The Big Mac index is a measure of how well the purchasing power parity theory works.
a. True
b. False
Firms often seek to borrow money to expand their capital stock, and the price they pay
for that money is the interest rate. What happens to the demand for money if the interest
rate increases?
a. It increases.
b. It decreases.
c. It does not change.
d. The quantity of money demanded will increase.
The difference between a fixed tax and a variable tax is that
a. fixed taxes can never be changed, but variable taxes can be changed.
b. a change in fixed taxes has no effect on aggregate demand, but a change in variable
taxes has an impact.
c. a variable tax changes when GDP changes, but a fixed tax does not change with GDP.
d. a variable tax can be changed easily, whereas changing fixed taxes requires a
constitutional amendment.
Students in a class are assigned to groups to work on a project. A grade will be given for
each project, and everyone in the group will receive that grade. For the members of a
particular group, the grade is a
a. beneficial externality.
b. public good.
c. detrimental externality.
d. moral hazard.
Figure 4-8
Women today are having more babies than women did fifteen years ago. The result is
that mothers today have trouble finding baby-sitters and are shocked at what they must
pay for child care. Which graph in Figure 4-8 best illustrates how the situation has
changed?
a. 1
b. 2
c. 3
d. 4
One of the objectives of supply-side policies is to
a. focus attention on the trade-off between inflation and unemployment.
b. sharpen the trade-off between inflation and unemployment.
c. eliminate the trade-off between inflation and unemployment.
d. convince the public of the trade-off between inflation and unemployment.
What is the effect on velocity if payments are made more often?
a. It will decrease.
b. It will increase.
c. It will remain constant.
d. Velocity is unrelated to payments.
Aneta has owned an Italian sports car for several years and now she wants to sell it. She
paid $8,500 for it in 1993 and she has just sold it for $39,000 in 2015. How is this sale
included in the GDP for 2015?
a. $8,500 is included in 2015 GDP
b. $39,000 is included in 2015 GDP
c. The increase in value of $10,500 is included in 2015 GDP
d. It is not included in 2015 GDP
The share of the burden of an emissions tax on output borne by the consumer of the
polluting output will rise as
a. the tax rises.
b. demand elasticity falls.
c. demand elasticity rises.
d. the tax falls.
The opportunity cost of a college education includes wages lost while enrolled in
school.
a. True
b. False
In the period of U.S. economic history known as the Great Depression, the rate of
inflation was generally
a. trending upward.
b. positive.
c. uncertain.
d. negative.
Double taxation is a problem for corporations.
a. True
b. False
Plots of land differ in
a. quality of soil.
b. topography.
c. proximity to marketplaces.
d. All of the above are correct.
____ is one in which exactly the amount one competitor gains must be lost by other
competitors.
a. Nash equilibrium
b. Prisoner’s dilemma
c. A win-win situation
d. A zero-sum game
As long as the multiplier process is working, firms will meet additional demand without
raising prices.
a. True
b. False
A grocery store sells soup for $1.50 a can, or $2.50 for two cans. To a customer, the
marginal cost of buying the second can of soup is
a. $1.
b. $1.25.
c. $1.50.
d. $2.50.
The income to someone such as Lebron James is
a. mostly pure rent.
b. composed of a payment necessary to induce him into employment plus economic
rent.
c. a return to a factor in fixed supply; there is only one of him.
d. All of the above are correct.
All points on the long run Phillips curve that are sustainable in the long run due to
economy’s self correcting mechanism correspond to
a. the mature rate of unemployment.
b. the natural rate of unemployment.
c. the seasonal rate of unemployment.
d. the cyclical rate of unemployment.
Many persons object to the results of the competitive market system because
a. it takes too much energy to coordinate activities.
b. efficient outcomes may not be compatible with their ideas of a fair distribution.
c. a few people can control all economic activity.
d. it fosters high rents and low beef prices.
The software industry has traits in common with monopoly markets.
a. True
b. False
Assume that the MPC is .75, and investment spending rises by $25 billion. How much
will real GDP change?
a. $25 billion
b. $75 billion
c. $100 billion
d. $175 billion
An airline industry study recently reported, “Evidence is abundant that larger firms are
not more efficient or less costly simply because they are larger. In fact, other things
equal, the largest carriers tend to have a higher level of unit costs, possibly caused by
the difficulties of managing an airline of large size.” This means that
a. there are increasing returns to scale in the airline industry.
b. the airline industry has constant returns to scale.
c. the larger airlines are not profitable.
d. airlines are experiencing decreasing returns to scale.
Which of the following is a listing of the types or categories of resources?
a. land, labor, and capital
b. land, labor, and education
c. land, labor, and efficiency
d. land, labor, and markets
e. land, labor, and inputs
Less than 13 percent of U.S. workers belong to unions.
a. True
b. False
In the United States, labor productivity is approximately
a. $73 per hour.
b. $94 per hour.
c. $102 per hour.
d. $110 per hour.
Industrialized countries generally have higher levels of educational attainment
compared with poorer countries.
a. True
b. False
The major limitation of both the Keynesian approach and the monetarist approach is
that both
a. focus on the determination of interest rates to the exclusion of price levels.
b. study the determination of real GDP equilibrium without including the price level.
c. are ways of studying the aggregate demand curve, but to learn anything about the
price level and output, the aggregate supply curve must be included in the analysis.
d. concentrate on interest rates without considering changes in consumption or net
exports.
The main reason the United States established a central bank was
a. a desire for a strong centralized financial authority.
b. to follow the conclusions of economic theory.
c. severe inflation after the Civil War.
d. disastrous experiences with financial panics.
What would be the output combination for two products A and B on the production
possibility frontier, if a country uses its entire resources for producing A?
a. A – Maximum; B – Zero
b. A- Maximum, B – Maximum
c. A – Zero, B – Maximum
d. A – Zero, B – Minimum
An increase in price will increase supply.
a. True
b. False
As wages for manufacturing workers rise, wages for service workers will stay the same.
a. True
b. False