Almost all variation in living standards is attributable to differences in countries’
a. population growth rates.
b. productivity.
c. systems of public education.
d. taxes.
Tim mows the yard for his neighbors. He spends $1 on gas and charges them $20 for
each lawn he mows. What’s the total contribution to GDP each time Tim mows a yard?
a. $1
b. $19
c. $20
d. $21
Suppose the interest rate is 7 percent. Consider four payment options:
Option A: $500 today.
Option B: $550 one year from today.
Option C: $575 two years from today.
Option D: $600 three years from today.
Which of the payments has the lowest present value today?
a. Option A
b. Option B
c. Option C
d. Option D
When studying how some event or policy affects a market, elasticity provides
information on the
a. equity effects on the market by identifying the winners and losers.
b. magnitude of the effect on the market.
c. speed of adjustment of the market in response to the event or policy.
d. number of market participants who are directly affected by the event or policy.
Electronics firms may be able to get patents on their ideas. Doing so makes their ideas
a. private goods rather than public goods. This gives people more incentive to engage in
research.
b. private goods rather than public goods. This gives people less incentive to engage in
research.
c. public goods rather than private goods. This gives people more incentive to engage in
research.
d. public goods rather than private goods. This gives people more incentive to engage in
private research.
Economists believe that production possibilities frontiers
a. never have a bowed shape.
b. rarely have a bowed shape.
c. often have a bowed shape.
d. always have a bowed shape.
To explain the long-run determinants of the price level and the inflation rate, most
economists today rely on the
a. quantity theory of money.
b. price-index theory of money.
c. theory of hyperinflation.
d. disequilibrium theory of money and inflation.
According to the circular-flow diagram GDP
a. can be computed as either the revenue firms receive from the sales of goods and
services or the payments they make to factors of production.
b. can be computed as the revenue firms receive from the sales of goods and services
but not as the payments they make to factors of production.
c. can be computed as payments firms make to factors of production but not as revenues
they receive from the sales of goods and services.
d. cannot be computed as either the revenue firms receive or the payments they make to
factors of production.
Which of the following would most likely serve as an example of a monopoly?
a. a restaurant in a large city
b. a dry cleaners in a large city
c. a local gas station
d. a local electrical company
Unemployment would decrease and prices increase if
a. aggregate demand shifted right.
b. aggregate demand shifted left.
c. aggregate supply shifted right.
d. aggregate supply shifted left.
According to 2009 data on the U.S. population, which of the following groups of adults
(ages 20 and older) had the lowest labor-force participation rate?
a. white males
b. white females
c. black males
d. black females
An American retailer purchased 100 pairs of shoes from a company in Denmark in the
second quarter of 2010 but does not sell them to a consumer until the third quarter of
2010. Which of the following components of U.S. GDP is affected by this transaction in
the third quarter of 2010?
a. consumption, investment and imports
b. only consumption and investment
c. only consumption and imports
d. only investment and imports
Which of the following is a tax on labor?
a. Medicare tax
b. inheritance tax
c. sales tax
d. All of the above are labor taxes.
Which of the following was not among the four industries with the largest employment
in the United States a century ago?
a. cotton goods
b. men’s clothing
c. meat packing
d. lumber
The price index was 110 in the first year, 100 in the second year, and 96 in the third
year. The economy experienced
a. 9.1 percent deflation between the first and second years, and 4 percent deflation
between the second and third years.
b. 9.1 percent deflation between the first and second years, and 4.2 percent deflation
between the second and third years.
c. 10 percent deflation between the first and second years, and 4 percent deflation
between the second and third years.
d. 10 percent deflation between the first and second years, and 4.2 percent deflation
between the second and third years.
A surplus exists in a market if
a. there is an excess demand for the good.
b. quantity demanded exceeds quantity supplied.
c. the current price is above its equilibrium price.
d. All of the above are correct.
If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the
following is correct?
a. The U.S. has a trade surplus of $100 billion.
b. The U.S. has a trade surplus of $50 billion.
c. The U.S. has a trade deficit of $100 billion.
d. The U.S. has a trade deficit of $50 billion.
By comparing the world price of horseradish to Cropland’s domestic price of
horseradish, we can determine whether Cropland
a. will export horseradish (assuming trade is allowed).
b. will import horseradish (assuming trade is allowed).
c. has a comparative advantage in producing horseradish.
d. All of the above are correct.
When the Fed makes open-market purchases bank
a. withdrawals and lending increase.
b. withdrawals increase and lending decreases.
c. deposits and lending increase.
d. deposits increase and lending decreases.
When the nation of Mooseland first permitted trade with other nations, domestic
producers of sugar experienced a decrease in producer surplus of $5 million and total
surplus in Mooseland’s sugar market increased by $2 million. We can conclude that
a. Mooseland became an exporter of sugar.
b. the overall economic well-being of participants in the sugar market in Mooseland fell
because of trade.
c. consumer surplus in Mooseland increased by $7 million.
d. the opening of trade caused the domestic demand curve for sugar in Mooseland to
shift to the right.
A manufacturing company is thinking about building a new factory. The factory, if
built, will yield the company $300 million in 7 years, and it would cost $220 million
today to build. The company will decide to build the factory if the interest rate is
a. no less than 4.53 percent.
b. no greater than 4.53 percent.
c. no less than 5.81 percent.
d. no greater than 5.81 percent.
