Which of the following would impose the greatest costs to society?
a. high levels of expected inflation
b. low levels of expected inflation
c. variable rates of inflation
d. stable rates of inflation
An optimal decision is one that chooses
a. the most desirable alternative among the possibilities permitted by the resources
available.
b. the lowest cost method of meeting goals, without regard to quality or any other
feature.
c. among various possible goals and offends no one, so that all are equally happy.
d. among equally important goals, and thereby avoids the “indispensable necessity”
syndrome.
e. among possible goals in such a way that spends as little money as possible.
How is human capital most commonly measured?
a. By the organizational rank and seniority
b. By the amount of pay and incentives
c. By the amount of education and training
d. By the compensation structure and work policies
The United States is one of the most marketized economies in the world.
a. True
b. False
The fractional reserve system of banking evolved because
a. goldsmiths did not have safes large enough to hold all their gold deposits.
b. there was always a dire need for additional money.
c. goldsmiths knew that on any given day, only a few depositors would come to claim
their deposits.
d. goldsmiths knew that they would not be prosecuted for lending out money they did
not have.
Table 11-1
Y = C + I + G
C = 500 + .8(Y − T)
I = 300
G = 700
T = .25Y
Refer to Table 11-1. What is the level of tax revenues in this model?
a. 1,000
b. 950
c. 945.5
d. 937.5
e. 437.5
The basic forces driving the “invisible hand” are
a. government and business.
b. information and computer technology.
c. competition and self-interest.
d. cooperation and altruism.
The number of Compact Discs purchased by a consumer depends on the price of the
discs as well as the prices of all other goods purchased.
a. True
b. False
The slope of the aggregate supply curve increases as output increases because
a. the cost of resource-use increases as potential is reached.
b. consumers are willing to pay more as output expands.
c. firms substitute capital for labor as prices increase.
d. firms substitute capital for labor as capacity is reached.
Which of the following was a reason that the Federal Reserve took on additional risks
associated with unconventional policy during the recession of 2007-2009?
a. The inflated price of Treasury bills made them too expensive to purchase in open
market operations.
b. The large budget deficit constrained conventional monetary policy.
c. The U.S. Treasury was unable to sell Treasury bills in the primary market.
d. The Fed was able to act more quickly than Congress.
If a firm shuts down in the short run, its losses are equal to
a. TC − TR.
b. TFC.
c. TVC.
d. MC.
Most economic activity in the United States is carried out by monopolies.
a. True
b. False
The Phillips curve is built on the assumption that business fluctuations are
a. from the demand side.
b. from the supply side.
c. from both the demand and supply side.
d. purely random events.
Many economists argue that there is imperfect information in the market and that this is
a failure of the market mechanism.
a. True
b. False
If the marginal net utility of beer is a positive number, the consumer should buy more
beer in order to maximize utility.
a. True
b. False
A conservative who was opposed to an increase in the size of the government sector but
believed in the Keynesian approach to aggregate demand management would most
likely favor which of the following expansionary policies?
a. increase taxes
b. decrease taxes
c. increase government spending
d. decrease government spending
Which of the following is likely to affect the position and shape of society’s production
possibilities frontier?
a. volume of physical resources
b. level of labor skills
c. level of technology
d. amount of factories on hand
e. All of the above are correct.
The price of one good produced by a multiproduct industry rises. For another good
produced by that industry
a. the supply curve will shift to the left.
b. the supply curve will remain constant.
c. the supply curve will shift to the right.
d. the demand curve will shift to the right.
A demand schedule relates prices of a particular good to quantities demanded.
a. True
b. False
Which of the following companies would gain from foreign currency depreciation?
a. companies which borrow in foreign currency.
b. companies which export goods and services.
c. companies which invest in the foreign equity markets.
d. companies which buy bonds issued by the foreign government.
Workers in high-wage countries cannot improve their real income when they trade with
low-wage countries.
a. True
b. False
In 2009, nominal GDP was $14,050 billion and M1 was $1,587 billion. Velocity was
a. 0.11.
b. 8.85.
c. 11.30.
d. 14.25.
An automatic stabilizer is a feature of the economy that
a. makes prices “sticky.”
b. reduces its sensitivity to shocks.
c. maximizes its volatility.
d. automatically reduces recessionary trends.
The resolution of Adam Smith’s diamond-water puzzle is based on the distinction
between marginal and total utility.
a. True
b. False
Technological change and labor productivity are negatively related.
a. True
b. False
If an economy is operating inefficiently, then
a. the economy can increase production of consumption goods without reducing capital
goods.
b. there is always a positive opportunity cost to increasing output.
c. output can only be increased through capital investment.
d. output cannot be increased.
Suppose the federal government is considering alternatives to increase the level of real
GDP in order to reduce unemployment. It can only do one of the following. Which will
have the smallest impact on the federal budget?
a. decreasing transfer payments
b. increasing government spending
c. increasing transfer payments
d. decreasing government spending
Capital is appropriately classified as a
a. flow.
b. process.
c. stock.
d. growth rate.
As a result of the war in Afghanistan, the population of Afghanistan as well as their
capital stock was reduced. This can be illustrated by aggregate supply curve
a. shifting outward.
b. becoming flatter.
c. shifting inward.
d. becoming more elastic.
A situation in which both players can adopt moves such that each player’s move is its
most profitable response to the move of the other is the
a. prisoner’s dilemma.
b. Nash equilibrium.
c. maximin criterion.
d. tacit collusion.
At its long-run equilibrium level of output, the demand curve facing an individual
perfectly competitive firm is tangent to its
a. total economic profit curve.
b. long-run average cost curve.
c. marginal cost curve.
d. marginal profit curve.