Figure 6-16
Refer to Figure 6-16. Suppose a tax of $5 per unit is imposed on this market. How
much will sellers receive per unit after the tax is imposed?
a. $5
b. between $5 and $10
c. between $10 and $14
d. $14
If there is capital flight from the United States, then the demand for loanable funds
a. and the supply of dollars in the foreign-exchange market shift right.
b. and the supply of dollars in the foreign-exchange market shift left.
c. shifts left while the supply of dollars in the foreign-exchange market shifts right.
d. shifts right while the supply of dollars in the foreign-exchange market shifts left.
Government policies designed to equalize the distribution of economic well-being
include
(i) the welfare system
(ii) unemployment insurance
(iii) progressive income tax
a. (i) only
b. (ii) only
c. (i) and (ii) only
d. (i), (ii), and (iii)
Table 3-8
Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
Labor Hours Needed
to Make 1 Quantity Produced
in 36 Hours
Refer to Table 3-8. At which of the following prices would both Huang and Min gain
from trade with each other?
a. 15 parasols for 10 plates
b. 15 parasols for 6 plates
c. 15 parasols for 3 plates
d. Huang and Min could not both gain from trade with each other at any price.
The country of Frequencia is politically very stable and has a long tradition of
respecting property rights. If several other countries suddenly became politically
unstable, we would expect Frequencia’s
a. real interest rate to rise.
b. real exchange rate to fall.
c. net exports to fall.
d. None of the above is likely.
Scenario 13-3. Assume the following information for an imaginary, open economy.
Consumption = $1,000; investment = $300; net exports = $100;
taxes = $230; private saving = $200; and national saving = $150.
Refer to Scenario 13-3. For this economy, GDP equals
a. $1,400.
b. $1,430.
c. $1,580
d. $1,680.
In the equation for the production function H/L represents
a. natural resources per worker.
b. human capital per worker.
c. output per worker.
d. physical capital per worker.
In the 19th century, when crop failures often led to bank runs, banks would make
relatively fewer loans and hold relatively more excess reserves. By itself, these actions
by the banks should have
a. increased the money multiplier and the money supply.
b. decreased the money multiplier and increased the money supply.
c. increased the money multiplier and decreased the money supply.
d. decreased both the money multiplier and the money supply.
In the long run, a decrease in the money supply growth rate
a. shifts the short-run Phillips curve left so inflation returns to its original rate.
b. shifts the short-run Phillips curve left so unemployment returns to its natural rate.
c. Both A and B are correct.
d. None of the above is correct.
Which of the following would tend to shorten recessions associated with anti-inflation
policies by central banks?
a. People adjust their expectations of inflation rapidly.
b. People believe policy announcements made by central bank officials.
c. The short-run Phillips shifts rapidly.
d. All of the above are correct.
In a fractional-reserve banking system, an increase in reserve requirements
a. increases both the money multiplier and the money supply.
b. decreases both the money multiplier and the money supply.
c. increases the money multiplier, but decreases the money supply.
d. decreases the money multiplier, but increases the money supply.
Which of the following would necessarily increase the equilibrium interest rate?
a. The demand for and the supply of loanable funds shift right.
b. The demand for and the supply of loanable funds shift left.
c. The demand for loanable funds shifts right and the supply of loanable funds shifts
left.
d. The demand for loanable funds shifts left and the supply of loanable funds shifts
right.
At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day.
At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per
day. Using the midpoint method, the price elasticity of supply is about
a. 0.45
b. 0.90
c. 1.11
d. 2.20
The sacrifice ratio is the
a. sum of the inflation and unemployment rates.
b. inflation rate divided by the unemployment rate.
c. number of percentage points annual output falls for each percentage point reduction
in inflation.
d. number of percentage points unemployment rises for each percentage point reduction
in inflation.
Figure 6-6
Refer to Figure 6-6. If the government imposes a price ceiling of $8 on this market,
then there will be
a. no shortage.
b. a shortage of 10 units.
c. a shortage of 20 units.
d. a shortage of 40 units.
