The relationship between consumption and disposable income is very unreliable and
unpredictable.
a. True
b. False
Since the debt is measured in dollars, the presence of inflation serves to understate the
true level of indebtedness.
a. True
b. False
If a nation can produce greater quantities of a good than another nation, it has a(n)
a. comparative advantage.
b. absolute advantage.
c. declarative advantage.
d. entire advantage.
The market demand curve is the horizontal summation of all individual demand curves.
a. True
b. False
In the fall of 2007, most economists felt that the
a. unemployment was at the natural rate.
b. unemployment rate was below the natural rate.
c. inflation rate was above the natural rate.
d. inflation rate was below the natural rate.
Table 7-2
Table 7-2 contains information on widget production. The average physical product of
the seventh pound of plastic is calculated as ____.
a. 9/25
b. 2
c. 25/9
d. 19/7
A transfer payment is a sum of money
a. spent by government for new goods and services.
b. shifted between members of a household.
c. given by government without a good or service in exchange.
d. moved between companies for goods and services.
e. required to pay taxes.
Perfect competition and pure monopoly are concepts useful primarily for realistic
application.
a. True
b. False
If the price level rises, the effect on the expenditure schedule and equilibrium real GDP
is to
a. increase both.
b. decrease both.
c. shift the expenditure schedule upward and decrease equilibrium real GDP.
d. shift the expenditure schedule downward and increase equilibrium real GDP.
Are markets always in equilibrium?
a. Yes, they are always at the equilibrium point, or very close to it.
b. Yes, because few things tend to alter supply and demand.
c. No, but if there is no interference, they tend to move toward equilibrium.
d. No, they never “settle down” into a stable price and quantity.
e. Uncertain, economic theory has no answer to this question.
In the face of the 2007-2009 recession, the President, Congress, and the Fed
a. decided to rely on the self-correcting mechanism of the economy to eliminate
inflation.
b. decided to rely on the self-correcting mechanism of the economy to reduce
unemployment.
c. pursued an active policy to balance the budget and fight inflation.
d. pursued an active policy to expand aggregate demand.
If the United States imposes a tariff on the import of Japanese cars instead of a quota,
the price
a. increase in Japanese cars goes into the revenue of U.S. automakers.
b. increase in Japanese cars goes into the revenue of Japanese automakers.
c. increase in Japanese cars goes into the revenue of the U.S. government.
d. decrease in Japanese cars comes out of the revenue of U.S. automakers.
e. decrease in Japanese cars comes out of the revenue of the U.S. government.
A ____ is a graph whose axes show the quantities of two inputs that are used to produce
some output.
a. production indifference map
b. two-variable diagram
c. scalar diagram
d. time-series graph
By the year 2100, global warming may lead to
a. shifts in world rain patterns.
b. disruption of agriculture.
c. expanded deserts.
d. coastal inundation.
e. all of the above
Which of the following definitions of the money supply includes only the most liquid
forms of money?
a. M1
b. M2
c. savings deposits.
d. money market mutual deposits.
The result that perfectly competitive firms produce at the lowest per-unit cost is derived
from the assumptions of
a. homogeneous products.
b. few sellers.
c. firms facing horizontal demand curves.
d. free entry and exit.
A voluntary exchange of products means that
a. if one nation gains from a swap, the other nation must necessarily lose.
b. each country must do its best to act to the disadvantage of its trading partners.
c. both parties must gain (or expect to gain) from the transaction.
d. both parties must lose owing to the transaction costs involved.
If at an output of 4,000 units Sloan Company is making an economic profit and
marginal profit is $20 per unit, the firm should
a. reduce output to maximize total profit.
b. increase output until marginal profit falls to zero.
c. do whatever is necessary to increase marginal profit.
d. There is not enough information to make a decision.
Mortgage loans made to borrowers with a more limited ability to repay are known as
a. subprime mortgages.
b. credit default swaps.
c. leveraged securities.
d. mortgage backed securities.
Which of the proposals for education reform is likely to be supported by an economist
concerned with efficiency?
a. Give families “education stamps” to be spent at the school of their choice.
b. Assign children to particular schools based on where they live.
c. Give all schoolchildren the same number of years of education.
d. Abolish private (i.e., fee-charging) schools.
Real GDP is the product of the
a. total hours of work times the labor force.
b. labor force times the output per hour.
c. nation’s capital stock times the output per hour.
d. total hours of work times the output per hour.
A fixed exchange rate can be maintained by a government as long as it has sufficient
a. supplies of its own currency.
b. foreign reserves.
c. gold and other precious metals.
d. tax revenues.
Economists believe that the goal of environmental policy should be zero pollution.
a. True
b. False
Economies of scale imply: (i) a continuously falling AC curve; (ii) a larger output is
more efficient than a smaller output.
a. i and ii
b. i but not ii
c. ii but not i
d. neither i nor ii
Which of the following is not true for a public good?
a. Marginal cost of serving public good to one more person is zero.
b. Free rider problem arises in case of public goods.
c. Exclusion is not possible in most of the public goods.
d. Public goods include only material commodities.
Which of the following groups would most likely to benefit from inflation?
a. borrowers
b. lenders
c. creditors
d. pensioners
Which of the following is correct?
a. AC = AFC/Q
b. AC = AFC + AVC
c. AC = MFC + MVC
d. TFC + TMC = MFC + MVC
A “specialist” is a
a. stockholder who finds buyers and sellers for specific stocks, but also operates outside
of specific stock markets.
b. person who works on the floor of the New York Stock Exchange and specializes in
certain stocks.
c. stockbroker who operates only in a particular regional stock market.
d. stockbroker who specializes in the “third market.”
Central planners in command economies
a. generally set production targets for firms.
b. always consult consumers on the output of goods they want to consume.
c. allow prices to organize the economy’s production.
d. depend upon the invisible hand to coordinate economic activities.
The increase in bank supervision in the U.S. in the 1980s and early 1990s was due to an
increase in bank
a. profits.
b. ownership of common stocks.
c. failures.
d. deposits and loans.
American households spend more of their incomes on goods than on services.
a. True
b. False
Monopolists usually earn economic rent.
a. True
b. False
Figure 20-3
Which of the situations illustrated in Figure 20-3 shows the effects of a currency
appreciation leading to a recession?
a. 1
b. 2
c. 3
d. 4
Table 9-1
In Table 9-1, inventories will be increasing as long as output is above
a. 1,000.
b. 1,500.
c. 2,000.
d. 3,000.