Archives: Quiz

A new computer will generate $1,000 in net revenue for a firm during its first year, $500 during its second year, $250 during its third year, and nothing thereafter. If the interest rate is 10 percent (0.10) per year, what […]

Which of the following would be most likely to cause a rightward shift of the demand for shares of Planet X, Inc.’s stock? If the interest rate at which you can lend funds is percent per year, then the present […]

In the following index, which year is most likely to be the base period: 2003 = 123.3; 2004 = 145.3; 2005 = 111.4; 2006 = 100; 2007 = 93? a. 2003 b. 2004 c. 2005 d. 2006 e. 2007 The […]

Which of the following policies would most likely increase the money supply? a. Selling government bonds b. Raising the discount rate c. Lowering tax rates d. Lowering the required reserve ratio e. Decreasing the prime lending rate If private investment […]

The demand for labor depends upon each of the following, except one. Which is the exception? When a bank needs to increase its reserves, it will a. call in all its loans b. stop paying interest on its saving accounts […]

Transfer payments provide benefits to a. all those in need b. those who have paid into governmental funds through their workplace c. those who are eligible recipients d. those who provide some service to the government e. anyone transferring from […]

The 2005-2008 Chinese policy with respect to the Yuan has been to a. allow its currency to float. b. allow its currency to rise in value quickly. c. allow its currency to rise in value slowly. d. allow its currency […]

A fixed exchange rate a. is a declared rate that is maintained by central bank intervention in the foreign exchange market b. is a rate that is fixed by the forces of supply and demand c. is a rate that […]

Jordan wants to sell her wedding gown for $250, but her cousin Jessica offered her $375 for it. If the gown is sold for $375, what is Jordan’s producer’s surplus Specialization and exchange result in Answer: B The real interest […]

A firm’s profit is The Bureau of Labor Statistics releases its employment report a. on the first Friday of every month. b. on the first Friday of every quarter. c. once every four months. d. on the first Friday every […]

Suppose that a local supermarket sells apples and oranges for 50 cents apiece, and at these prices is able to sell 100 apples and 200 oranges per week. One week, the supermarket lowered the price per apple to 40 cents […]

During the expansion phase of a business cycle a. employment and output are both at a peak b. employment and output are both rising c. employment is falling and output is rising d. unemployment is rising and output is falling […]

Which of the following can happen? a. Prices are rising and the inflation rate is negative but rising. b. Prices are falling and the inflation rate is positive and falling. c. Prices are falling and the inflation rate is positive […]

For a perfectly competitive firm, In Figure 7-4, marginal product of labor is diminishing for levels of employment Answer: C Answer: E How long are the terms of members of the Board of Governors in the Federal Reserve System? a. […]

Refer to Figure 11-9. If YFErepresents the full employment level of output, the situation depicted at Y1in the graph is a. impossible to achieve because employment would exceed full employment b. one in which we would expect businesses to cut […]

Assuming the economy was in equilibrium, use the following information to calculate the total value of leakages. Total leakages are a. $2.5 trillion b. $2.7 trillion c. $3.0 trillion d. $5.2 trillion e. $5.7 trillion Which of the following describes […]

If two economists disagree on an issue and their disagreement is based on personal value judgments, then this controversy is a normative one. The demand deposit multiplier is always less than 10. Answer: B The Federal Reserve Open Market Committee […]

The Fed’s efforts to attain full employment are complicated by a. the persistence of cyclical unemployment b. the instability of the inflation rate c. new legislation that attempts to avoid financial panics d. the difficulty of determining what normal unemployment […]

The Phillips curve a. illustrates the economy’s production possibilities b. measures the Fed’s willingness to stick with a particular interest rate target c. represents the Fed’s choices between inflation and unemployment d. demonstrates the need for a zero inflation rate […]

The more narrowly we define a good, the easier it is to find substitutes, and Which of the following policies would increase the demand for loanable funds and thus investment spending? a. A reduction in the investment tax credit. b. […]

If property rights are poorly defined The amount of a commodity that buyers in the market would like to purchase at a particular price is Answer: E A firm’s total revenue Answer: Answer: B A short-run decrease in real GDP […]

“Rising prices” and “rising inflation” mean the same thing. If autonomous consumption decreases, which of the following is the most likely effect in the short run? a. a decrease in output, an increase in money demand, and an increase in […]

Objections to free trade a. often come from those who are harmed by trade b. make no sense because everyone benefits from trade c. usually arise outside of the United States d. are not economically rational e. reflect a lack […]

Figure 7-7 shows a firm’s total variable cost for different daily output levels. In addition, the firm has total fixed cost of $50 per day. If output increases from 20 to 30 units, average total cost rises from Assume that […]

Most corporations do not pay back their debt. If a firm is experiencing diminishing marginal returns to labor, Answer: A Negative externalities produce inefficiency but positive externalities do not. Answer: B To say that the housing market is in equilibrium […]

