Table 3-6
Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
Hours Needed
To Make 1 Amount Produced
in 40 Hours
Refer to Table 3-6. Assume that Maya and Miguel each has 40 hours available. If each
person divides his/her time equally between the production of mixers and toasters, then
total production is
a. 2 mixer and 8 toasters.
b. 3.5 mixers and 6 toasters.
c. 5 mixers and 4 toasters.
d. 7 mixers and 12 toasters.
Suppose the real exchange rate is 5/4 of a Canadian textbook per U.S. textbook , a U.S.
textbook costs $150, and a Canadian one costs 120 Canadian dollars. To the nearest
penny, what is the nominal exchange rate?
a. 0.64 Canadian dollars per U.S. dollar
b. 1 Canadian dollar per U.S. dollar
c. 1.56 Canadian dollars per U.S. dollar
d. None of the above is correct.
Which of the following is the most accurate statement?
a. Trade policy has neither microeconomic nor macroeconomic effects.
b. Trade policy has similar microeconomic and macroeconomic effects.
c. The effects of trade policy are more macroeconomic than microeconomic.
d. The effects of trade policy are more microeconomic than macroeconomic.
If a seller in a competitive market chooses to charge more than the going price, then
a. the sellers’ profits must increase.
b. the owners of the raw materials used in production would raise the prices for the raw
materials.
c. other sellers would also raise their prices.
d. buyers will make purchases from other sellers.
Figure 6-3
Panel (a) Panel (b)
Refer to Figure 6-3. A binding price floor is shown in
a. both panel (a) and panel (b).
b. panel (a) only.
c. panel (b) only.
d. neither panel (a) nor panel (b).
Which of the following is not included in U.S. GDP?
a. unpaid cleaning and maintenance of houses
b. services such as those provided by lawyers and hair stylists
c. the estimated rental value of owner-occupied housing
d. production of foreign citizens living in the United States
During recessions
a. sales and profits fall.
b. sales and profits rise.
c. sales rise, profits fall.
d. profits fall, sales rise.
In a closed economy, what remains after paying for consumption and government
purchases is
a. national disposable income.
b. national saving.
c. public saving.
d. private saving.
Which of the following terms is used to refer to the ability of people to exercise
authority over the resources they own?
a. natural rights
b. property rights
c. input control
d. collective control
Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of
fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units
of fish per year. There are 30 workers in each country. No trade occurs between the two
countries. Boatland produces and consumes 75 units of wheat and 375 units of fish per
year while Farmland produces and consumes 375 units of wheat and 75 units of fish per
year. If trade were to occur, Boatland would trade 90 units of fish to Farmland in
exchange for 80 units of wheat. If Boatland now completely specializes in fish
production, how many units of fish could it now consume along with the 80 units of
imported wheat?
a. 490 units
b. 500 units
c. 610 units
d. 660 units
Economists generally believe that rent control is
a. an efficient and fair way to help the poor.
b. inefficient but the best available means of solving a serious social problem.
c. a highly inefficient way to help the poor raise their standard of living.
d. an efficient way to allocate housing, but not a good way to help the poor.
People go to the bank more frequently to reduce currency holdings when inflation is
high. The sacrifice of time and convenience that is involved in doing that is referred to
as
a. inflation-induced tax distortion.
b. relative-price-variability cost.
c. shoeleather cost.
d. menu cost.
If M = 3,000, P = 2, and Y = 12,000, what is velocity?
a. 1/2
b. 2
c. 4
d. 8
What is the present value of a payment of $100 to be made one year from today if the
interest rate is 5 percent?
a. $105.26
b. $105.00
c. $95.24
d. $95.00
In September 2009, President Obama
a. imposed a tariff on tires imported from China; in doing so, the president reneged on
an agreement into which the U.S. had entered in 2001.
b. imposed a tariff on tires imported from China; the tariff was in accordance with an
agreement into which the U.S. had entered in 2001.
c. removed a tariff on tires imported from China; the tariff had been imposed by
President George W. Bush.
d. removed a tariff on tires imported from China; the tariff had been imposed by
President Bill Clinton.
