In recent decades the United States has incurred overall balance of payments deficits.
Corporate managers and shareholders always have the same goals.
The amount of national income in an economy equals the money supply in an economy.
Consumers and make all economic decisions in a mixed economy.
Economic growth depends more on technological change than on increases on capital
per hour worked.
If a country produces only two goods, then it is not possible to have a comparative
advantage in the production of both those goods.
Real business cycle models argue that fluctuations in real GDP are caused by
unanticipated changes in the money supply.
If two countries adhere to a gold standard, the exchange rate for their currencies is
fixed.
The substitution effect of a wage decrease examines the effect of the decrease in wage
income on a worker’s ability to consume goods and services.
Most of the pressure for a monetary growth rule has disappeared because since 1980,
A) the relationship between movements in the money supply and movements in real
GDP and the price level have become much stronger.
B) the relationship between movements in the money supply and movements in real
GDP and the price level have become much weaker.
C) the relationship between movements in interest rates and movements in real GDP
and the price level have become much stronger.
D) the relationship between movements in interest rates and movements in real GDP
and the price level have become much weaker.
Long-run cost curves are U-shaped because
A) of the law of demand.
B) of the law of diminishing returns.
C) of economies and diseconomies of scale.
D) of the law of supply.
Of the following, which is the best example of a good with a perfectly inelastic
demand?
A) the demand for tickets in New York City when the Mets or Yankees are in the World
Series
B) the demand for gasoline
C) a diabetic’s demand for insulin
D) the demand for a college education by a student who has a full scholarship to an Ivy
League school
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
Table 2-10
Table 2-10 shows the output per day of two pet groomers, Tammi and Horace. They can
either devote their time to grooming dogs or bathing cats.
Which of the following statements istrue?
A) Horace has a comparative advantage in both tasks.
B) Tammi has a comparative advantage in both tasks.
C) Horace has a comparative advantage in grooming dogs and Tammi in bathing cats.
D) Horace has a comparative advantage in bathing cats and Tammi in grooming dogs.
Figure 4-5 Figure 4-5 shows the
market for apartments in Bay City. Recently, the government imposed a rent ceiling at
R0. With rent control, the quantity supplied is Q1. Suppose apartment owners ignore the
law and rent this quantity for the highest rent they can get. What is the highest rent they
can get?
A) R*
B) R1
C) R0
D) more than R1
Suppose a bank has $100 million in checking account deposits with no excess reserves
and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required
reserve ratio to 8 percent, then the bank can make a maximum loan of
A) $0.
B) $2 million.
C) $8 million.
D) $10 million.
“Household production” refers to
A) the manufacturing of durable household products.
B) the home building sector of the economy.
C) home-based craft businesses.
D) goods and services people produce for themselves.
If the demand for letters written by Abraham Lincoln is higher than the demand for
letters written by John Wilkes Booth, what would have to be true for the market
equilibrium prices for these letters to be equal?
A) The supply of Lincoln letters would have to be less than the supply of Booth letters.
B) The supply of Booth letters would have to be less than the supply of Lincoln letters.
C) The supply of Lincoln letters and the supply of Booth letters would have to be equal.
D) If the demand for Lincoln letters is greater than the demand for Booth letters, the
market equilibrium price for Lincoln letters will always be greater than the market
equilibrium price for Booth letters.
If a good has a negative income elasticity of demand, this indicates that the good is
A) a substitute with another good.
B) a complement with another good.
C) inferior.
D) normal.
As recently as 2000, ________ percent of doctors were in private practice and by 2013,
________ percent of doctors were in private practice.
A) only 20; more than 70
B) nearly 60; less than 40
C) about 50; about 50
D) over 80; less than 15
The textbook referred to the following quotation from a Federal Reserve publication:
“Trade is a win-win situation for all countries that participate.” But many firms and
workers oppose free trade policies and protests against globalization have become a
regular occurrence at meetings of the World Trade Organization. If trade is a “win-win”
situation, why is there strong opposition to free trade and globalization?
Article Summary. According to the Bureau of Labor Statistics, the unemployment
rate fell from 7.4 percent in July 2013 to 7.3 percent in August, and at the same
time the labor force participation rate fell to its lowest level in 35 years, from 63.4
percent to 63.2 percent. The decrease in the labor force participation rate was due
to a decline in the size of the workforce of about 300,000 people. A large portion of
the job growth in August was in the food service and retail sectors, areas which
typically account for part-time and lower-paying jobs. On a brighter note, the
average number of hours worked per week rose slightly, as did average hourly
earnings and temporary employment.
Source: Peter Coy, “Not Looking for Work: Labor-Force Participation Hits
35-Year Low,” BloombergBusinessweek, September 6, 2013.
Explain how the labor force declining by 300,000 people could have led to the decrease
in the unemployment rate.
The Bureau of Labor Statistics does not count discouraged workers as unemployed.
Suppose discouraged workers were counted as unemployed. Explain how the
unemployment rate and the labor force participation rate would change.
Use a 45-degree diagram to illustrate macroeconomic equilibrium. Make sure your
diagram shows the aggregate expenditure function. Include in your diagram a point
where aggregate expenditure is greater than GDP and a point where aggregate
expenditure is less than GDP.
List the five key determinants of price elasticity of demand and explain how each
determinant indicates if demand tends to be elastic or inelastic.
Suppose the price elasticity of demand for cigarettes is -0.4. The FDA decides to
regulate tobacco production, which increases the price of cigarettes and causes the
quantity of cigarettes demanded to decrease by 25 percent. What is the percentage
increase in price which would lead to the 25 percent decrease in quantity demanded? If
the price elasticity was -4, what would be the percentage increase in price?
Suppose, on average, a family in Church Falls earning $60,000 per year paid 6 percent
of its income in state taxes. A family earning $80,000 paid, on average, $4,760 in state
income taxes. Are state taxes in Church Falls progressive or regressive? Be sure to
explain the difference between a progressive tax and a regressive tax.
Figure 14-8
Use the decision tree to determine whether Microsoft should deter Toshiba from
entering the market for electronic book readers (e-readers). Assume that each firm must
earn a 20% return on investment to break even. Explain Microsoft’s decision process.
Table 22-2
Calculate the GDP per capita for each country in the table. Which country has the
highest standard of living? Why?
What economic impact would the closing of a nearby military base have on a town?
Would people and businesses that did not directly deal with the military personnel be
affected?