If there is an adverse supply shock, then
a. unemployment rises and the short-run Phillips curve shifts right.
b. unemployment rises and the short-run Phillips curve shifts left.
c. unemployment falls and the short-run Phillips curve shifts right.
d. unemployment falls and the short-run Phillips curve shifts left.
The Fed increases the reserve requirement, but it wants to offset the effects on the
money supply. Which of the following should it do?
a. sell bonds to increase reserves
b. sell bonds to decrease reserves
c. buy bonds to increase reserves
d. buy bonds to decrease reserves
When a tax is imposed on a good for which the supply is relatively elastic and the
demand is relatively inelastic,
a. buyers of the good will bear most of the burden of the tax.
b. sellers of the good will bear most of the burden of the tax.
c. buyers and sellers will each bear 50 percent of the burden of the tax.
d. both equilibrium price and quantity will increase.
If the Fed conducts open-market sales, which of the following quantities increase(s)?
a. interest rates, prices, and investment spending
b. interest rates and prices, but not investment spending
c. interest rates and investment, but not prices
d. interest rates, but not investment or prices
Table 3-8
Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
Labor Hours Needed
to Make 1 Quantity Produced
in 36 Hours
Refer to Table 3-8. Assume that Huang and Min each has 36 labor hours available. If
each person divides his/her time equally between the production of parasols and plates,
then total production is
a. 18 parasols and 6 plates.
b. 18 parasols and 7.5 plates.
c. 16 parasols and 12 plates.
d. 36 parasols and 15 plates.
Jorge deposited $1,000 into an account three years ago. The first two years he earned 5
percent interest; the third year he earned 6 percent interest. How much money does
Jorge have in his account today?
a. $1,157.90
b. $1,168.65
c. $1,176.00
d. None of the above are correct to the nearest cent.
Which of the following is not one of the categories into which the Bureau of Labor
Statistics places each adult of each surveyed household?
a. employed
b. unemployed
c. underemployed
d. not in the labor force
The mayor of Workerville proposes a local payroll tax to fund a new water park for the
city. The mayor proposes to collect half the tax from workers and half the tax from
firms. The mayor will be able to successfully divide the burden of the tax equally if the
a. demand for labor is more elastic than the supply of labor.
b. supply of labor is more elastic than the demand for labor.
c. demand for labor and supply of labor are equally elastic.
d. It is not possible for the tax burden to fall equally on firms and workers.
Suppose that the equilibrium price in the market for widgets is $5. If a law reduced the
maximum legal price for widgets to $4,
a. any possible increase in consumer surplus would be larger than the loss of producer
surplus.
b. any possible increase in consumer surplus would be smaller than the loss of producer
surplus.
c. the resulting increase in producer surplus would be larger than any possible loss of
consumer surplus.
d. the resulting increase in producer surplus would be smaller than any possible loss of
consumer surplus.
Table 11-4
The table below pertains to Wrexington, an economy in which the typical consumer’s
basket consists of 20 pounds of meat and 10 toys.
Refer to Table 11-4. The inflation rate was
a. negative in 2005 and negative in 2006.
b. negative in 2005 and positive in 2006.
c. positive in 2005 and negative in 2006.
d. positive in 2005 and positive in 2006.
In the country of Suchnott, the price of silver increased from $30 per ounce to $32 per
ounce during a time when the overall price level increased by 5 percent. During this
period, the real price of silver
a. increased.
b. decreased.
c. stayed the same.
d. might have increased, decreased or stayed the same; more information is needed to
be sure.
If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in
quantity supplied, then the price increase is about
a. 0.24%.
b. 4.2%.
c. 6%.
d. 6.2%.
Phillips found a negative relation between
a. output and unemployment.
b. output and employment.
c. wage inflation and unemployment.
d. None of the above is correct.
The single most important piece of information about a stock is its
a. term.
b. dividend.
c. daily volume.
d. price.
At the equilibrium price, the quantity of the good that buyers are willing and able to buy
a. is greater than the quantity that sellers are willing and able to sell.
b. exactly equals the quantity that sellers are willing and able to sell.
c. is less than the quantity that sellers are willing and able to sell.
d. Either a) or c) could be correct.
Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak.
When the price of ribeye steak increases from $9 to $11,
a. Alex experiences a decrease in consumer surplus, but Bella does not.
b. Bella experiences a decrease in consumer surplus, but Alex does not.
c. both Bella and Alex experience a decrease in consumer surplus.
d. neither Bella nor Alex experiences a decrease in consumer surplus.
