In the circular-flow diagram, firms produce
a. goods and services using factors of production.
b. output using inputs.
c. factors of production using goods and services.
d. Both (a) and (b) are correct.
Figure 17-2. On the graph, MS represents the money supply and MD represents money
demand. The usual quantities are measured along the axes.
Refer to Figure 17-2. What quantity is measured along the horizontal axis?
a. the price level
b. the real interest rate
c. the value of money
d. the quantity of money
An increase in the money supply
a. and an investment tax credit both cause aggregate demand to shift right.
b. and an investment tax credit both cause aggregate demand to shift left.
c. causes aggregate demand to shift right, while an investment tax credit causes
aggregate demand to shift left.
d. causes aggregate demand to shift left, while an investment tax credit causes
aggregate demand to shift right.
Figure 9-7. The figure applies to the nation of Wales and the good is cheese.
Refer to Figure 9-7. With trade, Wales
a. importsQ2 – Q1 units of cheese.
b. exportsQ2 – Q1 units of cheese.
c. importsQ2 – Q0 units of cheese.
d. exportsQ2 – Q0 units of cheese.
Elasticity is
a. a measure of how much buyers and sellers respond to changes in market conditions.
b. the study of how the allocation of resources affects economic well-being.
c. the maximum amount that a buyer will pay for a good.
d. the value of everything a seller must give up to produce a good.
During the early 1920s in Germany, prices
a. doubled annually.
b. doubled monthly.
c. tripled monthly.
d. tripled annually.
Index funds
a. buy all the stocks in a given stock index.
b. promise to beat the market by a certain percentage known as an index.
c. provide a return that is adjusted for changes in the consumer price index.
d. buy industries within a particular category of the North American Industry
Classification System.
A fiscal stimulus was initiated by President Obama in response to the economic
downturn of 2008-2009. At that time, the president’s economists estimated the
multiplier to be
a. 3.2 for government purchases and 2.0 for tax cuts.
b. 2.4 for government purchases and 1.4 for tax cuts.
c. 1.6 for government purchases and 1.0 for tax cuts.
d. 1.6 for government purchases and 0.4 for tax cuts.
What would happen in the market for loanable funds if the government were to
decrease the tax rate on interest income?
a. The supply of loanable funds would shift rightward and investment would increase.
b. The supply of loanable funds would shift leftward and investment would decrease.
c. The demand for loanable funds would shift rightward and investment would increase.
d. The demand for loanable funds would shift leftward and investment would decrease.
Efficiency means that
a. society is conserving resources in order to save them for the future.
b. society’s goods and services are distributed equally among society’s members.
c. society’s goods and services are distributed fairly, though not necessarily equally,
among society’s members.
d. society is getting the maximum benefits from its scarce resources.
Which of these statements best represents the law of supply?
a. When input prices increase, sellers produce less of the good.
b. When production technology improves, sellers produce less of the good.
c. When the price of a good decreases, sellers produce less of the good.
d. When sellers’ supplies of a good increase, the price of the good increases.
A $3.50 tax per gallon of paint placed on the sellers of paint will shift the supply curve
a. downward by exactly $3.50.
b. downward by less than $3.50.
c. upward by exactly $3.50.
d. upward by less than $3.50.
If labor in Mexico is less productive than labor in the United States in all areas of
production,
a. then neither nation can benefit from trade.
b. then Mexico can benefit from trade but the United States cannot.
c. then the United States will have a comparative advantage relative to Mexico in the
production of all goods.
d. then both Mexico and the United States still can benefit from trade.
Job search
a. and firms paying wages above equilibrium to improve worker health both create
frictional unemployment.
b. creates frictional unemployment, while firms paying wages above equilibrium to
improve worker health creates structural unemployment.
c. creates structural unemployment, while firms paying wages above equilibrium to
improve worker health creates frictional unemployment.
d. and firms paying wages above equilibrium to improve worker health both create
structural unemployment.
The Kennedy tax cut of 1964 was
a. successful in stimulating the economy.
b. designed to shift the aggregate demand curve to the right.
c. designed to shift the aggregate supply curve to the right.
d. All of the above are correct.
Figure 7-17
Refer to Figure 7-17. Which area represents consumer surplus when the price is P1?
a. A
b. B
c. C
d. D
Economic variables whose values are measured in goods are called
a. dichotomous variables.
b. nominal variables.
c. classical variables.
d. real variables.
If there is a temporary adverse supply shock, then the short-run Phillips curve shifts to
the
a. right. It remains to the right regardless of monetary policy.
b. right. It remains to the right if the central bank pursues expansionary monetary
policy.
c. left. It remains to the left regardless of monetary policy.
d. left. It remains to the left if the central bank pursues expansionary monetary policy.
Figure 5-4
Refer to Figure 5-4. Assume the section of the demand curve from B to C corresponds
to prices between $0 and $15. Then, when the price changes between $7 and $9,
a. quantity demanded changes proportionately less than the price.
b. quantity demanded changes proportionately more than the price.
c. quantity demanded changes the same amount proportionately as price.
d. the price elasticity of demand equals zero.
Which of the following events always would increase the size of the deadweight loss
that arises from the tax on gasoline?
a. The demand for gasoline becomes more inelastic.
b. The slope of the supply curve for gasoline becomes steeper.
c. The amount of the tax per gallon of gasoline increases.
d. All of the above are correct.
Every unit of good x that is produced in the United States is exported to other countries.
