Miller’s Dairy produces 960 gallons of milk per day. Each milker at the dairy works 8
hours per day and produces the same number of gallons of milk per hour. If the Dairy’s
productivity is 12 gallons of milk per hour of labor, then how many milkers does the
shop employ?
a. 8
b. 10
c. 80
d. 120
One year a country has positive net exports. The next year it still has positive but larger
net exports
a. its trade surplus fell.
b. its trade surplus rose.
c. its trade deficit fell.
d. its trade deficit rose
When two countries trade with one another, it is most likely because
a. the wealthy people in each of the two countries are able to benefit, through trade, by
taking advantage of other people who are poor.
b. some people involved in the trade do not understand that one of the two countries
will become worse-off because of the trade.
c. the opportunity costs of producing various goods are identical for the two countries.
d. the two countries wish to take advantage of the principle of comparative advantage.
The consumer price index is
a. not very useful as a measure of the cost of living.
b. a perfect measure of the cost of living.
c. a useful measure, but not a perfect measure, of the cost of living.
d. not used as a measure of the cost of living.
If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other
things the same
a. the trade deficit rises and net capital outflow rises.
b. the trade deficit rises and net capital outflow falls.
c. the trade deficit falls and net capital outflows rise.
d. the trade deficit falls and net capital outflows fall.
In 1972, one could buy a bag of chips, a pound of hamburger, a package of buns, and a
small bag of charcoal for about $2.50. If the same goods today cost $6.00, then which
pair of CPIs would make the cost in today’s dollars the same for both years?
a. 60 in 1972 and 150 today
b. 65 in 1972 and 156 today
c. 75 in 1972 and 160 today
d. 90 in 1972 and 145.8 today
A tax cut shifts aggregate demand
a. by more than the amount of the tax cut.
b. by the same amount as the tax cut.
c. by less than the tax cut.
d. None of the above is necessarily correct.
Figure 13-2. The figure depicts a supply-of-loanable-funds curve and two
demand-for-loanable-funds curves.
Refer to Figure 13-2. Which of the following events would shift the demand curve
from D1 to D2?
a. The government goes from running a budget deficit to running a budget surplus.
b. Firms become optimistic about the future and, as a result, they plan to increase their
purchases of new equipment and construction of new factories.
c. A change in the tax laws encourages people to consume less and save more.
d. A change in the tax laws encourages people to consume more and save less.
In responding to the Phillips curve hypothesis, Friedman argued that the Fed can peg
the
a. unemployment rate.
b. inflation rate.
c. growth rate of real national income.
d. All of the above are correct.
Using the midpoint method, the price elasticity of demand for a good is computed to be
approximately 2. Which of the following events is consistent with a 1 percent increase
in the price of the good?
a. The quantity of the good demanded decreases from 250 to 150.
b. The quantity of the good demanded decreases from 200 to 100.
c. The quantity of the good demanded decreases by 0.05 percent.
d. The quantity of the good demanded decreases by 0.2 percent.
Figure 7-21
Refer to Figure 7-21. Sellers whose costs are less than the equilibrium price are
represented by which line segment?
a. AC.
b. CK.
c. BC.
d. CH.
If there is a trade deficit, then
a. saving is greater than domestic investment and Y > C + I + G.
b. saving is greater than domestic investment and Y < C + I + G.
c. saving is less than domestic investment and Y > C +I + G.
d. saving is less than domestic investment and Y < C + I + G.
The “yardstick” people use to post prices and record debts is called
a. a medium of exchange.
b. a unit of account.
c. a store of value.
d. liquidity.
The opportunity cost of holding money
a. decreases when the interest rate increases, so people desire to hold more of it.
b. decreases when the interest rate increases, so people desire to hold less of it.
c. increases when the interest rate increases, so people desire to hold more of it.
d. increases when the interest rate increases, so people desire to hold less of it.
Catherine buys and sells real estate. Two weeks ago, she paid $300,000 for a house on
Pine Street, intending to spend $50,000 on repairs and then sell the house for $400,000.
Last week, the city government announced a plan to build a new landfill on Pine Street
just down the street from the house Catherine purchased. As a result of the city’s
announced plan, Catherine is weighing two alternatives: She can go ahead with the
$50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs and
sell the house as it is for $250,000. She should
a. keep the house and live in it.
b. go ahead with the $50,000 in repairs and sell the house for $290,000.
c. forgo the repairs and sell the house as it is for $250,000.
d. move the house from Pine Street to a more desirable location, regardless of the cost
of doing so.
