Other things the same, if the capital stock increases, then in the long run
a. both output and prices are higher.
b. output is higher and prices are lower.
c. output is lower and prices are higher.
d. both output and prices are lower.
When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an
exporter of a particular good,
a. producer surplus increases and total surplus increases in the market for that good.
b. producer surplus increases and total surplus decreases in the market for that good.
c. producer surplus decreases and total surplus increases in the market for that good.
d. producer surplus decreases and total surplus decreases in the market for that good.
The Employment Act of 1946 states that
a. the Fed should use monetary policy only to control the rate of inflation.
b. the government should promote full employment and production.
c. the government should periodically increase the minimum wage and unemployment
insurance benefits.
d. All of the above are correct.
If the demand for leather decreases, producer surplus in the leather market
a. increases.
b. decreases.
c. remains the same.
d. may increase, decrease, or remain the same.
Figure 3-3
Arturo’s Production Possibilities Frontier Dina’s Production Possibilities Frontier
Refer to Figure 3-3. At which of the following prices would both Arturo and Dina gain
from trade with each other?
a. 12 burritos for 21 tacos
b. 12 burritos for 27 tacos
c. 12 burritos for 36 tacos
d. Arturo and Dina could not both gain from trade with each other at any price.
Assume a central bank follows a rule that requires it to take steps to keep the price level
constant. If the price level rose because of an increase in aggregate demand and a
decrease in aggregate supply that kept output unchanged, then
a. the central bank would have to decrease the money supply which would decrease
output.
b. the central bank would have to decrease the money supply which would increase
output.
c. the central bank would have to increase the money supply which would decrease
output.
d. the central bank would have to increase the money supply which would increase
output.
Figure 5-4
Refer to Figure 5-4. The section of the demand curve from B to C represents the
a. elastic section of the demand curve.
b. perfectly elastic section of the demand curve.
c. unit elastic section of the demand curve.
d. inelastic section of the demand curve.
The two words economists use most often are
a. inflation and trade.
b. supply and demand.
c. competition and prices.
d. markets and equilibrium.
If a central bank increases the money supply in response to an adverse supply shock,
then which of the following quantities moves closer to its pre-shock value as a result?
a. both the price level and output
b. the price level but not output
c. output but not the price level
d. neither output nor the price level
Banks advertise
a. the real interest rate, which is how fast the dollar value of savings grows.
b. the real interest rate, which is how fast the purchasing power of savings grows.
c. the nominal interest rate, which is how fast the dollar value of savings grows.
d. the nominal interest rate, which is how fast the purchasing power of savings grows.
Which of the following equations is correct?
a. Y = C + I + G + NCO
b. NX = NCO
c. NCO = S – I
d. All of the above are correct.
If the reserve ratio is 10 percent, $1,000 of additional reserves can create up to
a. $100 of new money.
b. $1,000 of new money.
c. $10,000 of new money.
d. None of the above is correct.
In 2009, the imaginary nation of Mainland had a population of 6,000 and real GDP of
120,000. In 2010 the population was 6,200 and real GDP of 128,960. Over the year in
question, real GDP per person in Mainland grew by
a. 2 percent, which is high compared to average U.S. growth over the last one-hundred
years.
b. 2 percent, which is about the same as average U.S. growth over the last one-hundred
years.
c. 4 percent, which is high compared to average U.S. growth over the last one-hundred
years.
d. 4 percent, which is about the same as average U.S. growth over the last one-hundred
years.
Suppose that Firms A and B each produce high-resolution computer monitors, but Firm
A can do so at a lower cost. Cassie and David each want to purchase a high-resolution
computer monitor, but David is willing to pay more than Cassie. Which of the
following market outcomes is efficient?
a. Firm A produces a monitor that Cassie buys. David does not purchase a monitor.
b. Firm A produces a monitor that David buys.
c. Firm B produces a monitor that Cassie buys. David does not purchase a monitor.
d. Firm B produces a monitor that David buys.
The nation of Aquilonia has decided to end its policy of not trading with the rest of the
world. When it ends its trade restrictions, it discovers that it is importing rice, exporting
steel, and neither importing nor exporting TVs. We can conclude that producer surplus
in Aquilonia is now
a. higher in the steel market, lower in the rice market, and unchanged in the TV market.
b. higher in the rice and steel markets, and unchanged in the TV market.
c. lower in the rice and TV markets, and higher in the steel market.
d. lower in the rice and steel markets, and the same in the TV market.
The value of net exports equals the value of
a. national saving.
b. public saving.
c. national saving – net capital outflow.
d. national saving – domestic investment.
At present, the maximum legal price for a human kidney is $0. The price of $0
maximizes
a. consumer surplus but not producer surplus.
b. producer surplus but not consumer surplus.
c. both consumer and producer surplus.
d. neither consumer nor producer surplus.
Which of these statements best represents the law of demand?
a. When buyers’ tastes for a good increase, they purchase more of the good.
b. When income levels increase, buyers purchase more of most goods.
c. When the price of a good decreases, buyers purchase more of the good.
d. When buyers’ demands for a good increase, the price of the good increases.
