Unemployment insurance
a. reduces search effort which raises unemployment.
b. reduces search effort which lowers unemployment.
c. increases search effort which raises unemployment.
d. increases search effort which decreases unemployment.
Which of the following would cause prices to rise and real GDP to fall in the short run?
a. an increase in the expected price level
b. an increase in the capital stock
c. an increase in the quantity of labor available
d. All of the above are correct.
The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate?
a. 5.7 percent
b. 6.0 percent
c. 7.2 percent
d. 27.2 percent
Figure 15-1
Refer to Figure 15-1. If the government imposes a minimum wage of $8, then
employment will decrease by
a. 0 workers.
b. 2000 workers.
c. 3000 workers.
d. 4000 workers.
Other things the same, when the interest rate rises, the present value of future revenues
from investment projects
a. rises, so investment spending rises.
b. falls, so investment spending rises.
c. rises, so investment spending falls.
d. falls, so investment spending falls.
In a simple circular-flow diagram,
a. households spend all of their income.
b. all goods and services are bought by households.
c. expenditures flow through the markets for goods and services, while income flows
through the markets for the factors of production.
d. All of the above are correct.
What would happen to the equilibrium price and quantity of lattés if coffee shops began
using a machine that reduced the amount of labor necessary to produce steamed milk,
which is used to make lattés, and scientists discovered that lattés cause heart attacks?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would decrease, and the effect on equilibrium quantity would
be ambiguous.
d. The equilibrium quantity would decrease, and the effect on equilibrium price would
be ambiguous.
If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the
price of aluminum foil will increase the quantity demanded of aluminum foil by
a. 1.66%, and aluminum foil sellers’ total revenue will increase as a result.
b. 1.66%, and aluminum foil sellers’ total revenue will decrease as a result.
c. 3.48%, and aluminum foil sellers’ total revenue will increase as a result.
d. 3.48%, and aluminum foil sellers’ total revenue will decrease as a result.
If there are sticky wages, and the price level is greater than what was expected, then
a. the quantity of aggregate goods and services supplied falls, which is shown by a shift
of the short-run aggregate supply curve to the left.
b. the quantity of aggregate goods and services supplied falls, as shown by a movement
to the left along the short-run aggregate supply curve.
c. the quantity of aggregate goods and services supplied rises, as shown by a shift of the
short-run aggregate supply curve to the right.
d. the quantity of aggregate goods and services supplied rises, as shown by a movement
to the right along the short-run aggregate supply curve.
Table 7-6
Refer to Table 7-6. You have four essentially identical extra tickets to the Midwest
Regional Sweet 16 game in the men’s NCAA basketball tournament. The table shows
the willingness to pay of the four potential buyers in the market for a ticket to the game.
You offer to sell the tickets for $400. How many tickets do you sell, and what is the
total consumer surplus in the market?
a. one ticket; $100
b. two tickets; $100
c. two tickets; $0
d. three tickets; $0
Figure 8-5
Suppose that the government imposes a tax of P3 – P1.
Refer to Figure 8-5. The benefit to the government is measured by
a. tax revenue and is represented by area A+B.
b. tax revenue and is represented by area B+D.
c. the net gain in total surplus and is represented by area B+D.
d. the net gain in total surplus and is represented by area C+H.
When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an
importer of a particular good,
a. consumer surplus increases and total surplus increases in the market for that good.
b. consumer surplus increases and total surplus decreases in the market for that good.
c. consumer surplus decreases and total surplus increases in the market for that good.
d. consumer surplus decreases and total surplus decreases in the market for that good.
A bond is a
a. financial intermediary.
b. certificate of indebtedness.
c. certificate of partial ownership in an enterprise.
d. None of the above is correct.
If the wage for unskilled labor were fixed above the current wage, then we would
expect
a. an increase in the number of unskilled jobs available.
b. a decrease in the number of unskilled jobs available.
c. a decrease in the number of workers wanting unskilled jobs.
d. None of the above is correct.
In the late 1960s, economist Edmund Phelps published a paper that
a. argued that there was no long-run tradeoff between inflation and unemployment.
b. disproved Friedman’s claim that monetary policy was effective in controlling
inflation.
c. showed the optimal point on the Phillips curve was at an unemployment rate of 5
percent and an inflation rate of 2 percent.
d. argued that the Phillips curve was stable and that it would not shift.
The purchase of a new house is the one form of
a. investment that is financed by private saving rather than public saving.
b. household spending that is not counted as part of investment in the national income
accounts.
c. household spending that is investment rather than consumption.
d. household spending that does not contribute to GDP.
Table 10-1
The table below contains data for country A for the year 2010.
Refer to Table 10-1. What was country A’s consumption in 2010?
a. $2018
b. $3010
c. $3311
d. $4015
Satchel loses his job and immediately begins looking for another. Other things the
same, the unemployment rate
a. increases and the labor-force participation rate decreases.
b. and the labor-force participation rate both increase.
c. increases and the labor-force participation rate is unaffected.
d. is unaffected and the labor-force participation rate decreases.
If U.S. citizens decide to save a smaller fraction of their incomes, U.S. domestic
investment
a. increases, and U.S. net capital outflow increases.
b. increases, and U.S. net capital outflow decreases.
c. decreases, and U.S. net capital outflow increases.
d. decreases, and U.S. net capital outflow decreases.
David tunes pianos in his spare time for extra income. Buyers of his service are willing
to pay $135 per tuning. One particular week, David is willing to tune the first piano for
$115, the second piano for $125, the third piano for $140, and the fourth piano for
$175. Assume David is rational in deciding how many pianos to tune. His producer
surplus is
a. $-15.
b. $20.
c. $30.
d. $75.
