An institution that issues a currency at a fixed rate in exchange for an equivalent
amount of another designated currency and invests the funds in bonds and liquid assets
that provide 100 percent backing for the currency units issued is called
a. a central bank.
b. the International Monetary Fund.
c. the World Trade Organization.
d. a currency board.
Which of the following is true of public goods?
a. They can only be supplied by the government.
b. They will tend to be supplied efficiently by the private sector when markets are
competitive.
c. It is difficult to establish a one-to-one link between payment and receipt of such
goods.
d. From an efficiency standpoint, private markets will tend to supply an excessively
large amount of public goods.
In the short run, the marginal cost curve crosses the average total cost curve at
a. a point just below the average fixed cost curve.
b. the minimum point on the average total cost curve.
c. the maximum point of the average variable cost curve.
d. all of the above points.
Compared to the profit-maximizing outcome, average cost pricing in natural monopoly
leads to
a. a higher price.
b. decreased consumer surplus.
c. the elimination of economic profit.
d. less output.
In the aggregate demand/aggregate supply model, an increase in a country’s sustainable
potential output is represented by
a. an increase in aggregate demand.
b. a decrease in aggregate demand.
c. an increase in long-run aggregate supply.
d. an increase in the general level of prices.
Assume a competitive price-searcher firm is earning an economic profit. The marginal
revenue from selling an additional unit is $30 and the marginal cost of producing that
additional unit is $23. The firm should
a. change neither its price nor its output level
b. reduce its price and increase its output level
c. increase its price and reduce its output level
d. reduce both its price and its output level
e. increase both its price and its output level
Which of the following is the best definition of economics?
a. An investigation of the quantities and prices of the various goods produced by the
nations of the world.
b. A study of why inflation and unemployment periodically plague the U.S. economy.
c. An analysis of how individuals and societies deal with the problem of scarcity.
d. An examination of the role that money plays in the economy.
e. A study of how goods and services are distributed throughout the world.
How does an additional individual’s consumption of a good that is
nonrival-in-consumption, such as a radio broadcast, affect the amount of the good
available to other consumers?
a. The amount available to others will decline.
b. The amount available to others will increase.
c. The amount available to others is unaffected.
d. The amount available to others is eliminated.
In the long run, the primary effect of rapid monetary growth is
a. lower nominal interest rates.
b. reduced unemployment.
c. inflation.
d. an increase in real output.
Which of the following would lead to an increase in the demand for designer blue
jeans?
a. a decrease in the price of designer blue jeans
b. a reduction in the price of the cotton used to produce the jeans
c. an increase in the income of youthful Americans
d. an increase in the price of the cotton used to produce the jeans
Your professor loves her work, teaching economics. She has been offered other
positions in the corporate world that would increase her income by 25 percent, but she
has decided to continue working as a professor. Her decision would not change unless
a. the marginal cost of teaching increased.
b. the marginal benefit of teaching increased.
c. the marginal cost of teaching decreased.
d. the marginal benefit of a corporate job decreased.
For a major country with extensive capital flows, what is the effect of an increase in
interest rates?
a. There will be an inflow of capital, a currency depreciation, and increased net exports.
b. There will be an inflow of capital, a currency depreciation, and reduced net exports.
c. There will be an outflow of capital, a currency depreciation, and increased net
exports.
d. There will be an inflow of capital, a currency appreciation, and reduced net exports.
Which of the following factors explains why managers of government agencies have
little incentive to achieve operational efficiency?
a. Public-sector managers have no fear of bankruptcy when operational efficiency is not
achieved.
b. Public-sector managers face fierce competition.
c. It is relatively easy for voters to detect operational inefficiency in the public sector
and do something to correct it.
d. All of the above explain why government agencies have little incentive to be
efficient.
A monopolist will maximize profits by
a. setting his price as high as possible.
b. setting his price at the level that will maximize per-unit profit.
c. producing the output where marginal revenue equals marginal cost.
d. producing the output where price equals marginal cost.
What prompted the large increase in tax rates in 1932 in the midst of an economic
recession?
a. concern that inflation would rise due to increases in real output and aggregate
demand
b. expansionary fiscal policy designed to stimulate aggregate demand
c. the Keynesian view that taxes should be increased during a recession
d. the view that the federal government should maintain a balanced budget
Combined federal, state, and local government expenditures in the United States were
approximately 9 percent of the gross domestic product (GDP) in 1930. How large were
government expenditures as a share of GDP in 2012?
a. approximately 15 percent
b. approximately 25 percent
c. approximately 30 percent
d. approximately 38 percent
An appreciation of one’s currency means that
a. the country’s exports will become less expensive.
b. the country’s imports will become more expensive.
c. the country’s imports will become less expensive.
d. it now requires more of this currency in exchange for one unit of another currency.
e. it now requires less units of other currencies in exchange for one unit of this currency.
