Archives: Quiz

Ongoing inflation means the Fed must respond to a. an upward-shifting AS curve b. a downward-shifting AS curve c. changing interest rate targets d. a depression e. a lower real interest rate If the demand curve facing a firm shifts […]

Stagflation is caused by a. a negative supply shock. b. a positive supply shock. c. a negative demand shock. d. a positive demand shock. e. none of the above. In Figure 14-1, which area represents consumer surplus? Answer: B Answer: […]

People and organizations have to make choices about how to allocate time and money because An individual’s wealth constraint is determined by a. the individual’s level of education b. the facts that wealth is given and so she must give […]

Use the table below to calculate the CPI in 2007. Assume the base year is 2007 and the cost of the market basket in the base year is $275.50. The CPI in 2007 is a. 100 b. 126 c. 115 […]

Say’s Law a. cannot be satisfied if there is excess supply or demand in individual markets in the long run b. ensures that every firm will sell all of its output c. can be satisfied even if there is a […]

The 4-year term of the president of the Fed is coterminous with the 4-year term of the president of the U.S. The CPI’s approach is to a. track the cost of the CPI market basket, which is the collection of […]

If the Fed buys bonds in an open market operation, which of the following is most likely to occur? a. the equilibrium level of GDP will decrease. b. the money supply will decrease. c. the aggregate demand curve will shift […]

If the Consumer Price Index was 102.2 in 2007 and 104.9 in 2008, we can conclude that a. the prices of all consumer goods were higher in 2008 than in 2007 b. the prices of all consumer goods were lower […]

In the same city, one job currently pays $6 more per hour than another job. The two jobs have equivalent training requirements, but labor is not migrating toward the higher-paying occupation. Both markets are perfectly competitive. Which of the following […]

The “vicious cycle of discrimination” refers to If net taxes decrease by $500 billion, both household disposable income and consumption spending will increase by $500 billion. Answer: B Economics is the study of choice under conditions of Answer: C The […]

Which of the following would not cause a movement along the AD curve? a. An increase in the price level. b. A decrease in the price level. c. A change in the interest rate caused by a change in the […]

Classical economists believed that a. the government should play an active role in controlling the economy b. the government can best help the economy by leaving it alone c. the economy is controlled by the government d. laissez faire will […]

In Figure 5-3, the price elasticity of demand between points T and U is the same as between points V and W. If the prices of domestic consumer goods increased while the prices of imported consumer goods decreased, and the […]

The two phases of the business cycle are a. high economic growth and low economic growth b. expansion and contraction c. expansion and depression d. high inflation and low inflation e. potential economic growth and actual economic growth Refer to […]

If the marginal propensity to consume is 0.75 and government spending decreases by $2,000 billion, what is the change in GDP? a. -$2,000 billion b. -$8,000 billion c. $2,000 billion d. $1,500 billion e. $8,000 billion If the labor demand […]

Consider the typical monopolistically competitive firm whose demand curve and cost structure is illustrated in Figure 11-5. Which of the following statements is correct in the long run? Budget constraints exist for consumers because Answer: C If labor were completely […]

Consider the following three bonds, Bond F, Bond J and Bond P. Bonds F and P mature in 1 year while Bond J matures in 4 years. Bond F and J have a face value of $10,000 while Bond P […]

A perfectly competitive market usually achieves economic efficiency because In the short-run macro model, aggregate expenditures are found by which of the following formulas? a. AE = C + I + G + NX b. AE = I + T […]

The spreading of fixed costs over more output explains why the long-run average cost falls as output rises. The demand curve for a foreign currency a. slopes upward b. slopes downward c. is horizontal d. has a slope of 45 […]

Although there are barriers to entry in a monopolized industry, there are usually many close substitutes for the monopolist’s product. Every economic system requires a means for determining resource allocation. Answer: A Jacob is torn between two jobs, grounds keeper […]

The least-cost rule for firms states that in the long run, firms will If the interest rate increases, the money demand curve a. shifts to the right. b. shifts to the left. c. neither shifts nor changes slope. d. gets […]

If the Fed wishes to raise the interest rate, it will a. increase the money supply b. decrease the money supply c. increase money demand d. decrease money demand e. simply set a higher market interest rate If the government […]

At the long-run equilibrium output level, a monopolistically competitive firm’s average total cost curve When all resources used in production are not perfectly substitutable, Answer: D Which of the following is the Fed’s best strategy for dealing with demand shocks? […]

The classical model does a good job of explaining short-run fluctuations in the level of economic activity. Suppose that a perfectly competitive market is in equilibrium. Then, Answer: B A firm’s total cost of production Answer: B The equilibrium interest […]

A quota typically increases the volume of imports, whereas a tariff typically decreases the volume of imports. The means of payment function of money refers to the common unit for measuring how much something is worth Answer: B If the […]

