When the Art Institute of Chicago purchases a painting by Mary Cassatt that she
produced in Paris in 1885, this would not be included in the U.S. GDP for 2015.
a. True
b. False
The macroeconomic conditions during the mid-1990s confounded many economists
because of the simultaneous occurrence of
a. low unemployment and decreasing inflation rates.
b. low unemployment and increasing budget deficits.
c. low unemployment and increasing interest rates.
d. high unemployment and increasing inflation rates.
Because of the book, The Other America, Michael Harrington was important in
beginning the
a. Peace Corps.
b. “War on Poverty.”
c. regulation of industry.
d. Environmental Protection Agency.
Which of the following will increase the velocity of circulation?
a. Interest rates increase.
b. The inflation rate decreases.
c. Federal banking legislation abolishes credit cards.
d. Employers decide to pay employees once a month instead of once a week.
It is ____ to identify an asset bubble before it bursts ____ to identify an asset bubble
after it bursts.
a. simple; and also simple
b. simple; but difficult
c. difficult; but simple
d. difficult; and also difficult
The Rand Corporation estimates that the external costs imposed by alcohol
consumption (for example, deaths caused by drunk drivers) to be 48 cents per ounce
consumed. Taxes on alcohol amount to 23 cents per ounce consumed. This information
suggests: (i) alcohol is overconsumed; (ii) alcohol taxes should be raised. Which of
these statements is correct?
a. i and ii
b. i not ii
c. ii not i
d. neither i nor ii
A production indifference curve describes the input combinations that will produce a
given output.
a. True
b. False
If all variable taxes in the United States were removed and only fixed taxes remained,
what would be the effect on the expenditures schedule?
a. The expenditure schedule will shift upward and become steeper.
b. The expenditure schedule will shift upward and become less steep.
c. The expenditure schedule will shift downward and become less steep.
d. The expenditure schedule will shift downward and become steeper.
Economies of scope are present when a bank also sells insurance and provides
brokerage services for stocks and bonds.
a. True
b. False
Government-produced goods are added to GDP at
a. their market value.
b. the value they have to their users.
c. the value of the inputs used to produce them.
d. the value Congress places on them.
In a typical year, how accurate are forecasts of inflation and real GDP?
a. within 8-10 percentage points
b. within 2-3 percentage points
c. within 3/4 of 1 percentage point
d. within 1/4 of 1 percentage point
The marginal revenue curve for a monopolist
a. is identical to its demand curve.
b. is always below its demand curve if the demand curve is downward sloping.
c. is always below its demand curve if the demand curve is horizontal.
d. typically crosses the average revenue curve.
If the price of a depleting resource does not rise as anticipated, it may be because:
a. new reserves of the resource were discovered.
b. new methods of mining or refining were developed.
c. price controls were passed by law.
d. All of the above are correct.
Government production accounts for about half of all GDP in the United States.
a. True
b. False
The incidence of a payroll tax is borne by both employers and employees.
a. True
b. False
One of the distinguishing differences between periods of low inflation and periods of
high inflation is that
a. low inflation periods are short-lived.
b. high inflation periods are short-lived.
c. high inflation periods are long-lived.
d. low inflation leads to high inflation.
What is the nature of the elasticity of the demand curve faced by perfectly competitive
firm?
a. Perfectly inelastic
b. Perfectly elastic
c. Unit elastic
d. Highly elastic
If the government budget is balanced, and saving is greater than investment, then the
a. current account must be in surplus.
b. current account must be in deficit.
c. current account balance must be zero.
d. capital account must be in surplus.
Which type of economic system will produce the highest degree of allocative
efficiency?
a. a perfectly competitive market system
b. a purely command economic system
c. a market system with limited price controls and price ceilings
d. a command system with limited market activity for non-essentials
An increase in the price of poultry would lead to
a. a decrease in quantity demanded of fish and an increase in the demand for poultry.
b. a decrease in quantity demanded of poultry and an increase in the demand for fish.
c. an increase in quantity demanded of fish and a decrease in the demand for poultry.
d. an increase in quantity demanded of poultry and a decrease in the demand for fish.
The policy mix that the Clinton administration sought in early 1993 was a
a. smaller budget deficit and tighter monetary policy.
b. smaller budget deficit and looser monetary policy.
c. larger budget deficit and looser monetary policy.
d. larger budget deficit and tighter monetary policy.
For those workers who are given fringe benefits such as health insurance and pensions,
the additional income this amounts to over and above the average hourly wage can be
as much as (for some workers)
a. 10-12%
b. 30-40%
c. 51-62%%
d. 70% or more
A market society will always protect the natural environment.
a. True
b. False
When employers discriminate, they
a. believe they have a sound economic reason for doing so.
b. may pay the price in lost earnings and productivity.
c. subject themselves to civil action.
d. All of the above are correct.
Gross Domestic Product is the
a. least inclusive aggregate used to measure the economy.
b. total of goods and services desired by consumers.
c. most comprehensive measure of total output in the United States.
d. most accurate measure of the trade balance of the United States.
Throughout the 1980s, accounting departments in U.S. universities were unable to fill
many available faculty positions. This fact suggests that the salaries offered by these
departments
a. suffered from the cost disease of the service sector.
b. were below the market price for qualified accountants.
c. created externalities.
d. failed to reflect productivity growth in teaching.
The moral hazard problem refers to
a. difficulty banks have in satisfying the government’s reserve requirement.
b. depositors making a run on the bank, even though the bank is insured.
c. banks taking on more risk in their lending because they know their depositors are
insured.
d. banks issuing bank notes that compete with the government’s currency.
Marginal utility is
a. the difference in price between one store and another.
b. the difference in value between “some” of a thing and “none” of a thing.
c. the difference between any two successive total utility figures.
d. acquired only with the first few units of a good or service.
e. utility that is barely satisfactory.
Government spending plays no role in meeting our social and public needs.
a. True
b. False
Because of scarcity, every economic decision involves
a. a trade-off.
b. a free good.
c. a trade-in.
d. an increasing cost.
e. a money payment.
Explain how mutual funds are advantageous to small investors.
Why do environmentalists worry about faster economic growth? Economists concede
that faster growth is not always better. Why?
Give an appropriate remedy for correcting excessive pollution and note any difficulties
in implementing it.
According to Professor Robert Gordon of Northwestern University, what are the four
“headwinds” facing the U.S. economy, and how do they interact with innovation?
Explain some important situations where direct controls have a clear advantage over
taxes.
Distinguish between real rate of interest and nominal rate of interest.
Explain the effect of a usury law.
Draw a production possibilities frontier for an economy, with the axes labeled “military
goods” and “peace goods.” Indicate the region that is attainable and the region that is
not. Explain the shape of the curve-what assumptions did you make in drawing it?
Baumol and Blinder offer some reasons why countries trade with each other. List three
of the reasons, and give an example of each to illustrate the reason.
The period from the late 1990s to the winter of 2000 was marked by falling
unemployment rates and falling inflation rates as well. How does economic theory
explain this apparent violation of the Phillips curve model?
Economists cite some beneficial effects of price discrimination. What are these benefits
and how do the antitrust laws treat price discrimination?
Explain how stock options can ensure compatibility between the interest of
stockholders and managers.
List three bogus arguments about the “burden of the debt,” and point out the errors in
each of the arguments.
Explain how to derive the demand for an input.
What is the relationship between marginal utility and an individual demand curve?