Over the past six decades, the U.S. economy has experienced a dramatic increase in the
relative importance of international trade and finance.
a. True
b. False
Table 23-6
The table below contains data for the country of Batterland, which produces only
waffles and pancakes. The base year is 2013.
RefertoTable23-6.In 2011, this country’s real GDP was
a. $320.
b. $440.
c. $760.
d. $770.
A supply curve slopes upward because
a. as more is produced, total cost of production falls.
b. an increase in input prices increases supply.
c. the quantity supplied of most goods and services increases over time.
d. an increase in price gives producers an incentive to supply a larger quantity.
The Eye of Horus incense company has $10 million in cash which it has accumulated
from retained earnings. It was planning to use the money to build a new factory.
Recently, the rate of interest has increased. The increase in the rate of interest should
a. not influence the decision to build the factory because The Eye of Horus doesn’t have
to borrow any money.
b. not influence the decision to build the factory because its stockholders are expecting
a new factory.
c. make it more likely that The Eye of Horus will build the factory because a higher
interest rate will make the factory more valuable.
d. make it less likely that The Eye of Horus will build the factory because the
opportunity cost of the $10 million is now higher.
If the real exchange rate for the dollar is below the equilibrium level, the quantity of
dollars supplied in the market for foreign-currency exchange is
a. less than the quantity demanded and the dollar will appreciate.
b. less than the quantity demanded and the dollar will depreciate.
c. greater than the quantity demanded and the dollar will appreciate.
d. greater than the quantity demanded and the dollar will depreciate.
Which costs of inflation could the government reduce without reducing inflation?
a. arbitrary redistributions of wealth
b. shoeleather costs
c. menu costs
d. none of the above is correct.
Table 28-2
Labor Data for Aridia
RefetoTable28-2.The unemployment rate of Aridia in 2011 was
a. 20%.
b. 31.6%.
c. 46.2%.
d. 63.3%.
Which of the following is nota determinant of demand?
a. the price of a resource that is used to produce the good
b. the price of a complementary good
c. the price of the good next month
d. the price of a substitute good
Suppose a U.S. automaker builds and operates a new factory in Italy. Future production
from such an investment will
a. increase Italian GDP more than it increases Italian GNP.
b. increase Italian GNP more than it increases Italian GDP.
c. have no affect on Italian GNP, but will increase Italian GDP.
d. have no affect on either Italian GDP or GNP.
Table 3-18
The following table contains some production possibilities for an economy for a given
month.
RefertoTable3-18.If the production possibilities frontier is a straight line, then “?” must
be
a. 150.
b. 225.
c. 300.
d. 375.
In which period was most of the change in U.S. net capital outflow due to an increase in
investment in the U.S.?
a. 1980-1987
b. 1991-2000
c. 2000-2012
d. None of the above are correct.
Caroline is the owner of a hair-styling salon and spa. She decides to raise the wages of
her workers even though she faces an excess supply of labor. Her decision
a. might increase profits if it attracts a better pool of workers to apply for jobs at her
salon.
b. will increase the excess supply of labor.
c. may increase the quality of her work force.
d. All of the above are correct.
When a government increases its budget deficit, then that country’s
a. supply of loanable funds shifts right.
b. supply of loanable funds shifts left.
c. demand for loanable funds shifts right.
d. demand for loanable funds shifts left.
A model that shows how dollars flow through markets among households and firms is
called the
a. production possibilities frontier.
b. circular-flow diagram.
c. demand and supply diagram.
d. comparative advantage model.
In the early 1900s, Henry Ford introduced a
a. high-wage policy, and this policy produced many of the effects predicted by
efficiency-wage theory.
b. high-wage policy, and this policy produced none of the effects predicted by
efficiency-wage theory.
c. low-wage policy, and this policy produced many of the effects predicted by
efficiency-wage theory.
d. low-wage policy, and this policy produced none of the effects predicted by
efficiency-wage theory.
Table 3-26
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
RefertoTable3-26.Japan and Korea would notbe able to gain from trade if Korea’s
opportunity cost of one car changed to
a. 1/5 airplane.
b. 1/3 airplane.
c. 3 airplanes.
d. 5 airplanes.
If over a short time there is an increase in the number of people retired and a decrease
in the number of people working, then productivity
a. and real GDP per person rise.
b. rises but real GDP per person falls.
c. falls and real GDP per person rises.
d. and real GDP per person fall.