An increase in the size of a tax is most likely to increase tax revenue in a market with
a. elastic demand and elastic supply.
b. elastic demand and inelastic supply.
c. inelastic demand and elastic supply.
d. inelastic demand and inelastic supply.
Figure 5-17
Refer to Figure 5-17. Which of the following statements is correct?
a. Supply curve A is perfectly elastic.
b. Supply curve B is perfectly inelastic.
c. Supply curve C is more inelastic than supply curve D.
d. Supply curve D is unit elastic.
The economist A.W. Phillips published a famous article in 1958 in which he showed a
a. negative correlation between the rate of unemployment and the rate of inflation.
b. positive correlation between the rate of unemployment and the rate of inflation.
c. negative correlation between the rate of unemployment and the rate of interest.
d. positive correlation between the rate of unemployment and the rate of interest
Darin grows and sells marijuana to Jennifer. Thomas is an organic farmer who sells
broccoli to Jennifer. Marijuana is an illegal good and broccoli is a legal good. Assume
that if Jennifer marries either, they give her what they use to sell her. Which of the
following statements is consistent with the way GDP is computed?
a. GDP will fall if Jennifer marries either Darin or Thomas..
b. GDP will fall if Jennifer marries Darin but not if she marries Thomas.
c. GDP will fall if Jennifer marries Thomas but not if she marries Darin.
d. GDP remains the same whether Jennifer marries Darin or Thomas.
Which of the following statements is correct?
a. In an economy-wide sense, property rights are an important prerequisite for the price
system to work.
b. Property rights give people the ability to exercise authority over the resources they
own.
c. Based on the available evidence, the existence of well-established and well-enforced
property rights appears to be associated with an enhanced standard of living.
d. All of the above are correct.
Figure 2-9
Panel (a) Panel (b)
Refer to Figure 2-9, Panel (a). Production is
a. possible at points A, B, C, and D, but efficient only at points A, C, and D.
b. possible at points A, B, C, and D, but efficient only at point B.
c. possible at points A, C, D, and F, but efficient only at points A, C, and D.
d. possible at points A, C, D, and F, but efficient only at point F.
New cars are normal goods. What will happen to the equilibrium price of new cars if
the price of gasoline rises, the price of steel falls, public transportation becomes cheaper
and more comfortable, auto-workers accept lower wages, and automobile insurance
becomes more expensive?
a. Price will rise.
b. Price will fall.
c. Price will stay exactly the same.
d. The price change will be ambiguous.
Which of the following is not an important stock exchange in the United States?
a. New York Stock Exchange
b. American Stock Exchange
c. Chicago Mercantile Exchange
d. NASDAQ
The only two countries in the world, Alpha and Omega, face the following production
possibilities frontiers.
Alpha’s Production Possibilities Frontier Omega’s Production Possibilities
Frontier
a. Assume that each country decides to use half of its resources in the production of
each good. Show these points on the graphs for each country as point A.
b. If these countries choose not to trade, what would be the total world production of
popcorn and peanuts?
c. Now suppose that each country decides to specialize in the good in which each has a
comparative advantage. By specializing, what is the total world production of each
product now?
d. If each country decides to trade 100 units of popcorn for 100 units of peanuts, show
on the graphs the gain each country would receive from trade. Label these points B.
Figure 7-3
Refer to Figure 7-3. When the price falls from P1 to P2, which area represents the
increase in consumer surplus to existing buyers?
a. ABD
b. ACG
c. BCFD
d. DFG
If he devotes all of his available resources to cantaloupe production, a farmer can
produce 120 cantaloupes. If he sacrifices 1.5 watermelons for each cantaloupe that he
produces, it follows that
a. if he devotes all of his available resources to watermelon production, then he can
produce 80 watermelons.
b. he cannot have a comparative advantage over other farmers in producing
cantaloupes.
c. his opportunity cost of one watermelon is 2/3 of a cantaloupe.
d. his production possibilities frontier is bowed-out.
Points on the production possibilities frontier represent efficient levels of production.
Real GDP evaluates current production using prices that are fixed at past levels and
therefore shows how the economy’s overall production of goods and services changes
over time.
When two variables move in opposite directions, the curve relating them is upward
sloping, and we say the variables are positively related.
The main criticism of those who doubt the ability of the government to respond in a
useful way to the business cycle is that the theory by which money and government
expenditures change output is flawed.
Both monetary policy and fiscal policy affect aggregate demand.
According to the open-economy macroeconomic model, if the U.S. government budget
deficit decreases, then both U.S. domestic investment and net capital outflow increase.
The market demand curve shows how the total quantity demanded of a good varies as
the income of buyers varies, while all the other factors that affect how much consumers
want to buy are held constant.
A decrease in the price of peanut butter will increase both the equilibrium price and
quantity in the market for jelly.
A decrease in the price of pizza will shift the supply curve for pizza to the left.
The willingness to pay is the maximum amount that a buyer will pay for a good and
measures how much the buyer values the good.
The value of a stock depends on the ability of the company to generate dividends and
the expected price of the stock when the stockholder sells her shares.
According to the theory of liquidity preference, the interest rate adjusts to balance the
supply of, and demand for, loanable funds.
Which kind of lag is important for monetary policy? Which kind of lag is important for
fiscal policy?
Suppose that changes in aggregate demand tended to be infrequent and that it takes a
long time for the economy to return to long-run output. How would this affect the
arguments of those who oppose using policy to stabilize output?
When the price of an asset rises above what appears to be its fundamental value, the
market is said to be experiencing a speculative bubble.
For a given level of money and real GDP, an increase in velocity would lead to an
increase in the price level.
Most job search in the U.S. economy takes place without intervention by the
government.
The most important tax in the U.S. economy is the tax on corporations’ profits.
In the 1980s, both the U.S. government budget and U.S. trade deficits increased.