When the real exchange rate for the dollar appreciates, U.S. goods become
a. less expensive relative to foreign goods, which makes exports rise and imports fall.
b. less expensive relative to foreign goods, which makes exports fall and imports rise.
c. more expensive relative to foreign goods, which makes exports rise and imports fall.
d. more expensive relative to foreign goods, which makes exports fall and imports rise.
If people in a country that has had persistently high inflation expect it to remain high
and are skeptical of promises the central bank makes, then the Phillips curve is
a. farther to the left than otherwise. If the central bank tries to reduce inflation
unemployment will rise by more than if people had believed its promises.
b. farther to the left than otherwise. If the central bank tries to reduce inflation
unemployment will rise by less than if people had believed its promises.
c. farther to the right than otherwise. If the central bank tries to reduce inflation
unemployment will rise by more than if people had believed its promises
d. farther to the right than otherwise. If the central bank tries to reduce inflation
unemployment will rise by less than if people had believed its promises..
Consumption consists of spending by households on goods and services, with the
exception of
a. purchases of intangible services.
b. purchases of durable goods.
c. purchases of new houses.
d. spending on education.
A university’s football stadium is never more than half-full during football games. This
indicates
a. the ticket price is above the equilibrium price.
b. the ticket price is below the equilibrium price.
c. the ticket price is at the equilibrium price.
d. nothing about the equilibrium price.
Figure 4-15
Refer to Figure 4-15. At a price of $35, there would be
a. a shortage, and the price would tend to rise from $35 to a higher price.
b. a surplus, and the price would tend to rise from $35 to a higher price.
c. excess demand, and the price would tend to fall from $35 to a lower price.
d. excess supply, and the price would tend to fall from $35 to a lower price.
Other things the same, as the price level rises, exchange rates
a. and interest rates rise.
b. and interest rates fall.
c. fall and interest rates rise.
d. rise and interest rates fall.
Figure 7-18
Refer to Figure 7-18. The efficient price is
a. $22, and the efficient quantity is 40.
b. $22, and the efficient quantity is 110.
c. $16, and the efficient quantity is 80.
d. $8, and the efficient quantity is 40.
Figure 7-19
Refer to Figure 7-19. At equilibrium, consumer surplus is represented by the area
a. A.
b. A+B+C.
c. D+H+F.
d. A+B+C+D+H+F.
Other things the same, if the exchange rate changes from .30 Kuwaiti dinar per dollar to
.35 Kuwaiti dinar per dollar, then the dollar has
a. appreciated and so buys more Kuwaiti goods.
b. appreciated and so buys fewer Kuwaiti goods.
c. depreciated and so buys more Kuwaiti goods.
d. depreciated and so buys fewer Kuwaiti goods.
If the tax revenue of the federal government exceeds spending, then the government
necessarily
a. runs a budget deficit.
b. runs a budget surplus.
c. runs a national debt.
d. will increase taxes.
Who asserted that “the Federal Reserve’s job is to take away the punch bowl just as the
party gets going?”
a. president George W. Bush
b. president John F. Kennedy
c. economist John Maynard Keynes
d. former chairman of the Federal Reserve System William McChesney Martin
Which of the following would not be a consequence of an increase in the U.S.
government budget deficit?
a. The U.S. trade balance rises.
b. The U.S. interest rate rises.
c. Domestic investment in the U.S. falls.
d. The real exchange rate of the U.S. dollar appreciates.
