Policy makers who believe that the costs of unemployment are very high will tend to
favor which of the following during a recessionary gap?
a. moderate fiscal stimulus, no monetary stimulus
b. fiscal and monetary tightness
c. moderate monetary stimulus, fiscal tightness
d. strong fiscal and monetary stimulus
In economics, aggregation refers to
a. collecting sample specimens for reclassification.
b. using small stones to pave an artistic walkway.
c. combining many markets into one overall economy.
d. using large computers to solve economic problems.
The process of invention is the act of
a. introducing a new product into the market.
b. applying a process in a new area of the market.
c. discovering a new process or product.
d. adopting an innovation to a profitable use.
Most economists support the idea of peak-load pricing on the grounds of
a. fairness in income distribution.
b. efficiency in input usage.
c. equality of opportunity.
d. efficiency in output allocation.
Command economies are able to achieve greater allocative efficiency than market
economies.
a. True
b. False
“The hotter it gets, the more water people drink.” This statement implies that the
relationship between temperature and water consumption must have a
a. negative slope.
b. positive slope.
c. slope always equal to one.
d. slope always equal to 45 degrees.
A dominant strategy is one that gives a player in a game a bigger payoff than the other
player receives.
a. True
b. False
A budget line is the locus of all points representing every input combination of inputs
that the producer can afford to buy with a given amount of money and given input
prices.
a. True
b. False
The graph that relates hours of labor input to output is called the
a. consumption function.
b. conjunction function.
c. capital function.
d. production function.
Which of the following taxes is least likely to be shifted?
a. a federal excise tax on grapefruit
b. a sales tax on some foodstuffs
c. a personal income tax
d. a state tax on football tickets
Assuming that the reserve ratio is 10%, what amount of excess reserves are held by
with the bank balance sheet listed below?
a. zero
b. $240,000
c. $280,000
d. $320,000
The usual results of an adverse supply shock are
a. a rise in prices and a fall in output.
b. a fall in prices and a rise in output.
c. increased growth and lower inflation.
d. higher net exports.
The equation of exchange is an accounting identity, not an economic theory.
a. True
b. False
A deficit country, like Argentina in 2001, must follow restrictive monetary and fiscal
policy in order to maintain a fixed exchange rate.
a. True
b. False
A quota brings a more serious misallocation of resources than a tariff.
a. True
b. False
Bank regulation exists because public authorities are convinced that
a. the balance between public interest and safety does not affect profitability, and should
be removed from the hands of managers.
b. the balance between bank profitability and public interest cannot be handled with
legislation, but can be handled with regulation.
c. the balance between bank profitability and safety cannot be left to profit-maximizing
managers.
d. the balance between bank safety and public interest can best be obtained by reliance
on the market.
Figure 4-19
After a strike against the Financial News in London began, the number of copies of the
competing Broad Street Journal sold in England increased dramatically, yet there was
no increase in price. Which supply and demand graph in Figure 4-19 represents the
situation for the Broad Street Journal before the strike started?
a. 1
b. 2
c. 3
d. 4
The oversimplified money multiplier formula, when the required reserve ratio is m, is
a. change in money supply = change in reserves m.
b. change in money supply = (1/m) /change in reserves.
c. change in money supply = (1/m) change in reserves.
d. change in money supply = m/change in reserves.
Rachel agrees to lend Phoebe $100 for six months and charges her interest of 2 percent.
At the end of the six-month period, prices have risen by 4 percent.
a. Purchasing power has been redistributed to Rachel.
b. No purchasing power has been redistributed.
c. Purchasing power has been redistributed to Phoebe.
d. Both Rachel and Phoebe received extra purchasing power.
Pure monopoly
a. is defined as having only one supplier.
b. has no close substitutes for its product.
c. exists when entry and survival of potential competitors is extremely unlikely.
d. All of the above are correct.
An increase in rent will ordinarily lead to
a. an increase in usage of land that was formerly idle.
b. a decrease in total land employed.
c. less-intensive usage of land.
d. a decrease in the income of landlords.
Workers are generally in a better position to protect themselves from inflation in
comparison to retired persons because workers’ incomes
a. are more likely to be fixed.
b. are more likely to be variable.
c. always rise during inflation.
d. are guaranteed by the federal government.
“Anticompetitive practices” are actions by a powerful firm that:
a. threaten to destroy competitors
b. force competitors to compete less vigorously
c. prevent the entry of new rivals.
d. all of these are true.
On May 12, 2011, it cost U.S. $1.44 to buy one euro. How many euros would U.S. $1
buy?
a. 0.69
b. 1.44
c. 1.69
d. 2.44
The major cost of production in the economy is
a. interest expense.
b. capital costs.
c. rents.
d. profits.
e. wages.
Most statistical studies on the relationship between real interest rates and saving
conclude that higher real interest rates
a. increase saving.
b. tend to decrease saving.
c. tend to decrease both consumption and saving.
d. have no effect on saving.
On-the-job training is the one area of education in the United States most influenced by
the
a. business sector.
b. government sector.
c. household sector.
d. foreign sector.
President Obama would generally advocate increased spending when the economy
needs stimulus and increased taxation when the economy needs to be restricted.
a. True
b. False
In the circular flow model, which of the following is an injection?
a. investment spending
b. government taxes
c. total exports
d. imports
The concavity or bowed-out shape of the production possibilities frontier is the result of
a. the law of downward-sloping demand.
b. the law of upward-sloping demand.
c. the principle of increasing cost.
d. complementarity in consumption.
When OPEC cut energy production in 1973, the aggregate supply curve shifted
outward.
a. True
b. False
An open economy produces most of the goods and services that it needs, with few
imports and exports.
a. True
b. False
Government spending influences spending indirectly.
a. True
b. False