Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette
cheese over boiled new potatoes. If the price of Raclette cheese decreased, we would
expect to see:
A) an increase in demand for Raclette cheese.
B) an increase in demand for new potatoes.
C) no effect on the demand for either of the Raclette ingredients, since this is a
traditional dish and its consumption does not depend on the prices of the ingredients.
D) an increase in demand for Raclette cheese and for new potatoes.
Figure: Cold Drinks Sold and Temperature
Look at the figure Cold Drinks Sold and Temperature. If we move from point C to point
E in the figure, the outside temperature has ______ degrees and the number of cold
drinks sold has ______.
A) decreased by 30; decreased by 30
B) increased by 20; increased by 20
C) increased by 30; increased by 30
D) increased by 40; increased by 40
The experience of the Great Depression led to the widespread acceptance of classical
economics.
A) True
B) False
If the state government allocates additional spending on education, the opportunity cost
is:
A) zero.
B) the dollar amount of the additional spending.
C) considered only if taxes have to be raised to fund the spending.
D) measured in terms of the best alternative uses for that money.
When the price level increases, everyone becomes wealthier.
A) True
B) False
Assuming that Arepresents autonomous consumption and YDrepresents disposable
income, for the economy as a whole:
A) C= MPC+ (A YD).
B) C= A+ (MPC YD).
C) C= (A+ MPC) YD.
D) C= (A” MPS) + (MPC YD).
Inflationary and recessionary gaps are closed by self-correcting adjustments that shift:
A) the SRAS curve.
B) the AD curve.
C) the LRAS curve.
D) both the SRAS curve and the LRAS curve.
Firms want to undertake projects whose rate of return is greater than the interest rate.
A) True
B) False
Figure: A Tariff on Oranges in South Africa
Look at the figure A Tariff on Oranges in South Africa. When the government imposes a
tariff on imported oranges, the price of oranges in South Africa rises from PWto PTand
domestic producer surplus _____ to _____.
A) falls; G+ I
B) falls; G+ I+ J+ K
C) rises; G+ + J+ K
D) rises; G + H
Long-term interest rates affect the demand for money more than short-term interest
rates.
A) True
B) False
The United States places a tariff on imported Brazilian ethanol. The impact of this tariff
on the domestic ethanol market is a _____ domestic price, _____ consumer surplus, and
_____ producer surplus.
A) higher; less; more
B) lower; less; more
C) higher; more; less
D) higher; less; less
When the rate of inflation is high, people usually transfer money from interest-bearing
accounts into checking accounts more often than when inflation is low. This is an
example of a menu cost.
A) True
B) False
A fixed exchange rate is:
A) determined by the market.
B) set by government.
C) set by the International Monetary Fund.
D) determined by the United Nations.
In an economy with no taxes or imports, if the marginal propensity to save is 0.2, the
marginal propensity to consume must be:
A) 0.2
B) 0.8
C) 1.2
D) 0.16
Classical economists believed that wages and prices were _____, and as a result, the
aggregate _____ curve was vertical.
A) inflexible; supply
B) inflexible; demand
C) flexible; demand
D) flexible; supply
As a consequence of the 2008 financial crisis, the economies of the United States and
the European Union shrank by more than 25%.
A) True
B) False
The consumer price index is used to index income tax brackets.
A) True
B) False
The decision to build more aircraft carriers to keep employment high is an example of:
A) prudent defense spending.
B) expansionary fiscal policy.
C) neutral fiscal policy.
D) being prepared to defend our country.
Money whose value derives entirely from its official status as a means of exchange is
known as:
A) commodity money.
B) commodity-backed money.
C) fiat money.
D) bank reserves.
Which of the following factors would result solely in a movement along the demand
curve for a particular good?
A) a change in the prices of related goods
B) a change in the price of that good
C) a change in the size of the population
D) both a change in the price of that good and a change in the size of the population
Figure: Shifts in Demand and Supply
Look at the figure Shifts in Demand and Supply. The graph shows how supply and
demand might shift in response to specific events. Suppose a new machine allows
restaurants and fast-food outlets to produce french fries at a lower cost. Which panel
BEST describes how this will affect the market for french fries?
A) panel A
B) panel B
C) panel C
D) panel D
A family from Peru eats in a restaurant in Salt Lake City. In the accounting for U.S.
international transactions, this transaction would appear in the _____, and it would be
entered as a payment _____ foreigners.
A) current account; from
B) current account; to
C) financial account; from
D) financial account; to
If the price level falls by 10%, the purchasing power of $10,000 will:
A) increase to $11,000.
B) decrease to $9,000.
C) decrease to $1,000.
D) remain constant.
Look at the table The Demand for Chocolate-Covered Peanuts. If George, Barbara, and
Dan are the only three buyers in the market and the price of a bag of chocolate-covered
peanuts is $0.80, the total market quantity demanded is _____ bags per month.
A) 70
B) 80
C) 105
D) 280
The instrument by which a household makes a loan to a firm and the firm pays interest
to the household is known as:
A) a stock.
B) a bond.
C) a transfer payment.
D) disposable income.
Which of the following statements is TRUE?
A) People generally prefer to receive money later rather than sooner.
B) Interest is a payment made by lenders to borrowers.
C) The present value of a future payment will be lower the smaller the payment, the
later it is due, and the higher the interest rate.
D) The future value of a payment will be more if the interest rate is lower.
The national income and product accounts are calculated by:
A) the Congressional Budget Office.
B) the Federal Reserve.
C) the Bureau of Economic Analysis.
D) the Office of Management and Budget.
Radhika just graduated from college. She recently quit her part-time job to focus on
finding a full-time job that better uses the skills she acquired in college. Radhika is
considered to be:
A) structurally unemployed.
B) frictionally unemployed.
C) cyclically unemployed.
D) employed, since she is focusing on finding a full-time job.
If a country removes a tariff on imported shoes, we expect the domestic price of shoes
to _____ and the quantity of shoes consumed in the domestic market to _____ .
A) fall; fall
B) fall; rise
C) rise; fall
D) rise; rise
Firms demand goods and services in the product markets.
A) True
B) False
If a country revalues its currency, it increases its aggregate demand.
A) True
B) False
Anticipated inflation affects:
A) borrowers only.
B) lenders only.
C) all aspects of the economy.
D) only business firms involved in investment spending.
Inventory investment is:
A) a part of planned investment spending and is always positive.
B) a part of unplanned investment spending and may either be positive or negative.
C) not a part of investment spending, as it can’t be properly planned.
D) a part of consumption spending, as these are unsold goods.
Today U.S. dollars are redeemable for gold or silver.
A) True
B) False
Even if a bank is in excellent financial condition, a bank run can still drive it to failure.
A) True
B) False