Which of the following might explain why the United States has so much currency per
person?
a. U.S. citizens are holding a lot of foreign currency.
b. Currency may be a preferable store of wealth for criminals.
c. People use credit and debit cards more frequently.
d. All of the above help explain the abundance of currency.
Figure 17-3. On the graph, MS represents the money supply and MD represents money
demand. The usual quantities are measured along the axes.
Refer to Figure 17-3. Suppose the relevant money-supply curve is the one labeled
MS2; also suppose the economy’s real GDP is 45,000 for the year. If the money market
is in equilibrium, then the velocity of money is approximately
a. 4.5
b. 6.0
c. 9.0
d. 12.0
Your brother-in-law wants to buy either stock or bonds in Cedar Valley Furniture, which
manufactures wooden furniture. He wants your advice on whether to buy stock or
bonds. Explain how each of his quotes below should affect his choice between the stock
and the bond.
a. “I have reason to believe that people are soon going to find rocking chairs have
health benefits.”
b. “I would like to tell people I am part owner of Cedar Valley Furniture.”
c. “I do not want to take on much risk.”
Table 7-11
Refer to Table 7-11. At a price of $2.00, total surplus is
a. larger than it would be at the equilibrium price.
b. smaller than it would be at the equilibrium price.
c. the same as it would be at the equilibrium price.
d. There is insufficient information to make this determination.
Suppose that over the last twenty-five years a country’s nominal GDP grew to three
times its former size. In the meantime, population grew by 40 percent and prices rose
by 100 percent. What happened to real GDP per person?
a. It more than doubled.
b. It increased, but it less than doubled.
c. It was unchanged.
d. It decreased.
Suppose that in some tax year you earned a nominal interest rate of 4 percent. During
the time you held these funds inflation was 1 percent. You compute that you made a real
after-tax interest rate of 2 percent. What was your tax rate?
a. 50 percent
b. 33.3 percent
c. 25 percent
d. None of the above are correct.
Over extended periods of time, population growth
a. has no effect on the standard of living.
b. has uncertain effects on the standard of living.
c. clearly raises the standard of living.
d. clearly lowers the standard of living.
The U.S. has a trade surplus. Which of the following is correct?
a. capital is flowing into the U.S. and S > I
b. capital is flowing into the U.S. and S < I
c. capital is flowing out of the U.S. and S > I
d. capital is flowing out of the U.S. and S < I
Resources are
a. scarce for households but plentiful for economies.
b. plentiful for households but scarce for economies.
c. scarce for households and scarce for economies.
d. plentiful for households and plentiful for economies.
Figure 7-18
Refer to Figure 7-18. At the equilibrium price, producer surplus is
a. $480.
b. $640.
c. $1,120.
d. $1,280.
Table 11-12. Will’s expenditures on food for three consecutive years, along with other
values, are presented in the table below.
Refer to Table 11-12. Suppose Will’s 2009 food expenditures in 2011 dollars amount to
$5,750. Then the inflation rate for 2011 is about
a. 9.08 percent.
b. 9.52 percent.
c. 10.24 percent.
d. 10.78 percent.
Kelly and David are both capable of repairing cars and cooking meals. Which of the
following scenarios is not possible?
a. Kelly has a comparative advantage in repairing cars and David has a comparative
advantage in cooking meals.
b. Kelly has an absolute advantage in repairing cars and David has an absolute
advantage in cooking meals.
c. Kelly has a comparative advantage in repairing cars and in cooking meals.
d. David has an absolute advantage in repairing cars and in cooking meals.
Figure 6-12
Refer to Figure 6-12. When the price ceiling applies in this market, and the supply
curve for gasoline shifts from S1 to S2, the resulting quantity of gasoline that is bought
and sold is
a. less than Q3.
b. Q3.
c. between Q1 and Q3.
d. at least Q1.
Given the following information, what are the values of M1 and M2?
a. M1 = $830 billion, M2 = $4,370 billion.
b. M1 = $980 billion, M2 = $4,370 billion.
c. M1 = $980 billion, M2 = $3, 390 billion.
d. M1 = $1,020 billion, M2 = $3,390 billion.
The natural rate of unemployment refers to the current unemployment rate.
Figure 6-27
Refer to Figure 6-27. If the government places a $2 tax in the market, the buyer bears
$1 of the tax burden.
Alberta buys a paint sprayer and a lift for her car customizing shop. A macroeconomist
would refer to these purchases as investment.
A policy change that reduces the natural rate of unemployment shifts both the long-run
aggregate-supply curve and the long-run Phillips curve left.
How does a reduction in the money supply by the Fed make owning stocks less
attractive?
Advances in production technology typically reduce firms’ costs.
How does an import quota differ from an equivalent tariff?
An increase in demand shifts the demand curve to the left.
Diversification can reduce firm-specific risk.
Efficiency refers to whether a market outcome is fair, while equality refers to whether
the maximum amount of output was produced from a given number of inputs.
International data on the history of real GDP growth rates shows that over the last 110
years or so, rich countries got richer and poor countries got poorer.
A binding minimum wage may not help all workers, but it does not hurt any workers.
A century ago, the four industries with the largest employment in the United States
were cotton goods, woolen goods, men’s clothing, and lumber.
Once state and federal taxes are added together, a typical worker faces about a 40
percent marginal tax-rate on interest income.
If the United States legally allowed for a market in transplant organs, it is estimated that
one kidney would sell for at least $100,000.
An increase in the budget deficit shifts the demand for loanable funds to the right.