If there is a positive demand shock, which of the following would represent the most likely short and long-run outcomes? (Assume the economy was initially at full employment) a. In the short run, real GDP and the price level would […]

The return to owners for innovation and risk taking is a firm’s Price ceilings are primarily targeted to help __________, while price floors generally benefit __________. Answer: E Suppose that a consumer used to be at point R on budget […]

Refer to Figure 9-13. A decreased labor demand on the graph would a. increase total output b. decrease total output at a constant rate c. decrease total output at an increasing rate d. decrease total output at a decreasing rate […]

The skills and knowledge possessed by workers are referred to as a. labor capital b. human technology c. labor tools d. labor technology e. human capital Which of the following jobs is most likely to have a positive compensating wage […]

Which of the following is not an example of a commercial bank’s liabilities? a. Checking account deposits. b. Any type of demand deposit. c. Loans. d. a and b. e. None of the above. If British real GDP fell, there […]

In the classical model with an open economy, an increase in government purchases always causes complete crowding out. Even if employers are not prejudiced, employee or customer discrimination will tend to be reinforced by market forces and may lead to […]

The most liquid asset(s) of all is (are) a. cash in the hands of the public b. cash in the hands of banks c. demand deposits held by households and businesses at commercial banks d. travelers’ checks e. credit cards […]

In the short-run macro model, an increase in government spending a. may reduce real GDP b. partially crowds out private investment spending c. usually crowds out exports d. usually crowds out spending on services e. requires an increase in taxes […]

What is the value of a newly issued 3-year bond with a face value of $5,000 and no coupon payments? Assume the interest rate is 8 percent (0.08) per year. If the Fed wishes to maintain its interest rate target […]

Which of the following is the main weakness of the classical model? a. It assumes that the labor supply curve is vertical. b. It assumes that the labor supply curve is horizontal. c. It assumes that the labor market clears. […]

The average percentage markup in the economy a. is of special interest in microeconomics b. fluctuates greatly from year to year c. depends on competitive conditions in the economy d. depends on the level of GDP e. increases as the […]

Equilibrium real GDP is a. independent of the price level b. determined solely in the loanable funds market c. controlled by the Fed d. directly related to the interest rate e. the level of output at which total spending equals […]

Which of the following could shift the labor supply curve and increase employment? a. An increase in the number of firms b. An increase in income tax rates c. Increased spending on welfare programs d. Increased federal funding for education […]

If the required reserve ratio is 0.25 and the First National Bank holds $10 million in demand deposits and $2.5 million in reserves, how much more money is the bank capable of creating? a. $0 b. $0.625 million c. $1.875 […]

At any quantity at which the demand curve lies above the supply curve, The federal funds rate is not just targeted by the Fed but is determined by the Fed. Market forces are irrelevant. Answer: B When members of a […]

A monopoly For the two year period ending in 2008-2009, what has been the number of bank failures? a. About 500 b. About 2,000 c. Fewer than 150 d. More than 5,000 e. Fewer than 1,000 Answer: C Which combination […]

A negative demand shock would lead to a decline in both the price level and output in the short run. After John’s income rose by 8 percent, the amount of chicken he consumed fell by 2 percent. This means that […]

The economy’s money supply curve is vertical. When negative spending shocks occur, transfer payments automatically fall. Answer: B Suppose that production of the product in Figure 14-2 imposes a cost on society of $7.00 per unit. If the free market […]

Suppose the required reserve ratio is 10 percent, but banks choose to hold an additional 15 percent of demand deposits as excess reserves. Under these conditions, the demand deposit multiplier will be a. 0 b. 4 c. 5 d. 6.67 […]

The world’s total output will be greater the more self-sufficient each of the world’s economies becomes. If the Fed wanted to prevent a change in money demand from affecting real GDP, which of the following responses would it choose? a. […]

Suppose the same basket of goods costs $100 in the U.S. and 50 pounds in Britain. According to purchasing power parity, if the two countries’ price levels do not change, what will be the exchange rate? a. 2 dollars/pound b. […]

If we know that the exchange rate is 0.8 dollars per euro, then we know that the exchange rate of euros per dollars is a. 0.8 b. 1.8 c. 1.25 d. less than 1.0 e. 5 Assuming the economy was […]

Taking money from a wealthy individual in order to feed a destitute family would be a Pareto improvement. The efficient markets theory of stock prices, implies that Answer: E A family on a trip budgets $800 for restaurant meals and […]

When the market estimate of a company’s riskiness increases the market adjusts by For any change in net taxes, we can calculate the resulting change in equilibrium GDP by using the following formula: a. change in GDP = -MPC/(1 – […]

Use the table below to find the marginal propensity to save. a. 0 b. 0.25 c. 0.5 d. 0.75 e. 0.80 The natural rate of unemployment never changes. Answer: B A difference in wage rates that results from a difference […]