If a person has a comparative advantage in some activity, she must have an absolute
advantage in that activity as well.
Recall Application 3, “Civil Liberties and the Efficiency of Government,” to answer the
following questions:
The returns to public sector investment is highest in poor countries like North Korea
and Afghanistan, where measures of civil liberties are lower.
Liabilities plus net worth equal assets.
In the long run, output is determined solely by the supply of capital and the supply of
labor, not the price level.
If the economy is operating above full employment, wages in the economy will rise.
People will buy more of an inferior good when their income decreases.
Crowding out refers to the reduction of investment that can occur when government
spending rises.
Deposits in savings accounts are included in
A) M1.
B) M2.
C) both M1 and M2.
D) neither M1 nor M2.
Suppose that Zambia, a country in Africa, experienced an average GNP per capita
growth rate of -0.83 percent between 1960 and 2008. Based on this information, which
of the following is true?
A) GNP per person in 1960 is higher than in 2008.
B) GNP in 1960 is higher than in 2008.
C) GNP per person in 1960 is lower than in 2008.
D) Population in 1960 is higher than in 2008.
Figure 7.1 Please refer to Figure 7.1. Suppose the economy is at point A. An increase in
the capital stock will:
A) move the economy to point B.
B) move the economy to point C.
C) move the economy to point D.
D) keep the economy at point A
This application addresses the idea that
A) financial intermediaries facilitate investment spending.
B) government spending is needed to pull an economy out of a recession.
C) investment spending is the least stable component of GDP.
D) consumer spending is the most stable component of GDP.
Table 11.6 Refer to Table 11.6. In this example, the tax multiplier is:
A) 1.
B) -2.
C) 0.5.
D) -1.
Table 13.4 Refer to Table 13.4. If the required reserve ratio is 5%, First Charter Bank:
A) has no excess reserves.
B) has too few reserves on hand.
C) is meeting its required reserve ratio and has no excess reserves.
D) has excess reserves of $100,000.
Deposit insurance:
A) protects banks in the event of a bank failure.
B) protects depositors in the event of bank failures.
C) provides life insurance to depositors.
D) all of the above
Whenever the unemployment rate is pushed ________ the natural rate, wages begin to
________, thus pushing ________.
A) above; fall; down aggregate output
B) above; fall; down costs
C) above; rise; up costs
D) below; fall; down costs
Recall the Application about the method used by the Commerce Department to
determine if imported products are being sold at lower prices in the United States than
in their countries of origin to answer the following question(s).
Recall the Application. Firms that sell products at a lower price in foreign countries
than they do in their domestic markets are said to be engaging in
A) dumping.
B) protecting infant industries.
C) learning by doing.
D) voluntarily restricting exports.
If 1999 is the base year and the inflation rate between 1999 and 2000 is -12%, the price
index in 2000 must be equal to:
A) 120.
B) -120.
C) 88.
D) cannot be determined from this information because the base year is not known
An increase in the level of real GDP in the economy leads to
A) a leftward shift in the demand for money curve.
B) a rightward shift in the demand for money curve.
C) a leftward movement along the demand for money curve.
D) a rightward movement along the demand for money curve.
A centrally planned economy has a planning authority that decides:
A) what products to produce.
B) how the products are produced.
C) who receives the products.
D) all of the above.
Recall the Application about the impact Chinese imports have on U.S. labor markets to
answer the following question(s).
According to this Application, those communities that were more exposed to imports
had larger increases in workers receiving
A) food stamps.
B) unemployment insurance.
C) disability payments.
D) all of the above
Figure 18.1
Refer to Figure 18.1. The opportunity cost of bicycles in Canada is
A) 1/2 of a hang glider.
B) 2/3 of a hang glider.
C) 2 hang gliders.
D) 4 hang gliders.