The inside lag of macroeconomic policy is the:
A. time between a shift in aggregate demand and a shift in aggregate supply.
B. delay between when a policy change is needed and the policy is implemented.
C. difference between actual inflation and the target rate of inflation.
D. delay between when a policy change is implemented and when most of the effects of
policy have occurred in the economy.
High expected inflation leads to ____ increases in wages and costs and to ____ actual
inflation.
A. large; high
B. large; low
C. small; low
D. small; high
A government policy that allows retirement savings to accumulate tax-free is an
example of a policy to promote economic growth by:
A. increasing human capital.
B. increasing physical capital.
C. improving technology.
D. increasing the availability of natural resources.
The negative effect of a tax on the economic surplus of participants in a market should:
A. be enough to convince the government that the tax is a bad idea.
B. be weighed against the potential benefits of the public goods financed by the tax.
C. insure that the tax will never be approved by voters.
D. be ignored if the government needs to generate tax revenue.
Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your
total cost (in dollars) is given by the equation TC = 300 + 10Q, where Q represents the
number of t-shirts you make. If you make 1,000 t-shirts, your average total cost is
______.
A. $3
B. $3.10
C. $10.30
D. $1.03
The smaller the mpc, the ______ the income-expenditure multiplier and the ______ the
effect of a change in autonomous spending on short-run equilibrium output.
A. larger; larger
B. larger; smaller
C. smaller; smaller
D. smaller; larger
If both the lender and borrower agree on an 8% interest rate, both expect a 4% inflation
rate, and inflation turns out to be 4%, then ______ by the inflation.
A. the borrower is hurt and the lender gains
B. the borrower gains and the lender is hurt
C. neither the borrower nor the lender are hurt
D. both the borrower and lender are hurt
Refer to the figure below.
When the market is unregulated, producer surplus is represented by the area:
A. ABC
B. DGF
C. DBC
D. FHC
Miniville is an isolated town located on the southern shore of Lake Condescending, a
very large lake. The western edge of Miniville is adjacent to impassable mountains and
there are no towns or businesses for many miles to the east. The 300 residents of
Miniville are evenly distributed along 3 miles of shoreline on the lake, east of the
mountains. Lake Shore Drive, the only street in town, provides access to Miniville’s
homes and businesses. All residents live between the lake and the street; businesses
locate on the other side of the street. Lake Shore Drive is 3 miles long, and the points
labeled A, B, and C are 1, 2, and 3 miles from the western end of Lake Shore Drive,
respectively. All residents of Miniville shop at the store located closest to their homes.
If one store is located at A and the other store is located at C:
A. 150 people will shop at each store.
B. 200 people will shop at the store at A, and 100 people will shop at the store at C.
C. 100 people will shop at the store at A, and 200 people will shop at the store at C.
D. 100 people will certainly shop at each store, but where the other 100 will shop is
indeterminant.
A large decrease in oil prices is an example of:
A. a positive inflation shock.
B. a negative inflation shock.
C. inflation inertia.
D. excessive aggregate spending.
During recessions, when some workers lose their jobs and have lower incomes, sales of
durable goods (goods with a life expectancy of 3 years or more) decline. Apparently,
durable goods are:
A. substitutes.
B. normal goods.
C. complements.
D. inferior goods.
Some people have argued that the government should provide medical care to everyone.
Under this system:
A. the price of medical care will allocate resources efficiently.
B. the price of medical care will ration resources efficiently.
C. prices will not ration medical care so there will be no scarcity.
D. prices will not ration medical care so some other rationing method will be used.
The AS curve slopes upward because:
A. all firms will increase their prices in response to an increase in aggregate demand,
but some will increase their output and others will decrease their output.
B. all firms will increase their prices, but not their output in response to an increase in
aggregate demand.
C. some firms will increase their prices and their output in response to an increase in
aggregate demand.
D. all firms will increase their prices and their output in response to an increase in
aggregate demand.
All of the following describe trends in U.S. labor markets except:
A. growing wage equality in the United States in recent decades.
B. a slowdown in real wage growth since the 1970s.
C. substantial growth in the level of employment in the United States.
D. substantial growth in real ages during the last century.
Suppose Chris is offered the following gamble: with probability 0.1 he will win $90,
with probability 0.4 he will win $50, and with probability 0.5 he will lose $60. The
expected value of this gamble is ______.