Which of the following make(s) demand for U.S. dollars in the market for
foreign-currency exchange higher than otherwise?
a. a Russian firm wanting to buy equipment from a U.S. manufacturer and a U.S.
manufacturer wanting to buy zinc from Canada
b. a Russian firm wanting to buy equipment from a U.S. manufacturer but not a U.S.
manufacturer wanting to buy zinc from Canada
c. a U.S. manufacturer wanting to buy zinc from Canada but not a Russian firm wanting
to buy equipment from a U.S. manufacturer
d. neither a Russian firm wanting to buy equipment from a U.S. manufacturer nor a
U.S. manufacturer wanting to buy zinc from Canada
Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in
the long run. If an increase in the demand for soccer balls causes the price of soccer
balls to increase by 20%, then the quantity supplied of soccer balls will increase by
about
a. 0.67% in the short run and 17% in the long run.
b. 3% in the short run and 1.2% in the long run.
c. 6% in the short run and 24% in the long run.
d. 66.7% in the short run and 7% in the long run.
Prior to the collapse of communism, communist countries worked on the premise that
economic well-being could be best attained by
a. a market economy.
b. a strong reliance on prices and individuals’ self-interests.
c. a system of large privately-owned firms.
d. the actions of government central planners.
According to classical macroeconomic theory, changes in the money supply affect
a. real GDP and the price level.
b. real GDP but not the price level.
c. the price level, but not real GDP.
d. neither the price level nor real GDP.
Using the graph shown, answer the following questions.
a. What was the equilibrium price in this market before the tax?
b. What is the amount of the tax?
c. How much of the tax will the buyers pay?
d. How much of the tax will the sellers pay?
e. How much will the buyer pay for the product after the tax is imposed?
f. How much will the seller receive after the tax is imposed?
g. As a result of the tax, what has happened to the level of market activity?
If a reform of the tax laws encourages greater saving, the result would be
a. higher interest rates and greater investment.
b. higher interest rates and less investment.
c. lower interest rates and greater investment.
d. lower interest rate and less investment.
Quality Motors is a Japanese-owned company that produces automobiles; all of its
automobiles are produced in American plants. In 2008, Quality Motors produced $25
million worth of automobiles and sold $12 million in the U.S. and $13 million in
Mexico. In addition, it sold $2 million from the previous year’s inventory in the U.S.
The transactions just described contribute how much to U.S. GDP for 2008?
a. $12 million
b. $14 million
c. $25 million
d. $27 million
Mary talked to several stockbrokers and made the following conclusions. Which, if any,
of her conclusions are correct?
a. It is relatively easy to reduce firm-specific risk by increasing the number of
companies one holds stock in.
b. Stock prices, even if not exactly a random walk, are very close to it.
c. Some people have made a lot of money in the stock market by using insider
information, but these cases are not contrary to the efficient markets hypothesis.
d. All of Mary’s conclusions are correct.
What effect do protectionist policies have on the trade deficit?
Following the recession of 2001, there was a month in which employment and the
unemployment rate both rose. Assuming the computations were correct, how is it
possible for both to have increased?
Figure 6-27
Refer to Figure 6-27. If the government places a $2 tax in the market, the seller bears
$2 of the tax burden.
Just as the aggregate-supply curve slopes upward only in the short run, the trade-off
between inflation and unemployment holds only in the short run.
Taxes on labor tend to increase the number of hours that people choose to work.
The quantity theory of money can explain hyperinflations but not moderate inflation.
The unemployment that results from the quantity of labor supplied exceeding the
quantity demanded is called structural unemployment.
The tax burden falls more heavily on the side of the market that is more inelastic.
Inflation induces people to spend more resources maintaining lower money holdings.
The costs of doing this are called shoeleather costs.
Why might a favorable change in the economy, such as technological improvement or a
decrease in the price of imported oil, be associated with an increase in frictional
unemployment?
Real GDP per person tells us the income and expenditure of the average person in the
economy.
The Bureau of Labor Statistics does not try to account for quality changes in the goods
and services in the basket used to compute the CPI.
The impact of the minimum wage depends on the skill and experience of the worker.
The Bureau of Labor Statistics defines marginally attached workers as persons who
currently are neither working nor looking for work but indicate that they want and are
available for a job and have looked for work sometime in the recent past.
Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?
Most studies have found that tobacco and marijuana are complements rather than
substitutes.