In an open economy, the domestic real interest rate is determined by:
A. domestic saving, domestic investment, and net capital inflows.
B. domestic investment.
C. domestic saving and domestic investment.
D. domestic saving and net capital inflows.
If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals
10, the mpc equals 0.9, and potential output (Y*) equals 9,000, then transfers must be
decreased by approximately ______ to eliminate any output gap.
A. 90
B. 100
C. 111
D. 1,000
This graph shows one consumer’s demand for ice cream at the student union:
According to the demand curve shown above, each individual student has ______
consumer surplus when price is ___________.
A. less; lower
B. more; higher
C. more; lower
D. the same; higher
Countries with high real GDP tend to have ______ infant mortality rates and ______
literacy rates than countries with low real GDP.
A. higher; higher
B. higher; lower
C. lower; higher
D. lower; lower
Suppose that the equilibrium price of French fries rises while the equilibrium quantity
falls. The most consistent explanation for these observations is:
A. a decrease in demand for French fries with no change in supply.
B. an increase in demand for French fries with no change in supply.
C. an increase in the supply of French fries and an increase in the demand for French
fries.
D. a decrease in the supply of French fries with no change in demand.
The Great Recession was the result of:
A. two negative demand shocks.
B. a negative demand shock and a negative inflation shock.
C. two positive inflation shocks.
D. a negative demand shock and a positive inflation shock.
Educational services provided by public schools are:
A. included in GDP at market prices.
B. included in GDP at cost.
C. excluded from GDP because they are not sold in markets.
D. excluded from GDP because they are intermediate goods.
Suppose you camped out in front of an electronics store to be one of the 200 lucky
people able to purchase the latest gaming system. You bought the system for $350. Two
weeks later you see that the same system can be sold on e-Bay for $600, so you sell
your system. Your market role is as:
A. a consumer in both of these markets.
B. a consumer at the electronics store and as a seller on e-Bay.
C. a consumer at the electronics store; the e-Bay transaction did not occur in a market.
D. a seller in both of these markets.
This phone center uses only equipment and workers to provide service.
Relative to costs when equipment cost $10, if the price of equipment increased to $20
and nothing else changed,
A. Total Cost would increase by $10 per unit of output.
B. Marginal Cost would increase by $20 divided by units of output.
C. Marginal Cost would not change.
D. Average Total cost would increase by $10 at each level of output.
In an open economy, if domestic citizens decide to save more, then the domestic real
interest rate will ______ and the level of capital investment in the country will _____,
holding other factors constant.
A. increase; increase
B. increase; decrease
C. decrease; decrease
D. decrease; increase
Real GDP is measured in ______ prices; nominal GDP is measured in ______ prices.
A. current; base-year
B. base-year; current
C. current; current
D. base-year; base-year
Suppose two demand curves have a point in common. With respect to price at that
point, demand shown by the steeper curve will be _______ the less steep curve.
A. more elastic than
B. less elastic than
C. as elastic as
D. more likely to be unitary than
Jess gets half as much marginal utility from an additional bagel than from an additional
muffin. If the price of muffin is $2.00/each, then Jess is maximizing utility if the price
of a bagel is
A. $1.00
B. $1.50
C. $2.00
D. $4.00
If business inventories equal $40 billion at the beginning of the year and $55 billion at
the end of the year, then, assuming no other changes, GDP must have:
A. decreased by $15 billion.
B. increased by $15 billion.
C. increased by $40 billion.
D. increased by $55 billion.
In an open economy with flexible exchange rates, monetary policy affects consumption
and investment by changing the ______ and affects net exports by changing the _____.
A. inflation rate; unemployment rate
B. exchange rate; real interest rate
C. growth of domestic real GDP; growth of foreign real GDP
D. real interest rate; exchange rate
Steve takes $500 from his paycheck and uses it to purchase U.S. Savings Bonds. Based
on this information:
A. Steve’s saving has increased by $500.
B. Steve’s saving has decreased by $500.
C. Steve has a capital gain of $500.
D. Steve’s wealth is unchanged.
At the midpoint of a straight-line demand curve, the price elasticity of demand is
always:
A. greater than one.
B. less than one.
C. unitary.
D. zero.
Primary and secondary school teachers earn less than others with similar educational
requirements. Part of the difference is due to
A. a work schedule that coincides with their children’s schedule.
B. a lack of union representation.
C. discrimination.
D. society’s devaluing of education.
A supply-side policy is a policy that
A. shifts the short-run aggregate supply curve.
B. shifts the long-run aggregate supply curve.
C. shifts the aggregated demand curve.
D. prevents recessionary gaps that shift the AS curve.
Arguments that economic growth must be constrained by environmental problems and
limits of natural resources ignore the fact that economic growth can:
A. be measured in both nominal and real terms.
B. involve both average labor productivity and the share of population employed.
C. take the form of increases in quality as well as increases in quantity.
D. occur with only benefits and no economic costs.
Which of the following is NOT guaranteed by the efficiency of the market equilibrium?
