Figure 9-6
Refer to Figure 9-6. The amount of deadweight loss caused by the tariff equals
a. $100.
b. $200.
c. $400.
d. $500.
Table 7-11
Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At
equilibrium, total surplus is
a. $44.
b. $56.
c. $72.
d. $96.
Frictional unemployment is inevitable because
a. sectoral shifts are always happening.
b. there is a federal minimum-wage law in the U.S.
c. some people do not want to be employed.
d. unions are very popular in the U.S.
If V and M are constant and Y doubles, the quantity equation implies that the price level
a. falls to half its original level.
b. does not change.
c. doubles.
d. more than doubles.
Table 3-5
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Labor Hours Needed
to Make 1 Unit of Number of Units
Produced in 40 Hours
Refer to Table 3-5. If England and Spain each spends all its time producing the good in
which it has a comparative advantage and the countries agree to trade 2 units of bread
for 6 units of cheese, then England will consume
a. 34 units of cheese and 2 units of bread and Spain will consume 6 units of cheese and
3 units of bread.
b. 34 units of cheese and 2 units of bread and Spain will consume 16 units of cheese
and 3 units of bread.
c. 34 units of cheese and 12 units of bread and Spain will consume 6 units of cheese and
3 units of bread.
d. 34 units of cheese and 12 units of bread and Spain will consume 16 units of cheese
and 3 units of bread.
Suppose the demand for peanuts increases. What will happen to producer surplus in the
market for peanuts?
a. It increases.
b. It decreases.
c. It remains unchanged.
d. It may increase, decrease, or remain unchanged.
Suppose a McDonalds Big Mac cost $4.00 in the United States and 3.20 euros in the
euro area and 5.20 Australian dollars in Australia. If exchange rates are .75 euros per
dollar and 3 Australian dollars per dollar, where does purchasing power parity hold?
a. Both the euro area and Australia.
b. Neither the euro area or Australia.
c. The euro area but not Australia.
d. Australia but not the euro area.
Outward-oriented policies
a. allow countries to take advantage of gains from trade.
b. have generally led to high growth for the countries that pursued them.
c. receive widespread support from economists.
d. All of the above are correct.
If the stock market booms, then
a. aggregate demand increases, which the Fed could offset by increasing the money
supply.
b. aggregate supply increases, which the Fed could offset by increasing the money
supply.
c. aggregate demand increases, which the Fed could offset by decreasing the money
supply.
d. aggregate supply increases, which the Fed could offset by decreasing the money
supply.
Soup is an inferior good if the demand
a. for soup falls when the price of a substitute for soup rises.
b. for soup rises when the price of soup falls.
c. curve for soup slopes upward.
d. for soup falls when income rises.
Currency includes
a. paper bills and coins.
b. demand deposits.
c. credit cards.
d. Both (a) and (b) are correct.
Table 10-3
The table below reports nominal and real GDP for the U.S. from 1929 to 1932.
Refer to Table 10-3. What was the growth rate of real GDP for 1931?
a. -6.93%. Real GDP is a better gauge of economic well-being than nominal GDP.
b. -6.93%. Nominal GDP is a better gauge of economic well-being than real GDP.
c. -6.49%. Real GDP is a better gauge of economic well-being than nominal GDP.
d. -6.49%. Nominal GDP is a better gauge of economic well-being than real GDP.
Which of the following has been suggested as a cause of the Great Depression?
a. a decline in the money supply
b. a decrease in stock prices
c. the collapse of the banking system
d. All of the above are correct.
Which of the following statements is not correct?
a. The catch-up effect is based on the assumption of diminishing returns to capital.
b. Investment in poor countries by citizens of rich countries is one way poor countries
can learn new technologies.
c. Malthus argued that charity and government aid was an effective way to reduce
poverty.
d. Peace and justice are keys to growth.
Figure 3-7
Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier
Refer to Figure 3-7. Bintu has a comparative advantage in the production of
a. bowls and Juba has a comparative advantage in the production of cups.
b. cups and Juba has a comparative advantage in the production of bowls.
c. both goods and Juba has a comparative advantage in the production of neither good.
d. neither good and Juba has a comparative advantage in the production of both goods.
Which of the following is an example of an externality?
a. Annie purchases a handbag.
b. Bob’s dog barks loudly during the night waking his neighbors.
c. Clark sells a book to Calvin.
d. David watches a scary movie.
George has spent $600 purchasing and repairing an old fishing boat, which he expects
to sell for $900 once the repairs are complete. George discovers that, in addition to the
$600 he has already spent, he needs to make an additional repair, which will cost
another $400, in order to make the boat worth $900 to potential buyers. He can sell the
boat as it is now for $400. What should he do?
a. He should sell the boat as it is now for $400.
b. He should keep the boat since it would not be rational to spend $1,000 on repairs and
then sell the boat for $900.
c. He should complete the repairs and sell the boat for $900.
d. It does not matter which action he takes; the outcome is the same either way.
