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Suppose that the United States has an absolute advantage over Mexico in producing
both agricultural and manufactured goods. In the U. S., the opportunity cost of 1 unit of
agricultural output is 2 units of manufactured goods. In Mexico, the opportunity cost of
1 unit of agricultural output is 1.5 units of manufactured goods. Total production in the
U. S. and Mexico will be maximized if
a. the U. S. specializes in both types of output
b. Mexico specializes in both types of output
c. the U. S. specializes in agricultural goods and Mexico specializes in manufactured
goods
d. the U. S. specializes in manufactured goods and Mexico specializes in agricultural
goods
e. each country achieves self-sufficiency
The market for General Motors' bonds
a. exists only within the geographical boundaries of the United States
b. is not defined by its geographic location
c. is at the New York Stock Exchange
d. is at the U.S. Treasury
e. is in London, England
Which of the following would notlead to a change in the supply of chocolate ice cream?
a. a change in productive capacity
b. a change in the price of strawberry ice cream
c. a change in the price of milk
d. a change in the price of chocolate ice cream
e. a change in the expected future price of chocolate ice cream
Each point along the market demand curve shows
a. the quantity of the good that firms would be willing and able to supply at a specific
price
b. the relationship between the price of the good and total quantity demanded at a series
of prices
c. the opportunity cost of supplying a given quantity of goods to the market
d. the quantity of the good that consumers would be willing and able to purchase at a
specific price
e. how population changes affect the quantity demanded at a specific price
Over the past 90 years or so, the inflation rate has
a. generally increased
b. been positive in most years
c. stayed low
d. been negative in most years
e. dramatically increased
If households experienced greater uncertainty about their economic future, which of the
following would occur in the market for loanable funds?
a. Both the supply and demand for funds would increase, lowering the interest rate and
raising investment spending.
b. The supply of funds would decrease, raising the interest rate and lowering investment
spending.
c. The supply of funds would decrease, lowering both the interest rate and investment
spending.
d. The supply of funds would increase, lowering both the interest rate and investment
spending.
e. The supply of funds would increase, lowering the interest rate and raising investment
spending.
GDP is a flow variable because
a. all macroeconomic aggregates are flow variables
b. it measures the production that takes place over a period of time
c. it measures the amount of goods and services that exist at the end of a time period
d. the number of goods and services produced is usually a fixed number
e. it accounts for the goods and services transferred from one firm to another
When implementing monetary policy, the variable the Federal Reserve watches most
closely is the
a. required reserve ratio
b. federal funds rate
c. long term bond rate
d. national debt
e. short term corporate bond rate
As there is a movement upward and leftward along the AD curve,
a. aggregate expenditure decreases
b. the price level remains constant
c. equilibrium GDP increases
d. aggregate expenditure increases
e. the interest rate falls
When real GDP is falling, the economy is experiencing
a. a recession.
b. a financial crisis.
c. an expansion.
d. equilibrium.
e. environmental deterioration.
Assume that net exports are -$340, private investment is $1500, tax revenues are $800,
government purchases are $2000, and GDP - using the expenditure approach - is
$9,000. In this case, consumption expenditures must be
a. $1,840
b. $12,960
c. $5,840
d. $4,360
e. $5,160
Economic growth is defined as a long-run increase in an economy's
a. resources
b. employment rate
c. total output of goods and services
d. level of profits
e. money supply
