The income effect explains why there is a direct relationship between the price of a
product and the quantity of the product demanded.
The United States would gain from the elimination of tariffs and quotas even if other
countries do not reduce their tariffs and quotas.
In 1995, the General Agreement on Tariffs and Trade (GATT) was replaced by the
World Trade Organization (WTO).
Competitive market equilibrium is a market equilibrium with many buyers and sellers.
In the 1960s, many economists and policymakers believed the trade-off between
inflation and unemployment was permanent.
A tax is efficient if it imposes a small excess burden relative to the tax revenue it raises.
A change in quantity supplied is represented by a movement along the supply curve.
Small differences in economic growth rates result in small differences in living
standards.
The ability of a firm or country to produce a good or service at a lower opportunity cost
than other producers is called comparative advantage.
Technological change allows the economy to produce more output with the same
amount of capital and labor.
If real GDP grows by 3% in 2011, 3.2% in 2012, and 2.5% in 2013, what is the average
annual growth rate of real GDP?
A) 2.6%
B) 2.9%
C) 3.1%
D) 4.2%
Figure 4-1
Figure 4-1 shows Kendra’s demand curve for ice-cream cones.
Refer to Figure 4-1. If the market price is $2.50, what is the consumer surplus on the
third ice cream cone?
A) $0
B) $0.50
C) $1.50
D) $2.50
Article Summary
Unlike in many nations, when the financial crisis hit in 2008 the Polish economy
continued to grow, but due to a current slowdown in exports and domestic demand,
Poland is expecting a large outflow of workers. Unemployment was expected to grow
to 14 percent in Poland in 2013, and according to Krystyna Iglicka, a demographer at
Lazarski University in Warsaw, “€¦Poles have always treated emigration as a way of
improving their lot.” Despite earning relatively low salaries in Western European
countries, on average just over ¬2,000 (about $2,660) a month according to the
National Bank of Poland, this is still four times more than workers would earn on
average by staying in Poland. Iglicka predicts that between 500,000 and 800,000 Poles
will emigrate from Poland over the next five years.
Source: Jan Cienski, “Poland braces for fresh exodus of workers,” Washington Post,
January 22, 2013.
Refer to the Article Summary. If an outflow of workers leaves Poland with a smaller but
more productive workforce and the capital per hour worked does not change, there will
be ________ the per-worker production function in Poland.
A) a movement up
B) a movement down
C) an upward shift of
D) a downward shift of
The level of long-run aggregate supply is affected by all of the following except
A) changes in the price level.
B) changes in the technology.
C) changes in the capital stock.
D) changes in the number of workers.
When housing prices ________ as they did beginning in 2006 following the housing
market bubble, most banks and other lenders tightened the requirement for borrowers,
making it ________ for potential home buyers to obtain mortgages.
A) fell; easier
B) fell; harder
C) rose; easier
D) rose; harder
The Business Cycle Dating Committee defines a recession as
A) two consecutive quarters of declining real GDP.
B) two consecutive quarters of declining nominal GDP.
C) a significant decline in activity visible in industrial production, employment, real
income, and wholesale/retail trade lasting more than a few months.
D) a significant decline in inflation and unemployment lasting more than a few months.
Given the equations for C, I, G, and NX below, what is the equilibrium level of GDP?
C = 2,000 + 0.9Y
I = 2,500
G = 3,000
NX = 400
A) $4,333
B) $7,100
C) $8,778
D) $79,000
Figure 19-11
Refer to Figure 19-11. The graph above depicts supply and demand for British pounds
during a trading day, where the quantity is millions of pounds. In order to support a
fixed exchange rate of $2.00 per pound, the U.S. central bank must
A) buy 0.6 million pounds per trading day.
B) sell 0.6 million pounds per trading day.
C) buy 1.2 million pounds per trading day.
D) sell 1.2 million pounds per trading day.
Table 8-27
The components of national income for an economy are represented in Table 8-27
above. All values are in billions of dollars.
