Activist capitalists who seek out or create earnings opportunities and assume risk, for
which they receive profits, are called
a. rent seekers.
b. entrepreneurs.
c. muckrakers.
d. marginalists.
Critics of supply-side economics argue that
a. tax cuts do not affect supply, only demand.
b. supply-siders exaggerate the effects of tax cuts.
c. incentives have no effect on behavior.
d. the goals of supply-siders are not supported by most economists.
The rate at which one currency is traded for another is called a(n)
a. prime rate.
b. trade rate.
c. exchange rate.
d. money rate.
The legal system imposes large financial penalties on firms caught violating
Environmental Protection Agency guidelines. The EPA’s standards program is thus an
example of a
a. market-based approach to reducing pollution.
b. system of emissions taxes.
c. system of emissions permits.
d. direct-control system enforced through the courts.
A bottle of wine costs $8 and a quiche costs $5. At Robert’s present levels of
consumption, he spends all his income and receives marginal utility of $10 from the last
bottle of wine and marginal utility of $4 from the last quiche. To maximize his total
utility, Robert should
a. buy less wine and more quiche.
b. buy more wine and less quiche.
c. spend all of his money on wine.
d. change his spending pattern until he buys 8/5ths as much wine as quiche.
A useful economic model
a. deals only with possibilities that actually occurred.
b. makes only realistic assumptions.
c. may make some unrealistic assumptions in order to simplify a complex reality.
d. should avoid drawing conclusions that have public policy implications, since
economics is not equipped to make value judgments.
Growth in GDP systematically understates the growth in national well being because
a. ecological costs are netted out of GDP.
b. “bads” as well as “goods” get included in GDP.
c. investment is not included in GDP.
d. as a country gets richer, leisure time increases.
Regarding government manipulation of the interest rate, all of these statements are
correct, except:
a. To address business fluctuations, governments may reduce interest rates to induce
people to borrow.
b. Such manipulations may give little thought to the effects on resource allocation
between present and future.
c. Economists agree with the concept of using of interest rates to allocate resources
among different time periods.
d. Generally, the price system reflects public preference between present and future
resource allocation.
Firms in perfect competition are often described as price
a. takers.
b. makers.
c. setters.
d. leaders.
An example of a quota that protects an American industry is the quota on
a. tourists entering the country.
b. sugar imports.
c. sales of oil products to foreign countries.
d. purchases of military hardware to foreign dictators.
e. All of the above are examples of protective quotas.
Economics examines the options open to households and business firms, but ignores the
options of governments and entire societies.
a. True
b. False
Taxes on capital gains and interest decline as inflation rates increase.
a. True
b. False
In a move to free the economy from unnecessary regulation, Congress decides to
remove sugar price supports. What would most likely happen to the number of
producers of sugar?
a. It would decrease, because sugar prices would fall.
b. It would decrease, because sugar prices would rise.
c. It would increase, because sugar prices would fall.
d. It would increase, because sugar prices would rise.
The labor market is composed of
a. a relatively homogeneous supply of labor and downward-sloping demand curve.
b. a vertical supply curve for labor and relatively elastic market demand.
c. many submarkets for labor of different types.
d. more teenagers than any other age group of labor.
The production possibilities frontier for a country is usually drawn
a. as a straight line, sloping downward.
b. as a straight line, sloping upward.
c. bowed outward from the origin.
d. bowed inward toward the origin.
e. as a dotted line when sloping downward and as a full line when sloping upward.
For a given growth rate in aggregate supply, slower growth in aggregate demand will
lead to lower inflation.
a. True
b. False
In the long run, the chief determinant of exchange rate changes is a change in
a. interest rates.
b. real GDP.
c. the price of gold.
d. price levels.
Some politicians argue that reducing the corporate income tax will increase business
investment spending.
a. True
b. False
Figure 17-5
The data illustrated in Figure 17-5 would be most representative of which decade?
a. the 1960s
b. the 1970s
c. the 1980s
d. the 1990s
The 1960s are remembered by most economists as a period of
a. very high rates of inflation.
b. very high rates of unemployment.
c. price controls and low inflation.
d. noninflationary growth.
e. all of the above.
In perfect competition, marginal revenue always equals
a. total revenue.
b. price.
c. average cost.
d. marginal fixed cost.
If fluctuations in economic activity come from the supply side, higher inflation is
associated with
a. lower interest rates.
b. structural deficits.
c. higher rates of unemployment.
d. lower rates of unemployment.
Empirical research suggests that the steepness of the aggregate supply curve depends on
the
a. size of the multiplier.
b. interest rate.
c. level of wage rate.
d. amount of excess capacity in the economy.
One of the main conclusions of Keynes in The General Theory of Employment, Interest,
and Money is that the economy
a. will usually be at full employment.
b. will not automatically gravitate to full employment.
c. will automatically move quickly toward full employment without inflation.
d. is usually on the verge of a major depression or hyperinflation.
A company may borrow money from
a. banks.
b. insurance companies.
c. other firms.
d. All of the above are correct.
The share of GDP going to federal taxes
a. has been about 16 to 20 percent for the past 40 years.
b. has been about 35 percent for the past 40 years.
c. was about 40 percent until the early 1980s and has dropped greatly since then.
d. has risen steadily in the past 40 years to about 35 percent.
In a laissez-faire economy, the price system plays a key role in
a. selecting outputs.
b. selecting inputs.
c. distributing outputs.
d. All of the above are correct.
If AS increases at a faster rate than AD, the result will be
a. demand-side inflation.
b. supply-side inflation.
c. falling prices.
d. stable prices.
Supply-side policy is based on the assumption that people’s economic behavior is not
affected by taxes.
a. True
b. False
The government used the Herfindahl-Hirschman index to determine if a proposed
merger will lead to excessive concentration.
a. True
b. False
The federal agency that monitors and regulates the stock market is the
a. Chicago Mercantile Exchange.
b. Securities and Exchange Commission.
c. Department of Justice.
d. Federal Trade Commission.