Which of the following usually leads to currency appreciation?
a. galloping inflation
b. relatively low interest rates
c. declining real GDP
d. fixed exchange rates
The price of imported oil decreased in 2001. How did this affect the aggregate supply
curve?
a. It became steeper.
b. It became flatter.
c. It shifted inward.
d. It shifted outward.
Those who view education as a sorting mechanism emphasize that employers value
a. the skills that people who attend college have already acquired before they enter
college.
b. the docility and deference to authority learned in the classroom.
c. the analytic ability of the highly educated worker.
d. the work habits picked up in the home and school.
The firm can calculate all points on its total cost curve if it knows
a. its production function.
b. the prices of inputs and of output.
c. its average cost at its optimal output level.
d. the prices of inputs and its production function.
The graphical device that illustrates the concept of scarce resources being efficiently
utilized in the economy is a(n)
a. budget line.
b. indifference curve.
c. production possibilities frontier.
d. marginal cost curve.
The corporate income tax is
a. a tax on corporate profit, not revenue.
b. the single largest source of federal revenue.
c. a payroll tax paid partially by employees and partially by employers.
d. has increased as a proportion of federal tax revenue since 1950.
As a result of the Great Recession, most financial markets hit bottom around
a. September 2008
b. March 2009
c. September 2009
d. March 2010
Under a tying contract,
a. the price a buyer must pay for a good is tied to the size of his purchase.
b. a customer agrees as a condition of buying a good to purchase one or more additional
goods from the same seller.
c. a firm agrees to allow members of its competitors’ boards of directors to sit on its
board.
d. a firm agrees to pay an intermediary for having arranged a business deal for the firm.
The wage premium in the United States has risen consistently starting in
a. 1973.
b. 1975.
c. 1978.
d. 1983.
The market demand curve represents the total quantity demanded at each price.
a. True
b. False
If the Fed buys a T-bill from an individual rather than from a bank, the effect on the
money supply is
a. smaller because there is no multiplier process.
b. larger because of the multiplier process.
c. the same.
d. impossible to predict without knowing the value of the multiplier.
The slope of the budget line is the amount of one commodity that a consumer must give
up in order to obtain an additional unit of the other commodity.
a. True
b. False
Rational production decisions require an understanding of
a. trade-offs.
b. opportunity costs.
c. scarcity of resources.
d. All of the above are correct.
If both borrowers and lenders anticipate the rate of inflation correctly, then
a. borrowers will lose real income.
b. lenders will lose real income.
c. both borrowers and lenders will lose real income.
d. neither borrowers nor lenders will lose real income.
A price ceiling is only effective if it is above the market equilibrium.
a. True
b. False
Excess reserves make a bank less vulnerable to runs, but bankers do not like to hold
excess reserves because holding excess reserves
a. are disliked by depositors.
b. means lower profits for banks.
c. are discouraged by government regulators.
d. All of the above are correct.
One motive for “battling the invisible hand” is
a. unhappiness about the prices that occur in free markets.
b. envy toward those who apparently benefit from certain prices.
c. a desire to have government “correct” some problems.
d. an attempt to produce justice between buyers and sellers.
e. All of the above are correct.
The payroll tax appears to be a proportional tax. In reality it is
a. highly progressive.
b. actually proportional.
c. highly regressive.
d. regressive on low-income persons and progressive on high-income persons.
Agriculture is a sector of the economy where increased productivity has been
accompanied by a significant decrease in employment.
a. True
b. False
If Americans decide to buy more South African diamonds, what is the effect in the
foreign market?
a. It will increase demand for U.S. dollars.
b. It will decrease demand for U.S. dollars.
c. It will increase supply of U.S. dollars.
d. It will decrease supply of U.S. dollars.
In a market economy, incomes would be very equal if there was no discrimination.
a. True
b. False
When a government intentionally lowers the value of its currency, that is called
depreciation.
a. True
b. False
A change in consumer preferences will shift the budget line.
a. True
b. False
Using the standard 45-degree line diagram, how does a decrease in investment spending
effect the expenditure schedule?
a. It increases the slope of the expenditure schedule.
b. It decreases the slope of the expenditure schedule.
c. It shifts the expenditure schedule downward.
d. It shifts the expenditure schedule upward.
According to the relationship represented by the consumption function, governments
can indirectly decrease consumption spending by
a. increasing taxes.
b. decreasing transfers.
c. decreasing taxes.
d. decreasing government spending.
It is easy to discern the difference between vigorous competition and the exercise of
monopoly power.
a. True
b. False
A movement upward along the consumption function can be caused only by a(n)
a. increase in disposable income.
b. decrease in disposable income.
c. decrease in the price level.
d. increase in the price level.
Which of the following is the most frequently used tool of monetary policy?
a. changing the discount rate
b. changing reserve requirements
c. open market operations
d. interest rate changes
Profit can be maximized only where marginal revenue equals
a. average cost.
b. total cost.
c. marginal cost.
d. average cost.
The formula for price elasticity of demand that is used in practice
a. usually drops all minus signs.
b. usually takes on different values at different points on the demand curve.
c. may calculate the percentage change in price between P1 and P2 as “(P2 − P1) as a
percentage of (P1 + P2)/2.”
d. All of the above are correct.
The production possibilities frontier slopes downward and to the right because of
limited resources.
a. True
b. False
If a nation does not have an absolute advantage in producing anything, it
a. has no comparative advantage either.
b. will have a comparative advantage in the activity in which it is least inefficient.
c. will try to get along without trade.
d. will export raw materials and import finished products.
If demand is unit elastic, then a 10 percent increase in the price will lead to a 10 percent
increase in quantity demanded.
a. True
b. False