If people assume that future rates of inflation will follow the pattern of inflation rates in
the past, they are said to have
A) rational expectations.
B) adaptive expectations.
C) unstable expectations.
D) accommodative expectations.
In the long run,
A) GDP > potential GDP.
B) unemployment is at its natural rate.
C) LRAS and SRAS lie on the same line.
D) the inflation rate is zero.
The opportunity cost of taking an on-line history class is
A) the knowledge and enjoyment you receive from taking the class.
B) the value of the time spent on line.
C) equal to the highest value of an alternative use of the time and money spent on the
class.
D) zero because there is no classroom time involved if you are enrolled in the course.
E) the cost of tuition and fees only.
At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its
rental price to $125, 9 canoes were rented. Calculate the absolute value of the price
elasticity of demand for canoe rentals, using the midpoint formula.
A) 2
B) 1.25
C) 0.9
D) 0.75
Which of the following contributes to the efficiency of markets?
A) Governments play an active role in the day-to-day operations of markets.
B) Markets are able to bring about an equitable distribution of goods and services.
C) Markets promote equal standards of living.
D) Markets promote competition and voluntary exchange.
Suppose Tinsel Town Videos lowers the price of its movie club membership by 10
percent and as a result, CineArts Videos experienced a 16 percent decline in its movie
club membership. What is the value of the cross-price elasticity between the two movie
club memberships?
A) -1.6
B) -0.625
C) 0.625
D) 1.6
Figure 23-3
Suppose that investment spending decreases by $5 million, decreasing aggregate
expenditure and decreasing real GDP from GDP2 to GDP1. If the MPC is 0.8, then
what is the change in GDP?
A) -$4 million
B) -$5 million
C) -$25 million
D) -$40 million
The federal funds rate
A) is determined administratively by the Fed.
B) is determined by the supply of and demand for bank reserves.
C) is determined directly by household demand for funds.
D) is determined directly by firm demand for funds.
When the aggregate demand curve and the short-run aggregate supply curve intersect,
A) the long-run aggregate supply curve must also intersect at the same point.
B) inflation must be increasing.
C) structural and frictional unemployment equal zero.
D) the economy is in short-run macroeconomic equilibrium.
Figure 12-14
Consider a typical firm in a perfectly competitive industry which is incurring short-run
losses. Which of the diagrams in the figure shows the effect on the industry as it
transitions to a long-run equilibrium?
A) Panel A
B) Panel B
C) Panel C
D) Panel D
Which of the following would cause both the equilibrium price and equilibrium
quantity of oysters (assume that oysters are a normal good) to decrease?
A) an increase in consumer income
B) an oil spill that sharply reduces oyster output
C) a decrease in consumer income
D) a technological advancement in the production of oysters