When money is used to express the value of goods and services, it is functioning as a
A) medium of exchange.
B) store of value.
C) unit of account.
D) store of purchasing power.
Suppose your bank pays you 4 percent interest per year on your savings account, so that
$1,000 grows to $1,040 over a one-year period. If prices increase by 1 percent per year
over that time, approximately how much real value do you gain by keeping $100 in the
bank for a year?
A) $0
B) $10
C) $30
D) $50
If an investment projects offers to pay $200 in year 1 and $200 in year 2, and the
interest rate is 5%, the investment rule states that you should invest in the project as
long as the cost is less than:
A) $410.
B) $186.
C) $371.9.
D) none of the above.
Suppose that in 2006, 12 million cars were purchased at $15,000 each, while in 2007,
10 million cars were purchased at $12,000 each. What might have caused this change?
A) The price of airplane tickets (a substitute for cars) fell.
B) The price of airplane tickets (a substitute for cars) rose.
C) Automobile manufacturing technology increased.
D) Automobile manufacturing technology decreased.
Suppose a pound of dry roasted coffee beans cost $3 in the United States and 6 pounds
in England. The law of one price would predict that the exchange rate in the long run is:
A) $1 = 3 pounds.
B) $1 = 1/2 pound.
C) $1 = 2 pounds.
D) 1 pound = $4.
One common source of market failure is
A) perfect competition.
B) pollution.
C) perfect information.
D) private goods.
Recall the Application about the decrease in taxes on cigarettes in several
Canadian provinces in 1994 to answer the following question(s). According to this
Application, after the government deceased cigarette taxes in several Canadian
provinces, demand for cigarettes ________ in these provinces, shifting the demand
curve to the ________.
A) increased; right
B) increased; left
C) decreased; right
D) decreased; left
________ is the school of thought that emphasizes the role of taxes in the supply of
output in the economy.
A) Supply-side economics
B) Classical economics
C) Supply and demand
D) Keynesian economics
According to the marginal principle, an individual will do best by producing or
consuming where:
A) marginal benefit exceeds total benefits.
B) marginal benefit is less than marginal cost.
C) marginal benefit equals marginal cost.
D) total benefit equals total cost.
If a county has a growth rate of approximately 0.7 percent each year, it will take about:
A) 100 years for its output to double, but only take about 49 years to double if its
growth rate was 3 percent per year.
B) 100 years for its output to double, but only take about 23 years to double if its
growth rate was 3 percent per year.
C) 49 years for its output to double, but only take about 23 years to double if its growth
rate was 3 percent per year.
D) 49 years for its output to double, but only take about 10 years to double if its growth
rate was 3 percent per year.
The tax cuts enacted during the first term of President Reagan were designed primarily
to:
A) decrease aggregate demand.
B) increase aggregate demand.
C) increase the supply of output.
D) decrease the supply of output.
The weekly income earned in 2011 at that time could buy ________ standard baskets of
goods and services.
A) 1.70
B) 1.29
C) 1.54
D) 2.81
GDP is not a perfect measure of social welfare and the society’s economic well-being
because:
A) it does not say anything about the distribution of income.
B) GDP accounting rules do not adjust for production that causes negative spillovers.
C) it does not include all economic activities in the economy.
D) all of the above.