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Suppose a country increases trade restrictions. This country would be pursing an
a. inward policy, which most economists believe has beneficial effects on the economy.
b. inward policy, which most economists believe has adverse effects on the economy.
c. outward policy, which most economists believe has beneficial effects on the
economy.
d. outward policy, which most economists believe has adverse effects on the economy.
If you put $300 into an account paying 2 percent interest, what will be the value of this
account in 4 years?
a. $320.69
b. $324.00
c. $324.73
d. $327.81
Minimum-wage laws, unions, and efficiency wages contribute to
a. both structural unemployment and the natural rate of unemployment.
b. neither structural unemployment nor the natural rate of unemployment.
c. structural unemployment, but not the natural rate of unemployment.
d. the natural rate of unemployment, but not structural unemployment.
Workers waiting for jobs to open up is most closely associated with
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.
Over time continued budget deficits lead to
a. a higher capital stock and higher real wages.
b. a higher capital stock and lower real wages.
c. a lower capital stock and higher real wages.
d. a lower capital stock and lower real wages.
In 1979, Fed Chair Paul Volcker
a. instituted an accommodative monetary policy to address adverse supply shocks.
b. believed that inflation had not yet reached unacceptable levels.
c. believed decreasing inflation would temporarily decrease output growth.
d. All of the above are correct.
Table 3-6
Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
Hours Needed
To Make 1 Amount Produced
in 40 Hours
Refer to Table 3-6. At which of the following prices would both Maya and Miguel gain
from trade with each other?
a. 4 mixers for 7 toasters
b. 8 mixers for 10 toasters
c. 12 mixers for 18 toasters
d. Maya and Miguel could not both gain from trade with each other at any price.
Which of the following is an argument against trying to use policy to stabilize the
economy?
a. Recessions represent a waste of resources.
b. Pessimism on the part of households and firms may become a self-fulfilling
prophecy.
c. "Leaning against the wind" requires policymakers to increase aggregate demand in
recessions and reduce aggregate demand in booms.
d. Macroeconomic forecasting is not developed sufficiently to allow policymakers to
change aggregate demand at the proper time.
The short-run relationship between inflation and unemployment is often called
a. the Classical Dichotomy.
b. Money Neutrality.
c. the Phillips curve.
d. None of the above is correct.
If the U.S. were to impose import quotas
a. the demand for loanable funds and the demand for dollars in the market for
foreign-currency exchange would both increase.
b. nether the demand for loanable funds nor the demand for dollars in the market for
foreign-currency exchange would increase.
c. the demand for loanable funds would increase, but the demand for dollars in the
market for foreign-currency exchange would not.
d. the demand for dollars in the market for foreign-currency exchange would increase,
but the demand for loanable funds would not.
The price received by sellers in a market will increase if the government decreases a
a. binding price floor in that market.
b. binding price ceiling in that market.
c. tax on the good sold in that market.
d. None of the above is correct.
Figure 4-8
Refer to Figure 4-8. The movement from Point A to Point B represents a(n)
a. increase in the price.
b. decrease in the quantity supplied.
c. shift in the supply curve.
d. Both a) and b) are correct.
Figure 8-2
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 8-2. The imposition of the tax causes the quantity sold to
a. increase by 1 unit.
b. decrease by 1 unit.
c. increase by 2 units.
d. decrease by 2 units.
Proprietary technology is knowledge that is
a. known but no longer used much.
b. known, but only recently discovered.
c. known mostly by only those in a certain profession.
d. known only by the company that discovered it.
Consider two individuals Marquis and Serena each of whom would like to wear
sweaters and eat tasty food. The gains from trade between Marquis and Serena are most
obvious in which of the following cases?
a. Marquis is very good at knitting sweaters and at cooking tasty food, but Serena's
skills in both of these activities are very poor.
b. Marquis and Serena both are very good at cooking tasty food, but neither has the
necessary skills to knit a sweater.
c. Marquis's cooking and knitting skills are very poor, and Serena's cooking and knitting
skills are also very poor.
d. Marquis's skills are such that he can produce only sweaters, and Serena's skills are
such that she can produce only tasty food.
Last year real GDP per person in the imaginary nation of Olympus was 4,500. The year
before it was 4,250. By about what percentage did Olympian real GDP per person grow
during the period?
a. 4.6 percent
b. 5.2 percent
c. 5.9 percent
d. 6.5 percent
Figure 3-9
Uzbekistan's Production Possibilities Frontier Azerbaijan's Production
Possibilities Frontier
Refer to Figure 3-9. If the production possibilities frontiers shown are each for two
days of production, then which of the following combinations of bolts and nails could
Uzbekistan and Azerbaijan together not make in a given 2-day production period?
a. 9 bolts and 122 nails
b. 21 bolts and 98 nails
c. 36 bolts and 56 nails
d. 47 bolts and 18 nails
Figure 19-1
Refer to Figure 19-1. In the Figure shown, if the real interest rate is 6 percent, there
will be pressure for
a. the real interest rate to fall.
b. the demand for loanable funds curve to shift left.
c. the supply for loanable funds curve to shift right.
d. All of the above are correct.
