A tariff on a product makes
a. domestic sellers better off and domestic buyers worse off.
b. domestic sellers worse off and domestic buyers worse off.
c. domestic sellers better off and domestic buyers better off.
d. domestic sellers worse off and domestic buyers better off.
Figure 8-9
The vertical distance between points A and C represent a tax in the market.
Refer to Figure 8-9. The amount of the tax on each unit of the good is
a. $20.
b. $200.
c. $300.
d. $500.
When a country has a comparative advantage in producing a certain good,
a. the country should import that good.
b. the country should produce just enough of that good for its own consumption.
c. the country’s opportunity cost of that good is high relative to other countries’
opportunity costs of that same good.
d. None of the above is correct.
Which of the following policy actions shifts the aggregate-demand curve?
a. an increase in the money supply
b. an increase in taxes
c. an increase in government spending
d. All of the above are correct.
Figure 3-11
The graph below represents the various combinations of ham and cheese (in pounds)
that the nation of Bonovia could produce in a given month.
Refer to Figure 3-11. In the nation of Cropitia, the opportunity cost of a pound of ham
is 3 pounds of cheese. Bonovia and Cropitia both can gain from trading with one
another if one pound of ham trades for
a. 0.40 pounds of cheese.
b. 0.55 pounds of cheese.
c. 0.75 pounds of cheese.
d. All of the above are correct.
Which of the following sequences best represents the crowding-out effect?
a. government purchases GDP supply of money
equilibrium interest rate quantity of goods and services demanded
b. government purchases GDP demand for money
equilibrium interest rate quantity of goods and services demanded
c. government purchases GDP demand for money
equilibrium interest rate quantity of goods and services demanded
d. taxes GDP demand for money equilibrium
interest rate quantity of goods and services demanded
Which of the following is correct?
a. In the U.S. the natural rate of unemployment is frequently near 2%.
b. The natural rate of unemployment fluctuates more than the cyclical rate of
unemployment.
c. The cyclical rate of unemployment is sometimes below the natural rate of
unemployment.
d. None of the above is correct.
Which of the following statements about GDP is correct?
a. Nominal GDP values production at current prices, whereas real GDP values
production at constant prices.
b. Nominal GDP values production at constant prices, whereas real GDP values
production at current prices.
c. Nominal GDP values production at market prices, whereas real GDP values
production at the cost of the resources used in the production process.
d. Nominal GDP values production at the cost of the resources used in the production
process, whereas real GDP values production at market prices..
Which of the following properly describes the interest-rate effect?
a. A higher price level leads to higher money demand; higher money demand leads to
higher interest rates; a higher interest rate increases the quantity of goods and services
demanded.
b. A higher price level leads to higher money demand; higher money demand leads to
lower interest rates; a higher interest rate reduces the quantity of goods and services
demanded.
c. A lower price level leads to lower money demand; lower money demand leads to
lower interest rates; a lower interest rate reduces the quantity of goods and services
demanded.
d. A lower price level leads to lower money demand; lower money demand leads to
lower interest rates; a lower interest rate increases the quantity of goods and services
demanded.
Manufacturers of Weightbegone are concerned that genetic advances in weight control
might reduce the demand for their diet snacks. This is an example of
a. firm-specific risk, which will likely raise shareholders’ demand for higher return.
b. firm-specific risk, which will likely not likely raise shareholders’ demand for higher
return.
c. market risk, which will likely raise shareholders’ demand for higher return.
d. market risk, which will likely not raise shareholders’ demand for higher return.
Assume that consumers consider rice and potatoes to be substitutes, so that when the
price of rice rises, consumers purchase less rice and more potatoes. When the CPI is
computed following the increase in the price of rice, it takes into account
a. the increase in the price of rice.
b. the decrease in the quantity of rice purchased and the increase in the quantity of
potatoes purchased.
c. Both (a) and (b) are correct.
d. None of the above is correct.
In the open-economy macroeconomic model, the market for loanable funds equates
national saving with
a. domestic investment.
b. net capital outflow.
c. the sum of national consumption and government spending.
d. the sum of domestic investment and net capital outflow.
Scenario 21-2. The following facts apply to a small, imaginary economy.
Consumption spending is $5,200 when income is $8,000.
Consumption spending is $5,536 when income is $8,400.
Refer to Scenario 21-2. In response to which of the following events could aggregate
demand increase by $1,500?
a. A stock-market boom stimulates consumer spending by $300, and there is an
operative crowding-out effect.
b. A stock-market boom stimulates consumer spending by $225, and there is an
operative crowding-out effect.
c. An economic boom overseas increases the demand for U.S. net exports by $300, and
there is no crowding-out effect.
d. An economic boom overseas increases the demand for U.S. net exports by $225, and
there is no crowding-out effect.
Which of the following is likely to have the most price inelastic demand?
a. athletic shoes
b. running shoes
c. Nike running shoes
d. Nike Shox running shoes
In competitive markets,
a. firms produce identical products.
b. buyers can influence the market price more easily than sellers.
c. markets are more likely to be in equilibrium.
d. sellers are price setters.
Suppose that a country increased its saving rate. In the long run it would have
a. higher productivity, and another unit of capital would increase output by more than
before.
b. higher productivity, but another unit of capital would increase output by less than
before.
c. lower productivity, and another unit of capital would increase output by more than
before.
d. lower productivity, but another unit of capital would increase output by less than
before.
