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Comparative advantage indicates that:
a. specialization and exchange will permit trading partners to maximize their joint
consumption.
b. a nation can gain from trade only if it is not at an absolute disadvantage in producing
all goods.
c. a nation can gain from trade only when its trading partners are not low-wage
countries.
d. countries should export products for which they are high-opportunity cost producers.
In the real world, most economic systems are:
a. market economies.
b. command economies
c. mixed economies.
d. traditional economies.
Best National Bank is subject to a 20 percent required reserve ratio. If this bank
received a new checkable deposit of $1,000, it could make new loans of:
a. $500.
b. $800.
c. $1,000.
d. $5,000.
If people expect prices to fall in the future,
a. their consumption function in the present will shift downward.
b. their consumption function in the present will shift upward.
c. their consumption function in the present will be unchanged.
d. they will increase their current levels of consumption by moving up along their
consumption functions.
e. they will decrease their current levels of consumption by moving down along their
consumption functions.
The equation specifying a direct relationship between the money supply and prices is
the quantity theory of:
a. money.
b. prices.
c. exchange.
d. spending.
e. dollars.
Unemployment caused by a recession is called:
a. structural unemployment.
b. frictional unemployment.
c. involuntary unemployment.
d. cyclical unemployment
Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. Now
the exchange rate changes to 90 yen = $1. Then the:
a. machine would now cost more dollars.
b. machine would now cost the Japanese citizen less yen.
c. machine would now cost less dollars.
d. machine would now cost the Japanese citizen more yen.
e. yen has depreciated in value.
If M stands for the money supply, V for the velocity of money, P for the average selling
price, and Q for the output of goods and services, the equation of exchange is:
a. MP = VQ.
b. MV = PQ.
c. MQ = VP.
d. MP = PQ.
Which of the following applies to a real-world socialistic economy?
a. Private ownership of all factors of production.
b. Government ownership of all factors of production.
c. Government ownership of most of the factors of production.
d. Lack of central planning.
When the Fed raises the required reserve ratio, it:
a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the
general public.
b. raises the cost of borrowing from the Fed, discouraging banks from making loans to
the general public.
c. increases the amount of excess reserves that banks hold, encouraging them to make
loans to he general public.
d. increases the amount of excess reserves that banks hold, discouraging them from
making loans to the general public.
e. decreases the amount of excess reserves that banks hold, discouraging them from
making loans to the general public.
Exhibit 2-9 Production possibilities curve
If the economy represented in Exhibit
2-9 is operating at Point W:
a. no tractor product must be forgone to produce more food in the current period.
b. resources are not fully used.
c. some tractor production must be forgone to produce more food in the current period.
d. increased food production would be impossible.
In 1980, U.S. nominal GDP was $2,784 billion and the GDP chain price index is 60.4.
Real GDP in 1996 dollars is:
a. $1,682 billion.
b. $4,609 billion.
c. $3,889 billion.
d. $4,000 billion.
A person who is in a 31 percent marginal tax bracket and has a total taxable income of
$100,000 will owe $31,000 in taxes.
When the market price of a product is below the equilibrium price, shortages will result
and sellers can be expected to reduce the supply of that product.
The marginal propensity to consume (MPC) is the change in consumption divided by
the change in saving.
Since the 1950s, total private sector expenditures in the United States fell by half to 50
percent of GDP.
M1 includes savings accounts.
