International trade does all the following except
a. allow a country to specialize in producing certain goods and services.
b. reduce world output.
c. allow a country to move to higher consumption levels.
d. increase world output.
When the top marginal tax rates were lowered substantially during the 1980s, the
inflation-adjusted income tax revenue collected from the top 1 percent of all income
earners
a. declined sharply.
b. remained approximately constant.
c. increased substantially.
d. did none of the above.
Figure 5-4
Refer to Figure 5-4. The efficient price and quantity are
a. $1.90 and 38 units, respectively.
b. $1.80 and 35 units, respectively.
c. $1.60 and 42 units, respectively.
d. $1.35 and 58 units, respectively.
If income in the United States increases more rapidly than the income of our trading
partners, other things constant, the dollar will
a. appreciate, imports will become less expensive, and domestic exports will become
more expensive to foreigners.
b. depreciate, imports will become less expensive, and domestic exports will become
more expensive to foreigners.
c. appreciate, imports will become more expensive, and domestic exports will become
less expensive to foreigners.
d. depreciate, imports will become more expensive, and domestic exports will become
less expensive to foreigners.
The figure below depicts a production function for a firm that produces cookies.
Figure 12-4
Refer to Figure 12-4. As the number of workers increases,
a. total output increases, but at a decreasing rate.
b. marginal product increases, but at a decreasing rate.
c. marginal product increases at an increasing rate.
d. total output decreases.
Are “smart cards” or E-cash cards part of the money supply?
a. Yes, because they can be given away to make a payment.
b. Yes, because they will soon completely replace cash.
c. No, because they are not issued by banks.
d. No, because they are merely means to transfer checking deposits.
High and variable rates of inflation will
a. distort the information delivered by market prices.
b. encourage people to spend more time producing and less time trying to protect their
wealth.
c. decrease the risks that accompany the undertaking of long-term investment projects.
d. promote economic growth and the efficient use of resources.
Which of the following is an important ingredient for the achievement of efficient
economic organization?
a. highly restrictive exchange rate controls
b. secure property rights and political stability
c. high and variable rates of inflation
d. high marginal tax rates
Raising taxes as an element of discretionary fiscal policy is intended to reduce
aggregate demand, but it can also reduce aggregate supply if
a. the higher taxes lead workers to seek out a second job.
b. the higher taxes cause workers to work less.
c. the government purchases goods with the additional revenue.
d. the government uses the additional revenue to retire some of the federal debt.
e. the higher taxes cause people to save less.
The notion that the demand for inputs depends on the demand for outputs is termed
a. inverse demand.
b. derived demand.
c. proportional demand.
d. complementary demand.
A decrease in the price of milk will
a. increase the demand for milk.
b. reduce the demand for milk.
c. reduce the demand for orange juice, a substitute for milk.
d. do both a and c
What are the two distinguishing characteristics of a public good?
a. nonrivalry in consumption and nonexcludability
b. indivisibility in production and excludability of nonpaying customers
c. provision by government and funding through taxation
d. mass production and comparative advantage
During the first 125 years of the United States,
a. there were no constitutional constraints on the spending of the federal government.
b. real spending per person by the federal government rose by a factor of 60.
c. most of the government spending was undertaken at the state and local levels.
d. most of the government spending was undertaken at the federal level.
Since 1995, federal regulations have
a. tightened mortgage lending standards and therefore made it difficult to obtain a loan
to purchase a house.
b. increased the down payment housing buyers are required to make in order to obtain a
mortgage loan.
c. loosened lending standards and made it possible for many buyers to purchase a house
with little or no down payment.
d. required investment banks to maintain more capital against their holdings of
mortgage loans.
Figure 3-18
Refer to Figure 3-18. Which area represents the increase in consumer surplus when the
price falls from P1 to P2?
a. ABD
b. ACF
c. DEF
d. BCFD
Stable money and prices are a key source of economic growth because
a. they allow activist policymakers to fine tune the economy.
b. uncertainty and instability in prices will attract investors and business decision
makers.
c. price instability increases capital formation.
d. price stability reduces the risks that accompany investment and other long-term
commitments.
Figure 3-15
Refer to Figure 3-15. Which area represents producer surplus when the price is P2?
a. BCE
b. ACF
c. ABED
d. AFEB
Figure 4-25
Refer to Figure 4-25. The benefit to the government is
a. measured by tax revenue and is represented by area A + B.
b. measured by tax revenue and is represented by area B + D.
c. measured by the net gain in total surplus and is represented by area B + D.
d. measured by the net gain in total surplus and is represented by area D + E.
