Exhibit 39-8
Assume that E1 represents the initial equilibrium in the market for grain X. If all the
farmers agree to restrict production and abide by the agreement,
a. the price of X increases.
b. the equilibrium quantity decreases.
c. total revenues increase if the demand curve is inelastic between E1 and E3.
d. all of the above
e. a and b only
Agricultural price supports refer to
a. minimum prices set by the government on certain farm products.
b. maximum prices set by the government on certain farm products.
c. supply-restricting policies imposed by the government on certain farm products.
d. b and c
e. none of the above
Exhibit 2-5
The opportunity cost of moving from point C to
point B is
a. 15,000 televisions.
b. 15,000 fax machines.
c. 10,000 televisions.
d. 20,000 fax machines.
Applied to any investment, the phrase “there’s no such thing as a free lunch” means that
higher returns come with lower risks, and lower returns come with higher risks.
a. True
b. False
When total production is greater than total expenditures,
a. the economy is in disequilibrium.
b. there are increases in inventory.
c. total output will decrease.
d. all of the above
When the government enacts policies that lead to lower mortgage lending standards and
lower interest rates, their actions can indirectly lead to higher home prices.
a. True
b. False
What is the definition of producers€ surplus?
a. price received minus maximum selling price
b. maximum selling price minus price received
c. price received minus minimum selling price
d. highest price minus lowest price
e. none of the above
Good X is a normal good. If the average income of those who buy good X rises, the
_____________ curve for good X will shift ____________ resulting in a(n)
_____________ in the equilibrium price of X and a(n) ____________ in the
equilibrium quantity of X.
a. supply; rightward; decrease; increase.
b. demand; leftward; decrease; decrease
c. demand; rightward; increase; increase
d. supply; leftward; increase; decrease
e. supply; leftward; increase; increase
If the economy is currently in a recessionary gap, the SRAS curve intersects the AD
curve to the left of Natural Real GDP.
a. True
b. False
The effectiveness lag is the time between
a. the implementation of a policy and when the impact of the policy is felt.
b. the enactment of a policy and the implementation of the policy.
c. realizing a policy is needed and enacting the policy.
d. the occurrence of an event and policymakers realizing the event has occurred.
A decrease in business taxes, causes the expected profitability of investment projects to
__________, which then shifts the AD curve to the __________.
a. rise; right
b. rise; left
c. decline; right
d. decline; left
Exhibit 34-6
Which of the following is true?
a. Country A has a comparative advantage in both cheese and wine.
b. Country B has a comparative advantage in both cheese and wine.
c. Country A has a comparative advantage in cheese, and country B has a comparative
advantage in wine.
d. Country B has a comparative advantage in cheese, and country A has a comparative
advantage in wine.
e. none of the above
Exhibit 39-3
If P3 is a target price, the quantity supplied is
a. Q1.
b. Q2.
c. Q3.
d. Q2 – Q3.
e. Q1 – Q3.
Suppose that the Fed implements expansionary monetary policy that raises aggregate
demand, but individuals incorrectly anticipate the policy measure (bias
downward).According to new classical theory, in the short run the price level would
____________ and Real GDP would ______________.In the long run, new classical
theory would predict that the price level would ___________compared to its original
long-run equilibrium level and that Real GDP would ____________.
a. rise; decline; rise; remain unchanged
b. rise; rise; rise; remain unchanged
c. rise; decline; remain unchanged; rise
d. fall; rise; remain unchanged; rise
Which of the following is true?
a. Reserves = required reserves – excess reserves.
b. Reserves – required reserves = excess reserves.
c. Reserves = required reserves + excess reserves.
d. b and c
e. a and b
Which of the following statements is false?
a. The exchange equation assumes that velocity is constant.
b. Velocity is the average number of times a dollar is spent to buy final goods and
services in a year.
c. The simple quantity theory of money predicts that changes in the money supply lead
to strictly proportional changes in the price level.
d. In the simple quantity theory of money the aggregate supply curve is vertical.
Stagflation implies that
a. a tradeoff between inflation and unemployment may not always exist.
b. policymakers can choose to have less unemployment if they are willing to accept a
higher rate of inflation.
c. the short-run Phillips curve is stable.
d. the short-run Phillips curve is vertical.
Suppose farmers get together and decide to be less productive. They want to do this so
that they can shift the supply curve of farm products leftward and raise the price. They
must be assuming that the demand curve between the current price and the higher price
is
a. inelastic.
b. elastic.
c. unit elastic.
d. There is not enough information to answer this question.