Archives: Quiz

If a consumer can buy four DVDs for $44 and five DVDs for $50, then the marginal cost of the fifth DVD is: A) $10. B) $50. C) $11. D) $6. Figure 2.4 Joe runs a business and needs to […]

Mexico pegged its exchange rate to the U.S. dollar in the 1980s A) to discourage foreign investment. B) in an attempt to abandon the peso and switch to U.S. dollars as currency. C) to signal investors that Mexico was serious […]

Recall the Application about the time involved in including cell phones in the calculation of the CPI to answer the following question. According to this Application, the failure of including cell phones in a timely manner when calculating the CPI […]

Recall the Application about the possibility of increases in health-care expenditures crowding out consumption or investment spending to answer the following question(s). In 1950, health-care expenditures in the United States were 5.2 percent of GDP; by 2000, this share had […]

Recall Application 4, “Coping with the Financial Chaos Caused by the Mortgage Crisis,” to answer the following questions: According to Application 4, which insurance company did the Fed take an 80 percent stake in and made an $85 billion loan […]

The marginal propensity to save (MPS) is equal to A) 1 – MPC. B) MPC – 1. C) MPC + 1. D) 1 + MPC. Recall Application 1, “Creating the U.S. Federal Fiscal System Through Debt Policy,” to answer the […]

The entire short-run production function shifts upward if: A) diminishing returns are close to zero. B) the stock of capital increases. C) the quantity of labor increases. D) productivity decreases. If the marginal propensity to consume is 0.75 and marginal […]

When money is used to express the value of goods and services, it is functioning as a A) medium of exchange. B) store of value. C) unit of account. D) store of purchasing power. Suppose your bank pays you 4 […]

Suppose your bank pays you 6% interest per year on your savings account. If prices increase by 3% per year over that time, approximately how much nominal value do you gain by keeping $100 in the bank for a year? […]

Assume that coffee and tea are substitutes. When the price of coffee increases A) the demand for tea decreases. B) the demand for tea increases. C) the supply of tea increases. D) the supply of tea decreases. The GDP equation […]

If K = $200, t = 30 years, i = 5%, the present value (PV) of a payment to be received in 30 years is: A) $190.48. B) $46.27. C) $864.39. D) none of the above Economists say that the […]

The principle that states that the cost of something is equal to what is sacrificed to get it is known as the: A) marginal principle. B) principle of opportunity cost. C) principle of diminishing returns. D) reality principle. Suppose a […]

The federal budget works as an automatic economic stabilizer because: A) budgetary lags are shorter than monetary lags. B) federal agencies can not be crowded out. C) it is activated by a constitutional amendment. D) it does not require explicit […]

Table 11.2 Refer to Table 11.2. If aggregate output equals ________, there will be a $100 unplanned decrease in inventories. A) $200 B) $400 C) $600 D) $800 If real GDP was 100 in 2011 and 104.4 in 2012, the […]

If the quantity of money demanded is less than the quantity of money supplied, then the A) interest rate stays the same. B) interest rate will increase. C) interest rate will decrease. D) effect on the interest rate is indeterminate. […]

If the yen to dollar exchange rate moves from 105 to 115 yen per dollar, then the dollar has ________ and the yen has ________. A) depreciated; depreciated B) depreciated; appreciated C) appreciated; depreciated D) appreciated; appreciated Recall Application 2, […]

Recall Application 3, “Are They Really Dumping?” to answer the following questions: Based on what you learned from the application, can a firm that exports to the U.S. be charged with dumping even though the price it sells at home […]

Table 11.2 Refer to Table 11.2. At an aggregate output level of $600, the unplanned inventory change is: A) -$100. B) -$50. C) $0. D) $50. Table 6.13 Refer to Table 6.13. If 2000 is the base year, the inflation […]

Table 5.1 Refer to Table 5.1. Assume that this economy produces only two goods: Good X and Good Y. If year 1 is the base year, the value for this economy’s real GDP in year 3 is: A) $110. B) […]

Additional Application NEETS ARE THE NEW DISCOURAGED WORKERS IN JAPAN Who are the new discouraged workers in Japan? In Japan, there is growing concern about young people who are not joining the labor force. Young workers who have given up […]

If the MPC = 0.75, the government spending multiplier would be A) 0.25. B) -7.5. C) 4. D) 25. The depreciation of the dollar will make U.S. goods ________ to foreigners and make imports ________ for U.S. residents. A) more […]

Figure 18.2 Refer to Figure 18.2. In autarky, the maximum amount of spears that Macadamia can produce is A) 40. B) 100. C) 120. D) 160. If incomes increase and hotdogs are inferior goods, then: A) the demand for hotdogs […]

During periods of poor economic performance, real GDP A) declines and unemployment rises. B) declines and unemployment declines. C) declines but unemployment typically does not change. D) is unchanged but unemployment rises sharply. Figure 4.6 Figure 4.6 illustrates a set […]

Recall the Application about the lack of property rights in Peru, and why clear property rights are important for economic growth in developing countries, to answer the following question(s). Clear property rights give owners an incentive to make long-term investments […]

A nation’s net exports consist of A) its exports plus its imports. B) its exports minus its imports. C) its exports plus all other nation’s imports. D) its imports plus all other nation’s exports. The efforts of nations to influence […]

