Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the
demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were
levied on the sellers of both of these commodities, we would expect that the burden of
a. both taxes would fall more heavily on the buyers than on the sellers.
b. the macaroni tax would fall more heavily on the sellers than on the buyers, and the
burden of the cigarette tax would fall more heavily on the buyers than on the sellers.
c. the macaroni tax would fall more heavily on the buyers than on the sellers, and the
burden of the cigarette tax would fall more heavily on the sellers than on the buyers.
d. both taxes would fall more heavily on the sellers than on the buyers.
Reserves decrease if the Federal Reserve
a. raises the discount rate or auctions more credit.
b. raises the discount rate but not if it auctions more credit.
c. lowers the discount rate or auctions more credit.
d. lowers the discount rate but not if it auctions more credit.
Which of the following is correct concerning the FOMC?
a. the members of the Board of Governors have the majority of the votes
b. the New York Federal Reserve Bank District President is always a voting member
c. all Federal Reserve Bank presidents attend the meetings
d. All of the above are correct.
A balanced budget would require that when real GDP was growing rapidly,
a. the government raise taxes or cut expenditures. This would increase the magnitude of
economic fluctuations.
b. the government raise taxes or cut expenditures. This would decrease the magnitude
of economic fluctuations.
c. the government cut taxes or raise expenditures. This would increase the magnitude of
economic fluctuations.
d. the government cut taxes or raise expenditures. This would decrease the magnitude
of economic fluctuations.
If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price
results in a
a. 0.6 percent increase in the quantity demanded.
b. 1.5 percent increase in the quantity demanded.
c. 2 percent increase in the quantity demanded.
d. 6 percent increase in the quantity demanded.
Assume that for good X the supply curve for a good is a typical, upward-sloping
straight line, and the demand curve is a typical downward-sloping straight line. If the
good is taxed, and the tax is doubled, the
a. base of the triangle that represents the deadweight loss doubles.
b. height of the triangle that represents the deadweight loss doubles.
c. deadweight loss of the tax quadruples.
d. All of the above are correct.
Figure 5-4
Refer to Figure 5-4. Assume, for the good in question, two specific points on the
demand curve are (Q= 1,000, P = $40) and (Q = 1,500, P = $30). Then which of the
following scenarios is possible?
a. Both of these points lie on the section of the demand curve from B to C.
b. The vertical intercept of the demand curve is the point (Q = 0, P = $60).
c. The horizontal intercept of the demand curve is the point (Q = 1,800, P = $0).
d. Any of these scenarios is possible.
From 1980 to 1987, U.S. net capital outflows decreased. According to the
open-economy macroeconomic model, which of the following could have caused this?
a. an increase in the demand for U.S. currency in the market for foreign-currency
exchange
b. a decrease in the demand for U.S. currency in the market for foreign-currency
exchange
c. an increase in the supply of loanable funds
d. a decrease in the supply of loanable funds
On the basis of theory and empirical evidence, economists have reached several
conclusions about economic growth. Which of the following is not one of these
conclusions?
a. A relatively simple way to increase growth rates permanently is to increase a
country’s saving rate.
b. Growth is generally inhibited rather than promoted by policies like protective tariffs.
c. Well-established property rights that are enforced by fair and efficient courts are
important to economic growth.
d. Countries with few domestic natural resources still have opportunities for economic
growth.
Figure 6-21
Refer to Figure 6-22. The amount of the tax per unit is
a. $1.
b. $1.50.
c. $2.
d. $3.
The marginal seller is the seller who
a. cannot compete with the other sellers in the market.
b. would leave the market first if the price were any lower.
c. can produce at the lowest cost.
d. has the largest producer surplus.
Suppose that the United States imposes an import quota on televisions. In the
open-economy macroeconomic model this quota shifts the
a. U.S. supply of loanable funds left.
b. U.S. demand for loanable funds left.
c. demand for U.S. dollars in the market for foreign-currency exchange right.
d. supply of U.S. dollars in the market for foreign-currency exchange left.
Which of the following statements is correct?
a. A decrease in the size of a tax always decreases the tax revenue raised by that tax.
b. A decrease in the size of a tax always decreases the deadweight loss of that tax.
c. Tax revenue decreases when there is a small decrease in the tax rate and the economy
is on the downward-sloping part of the Laffer curve.
d. An increase in the size of a tax leads to an increase in the deadweight loss of the tax
only if the economy is on the upward-sloping part of the Laffer curve.
The y-coordinate is the
a. first number of an ordered pair and represents the point’s horizontal location.
b. second number of an ordered pair and represents the point’s horizontal location.
c. first number of an ordered pair and represents the point’s vertical location.
d. second number of an ordered pair and represents the point’s vertical location.
Denmark is an importer of computer chips and adds a $5 per chip tariff to the world
price of $12 per chip. Suppose Denmark removes the tariff. Which of the following
outcomes is not possible?
a. More Danish-produced chips are sold in Denmark.
b. More foreign-produced chips are sold in Denmark.
c. Danish consumers of chips become better off.
d. Total surplus in the Danish chip market increases.
Serena purchased 10 shares of GLC, Inc.stock for $200 per share; one year later she
sold the 10 shares for $220 a share. Over the year, the price level increased from 135.0
to 143.1. The tax rate on capital gains is 50 percent. If the capital gains tax is on
nominal gains, how much tax does Serena pay on her gain?
a. $90
b. $95
c. $100
d. None of the above is correct.
An early frost in the vineyards of Napa Valley would cause a(n)
a. increase in the demand for wine, increasing price.
b. increase in the supply of wine, decreasing price.
c. decrease in the demand for wine, decreasing price.
d. decrease in the supply of wine, increasing price.