A. -$1
B. $0
C. $1
D. None of these
In recent decades, slower growth in the demand for labor accompanied by an
accelerated growth in the supply of labor in the U.S. explains:
A. negativereal wage growth and double-digit rates of unemployment. B negative real
wage growth and increasing wage inequality.
B. negative real wage growth and an increase in the number of people with jobs.
C. increasing wage inequality and double-digit rates unemployment.
An “unemployment spell” is a period during which:
A. the unemployment rate is less than 10 percent.
B. the unemployment rate exceeds 15 percent.
C. an unemployed individual leaves the labor force and then returns.
D. an individual is continuously unemployed.
If the market equilibrium quantity is greater than the socially optimal quantity, one can
infer that:
A. the private supply curve for the activity is to the left of the socially optimal supply
curve.
B. the private demand curve for the activity is below the socially optimal demand.
C. there is a positive externality associated with this good.
D. there is a negative externality associated with this good.
If the price elasticity of demand for a good equals one, then the demand for that good
is:
A. elastic.
B. inelastic.
C. unit elastic.
D. perfectly elastic.
Elaine owns a beautiful diamond ring she purchased for $2,500. When she has it
appraised she learns that it is now worth $3,000. Based on this information:
A. Elaine’s saving this year has increased by $500.
B. Elaine’s saving this year has decreased by $500.
C. Elaine has experienced a $500 capital gain.
D. Elaine’s wealth is unchanged.
If Alex deposits $1,000 from her paycheck into her checking account and, at the same
time, increases her credit card balance by $1,500, then her saving is ______, and her
wealth ______.
A. +$1,000; decreases by $500
B. +$500; decreases by $1,000
C. -$500; increases by $2,500
D. -$500; decreases by $500
Commitment devices are necessary when:
A. people cannot correctly identify their dominant strategy.
B. players cannot trust that other players will avoid playing a dominated strategy.
C. following through on a threat or promise is not in a player’s best interest.
D. commitments cannot be purchased.
Pork barrel programs are government programs that:
A. benefit agriculture.
B. increase total economic surplus but lack political support.
C. benefit industry.
D. benefit local areas but are of questionable value from a national perspective.
Firms will invest in new equipment whenever:
A. the expected cost of the equipment exceeds the expected benefit.
B. the expected cost of the equipment is less than the expected benefit.
C. the expected cost of the equipment is greater than the value of the marginal product
of the equipment.
D. public saving is greater than private saving.
An example of an implicit cost is:
A. interest paid on a bank loan used to purchase equipment.
B. wages paid to a family member who works at the firm.
C. the value of a spare bedroom turned into a home office.
D. operating costs of a company-owned car.
In order to achieve a socially optimal level of output, goods that entail positive
externalities should be:
A. required.
B. subsidized.
C. taxed.
D. deregulated.
The price elasticity of demand is a measure of:
A. the change in quantity demanded of a good that results from a change in its price.
B. the change in price of a good that results from a change in its quantity demanded.
C. the demand for a good.
D. how consumers respond to excess demand.
The government purchases component of GDP includes:
A. purchases of final goods and services.
B. interest payments on government debt.
C. transfer payments.
D. payments made to social security recipients.
High Tech, Inc. produces plastic chairs that sell for $10 each. The following table
provides information about how many plastic chairs can be produced per hour.
How many workers will be hired if the hourly wage for workers is $30?
A. 1
B. 2
C. 3
D. 4
Suppose several United States software design companies compete with each other in a
perfectly competitive environment. If one company decides to move some of its offices
to a low-wage country in order to reduce operating costs, then:
A. the other companies will still be able to remain profitable while operating solely in
the United States.
B. the company that moves to the low-wage country will earn a positive economic
profit in the long run.
C. other companies will have an incentive move to the low-wage country in order to
remain competitive.
D. the company that moves to the low-wage country will soon return to the United
States.
Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood
that anyone will get this flu decreases as more people receive the vaccine. One of the
demand curves below represents the private demand for the vaccine and the other
represents the social demand for the vaccine.
The private demand for the vaccine is given by ______, and social demand for the
vaccine is given by ______.
A. D1; MC
B. D2; MC
C. D1; D2
D. D2; D1