A. Price represents the value of an extra unit of consumption.
B. Rich and poor will have adequate access to the good.
C. Price represents the cost of an extra unit of production.
D. All mutually beneficial trades will have been made.
_____________ work together to guide resources to their highest value.
A. The explicit cost and the implicit cost of a profit maximizing firm
B. The short run and long run supply curve
C. The rationing and allocative functions of price
D. The economic profit and accounting profit
The demand for money is:
A. unlimited, since people want to hold as much money as possible.
B. limited by the amount of currency printed by the government.
C. the amount of wealth an individual chooses to hold in the form of money.
D. the amount of income an individual chooses to hold in the form of money.
The self-correcting property of the economy means that output gaps are eventually
eliminated by:
A. rising or falling prices.
B. falling prices only.
C. increasing or decreasing potential output.
D. government policy.
The very small city of Pleasantville is considering building a public swimming pool that
costs $1,000. The table shows the five voters in the city and their marginal benefit of a
swimming pool. It takes a 4/5 majority to pass any tax measure and all voters must
vote.
Building the swimming pool would __________ total economic surplus because
__________.
A. reduce; the costs exceed the benefits
B. reduce; taxes would have to be collected to build it
C. increase; the benefits exceed the costs
D. increase; the costs can be passed to users from other towns
Total economic surplus is greatest when:
A. price controls keep prices low enough that most consumers can purchase the item.
B. consumer surplus and producer surplus are equal.
C. consumer surplus exceeds producer surplus.
D. the market is in equilibrium.
The following graph depicts demand.
Refer to the figure above. The price elasticity of demand at point B is:
A. 3/4.
B. 4/3.
C. 3.
D. 1/3.
Which of the following would increase the government purchases component of U.S.
GDP?
A. The U.S. federal government pays $3 billion in pensions to government workers.
B. The U.S. federal government pays $3 billion in interest on the national debt.
C. The U.S. federal government pays $3 billion in salaries to soldiers in the military.
D. The U.S. federal government pays $3 billion in interest to foreign holders of U.S.
government bonds.
During Thanksgiving you participated in a pumpkin-pie eating contest since you love
pumpkin pie. You really enjoyed the first two pies, the third one was OK, but as soon as
you ate the 4th one you became ill and lost the contest.
Your total utility _______ with each pie you ate up to the 3rd pie.
A. increased
B. decreased
C. stayed the same
D. first increased than decreased
The following payoff matrix shows the outcomes for the US and the USSR from relying
on conventional weapons or atomic weapons. The percentages refer to the fraction of
the population that would die if a war occurred under the two weapons strategies.
Assume the payoff matrix is for 1945, shortly after the US had demonstrated the
effectiveness of the atomic bomb in World War II, i.e., the example begins in the upper
right cell where USA has atomic weapons and the USSR has only conventional
weapons.
Refer to the information given above. As a result of the positional externality in this
game:
A. both countries are worse off.
B. the United States is better off but the USSR is worse off.
C. the United States is worse off and the USSR is better off.
D. both countries are better off.
The chart below describes the short run productivity of workers at Paper Pushers Inc.,
an office support firm that has no variable costs other than labor.
If the price of pages increases, the demand for workers will
A. remain the same, as the workers are hired in the labor market and the product is sold
in the paper processing market.
B. increase because the workers will be motivated to produce more.
C. increase because the value of what the workers make has increased.
D. decrease because at a higher sales price the firm will not have to produce as much
output.
Earth Movers & Shakers operates 3 iron ore mines. This table shows their daily
production rates and the current number of miners at each mine. All of the miners work
for the same wage and each miner in any given mine produces the same number of tons
as each other miner in that mine.
Refer to the table above. The daily opportunity cost of moving one miner from Mother
Lode to Scraping Bottom is:
A. 2 tons.
B. 3 tons.
C. 4 tons.
D. 1 ton.