Archives: Quiz

Gold and silver have historically been the most common form of commodity money. a. True b. False If the credit market is close to being a competitive market, an interest rate ceiling imposed by usury laws will bring misallocations of […]

In reality, there is not one labor market, but many. a. True b. False There is some agreement between the beliefs of President George W. Bush in 2001 on the effectiveness of tax cuts with the beliefs of former President […]

The Big Mac index is a measure of how well the purchasing power parity theory works. a. True b. False Firms often seek to borrow money to expand their capital stock, and the price they pay for that money is […]

The productivity speed-up in the United States could be explained by a. improvements in labor force quality. b. falling energy prices. c. rising rates of domestic saving. d. advances in information technology. Table 20-2 In Table 20-2, assume that exports […]

A good will tend to be more price elastic if it a. is a luxury good. b. has no close substitutes. c. is a small part of the household budget. d. is a necessity. A government currently uses price controls […]

In 2013, corporate profits in the U.S. economy were about 14 percent of national income. a. True b. False Figure 13-1 In Figure 13-1, which panel shows the effect of a recession on the interest rate? a. Panel (A) b. […]

Optimal decisions are made on the basis of a. rate of growth in total profit. b. average cost and average revenue figures. c. impact on market share. d. marginal cost and marginal revenue figures. If the price of a good […]

Contestable markets improve the performance of imperfect markets with a. government regulations. b. the threat of entry. c. advertising. d. tacit collusion. Long-run average cost of the perfectly competitive firm includes the a. cost of raw materials per unit of […]

Which of the following scenarios best illustrates the concept of cyclical unemployment? a. Grace loses her job because of new automated machinery. b. Sean quits his job to look for work that is more fun. c. Ellen quits looking for […]

An example of indexing is a “cost of living” adjustment clause in a wage contract. a. True b. False When the average tax rate rises as income rises, this is known as progressive taxation. a. True b. False Answer: True […]

If the quantity of euro demanded were greater than the quantity supplied, then the price of the a. euro would rise. b. euro would fall. c. dollar would rise. d. euro would be in equilibrium. From 2000 to 2001, the […]

The effect of opening trade between countries is a. living standards rise in the country with efficient, high-pay workers. b. both countries can exploit comparative advantage and increase productivity. c. total world production increases as both countries specialize in specific […]

As the economy becomes more technologically sophisticated, the wage premium can be expected to a. continue rising. b. continue falling. c. rise. d. fall. Figure 18-1 According to the graph in Figure 18-1, the increase in the amount that consumers […]

The existence of the “underground economy” causes measured GDP to overestimate actual output. a. True b. False If the multiplier is 4 and real GDP increases by $520 billion, the increase in investment spending must have been a. $110 billion. […]

When the expenditure schedule is too low, the result is a(n) a. unemployment surplus. b. inflationary gap. c. recessionary gap. d. budgetary gap. Average revenue is slightly higher than price. a. True b. False Answer: False A country that must […]

Which of the following might lead a nation to engage in international trade? a. Differences in natural endowments such as climate b. Differences in skills of labor force c. Differences in endowments of natural resources d. All of the above […]

The world price of a commodity will settle at the level where a. supply and demand are equal within each country. b. the excess demand of the importing country is equal to the excess supply of the exporting country. c. […]

In 1962, Michael Harrington argued in The Other America that there was chronic, severe poverty in America. a. True b. False Table 20-2 In Table 20-2, what are net exports when GDP = 3,500? a. 400 b. 300 c. 200 […]

We should expect to see home construction activity decrease when interest rates increase. a. True b. False The accounting identity for the economy’s factor payments can be written as ____. a. GDP = wages + interest + rents + profits […]

If there are strong economies of scale and scope, then society a. will not be able to prevent overt collusion. b. will benefit from establishing a cartel. c. cannot benefit from regulation of a natural monopoly. d. will not be […]

Define the following terms and explain their importance to the study of macroeconomics. a. the relationship between interest rates and velocity b. lags in stabilization policy c. rules versus discretion An improvement in productivity will usually increase profits. a. True […]

Increases in the supply of scientists and engineers can increase the level of a. investment. b. consumption. c. government spending. d. technology. If a farmer’s opportunity cost of producing 50,000 bushels of wheat is 20,000 fewer bushels of soybeans, then […]

One of the reasons that pollution problems are as large as they are is that a. markets let individuals and firms deplete valuable resources without charging money for doing so. b. markets are incapable of incorporating valuable resources such as […]

The primary goal of supply-side economics is to a. balance the federal budget. b. reduce the balance of payments deficit. c. reduce the money supply. d. reduce inflation and increase growth at the same time. Prices set too low can […]

If crowding out occurs, the Main Burden of the debt is a. smaller government assets passed along to the next generation. b. smaller capital stock passed along to the next generation. c. fewer government services during this generation. d. higher […]

