Robert Lucas argues that there are ________ returns to human capital, and these
productivity increases are not completely captured by individuals as they decide how
much education to purchase. As a result, the market produces ________ education and
training.
A) increasing; too much
B) decreasing; too much
C) increasing; too little
D) decreasing; too little
A Big Mac costs $4.00 in the United States and 9.00 reals in Brazil. If the exchange rate
is 2 reals per dollar, purchasing power parity predicts that
A) the dollar will appreciate as the demand for dollars falls in the long run.
B) the dollar will appreciate as the supply of dollars falls in the long run.
C) the dollar will depreciate as the demand for dollars falls in the long run.
D) the dollar will depreciate as the supply of dollars rises in the long run.
Table 7-5
Table 7-5 shows the output per week for pens and pencils by Tran and Farah.
Refer to Table 7-5.
a. Which person has an absolute advantage in the production of pens? pencils?
b. Which person has a comparative advantage in the production of pens?
c. Which person has a comparative advantage in the production of pencils?
You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. If
inflation over the year is 2%, what is the real interest rate you are paying?
A) 2%
B) 2.5%
C) 3%
D) 5%
Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts. Table 7-6 shows the
production and consumption quantities without trade, and the production numbers with
trade.
Refer to Table 7-6. Prior to trade, what was the opportunity cost to produce 1 sword in
Estonia?
A) 1/2 of a belt
B) 4/5 of a belt
C) 1.25 belts
D) 2 belts
If relative purchasing power between the United States and Argentina is 3.22 pesos per
dollar, under which circumstances would we say that the dollar is “overvalued”?
A) if the actual exchange rate between the dollar and the Argentinean peso is 3.22 pesos
per dollar
B) if the actual exchange rate between the dollar and the Argentinean peso is 4 pesos
per dollar
C) if the actual exchange rate between the dollar and the Argentinean peso is 0.22 pesos
per dollar
D) if the actual exchange rate between the dollar and the Argentinean peso is 3 pesos
per dollar
Figure 2-13
Refer to Figure 2-13. Which two arrows in the diagram depict the following
transaction: Lizzie Haxem hires “The Paint Pros,” a professional painting company, to
paint her home.
A) J and M
B) K and G
C) K and M
D) J and G
Table 4-4
Table 4-4 shows the demand and supply schedules for the low-skilled labor market in
the city of Westover.
Refer to Table 4-4. If a minimum wage of $10.50 an hour is mandated, what is the
quantity of labor demanded?
A) 400,000
B) 370,000
C) 340,000
D) 60,000
Figure 19-4
Refer to Figure 19-4. The equilibrium exchange rate is originally at A, $3/pound.
Suppose the British government pegs its currency at $4/pound. Speculators expect that
the value of the pound will drop and this shifts the demand curve for pounds to D2. If
the government abandons the peg, the equilibrium exchange rate would be
A) $4/pound.
B) $3/pound.
C) $2/pound.
D) less than $2/pound.
If the Phillips curve represents a ‘structural relationship,” then
A) the trade-off between unemployment and inflation is permanent.
B) the trade-off between unemployment and inflation holds only for the short run.
C) the trade-off between unemployment and inflation holds in the long run, but not in
the short run.
D) the Phillips curve will be vertical in the long run.
Suppose the reserve ratio is RR. Then,
A) required reserves = RR x actual reserves.
B) required reserves = RR x excess reserves.
C) required reserves = RR x deposits.
D) required reserves = RR x loans.
Contractionary fiscal policy to prevent real GDP from rising above potential real GDP
would cause the inflation rate to be ________ and real GDP to be ________.
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower
A corporation is the type of business has ________ government rules and regulations
affecting it.
A) no
B) the fewest
C) the most
D) only federal