When an economy is operating at a point on its production possibilities frontier, then
a. consumers are content with the mix of goods and services that is being produced.
b. there is no way to produce more of one good without producing less of the other.
c. equal amounts of the two goods are being produced.
d. All of the above are correct.
The field of finance primarily studies
a. how society manages its scarce resources.
b. the implications of time and risk for allocating resources over time.
c. firms’ decisions concerning how much to produce and what price to charge.
d. how society can reduce market risk.
A common argument in favor of restricting trade
a. concerns the strategy of bargaining.
b. is that efforts should be made to get new industries started.
c. emphasizes the belief that all countries should play by the same rules.
d. All of the above are correct.
What is the most important factor that explains differences in living standards across
countries?
a. the quantity of money
b. the level of unemployment
c. productivity
d. equality
Table 5-6
Refer to Table 5-6. Using the midpoint method, the income elasticity of demand for
good Y is
a. 2.33, and good Y is a normal good.
b. -2.33, and good Y is an inferior good.
c. -0.43, and good Y is a normal good.
d. -0.43, and good Y is an inferior good.
Table 7-8
The only four producers in a market have the following costs:
Refer to Table 7-8. If the sellers bid against each other for the right to sell the good to a
consumer, then the producer surplus will be
a. $0 or slightly more.
b. $50 or slightly less.
c. $150 or slightly less.
d. $200 or slightly more.
Figure 7-13
Refer to Figure 7-13. Suppose the price of the good is $450. Then, on the first unit of
the good that is sold, producer surplus is
a. $250, and on the second unit of the good that is sold, producer surplus is $100.
b. $250, and on the second unit of the good that is sold, producer surplus is $150.
c. $350, and on the second unit of the good that is sold, producer surplus is $100.
d. $350, and on the second unit of the good that is sold, producer surplus is $150.
Over the last 70 years, the average annual U.S. inflation rate was about
a. 2 percent, implying that prices have increased 10-fold.
b. 4 percent, implying that prices have increased 10-fold.
c. 2 percent, implying that prices have increased 16-fold.
d. 4 percent, implying that prices increased about 16-fold.
Table 11-1
The table below pertains to Pieway, an economy in which the typical consumer’s basket
consists of 10 bushels of peaches and 15 bushels of pecans.
Refer to Table 11-1. If 2005 is the base year, then the CPI for 2005 was
a. 83.3.
b. 100.
c. 120.
d. 200.
U.S- based Dell sells computers to an Irish company that pays with previously obtained
U.S. currency. This exchange
a. increases U.S. net capital outflow because the U.S. acquires foreign-owned assets.
b. decreases U.S. net capital outflow because the U.S. acquires foreign-owned assets.
c. increases U.S. net capital outflow because the U.S. sells capital goods.
d. decreases U.S. net capital outflow because the U.S. sells capital goods.
The sticky-price theory of the short-run aggregate supply curve says that if the price
level rises by 5% and people were expecting it to rise by 2%, then firms have
a. higher than desired prices which leads to an increase in the aggregate quantity of
goods and services supplied.
b. higher than desired prices which leads to a decrease in the aggregate quantity of
goods and services supplied.
c. lower than desired prices which leads to an increase in the aggregate quantity of
goods and services supplied.
d. lower than desired prices which leads to a decrease in the aggregate quantity of
goods and services supplied.
To reduce the effects of crowding out caused by an increase in government
expenditures, the Federal Reserve could
a. increase the money supply by buying bonds.
b. increase the money supply by selling bonds.
c. decrease the money supply by buying bonds.
d. increase the money supply by selling bonds.
The variable that links the market for loanable funds and the market for
foreign-currency exchange is
a. net capital outflow.
b. national saving.
c. exports.
d. domestic investment.
A basis for the slope of the short-run Phillips curve is that when unemployment is high
there are
a. downward pressures on prices and wages.
b. downward pressures on prices and upward pressures on wages.
c. upward pressures on prices and downward pressures on wages.
d. upward pressures on prices and wages.
The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in
the United States costs $40, how many florins must a basket of goods in Aruba cost for
purchasing power parity to hold?
a. 20 florin
b. 40 florin
c. 60 florin
d. 80 florin
A tax on the buyers of sofas
a. increases the size of the sofa market.
b. decreases the size of the sofa market.
c. has no effect on the size of the sofa market.
d. may increase, decrease, or have no effect on the size of the sofa market.
Figure 7-15
Refer to Figure 7-15. At the equilibrium price, consumer surplus is
a. $150.
b. $200.
c. $250.
d. $350.
The local bakery makes such great cinnamon rolls that consumers do not respond much
at all to a change in the price. If the owner is only interested in increasing revenue, she
should
a. lower the price of the cinnamon rolls.
b. leave the price of the cinnamon rolls unchanged.
c. raise the price of the cinnamon rolls.
d. reduce costs.
When inflation rises, people tend to go to the bank
a. more often, giving rise to menu costs.
b. more often, giving rise to shoeleather costs.
c. less often, giving rise to redistribution costs.
d. less often, thereby lessening the severity of the inflation tax.
Table 11-6. The table below applies to an economy with only two goods hamburgers
and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.
Refer to Table 11-6. Between 2010 and 2011, the cost of living increased by
a. 5.30 percent.
b. 6.36 percent.
c. 7.78 percent.
d. We need to know the base year in order to answer this question.
The smaller the price elasticity of demand, the
a. steeper the demand curve will be through a given point.
b. flatter the demand curve will be through a given point.
c. more strongly buyers respond to a change in price between any two prices P1 and P2.
d. smaller the decrease in equilibrium price when the supply curve shifts rightward
from S1 to S2.