Teenagers have more frequent unemployment spells so on average they spend more
time searching for jobs. Other thing the same this means that teenagers have a
a. higher unemployment rate. If a larger portion of the adult population were teenaged,
the natural rate of unemployment would be higher.
b. higher unemployment rate. The portion of the adult population that is teenaged does
not affect the natural rate of unemployment.
c. lower unemployment rate. If a larger portion of the adult population were teenaged,
the natural rate of unemployment would be lower.
d. lower unemployment rate. The portion of the adult population that is teenaged does
not affect the natural rate of unemployment.
Figure 2-1
Refer to Figure 2-1. Which arrow represents the flow of goods and services?
a. A
b. B
c. C
d. D
The inflation tax
a. is an alternative to income taxes and government borrowing.
b. taxes most those who hold the most money.
c. is the revenue created when the government prints money.
d. All of the above are correct.
Economists normally assume people's preferences should be
a. respected.
b. adjusted.
c. overruled.
d. ignored.
The model of aggregate demand and aggregate supply
a. is different from the model of supply and demand for a particular market, in that we
cannot focus on the substitution of resources between markets to explain aggregate
relationships.
b. is different from the model of supply and demand for a particular market, in that we
have to separate real and nominal variables in the aggregate model.
c. is a straightforward extension of the model of supply and demand for a particular
market, in which substitution of resources between markets is highlighted.
d. is a straightforward extension of the model of supply and demand for a particular
market, in which the interaction between real and nominal variables is highlighted.
At which interest rate is the present value of $145.80 two years from today equal to
$125 today?
a. 2 percent
b. 4 percent
c. 6 percent
d. 8 percent
When a union raises the wage above the equilibrium level,
a. the quantity of labor supplied and unemployment both rise.
b. the quantity of labor supplied and unemployment both fall.
c. the quantity of labor supplied rises and unemployment falls.
d. the quantity of labor supplied falls and unemployment rises.
When studying the effects of public policy changes, economists
a. always refrain from making assumptions.
b. sometimes make different assumptions about the short run and the long run.
c. consider only the direct effects of those policy changes and not the indirect effects.
d. consider only the short-run effects of those policy changes and not the long-run
effects.
Figure 7-14
Refer to Figure 7-14. Suppose the willingness to pay of the marginal buyer of the 3rd
unit is $225. Then total surplus is maximized if
a. 1 unit of the good is produced and sold.
b. 2 units of the good are produced and sold.
c. 3 units of the good are produced and sold.
d. 4 units of the good are produced and sold.
Answer the following questions based on the graph that represents J.R.'s demand for
ribs per week at Judy's Rib Shack.
a. At the equilibrium price, how many ribs would J.R. be willing to purchase?
b. How much is J.R. willing to pay for 20 ribs?
c. What is the magnitude of J.R.'s consumer surplus at the equilibrium price?
d. At the equilibrium price, how many ribs would Judy be willing to sell?
e. How high must the price of ribs be for Judy to supply 20 ribs to the market?
f. At the equilibrium price, what is the magnitude of total surplus in the market?
g. If the price of ribs rose to $10, what would happen to J.R.'s consumer surplus?
h. If the price of ribs fell to $5, what would happen to Judy's producer surplus?
i. Explain why the graph that is shown verifies the fact that the market equilibrium
(quantity) maximizes the sum of producer and consumer surplus.
During a hyperinflation the real domestic value of a country's currency
a. falls and its nominal exchange rate depreciates.
b. falls and its nominal exchange rate appreciates.
c. rises and its nominal exchange rate depreciates.
d. rises and its nominal exchange rate appreciates.
Suppose a Starbucks tall latte cost $4.00 in the United States, 00 euros in the euro area
and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per
dollar and 1.4 Australian dollars per U.S. dollar. Where does purchasing power parity
hold?
a. Both the euro area and Australia.
b. Neither the euro area or Australia.
c. The euro area but not Australia.
d. Australia but not the euro area.
Figure 7-15
Refer to Figure 7-15. At the equilibrium price, total surplus is
a. $150.
b. $200.
c. $250.
d. $300.
Sandra purchases 5 pounds of coffee and 10 gallons of milk per month when the price
of coffee is $10 per pound. She purchases 6 pounds of coffee and 12 gallons of milk per
month when the price of coffee is $8 per pound. Sandra's cross-price elasticity of
demand for coffee and milk is
a. 0.82, and they are substitutes.
b. -0.82, and they are complements.
c. 1.22, and they are substitutes.
d. -1.22, and they are complements.
As the aggregate demand curve shifts leftward along a given aggregate supply curve,
a. unemployment and inflation are higher.
b. unemployment and inflation are lower.
c. unemployment is higher and inflation is lower.
d. unemployment is lower and inflation is higher.
