R1 is
A) long-term unemployment.
B) the official unemployment rate.
C) comparable to the official U.S. rate.
D) short-term unemployment.
E) the unemployment rate that adds discouraged searchers to the official rate.
Which one of the following is false?
A) The marginal cost curve intersects the average variable cost curve and the average
total cost curve at their maximum points.
B) When marginal cost is greater than average variable cost, average variable cost is
increasing.
C) When marginal cost is greater than average total cost, average total cost is
increasing.
D) The average total cost curve is U-shaped.
E) The average fixed cost curve is downward sloping.
If the exchange rate is higher than the Bank of Canada’s target exchange rate, the Bank
A) implements purchasing power parity.
B) implements interest rate parity.
C) buys dollars.
D) sells dollars.
E) raises the target exchange rate.
Which one of the following factors will not shift the aggregate demand curve?
A) an increase in the interest rate
B) an increase in the expected inflation rate
C) an increase in the price level
D) an increase in expected future profits
E) an increase in the quantity of money
If AFC is falling then MC must be
A) rising.
B) falling.
C) above AFC.
D) below AFC.
E) none of the above
Suppose we observe a rise in the price of good A and an increase in the quantity of good
A bought and sold. Which one of the following is a likely explanation?
A) The law of demand is violated.
B) The demand for A decreased.
C) The demand for A increased.
D) The supply of A increased.
E) The supply of A decreased.
Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2. If 6 units of X are currently
being produced, then
A) 40 units of Y cannot be produced unless production of X is decreased.
B) 40 units of Y cannot be produced unless production of X is increased.
C) 60 units of Y can be produced with some resources not fully used.
D) 50 units of Y must be produced, regardless of resource utilization.
E) 50 units of Y can be produced if all resources are used and assigned to the task for
which they are the best match.
Public choice theory predicts that
A) voters are fully informed about the effects of policies.
B) voters are rationally ignorant.
C) governments make choices that achieve an efficient provision of public goods.
D) votes are based on reality, not perceptions.
E) votes are based on lobbyists’ viewpoints.
Refer to Table 26.3.3. When the economy is at its short-run macroeconomic
equilibrium,
A) the unemployment rate is below its natural rate.
B) the unemployment rate is above its natural rate.
C) the money wage rate will rise.
D) the long-run aggregate supply curve will shift eventually shift leftward to return to
full employment.
E) potential GDP will eventually increase.
Which of the following is least likely to be a natural monopoly?
A) subway services
B) electric utilities
C) water and sewer services
D) taxicab service
E) cable television services
If China’s government increases its budget surplus, there is ________ in the supply of
loanable funds, private saving ________ and investment ________.
A) an increase; decreases; increases
B) a decrease; increases; increases
C) an increase; increases; increases
D) a decrease; decreases; increases
E) an increase; decreases; is crowded out
Refer to Fact 12.1.1. These gas stations operate in a ________market.
A) competitive
B) noncompetitive
C) monopolistic
D) challenging
E) consumer’s
The substitution effect is the effect of
A) a change in income on the quantity bought.
B) a change in price on the quantity bought when the consumer moves to a higher
indifference curve.
C) a change in income on the quantity bought when the consumer moves to a higher
indifference curve.
D) a change in the best affordable point.
E) a change in price on the quantity bought when the consumer hypothetically remains
on the same indifference curve.
Suppose that a country has $50 billion in bank reserves, $100 billion in currency held
by the public, and $500 billion in bank deposits. The currency drain ratio is
A) 18%.
B) 50%.
C) 30%.
D) 10%.
E) 20%.
The change in capital from year to year is equal to
A) gross investment.
B) gross investment minus net investment.
C) savings.
D) net investment minus depreciation
E) gross investment minus depreciation.
The price in a contestable market is similar to that in a perfectly competitive market
because
A) firms in the market make an economic profit in the long run.
B) there are no barriers to entry.
C) there are many firms in the market.
D) the Nash equilibrium is that all firms cheat.
E) collusion is possible.
Which of the following quotations illustrates a decrease in aggregate expenditure?
A) “The new stadium will generate $200 million in spin off spending.”
B) “Higher expected profits are leading to higher investment spending by business, and
will lead to higher consumer spending.”
C) “The projected cuts in government jobs will hurt the local retail industry.”
D) “Taking the grain elevator out of our small town will destroy 300 jobs.”
E) Both C and D
Beverly is currently in consumer equilibrium. An increase in her income
A) increases her total utility.
B) decreases her total utility.
C) increases her marginal utility from all goods.
D) decreases her marginal utility from all goods.
E) increases her consumption of all goods.
The marginal propensity to consume is the
A) fraction of the first dollar of disposable income received that is saved.
