If velocity = 5, the price level = 1.5, and the real value of output is 2,500, then the
quantity of money is
a. 333.33.
b. 750.00.
c. 1,050.00.
d. 8,333.33.
If the discount rate is raised then banks borrow
a. more from the Fed so reserves increase.
b. more from the Fed so reserves decrease.
c. less from the Fed so reserves increase.
d. less from the Fed so reserves decrease.
Table 7-4
The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a
Chicago Cubs vs. St. Louis Cardinal’s baseball game at Wrigley Field.
Refer to Table 7-4. If you have a ticket that you sell to the group in an auction, what
will be the selling price?
a. $21
b. $26
c. $51
d. $61
Melvin’s Magnets earned $200 in total revenue last month when it sold 100 souvenir
magnets. This month it earned $300 in total revenue when it sold 60 souvenir magnets.
The price elasticity of demand for Marvin’s Magnets is
a. 0.27.
b. 0.58.
c. 1.25.
d. 1.71.
Stocks and bonds
a. and checking accounts are all stores of value and commonly function as mediums of
exchange.
b. and checking accounts are all stores of value, but only stocks and bonds commonly
function as mediums of exchange.
c. and checking accounts are all stores of value, but only checking accounts commonly
function as mediums of exchange.
d. and checking accounts all commonly function as mediums of exchange, but only
stocks and bonds are a store of value.
Erma and Wayne are both economists. Erma thinks that taxing consumption, rather than
income, would result in higher household saving because income that is saved would
not be taxed. Wayne does not think that household saving would respond much to a
change in the tax laws. In this example, Erma and Wayne
a. have different normative views about tax policy.
b. disagree about the validity of a positive theory.
c. must both be incorrect because economists always agree on policy issues.
d. None of the above is correct.
The most important reason for the slope of the aggregate-demand curve is that as the
price level
a. increases, interest rates increase, and investment decreases.
b. increases, interest rates decrease, and investment increases.
c. decreases, interest rates increase, and investment increases.
d. decreases, interest rates decrease, and investment decreases.
Marion collected Social Security payments of $250 a month in If the price index rose
from 90 to 108 between 1985 and 1986, then her Social Security payments for 1986
should have been
a. $268.
b. $292.
c. $300.
d. $358.
Figure 2-17
Relationship Between Years of Education and Annual Income
Refer to Figure 2-17. Senator Smith observes the graph and concludes that people who
earn higher incomes attend school for more years. Senator Jones observes the graph and
concludes that people who attend school for more years earn higher incomes. Who is
correct?
a. Senator Smith is correct.
b. Senator Jones is correct.
c. It is difficult to say which senator might be correct due to the reverse causality
problem.
d. It is difficult to say which senator might be correct due to omitted variable bias.
Figure 7-17
Refer to Figure 7-17. When the price is P1, area B represents
a. total surplus.
b. producer surplus.
c. consumer surplus.
d. profits.
In the simple circular-flow diagram, who consumes the goods and services that firms
produce?
a. households only
b. firms only
c. both households and firms
d. neither households nor firms
If fear of default on bonds issued by U.S. corporations rise, then
a. net capital outflow and the exchange rate both rise.
b. net capital outflow rises and the exchange rate falls.
c. net capital outflow falls and the exchange rate rises.
d. net capital outflow and the exchange rate both fall.
A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland.
Her expenditures are U.S.
a. foreign portfolio investment that increase U.S. net capital outflow.
b. foreign portfolio investment that decrease U.S. net capital outflow.
c. foreign direct investment that increase U.S. net capital outflow.
d. foreign direct investment that decrease U.S. net capital outflow.
Which of the following is an example of a renewable natural resource?
a. the knowledge possessed by scientists
b. carpenters’ labor services
c. lumber
d. All of the above are correct.
Table 15-1
Labor Data for Aridia
Refer to Table 15-1. The labor force of Aridia in 2012 was
a. 1600.
b. 1800.
c. 3000.
d. 3200.
An increase in government spending shifts aggregate demand
a. to the right. The larger the multiplier is, the farther it shifts.
b. to the right. The larger the multiplier is, the less it shifts.
c. to the left. The larger the multiplier is, the farther it shifts.
d. to the left. The larger the multiplier is, the less it shifts.
According to the classical dichotomy, which of the following increases when the money
supply increases?
a. the real interest rate
b. real GDP
c. the real wage
d. None of the above increases.
An increase in the number of corporations in a portfolio from 110 to 120 reduces
a. market risk by more than an increase from 1 to 10.
b. market risk by less than an increase from 1 to 10.
c. firm-specific risk by more than an increase from 1 to 10.
d. firm-specific risk by less than an increase from 1 to 10.