Figure 7-3
Refer to Figure 7-3. Which area represents consumer surplus at a price of P2?
a. ABD
b. ACG
c. BCDF
d. DFG
Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.
Refer to Figure 8-8. After the tax goes into effect, consumer surplus is the area
a. A.
b. B+C.
c. A+B+C.
d. A+B+D+J+K.
Table 10-2
The table below contains data for the country of Crete for the year 2010.
Refer to Table 10-2. What was Crete’s investment in 2010?
a. $675
b. $1090
c. $1491
d. $1793
The equation,
Unemployment rate = Natural rate of unemployment – a ctual inflation – Expected
inflation),
a. is the equation of the short-run Phillips curve.
b. implies the short-run Phillips curve shifts every time there is a change in actual
inflation.
c. reflects the reasoning of Samuelson and Solow.
d. All of the above are correct.
In the early 1920s,
a. Germany experienced a very high rate of inflation.
b. the quantity of German money was declining rapidly.
c. the value of German money remained almost constant.
d. All of the above are correct.
When a nation first begins to trade with other countries and the nation becomes an
importer of corn,
a. this is an indication that the world price of corn exceeds the nation’s domestic price of
corn in the absence of trade.
b. this is an indication that the nation has a comparative advantage in producing corn.
c. the nation’s consumers of corn become better off and the nation’s producers of corn
become worse off.
d. All of the above are correct.
If the government levies a $500 tax per car on sellers of cars, then the price received by
sellers of cars would
a. decrease by less than $500.
b. decrease by exactly $500.
c. decrease by more than $500.
d. increase by an indeterminate amount.
When the dollar depreciates, U.S.
a. exports and imports increase.
b. exports increase, while imports decrease.
c. exports decrease, while imports increase.
d. exports and imports decrease.
Other things the same, a decrease in the U.S. real interest rate induces
a. Americans to buy more foreign assets, which increases U.S. net capital outflow.
b. Americans to buy more foreign assets, which reduces U.S. net capital outflow.
c. foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
d. foreigners to buy more U.S. assets, which increases U.S. net capital outflow.
Table 3-3
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Machine Minutes
Needed to Make 1
Refer to Table 3-3. Suppose Zimbabwe decides to increase its production of
toothbrushes by 10. What is the opportunity cost of this decision?
a. 0.3 hairbrush
b. 3 hairbrushes
c. 30 hairbrushes
d. 100 hairbrushes
Scenario 12-1. An economy’s production form takes the form Y = AF(L, K, H, N).
Refer to Scenario 12-1. If the production function has the constant-returns-to-scale
property, then it is possible that the specific form of the production function is
a. Y = 4L + 2K + 3H + N
b. Y = (L + K +H + N)/4
c. Y =2
d. Y = 4
Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The
price elasticity of demand for this good is
a. inelastic and equal to 6.
b. elastic and equal to 6.
c. inelastic and equal to 0.17.
d. elastic and equal to 0.17.
In 2008, income per person in the United States was about 16 times that in India.
If the wage is kept above the equilibrium wage for any reason, the result is structural
unemployment.
Job search is the process of matching workers with appropriate jobs.
According to the open-economy macroeconomic model, if the U.S. government budget
deficit increases, then both U.S. domestic investment and U.S. net capital outflow
decrease.
During recessions, unemployment insurance payments tend to rise.
Since unemployment rates are consistently higher in Canada and some Western
European countries than in the United States, it appears that the natural rate of
unemployment is lower in the United States. What might explain this difference?
An American worker who becomes unemployed typically receives 100% of her former
salary during the first six months she is unemployed.
Workers in unions reap the benefit of collective bargaining, while workers not in unions
bear some of the cost.
One explanation for long-run unemployment is that it takes time for workers to search
for the jobs that are best suited for them.
The world price of cotton is the highest price of cotton observed anywhere in the world.
If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the
inflation rate is 3 percent.
If Argentina suffers from capital flight, Argentinean domestic investment and
Argentinean net exports will both decline.
The Federal Reserve operates under a rule that requires money supply growth to
increase by one percentage point for every percentage point that unemployment rises
above its natural rate.
Currently, bank runs are a major problem for the U.S. banking system and the Fed.
A price floor set below the equilibrium price causes quantity supplied to exceed
quantity demanded.
All else equal, an increase in supply will cause an increase in consumer surplus.
The demand for bread is less elastic than the demand for donuts; hence, a tax on bread
will create a larger deadweight loss than will the same tax on donuts, other things equal.
Market power and externalities are two possible causes of market failure.