A country is likely to have a higher sacrifice ratio if
a. contracts are shorter, and people believe the central bank will reduce inflation.
b. contracts are longer, and people believe the central bank will not reduce inflation
c. contracts are longer, and people believe the central bank will reduce inflation.
d. contracts are shorter, and people believe the central bank will not reduce inflation.
Figure 8-10
Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity
sold in the market after the tax to Q2. The size of the tax is
a. P0-P2.
b. P2-P8.
c. P2-P5.
d. P5-P8.
Suppose that monetary neutrality and the Fisher effect both hold. An increase in the
money supply growth rate increases
a. the inflation rate and nominal interest rates.
b. the inflation rate, but not nominal interest rates.
c. nominal interest rates, but not the inflation rate.
d. neither the inflation rate nor nominal interest rates.
Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal,
international tensions, and loss of confidence in policymakers, people become
pessimistic regarding the future and retain that level of pessimism for some time.
Refer to Pessimism. How is the new long-run equilibrium different from the original
one?
a. both price and real GDP are higher.
b. both price and real GDP are lower.
c. the price level is the same and GDP is lower.
d. the price level is lower and real GDP is the same.
Figure 14-2. The figure shows a utility function for Mary Ann.
Refer to Figure 14-2. Suppose Mary Ann begins with $1,050 in wealth. Starting from
there,
a. she would be willing to accept a coin-flip bet that would result in her winning $300 if
the result was “heads” or losing $300 if the result was “tails.”
b. the pain of losing $300 of her wealth would equal the pleasure of adding $300 to her
wealth.
c. the pain of losing $300 of her wealth would exceed the pleasure of adding $300 to
her wealth.
d. the pleasure of adding $300 to her wealth would exceed the pain of losing $300 of
her wealth.
Fiscal policy affects the economy
a. only in the short run.
b. only in the long run.
c. in both the short and long run.
d. in neither the short nor the long run.
Other things the same, if the dollar depreciates relative to the Japanese yen, then
a. the exchange rate falls. It will cost fewer yen to travel in the U.S.
b. the exchange rate falls. It will cost more yen to travel in the U.S.
c. the exchange rate rises. It will cost fewer yen to travel in the U.S.
d. the exchange rate rises. It will cost more yen to travel in the U.S.
Figure 8-6
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-6. Without a tax, producer surplus in this market is
a. $1,500.
b. $2,400.
c. $3,000.
d. $3,600.
If the Federal Reserve decided to lower interest rates, it could
a. buy bonds to lower the money supply.
b. buy bonds to raise the money supply.
c. sell bonds to lower the money supply.
d. sell bonds to raise the money supply.
Which of the following values would be included in U.S. GDP for 2009?
a. the rent that Sean, an American citizen, would have paid on his home in New York in
2009 had he not owned that home
b. the rent that John, an American citizen, paid on his apartment in San Francisco in
2009
c. the value of the legal services provided by Juan, an attorney and a Mexican citizen,
who lived in Houston and practiced law there in 2009
d. All of the above would be included in U.S. GDP for 2009.
Matt is waiting to be recalled to a job from which he was laid off. David was fired but
hasn”t looked for work during the last two months. Who does the BLS count as
unemployed?
a. Matt but not David
b. David but not Matt
c. both David and Matt
d. neither David nor Matt
Prisoners sometimes determine a single good to be used as money. This good becomes
a. a medium of exchange and a unit of account.
b. a medium of exchange, but not a unit of account.
c. a unit of account, but not a medium of exchange.
d. neitehr a unit of account nor a medium of exchange.
A good will have a more inelastic demand, the
a. greater the availability of close substitutes.
b. broader the definition of the market.
c. longer the period of time.
d. more it is regarded as a luxury.
Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal,
international tensions, and loss of confidence in policymakers, people become
pessimistic regarding the future and retain that level of pessimism for some time.
Refer to Pessimism. What happens to the expected price level and what’s the result for
wage bargaining?
a. The expected price level rises. Bargains are struck for higher wages.
b. The expected price level rises. Bargains are struck for lower wages.
c. The expected price level falls. Bargains are struck for higher wages.
d. The expected price level falls. Bargains are struck for lower wages.
In addition to the consumer price index, the Bureau of Labor Statistics also calculates
the
a. macroeconomic price index.
b. producer price index.
c. rental unit price index.
d. terms of trade.