Under a flexible exchange system, which of the following will most likely cause a
nation’s currency to appreciate on the foreign exchange market?
a. an acceleration in the nation’s inflation rate
b. a balance of trade deficit
c. a current account deficit
d. a decline in the domestic inflation rate
Figure 9-3
Suppose that U.S. tastes for British goods increase. Then, in Figure 9-3
a. the supply curve shifts from S1 to S2
b. the supply curve shifts from S2 to S1
c. the demand curve shifts from D2 to D1
d. the demand curve shifts from D1 to D2
e. both demand and supply shift to the right
The random walk theory implies that stock prices
a. go down, then up, and then down again.
b. follow systematic trends.
c. can be forecast accurately by experts who are knowledgeable about how the stock
market works.
d. will change as the result of unexpected factors that are virtually impossible to
forecast accurately.
Figure 17-13
In Figure 17-13, if the world price of a baseball is $3 and a tariff of $1 per baseball is
imposed in the United States, which area represents the United States’ net loss as a
result of the tariff?
a. a + b + c + e
b. b + c + e
c. b + c
d. c + e
e. b + f
Figure 9-16
If the price-taker firm in Figure 9-16 is currently producing 6 units, then to maximize
profit in the short run, it should
a. keep producing 6 units
b. increase production to 12 units
c. increase production to 14 units
d. increase production to 8 units
e. shut down
Renewable resources are those that
a. can be renewed, but only with the use of energy resources.
b. are constantly being renewed by nature.
c. will inevitably run out over time, like all other resources.
d. are not really scarce, because they are constantly renewed naturally.
When the interest rate decreases, the opportunity cost of holding money
a. increases, so the quantity of money demanded increases.
b. increases, so the quantity of money demanded decreases.
c. decreases, so the quantity of money demanded increases.
d. decreases, so the quantity of money demanded decreases.
As domestic income rises, net exports will tend to
a. fall, since exports remain the same but imports increase.
b. rise, since exports remain the same but imports fall.
c. fall, since exports are lower and imports remain the same.
d. rise, since exports are higher and imports remain the same.
e. may either rise or fall, since exports and imports change in opposite directions.
When the free-rider problem exists,
a. the market will devote too few resources to the production of the good.
b. the cost of the good will always be more than the benefit of the good.
c. the good will not be produced.
d. entrepreneurs will eventually find a way to make free-riders pay their share.
If the price of coffee decreases, the demand curve for tea (a substitute good) will
a. remain unchanged.
b. shift to the right.
c. shift to the left.
d. do none of the above
The main difference between a firm that is a price searcher and a firm that is a price
taker is that a
a. price searcher produces products that are identical to its competitors’ products.
b. price taker can decide what price to charge for its product.
c. price searcher cannot decide what price to charge for its product.
d. price searcher will still be able to sell some of its product if it increases its price.
What basket of goods is used to construct the CPI?
a. a random sample of all goods and services produced in the economy
b. the goods and services that are typically bought by consumers as determined by
government surveys
c. only food, clothing, transportation, entertainment, and education
d. the least expensive and the most expensive goods and services in each major
category of consumer expenditures
Which of the following is true of government activities under a system of representative
democracy?
a. When voters pay in proportion to benefits received, all voters will gain if the
government activity is productive.
b. If a majority opposes an activity, it must be counterproductive.
c. When voters must pay in proportion to benefits received for an activity undertaken by
the government, the activity will most likely be rejected by the majority of voters.
d. Government activities must be productive in order to be eligible for vote.
If the economy is in an inflationary boom, the Fed would most likely
a. encourage banks to provide loans by buying government securities.
b. encourage banks to provide loans by raising the discount rate.
c. encourage banks to provide loans by selling government securities.
d. restrict bank lending by selling government securities.
e. restrict bank lending by lowering the federal funds rate.
Measured as a share of the economy, government spending
a. has been between 10 and 15 percent of the U.S. economy since 1930.
b. has been between 20 and 25 percent of the U.S. economy since 1930.
c. rose from less than 10 percent in 1929 to over 35 percent in 2012.
d. declined from more than 50 percent in 1929 to approximately 25 percent in 2012.
Which of the following is true regarding value and exchange?
a. Middlemen fail to create value since they do not expand the supply of physical
goods.
b. A good or service has a given value regardless of who uses it or how it is used.
c. If it were not for middlemen, transaction costs would be zero.
d. Voluntary exchange creates value by channeling goods into the hands of people who
value them most.
