Pete throws leftover bread onto his front lawn because he enjoys watching the pigeons
feeding. His neighbor John is not happy about the pigeons, since they leave a mess on
his property. This is an example of:
a. a negative externality.
b. a public good.
c. privatization.
d. third-party benefits.
e. well-defined property rights.
In the upward-sloping segment of the aggregate supply curve,
a. increases in output are linked to decreases in the price level.
b. increasing prices drag down resource costs.
c. producers can hire more workers without having to raise the wage rate.
d. the economy can increase aggregate supply without prices going up.
e. firms are willing to pay higher wages to get more labor.
An increase in inflation in the United States relative to the rate in France would make:
a. U.S. goods relatively less expensive in the United States and in France.
b. French goods relatively less expensive in the United States and U.S. goods relatively
more expensive in France.
c. French goods relatively more expensive in the United States and in France.
d. French goods relatively more expensive in the United States and U.S. goods
relatively less expensive in France.
If an economy spends 90 percent of any increase in real GDP, then an increase in
investment of $1 billion would result ultimately in an increase in real GDP of:
a. $0.
b. $0.9 billion.
c. $1.0 billion.
d. $10 billion.
The Phillips curve shows a negative relationship between the:
a. consumption rate and the unemployment rate.
b. savings rate and the inflation rate.
c. interest rate and the savings rate.
d. inflation rate and the unemployment
The term “balance of payments” refers to a nation’s:
a. goods exports minus imports.
b. record of all international transactions.
c. capital inflows minus outflows.
d. official reserves inflows minus outflows.
Assume that the Paris First National Bank currently has deposits of $20 million. If the
current required reserve ratio is raised from 20 percent to 40 percent, then:
a. Paris First National Bank does not have to comply with the Federal Reserve mandate.
b. required reserves will decrease from $16 million to $12 million.
c. excess reserves will automatically increase by $20 million.
d. Paris First National Bank must close out 4 million in loans.
e. Paris First National Bank must increase its required reserves from $4 million to $8
million.
The ratio of a change in consumption to a change in disposable income is the:
a. consumption function.
b. propensity to consume.
c. average propensity to consume.
d. extra propensity to consume.
e. marginal propensity to consume.
“Because of unseasonable cold weather, much of the peach crop has been destroyed.”
This statement indicates that the:
a. price of peaches will fall.
b. quantity of peaches that will be available at any given price has decreased.
c. demand for peaches will shift to the left.
d. quantity of peaches that will be available at any given price have increased.
“More productive workers receive higher wages than less productive workers.” This
observation is a major flaw in which of the following arguments for protectionism?
a. The infant industry argument.
b. The national security argument.
c. The employment argument.
d. The cheap foreign labor argument.
The federal funds rate is:
a. the minimum amount of reserves the Fed requires a bank to hold.
b. the interest rate that the Fed charges banks who borrow from it.
c. the interest rate on loans made by banks to other banks
d. the maximum percentage of the cost of a stock that can be borrowed from a bank,
with the stock offered as collateral.
e. an appeal by the Fed to banks, asking for voluntary compliance with the Fed’s
wishes.
Suppose there are two countries, X and Y. If the exchange rate, as measured in X’s
currency, is currently 9, what do citizens of the nation of Y see when they read their
newspapers?
a. The exchange rate for X’s currency is 9.
b. The exchange rate for X’s currency is more than 9.
c. The exchange rate for X’s currency is 3.
d. The exchange rate for X’s currency is 0.11.
e. Knowing one exchange rate does not mean we can tell the other exchange rate.
At a price of $5, Sam buys 10 units of a product; when the price increases to $6, Sam
buys 8 units. Martha says Sam’s demand has decreased. Is Martha correct?
a. Yes, Martha is correct. Sam’s demand has decreased.
b. No, Martha is incorrect. Sam’s demand has increased.
c. No, Martha is incorrect. Sam’s quantity demanded has decreased, and his demand has
not changed.
d. No, Martha is incorrect. Sam’s quantity demanded has increased, and his demand has
increased.
e. No, Martha is incorrect. Sam’s demand has increased, and his quantity demanded has
decreased.
The modern view of the Phillips curve suggests that:
a. when inflation is reduced, unemployment will fall below the natural rate.
b. the Phillips curve is an unstable relationship.
c. systematic demand stimulus policies will be unable to affect prices in the long run.
d. there will be a trade-off between inflation and unemployment in the long run.