Table 11-2
The table below pertains to Iowan, an economy in which the typical consumer’s basket
consists of 3 pounds of pork and 4 bushels of corn.
Refer to Table 11-2. If 2009 is the base year, then the CPI for 2009 was
a. 73.5.
b. 100.
c. 136.1.
d. 147.
An economic outcome is said to be efficient if the economy is
a. using all of the scarce resources it has available.
b. conserving on resources, rather than using all available resources.
c. getting all it can get from the scarce resources it has available.
d. able to produce more than what is currently being produced without additional
resources.
If the government allowed a free market for transplant organs such as kidneys to exist,
the
a. shortage of organs would be eliminated, and there would be no surplus of organs.
b. shortage of organs would be eliminated, but a surplus of organs would develop.
c. shortage of organs would persist.
d. overall well-being of society would remain unchanged.
Scenario 5-2
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both
goods are considered to be normal goods by a majority of consumers. Suppose that a
large income tax increase decreases the demand for both goods by 10%.
Refer to Scenario 5-2. The equilibrium price will
a. increase in both the aged cheddar cheese and bread markets.
b. increase in the aged cheddar cheese market and decrease in the bread market.
c. decrease in the aged cheddar cheese market and increase in the bread market.
d. decrease in both the aged cheddar cheese and bread markets.
The price received by sellers in a market will decrease if the government
a. increases a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. decreases a tax on the good sold in that market.
d. None of the above is correct.
The principle that “trade can make everyone better off” applies to interactions and trade
between
a. families.
b. states within the United States.
c. nations.
d. All of the above are correct.
Most goods and services produced at home
a. and most goods and services produced illegally are included in GDP.
b. are included in GDP while most goods and services produced illegally are excluded
from GDP.
c. are excluded from GDP while most goods and services produced illegally are
included in GDP
d. and most goods and services produced illegally are excluded from GDP.
When the price level falls
a. households want to lend more, so the interest rate rises making the quantity of goods
and services demanded rise.
b. households want to lend more, so the interest rate falls, making the quantity of goods
and services demanded rise.
c. households want to lend more, so the interest rate rises, making the quantity of goods
and services demanded fall.
d. None of the above are correct.
When a shortage exists in a market, sellers
a. raise price, which increases quantity demanded and decreases quantity supplied until
the shortage is eliminated.
b. raise price, which decreases quantity demanded and increases quantity supplied until
the shortage is eliminated.
c. lower price, which increases quantity demanded and decreases quantity supplied until
the shortage is eliminated.
d. lower price, which decreases quantity demanded and increases quantity supplied until
the shortage is eliminated.
Figure 2-8
Panel (a) Panel (b)
Refer to Figure 2-8, Panel (a). The opportunity cost of moving from point M to point
L is
a. 2 donuts.
b. 2 donuts and 4 cups of coffee.
c. 4 donuts.
d. 4 cups of coffee.
If the government removes a tax on a good, then the price paid by buyers will
a. increase, and the price received by sellers will increase.
b. increase, and the price received by sellers will decrease.
c. decrease, and the price received by sellers will increase.
d. decrease, and the price received by sellers will decrease.
Suppose monetary neutrality holds and velocity is constant. A 5 percent increase in the
money supply
a. increases the price level by more than 5 percent.
b. increases the price level by 5 percent.
c. increases the price level by 5 percent.
d. does not change the price level.
Figure 9-1
The figure illustrates the market for wool in Scotland.
Refer to Figure 9-1. When trade in wool is allowed, consumer surplus in Scotland
a. increases by the area B + D.
b. increases by the area C + F.
c. decreases by the area B + D.
d. decreases by the area D + G.
The real interest rate is the
a. interest rate corrected for inflation.
b. interest rate as usually reported by banks.
c. difference between the interest rate charged by banks on the loans they make and the
interest rate paid by banks to their depositors.
d. difference between the average dividend yield on stocks and the average interest rate
on bonds.
Other things the same, if prices fell when firms and workers were expecting them to
rise, then
a. employment and production would rise.
b. employment would rise and production would fall.
c. employment would fall and production would rise.
d. employment and production would fall.
