Permanent tax cuts shift the AD curve
a. farther to the right than do temporary tax cuts.
b. not as far to the right as do temporary tax cuts.
c. farther to the left than do temporary tax cuts.
d. not as far to the left as do temporary tax cuts.
Figure 21-1
Refer to Figure 21-1. If the current interest rate is 2 percent,
a. there is an excess supply of money.
b. people will sell more bonds, which drives interest rates up.
c. as the money market moves to equilibrium, people will buy more goods.
d. All of the above are correct.
Suppose the United States had a short-term shortage of farmers. Which mechanisms
would adjust to remove the shortage?
a. The government would provide tax incentives to encourage people to become
farmers.
b. The government would subsidize the production of food.
c. The prices of food and the wages of farmers would adjust.
d. There are no mechanisms to remove the shortage.
Figure 7-21
Refer to Figure 7-21. Sellers whose costs are greater than the equilibrium price are
represented by segment
a. AC.
b. CK.
c. BC.
d. CH.
Research studies have shown that
a. the correlation between how well a stock does one year and how well it does the next
is significantly greater than zero.
b. managed mutual funds generally outperform indexed mutual funds.
c. people tend to be overconfident when making investment decisions.
d. All of the above are correct.
Taxes on labor encourage all of the following except
a. older workers to take early retirement from the labor force.
b. mothers to stay at home rather than work in the labor force.
c. workers to work overtime.
d. people to be paid “under the table.”
If the price of a dozen eggs were fixed above the current price, then we would expect
a. an increase in the number of eggs people want to buy and an increase in the number
of eggs farmers want to sell.
b. an increase in the number of eggs people want to buy and a decrease in the number of
eggs farmers want to sell.
c. a decrease in the number of eggs people want to buy and an increase in the number of
eggs farmers want to sell.
d. a decrease in the number of eggs people want to buy and a decrease in the number of
eggs farmers want to sell.
Table 4-9
The demand schedule below pertains to sandwiches demanded per week.
Refer to Table 4-9. Regarding Harry and Darby, for whom are sandwiches a normal
good?
a. only for Harry
b. only for Darby
c. for both Harry and Darby
d. This cannot be determined from the given information.
The slope of the demand for loanable funds curve represents the
a. positive relation between the real interest rate and investment.
b. negative relation between the real interest rate and investment.
c. positive relation between the real interest rate and saving.
d. negative relation between the real interest rate and saving.
In which of the following decades was there both high inflation and rapid money supply
growth in the US?
a. the 1970’s and the 1990’s
b. the 1970’s but not the 1990’s
c. the 1990’s but not the 1970’s
d. neither the 1970’s nor the 1990’s
When a tax is placed on the buyers of cell phones, the size of the cell phone market
a. and the effective price received by sellers both decrease.
b. decreases, but the effective price received by sellers increases.
c. increases, but the effective price received by sellers decreases.
d. and the effective price received by sellers both increase.
Monetary Policy in Southland
In Southland the Department of Finance is responsible for monetary policy. Southland
has had an inflation rate of 25% for many years.
Refer to Monetary Policy in Southland. Suppose Southland has had the same
inflation rate for a long time. Which, if either, of the following ideas imply that the
unemployment rate in Southland would be above the natural rate.
a. both the Classical dichotomy and the long-run Phillips curve
b. the Classical dichotomy, but not the long run Phillips curve
c. the long-run Phillips curve, but not the Classical dichotomy
d. neither the long-run Phillips curve nor the Classical dichotomy
Figure 9-15
Refer to Figure 9-15. For the saddle market, area B represents
a. government’s revenue from the tariff.
b. the deadweight loss of the tariff.
c. the increase in producer surplus, relative to the free-trade situation, as a result of the
tariff.
d. None of the above is correct.
Ms. Lane borrowed $1,000 from her bank for one year at an interest rate of 10 percent.
During that year, the price level went up by 15 percent. Which of the following
statements is correct?
a. Ms. Lane will repay the bank fewer dollars than she initially borrowed.
b. Ms. Lane’s repayment will give the bank less purchasing power than it originally
loaned her.
c. Ms. Lane’s repayment will give the bank greater purchasing power than it originally
loaned her.
d. Ms. Lane’s repayment will give the bank the same purchasing power that it originally
loaned her.
Figure 2-13
Refer to Figure 2-13. Cups of coffee per day and the hours that someone can go
without sleep appear to have
a. a positive correlation.
b. a negative correlation.
c. a random correlation.
d. no correlation.
Figure 9-15
Refer to Figure 9-15. As a result of the tariff, there is a deadweight loss that amounts to
a. B.
b. E.
c. D + F.
d. B + D + E + F.
