Which of the following observations concerning poverty rates in America is true?
a. Major increase in poverty in the decade from 1963 to 1973.
b. It hit an all-time low by 1983.
c. The economic boom of the 1990s restored it almost to its 1970s levels.
d. It decreased from 2007 to 2009.
The banking system receives a new cash deposit of $250,000. Total deposits eventually
rise by $1 million. The value of the reserve ratio is
a. 25.
b. 4.
c. 0.50.
d. 0.25.
e. 0.20.
Two studies published in the New England Journal of Medicine link the risk of breast
cancer to alcohol consumption. Young women who have nine drinks per week were
reportedly 150 percent more likely to develop breast cancer. Considering the market for
alcohol, an economist would predict a movement
a. up the demand curve as quantity demanded falls.
b. up the supply curve as the demand curve shifts.
c. down the supply curve as the demand curve shifts.
d. down the demand curve as quantity falls.
An increase in the reserve ratio would tend to
a. increase excess reserves and raise the money multiplier.
b. decrease excess reserves and decrease the money multiplier.
c. increase excess reserves and decrease the money multiplier.
d. decrease excess reserves and raise the money multiplier.
The distinction between productivity levels and productivity growth rates is theoretical,
and has no practical application.
a. True
b. False
Table 10-1
In Table 10-1 are the short-run cost schedules of a perfectly competitive firm. If the
market price of output is $50, the firm will produce ____ units and earn a profit of
____.
a. 6; $187.02
b. 6; $48
c. 8; $154.96
d. 8; $245.04
Union members earn about the same wage level as nonunion members in the same
industry.
a. True
b. False
The concept of absolute poverty states that anyone who falls too far behind the average
income should be considered poor.
a. True
b. False
Exhibit 4-1
The following are the equations for the supply and demand curves in the market for
weezils:
Demand: Qd = 20 − 2P
Supply: Qs = 5 + 3P
where Qd is the quantity demanded, Qs is the quantity supplied, and P is the price per
weezil in dollars.
Refer to Exhibit 4-1. According to the data given, the equilibrium price of a weezil is
a. $3.
b. $5.
c. $11.
d. $14.
In response to significant economic problems, the Obama administration recommended
a. more tax cuts.
b. increased government spending.
c. substantial aid to state and local governments.
d. all of the above
Studies at Cornell University revealed that chickens grow 2 percent larger when a red
mitten is placed in their cage and Vivaldi is played in the coop. Resultant feed savings
are estimated at $60 million a year. In the chicken market, the
a. demand curve shifts to the right.
b. supply curve shifts to the right.
c. price will rise.
d. quantity sold will fall.
Sticky prices are a direct result of the kinked demand curve.
a. True
b. False
Many banks offer accounts featuring “Automatic Transfer from Savings” allowing
customers to overdraw checking accounts and the bank will transfer enough funds to
cover the check automatically. Most likely, what is the effect of this feature on velocity?
a. It will decrease.
b. It will increase.
c. It will remain constant.
d. Velocity is unrelated to saving accounts.
A perfectly competitive firm should continue to expand output until
a. total revenue exceeds total costs.
b. total revenue exceeds variable costs.
c. marginal revenue equals marginal costs.
d. average revenue equals variable costs.
“Satisficing” rather than “maximizing” primarily emerges under conditions where
a. information is costly.
b. management lacks ambition.
c. profit maximization is rejected on moral grounds.
d. risk is minimal.
Figure 10-3
In Figure 10-3, both graphs (a) and (b) indicate that the economy is experiencing a(n)
a. recessionary gap of RE.
b. recessionary gap of RG.
c. inflationary gap of RG.
d. inflationary gap of RE.
Since an individual spends a small share of her income on salt, the elasticity of demand
is likely to be low.
a. True
b. False
Any point on the lowest indifference curve is preferable to a point on a higher
indifference curve.
a. True
b. False
The demand curve for loanable funds is downward sloping because
a. people save more at higher interest rates.
b. more investments are profitable at low interest rates than at high interest rates.
c. future income is more valuable now at higher interest rates than at low interest rates.
d. usury laws increase the quantity of funds demanded at low interest rates but do not
affect the quantity of funds demanded at high interest rates.
In 2006 and 2007 the U.S. faced an inflationary gap which would suggest the use of
restrictive fiscal policy.
a. True
b. False
Table 22-3
The data in Table 22-3 indicate that the United States has
a. an absolute advantage in both goods, and a comparative advantage in cotton.
b. an absolute advantage in both goods, and a comparative advantage in wheat.
c. only a comparative advantage in wheat.
d. only a comparative advantage in cotton.
Domestic monetary policy is essentially useless under
a. a floating exchange rate system.
b. a fixed exchange rate system.
c. the gold standard.
d. conditions of balance of payments surpluses.
A congress member concerned about ensuring vertical equity in taxation would be most
likely to argue for obtaining government revenue through a
a. progressive tax on personal income.
b. regressive tax on corporate income.
c. sales tax.
d. head tax.
Personal income taxes and corporate income taxes are examples of ____ taxes.
a. variable
b. sales
c. fixed
d. disposable
If President Obama wanted to decrease aggregate demand, which of the following
would he tend to favor?
a. An increase in government spending, because it will increase the size of the public
sector.
b. A decrease in government spending, because it keeps the public sector small.
c. An increase in transfer payments, because it has a larger multiplier than tax changes.
d. An increase in taxes, because it would not make the public sector smaller.
Capital is to investment as
a. hard is to soft.
b. a flow is to a stock.
c. a stock is to a flow.
d. paper is to metal.
The development of game theory was the work of
a. Joan Robinson and Edward Chamberlin.
b. John von Neumann and Oskar Morgenstern.
c. Wassily Leontief and Joseph Schumpeter.
d. John Maynard Keynes.
Which is likely to be larger, the velocity of M1 or M2?
a. M1, because M2 is a larger number.
b. M2, because M1 is a larger number.
c. The velocities of both are approximately equal.
d. The numbers of velocity switch in relative size.
Frictional unemployment is a “necessary” cost of a dynamic economy.
a. True
b. False
As productivity in the manufacturing sector increases, the service sector must keep pace
or it will become more expensive in the long run.
a. True
b. False
Most consumers in stores use marginal analysis to make their buying decisions.
a. True
b. False
If the United States is to reduce poverty by using a negative income tax, the guaranteed
income should be
a. two times the tax rate.
b. close to the poverty line.
c. close to the median income of all families.
d. above the poverty line.
A monopoly firm operates with declining marginal cost. If regulators impose marginal
cost pricing, the market will
a. remain a monopoly but behave like a perfectly competitive industry.
b. become perfectly competitive.
c. be entered by additional firms but will not necessarily become perfectly competitive.
d. be exited by the existing firm if the regulators will let the firm leave the market.
Table 4-1
Use this table for the following questions.
Refer to Table 4-1. What is the equilibrium price in the example above?
a. $9
b. $8
c. $7
d. $6
e. $5
If the velocity of circulation is 10 and the money supply is $250, the value of
transactions will be $25.
a. True
b. False