Actively managed mutual funds usually fail to outperform index funds, and this fact
provides evidence in favor of the efficient markets hypothesis.
a. True
b. False
If a rich country reduced subsidies to domestic producers of goods that poor countries
have a comparative advantage producing, the standard of living in these poor countries
would likely rise.
a. True
b. False
When society requires that firms reduce pollution, there is
a. a tradeoff because of reduced incomes to the firms’ owners and workers.
b. a tradeoff only if some firms are forced to close.
c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the
requirements.
d. no tradeoff, since everyone benefits from reduced pollution.
Other things the same,as the price level falls,
a. the money supply falls.
b. interest rates rise.
c. a dollar buys more domestic goods.
d. the aggregate-demand curve shifts right.
Figure 3-19
RefertoFigure3-19.Chile’s opportunity cost of one pound of soybeans is
a. 3/4 pound of coffee and Colombia’s opportunity cost of one pound of soybeans is 1/2
pound of coffee.
b. 3/4 pound of coffee and Colombia’s opportunity cost of one pound of soybeans is 2
pounds of coffee.
c. 4/3 pounds of coffee and Colombia’s opportunity cost of one pound of soybeans is
1/2 pound of coffee.
d. 4/3 pounds of coffee and Colombia’s opportunity cost of one pound of soybeans is 2
pounds of coffee.
Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S.
citizens decide to buy more stock in foreign corporations. Other things the same, these
actions
a. raise both U.S. net exports and U.S. net capital outflows.
b. raise U.S. net exports and lower U.S. net capital outflows.
c. lower both U.S. net exports and U.S. net capital outflows.
d. lower U.S. net exports and raise U.S. net capital outflows.
Which of the following is a positive, as opposed to a normative, statement?
a. The US Department of Justice should allow a merger between AT&T and T-Mobile
because it would have little effect on consumers.
b. Antitrust laws should be used to prevent further concentration in the wireless
telephone service market.
c. The US Department of Justice sued AT&T to block its merger with T-Mobile.
d. The wireless telephone service market is too highly concentrated.
Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of
improved international relations and increased confidence in policy makers, people
become more optimistic about the future and stay this way for some time.
RefertoOptimism.What happens to the expected price level and what’s the result for
wage bargaining?
a. The expected price level falls. Bargains are struck for higher wages.
b. The expected price level falls. Bargains are struck for lower wages.
c. The expected price level rises. Bargains are struck for higher wages.
d. The expected price level rises. Bargains are struck for lower wages.
A country has $100 million of net exports and $170 million of saving. Net capital
outflow is
a. $70 million and domestic investment is $170 million.
b. $70 million and domestic investment is $270 million.
c. $100 million and domestic investment is $70 million.
d. None of the above is correct.
If a country’s government reduced corruption and reformed its tax system so that
businesses found operating there less risky, it’s likely that this country’s
a. net exports and net capital outflows would increase.
b. net exports would increase and its net capital outflows would decrease.
c. net exports and net capital outflow would decrease.
d. net exports would decrease and its net capital outflow would increase.
A country has a trade deficit. Which of the following must also be true?
a. net capital outflow is positive and domestic investment is larger than saving
b. net capital outflow is positive and saving is larger than domestic investment
c. net capital outflow is negative and domestic investment is larger than saving
d. net capital outflow is negative and saving is larger than domestic investment
Figure 28-4
RefetoFigure28-4.If 2,000 workers are unemployed, then the minimum wage must be
a. $3.
b. $4.
c. $5.
d. $6.
Janelle earned a salary of $40,000 in 1996 and $65,000 in 2006. The consumer price
index was 160 in 1996 and 266 in 2006. Janelle’s 2006 salary in 1996 dollars is
a. $39,097.74.
b. $43,062.50.
c. $68,900.00.
d. $108,062.50.