If unemployment is below its natural rate, what happens to move the economy to
long-run equilibrium?
a. Inflation expectations rise which shifts the short-run Phillips curve to the right.
b. Inflation expectations rise which shifts the short-run Phillips curve to the left.
c. Inflation expectations fall which shifts the short-run Phillips curve to the right.
d. Inflation expectations fall which shifts the short-run Phillips curve to the left.
Which of the following would be considered physical capital?
a. the available knowledge on how to make semiconductors
b. a taxi-cab driver’s knowledge of the fastest routes to take
c. bulldozers, backhoes and other construction equipment
d. All of the above are correct.
A favorable supply shock causes output to
a. rise. To counter this a central bank would increase the money supply.
b. rise. To counter this a central bank would decrease the money supply.
c. fall. To counter this a central bank would increase the money supply.
d. fall. To counter this a central bank would decrease the money supply.
There are very few, if any, good substitutes for motor oil. Therefore, the
a. demand for motor oil would tend to be inelastic.
b. demand for motor oil would tend to be elastic.
c. demand for motor oil would tend to respond strongly to changes in prices of other
goods.
d. supply of motor oil would tend to respond strongly to changes in people’s tastes for
large cars relative to their tastes for small cars.
Suppose roses are currently selling for $20 per dozen, but the equilibrium price of roses
is $30 per dozen. We would expect a
a. shortage to exist and the market price of roses to increase.
b. shortage to exist and the market price of roses to decrease.
c. surplus to exist and the market price of roses to increase.
d. surplus to exist and the market price of roses to decrease.
Table 11-12. Will’s expenditures on food for three consecutive years, along with other
values, are presented in the table below.
Refer to Table 11-12. Suppose Will’s 2009 food expenditures in 2011 dollars amount to
$5,750. Then x, the consumer price index for 2011, has a value of
a. 184.0.
b. 185.8.
c. 187.5.
d. 189.4.
When the money market is drawn with the value of money on the vertical axis, as the
price level increases which of the following increases?
a. the quantity of money demanded and the quantity of money supplied
b. the quantity of money demanded but not the quantity of money supplied
c. the quantity of money supplied but not the quantity of money demanded
d. neither the quantity of money supplied nor the quantity of money demanded
If a country changes its corporate tax laws so that domestic businesses build and
manage more business in other countries, then the net capital outflow of that country
a. and the net capital outflow of other countries rise.
b. rises and the net capital outflow of other countries fall.
c. falls and the net capital outflow of other countries rise.
d. None of the above are correct.
According to Adam Smith, the success of decentralized market economies is primarily
due to
a. the basic benevolence of society.
b. society’s legal system.
c. individuals’ pursuit of self-interest.
d. partnerships that are forged between business and government.
Which of the following reduces the potential burden of an increase in debt on future
generations?
a. the growth rate of output is high
b. in response to increased debt, parents save more to leave their children larger
bequests
c. some of the current spending benefits future taxpayers
d. All of the above are correct.
Domestic producers of a good become better off, and domestic consumers of a good
become worse off, when a country begins allowing international trade in that good and
a. the country becomes an importer of the good as a result.
b. the world price exceeds the domestic price of the good that prevailed before
international trade was allowed.
c. other countries have a comparative advantage, relative to the country in question, in
producing the good.
d. total surplus does not change as a result.
Which of the following is not held constant in a demand schedule?
a. income
b. tastes
c. price
d. expectations
Figure 2-8
Panel (a) Panel (b)
Refer to Figure 2-8, Panel (a). Production is
a. possible at points J, K, L, and M, but efficient only at points J, L, and M.
b. possible at points J, K, L, and M, but efficient only at point K.
c. possible at points J, L, M, and N, but efficient only at points J, L, and M.
d. possible at points J, L, M, and N, but efficient only at point N.
Which of the following is not true when the price of a good or service falls?
a. Buyers who were already buying the good or service are better off.
b. Some new buyers, who are now willing to buy, enter the market.
c. The total consumer surplus in the market increases.
d. The total value of purchases before and after the price change is the same.
Suppose that Chile has a government budget surplus, and then goes into deficit. This
change would
a. increase national saving and shift Chile’s supply of loanable funds left.
b. increase national saving and shift Chile’s demand for loanable funds right.
c. decrease national saving and shift Chile’s supply of loanable funds left.
d. decrease national saving and shift Chile’s demand for loanable funds right.
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-7. Which of the following statements is correct?
a. Total surplus before the tax is imposed is $45.
b. After the tax is imposed, consumer surplus is 25 percent of its pre-tax value.
c. After the tax is imposed, producer surplus is 36 percent of its pre-tax value.
d. All of the above are correct.