According to the quantity equation, if velocity and output are constant, then an increase
in the money supply leads to ______ in inflation.
A. a less than proportional increase
B. a less than proportional decreases
C. the same percentage increase
D. a greater than proportional increase
The production possibilities curve is:
A. the boundary that divides all production combinations into efficient and inefficient
ones.
B. a graph illustrating the production combinations society would like to choose.
C. the boundary that divides all production combinations into attainable ones and
unattainable ones.
D. a graph illustrating supply curves for different combinations of output.
The expenditure line in the Keynesian cross diagram represents the:
A. equilibrium condition that Y = PAE.
B. relationship between planned expenditure and output.
C. relationship between consumption and after-tax disposable income.
D. equilibrium condition that Y = Y*.
An expansion occurs when either ______ or _______, or both.
A. potential output grows rapidly; actual output rises above potential output
B. potential output grows slowly; actual output rises above potential output
C. potential output grows rapidly; actual output equals potential output
D. potential output grows rapidly; actual output falls below potential output
If the Federal Reserve is currently paying 1% interest on bank reserves, but then
reduces that interest rate to 0.5%, banks may decide to hold ______ reserves, and the
money supply may _____.
A. more; increase
B. more; decrease
C. fewer; increase
D. fewer; decrease
The following graph depicts demand.
Refer to the figure above. The price elasticity of demand at point D is:
A. 5/2.
B. 1/2.
C. 2/5.
D. 2.
Payments by the government to the public for which the government receives no
current goods or services in return are called:
A. public saving.
B. net taxes.
C. transfer payments.
D. capital losses.
Economists have found that the price elasticity of demand for water is higher in the
summer than in the winter. Why?
A. Winter is longer than summer, and price elasticity is lower over longer time
horizons.
B. Winter is longer than summer, and price elasticity is higher over longer time
horizons.
C. Winter water use tends to be for necessities like cleaning and cooking, and summer
water use tends to be for both necessities and non-necessities, like gardening and
recreation.
D. People take more vacations in the summer and so use less water at home.
Supply and Demand Curve for Jeans in Gallania Mall.
Refer to the figure above. At the price of $60 each, sellers offer _____ pairs of jeans per
day, and buyers wish to purchase _____ pairs of jeans a day.
A. 60; 20
B. 8; 24
C. 16; 16
D. 24; 8
Two possible explanations for the decline in the natural rate of unemployment in the
United States over the past twenty years are:
A. the changing age structure of the population and more efficient labor markets.
B. advances in computer technology and globalization.
C. increasing wage inequality and skill-biased technological change.
D. greater quantities of human capital and increased average labor productivity.
In determining the beginning of recessions, the NBER Business Cycle Dating
Committee looks for evidence of decline in:
A. specific sectors of the economy.
B. the rate of inflation.
C. the entire economy.
D. the stock market.
Acme Dynamite has $2000 of variable costs and $500 of fixed costs when its output is
250 units. It sells each unit for $25.
If the price of dynamite drops to $10, should Acme continue to operate in the short run?
A. No, because Price is less than Average Total Cost
B. Yes, because Price is less than Average Variable Cost
C. No, because Price is not greater than Average Total Cost
D. Yes, because Price is greater than Average Variable Cost
Economic growth can result from a(n):
A. increase in the amount of productive resources.
B. increase in number of the minimum wage jobs.
C. increase in the amount of consumer goods produced.
D. decrease in the number of workers available.
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner
Store is produced by the following production process:
What is the value added of Florida Jam Company?
A. $0.50
B. $0.75
C. $1.25
D. $2.00
Workers’ compensation is
A. another term for wages.
B. a private insurance plan for workers.
C. the total amount workers are paid, counting both wages and benefits.
D. a government insurance plan that provides benefits to workers injured on the job.
International capital flows are:
A. purchases of foreign goods or services.
B. sales of domestic goods or services to foreigners.
C. exports plus imports.
D. purchases or sales of real and financial assets across international borders.
Assume an economy produces only footballs and baseballs and the base year is 2005.
Given the data in the table above, what is the value of real GDP in 2006?
A. $9,000
B. $10,000
C. $12,000
D. $12,500
Leaving the labor force or finding a job are two ways that:
A. a person can become a discouraged worker.
B. a person can become an involuntary part-time worker.
C. an unemployment spell can begin.
D. an unemployment spell can end.
Refer to the figure above. If both firms cut their rates in the summer, each earns _____
and if both firms keep their rates high, each earns _____.
