The successes of the 1960s were ascribed to the effects of
a. classical policies from the 1800s.
b. classical policies from the 1930s.
c. classical policies from the 1950s.
d. Keynesian policies from the 1930s.
e. Keynesian policies from the 1950s.
If the national debt is owed to foreigners,
a. the debt constitutes a burden to domestic citizens.
b. economic growth will necessarily be higher than if the debt were owed to domestic
citizens.
c. paying off the debt will involve a transfer of resources within the country.
d. future interest payments on the debt are not a burden to the nation.
Why does anyone demand foreign currency?
a. international trade in goods and services
b. international trade in financial assets
c. purchases of physical assets overseas
d. All of the above are correct.
Any restriction of international trade that is accomplished by a quota can also be
accomplished by a tariff.
a. True
b. False
Profits account for about 30 cents out of each dollar spent on goods in the United
States.
a. True
b. False
With regard to GDP, residential property taxes are an example of ____ taxes.
a. variable
b. sales
c. fixed
d. disposable
If the demand for softballs increases, one could expect the demand for leather to
increase. This is attributable to the
a. opportunity cost of producing softballs.
b. marginal productivity principle.
c. reduction in the cost of production of softballs.
d. derived demand for an input.
The British economist A. C. Pigou
a. wrote The Economics of Welfare in 1911.
b. offered an explanation of the market economy’s poor environmental performance.
c. outlined an approach to environmental policy still in favor with economists today.
d. All of the above are correct.
In 1984, British Prime Minister Margaret Thatcher decided to shut down so-called
“uneconomic” coal mines owned by the government. The National Union of
Mineworkers protested, asserting that there was enough coal in the mines to continue
current levels of production for years. Thatcher implicitly argued that her decision was
economically sound because, at any practical level of output, for each “uneconomic”
mine,
a. MC > AC.
b. for every input, MPP > APP.
c. MC > MR.
d. AC > MC.
The definition of cross elasticity of demand for two products X and Y is
a. percentage change in quantity of X demanded/percentage change in quantity of Y
demanded.
b. percentage change in price of Y/percentage change in quantity of X demanded.
c. percentage change in price of Y/percentage change in price of X.
d. percentage change in quantity of X demanded/percentage change in price of Y.
Gross domestic product is
a. the largest industry in an economy.
b. the money value of all final goods and services produced in a year.
c. the volume of goods and services which are subject to international trade.
d. goods and services produced by private companies.
e. non-market production of goods and services.
For a given technology and a given labor force, labor productivity will be ____ when
the capital stock is ____.
a. higher; larger
b. lower; larger
c. lower; unchanged.
d. higher; smaller
All other things being equal, an increase in the supply of labor will lead to a fall in the
wage.
a. True
b. False
In 2009, President Obama and Congress stimulated aggregate demand by
a. increasing taxes and government spending.
b. decreasing taxes and government spending.
c. increasing taxes and decreasing government spending.
d. decreasing taxes and increasing government spending.
If total spending is less than total output, then price levels will
a. rise and output will increase.
b. rise and output will decrease.
c. fall and output will increase.
d. fall and output will decrease.
To determine total cost, the businessperson must know
a. input quantity and output price.
b. output quantity and output price.
c. output quantity and input price.
d. input quantity and input price.
Define the following terms briefly and concisely and indicate their importance to the
study of economics.
a. entrepreneurship
b. investment
c. capital
d. innovation
e. discounting
Which of the following is a reason that the Fed does not traditionally attempt to limit
asset price bubbles?
a. The Fed’s policies cannot be targeted at only one sector of the economy.
b. Price changes for one asset or one industry cannot have a substantial impact on the
entire economy.
c. The FDIC rather than the Fed is responsible for recognizing bad lending practices.
d. all of the above
A natural monopoly occurs when a single firm can produce the entire output of the
market at a lower average cost than could many firms.
a. True
b. False
If the capital stock decreases, then the economy will produce ____ output with the ____
amount of labor.
a. same, same
b. less, same
c. more, same
d. more, decreased
Along a perfectly elastic demand curve,
a. the slope is always zero.
b. the price elasticity of demand is 1.
c. consumer purchases will not respond at all to a change in price.
d. All of the above are true.
Regulation of industry is usually carried out by special government agencies that
administer and interpret the law.
a. True
b. False
Rent seeking
a. often entails large opportunity costs.
b. prevents waste of resources.
c. often promotes fairness in distribution of resources.
d. cannot occur in a planned economy.
Unionism is much more prevalent in the United States than in other industrialized
countries.
a. True
b. False
In recent decades, other countries have:
a. caught up to the U.S. in several important economic arenas
b. surpassed the U.S. in several important economic arenas
c. both of the above are true
During the financial crisis of 2007-2009 the interest rate spread on mortgage-backed
securities over Treasury bills
a. increased tremendously.
b. increased moderately.
c. decreased moderately.
d. decreased tremendously.
Like the debt of many families, the national debt in 2014 was many times larger than
the national income.
a. True
b. False
Markets can efficiently handle irreversible decisions without involvement of
government.
a. True
b. False
In contrast to changes in government spending, tax changes affect spending
a. directly.
b. in the same proportion.
c. by a greater amount.
d. indirectly.
The Federal Reserve’s principal tool in the manipulation of aggregate demand is the
personal income tax.
a. True
b. False
You have invested $1,000 in a stock whose price is increasing at 10 percent a year. Your
stock broker, who is never wrong, recommends a stock rising at 20 percent a year.
Assuming the broker earns 4 percent of the stock’s value on any purchase or sale of the
stock, should you take her recommendation?
Explain the role of the International Monetary Fund. Discuss the criticisms leveled
against this agency in the wake of economic crises of the 1990s.
The following table depicts the production relationship between units of labor and
output of pepper on Pietrov’s Pepper Farm.
Graphically show the three zones of production corresponding to increasing,
decreasing, and negative marginal product, noting the point of diminishing returns.
Explain how usury laws distort the market for funds. What is the most likely result if a
usury law is passed and enforced?
Some take issue with the human capital argument that employers pay more for college
graduates because firms recognize the value of human capital. What are two alternative
explanations for why college grads receive higher pay?
What important changes have occurred in the composition of the labor force since
1960? Is the popular image of the American worker as a factory worker accurate?
Describe the types of jobs Americans are working in today.
During the course of the twentieth century, the average workweek in the United States
has gotten shorter and Americans have enjoyed greater amounts of leisure time. How
has this development affected potential GDP and labor productivity?
Why is it customary to report price elasticity of demand in absolute value terms, while
cross elasticities and income elasticities are reported with their sign attached?
What is the distinction between innovation and invention?
Do firms really seek to maximize profits?
Explain why movie theaters charge more for evening performances than for matinees.
“The United States has more oil in Alaska than there is oil in Kuwait. Therefore, the
United States should stop importing oil.” Evaluate this statement using economic
analysis.