The Bureau of Labor Statistics reported in 2005 that there were 28.19 million people
over age 25 who had no high school degree or its equivalent, 11.73 million of whom
were employed and 1.04 million of whom were unemployed. What were the labor-force
participation rate and the unemployment rate for this group?
a. 45.3% and 3.7%
b. 45.3% and 8.1%
c. 41.6% and 3.7%
d. 41.6% and 8.1%
Table 4-6
RefertoTable4-6.If these are the only four sellers in the market, then the market
quantity supplied at a price of $4 is
a. 4 units.
b. 7.5 units.
c. 10 units.
d. 30 units.
Which of the following is an example of human capital?
a. a student loan
b. knowledge learned from reading books
c. training videos for new corporate employees
d. All of the above are correct.
If the government of India implemented a policy that decreased national saving, its real
exchange rate would
a. depreciate and Indian net exports would rise.
b. depreciate and Indian net exports would fall.
c. appreciate and Indian net exports would rise.
d. appreciate and Indian net exports would fall.
Government policies resulting in reduced efficiency include
(i) the welfare system
(ii) unemployment insurance
(iii) progressive income tax
a. (i) only
b. (ii) only
c. (i) and (ii) only
d. (i), (ii), and (iii)
Evidence indicates that the typical person who becomes unemployed will
a. soon find a job.
b. find a job but not before a year or more has gone by.
c. leave the labor force and never return.
d. retire soon after
Imagine that the government increases its spending by $75 billion. Which of the
following by itself would tend to make the change in aggregate demand different from
$75 billion?
a. both the multiplier effect and the crowding-out effect
b. the multiplier effect, but not the crowding-out effect
c. the crowding-out effect, but not the multiplier effect
d. neither the crowding out effect nor the multiplier effect
An American company operates a fast food restaurant in Paris, France. Which of the
following statements is accurate?
a. The value of the goods and services produced by the restaurant is included in both
French GDP and U.S. GDP.
b. The value added by American workers and equipment in France is included in U.S.
GDP and the value added by French workers and equipment is added to French GDP.
c. The value of the goods and services produced by the restaurant is included in French
GDP, but not in U.S. GDP.
d. The value of the goods and services produced by the restaurant is included in U.S.
GDP, but not in French GDP.
If a central bank announced that it was going to decrease inflation by 5%, people
revised their inflation expectations downward by 4%, and the central bank only lowered
inflation by 1%, the short run Phillips curve would shift
a. right and unemployment would rise.
b. right and unemployment would fall.
c. left and unemployment would rise.
d. left and unemployment would fall.
Over the past several decades, the difference between the labor-force participation rates
of men and women in the U.S. has
a. gradually increased.
b. remained constant.
c. gradually decreased.
d. been eliminated.
The Bureau of Labor Statistics produces data on unemployment, types of employment,
length of the average workweek, and the duration of unemployment.
a. True
b. False
If U.S. net exports are negative, then net capital outflow is
a. positive, so foreign assets bought by Americans are greater than American assets
bought by foreigners.
b. positive, so American assets bought by foreigners are greater than foreign assets
bought by Americans.
c. negative, so foreign assets bought by Americans are greater than American assets
bought by foreigners.
d. negative, so American assets bought by foreigners are greater than foreign assets
bought by Americans.
Governments may prefer an inflation tax to some other type of tax because the inflation
tax
a. is easier to impose.
b. reduces inflation.
c. falls mainly on high-income individuals.
d. reduces the real cost of government expenditure.
The present value of a future payment to be received in three years is $1,000. If the
interest rate is 5%, what is the amount that will be paid in three years?
a. $1,150.00
b. $1,157.63
c. $1,215.51
d. $1,250.00
If the Federal Reserve decreases the rate at which it increases the money supply, then
unemployment is higher in
a. the long run and the short run.
b. the long run but not the short run.
c. the short run but not the long run.
d. neither the short run nor the long run.
Suppose that reducing inflation by 2 percentage points would cost a country 5 percent
of its annual output. This country’s sacrifice ratio is
a. 0.4.
b. 1.5.
c. 2.5.
d. 5.0.
Which of the following shifts short-run aggregate supply right?
a. an increase in the price level
b. an increase in the minimum wage
c. a decrease in the price of oil
d. more people migrate abroad than immigrate from abroad
In building economic models, economists often omit
a. assumptions.
b. theories.
c. details.
d. equations.