Suppose the United States has a comparative advantage over Mexico in producing pork.
The principle of comparative advantage asserts that
a. the United States should produce more pork than what it requires and export some of
it to Mexico.
b. the United States should produce a moderate quantity of pork and import the
remainder of what it requires from Mexico.
c. the United States should refrain altogether from producing pork and import all of
what it requires from Mexico.
d. Mexico has nothing to gain from importing United States pork.
Which of the following is nota determinant of the long-run level of real GDP?
a. the price level.
b. the amount of capital used by firms.
c. available stock of human capital.
d. available technology
Assuming the Fisher Effect holds, and given U.S. tax laws, an increase in inflation
a. increases the real interest rate and the after-tax real rate of interest.
b. increases the real interest rate and the after-tax real rate of interest.
c. does not change the real interest rate but raises the after tax real rate of interest.
d. does not change the real interest rate but reduces the after-tax real rate of interest.
Among economic models, the circular-flow diagram is unusual in that it
a. drastically simplifies the real world.
b. features more than one type of market.
c. features flows of dollars.
d. does not involve mathematics.
“The US should not restrict employers from outsourcing work to foreign countries” is a
normative statement.
a. True
b. False
Other things the same, a decrease in the interest rate
a. reduces domestic investment which reduces the quantity of loanable funds supplied.
b. reduces domestic investment which reduces the quantity of loan funds demanded.
c. raises domestic investment which raises the quantity of loanable funds supplied.
d. raises domestic investment which raises the quantity of loanable funds demanded.
A certain production process requires only two types of inputs capital and labor. In
2006, 100 units of labor and 50 units of capital were employed, and 100 units of output
were produced. In 2013, 112 units of labor and 56 units of capital were employed. If the
production process displays constant returns to scale, then how many units of output
were produced in 2013?
a. 100
b. 112
c. 124
d. 144
Figure 35-2
Use the pair of diagrams below to answer the following questions.
RefertoFigure35-2. If the economy starts at C and 1, then in the short run, a decrease
in taxes moves the economy to
a. D and 2.
b. D and 3.
c. back to C and 1.
d. None of the above is correct.
Which of the following would likely be studied by a macroeconomist rather than a
microeconomist?
a. the effect of an increase in the alcohol tax on the market for beer
b. the effect of foreign competition on the domestic auto industry
c. the effect of a price war in the airline industry
d. the effect of an increase in the minimum wage on an economy’s overall rate of
unemployment
Which of the following is the most likely response to a decrease in the U.S. real interest
rate?
a. a U.S. company decides to expand its factory
b. a U.S. citizen decides to purchase fewer foreign bonds
c. a German mutual fund decides to increase its deposits at a U.S. bank
d. All of the above are consistent.
If there is a shortage of loanable funds, then
a. the quantity of loanable funds demanded is greater than the quantity of loanable
funds supplied and the interest rate is above equilibrium.
b. the quantity of loanable funds demanded is greater than the quantity of loanable
funds supplied and the interest rate is below equilibrium.
c. the quantity of loanable funds supplied is greater than the quantity of loanable funds
demanded and the interest rate is above equilibrium.
d. the quantity of loanable funds supplied is greater than the quantity of loanable funds
demanded and the interest rate is below equilibrium.
An increase in the money supply decreases the equilibrium interest rate and shifts the
aggregate-demand curve to the right.
a. True
b. False
Fourteen years ago William put money in his account at First National Bank. William
decides to cash in his account and is told that his money has quadrupled. According to
the rule of 70, what rate of interest did Alfred earn?
a. 5 percent
b. 7 percent
c. 10 percent
d. 14 percent
Tax cuts
a. can easily target investment spending, but investment spending falls by only a small
percentage during recessions.
b. can easily target investment spending, which falls by a large percentage during
recessions.
c. cannot easily target investment spending, but investment spending falls by only a
small percentage during recessions.
d. cannot easily target investment spending, which falls by a large percentage during
recessions.
Figure 3-14
RefertoFigure3-14.Dina has an absolute advantage in the production of
a. burritos and a comparative advantage in the production of tacos.
b. burritos and a comparative advantage in the production of burritos.
c. neither good and a comparative advantage in the production of tacos.
d. neither good and a comparative advantage in the production of burritos.
The Fed lowered interest rates in 2001 and 2002. This implies, other things the same,
that the Fed
a. increased the money supply because it was concerned about unemployment.
b. increased the money supply because it was concerned about inflation.
c. decreased the money supply because it was concerned about unemployment.
d. decreased the money supply because it was concerned about inflation.
During World War II,
a. government purchases of goods and services increased fivefold.
b. the economy’s production increased about 25 percent.
c. unemployment fell to about 5%.
d. All of the above are correct.
An increase in expected inflation shifts
a. the long-run Phillips curve right.
b. the short-run Phillips curve right.
c. neither the short-run nor long-run Phillips curve right.
d. both the short-run and long-run Phillips curve right.
A union is a type of cartel.
a. True
b. False
As real interest rates fall, firms desire to
a. buy more new equipment and buildings. This response helps explain why the supply
of loanable funds is upward sloping.
b. buy more new equipment and buildings. This response helps explain why the demand
for loanable funds is downward sloping.
c. buy less new equipment and buildings. This response helps explain why the supply of
loanable funds is upward sloping.
d. buy less new equipment and buildings. This response helps explain why the demand
for loanable funds is downward sloping.
Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an
example of
a. a U.S. import and a Canadian export
b. a U.S. export and a Canadian import
c. an export for both the U.S. and Canada
d. an import for both Canada and the U.S.
A tradeoff exists between a clean environment and a higher level of income in that
a. studies show that individuals with higher levels of income pollute less than
low-income individuals.
b. efforts to reduce pollution typically are not completely successful.
c. laws that reduce pollution raise costs of production and reduce incomes.
d. employing individuals to clean up pollution causes increases in employment and
income.
Which of the following causes of unemployment is notassociated with a wage rate
above the market equilibrium level?
a. efficiency wages
b. job search
c. minimum-wage laws
d. unions
If the budget deficit were reduced
a. interest rates and investment would increase.
b. interest rates would increase and investment would decrease.
c. interest rates and investment would decrease.
d. interest rates would decrease and investment would increase.
The exchange-rate effect is the idea that a higher U.S. price level causes the value of the
dollar to increase in foreign exchange markets, and this effect contributes to the
downward slope of the aggregate-demand curve.
a. True
b. False
It takes Ross 6 hours to produce a bushel of corn and 2 hours to wash and polish a car.
It takes Courtney 6 hours to produce a bushel of corn and 1 hour to wash and polish a
car. Courtney and Ross cannot gain from specialization and trade, since it takes each of
them 6 hours to produce 1 bushel of corn.
a. True
b. False
Suppose that the real exchange rate between the United States and South Korea is
defined in terms of baskets of goods. Other things the same, which of the following will
increase the real exchange rate (that is increase the number of baskets of South Korean
goods a basket of U.S goods buys)?
a. a decrease in the quantity of South Korean currency that can be purchased with a
dollar
b. a decrease in the price of U.S. baskets of goods
c. a decrease in the price in South Korean currency of South Korean goods.
d. None of the above is correct.
Figure 2-23
RefertoFigure2-23. Points A, B, and D represent efficient outcomes for this economy.
a. True
b. False
Which of the following is likely more important for explaining the slope of the
aggregate-demand curve of a small economy than it is for the United States?
a. the wealth effect
b. the interest-rate effect
c. the exchange-rate effect
d. the real-wage effect
A change in the money supply changes only nominal variables in the long run.
a. True
b. False