A. 300; 50
B. 50; 300
C. 300; 500
D. 500; 300
Refer to the figure above. The relationship between point B and point C on this supply
curve is due to:
A. the slope of the supply curve being greater than one.
B. the slope of the supply curve being less than one.
C. the positive slope of the supply curve.
D. the fact that the ratio of price to quantity is equal at all points on the line.
The textbook notes that the last time a major league batter hit .400 was in 1941. This is
because:
A. the average quality of batters has fallen.
B. the league imposes harsh penalties for steroid use.
C. specialization by pitchers, infielders, and outfielders has made it harder for batters to
hit.
D. baseball diamonds have become larger.
Jenna decides to see a movie that costs $7 for the ticket and has an opportunity cost of
$20. After the movie, she says to one of her friends that the movie was not worth it.
Apparently:
A. Jenna failed to apply the cost-benefit model to her decision.
B. Jenna was not rational.
C. Jenna overestimated the benefits of the movie.
D. Jenna underestimated the benefits of the movie.
The equilibrium in a prisoner’s dilemma is an example of:
A. the low-hanging fruit principle.
B. the comparative advantage principle.
C. the equilibrium principle.
D. the smart for one, dumb for all principle.
The real interest rate is the:
A. market interest rate.
B. annual percentage increase in the nominal value of a financial asset.
C. annual percentage increase in the purchasing power of a financial asset.
D. the interest rate charged on a loan in dollar terms.
Alex, who is risk-neutral, is looking for an apartment. The distribution of apartments of
equal quality is as follows: 70% rent for $700 per month, 20% rent for $600 per month,
and 10% rent for $500 per month. Alex’s costs of searching rise by $10 with each
search.
Alex should stop searching for a lower cost apartment when
A. Alex finds one that rents for $500.
B. Alex finds one that rents for $600.
C. the expected benefit of finding a cheaper apartment is less than 10 times the number
of apartments visited.
D. the expected benefit of finding a cheaper apartment is less than 10.
Some people have argued that the government should provide medical care to everyone.
Under this system:
A. the price of medical care will allocate resources efficiently.
B. the price of medical care will ration resources efficiently.
C. prices will not ration medical care so there will be no scarcity.
D. prices will not ration medical care so some other rationing method will be used.
In a free market economy, the decisions of buyers and sellers are:
A. random.
B. motivated by custom and tradition.
C. in need of coordination by the government.
D. guided by prices.
In general, when the supply curve shifts to the left and demand is constant then:
A. the market cannot reestablish an equilibrium.
B. the equilibrium price will fall.
C. the equilibrium quantity will rise.
D. the equilibrium price will rise.
If the Boskin Commission’s conclusion that the CPI ______ the “true” inflation rate is
correct, then the true improvement in living standards over time has been _____.
A. understates; overestimated
B. understates; underestimated
C. overstates; underestimated
D. measures; overestimated
A firm employs Pam to assemble personal computers. Pam can assemble 1 computer if
she works 1 hour, 4 computers in 2 hours, 8 computers in 3 hours, 10 computers in 4
hours, and 11 computers in 5 hours. Each computer consists of a motherboard that costs
$200, a hard drive that costs $100, a case that costs $20, a monitor that costs $200, a
keyboard that costs $60 and a mouse that costs $20. The cost of employing Pam is $40
per hour.
The firm sells each computer for $640. How many hours should the firm employ Pam
to maximize its benefit from her employment?
A. 1 hour
B. 2 hours
C. 3 hours
D. 4 hours
A few years ago Stan and his kids were the only people who fished in Stan’s personal
pond. Then Stan started to sell tickets to the public. Stan left the pond and the land it
was on to the state in his will, stipulating that the land be used as a public fishing area.
After Stan dies the pond will become a _______ good.
A. private
B. commons
C. collective
D. public
All of the following would be included in planned aggregate expenditure EXCEPT:
A. spending on consumer durables.
B. planned changes in inventories.
C. sales of domestically produced goods to foreigners.
D. interest paid on the government debt.
Suppose that the company that owns all of the vending machines on your campus has
doubled the price of a can of soda. They notice that they are selling approximately 15%
fewer sodas. Price elasticity of demand for sodas from the campus vending machines is:
A. inelastic
B. unitary elastic
C. elastic
D. infinite