Before entry into an industry, a profit-maximizing decision maker will compare the
expected market price with the expected
a. long-run average total cost.
b. short-run marginal cost.
c. long-run average variable cost.
d. short-run average total cost.
The demand for a product is likely to be more elastic when
a. the share of the total budget spent on the product is small.
b. more complementary products are available.
c. the consumer has a short time to adjust to price changes.
d. more good substitutes for the product are available.
The more elastic the supply of a product, the more likely that the actual benefit of a
subsidy granted of the product will
a. go to sellers.
b. go to buyers.
c. go equally to both buyers and sellers.
d. do none of the above.
Why did many economists during the 1960s and 1970s believe that expansionary
macroeconomic policy that resulted in inflation would reduce the rate of
unemployment?
a. They failed to realize that the expansionary policy would stimulate aggregate
demand.
b. They failed to realize that the expansionary policy would reduce real interest rates.
c. They failed to incorporate expectations into their analysis.
d. They thought that money growth would simply lead to a proportional increase in the
price level.
In response to a severe recession, the Fed more than doubled the monetary base and
pushed short-term interest rates to near zero during 2009-2010. What happened in
2011?
a. The inflation rate soared to double-digit levels.
b. Aggregate demand increased and the economy recovered rapidly.
c. The large budget deficit of the earlier years was transformed into a budget surplus.
d. The high rate of unemployment continued.
Which of the following transactions would enter directly into the determination of
GDP?
a. a bicycle you purchased at a garage sale
b. the retirement check your uncle received for spending 25 years in the Marine Corps
c. the DVD player you purchased from Best Buy
d. the five shares of Microsoft stock your grandparents gave you for making an A in
economics
Other things constant, if the Fed decreased the discount rate,
a. the earnings of the Fed would increase.
b. the incentive of commercial banks to borrow from the Fed would be reduced.
c. the prime interest rate would automatically decline.
d. commercial banks probably would reduce their excess reserves and be more willing
to extend additional loans.
A balanced budget is present when
a. the economy is at full employment.
b. the actual level of aggregate spending equals the planned level of spending.
c. public sector spending equals private sector spending.
d. government revenues equal government expenditures.
Which of the following is true?
a. All types of environmental problems can be solved merely by the enforcement of
individual property rights.
b. Environmental regulation cannot improve environmental quality.
c. Income levels exert little impact on the demand for environmental quality.
d. Markets often result in outcomes that are inefficient when it is difficult to assign and
enforce property rights.
Prices direct economic activity in a market economy by
a. influencing the actions of buyers and sellers.
b. reducing scarcity of the goods and services produced.
c. eliminating the need for government intervention.
d. allocating goods and services in the most equitable way.
A market is unlikely to provide an efficient quantity of public goods because
a. only the government has the vast resources necessary to produce public goods.
b. the nature of public goods makes it difficult for producers to withhold them from
nonpaying consumers.
c. the technology involved in the production of public goods makes it difficult for
private firms to produce them even though they could be produced efficiently.
d. private production of public goods generally results in a large amount of profit,
which is difficult for a firm to effectively pay out to shareholders.
Which of the following countries have experienced recession and high levels of
unemployment related to their inability to control the growth of government and high
levels of debt?
a. Greece.
b. Portugal.
c. Italy.
d. all of the above.
Government expenditures as a share of the U.S. economy are
a. the largest in the world.
b. the smallest in the world.
c. smaller than most Western European countries but larger than a number of
high-growth Asian economies.
d. larger than Canada, France, and the United Kingdom but slightly smaller than
Germany and Italy.
Kayla decides that she would pay as much as $400 for a new refrigerator. She buys the
refrigerator and realizes consumer surplus of $75. How much did Kayla pay for her
refrigerator?
a. $75
b. $325
c. $400
d. $475
Use the table below to answer the following question(s).
Table 7-5
Refer to Table 7-5. Gross domestic product equals
a. $1,860.
b. $1,380.
c. $1,910.
d. $4,170.
If consumer tastes are changing more in favor of the consumption of a particular good
the
a. market demand curve will shift to the left.
b. consumer will move up a given demand curve, decreasing the quantity demanded.
c. consumer would move down a given demand curve, decreasing the quantity
demanded.
d. consumer would move down a given demand curve, increasing the quantity
demanded.
e. market demand curve would shift to the right.