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Suppose a product suddenly loses popularity and the firms producing the product begin
to realize large losses. As firms exit the market, the equilibrium price in the market will:
A) increase and make the remaining firms stay in business.
B) decrease and make the remaining firms stay in business.
C) decrease further and push more firms out of business.
D) decrease further while making the remaining firms realize profits again.
Many economists believe that technological progress in the U.S. would be accelerated
if:
A) less money were spent in funding research and development in defense-related areas
and more money were spent in other areas.
B) the U.S. were to increase its capital stock.
C) less money were spent in funding research and development of production
technology and more money were spent in education.
D) the U.S. government were to become the most prominent funder of research and
development projects.
According to the real business cycle theory, technological advances:
A) increase the productivity of labor, which causes real wages and output to decline.
B) decrease the productivity of labor, which causes real wages and output to increase.
C) increase the productivity of labor, which causes real wages to increase and output to
decline.
D) increase the productivity of labor, which causes real wages and output to increase.
Recall the Application about growth in China and India to answer the following
question(s). From 1978 to 2004, China grew at a rate of 9.3 percent per year and India
grew at a rate of 5.4 percent per year.
According to this Application, China's and India's GNP per capita are ________ U.S.
GNP per capita.
A) now greater than
B) still significantly less than
C) now equal to
D) within 5 percentage points of
A rise in the interest rate:
A) decreases the opportunity cost of investing.
B) increases firms' desires to invest.
C) increases the opportunity cost of investing.
D) none of the above
The opportunity cost of something is
A) what you sacrifice to get it.
B) the price you must pay to purchase it.
C) the real rate of interest.
D) what you get when you give something up.
Assuming all excess reserves are loaned out, currency holdings by the public are zero,
and a reserve ratio of 5 percent, an initial deposit of $10,000 will lead to a total increase
in deposits of
A) $500.
B) $10,000.
C) $50,000.
D) $200,000.
During a recession, automatic stabilizers cause the federal budget deficit to:
A) decrease.
B) either increase or decrease.
C) remain unchanged.
D) increase.
If the demand for one good decreases when the price of another good increases, the two
goods are ________ goods.
A) normal
B) inferior
C) complementary
D) substitute
Suppose the exchange rate between the United States and France changed from $1 = 5
euros to $1 = 4 euros, which of the following statements is true?
A) The dollar depreciated.
B) The euro appreciated.
C) The price of euros in dollars increased.
D) all of the above
Suppose that a new advertising campaign extolling the virtues of apple juice is
successful and a major freeze destroys half of the country's apple crop. What happens to
the price and quantity of apple juice?
A) The equilibrium price of apple juice might rise or fall and the equilibrium quantity
of apple juice falls.
B) The equilibrium price of apple juice might rise or fall and the equilibrium quantity of
apple juice rises.
C) The equilibrium price of apple juice rises and the equilibrium quantity of apple juice
might rise or fall.
D) The equilibrium price of apple juice falls and the equilibrium quantity of apple juice
might rise or fall.
Small time deposits of $100,000 or less are classified as
A) part of M1.
B) part of M2.
C) FDIC insured.
D) highly liquid.
Which of the following is NOT a component of gross domestic product?
A) net exports
B) government purchases
C) purchases by consumers of used goods
D) purchases by consumers of finished goods
Table 2.2 Julianne runs a business and needs to
decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying
open for each additional hour. Suppose that Julianne's marginal benefit of staying open
per hour is $12. If she is following the marginal principle, how many hours should
Julianne stay open?
A) 3 hours
B) 4 hours
C) 6 hours
D) 7 hours
