Which of the following might explain why the government would create a price floor
for a certain good?
The equation GDP = C + I + G + NX best describes the
a. the output approach to measuring GDP
b. the factor payments approach to measuring GDP
c. the value added approach to measuring GDP
d. the expenditures approach to measuring GDP
e. the exchanges approach to measuring GDP
For the total product curve shown in Figure 7-3, the marginal product of hiring the fifth
unit of labor is
Your friend Shahla argues that inflation is bad for the economy because it lowers
everyone’s purchasing power. How would an economist respond to Shahla’s statement?
a. Her statement is true.
b. Her statement is false because inflation redistributes income but does not change the
average level of income in the economy.
c. Her statement is true when everyone’s nominal income changes by the same amount.
d. Her statement is true when wages and benefits are not indexed to the CPI.
e. Her statement is true only in a closed economy.
If the American Medical Association lobbied successfully to eliminate licensing laws
for physicians,
If government spending increases, which of the following would be most likely in the
short and in the long run? (Both comparisons are with regard to the original price
level/output combination.)
a. Short-run increases in the price level, no change in output; long-run increases in
output and in the price level
b. Short-run increases in output and in the price level; long-run increase in output,
decrease in the price level
c. Short-run decreases in output and in the price level; long-run increase in the price
level, no change in output
d. Short-run increases in output and in the price level; long-run increase in the price
level, no change in output
e. Short-run decreases in output and in the price level; long-run decreases in output and
in the price level
If Papagna’s Pizza Parlor knows that the marginal cost of the 500thpizza is $3.00 and
that the average total cost of making 499 pizzas is $3.30, then
A weakness of the classical model is
a. the quality of its explanations for long-run movements of the economy
b. its confusion between the long and short run
c. its assumption that the labor market always clears
d. its treatment of crowding out in the long run
e. its inadequate attention to the long run
What would a rightward shift of the labor demand curve indicate?
a. Firms want to hire more workers than before at any given wage rate.
b. Households want to supply more hours of work than before at any given wage rate.
c. Firms want to pay a lower wage rate than before at any given level of employment.
d. Households want to supply fewer hours of work than before at any given wage rate.
e. Firms want to hire less workers than before at any given wage rate.
A spending shock typically involves a dramatic reduction in spending in virtually all
sectors of the economy simultaneously.
Marginal cost is
Competitive pricing
If an economy’s consumption spending is $5 trillion, investment is $2 trillion,
government spending is $1 trillion, net taxes are $1 trillion and household saving is $2
trillion, total income is
a. $3 trillion
b. $5 trillion
c. $7 trillion
d. $8 trillion
e. $11 trillion
The classical model
a. relies on the equivalency of the labor, capital, and land resource markets
b. includes a land market and a labor market
c. focuses primarily on capital markets
d. focuses primarily on labor markets
e. focuses on labor, capital, and land markets