding.
In practice, the problems created by time inconsistency and the political business cycle
appear to be quite serious.
If a price floor is not binding, then it will have no effect on the market.
Sometimes, changes in monetary policy and/or fiscal policy are intended to offset
changes to aggregate demand over which policymakers have little or no control.
When economists refer to investment, they mean the purchasing of stocks and bonds
and other types of saving.
A price ceiling set below the equilibrium price is binding.
The business cycle refers to fluctuations in economic activity such as employment and
production.
A typical American worker covered by unemployment insurance receives 50 percent of
his former wages for 52 weeks.
OPEC failed to maintain a high price of oil in the long run, partly because both the
supply of oil and the demand for oil are more elastic in the long run than in the short
run.
Advocates of the minimum wage admit that it has some adverse effects, but they
believe that these effects are small and that a higher minimum wage makes the poor
better off.
Most spells of unemployment are short, and most unemployment observed at any given
time is long term. How can this be?