Refer to Table 8-27. What is the level of disposable personal income for this economy?
A) $1,080 billion
B) $1,010 billion
C) $980 billion
D) $860 billion
During the Great Depression, what appeared to be ________ fiscal policy was actually
not when the ________ budget deficit or surplus is examined.
A) expansionary; actual
B) expansionary; cyclically adjusted
C) contractionary; actual
D) contractionary; cyclically adjusted
A decrease in expected inflation will
A) reduce real wages.
B) increase the natural rate of unemployment.
C) shift the long-run Phillips curve to the left.
D) shift the short-run Phillips curve to the left.
Legalizing all forms of illegal activities
A) reduces GDP and the size of the underground economy.
B) reduces GDP and increases the size of the underground economy.
C) increases GDP and reduces the size of the underground economy.
D) increases GDP and increases the size of the underground economy.
Which of the following policies are designed specifically to directly promote
technological change in an economy?
A) government subsidization of research and development
B) tax incentives to promote investment in 401K plans
C) laws to strengthen property rights
D) a vaccination program to combat infectious diseases
The process of an economy adjusting from a recession back to potential GDP in the
long run without any government intervention is known as
A) monetary policy.
B) an automatic mechanism.
C) “releasing sticky prices.”
D) fiscal policy.
You’re traveling in Ireland and are thinking about buying a new digital camera. You’ve
decided you’d be willing to pay $125 for a new camera, but cameras in Ireland are all
priced in euros. If the camera you’re looking at costs 115 euros, under which of the
following exchange rates would you be willing to purchase the camera? (Assume no
taxes or duties are associated with the purchase.)
A) 0.56 euros per dollar
B) 0.89 euros per dollar
C) 0.92 euros per dollar
D) You would purchase the new camera at any of the above exchange rates.
The “Big Mac Theory of Exchange Rates” tests the accuracy of purchasing power
parity theory. In July 2013, The Economist reported that the average price of a Big Mac
in the United States was $4.56. In India, the average price of a Big Mac at that time was
90 rupees. What is the “implied exchange rate” between the yen and the dollar?
A) 0.05 rupees per dollar
B) 19.74 rupees per dollar
C) 46.72 rupees per dollar
D) 410.4 rupees per dollar
If planned aggregate expenditure is greater than total production,
A) actual inventories will equal planned inventories.
B) firms will experience an unplanned decrease in inventories.
C) GDP will decrease.
D) the economy is in equilibrium.
The current exchange rate system in the United States is best described as a
A) silver standard.
B) managed float exchange rate system.
C) fixed exchange rate system.
D) gold standard.
Consumption is $5 million, planned investment spending is $8 million, government
purchases are $10 million, and net exports are equal to $2 million. If GDP during that
same time period is equal to $23 million, what unplanned changes in inventories
occurred?
A) There was an unplanned increase in inventories equal to $2 million.
B) There was no unplanned change in inventories.
C) There was an unplanned decrease in inventories equal to $2 million.
D) There was an unplanned decrease in inventories equal to $19 million.
What are the advantages of setting up a proprietorship or partnership as opposed to a
corporation?
What is the difference between a demand schedule and a demand curve?
Does the short-run Phillips curve have a positive or negative slope? Explain how this
slope is derived.
Debbie makes porcelain plates in her home and sells them to the Opus gallery. She
spent $400 last month on supplies and made 50 plates. She sold the plates to the gallery
at $25 per plate. The gallery sells all the plates for $40 each. For all of the 50 plates,
what is Debbie’s total value added? For all the 50 plates, what is the gallery’s total value
added?
Does globalization promote economic growth, and how does globalization affect the
welfare of a given country’s citizens?
What are the four categories of aggregate expenditure?
Assume that it will cost a plumber an additional $35,000 each year by keeping her shop
open for one additional hour per week. What must the additional revenue from keeping
the shop open this additional hour per week be to make staying open for the extra hour
economically rational?