In response to a shortage the market price of a good will rise; as the price rises, the
demand will decrease and supply will increase until equilibrium is reached.
Answer:
A surplus is defined as the situation that exists when the quantity of a good supplied is
greater than the quantity demanded.
Answer:
An externality refers to economic events outside a market.
Answer:
In the 1930s and 1940s, the Technicolor company was able to leverage its bargaining
power over the movie industry because Technicolor was the sole producer of cameras
and films needed to produce color films.
Answer:
During the 1960s, in face of moderate and stable inflation, people tended to form
adaptive expectations of future inflation rates.
Answer:
Adverse selection is a situation in which one party to a transaction takes advantage of
knowing more than the other party to the transaction.
Answer:
An increase in population results in an increase in demand.
Answer:
If banks receive a greater amount of reserves and do not hold all of these reserves as
excess reserves, the money supply expands.
Answer:
What impact does expansionary monetary policy have on the short-run Phillips curve if
consumers and firms expect the expansionary monetary policy to increase inflation?
A) The short-run Phillips curve shifts down.
B) The short-run Phillips curve shifts up.
C) The short-run Phillips curve becomes the long-run Phillips curve.
D) The short-run Phillips curve is not affected by expansionary monetary policy.
Answer:
An economic growth model
A) explains changes in nominal GDP per capita in the long run.
B) explains changes in real GDP per capita in the long run.
C) explains changes in nominal GDP per capita in the short run.
D) explains changes in real GDP per capita in the short run.
Answer:
As a firm moves to higher isocost lines,
A) its profits increase.
B) its revenue increases.
C) its input price ratio increases.
D) its total cost increases.
Answer:
If actual inflation is less than expected inflation, which of the following will be true?
A) Real wages will rise.
B) Real wages will fall.
C) The Phillips curve will be a vertical line.
D) The unemployment rate will fall.
Answer:
Which of the following is not true about the composition of GDP in 2012?
A) The majority of consumer spending is on durable goods.
B) Purchases made by state and local governments are greater than purchases made by
the federal government.
C) Imports are greater than exports.
D) Business fixed investment is the largest component of investment.
Answer:
Figure 2-12
Figure 2-12 shows the production possibilities frontiers for Pakistan and Indonesia.
Each country produces two goods, cotton and cashews.
What is the opportunity cost of producing 1 pound of cashews in Pakistan?
A) 3/8 of a bolt of cotton
B) 5/8 of a bolt of cotton
C) 1 3/5 bolts of cotton
D) 240 bolts of cotton
Answer:
Which of the following is counted in GDP?
A) the value of goods and services produced in the underground economy
B) the cost of a speed boat purchased by drug smugglers
C) the value of do-it-yourself work
D) the value of leisure
Answer:
The production possibilities frontier shows the ________ combinations of two products
that may be produced in a particular time period with available resources.
A) minimum attainable
B) maximum attainable
C) only
D) equitable
Answer:
Laura’s Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit
costs. The restaurant earns $1.3 million in revenues and has $5 million in net worth.
Based on this information, what is economic profit for Laura’s Pizza Place?
A) $200,000
B) $400,000
C) $500,000
D) $2.8 million
Answer:
If a U.S. firm produces cars in Mexico, that production should count towards
A) U.S. GNP.
B) Mexico’s GNP.
C) U.S. GDP.
D) It will not affect either U.S. GNP or U.S. GDP.
Answer:
How do firms raise external funds through indirect finance?
Answer:
Explain why economies with financial account surpluses usually have current account
deficits.
Answer:
How are market price, average revenue, and marginal revenue related for a perfectly
competitive firm and why?
Answer:
Assume a country is required by law to balance the budget every year. Suppose
aggregate demand falls, causing a recession and a budget deficit. To balance the budget,
what would the government need to do with the level of government spending and
taxes? How would these changes in government spending and taxes affect aggregate
demand and the economy?
Answer:
What is odd pricing? Why do some merchants use odd pricing?
Answer:
What are terms of trade?
Answer:
What are the main sources of health insurance in the United States?
Answer:
Table 20-20
Salaries in major league baseball have soared over the last 30 to 40 years. Some of the
salary increase is due to inflation. The table above reports the consumer price index and
the median nominal salary of the New York Yankees for 1989 and 2009.
Source: USA Today Salaries Database,
asp.usatoday.com/sports/baseball/salaries/default.aspx
Calculate the real median salary of the New York Yankees in both 1982-1984 dollars
and 2009 dollars. Calculate the percentage increase in the median salary of the Yankees
from 1989 to 2009 in both nominal terms and in real terms.
Answer:
Explain and show graphically the effect of a decrease in U.S. budget deficits that
decrease U.S. interest rates on the demand and supply of U.S. dollars for euros.
Answer: