Archives: Quiz

If demand is elastic, an increase in price will decrease total revenue. a. True b. False A typical American family sends about _____% of its budget on services. a. 20% b. 32% c. 66% d. 70% Answer: c It might […]

Critics of affirmative action programs argue that they a. promote statistical discrimination. b. impair economic efficiency by preventing firms from freely choosing the most productive employee for a particular job. c. are not as efficient as quota systems at hiring […]

A demand schedule shows a. the “market potential” for a product. b. how much consumers are willing and able to buy at different prices. c. possible combinations of output under different conditions. d. how much producers would like to sell […]

The “Taylor rule” for monetary policy provides the Fed with a a. mechanical prescription for monetary policy. b. benchmark to guide policy decisions. c. time frame for discount rate changes. d. rule for changing the M1 money supply. A budget […]

The immediate impetus for the establishment of the Federal Reserve System came from a. severe outbreaks of inflation in the early 1900s. b. four severe banking panics between 1873 and 1907. c. the discovery of gold in Alaska. d. the […]

Compared to workers in poor countries, workers in richer countries have a. lower productivity but higher wages. b. higher productivity and higher wages. c. higher productivity but lower wages. d. the same productivity but higher wages. Given the economy’s existing […]

If demand is inelastic, a drop in price will raise total expenditure. a. True b. False The concentration ratio of industry is a measure relating to the proportion of the industry’s total output that is produced by a small number […]

Given the labor force, either more capital or better technology will shift the production function downward. a. True b. False Assuming free trade between countries, exchange rates will change so that goods cost the same in all countries. This concept […]

Members of the Board of Governors of the Federal Reserve System are a. elected by member banks to serve four-year terms. b. appointed by Congress for 14-year terms. c. appointed by the president for 14-year terms. d. appointed by the […]

The concept that increases in spending cause larger increases in equilibrium GDP is known as the a. profiler. b. mystifier. c. multiplier. d. depreciator. In the circular flow model, which of the following is considered a leakage? a. investment spending […]

The Fed’s purchase and sale of government securities is known as a. margin operations. b. open market operations. c. bank reserve operations. d. cash management operations. A bond and stock differ in that a stock is an IOU for a […]

The windfall profits tax on oil will curtail oil production if a. oil executives decide to be spiteful. b. the demand for oil is inelastic. c. the supply curve for oil is upward sloping. d. the supply curve for oil […]

If the firm’s marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating a. short of an optimal input point. b. at the optimum input point. c. beyond the […]

The school of engineering at a modern university would be a supporter of the new a. consumption theory. b. growth theory. c. monetary theory. d. construction theory. Which of the following would be the most likely candidate for direct application […]

Gross domestic product is the money value of manufacturing production in a year. a. True b. False Figure 9-1 Which of the graphs in Figure 9-1 best illustrates the path of a composite of common stock prices over the long […]

On the job training: a. is an important component for building human capital b. may be just as important as formal education in raising productivity c. is less amenable to influence by the government d. All of the above are […]

In August 1988, the Los Angeles Kings hired Wayne Gretzky for $15 million in cash. The hockey team’s decision must have been based on the expectation that a. Gretzky’s opportunity cost will exceed $15 million. b. Gretzky’s marginal revenue product […]

Prices are useful in coordinating society’s economic planning because a. they convey information about which goods are scarce and which are plentiful. b. economies based on price systems are more flexible than centrally planned economies. c. economies based on price […]

What does the Herfindahl-Hirschman Index value near 10,000 imply about the market? a. Pure monopoly b. Perfect competition c. Monopolistic competition d. Oligopoly The statement “Resources employed in producing X are better suited to making Y” is another way of […]

What is the most probable reason why garbage men have higher wages than nurses? a. marketplace discrimination b. active unionization in the garbage collection field c. higher demand for garbage men than nurses d. the nonmonetary attractiveness of garbage collection […]

Policy makers who believe that the costs of unemployment are very high will tend to favor which of the following during a recessionary gap? a. moderate fiscal stimulus, no monetary stimulus b. fiscal and monetary tightness c. moderate monetary stimulus, […]

Figure 16-3 If budget deficits shift the money demand curve as is illustrated in Figure 16-3, which component of total expenditures will be affected the most? a. consumption spending b. government spending c. private investment spending d. net exports The […]

Deregulation has led to higher prices. a. True b. False The most volatile component of aggregate demand is a. consumption spending. b. government spending. c. investment spending. d. net exports. Answer: c Under the gold standard, a. no nation had […]

Figure 4-20 If there are empty seats at the university basketball game when the price per ticket is P*, then this situation can best be represented by which graph in Figure 4-20? a. 1 b. 2 c. 3 d. 4 […]

Inefficient resource allocation is a major problem with monopolies. a. True b. False The cost of a hospital stay has been going down slowly. a. True b. False Answer: False A fall in the price of a competing product will […]

Explain how and why economic events in the U.S. affected the economies of Thailand, South Korea, and Indonesia and vice-versa. Part of the normal aftermath of a period of excessive aggregate demand is a. improvement in the quality of life. […]