A tax levied on the buyers of a good shifts the
a. supply curve upward (or to the left).
b. supply curve downward (or to the right).
c. demand curve downward (or to the left).
d. demand curve upward (or to the right).
Given that a country’s real output has increased, in which of the following cases can we
be sure that its productivity also has increased?
a. The total number of hours worked rose.
b. The total number of hours worked stayed the same.
c. The total number of hours worked fell.
d. Both b and c are correct.
The classical dichotomy refers to the idea that the supply of money
a. is irrelevant for understanding the determinants of nominal and real variables.
b. determines nominal variables, but not real variables.
c. determines real variables, but not nominal variables.
d. is a determinant of both real and nominal variables.
Figure 9-11
Refer to Figure 9-11. Consumer surplus in this market after trade is
a. A.
b. C + B.
c. A + B + D.
d. B + C + D.
An increase in U.S. sales of movies to other countries raises U.S.
a. exports and so raises the U.S. trade balance.
b. exports and so reduces the U.S. trade balance.
c. imports and so raises the U.S. trade balance.
d. imports and so reduces the U.S. trade balance.
Suppose a country imposes new restrictions on how many hours people can work. If
these restrictions reduce the total number of hours worked in the economy, but all other
factors that determine output are held fixed, then
a. productivity and output both rise.
b. productivity rises and output falls.
c. productivity falls and output rises.
d. productivity and output fall.
Figure 8-4
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-4. The price that buyers effectively pay after the tax is imposed is
a. $12.
b. between $8 and $12.
c. between $5 and $8.
d. $5.
Andre walks Julia’s dog once a day for $50 per week. Julia values this service at $60
per week, while the opportunity cost of Andre’s time is $30 per week. The government
places a tax of $35 per week on dog walkers. Before the tax, what is the total surplus?
a. $60
b. $50
c. $30
d. $25
Which of the following statements is not valid when supply is perfectly elastic?
a. The elasticity of supply approaches infinity.
b. The supply curve is horizontal.
c. Very small changes in price lead to very large changes in quantity supplied.
d. The time period under consideration is more likely a short period rather than a long
period.
Currently you purchase ten frozen pizza per month. You will graduate from college in
December, and you will start a new job in January. You have no plans to purchase
frozen pizzas in January. For you, frozen pizzas are a(n)
a. substitute good.
b. normal good.
c. inferior good.
d. complementary good.
The consumer price index is subject to substitution bias because
a. some pairs of goods are complements rather than substitutes.
b. some goods are inferior rather than normal.
c. the law of demand applies to most, if not all, goods.
d. the index does not take into account the likelihood that consumers substitute
newly-introduced goods for more-established goods.
For which of the following individuals would the opportunity cost of going to college
be highest?
a. a promising young mathematician who will command a high salary once she earns
her college degree
b. a student with average grades who has never held a job
c. a famous, highly-paid actor who wants to take time away from show business to
finish college and earn a degree
d. a student who is the best player on his college basketball team, but who lacks the
skills necessary to play professional basketball
Import quotas and tariffs produce some common results. Which of the following is not
one of those common results?
a. Total surplus in the domestic country falls.
b. Producer surplus in the domestic country increases.
c. The domestic country experiences a deadweight loss.
d. Revenue is raised for the domestic government.
Figure 4-15
Refer to Figure 4-15. At what price would there be an excess supply of 200 units of the
good?
a. $15
b. $20
c. $30
d. $35
Beef is a normal good. You observe that both the equilibrium price and quantity of beef
have fallen over time. Which of the following explanations would be most consistent
with this observation?
a. Consumers have experienced an increase in income, and beef-production technology
has improved.
b. The price of chicken has risen, and the price of steak sauce has fallen.
c. New medical evidence has been released that indicates a negative correlation
between a person’s beef consumption and life expectancy.
d. The demand curve for beef must be positively sloped.