If the economy is self-regulating and in a recessionary gap,
a. wages and prices will fall.
b. wages will fall, but prices will rise.
c. neither wages nor prices will change.
d. wages will rise, but prices will fall.
e. wages and prices will rise.
The actions of speculators make the speculators better off, but they necessarily make
the rest of society worse off.
a. True
b. False
The Wilshire 5000 stock index is made up of the stocks of 5,000 of the largest U.S.
companies.
a. True
b. False
Exhibit 10-8
When disposable income equals $2,000, saving equals
a. $1,800.
b. $2,100.
c. $200.
d. -$200.
The law of supply states that price and quantity supplied are
a. inversely related, ceteris paribus.
b. directly related, ceteris paribus.
c. not related.
d. fixed.
If real income rises in the economy and, at the same time, productivity in the agriculture
sector rises, too, then it follows that the demand for food will
a. rise (assuming that income elasticity of demand for food is greater than 1) and the
supply of food will remain constant.
b. rise (assuming that income elasticity of demand for food is greater than 0) and the
supply of food will increase, too.
c. fall (assuming that income elasticity of demand for food is greater than 1) and the
supply of food will fall, too.
d. fall (assuming that income elasticity of demand for food is equal to 1) and the supply
of food will rise.
e. none of the above
Which of the following statements is false?
a. If the SRAS curve shifts rightward, the price level falls in the short run.
b. If AD rises and SRAS is constant, the price level rises in the short run.
c. If both SRAS and AD decline, Real GDP falls in the short run.
d. If both SRAS and AD increase, the price level necessarily rises in the short run.
e. none of the above
The latest Taylor Swift album is available to be downloaded for $18.99. Is this price a
rationing device?
a. No, the album will be sold to anyone having the required number of dollars.
b. Yes, because the album will only be purchased by people who are willing and able to
pay $18.99.
c. No, for price to be a rationing device, it must be so high that only one unit of the item
is sold.
d. Yes, since that is a reasonable price.
If total production is greater than total expenditures, then business firms
a. have underproduced.
b. will step up production.
c. will lower production.
d. will experience decreases in inventory.
e. a and b
Exhibit 9-2
The economy is currently producing Q1. At this level of Real GDP, the economy is in
a. an inflationary gap.
b. a recessionary gap.
c. long-run equilibrium.
d. none of the above
Fractional reserve banking originated
a. when the United States Congress passed a law regarding the required reserve ratio.
b. when goldsmiths realized they could issue warehouse receipts beyond gold on
deposits.
c. with the establishment of the Federal Reserve System.
d. in the United States with the Clayton Act.
The simple quantity theory of money can be written as
a. P = MV/Q.
b. MV = Q/P.
c. PM = VQ.
d. Q = PMV.
e. all of the above
Theory A predicts that the higher the opportunity cost of having a child, the fewer
children a woman will have.Which of the following is evidence against the theory if
opportunity cost is measured in terms of foregone salary?
a. women with high-paying jobs have more children than women with low-paying jobs.
b. women with low-paying jobs have more children than women with high-paying jobs.
c. men married to women with high-payingjobs want more children than men married
to women with low-paying jobs.
d. the mothers of women with high-paying jobs will want their daughters to have
children more than the mothers of women with low-paying jobs will want their
daughters to have children.
e. none of the above
The Friedman natural rate theory implies that there is a tradeoff between inflation and
unemployment in
a. neither the short run nor the long run.
b. both the short run and the long run.
c. the short run, but not in the long run.
d. the long run, but not in the short run.
If people want more cars than there are cars available, then it is necessarily true that
a. cars are scarce.
b. there is a surplus of cars.
c. there is a decreased supply of cars.
d. none of the above
In 2013, the U.S. GDP was approximately
a. $16.79 trillion.
b. $5.15 trillion.
c. $10.67 trillion.
d. $890.22 billion.
e. $25.30 trillion.
If Alex and Adam each specialize in the good in which he has a comparative advantage
and then engage in trade, ____________________ can consume a combination of
goods that lies beyond his PPF.
a. Alex, but not Adam,
b. Adam, but not Alex
c. Alex and Adam
d. neither Alex nor Adam