Scenario 8-2
Tom mows Stephanie’s lawn for $25. Tom’s opportunity cost of mowing Stephanie’s
lawn is $20, and Stephanie’s willingness to pay Tom to mow her lawn is $28.
Refer to Scenario 8-2. If Stephanie hires Tom to mow her lawn, Tom’s producer
surplus is
a. $2.
b. $3.
c. $5.
d. $25.
A competitive market is one in which there
a. is only one seller, but there are many buyers.
b. are many sellers, and each seller has the ability to set the price of his product.
c. are many sellers, and they compete with one another in such a way that some sellers
are always being forced out of the market.
d. are so many buyers and so many sellers that each has a negligible impact on the price
of the product.
The amount of deadweight loss from a tax depends upon the
a. price elasticity of demand.
b. price elasticity of supply.
c. amount of the tax per unit.
d. All of the above are correct.
Table 3-8
Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
Labor Hours Needed
to Make 1 Quantity Produced
in 36 Hours
Refer to Table 3-8. The opportunity cost of 1 parasol for Min is
a. 1/3 plate.
b. 1/2 plate.
c. 2 plates.
d. 3 plates.
A worker received $5 for a daily wage in 1930, which has the equivalent value of
$63.24 today. If the CPI was 17 in 1930 what is the value of the CPI today, rounded to
the nearest whole number?
a. 215
b. 134
c. 17
d. 1.3
If a bank that desires to hold no excess reserves and has just enough reserves to meet
the required reserve ratio of 10 percent receives a deposit of $400 it has a
a. $400 increase in excess reserves and no increase in required reserves.
b. $400 increase in required reserves and no increase in excess reserves.
c. $360 increase in excess reserves and a $40 increase in required reserves.
d. $40 increase in excess reserves and a $360 increase in required reserves.
Table 3-11
Assume that Falda and Varick can switch between producing wheat and producing cloth
at a constant rate.
Quantity Produced in 1 Hour
Refer to Table 3-11. Falda has an absolute advantage in the production of
a. wheat.
b. cloth.
c. both goods.
d. neither good.
The supply of money increases when
a. the value of money increases.
b. the interest rate increases.
c. the Fed makes open-market purchases.
d. None of the above is correct.
As it is usually practiced, inflation targeting sets
a. a specific inflation rate for the central bank to target and prohibits it from deviating
from the target even when some shock pushes inflation away from that number.
b. a specific inflation rate for the central bank to target but allows it to deviate from the
target when some shock pushes inflation away from that number.
c. sets some range of inflation rates for the central bank to target but prohibits it from
deviating from that range even when some shock pushes inflation outside the range.
d. sets some range of inflation rates for the central bank to target but allows it to deviate
from that range even when some shock pushes inflation outside the range.
If in the past Congress had taken additional actions to make saving more rewarding,
then today it is likely that the equilibrium interest rate
a. and the equilibrium quantity of loanable funds both would be lower.
b. and the equilibrium quantity of loanable funds both would be higher.
c. would be higher and the equilibrium quantity of loanable funds would be lower.
d. would be lower and the equilibrium quantity of loanable funds would be higher.
If a dollar buys more rice in the China. than in the U.S., then
a. the real exchange rate is greater than 1; a profit might be made by buying rice in the
U.S. and selling it in China.
b. the real exchange rate is greater than 1; a profit might be made by buying rice in
China. and selling it in the U.S.
c. the real exchange rate is less than 1; a profit might be made by buying rice in the U.S.
and selling it in China.
d. the real exchange rate is less than 1; a profit might be made by buying rice in China
and selling it in the U.S.
President Gerald Ford referred to inflation as
a. a blight on our nation’s economy.
b. a necessary evil to combat high unemployment.
c. public enemy number one.
d. a fly in the ointment.
Figure 6-23
Refer to Figure 6-23. The effective price received by sellers after the tax is imposed is
a. $8.
b. $10.
c. $14.
d. $18.
The Fed’s control of the money supply is not precise because
a. Congress can also make changes to the money supply.
b. there are not always government bonds available for purchase when the Fed wants to
perform open-market operations.
c. the Fed does not know where all U.S. currency is located.
d. the amount of money in the economy depends in part on the behavior of depositors
and bankers.
If sales of Saudi Arabian oil to the rest of the world increase and Saudis use the
proceeds to buy foreign goods, which of the following increases?
a. Saudi Arabian net exports but not Saudi Arabian net capital outflow
b. Saudi Arabian net capital outflow but not Saudi Arabian net exports
c. both Saudi Arabian net exports and net capital outflow
d. neither Saudi Arabian net exports nor net capital outflow
For which pairs of goods is the cross-price elasticity most likely to be positive?
a. peanut butter and jelly
b. bicycle frames and bicycle tires
c. pens and pencils
d. college textbooks and iPods