Figure 9-5
Refer to Figure 9-5. With trade, the price of wagons in this country is
a. $8, with 70 wagons produced in this country, 20 of which are exported.
b. $8, with 90 wagons produced in this country, 50 of which are exported.
c. $5, with 40 wagons produced in this country and another 30 wagons imported.
d. $5, with 40 wagons produced in this country and another 50 wagons imported.
In September 2009, China took steps toward imposing tariffs on American exports of
a. automotive products and chicken in response to President Obama’s decision to
impose tariffs on toys imported from China.
b. airplanes and beef in response to President Obama’s decision to impose tariffs on toys
imported from China.
c. automotive products and chicken in response to President Obama’s decision to
impose tariffs on tires imported from China.
d. airplanes and beef in response to President Obama’s decision to impose tariffs on
tires imported from China.
In the late summer of 2005 some regions of the country were suffering from drought.
What effect would we expect this to have on the stock of companies such as John Deere
that manufacture farm equipment?
a. raise the demand for existing shares of the stock, causing the price to rise
b. decrease the demand for existing shares of the stock, causing the price to fall
c. raise the supply of the existing shares of stock, causing the price to rise
d. raise the supply of the existing shares of stock, causing the price to fall
Which of the following is an example of a normative, as opposed to positive,
statement?
a. Universal health care would be good for U.S. citizens.
b. An increase in the cigarette tax would cause a decrease in the number of smokers.
c. A decrease in the minimum wage would decrease unemployment.
d. A law requiring the federal government to balance its budget would increase
economic growth.
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The imposition of the tax causes the quantity sold to
a. increase by 20 units.
b. increase by 500 units.
c. decrease by 20 units.
d. decrease by 500 units.
Economists sometimes give conflicting advice because
a. graduate students in economics are encouraged to argue with each other.
b. economists have different values and scientific judgment.
c. economists acting as scientists do not like to agree with economists acting as policy
advisers.
d. economics is more of a belief system than a science.
On the graph that depicts the theory of liquidity preference,
a. the demand-for-money curve is vertical.
b. the supply-of-money curve is vertical.
c. the interest rate is measured along the horizontal axis.
d. the price level is measured along the vertical axis.
If Congress instituted an investment tax credit
a. it would make buying bonds more desirable, so the demand for loanable funds would
shift.
b. it would make buying capital goods more desirable, so the demand for loanable funds
would shift.
c. it would make buying bonds more desirable, so the supply of loanable funds would
shift.
d. it would make buying capital goods more desirable, so the supply of loanable funds
would shift.
The benefit to buyers of participating in a market is measured by
a. consumer surplus.
b. producer surplus.
c. total surplus.
d. deadweight loss.
Assume the following.
The MPC has a value of 0.8.
The relationship between the interest rate, r, and investment, I, is given by the equation,
, where b is a positive constant.
Government purchases, G, are increased by $1,000.
In which of the following cases would there be no crowding out?
a.
b.
c.
d.
When the price of a good is measured in dollars, then the size of the deadweight loss
that results from taxing that good is measured in
a. units of the good that is being taxed.
b. units of a related good that is not being taxed.
c. dollars.
d. percentage change.
Which of the following items is included in U.S. GDP?
a. the estimated value of production accomplished at home, such as backyard
production of fruits and vegetables
b. the value of illegally-produced goods and services
c. the value of cars and trucks produced in foreign countries and sold in the U.S.
d. None of the above is included in U.S. GDP.
Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline
tickets are required to pay the tax to the government. If the tax is reduced from $50 per
ticket to $30 per ticket, then the
a. demand curve will shift upward by $20, and the price paid by buyers will decrease by
less than $20.
b. demand curve will shift upward by $20, and the price paid by buyers will decrease by
$20.
c. supply curve will shift downward by $20, and the effective price received by sellers
will increase by less than $20.
d. supply curve will shift downward by $20, and the effective price received by sellers
will increase by $20.
The price received by sellers in a market will increase if the government
a. decreases a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. increases a tax on the good sold in that market.
d. imposes a binding price ceiling in that market.