If the Fed conducts open-market sales, the money supply
a. increases and aggregate demand shifts right.
b. increases and aggregate demand shifts left.
c. decreases and aggregate demand shifts right.
d. decreases and aggregate demand shifts left.
Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Refer to Table 3-1. Andia should specialize in the production of
a. wheat and Zardia should specialize in the production of beef.
b. beef and Zardia should specialize in the production of wheat.
c. both goods and Zardia should specialize in the production of neither good.
d. neither good and Zardia should specialize in the production of both goods.
Meredith recently graduated from college but has not yet started working. To be
counted as unemployed she
a. does not have to have looked for work.
b. must have looked for work no more than a week ago.
c. must have looked for work no more than 4 weeks ago.
d. must have looked for work no more than 12 weeks ago.
A tariff on a product
a. is a direct quantitative restriction on the amount of a good that can be imported.
b. increases the domestic quantity supplied.
c. increases domestic consumer surplus.
d. All of the above are correct.
Table 16-6.
Bank of Springfield
Refer to Table 16-6. Assuming the Bank of Springfield and all other banks have the
same reserve ratio, then what is the value of the money multiplier?
a. 5.0
b. 7.5
c. 10.00
d. 12.5
An adverse supply shock causes inflation to
a. rise and the short-run Phillips curve to shift right.
b. rise and the short-run Phillips curve to shift left.
c. fall and the short-run Phillips curve to shift right.
d. fall and the short-run Phillips curve to shift left.
If purchasing-power parity holds, then the value of the
a. nominal exchange rate is equal to one. A dollar buys as many goods in the U.S. as it
does overseas.
b. nominal exchange rate is equal to one. A dollar buys the quantity of foreign currency
equal to the U.S. price level divided by the foreign country’s price level.
c. real exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does
overseas.
d. real exchange rate is equal to one. A dollar buys the quantity of foreign currency
equal to the U.S. price level divided by the foreign country’s price level.
Table 6-1
Refer to Table 6-1. Suppose the government imposes a price ceiling of $5 on this
market. What will be the size of the shortage in this market?
a. 0 units
b. 2 units
c. 8 units
d. 10 units
Figure 3-6
Maxine’s Production Possibilities Frontier Daisy’s Production Possibilities
Frontier
Refer to Figure 3-6. If Maxine and Daisy switch from each person dividing her time
equally between the production of pies and tarts to each person spending all of her time
producing the good in which she has a comparative advantage, then total production of
tarts will increase by
a. 7.
b. 10.
c. 17.
d. 20.
In the United States, real interest rates were
a. high in the 1970s and 1990s.
b. low in the 1970s and 1990s.
c. high in the 1970s and low in the 1990s.
d. low in the 1970s and high in the 1990s.
Supporters of using government expenditures to respond to recession
a. argue that monetary policy should be used first. An increase in the money supply will
reduce interest rates.
b. argue that monetary policy should be used first. An increase in the money supply will
raise interest rates.
c. argue that monetary policy should be used only after fiscal policy has been used. An
increase in the money supply will reduce interest rates.
d. argue that monetary policy should be used only after fiscal policy has been used. An
increase in the money supply will raise interest rates.
The inflation rate you are likely to hear on the nightly news is calculated from
a. the GDP deflator.
b. the CPI.
c. the Dow Jones Industrial Average.
d. the unemployment rate.
A British grocery chain uses previously obtained U.S. dollars to purchase apples from
the United States. This transaction
a. increases British net capital outflow, and increases U.S. net exports.
b. increases British net capital outflow, and decreases U.S. net exports.
c. decreases British net capital outflow, and increases U.S. net exports.
d. decreases British net capital outflow, and decreases U.S. net exports.
Figure 2-2
Refer to Figure 2-2. Boxes C and D of this circular-flow diagram represent
a. households and government.
b. firms and government.
c. the markets for goods and services and the markets for financial assets.
d. the markets for goods and services and the markets for factors of production.
GDP is the market value of all final goods and services produced by a country’s citizens
in a given period of time.
If the real interest rate were above the equilibrium rate, there would be a shortage of
loanable funds.
Most macroeconomic variables that measure some type of income, spending, or
production fluctuate closely together.
An economy’s natural rate of unemployment refers to the amount of unemployment that
the economy normally experiences.
The Laffer curve illustrates how taxes in markets with greater elasticities of demand
compare to taxes in markets with smaller elasticities of supply.
If a U.S. firm buys Chinese toys using previously obtained Chinese currency, then both
U.S. net exports and U.S. net capital outflow decrease.
In surveys of professional economists, fourteen propositions were endorsed by an
overwhelming majority of respondents.
Price ceilings are typically imposed to benefit sellers.
Within the U.S. population, women ages 20 and older have lower rates of labor-force
participation than men.
If the U.S. real exchange rate is greater than 1, then there is the possiblity of arbitraging
by buying foreign goods to sell in the U.S.
The content of the basket of goods and services used to compute the CPI changes every
month.
Over the past two decades the U.S. has persistently had trade deficits.
Suppose that the economy is at an inflation rate such that unemployment is above the
natural rate. How does the economy return to the natural rate of unemployment if this
lower inflation rate persists? Use sticky-wage theory to explain your answer.
According to purchasing-power parity theory, the nominal exchange rate between the
U.S. and another country should equal the U.S. price level divided by the price level in
the foreign country.
A decrease in the price of a complement will shift the demand curve for a good to the
left.
In an open economy, the supply of loanable funds comes from national saving.