Which of the following is an example of a durable good?
a. a refrigerator
b. a quart of motor oil
c. a business suit
d. a can of soup
When conducting an open-market purchase, the Fed
a. buys government bonds, and in so doing increases the money supply.
b. buys government bonds, and in so doing decreases the money supply.
c. sells government bonds, and in so doing increases the money supply.
d. sells government bonds, and in so doing decreases the money supply.
Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of
oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels
of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the
two countries do not trade, Cornland will produce and consume 400 bushels of corn and
100 bushels of oats, while Oatland will produce and consume 60 bushels of corn and
400 bushels of oats. If each country made the decision to specialize in producing the
good in which it has a comparative advantage, then the combined yearly output of the
two countries would increase by
a. 280 bushels of corn and 450 bushels of oats.
b. 340 bushels of corn and 500 bushels of oats.
c. 360 bushels of corn and 520 bushels of oats.
d. 360 bushels of corn and 640 bushels of oats.
Which list ranks assets from most to least liquid?
a. currency, demand deposits, money market mutual funds
b. currency, money market mutual funds, demand deposits
c. money market mutual funds, demand deposits, currency
d. demand deposits, money market mutual funds, currency
If people had been expecting prices to rise but in fact prices fell, then who among the
following would benefit?
a. lenders and people holding a lot of currency
b. lenders but not people holding a lot of currency
c. people holding a lot of currency but not lenders
d. neither lenders nor people holding a lot of currency
Economists use the term inflation to describe a situation in which
a. some prices are rising faster than others.
b. the economy’s overall price level is rising.
c. the economy’s overall price level is high, but not necessarily rising.
d. the economy’s overall output of goods and services is rising faster than the economy’s
overall price level.
If nominal GDP is $8 trillion and real GDP is $10 trillion, then the GDP deflator is
a. 80, and this indicates that the price level has decreased by 20 percent since the base
year.
b. 80, and this indicates that the price level has increased by 80 percent since the base
year.
c. 125, and this indicates that the price level has increased by 25 percent since the base
year.
d. 125, and this indicates that the price level has increased by 125 percent since the base
year.
Which of the following is an example of a normative, as opposed to positive,
statement?
a. Gasoline prices ought to be lower than they are now.
b. The federal government should raise taxes on wealthy people.
c. The social security system is a good system and it deserves to be preserved as it is.
d. All of the above are normative statements.
Which of the following will cause a decrease in producer surplus?
a. the imposition of a nonbinding price ceiling in the market
b. buyers expect the price of a good to be higher next month
c. the price of a substitute increases
d. income increases and buyers consider the good to be inferior
Public policy
a. can reduce both frictional unemployment and the natural rate of unemployment.
b. can reduce frictional unemployment, but it cannot reduce the natural rate of
unemployment.
c. cannot reduce frictional unemployment, but it can reduce the natural rate of
unemployment.
d. cannot reduce either frictional unemployment or the natural rate of unemployment.
Changes in the quality of a good
a. do not present a problem in the construction of the consumer price index.
b. present a problem in the construction of the consumer price index, and that problem
is sometimes referred to as substitution bias.
c. are not accounted for, as a matter of policy, by the Bureau of Labor Statistics.
d. can lead to either an increase or a decrease in the value of a dollar.
Other things the same, as the number of stocks in a portfolio rises,
a. risk increases and the standard deviation of the return rises.
b. risk increases and the standard deviation of the return falls.
c. risk decreases and the standard deviation of the return rises.
d. risk decreases and the standard deviation of the return falls.
Figure 2-5
Refer to Figure 2-5. If this economy devotes all of its resources to the production of
sweaters, then it will produce
a. 0 sweaters and 200 soccer balls.
b. 180 sweaters and 125 soccer balls.
c. 300 sweaters and 0 soccer balls.
d. 300 sweaters and 200 soccer balls.
In an economy where net exports are zero, if saving rises in some period, then in that
period
a. consumption and investment fall.
b. consumption falls and investment rises.
c. consumption rises and investment falls.
d. consumption rises and investment falls.
One should be especially wary of the national-security argument for restricting trade
when that argument is made by
a. representatives of industry.
b. representatives of the defense establishment.
c. members of households.
d. foreign government officials.