Tom Brady should probably not mow his own lawn because
a. his opportunity cost of mowing his lawn is higher than the cost of paying someone to
mow it for him.
b. he has a comparative advantage in mowing his lawn relative to a landscaping service.
c. he has an absolute advantage in mowing his lawn relative to a landscaping service.
d. he might sprain his ankle.
A market supply curve shows
a. the total quantity supplied at all possible prices.
b. the average quantity supplied by producers at all possible prices.
c. how quantity supplied changes when consumer income changes.
d. suppliers’ responses, in terms of the amounts they will supply, to the demands of
buyers.
If a government increases its budget deficit, then interest rates
a. rise and the real exchange rate appreciates.
b. fall and the real exchange rate depreciates.
c. rise and the real exchange rate depreciates.
d. fall and the real exchange rate appreciates.
A change in the tax laws that increases the supply of loanable funds will have a smaller
effect on investment when
a. the demand for loanable funds is more elastic and the supply of loanable funds is
more inelastic.
b. the demand for loanable funds is more inelastic and the supply of loanable funds is
more elastic.
c. both the demand for and supply of loanable funds are more elastic.
d. both the demand for and supply of loanable funds are more inelastic.
Scenario 24-2
The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005
read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.
RefertoScenario24-2.In 1975 dollars, a 1975 golf ball cost $0.20 and a 2005 golf ball
cost
a. $0.55, so golf balls were cheaper in 1975.
b. $0.55, so golf balls were cheaper in 2005.
c. $7.32, so golf balls were cheaper in 1975.
d. $7.32, so golf balls were cheaper in 2005.
In an economy that relies upon barter,
a. trade does not require a double coincidence of wants.
b. scarce resources are allocated just as easily as they are in economies that do not rely
upon barter.
c. there is no item in the economy that is widely accepted in exchange for goods and
services.
d. All of the above are correct.
Economic models are most often composed of diagrams and equations.
a. True
b. False
Figure34-4.On the figure, MSrepresents money supply and MDrepresents money
demand.
RefertoFigure34-4. Suppose the current equilibrium interest rate is 3. Which of the
following events would cause the equilibrium interest rate to decrease?
a. The Federal Reserve increases the money supply.
b. Money demand decreases.
c. The price level decreases.
d. All of the above are correct.
When the overall level of prices in the economy is increasing, economists say that the
economy is experiencing
a. economic growth.
b. stagflation.
c. inflation.
d. deflation.
Air pollution from burning fossil fuels causes damages to crops and public health. This
is an example of
a. a market failure caused by an externality.
b. a market failure caused by market power.
c. a market failure caused by equality.
d. There is no market failure in this case.
Unemployment insurance reduces the incentive for the unemployed to find and take
new jobs.
a. True
b. False
Which of the following illustrates how the investment accelerator works?
a. An increase in government expenditures increases the interest rate so that the
Burgerville chain of restaurants decides to build fewer new restaurants.
b. An increase in government expenditures increases aggregate spending so that
Burgerville finds it profitable to build more new restaurants.
c. An increase in government expenditures increases the interest rate so that the demand
for stocks and bonds issued by Burgerville increases.
d. An increase in government expenditures decreases the interest rate so that Burgerville
decides to build more new restaurants.
Suppose that an economy produces 20,000 units of good A which sells at $3 a unit and
40,000 units of good B which sells at $1 per unit. Production of good A contributes
a. 1/3 times as much to GDP as the production of good B.
b. 3/2 times as much to GDP as the production of good B.
c. 3 times as much to GDP as the production of good B.
d. 2/3 times as much to GDP as production of good B.
Some individuals would like to have a job, but they have given up looking for a job
after an unsuccessful search. These individuals are called
a. detached workers, and they are classified by the Bureau of Labor Statistics as
unemployed.
b. detached workers, and they are not classified by the Bureau of Labor Statistics as
unemployed.
c. discouraged workers, and they are classified by the Bureau of Labor Statistics as
unemployed.
d. discouraged workers, and they are not classified by the Bureau of Labor Statistics as
unemployed.
Profits notpaid out to stockholders are
a. retained earnings.
b. known as dividends.
c. the denominator in the price-earnings ratio.
d. All of the above are correct.
Figure27-4. The figure shows a utility function for Alex.
RefertoFigure27-4. From the appearance of Alex’s utility function, we know that
a. the pain that Alex would experience if he lost $500 of his wealth would exceed the
pleasure that he would experience if he added $500 to his wealth.
b. the pleasure that Alex would experience if he added $500 to his wealth would exceed
the pain that he would experience if he lost $500 of his wealth.
c. the property of increasing utility does not apply to Alex.
d. the property of diminishing marginal utility does not apply to Alex.