Suppose an economy produces only iPhones and bananas. In 2010, 1000 iPhones are
sold at $300 each and 5000 pounds of bananas are sold at $3 per pound. In 2009, the
base year, iPhones sold at $400 each and bananas sold at $2 per pound. For 2010,
a. nominal GDP is $315,000, real GDP is $410,000, and the GDP deflator is 76.83.
b. nominal GDP is $410,000, real GDP is $315,000, and the GDP deflator is 130.16.
c. nominal GDP is $315,000, real GDP is $410,000, and the GDP deflator is 130.16.
d. nominal GDP is $410,000, real GDP is $315,000, and the GDP deflator is 76.83.
Table 11-8
The table below relates to the economy of Mainland, where the typical consumer’s
market basket consists of 2 iPhones and 3 hamburgers.
Refer to Table 11-8. If the base year is 2008, then the consumer price index (rounded to
the nearest whole number) was
a. 100 in 2007, 109 in 2008, and 132 in 2009.
b. 109 in 2007, 100 in 2008, and 132 in 2009.
c. 132 in 2007, 100 in 2008, and 109 in 2009.
d. 100 in 2007, 76 in 2008, and 83 in 2009.
In a closed economy, if Y and T remained the same, but G rose, and C fell but by less
than the rise in G, what would happen to private and national saving?
a. private and national saving would rise
b. private and national saving would fall
c. private saving would rise and national saving would fall
d. private saving would fall and national saving would rise
Figure 2-11
Refer to Figure 2-11. Which of the following would most likely have caused the
production possibilities frontier to shift outward from A to B?
a. a decrease in unemployment
b. a technological advance in the consumer goods industries
c. a general technological advance
d. an increase in the availability of capital-producing resources
If people in countries that have had persistently high inflation are skeptical about efforts
to reduce inflation, the short-run Phillips curve will remain far to the
a. left, and the sacrifice ratio will be low.
b. left, and the sacrifice ratio will be high.
c. right, and the sacrifice ratio will be low.
d. right, and the sacrifice ratio will be high.
In the base year, the GDP deflator is always
a. -1.
b. 0.
c. 1.
d. 100.
Which of the following is correct?
a. Managed funds typically have a higher return than indexed funds. This tends to refute
the efficient market hypothesis.
b. Managed funds typically have a higher return than indexed funds. This tends to
support the efficient market hypothesis.
c. Index funds typically have a higher rate of return than managed funds. This tends to
refute the efficient market hypothesis.
d. Index funds typically have a higher rate of return than managed funds. This tends to
support the efficient market hypothesis.
Figure 6-19
Refer to Figure 6-19. For every unit of the good that is sold, sellers are required to
send
a. one dollar to the government, and buyers are required to send two dollars to the
government.
b. two dollars to the government, and buyers are required to send one dollar to the
government.
c. three dollars to the government, and buyers are required to send nothing to the
government.
d. nothing to the government, and buyers are required to send two dollars to the
government.
If the Fed announced a policy to reduce inflation and people found it credible, the
short-run Phillips curve would shift
a. right and the sacrifice ratio would fall.
b. right and the sacrifice ratio would rise.
c. left and the sacrifice ratio would fall.
d. left and the sacrifice ratio would rise.
Figure 14-1. The figure shows a utility function.
Refer to Figure 14-1. For the person to whom this utility function applies,
a. the more wealth she has, the less utility she gets from an additional dollar of wealth.
b. the more wealth she has, the more utility she gets from an additional dollar of wealth.
c. her level of satisfaction will be enhanced more by an increase in wealth from $600 to
$800 than it would be by an increase in wealth from $400 to $600.
d. her level of satisfaction will be enhanced equally by an increase in wealth from $600
to $800 or by an increase in wealth from $400 to $600.
If the wage is kept above the equilibrium wage for any reason, the result is
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.
Other things the same, continued technological progress and continued increases in the
money supply would unambiguously lead to
a. rising prices only.
b. rising real GDP only.
c. rising prices and rising real GDP.
d. neither rising prices nor rising real GDP.
