Trade allows a person to obtain goods at prices that are less than that person’s
opportunity cost because each person specializes in the activity for which he or she has
the lower opportunity cost.
a. True
b. False
Ken and Traci are two woodworkers who both make tables and chairs. In one month,
Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs.
Given this, we know that the opportunity cost of 1 table is
a. 1/6 chair for Ken and 1/3 chair for Traci.
b. 1/6 chair for Ken and 3 chairs for Traci.
c. 6 chairs for Ken and 1/3 chair for Traci.
d. 6 chairs for Ken and 3 chairs for Traci.
The economic boom of the early 1940s resulted mostly from
a. increased government expenditures.
b. falling prices of oil and other natural resources.
c. an increase in the growth rate of the money supply.
d. rapid developments in transportation, electronics, and communication.
The tradeoff between inflation and unemployment
a. implies that policies designed to reduce unemployment also reduce inflation.
b. was eliminated by improved economic policies in the 1900s.
c. is a long-run tradeoff, persisting for decades, according to most economists.
d. None of the above are correct.
In the circular-flow diagram, firms own the factors of production and use them to
produce goods and services.
a. True
b. False
Suppose the tax rate on interest income from saving were reduced.
a. The income effect, but not the substitution effect, would tend to reduce private
saving.
b. The substitution effect, but not the income effect, would tend to reduce private
saving.
c. Both the income and substitution effect would tend to reduce private saving.
d. Neither the income nor the substitution effect would tend to reduce private saving.
Sectoral shifts temporarily cause unemployment.
a. True
b. False
Which among the following assets is the most liquid?
a. capital goods
b. stocks and bonds with a low risk
c. real estate
d. funds in a checking account
According to Friedman and Phelps, the unemployment rate is above the natural rate
when actual inflation
a. is greater than expected inflation.
b. is less than expected inflation.
c. equals expected inflation.
d. low whether its greater than or less than expected.
Over time, people have come to rely more on market-produced goods and services and
less on goods and services they produce for themselves. For example, busy people with
high incomes, rather than cleaning their own houses, hire people to clean their houses.
By itself, this change has
a. caused measured GDP to fall.
b. not caused any change in measured GDP.
c. caused measured GDP to rise.
d. probably changed measured GDP, but in an uncertain direction; the direction of the
change depends on the difference in the quality of the cleaning that has resulted.
The efficient markets hypothesis says that beating the market consistently is
a. impossible. Many studies find that beating the market is, at best, extremely difficult.
b. impossible. Many studies find that beating the market is relatively easy.
c. relatively easy. Many studies find that beating the market is, at best, extremely
difficult.
d. relatively easy. Many studies find that beating the market is relatively easy.
According to the classical dichotomy, which of the following increases when the money
supply increases?
a. the real interest rate
b. real GDP
c. the real wage
d. the nominal wage.
The measure of the money stock called M1 includes
a. wealth held by people in their checking accounts.
b. wealth held by people in their savings accounts.
c. wealth held by people in money market mutual funds.
d. everything that is included in M2 plus some additional items.
Analysis of data on workers and those looking for work is conducted by economists at
the
a. Office of Management and Budget.
b. Department of Labor.
c. Congressional Budget Office.
d. Department of the Treasury.
Table 23-2
The table below contains data for country A for the year 2010.
RefertoTable23-2.What were country A’s imports in 2010?
a. -$32
b. $32
c. $88
d. $120
A Japanese bank buys U.S. government bonds, this purchase
a. increases U.S. net capital outflow and has no affect on Japanese net capital outflow.
b. increases U.S. net capital outflow and increases Japanese net capital outflow.
c. increases U.S. net capital outflow, but decreases Japanese net capital outflow.
d. decreases U.S. net capital outflow, but increases Japanese net capital outflow.
In 2011 Buckeye Brewing produced 1,000 bottles of ginger ale each day. It employed
10 workers each working 8 hours a day. In 2012 it produced 960 bottles of ginger ale
each day employing 8 workers who worked 8 hours each day. Productivity at Buckeye
Brewing
a. increased by 20%.
b. increased by 16.67%.
c. decreased by 1.67%.
d. decreased by 40%.
During World War II, the economy’s production increased about
a. 25 percent and prices rose about 5 percent.
b. 50 percent and prices rose about 10 percent.
c. 75 percent and prices rose about 15 percent.
d. 100 percent and prices rose about 20 percent.