The decline in the value of the dollar from 1985 to 1988 was beneficial to a. American tourists travelling to Europe. b. firms importing goods into America. c. American exporting businesses. d. foreigners holding U.S. government bonds. Combating recession may […]

If the economy of Gwondanaland is growing more rapidly than the economy of Japan, most likely a. Japan has more current investment than Gwondanaland. b. Japan has more government spending than Gwondanaland. c. Japan spends more on capital goods than […]

Which of the following is exempt from taxation (a tax exemption)? a. interest on a home mortgage b. interest from municipal bonds c. rent d. property taxes Member banks of the Federal Reserve System a. advise the Fed on monetary […]

Which term refers to provisions in a law or a contract whereby monetary payments are automatically adjusted whenever a specified price index changes? a. Contango b. Swap c. Averaging d. Indexing A price-discriminating firm will always maximize profit by following […]

If the short-run Phillips curve has a very steep slope, the a. structural deficit will grow during inflation. b. structural deficit will fall during recession. c. inflation costs of reducing unemployment are relatively low. d. inflation costs of reducing unemployment […]

Would a profit-maximizing firm sell where demand is inelastic? a. No, this would not follow the rule of MC = MR. b. No, the firm could not profitably raise price. c. Yes, the firm could profitably lower price to attract […]

Bankers must always trade off a. honesty and dishonesty. b. stocks and loans. c. prudence and profits. d. gold and cash. e. All of the above are correct. If the Fed raises the discount rate, what will be the effect […]

Most of the investment decisions in the U.S. economy are made by a. consumers. b. businesses. c. governmental institutions. d. international financial agencies. Rent seeking is the term given a. to an attempt by firms to create a profitable monopoly […]

Taxes constitute the difference between GDP and disposable income. a. True b. False An economist who claims that an increase in government spending would result mainly in a higher price level believes the economy is operating where a. the MPC […]

Which of the following illustrates government acting as a referee? a. taxing high income persons b. enforcing contract provisions between buyer and seller c. buying new weapons for defense d. mailing checks to social security recipients e. collecting data on […]

Saving is often discouraged by usury laws during inflationary periods because a. nominal rates of interest are kept above real rates of interest. b. nominal rates of interest are kept below inflation rates. c. nominal rates of interest are kept […]

Compared to an economy’s self-correcting mechanism, active contractionary fiscal policy will a. work more slowly and calmly. b. work more quickly. c. have less deflationary effects. d. have a smaller effect on real GDP. Invention is the act of generating […]

A given income-expenditure diagram always assumes a variable price level. a. True b. False As more of a good is produced, its opportunity cost tends to increase because resources are not equally efficient at producing all goods. a. True b. […]

An airline is considering adding a flight from Chicago to Sioux Falls. Total cost of the flight is $5,500. Variable cost is $2,000. Revenue from the flight is expected to be $3,000. Should the flight be added? a. No, the […]

On May 12, 2011, the U.S. dollar was worth 28 Russian rubles. How many U.S. dollars did it take to buy one Russian ruble? a. 0.01 b. 0.04 c. 0.28 d. 0.40 How will a cut in a fixed tax […]

“Rent seeking” describes the search and battle for opportunities to collect economic rents. a. True b. False In 2010, many politicians argued that the deficit should be reduced at all costs but many economists countered that deficit reduction would be […]

According to economists, one of the signs of an unhealthy economy is a(n) a. rising labor productivity. b. increasing real GDP. c. declining real GDP. d. declining unemployment. What involves taking the risks that are necessary to seek out business […]

The current debate about fiscal and monetary policy tends to focus on a. which policy is less destabilizing. b. which policy is more effective. c. whether the Fed can control the money supply. d. which policy works more quickly. Which […]

The relationship between consumption and disposable income is very unreliable and unpredictable. a. True b. False Since the debt is measured in dollars, the presence of inflation serves to understate the true level of indebtedness. a. True b. False Answer: […]

The sum of capital inflows and the trade balance must be zero. a. True b. False A liability to a bank is a. something that the bank owns. b. something that the bank owes. c. something a customer owes the […]

If short-run equilibrium GDP is above potential GDP, prices will eventually rise. a. True b. False At any given moment there is one exchange rate a. for currencies in the free world. b. between every pair of currencies. c. for […]

A monopsony is a market situation in which there is only one seller. a. True b. False Economists use the term capital to describe that factor of production that includes human-made resources such as factories, buildings, machinery and tools. a. […]

If European economies experience a strong economic recovery, U.S. net exports will a. increase and AD will shift outward. b. increase and AD will shift inward. c. decrease and AD will shift inward. d. decrease and AD will shift outward. […]

Life expectancy in the U.S.: a. is the highest in the world b. is the lowest in the world c. ranks about 100th in the world d. ranks about 40th in the world If marginal cost of an additional unit […]

Explain the effect of the following changes on equilibrium price and quantity of a commodity: (a) increase in average incomes. (b) increase in population. The construct used to demonstrate efficient use of society’s resources is the a. production possibilities frontier. […]