An increase in the price of good x shows up
a. in the consumer price index and in the GDP deflator.
b. in the consumer price index, but not in the GDP deflator.
c. in the GDP deflator, but not in the consumer price index.
d. in neither the consumer price index nor in the GDP deflator.
The model of short-run economic fluctuations focuses on the price level and
a. real GDP.
b. economic growth.
c. the neutrality of money.
d. None of the above is correct.
Figure 3-11
The graph below represents the various combinations of ham and cheese (in pounds)
that the nation of Bonovia could produce in a given month.
Refer to Figure 3-11. For Bonovia, what is the opportunity cost of a pound of cheese?
a. 0.8 pounds of ham
b. 1.25 pounds of ham
c. 8 pounds of ham
d. 16 pounds of ham
The line that relates the price of a good and the quantity supplied of that good is called
the supply
a. schedule, and it usually slopes upward.
b. schedule, and it usually slopes downward.
c. curve, and it usually slopes upward.
d. curve, and it usually slopes downward.
A tax levied on the sellers of a good shifts the
a. supply curve upward (or to the left).
b. supply curve downward (or to the right).
c. demand curve upward (or to the right).
d. demand curve downward (or to the left).
If the real exchange rate for the dollar is below the equilibrium level, the quantity of
dollars supplied in the market for foreign-currency exchange is
a. less than the quantity demanded and the dollar will appreciate.
b. less than the quantity demanded and the dollar will depreciate.
c. greater than the quantity demanded and the dollar will appreciate.
d. greater than the quantity demanded and the dollar will depreciate.
In the first part of the decade that began in 2000, the U.S. government went from a
surplus to a deficit. Other things the same, this means the
a. supply of loanable funds shifted to the right.
b. supply of loanable funds shifted to the left.
c. demand for loanable funds shifted to the right.
d. demand for loanable funds shifted to the left.
The efficiency-wage theory of worker quality suggests that if firms respond to a surplus
of labor by reducing the wage, then highly qualified workers will be
a. more likely to apply, and unemployment will increase.
b. more likely to apply, and unemployment will decrease.
c. less likely to apply, and unemployment will increase.
d. less likely to apply, and unemployment will increase.
Which of the following would shift long-run aggregate supply to the right?
a. increased immigration from abroad
b. a decrease in the price of an imported natural resource
c. opening the economy to international trade
d. All of the above are correct.
If the cross-price elasticity of two goods is positive, then the two goods are
a. substitutes.
b. complements.
c. normal goods.
d. inferior goods.
Monetary neutrality means that a change in the money supply
a. does not change real variables. Most economists think this is a good description of
the economy in the short run and in the long run.
b. does not change real variables. Most economists think this is a good description of
the economy in the long run but not the short run.
c. does not change nominal variables. Most economists think this is a good description
of the economy in the short-run and the long run.
d. does not change nominal variables. Most economists think this is a good description
of the economy in the long run but not the short run.
Which of the following would be the most likely result of a binding price ceiling
imposed on the market for rental cars?
a. frequent rental programs such as “Rent nine times and the tenth rental is free!”
b. enhanced maintenance programs to promote the high quality of the cars
c. free gasoline given to people as an incentive to a rent a car
d. slow replacement of old rental cars with newer ones
A country experiencing a growth rate of 8% per year can go from being one of the
poorest to one of the richest in
a. one generation. In the last couple of decades China’s growth rate has been higher than
8%.
b. one generation. However, in the last couple of decades not even China’s growth rate
has been this high.
c. three generations. In the last couple of decades China’s growth rate has been higher
than 8%.
d. three generations. However, in the last couple of decades not even China’s growth
rate has been this high.
The inflation rate is the absolute change in the price level from the previous period.
Tax revenues increase in direct proportion to increases in the size of the tax.
In principle, trade can make a nation better off, because the gains to the winners exceed
the losses to the losers.
If all workers and all jobs were the same such that all workers were equally well suited
for all jobs, then job search would not be a problem.
Tax laws do not give preferential treatment to some kinds of retirement saving.
If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the
price must have decreased by 3%.
Elasticity measures how responsive quantity is to changes in price.
Given the following two equations:
1) Total Surplus = Consumer Surplus + Producer Surplus
2) Total Surplus = Value to Buyers – Cost to Sellers
Show how equation (1) can be used to derive equation (2).
If over the next year the price level in Turkey increases and the price level in Japan
falls, then the Turkish lira should depreciate relative to the Japanese Yen.
Table 15-5
2010 Labor Data for Tajnia
Refer to Table 15-5. The labor force of Tajnia in 2010 is 10,000.
If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of
demand equals 1.
Price elasticity of supply measures how much the quantity supplied responds to changes
in the price.
Minimum wage laws help explain the natural rate of unemployment if they create a
surplus in any labor market.
Minimum wages are the predominant reason for unemployment in the U.S. economy.
When the price of nuclear missiles rises, this change is reflected in the CPI but not in
the GDP deflator.
If exports are $500, GDP is $8000, government purchases are $1200, imports are $700,
and investment is $800, then consumption is $6200.
If the Fed increases the money supply, the equilibrium value of money decreases and
the equilibrium price level increases.
Price elasticity of demand along a linear, downward-sloping demand curve increases as
price falls.
What variables besides real GDP tend to decline during recessions? Given the definition
of real GDP, argue that declines in these variables are to be expected.
The federal funds rate is a long-term interest rate banks charge one another for loans.