Table 15-1
Labor Data for Aridia
Refer to Table 15-1. The number of adults not in the labor force of Aridia in 2011 was
a. 600.
b. 1100.
c. 1700.
d. 2400.
Critics of free trade sometimes argue that allowing imports from foreign countries
causes a reduction in the number of domestic jobs. An economist would argue that
a. foreign competition may cause unemployment in import-competing industries, but
the effect is temporary because other industries, especially exporting industries, will be
expanding.
b. foreign competition may cause unemployment in import-competing industries, but
the increase in consumer surplus due to free trade is more valuable than the lost jobs.
c. the critics are correct, so countries must protect their industries with tariffs or quotas.
d. foreign competition may cause unemployment in import-competing industries, but
the increase in the variety of goods consumers can choose from is more valuable than
the lost jobs.
Figure 2-13
Refer to Figure 2-13. Taking cause and effect into account, which of the following
interpretations would be most reasonable regarding the relationship between coffee and
hours without sleep?
a. The less coffee a person drinks per day, the more time he can go without sleep.
b. There is no relationship between how much coffee per day a person drinks and how
long he can go without sleep.
c. The more coffee a person drinks per day, the more time he can go without sleep.
d. The more coffee a person drinks per day, the less time he can go without sleep.
When the price of hot dogs changes, the demand curve for hot dogs
a. shifts because the price of hot dogs is measured on the vertical axis of the graph.
b. shifts because the quantity demanded of hot dogs is measured on the horizontal axis
of the graph.
c. does not shift because the price of hot dogs is measured on the vertical axis of the
graph.
d. does not shift because the price of hot dogs is measured on the horizontal axis of the
graph.
Some countries have had high inflation for a long time. Others have had low or
moderate inflation for a long time. Which of the following, at least in theory, could
explain why some countries would continue to have high inflation?
a. High inflation countries have relatively small sacrifice ratios and so see no need to
reduce inflation.
b. Inflation reduction works best when it is unexpected, and people in high inflation
countries would quickly anticipate any change in monetary policy.
c. In a country where inflation has been high for a long time, people are likely to have
found ways to limit the costs.
d. In a country where inflation has been high for a long time, there are no costs to the
inflation.
Figure 9-17
Refer to Figure 9-17. With trade and a tariff, total surplus is
a. $1,224.
b. $1,416.
c. $1,512.
d. $1,704.
Suppose the tax on liquor is increased so that the tax goes from being a “medium” tax to
being a “large” tax. As a result, it is likely that
a. tax revenue increases, and the deadweight loss increases.
b. tax revenue increases, and the deadweight loss decreases.
c. tax revenue decreases, and the deadweight loss increases.
d. tax revenue decreases, and the deadweight loss decreases.
Table 4-3
Refer to Table 4-3. If these are the only four buyers in the market, then when the price
increases from $1.00 to $1.50, the market quantity demanded
a. decreases by 1.75 units.
b. increases by 2 units.
c. decreases by 7 units.
d. decreases by 24 units.
If a U.S. citizen buys a television made in Korea by a Korean firm, then
a. U.S. net exports decrease and U.S. GDP decreases.
b. U.S. net exports are unaffected and U.S. GDP decreases.
c. U.S. net exports are unaffected and U.S. GDP is unaffected.
d. U.S. net exports decrease and U.S. GDP is unaffected.
Table 11-1
The table below pertains to Pieway, an economy in which the typical consumer’s basket
consists of 10 bushels of peaches and 15 bushels of pecans.
Refer to Table 11-1. The cost of the basket in 2006 was
a. $200.
b. $210.
c. $240.
d. $245.
The consumer price index and the GDP deflator are two alternative measures of the
overall price level. Which of the following statements about the two measures is
correct?
a. The two measures are constructed differently, but they always indicate the same
inflation rate.
b. The substitution bias applies equally to both measures.
c. A change in the price of Korean televisions is reflected in the U.S. consumer price
index but not in the U.S. GDP deflator.
d. All of the above are correct.
If the nominal interest rate is 5 percent and the rate of inflation is 9 percent, then the
real interest rate is
a. -4 percent.
b. -0.44 percent.
c. 4 percent.
d. 14 percent.
Which of the following would both shift aggregate demand right?
a. the price level decreases and government expenditures increase
b. the price level decreases and the government repeals an investment tax credit
c. government expenditures increase and the money supply increases
d. None of the above are correct.
The law of one price states that
a. a good must sell at the price fixed by law.
b. a good must sell at the same price at all locations.
c. a good cannot sell for a price greater than the legal price ceiling.
d. nominal exchange rates will not vary.
The money supply in Muckland is $100 billion. Nominal GDP is $800 billion and real
GDP is $400 billion. What are the price level and velocity in Muckland?
a. The price level and velocity are both 8.
b. The price level is 2 and velocity is 8.
c. The price level and velocity are both 4.
d. The price level is 4 and velocity is 8.
Marginally attached workers are people who
a. are looking for a better job than they currently have.
b. are not working and are not looking for work, but would work if asked.
c. are working part-time while they go to school or get training for a better job.
d. are only a few years from retirement.
Part of the argument against deficits is that they
a. increase interest rates and investment.
b. increase interest rates and decrease investment.
c. decrease interest rates and investment.
d. decrease interest rates and increase investment.