Inflation refers to an increase in the a. price level. b. rate of inflation. c. total income. d. real GDP. A society must make three sorts of decision: what goods to produce, how to produce them, and how to distribute […]

When the growth rates of actual and potential GDP diverge, they usually diverge because a. actual GDP growth equals potential GDP growth. b. actual GDP growth falls below potential GDP growth. c. potential GDP growth rates fall below actual GDP […]

Under an emissions tax program, the government sets ____; under an emissions permits program, the government sets ____. a. the price of the right to pollute; the price of the right to pollute b. the price of the right to […]

Previously a creditor nation, in the 1980s the U.S. became a debtor nation. a. True b. False The reason that higher interest rates reduce aggregate demand in an open economy with capital flows is that investment a. increases generated by […]

Inflation reduces the multiplier effect by reducing consumers’ wealth and purchasing power. a. True b. False When a shortage occurs in the market for a good, quantity a. demanded exceeds quantity supplied and the market mechanism pushes the price up, […]

In which of the following monetary aggregates are Treasury Bills included? a. M1 only b. M2 only c. both M1 and M2 d. neither M1 nor M2 Game theory is based on the idea that each participant makes decisions based […]

The “investment” component of aggregate demand will include all of the following except a. expenditures of business firms on new plants. b. expenditures of business firms on new equipment. c. resales of existing physical assets. d. household spending on new […]

In a simple economy (no government), the vertical distance between the consumption function and the expenditure schedule measures a. undesired inventory depletion. b. planned investment c. undesired investment. d. unintended investment. To “cure” their balance of payments deficits without altering […]

Lower inflation rates are usually correlated with lower unemployment rates. a. True b. False GDP can be calculated by the value-added approach, which a. is useful in avoiding double counting. b. includes only the value-added portion from the sale of […]

When a teacher in a private school points out to her high school principal that since there are empty seats in all classrooms, the cost of additional students is really zero, she is using the a. law of comparative advantage. […]

Figure 7-10 In Figure 7-10, the curve labeled C is a. average fixed cost. b. average total cost. c. average variable cost. d. marginal cost. Under perfect competition the price of a depletable resource whose cost of extraction is not […]

Which of the following is an imperfection of market economies? a. They produce inexpensive services but expensive manufactured goods. b. They place undue importance on the needs of future generations. c. They cannot provide certain goods such as national defense. […]

A tax is progressive if it raises a greater fraction of total tax revenue every year. a. True b. False Society benefits from monopolistic competition because the firms are allocatively efficient. a. True b. False Answer: False In an attempt […]

All two-dimensional graphs must have an origin, a horizontal axis, and a vertical axis. a. True b. False A depreciation of the U.S. dollar has the same effect on aggregate supply as an increase in foreign prices. a. True b. […]

Compared to a perfectly competitive firm, a monopolist a. is less likely to advertise. b. will, according to Schumpeter, invest fewer resources in research and development. c. usually produces an inefficiently small level of output. d. is less likely to […]

If aggregate quantity demanded exceeds aggregate quantity supplied, we can expect an unplanned a. depletion of inventories, causing firms to raise prices. b. depletion of inventories, causing firms to lower prices. c. accumulation of inventories, causing firms to raise prices. […]

Railroads have received significant attention from regulators because a. railroads enjoy significant economies of scale. b. conditions in the railroad industry are conducive to destructive competition. c. regulators would like to ensure universal service to all potential railroad customers. d. […]

Environmental damage a. cannot be reduced to zero. b. is inevitable where humans exist. c. tends to increase as long as benefits outweigh the costs to the damagers. d. All of the above are correct. Explain why it makes a […]

In reality, commercial banks function most like ____ of the district Federal Reserve Banks. a. stockholders b. regulators c. customers d. competitors Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as “fairer.” a. […]

The aggregate supply curve shows the relationship between ____ and ____, holding all other factors constant. a. price level; quantity of real GDP supplied b. price level; supply of nominal GDP c. nominal GDP; price level of real GDP d. […]

The successes of the 1960s were ascribed to the effects of a. classical policies from the 1800s. b. classical policies from the 1930s. c. classical policies from the 1950s. d. Keynesian policies from the 1930s. e. Keynesian policies from the […]

Cost-reducing technological advancements allow suppliers to earn more profits but have no noticeable effect on the supply curve. a. True b. False A common characteristic in oligopolistic markets is a. consideration of rivals’ reactions. b. standardized products. c. high profits. […]

Figure 12-2 In Figure 12-2, which of the graphs represents a monopolistic competitor in long-run equilibrium? a. 1 b. 2 c. 3 d. 4 Under the Bretton Woods system of fixed exchange rates, a. devaluations were frequent and small. b. […]

A duopoly is a. a cartel in which all members try to cheat on the cartel. b. an industry with only two sellers. c. an industry with only two buyers. d. a cartel with only two members. Stabilization policy is […]