Anna recently graduated from college with a degree in electrical engineering, but she
has not yet started working. To be counted as “unemployed” she
a. does not have to have looked for work.
b. must have looked for work no more than a week ago.
c. must have looked for work no more than four weeks ago.
d. must have looked for work no more than twelve weeks ago.
Suppose Japanese-based Toshiba Corporation builds and operates a new computer
factory in the United States.
Future production from such an investment will
a. increase U.S. GNP more than it increases U.S. GDP.
b. increase U.S. GDP more than it increases U.S. GNP.
c. have no affect on U.S. GNP, but will increase U.S. GDP.
d. have no affect on U.S. GNP or GDP.
Table 24-5
The table below pertains to Wrexington, an economy in which the typical consumer’s
basket consists of 20 pounds of meat and 10 toys.
RefertoTable24-5.If the base year is 2004, then the CPI in 2004 was
a. 0.
b. 1.
c. 80.
d. 100.
Right-to-work laws allow striking union members to be permanently replaced.
a. True
b. False
If when the money supply changes, real output and velocity do not change, then a 2
percent increase in the money supply
a. decreases the price level by 2 percent.
b. decreases the price level by less than 2 percent.
c. increases the price level by less than 2 percent.
d. increases the price level by 2 percent.
Increased uncertainty and pessimism about the future of the economy lead firms to
desire less investment spending which shifts the aggregate-demand curve to the left.
a. True
b. False
The aggregate supply curve is upward sloping in
a. the short and long run.
b. neither the short nor long run.
c. the long run, but not the short run.
d. the short run, but not the long run.
For an imaginary economy, the value of the consumer price index was 140 in 2013 and
146.5 in 2014. The economy’s inflation rate for 2014 was
a. 4.6 percent.
b. 6.5 percent.
c. 4.4 percent.
d. 46.5 percent.
The largest reduction in a portfolio’s risk is achieved when the number of stocks in the
portfolio is increased from
a. 80 to 100.
b. 40 to 80.
c. 10 to 20.
d. 1 to 10.
If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount
of goods and services as
a. $4.75 purchased in 1955.
b. $20.00 purchased in 1955.
c. $95.00 purchased in 1955.
d. $500 purchased in 1955.
Almost all variation in living standards is attributable to differences in countries’
a. population growth rates.
b. productivity.
c. systems of public education.
d. taxes.
When you were 10 years old, your grandparents put $500 into an account for you
paying 7 percent interest. Now that you are 18 years old, your grandparents tell you that
you can take the money out of the account. What is the balance to the nearest cent?
a. $1,200.00
b. $1,111.77
c. $983.58
d. $859.09
Recently, Lisa’s wealth increased by $500. If her wealth were to increase by another
$500 in the near future, then her utility would increase, but not by as much as it
increased with the recent increase to her wealth. Based on this information, Lisa’s utility
function
a. and marginal utility function are both upward sloping.
b. and marginal utility function are both downward sloping.
c. is upward sloping and her marginal utility function is downward sloping.
d. is downward sloping and her marginal utility function is upward sloping.
In the 15 years ending June 2010, most active portfolio managers failed to beat the
market.
a. True
b. False
Suppose that a country has $120 billion of national saving, and $80 billion of domestic
investment. Is this possible? Where did the other $40 billion of national savings go?
Figure 3-26
RefertoFigure3-26.What is Kate’s opportunity cost of one muffin?
Give an example of adverse selection and an example of moral hazard using
homeowners insurance.
Scenario 27-2
Suppose Dave has a utility function where Wis his wealth in millions of
dollars and Uis the utility he obtains.
RefetoScenario27-2.Use the following diagram to graph Dave’s utility function for
.
The additional shifts in aggregate demand that result when there is an increase in
government spending is known as the _____.
Table 4-16
The following table shows the supply and demand schedules in a market.
RefertoTable4-16. What is the equilibrium price in this market?
Explain how GNP differs from GDP.
If there is a large and sudden but temporary increase in the price of oil, which way does
the short-run Phillips curve shift? If the central bank does not respond what happens to
inflation and the unemployment rate in the long run?
In the short run, an increase in the money supply is likely to lead to inflation and
unemployment.
The interest rate will and the quantity of loanable funds invested will when the
government decreases the budget deficit.
One benefit of low inflation is that it _____ the variability of relative price changes.
Therefore, resources are _____ likely to be better allocated.
If the Fed raised the money supply growth by more than expected then the
unemployment rate would_______in the short run. Explain the process by which the
economy moves to the long run if the Fed maintains the higher money supply growth
rate.
According to the Phillips curve, which fiscal policies can be used to reduce
unemployment in the short run?
Scenario 3-1
The production possibilities frontiers below show how much Greg and Catherine can
each produce in 8 hours of time.
RefertoScenario3-1. Which if any good(s) does Catherine have an absolute advantage
producing?
Table 3-41
RefertoTable3-41.Which country has an absolute advantage in producing compasses?