When the inflation rate of a country is high over a lengthy time period,
a. the year-to-year variability in the rate of inflation is generally small.
b. the year-to-year variability in the rate of inflation is generally large.
c. decision makers will be able to forecast future rates of inflation accurately.
d. there is no reason to believe that the inflation will exert harmful side effects on real
output and the prosperity of the country.
Figure 17-13
In Figure 17-13, if the world price of a baseball is $3 and a tariff of $1 per baseball is
imposed in the United States, which area represents the amount of tariff revenue the
United States government collects?
a. a
b. b
c. c
d. f
e. e
Figure 2-9
Refer to Figure 2-9. The opportunity cost of obtaining 15 additional toasters by moving
from point D to point C is
a. 10 toothbrushes.
b. 20 toothbrushes.
c. 30 toothbrushes.
d. none of the above; the economy cannot move from point D to point C.
If the required reserve ratio were decreased,
a. the money supply would tend to decrease, but the outstanding loans of banks would
tend to increase.
b. both the money supply and the outstanding loans of banks would tend to decrease.
c. the money supply would tend to increase, but the outstanding loans of banks would
tend to decrease.
d. both the money supply and the outstanding loans of banks would tend to increase.
According to the invisible hand principle, competitive markets generally
a. bring the self-interest of individuals into harmony with the efficient allocation of
resources, even though centralized planning of economic activities is absent.
b. bring the self-interest of individuals into harmony with the efficient allocation of
resources when the behavior of individuals is directed by democratic centralized
planning.
c. require central direction; otherwise, the actions of self-interested individuals will
conflict with the general interests of society.
d. promote the economic welfare of self-interested producers at the expense of
unorganized groups such as consumers and taxpayers.
When the Fed sells Treasury Bonds on the open market, it will tend to
a. decrease the money supply and raise interest rates.
b. decrease the money supply and lower interest rates.
c. increase the money supply and raise interest rates.
d. increase the money supply and lower interest rates.
Other things constant, as the price of a resource increases,
a. the quantity of the resource demanded falls.
b. the quantity of the resource supplied falls.
c. the price of the product the resource helps to produce falls.
d. there is less of an incentive for users of the resource to find substitute resources.
Figure 3-16
Refer to Figure 3-16. When the price is P1, producer surplus is
a. A.
b. C.
c. A + B.
d. C + D.
Sellers will tend to be most concerned with customer satisfaction when
a. it is difficult for the customer to evaluate product quality.
b. they depend on repeat customers for most of their business.
c. they sell primarily to tourists.
d. they are a monopoly protected from competition by government licensing.
A picture frame company operates in a competitive price-searcher market. Its short-run
equilibrium price is $80 and its ATC is $65. It sells 100 picture frames a week. From
this we can conclude
a. this firm is making a normal profit.
b. other picture frame companies will want to exit the market.
c. there are no other picture frame companies in the area.
d. economic profits are $1,500.
e. total profits are being maximized.
Which of the following did not contribute to the severity of the Great Depression?
a. a sharp reduction in the money supply during the early 1930s
b. a large tax increase (to balance the budget) in the early 1930s
c. substantial increases in the tariff rates on imported goods
d. a reduction in government expenditures and a substantial cut in personal income tax
rates during 1932 and again in 1936
A price index like the CPI, which uses a fixed basket of goods from one year to the
next, will tend to overstate inflation because
a. producers are likely to change the number of goods they sell from year to year.
b. producers will generally reduce the quality of goods as prices increase over time.
c. consumers will tend to substitute away from goods that become more expensive.
d. consumers will usually reduce their consumption of goods when they become
relatively cheaper.
Suppose that the nominal value of GDP increased by approximately 2 percent during a
given year, but real GDP decreased by 3 percent. Which of the following best explains
these events?
a. The money supply decreased by approximately 5 percent.
b. Prices fell by approximately 5 percent.
c. Prices increased by approximately 5 percent.
d. The real productive capacity of the economy increased by approximately 5 percent.
During 1980-2009, the countries achieving the most rapid growth of real GDP were
nearly all
a. high-income developed economies.
b. low-income less developed economies at the beginning of the period.
c. South American economies.
d. European economies.
e. African economies.
As more and more resources are dedicated to an activity
a. the benefits will increase proportionately.
b. the benefits will become smaller and smaller while the costs will rise.
c. the demand for that activity will increase.
d. the costs will be offset by the benefits received from the activity.
The employment/population ratio _____ between 1980 and 2000, but this ratio has
_______ since 2000. (fill in the blanks)
a. fell; risen
b. was virtually constant; risen
c. rose; been virtually constant
d. rose; fallen