If an investor’s primary stock holding is currently Exxon Mobil, the purchase of which
of the following stocks would provide the investor with the largest reduction in risk?
a. BP / Amoco.
b. Shell Oil Corporation.
c. General Motors.
d. Texaco.
Most economists believe that the poor economic performance of countries located in
tropical areas is primarily the result of
a. the hot climate that saps the energy of people in tropical countries.
b. the poor institutional quality in most tropical countries.
c. the lack of natural resources in most tropical countries.
d. the failure of rich countries to provide foreign aid to tropical countries.
The potential output of an economy is the level of output produced when the
a. real wage equals the nominal wage.
b. price level is constant.
c. expected real wage equals the inflation rate.
d. expected price level equals the unemployment rate.
e. expected price level equals the actual price level.
When the Social Security system enters its deficit years and the bonds held in the trust
fund are drawn down,
a. overall taxes will be reduced as the trust funds are used to pay benefits to retirees.
b. the payroll taxes used to finance Social Security benefits can be reduced because the
trust funds will be sufficient to pay the retirement benefits of the baby boom generation.
c. taxes will have to be raised (or additional funds will have to be borrowed) in order to
redeem the bonds held in the trust fund.
d. income taxes will have to be reduced in order to keep the revenues and expenditures
of the Social Security system in balance.
An excise tax levied on a product will impose a larger relative burden on consumers
(and a smaller relative burden on sellers) when
a. the supply of the product is relatively inelastic.
b. the supply of the product is relatively elastic.
c. the demand for the product is relatively inelastic.
d. either b or c is true
Other things constant, if the Fed decreased the discount rate,
a. the earnings of the Fed would increase.
b. the incentive of commercial banks to borrow from the Fed would be reduced.
c. borrowing from the Fed will tend to increase and the money supply will tend to
expand.
d. borrowing from the Fed will tend to decrease and the money supply will tend to
decline.
If an increase in the price of good X causes the demand for good Y to decrease, this
indicates that
a. X and Y are complements.
b. X and Y are substitutes.
c. X and Y are unrelated.
d. the demand for X is elastic, but the demand for Y is inelastic.
Use the figure below to answer the following question(s).
Figure 10-4
Starting from long-run equilibrium at point F in Figure 10-4, at which of the following
points would short-run equilibrium occur following a drought in the Midwestern states?
a. I
b. F
c. G
d. H
Cross country data illustrates that rapid expansion in the supply of money over a
lengthy period of time (for example, a decade) leads to
a. rapid growth of real output.
b. a low real rate of interest.
c. high rates of inflation.
d. an inflow of capital and a high rate of investment.
Which one of the following groups has a below-average incidence of poverty?
a. persons who are divorced or separated from their spouse
b. families headed by a female
c. persons 18 to 24 years of age
d. married-couple families
Use the figure to answer the following question(s).
Figure 11-3
The cost and demand conditions for a monopolist are depicted in Figure 11-3. If the
monopolist is maximizing profit, it will charge a price of
a. $10 and produce an output of 20,000.
b. $20 and produce an output of 10,000.
c. $20 and produce an output of 20,000.
d. more than $20.
External debt is that portion of the national debt
a. owed to investors outside the United States (foreign investors).
b. owed to the Federal Reserve system.
c. that the U.S. does not intend to repay.
d. owed to U.S. citizens and corporations.
What will happen if a country uses money creation to finance a large and expanding
national debt?
a. Real output and employment will grow rapidly.
b. Nominal interest rates will fall.
c. The foreign exchange value of the currency will increase.
d. The rate of inflation will rise.
The highest interest rates in the world are found in countries
a. that have followed a monetary policy that is highly restrictive.
b. with governments that have run large budget surpluses.
c. with governments that have run sizable budget deficits.
d. that have followed an expansionary monetary policy that resulted in high rates of
inflation.
A profit-maximizing restaurant owner will hire more busboys to keep more tables clean
and quickly available to new customers, as long as the
a. marginal product of busboys exceeds the marginal product of other employees.
b. hourly wage of busboys is lower than that of cashiers and cooks.
c. marginal revenue product of busboys exceeds their wage rate.
d. wage of busboys exceeds the wage of other employees.