Figure 2-2
Refer to Figure 2-2. If the flow of goods and services is part of what is represented by
the inner loop of this circular-flow diagram, then
a. the flow of factors of production is also part of what is represented by the inner loop.
b. the flow of income paid to households is also part of what is represented by the inner
loop.
c. the flow of revenue to firms is also part of what is represented by the inner loop.
d. households must be sellers of output.
Pizza is a normal good if the demand
a. for pizza rises when income rises.
b. for pizza rises when the price of pizza falls.
c. curve for pizza slopes upward.
d. curve for pizza shifts to the right when the price of burritos rises, assuming pizza and
burritos are substitutes.
If Miguel expects to earn a higher income next month, he may choose to
a. save more now and spend less of his current income on goods and services.
b. save less now and spend more of his current income on goods and services.
c. decrease his current demand for goods and services.
d. move along his current demand curves for goods and services.
Macroeconomic forecasts are
a. precise; this makes policy lags less relevant.
b. precise; this makes policy lags more relevant.
c. imprecise; this makes policy lags less relevant.
d. imprecise; this makes policy lags more relevant.
Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Alex, Barb, and Carlos are the only three
buyers of oranges, and only three oranges can be supplied per day.
Refer to Table 7-5. If the market price of an orange is $0.40, then
a. 6 oranges are demanded per day, and consumer surplus amounts to $4.45.
b. 6 oranges are demanded per day, and consumer surplus amounts to $5.10.
c. 7 oranges are demanded per day, and consumer surplus amounts to $5.35.
d. 7 oranges are demanded per day, and consumer surplus amounts to $5.50.
Average income has been stagnant for many years in
a. Argentina.
b. India.
c. Senegal.
d. All of the above are correct.
Suppose your management professor has been offered a corporate job with a 30 percent
pay increase. He has decided to take the job. For him, the marginal
a. cost of leaving was greater than the marginal benefit.
b. benefit of leaving was greater than the marginal cost.
c. benefit of teaching was greater than the marginal cost.
d. All of the above are correct.
An increase in the minimum wage
a. reduces structural unemployment.
b. reduces frictional unemployment,
c. increases structural unemployment.
d. increases fricitional unemployment.
How does U.S. gross domestic product (GDP) differ from U.S. gross national product
(GNP)?
a. GNP = GDP – losses from depreciation
b. GNP = GDP + income earned by U.S. citizens abroad – income that foreign citizens
earned in the U.S.
c. GNP = GDP + transfer payments to households + – indirect sales taxes
d. GNP = GDP – depreciation – retained earnings
In the circular-flow diagram,
a. firms are buyers in the markets for goods and services.
b. households are sellers in the markets for the factors of production.
c. firms are sellers in the markets for factors of production and in the markets for goods
and services.
d. dollars that are spent on goods and services flow directly from firms to households.
“Prices rise when the quantity of money rises rapidly” is an example of a
a. negative economic statement.
b. positive economic statement.
c. normative economic statement.
d. statement that contradicts one of the basic principles of economics.
The present value of a payment to be made in the future falls as
a. the interest rate rises and the time until the payment is made increases.
b. the interest rate rises and the time until the payment is made decreases.
c. the interest rate falls and the time until the payment is made increases.
d. the interest rate falls and the time until the payment is made decreases.
Within the U.S., teenagers have similar rates of labor-force participation as older
workers.
According to the rule of 70, if you earn an interest rate of 3.5 percent, your savings will
double about every 20 years.
If the nominal interest rates rises, then the inflation rate must have increased.
Sellers respond to a shortage by cutting their prices.
The production possibilities frontier shows the opportunity cost of one good as
measured in terms of the other good.
Cocoa and marshmallows are complements, so a decrease in the price of cocoa will
cause an increase in the demand for marshmallows.
If the marginal propensity to consume is 4/5, then a decrease in government spending of
$1 billion decreases the demand for goods and services by $5 billion.
The normal rate of unemployment around which the unemployment rate fluctuates is
called the natural rate of unemployment.
When a minimum-wage law forces the wage to remain above the level that balances
supply and demand, the result is a shortage of labor.
When a good is taxed, the deadweight loss is larger the more elastic are demand and
supply.
Harry is a computer company executive, earning $200 per hour managing the company
and promoting its products. His daughter Quinn is a high school student, earning $6 per
hour helping her grandmother on the farm. Harry’s computer is broken. He can repair it
himself in one hour. Quinn can repair it in 10 hours. Harry’s opportunity cost of
repairing the computer is lower than Quinn’s.
The Bureau of Labor Statistics defines discouraged workers as marginally attached
workers who have given a job-market related reason for not currently looking for a job.
The idea that tax cuts would increase the quantity of labor supplied, thus increasing tax
revenue, became know as supply-side economics.
Historical episodes are not valuable to economists.
An increase in the money supply shifts the long-run aggregate supply curve to the right.
Owners of bonds that were issued by the federal government are not required to pay
federal income tax on the interest income.
Because of the multiple tools at its disposal, the Fed can control the money supply very
precisely.