Economies with poorly defined property rights are often inefficient because A new moving van will increase a moving company’s yearly revenue by $15,000. Its useful life is three years. If the interest rate is 10 percent (0.1) per year, which […]

Ink jet printers are a normal good only if, as income falls by a certain percentage, the quantity demanded rises by an even greater percentage. In real-world markets Answer: C The national debt must be paid back in the future. […]

If the Federal Reserve buys $1,000 in bonds and the reserve requirement ratio is 0.5, what happens to the money supply and the net worth of all banks? a. The money supply decreases by $2,000 and net worth increases by […]

What can be said about the comparison between the unemployment benefits offered in Europe and in the United States? a. Unemployment benefits tend to be lower in Europe and are offered for shorter periods than in the United States b. […]

In a perfectly competitive market, the good or service cannot differ substantially among sellers. Average total cost is Answer: C An increase in the capital stock causes labor productivity to a. decrease and the standard of living to increase b. […]

A negative demand shock decreases the price level in the short run. Approximately how often is the Consumer Price Index (CPI) market basket updated? a. Every 10 years b. Every 25 years c. Every year d. Every 2 years e. […]

Figure 10-1 shows the demand schedule facing the only gas station in a small Midwestern town. The station does not price discriminate. Which of the following statements is correct? If Cathy has a bond that will pay $1,000 one year […]

Suppose the opportunity cost is a constant 500 TV sets for 1 car in Canada and 1,000 TV sets for 8 cars in Mexico. Then, if both countries specialize in accordance with their comparative advantage, the production of 1,000 extra […]

Which of the following goods and services would be excluded from the CPI? a. Legal services b. Used cars c. French wines sold in the U.S. d. Restaurant meals e. Shares of stock in U.S. corporations The relationship between the […]

If the dollar price of a foreign currency increases, there will be a(n) a. rightward movement along the supply of foreign exchange curve b. leftward movement along the supply of foreign exchange curve c. leftward shift of the supply of […]

A low rate of inflation, whereby prices increase so slowly from week to week that we hardly notice the change, is referred to as a. zero inflation b. creeping inflation c. nominal inflation d. real inflation e. episodic inflation If […]

You have a bond that you can redeem for $10,000 one year from now. The interest rate is 10 percent (0.10) per year. How much is the bond worth today? Suppose that the equilibrium interest rate is 8 percent, but […]

Refer to Figure 8-4. Based on these graphs, what is the total quantity of loanable funds demanded at an interest rate of 5 percent? a. $0.8 trillion b. $1.0 trillion c. $1.4 trillion d. $1.8 trillion e. $2.2 trillion In […]

As a large number of students graduate from college, which category of unemployment would increase? a. Seasonal unemployment b. Structural unemployment c. Frictional unemployment d. Cyclical unemployment e. They will have no effect on unemployment In the long run, the […]

Which of the following might explain why the government would create a price floor for a certain good? The equation GDP = C + I + G + NX best describes the a. the output approach to measuring GDP b. […]

If an excise tax is imposed on shoes, The production possibilities frontier is useful for demonstrating both scarcity and productive inefficiency. Answer: A According the AS/AD model, in the long run, expansionary monetary policy will a. increase both real GDP […]

The trend of shorter working days and longer vacations is expected to reversed in most wealthy countries in the future. Use the table below to determine autonomous consumption spending. a. $0 b. $100 c. $180 d. $200 e. $1,000 Answer: […]

The study of economics would be superfluous if __________ did not exist. For which of the following would purchasing power parity have the least relevance? a. Pens b. Toothpicks c. Paper clips d. Pencils e. Shoe shines Answer: E If […]

An increase in the demand for bonds will increase both the price of bonds and the quantity of bonds held. If the market supply curve slopes upward Answer: A The law of diminishing marginal utility Answer: B Answer: B Because […]

Which of the following is true in the classical model? a. A spontaneous increase in spending can cause an increase in output and employment. b. An increase in output and employment can cause a decrease in spending. c. A spontaneous […]

Suppose that a consumer’s original budget line was AB in Figure 5-4, but it has now changed to line AC. Which of the following must have occurred? Figure 5-6 shows the demand curve for chicken. Between points L and M, […]

The production possibility frontier in Figure 2-8 assumes that U.S. agricultural land is used either to raise cotton for clothing or to grow wheat. This is an example of a(n) Figure 2-8 Refer to Figure 8-1. If the real hourly […]

Crowding out refers to a(n) a. decrease in the amount of goods produced after too many goods have crowded onto the market b. business tactic used to steal a competitor’s customers c. increase in one sector’s spending caused by an […]

What can be said regarding comparative advantage in production for the two countries shown in Figure 16-1? Figure 16-1 Number of workers needed to produce one unit of each of the following goods: a. Colombia has a comparative advantage in […]

If a firm is a price taker, then the demand curve it faces is perfectly Relative to GDP, interest on the national debt a. has grown at a steady rate during the last 40 years b. has remained constant in […]