A “trade deficit” occurs when A) we sell more to other countries than we buy from them. B) we buy more from other countries than we sell to them. C) we sell more to one country than another. D) we […]

Which of the following sequence of events would follow an open market purchase of bonds? A) interest rate investment aggregate demand real GDP B) interest rate investment aggregate demand real GDP C) interest rate investment aggregate demand real GDP D) […]

Explain how each of the following policy actions by the Federal Reserve would affect the quantity of money supplied: (a) a decrease in the required reserve ratio (b) an increase in the discount rate (c) the Fed purchases government bonds […]

_______________________ Suppose: C = 100 + .75 (y-T) I = 200 G = 300 T = 300 _______________________ Table 11.5 Refer to Table 11.5. If both G and T decrease by 100, equilibrium output will: A) stay the same. B) […]

A(n) ________ in U.S. interest rates will cause an increase in the demand for U.S. dollars and a(n) ________ in the (per dollar) exchange rate. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease Figure 9.1 shows […]

Suppose that a natural disaster substantially increases the cost of producing cheese. We would predict that the equilibrium quantity of cheese will ________ and the equilibrium price of cheese will ________. A) increase; increase B) increase; decrease C) decrease; increase […]

The Fed’s management of public expectations is sometimes hindered by its own: A) inside lags. B) difficulty in communicating the direction of future policy actions. C) internal disagreements about the course of future monetary policy. D) inability to conduct effective […]

Recall Application 1, “Absolute Advantage and Comparative Disadvantage in Latvia,” to answer the following questions: According to the Application, which good does Latvia have comparative advantage on? A) timber B) grain C) milk D) livestock Recall Application 3, “The Financial […]

The labor supply curve is based on the decision of: A) workers on how many hours to work and how much to enjoy as leisure. B) firms on how many workers to hire. C) firms on how many goods and […]

Minimum wage laws are examples of: A) price ceilings. B) equilibrium prices. C) price floors. D) minimum supply prices. During the Kennedy Era, the tax cut implemented resulted in: A) stimulating economic growth. B) facilitating a recession. C) driving the […]

To measure the effect of debt in an economy, economists use a standard measure which involves the ________ relative to the GDP. A) stock market activity B) outstanding government bonds C) stock of debt D) capital stock of equipment If […]

Capital gains are taxed at a different rate than income and this reduces revenues the government receives. All else equal, what would happen if capital gains taxes were eliminated? A) The government would not be able to spend money on […]

Additional Application INFLATION-INDEXED BONDS IN THE UNITED STATES Are there bonds that can protect your investments from inflation? In 1997, the U.S. Department of the Treasury created a new financial instrument called the Treasury Inflation-Protected Security, or TIPS. The key […]

Which of the following is not a transfer payment? A) Social Security benefits B) corporate dividends C) Medicaid D) government welfare payments Arguments against the balanced budget amendment include which of the following? A) A balanced budget amendment would exert […]

Table 3.1 Table 3.1 illustrates Willy and Blythe’s hourly production for apples and carrots. Based on the table, Willy’s opportunity cost of 1 apple is: A) 1 carrot. B) 2/3 carrot. C) 4 carrots. D) 6 carrots. If the nominal […]

Suppose that an economy is experiencing continuously rising prices. If 2000 is the base year, then the real GDP in 1990 is ________ the nominal GDP. A) less than B) equal to C) greater than D) There is insufficient information […]

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are known as: A) sticky prices. B) fixed prices. C) regulatory prices. D) market prices. Refer to Figure 15.2. A decrease in wages is […]

During hyperinflations, the velocity of money generally increases because A) money is no longer a good store of value, so people spend it slowly. B) money is better store of value, so people spend it immediately. C) economic agents have […]

Assume that the consumption function is C = 100 + 0.8Y, income (Y) is $1,000 billion, and investment I is $50 billion, then the unplanned inventory change will be $ ________ billion. A) -50 B) 0 C) 50 D) 100 […]

Recall the Application about the increase in Chinese demand for pecans to answer the following question(s). Between 2006 and 2009, Chinese imports of U.S. pecans increased from 9 million pounds per year to 88 million pounds per year, and as […]

Recall Application 2, “Economic Equality May Sustain Economic Growth,” to answer the following questions: After reading the application, one can conclude that all countries that experience economic growth also experience improved income equality. If the unemployment rate is above the […]

The income-expenditure model focuses on changes in price levels. Social insurance taxes are paid by corporations based on their profits. Answer: FALSE The Keynesian short-run aggregate supply curve is vertical. Answer: FALSE Nominal GDP is calculated using a constant set […]

The corporate tax rate during the Kennedy Administration was lower than the corporate tax rate today. Banks will never hold any additional reserves beyond what is required. Answer: FALSE This year’s nominal GDP is this year’s output of final goods […]

Changes in demand will often be met with changes in output rather than changes in prices because of formal and informal contracts. Taxes are the only mechanism by which the federal government earns money. Answer: FALSE Unemployment occurs even during […]

Imports are products produced in the home country and sold in another country. The World Trade Organization was formed to enforce GATT and other international trade agreements. Answer: TRUE Recall Application 3, “The Effectiveness of Committees,” to answer the following […]