Other things the same, continued increases in the money supply lead to
a. continued increases in the price level and real GDP.
b. continued increases in the price level but not continued increases in real GDP.
c. continued increases in real GDP but not continued increases in the price level.
d. a one-time permanent increase in both prices and real GDP.
Below are pairs of GDP growth rates and unemployment rates. Economists would be
shocked to see most of these pairs in the U. S. Which pair of GDP growth rates and
unemployment rates is realistic?
a. 5 percent, 1 percent
b. 3 percent, 5 percent
c. -1 percent, 3 percent
d. -2 percent, 4 percent
When an economist is asked a question like “why is unemployment higher for teenagers
than for older workers?” the economist
a. is asked to explain the cause of an economic event.
b. is asked to recommend a policy to improve economic outcomes.
c. is asked as a policy adviser.
d. does not have enough information to respond.
Figure 5-5
Refer to Figure 5-5. Using the midpoint method, between prices of $12 and $18, price
elasticity of demand is
a. 0.33.
b. 0.67.
c. 1.33.
d. 1.89.
Since the end of World War II, the U.S. has almost always had rising prices and an
upward trend in real GDP. To explain this
a. it is only necessary that long-run aggregate supply shifts right over time.
b. it is only necessary that aggregate demand shifts right over time.
c. both aggregate demand and long-run aggregate supply must be shifting right and
aggregate demand must be shifting farther.
d. None of the above cases would produce rising prices and growing real GDP over
time.
Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents
the price of cars.
Refer to Figure 9-8. The price corresponding to the horizontal dotted line on the graph
represents the price of cars
a. after trade is allowed.
b. before trade is allowed.
c. that maximizes total surplus when trade is allowed.
d. that minimizes the well-being of domestic car producers when trade is allowed.
Suppose good X has a negative income elasticity of demand. This implies that good X
is
a. a normal good.
b. a necessity.
c. an inferior good.
d. a luxury.
A country’s saving is greater than its domestic investment. This difference means that its
a. net capital outflow and net exports are positive.
b. net capital outflow and net exports are negative.
c. net capital outflow is positive and net exports are negative.
d. net capital outflow is negative and net exports are positive.
Figure 2-5
Refer to Figure 2-5. If this economy moves from point A to point B, then which of the
following statements is correct?
a. This economy has moved from a point of inefficient production to a point of efficient
production.
b. This economy has experienced economic growth.
c. This economy has experienced an increase in employment.
d. None of the above is correct.
You buy a new car built in Sweden. Other things the same, your purchase by itself
a. raises both U.S. exports and U.S. net exports.
b. raises U.S. exports and lowers U.S. net exports.
c. raises both U.S. imports and U.S. net exports.
d. raises U.S. imports and lowers U.S. net exports.
Table 7-8
The only four producers in a market have the following costs:
Refer to Table 7-8. If the sellers bid against each other for the right to sell the good to a
consumer, then the good will sell for
a. $50 or slightly more.
b. $100 or slightly less.
c. $150 or slightly less.
d. $200 or slightly more.
Suppose a basket of goods and services has been selected to calculate the CPI. In 2002,
the basket’s cost was $80; in 2008, the basket’s cost was $92; and in 2010, the basket’s
cost was $108. The base year must be
a. 2002.
b. 2008.
c. one of the years between 2008 and 2010.
d. The base year cannot be determined from the given information.
Table 7-4
The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a
Chicago Cubs vs. St. Louis Cardinal’s baseball game at Wrigley Field.
Refer to Table 7-4. If you have a ticket that you sell to the group in an auction, who
will buy the ticket?
a. Dan
b. David
c. Ken
d. Lisa
According to the assumptions of the quantity theory of money, if the money supply
increases 5 percent, then
a. both the price level and real GDP would rise by 5 percent.
b. the price level would rise by 5 percent and real GDP would be unchanged.
c. the price level would be unchanged and real GDP would rise by 5 percent.
d. both the price level and real GDP would be unchanged.
All else equal, which of the following would tend to cause real GDP per person to rise?
a. a change from outward-oriented policies to inward-oriented policies
b. an increase in investment in human capital
c. a weakening of property rights
d. All of the above are correct.
Producer surplus measures the
a. benefits to sellers of participating in a market.
b. costs to sellers of participating in a market.
c. price that buyers are willing to pay for sellers’ output of a good or service.
d. benefit to sellers of producing a greater quantity of a good or service than buyers
demand.
Prices in both the U.S. and India rise, but prices in India increase by a larger percentage.
According to purchasing-power parity the U.S. dollar
a. gains value both in terms of the domestic goods and services it can buy and in terms
of the Indian currency it can buy.
b. gains value in terms of the domestic goods and services it can buy, but loses value in
terms of the Indian currency it can buy.
c. loses value in terms of the domestic goods and services it can buy, but gains value in
terms of the Indian currency it can buy.
d. loses value both in terms of the domestic goods and services it can buy and in terms
of the Indian currency it can buy.