Potential buyers of ABC Corporation bonds are not concerned about ABC Corporation
declaring bankruptcy. Potential buyers of XYZ Corporation bonds are concerned that
XYZ Corporation may declare bankruptcy. Which of the following statements is
correct?
a. Other things equal, the interest rate on XYZ Corporation bonds will be high relative
to the interest rate on ABC Corporation bonds.
b. An ABC Corporation bond is a perpetuity, whereas an XYZ Corporation bond is not
a perpetuity.
c. XYZ Corporation bonds carry more interest-rate risk than do ABC Corporation
bonds.
d. All of the above are correct.
The arguments of Friedman and Phelps would suggest that other things the same, a
country that pursues a disinflationary policy that the public does not find completely
credible
a. should not see an increase in the unemployment rate even in the short run.
b. will having rising unemployment for a while, but then return to the natural rate of
unemployment.
c. will have a permanently higher unemployment rate.
d. None of the above is suggested by the arguments of Friedman and Phelps.
There is a
a. short-run tradeoff between inflation and unemployment.
b. short-run tradeoff between an increase in the money supply and inflation.
c. long-run tradeoff between inflation and unemployment.
d. long-run tradeoff between an increase in the money supply and inflation.
According to liquidity preference theory, if the price level decreases, then
a. the interest rate falls because money demand shifts right.
b. the interest rate falls because money demand shifts left.
c. the interest rate rises because money supply shifts right.
d. the interest rate rises because money supply shifts left.
Table 11-4
The table below pertains to Wrexington, an economy in which the typical consumer’s
basket consists of 20 pounds of meat and 10 toys.
Refer to Table 11-4. The cost of the basket
a. increased from 2004 to 2005 and increased from 2005 to 2006.
b. increased from 2004 to 2005 and decreased from 2005 to 2006.
c. decreased from 2004 to 2005 and increased from 2005 to 2006.
d. decreased from 2004 to 2005 and decreased from 2005 to 2006.
We would expect the interest rate on Bond A to be higher than the interest rate on Bond
B if the two bonds have identical characteristics except that
a. Bond A was issued by a financially weak corporation and Bond B was issued by a
financially strong corporation.
b. Bond A was issued by the Exxon Mobil Corporation and Bond B was issued by the
state of New York.
c. Bond A has a term of 20 years and Bond B has a term of 1 year.
d. All of the above are correct.
The lower the price, the lower the consumer surplus, all else equal.
Structural unemployment is often thought to explain relatively short spells of
unemployment.
What are the arguments in favor of trade restrictions, and what are the
counterarguments? According to most economists, do any of these arguments really
justify trade restrictions? Explain.
In the open-economy macroeconomic model, at the equilibrium real interest rate, the
amount that people (including government) want to save exactly balances desired
domestic investment.
If we observe that when the price of chocolate increases by 10%, total revenue
increases by 10%, then the demand for chocolate is unit price elastic.
When U.S. national saving rises, domestic investment also necessarily rises.
When an American doctor opens a practice in Bermuda, his production there is part of
U.S. GNP.
Most economists believe that classical theory describes the world in the short run but
not in the long run.
The primary focus of the open-economy macroeconomic model is the determination of
GDP and the price level.
Over the past several decades, the difference between the labor-force participation rates
of men and women in the U.S. has gradually increased.
The unemployment that results from the process of matching workers and jobs is called
frictional unemployment.
Just after the terrorist attack on September 11, 2001, the Fed stood ready to lend
financial institutions funds. When the Fed did this, it was acting in its role of lender of
last resort.
If the government imposes a binding price ceiling in a market, then the producer surplus
in that market will increase.
Taxes drive a wedge into the market by raising the price that sellers receive and
lowering the price that buyers pay.
The ratio of government debt to GDP was higher during the Reagan presidency than at
any previous time in U.S. history.
A decrease in the price of sugar will shift the supply curve for cookies to the right.
Both the multiplier effect and the investment accelerator tend to make the
aggregate-demand curve shift further than it does due to an initial increase in
government expenditures.