B) fraction of the first dollar of disposable income received that is consumed.
C) fraction of the last dollar of disposable income received that is saved.
D) fraction of a change in disposable income that is spent on consumption.
E) total amount of consumption divided by the total amount of disposable income.
In general, if country A is accumulating capital at a faster rate than country B, then
country A
A) will soon have a comparative advantage in the production of most goods.
B) is using a larger proportion of resources to produce consumption goods.
C) will have a production possibilities frontier that is shifting out faster than country
B‘s.
D) will have a higher rate of inflation than country B.
E) will have more unemployment than country B.
Use the figure below to answer the following question.
Figure 9.2.4
Refer to Figure 9.2.4. Rashid buys only books and albums. The figure shows his
preferences. Rashid’s indifference curves ________ display diminishing marginal rate
of substitution because ________.
A) do; Rashid is indifferent between consuming 6 albums and 2 books and consuming 2
albums and 3 books
B) do not; the magnitude of the slope of both indifference curves decreases as Rashid
consumes more albums and fewer books
C) do not; Rashid is indifferent between consuming 6 albums and 2 books and
consuming 2 albums and 3 books
D) do; the magnitude of the slope of both indifference curves decreases as Rashid
consumes more albums and fewer books
E) do; the price of an album decreases as Rashid increases the quantity he buys
Use the figure below to answer the following questions.
Figure 5.2.1
Consider the demand curve in Figure 5.2.1. What is the value of the first unit of the
good?
A) $10
B) $9
C) $8
D) $5
E) $4
Firms in monopolistic competition make zero economic profit in the long run because
A) their costs rise over time.
B) the demand they face decreases as rival firms offer slightly differentiated products
for sale in the same market.
C) their marginal cost curves slope upward.
D) the market eventually becomes perfectly competitive.
E) both A and B are correct.
Refer to Table 27.1.1. Based on the information in the table, ifYD were zero, then
A) consumption would be zero.
B) consumption would be $150.
C) saving would be zero.
D) consumption would be -$150.
E) consumption would be $100.
When comparing perfect competition and monopolistic competition, we find that
A) firms in monopolistic competition produce identical products just as do firms in
perfect competition.
B) firms in monopolistic competition face barriers to entry, unlike firms in perfect
competition.
C) advertising plays a large role in monopolistic competition, unlike in perfect
competition.
D) firms in monopolistic competition are price takers just as is the case for firms in
perfect competition.
E) firms in monopolistic competition each have a large market share.
The price of good X falls and the demand for good Y decreases. We can conclude that
A) X and Y are complements.
B) X and Y are independent of each other.
C) X is an inferior good.
D) X is a normal good.
E) X and Y are substitutes.
Which of the following pieces of information do you need to calculate the labour force
participation rate?
I. the number of employed persons
II. the number of unemployed persons
III. the population
IV. the working age population
A) I and II
B) I and III
C) I, II, and III
D) I, II, and IV
E) I, II, III, and IV
A technological improvement is represented by
A) an outward shift of the production possibilities frontier.
B) a movement along the production possibilities frontier.
C) a point inside the production possibilities frontier.
D) a point outside the production possibilities frontier.
E) a movement from a point inside the production possibilities frontier to a point on the
production possibilities frontier.
Consider Figure 5.2.1. If the price is $4, what is the consumer surplus from the third
unit of the good?
A) $0
B) $1
C) $2
D) $3
E) $4
Use the figure below to answer the following questions.
Figure 13.3.3
Consider the market demand curve in Figure 13.3.3. If the market is perfectly
competitive, which area indicates consumer surplus?
A) AEK
B) DHK
C) DIK
D) DIH
E) ACD
Use the table below to answer the following questions.
Table 23.2.2
The table shows an economy’s demand for loanable funds schedule and supply of
loanable funds schedule.
Consider Table 23.2.2. What is the equilibrium real interest rate?
A) 6 percent a year
B) 5 percent a year
C) 7 percent a year
D) 4 percent a year
E) There is no equilibrium real interest rate.
Canada produces both lumber and wine. Canada exports lumber and imports wine. The
rest of the world imports Canadian lumber and exports wine to Canada. If Canada did
not trade with the rest of the world, then the equilibrium price of lumber would be
________ in Canada than the rest of the world, and the equilibrium price of wine would
be ________ in Canada than the rest of the world.
A) lower; higher
B) higher; lower
C) higher; higher
D) lower; lower
E) the same or lower; the same or higher
A market structure where a small number of firms compete occurs in
A) perfect competition.
B) monopolistic competition.
C) the worldwide market for wheat, corn, and rice.
D) oligopoly.
E) monopoly.