Which of the following can explain faster growth of real GDP in country A than in
Country B?
a. both greater population growth and greater productivity growth in Country A
b. greater population growth in Country A, but not greater productivity growth in
Country A
c. greater productivity growth in Country A, but not greater population growth in
Country A
d. neither greater population growth nor greater productivity growth in Country A
GA wind farm in Iowa buys a large turbine generator from a Swedish-owned factory
located in Connecticut that uses workers who live in Connecticut. As a result,
a. U.S. investment, GDP, and GNP all increase by the same amount.
b. U.S. investment increases, but GDP and GNP are unaffected by the purchase.
c. U.S. investment and GDP increase by the same amount, but U.S. GNP increases by a
smaller amount.
d. U.S. investment and GNP increase by the same amount, but U.S. GDP increases by a
smaller amount.
Table 28-2
Labor Data for Aridia
RefetoTable28-2.The labor force of Aridia in 2010 was
a. 1,400.
b. 1,600.
c. 1,800.
d. 2,000.
Suppose an economy only produces two goods, robots and ice cream. Last month, the
economy produced 10 robots and 200 gallons of ice cream. This month, the same
economy produced 15 robots and 240 gallons of ice cream. Which of the following
statements could explain this change?
a. This month, the economy reduced the unemployment of its resources.
b. This month, the economy experienced an improvement in technology.
c. This month, the economy experienced an increase in resources
d. All of the above are correct.
When the U.S. real exchange rate appreciates, U.S. goods become
a. more attractive to consumers in the U.S. and abroad.
b. more attractive to consumers in the U.S. and less attractive to consumers abroad.
c. less attractive to consumers in the U.S. and abroad.
d. less attractive to consumers in the U.S. and more attractive to consumers abroad.
Which of the following are taxed?
a. both corporate profits and dividends paid to stockholders
b. corporate profits but not dividends paid to stockholders
c. dividends paid to stockholders but not corporate profits
d. neither corporate profits nor dividends paid to stock holders
Efficiency wages create structural unemployment.
a. True
b. False
Your spouse complains that her 6% raise this year will not keep up with the increase in
prices. In other words, she is unable to buy the same basket of goods with her 6% raise.
Therefore, she believes that her
a. nominal income and real income increased.
b. nominal income increased, but their real income decreased.
c. nominal income and real income decreased.
d. nominal income decreased, but their real income increased.
If net exports is a negative number for a particular year, then
a. the value of firms’ inventories declined over the course of the year.
b. consumption exceeded the sum of investment and government purchases during the
year.
c. the value of goods sold to foreigners exceeded the value of foreign goods purchased
during the year.
d. the value of foreign goods purchased exceeded the value of goods sold to foreigners
during the year.
Table 4-4
RefertoTable4-4.Suppose the market consists of Barb and Carl only. If the price falls
by $2, the quantity demanded in the market increases by
a. 4 units.
b. 6 units.
c. 8 units.
d. 10 units.
Following the implementation of laws requiring automobiles to have seat belts, which
of the following occurred?
a. An individual’s probability of surviving an auto accident rose.
b. There was an increase in pedestrian deaths.
c. There was an increase in automobile accidents.
d. All of the above are correct.
Given the table below, graph the demand and supply curves for flashlights. Make
certain to label the equilibrium price and equilibrium quantity.
a. What is the equilibrium price and the equilibrium quantity?
b. Suppose the price is currently $5. What problem would exist in the market? What
would you expect to happen to price? Show this on your graph.
c. Suppose the price is currently $2. What problem would exist in the market? What
would you expect to happen to price? Show this on your graph.
Your accountant tells you that if you can continue to earn the current interest rate on
your balance of $500 for ten years, you will have about $983.58. If your accountant is
correct, what is the current rate of interest?
a. 5 percent
b. 6 percent
c. 7 percent
d. 8 percent
GDP is not a perfect measure of well-being; for example,
a. GDP excludes the value of volunteer work.
b. GDP does not address the distribution of income.
c. GDP does not address environmental quality.
d. All of the above are correct.
If the government instituted an investment tax credit, then which of the following
would be higher in equilibrium?
a. saving and the interest rate
b. saving but not the interest rate
c. the interest rate but not saving
d. neither saving nor the interest rate
If the Fed increases the money supply,
a. the interest rate increases, which tends to raise stock prices.
b. the interest rate increases, which tends to reduce stock prices.
c. the interest rate decreases, which tends to raise stock prices.
d. the interest rate decreases, which tends to reduce stock prices.
Table 29-8
RefetoTable29-8. This bank’s leverage ratio is
a. 2.
b. 50.
c. 13.3.
d. 7.5.