A mutual fund
a. is a financial market where small firms mutually agree to sell stocks and bonds to
raise funds.
b. is funds set aside by local governments to lend to small firms who want to invest in
projects that are mutually beneficial to the firm and community.
c. sells stocks and bonds on behalf of small and less known firms who would otherwise
have to pay high interest to obtain credit.
d. is an institution that sells shares to the public and uses the proceeds to buy a selection
of various types of stocks, bonds, or both stocks and bonds.
Consider the exhibit below for the following questions.
Figure 20-1
Refer to Figure 20-1. An increase in the money supply would move the economy from
C to
a. B in the short run and the long run.
b. D in the short run and the long run.
c. B in the short run and A in the long run.
d. D in the short run and C in the long run.
Figure 9-17
Refer to Figure 9-17. With free trade, consumer surplus is
a. $400 and producer surplus is $200.
b. $400 and producer surplus is $800.
c. $1,600 and producer surplus is $200.
d. $1,600 and producer surplus is $800.
Suppose that in 2010, the producer price index increases by 1.5 percent. As a result,
economists most likely will predict that
a. GDP will increase in 2011.
b. the producer price index will increase by more than 1.5 percent in
c. interest rates will decrease in the future.
d. the consumer price index will increase in the future.
Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from
drinking the third soda
a. can be thought of as the total benefit Bridget enjoys by drinking three sodas minus
the total benefit she would have enjoyed by drinking just two sodas.
b. determines Bridget’s willingness to pay for the third soda.
c. is likely different from the marginal benefit provided to Bridget by the second soda.
d. All of the above are correct.
If the real exchange rate between the U.S. and Japan is 1, the nominal exchange rate is
100 yen per U.S. dollar and the price of chicken in the U.S. is $2.50 per pound, what is
the price of chicken in Japan?
a. 400 yen per pound
b. 250 yen per pound
c. 100 yen per pound
d. 40 yen per pound
A tax burden falls more heavily on the side of the market that
a. has a fewer number of participants.
b. is more inelastic.
c. is closer to unit elastic.
d. is less inelastic.
Figure 8-12
Refer to Figure 8-12. Which of the following statements is correct?
a. Supply 1 is more elastic than supply 2.
b. Demand 2 is more elastic than demand 1.
c. Demand 1 is more elastic than supply 1.
d. All of the above are correct.
Figure 3-8
Chile’s Production Possibilities Frontier Colombia’s Production Possibilities
Frontier
Refer to Figure 3-8. At which of the following prices would both Chile and Colombia
gain from trade with each other?
a. 6 pounds of soybeans for 9 pounds of coffee
b. 8 pounds of soybeans for 20 pounds of coffee
c. 11 pounds of soybeans for 33 pounds of coffee
d. Chile and Colombia could not both gain from trade with each other at any price.
Table 4-3
Refer to Table 4-3. For whom is the good a normal good?
a. Bert only
b. Grover only
c. Bert, Ernie, Grover, and Oscar
d. This cannot be determined from the table.
You want to have $100,000 in five years. If the interest rate is 8 percent, about how
much do you need to have today?
a. $66,225.25
b. $67,556.42
c. $68,058.32
d. $71,428.57
Suppose an economy produces only cheese and fish. In 2010, 20 units of cheese are
sold at $5 each and 8 units of fish are sold at $50 each. In 2009, the base year, the price
of cheese was $10 per unit and the price of fish was $75 per unit. For 2010,
a. nominal GDP is $500, real GDP is $800, and the GDP deflator is 62.5.
b. nominal GDP is $500, real GDP is $800, and the GDP deflator is 160.
c. nominal GDP is $800, real GDP is $500, and the GDP deflator is 62.5.
d. nominal GDP is $800, real GDP is $500, and the GDP deflator is 160.
A tax levied on the sellers of blueberries
a. increases sellers’ costs, reduces profits, and shifts the supply curve up.
b. increases sellers’ costs, reduces profits, and shifts the supply curve down.
c. decreases sellers’ costs, increases profits, and shifts the supply curve up.
d. decreases sellers’ costs, increases profits, and shifts the supply curve down.
Figure 8-6
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-6. What happens to consumer surplus when the tax is imposed in this
market?
a. Consumer surplus falls by $3,600.
b. Consumer surplus falls by $2,700.
c. Consumer surplus falls by $1,800.
d. Consumer surplus falls by $900.
Economists have found that union workers earn about 30 to 40 percent more than
similar workers who do not belong to unions.
Necessities tend to have inelastic demands, whereas luxuries tend to have elastic
demands.
Differences in opportunity cost allow for gains from trade.
According to the Friedman-Phelps analysis, in the long run actual inflation equals
expected inflation and unemployment is at its natural rate.
A price ceiling set below the equilibrium price causes quantity demanded to exceed
quantity supplied.
Because resources are scarce, a society cannot give all individuals the standard of living
to which each aspires.
Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because
there is a consensus that the relevant elasticities of demand and supply are very low.
In most countries today, many goods and services consumed are imported from abroad,
and many goods and services produced are exported to foreign customers.
An increase in the government budget deficit shifts the demand for loanable funds to
the right.
In countries where women are discriminated against, policies that increase the
likelihood of career success and educational opportunities for women are likely to
decrease the birth rate.
Most economists support the infant-industry argument because it is so easy to
implement in practice.
An increase in the price of pizza will shift the demand curve for pizza to the left.
To state that public saving is equal to investment, for a closed economy, is to state an
accounting identity.
Taxes on labor tend to encourage the elderly to retire early.
Renters of rent-controlled apartments will likely benefit from both lower rents and
higher quality of apartments.
Whenever a determinant of supply other than price changes, the supply curve shifts.