If your company opens and operates a branch in a foreign country, your company
engages in foreign direct investment.
a. True
b. False
Just like models constructed in other areas of science, economic models
a. incorporate assumptions that contradict reality.
b. incorporate all details of the real world.
c. complicate reality.
d. avoid the use of diagrams and equations.
The position of the long-run Phillips curve depends on
a. the inflation rate and the natural rate of unemployment.
b. the inflation rate but not the natural rate of unemployment.
c. the natural rate of unemployment, but not the inflation rate.
d. neither the natural rate of unemployment nor the inflation rate.
All scientific models, including economic models, simplify reality in order to improve
our understanding of it.
a. True
b. False
Table 29-9
Metropolis National Bank is currently holding 2% of its deposits as excess reserves.
RefetoTable29-9. Metropolis National Bank is currently holding 2% of deposits as
excess reserves. Assume that no banks in the economy want to hold excess reserves and
that people only hold deposits and no currency. How much does the money supply
ultimately increase when Metropolis National Bank lends out its excess reserves?
a. $100,000
b. $110,000
c. $120,000
d. None of the above are correct.
The explanation for the slope of
a. the supply of loanable funds curve is based on the logic that a higher real interest rate
leads to higher saving.
b. the demand for loanable funds curve is based on the logic that a higher interest rate
leads to higher saving.
c. the supply of loanable funds curve is based on the logic that a higher real interest rate
leads to lower saving.
d. the demand for loanable funds curve is based on the logic that a higher interest rate
leads to lower saving.
Steve purchases some land for $30,000. He maintains it, but makes no improvements to
it. One year later he sells it for $32,000. Stephanie puts $30,000 in a savings account
that pays 6% interest. Steve has to pay the 50% capital gains tax, Stephanie is in the
35% tax bracket. The inflation rate was 2%. Who had the higher before-tax real gain
and who had the higher after-tax real gain?
a. Steve had both the higher before-tax real gain and the higher after-tax real gain.
b. Steve had the higher before-tax real gain but Stephanie had the higher after-tax real
gain.
c. Stephanie had the higher before-tax real gain but Steve had the higher after-tax real
gain.
d. Stephanie had both the higher before-tax real gain and the higher after-tax real gain.
Inflation can be measured using either the GDP deflator or the consumer price index.
a. True
b. False
Which of the following statements about comparative advantage is nottrue?
a. Comparative advantage is determined by which person or group of persons can
produce a given quantity of a good using the fewest resources.
b. The principle of comparative advantage applies to countries as well as to individuals.
c. Economists use the principle of comparative advantage to emphasize the potential
benefits of free trade.
d. A country may have a comparative advantage in producing a good, even though it
lacks an absolute advantage in producing that good.
If a state made a previously-illegal activity, such as gambling or prostitution, legal,
then, other things equal, GDP
a. decreases.
b. increases.
c. doesn’t change because both legal and illegal production are included in GDP.
d. doesn’t change because these activities are never included in GDP.
Which of the following does nothelp explain the direction the quantity of aggregate
goods demanded changes when the price level decreases?
a. consumer wealth rises
b. borrowing rises
c. each dollar is worth more domestic goods
d. the dollar appreciates relative to other currencies
The marginal benefit Susie gets from purchasing a third pair of gloves is
a. the same as the total benefit she gets from purchasing three pairs of gloves.
b. more than the marginal cost of purchasing the third pair of gloves.
c. the total benefit she gets from purchasing three pairs of gloves minus the total benefit
she gets from purchasing two pairs of gloves.
d. the total benefit she gets from purchasing four pairs of gloves minus the total benefit
she gets from purchasing three pairs of gloves.
If domestic residents of France purchase 1.2 trillion euros of foreign assets and
foreigners purchase 1.5 trillion euros of French assets, then France’s net capital outflow
is
a. -.3 trillion euros, so it must have a trade deficit.
b. -.3 trillion euros, so it must have a trade surplus.
c. .3 trillion euros, so it must have a trade deficit.
d. .3 trillion euros, so it must have a trade surplus.
If the federal funds rate were below the level the Federal Reserve had targeted, the Fed
could move the rate back towards its target by
a. buying bonds. This buying would increase the money supply.
b. buying bonds. This buying would reduce the money supply.
c. selling bonds. This selling would increase the money supply.
d. selling bonds. This selling would reduce the money supply.