question
The study of economics
A) is a way of analyzing decision-making processes caused by scarcity.
B) is a very narrow endeavor.
C) focuses on how a business should function.
D) is concerned with proving that capitalism is better than socialism.
A) is a way of analyzing decision-making processes caused by scarcity.
B) is a very narrow endeavor.
C) focuses on how a business should function.
D) is concerned with proving that capitalism is better than socialism.
answer
A) is a way of analyzing decision-making processes caused by scarcity.
question
Which of the following is NOT an opportunity cost of attending college?
A) the income you could have earned if you didn't attend college
B) the tuition you pay
C) the alternative uses of the time you spend studying
D) the cost of the food that you consume while you are attending college
A) the income you could have earned if you didn't attend college
B) the tuition you pay
C) the alternative uses of the time you spend studying
D) the cost of the food that you consume while you are attending college
answer
D) the cost of the food that you consume while you are attending college
question
The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units is
A) normative economics.
B) macroeconomics.
C) microeconomics.
D) positive economics.
A) normative economics.
B) macroeconomics.
C) microeconomics.
D) positive economics.
answer
C) microeconomics.
question
The government should extend the duration of unemployment benefits to those workers who lost their jobs due to outsourcing. This statement is best described as
A) an example of marginalism.
B) a normative statement.
C) an example of the fallacy of composition.
D) a positive statement.
A) an example of marginalism.
B) a normative statement.
C) an example of the fallacy of composition.
D) a positive statement.
answer
B) a normative statement.
question
The concept of trade-offs would become irrelevant if
A) poverty were eliminated.
B) scarcity were eliminated.
C) we were dealing with a very simple, one-person economy.
D) capital were eliminated.
A) poverty were eliminated.
B) scarcity were eliminated.
C) we were dealing with a very simple, one-person economy.
D) capital were eliminated.
answer
B) scarcity were eliminated.
question
If the unemployment rate increases from 10% to 14%, the economy will
A) remain on the ppf.
B) remain on the origin.
C) move away from the ppf toward the origin.
D) move closer to a point on the ppf.
A) remain on the ppf.
B) remain on the origin.
C) move away from the ppf toward the origin.
D) move closer to a point on the ppf.
answer
C) move away from the ppf toward the origin.
question
Refer to Figure 2.6. Which of the following will NOT cause the production possibility frontier to shift from ppf1 to ppf2?
A) an improvement in technology
B) an increase in the stock of capital
C) the discovery of previously unknown oil fields
D) a decrease in the unemployment rate
A) an improvement in technology
B) an increase in the stock of capital
C) the discovery of previously unknown oil fields
D) a decrease in the unemployment rate
answer
D) a decrease in the unemployment rate
question
Refer to Table 2.1. To maximize total production,
A) Krystal and Mark should both split their time between writing poems and writing TV commercials.
B) Krystal should write poems and write TV commercials, but Mark should only write poems.
C) Krystal should specialize in writing TV commercials, and Mark should specialize in writing poems.
D) Mark should specialize in writing TV commercials, and Krystal should specialize in writing poems.
A) Krystal and Mark should both split their time between writing poems and writing TV commercials.
B) Krystal should write poems and write TV commercials, but Mark should only write poems.
C) Krystal should specialize in writing TV commercials, and Mark should specialize in writing poems.
D) Mark should specialize in writing TV commercials, and Krystal should specialize in writing poems.
answer
D) Mark should specialize in writing TV commercials, and Krystal should specialize in writing poems.
question
Refer to Table 2.1. For Mark, the opportunity cost of writing six TV commercials is ________ poems made.
A) 2
B) 18
C) 24
D) an indeterminate number of
A) 2
B) 18
C) 24
D) an indeterminate number of
answer
B) 18
question
If someone has a comparative advantage in growing pineapples,
A) they also have an absolute advantage in growing pineapples.
B) pineapples are the only product they can grow.
C) they can grow more pineapples using the same resources than other pineapple growers.
D) they can grow pineapples at a lower opportunity cost than other pineapple growers.
A) they also have an absolute advantage in growing pineapples.
B) pineapples are the only product they can grow.
C) they can grow more pineapples using the same resources than other pineapple growers.
D) they can grow pineapples at a lower opportunity cost than other pineapple growers.
answer
D) they can grow pineapples at a lower opportunity cost than other pineapple growers.
question
Country A would have an absolute advantage compared to Country B in the production of corn if
A) corn sells for a higher price in Country A than in Country B.
B) corn can be produced at lower cost in terms of other goods than it could be in Country B.
C) Country A uses fewer resources to produce corn than Country B does.
D) the demand for corn is higher in Country A than in Country B.
A) corn sells for a higher price in Country A than in Country B.
B) corn can be produced at lower cost in terms of other goods than it could be in Country B.
C) Country A uses fewer resources to produce corn than Country B does.
D) the demand for corn is higher in Country A than in Country B.
answer
C) Country A uses fewer resources to produce corn than Country B does.
question
Refer to Table 19.1. In Mexico, the opportunity cost of 1 bushel of bananas is
A) 1/2 bushel of oranges.
B) 1 bushels of oranges.
C) 2 bushel of oranges.
D) 5 bushels of oranges.
A) 1/2 bushel of oranges.
B) 1 bushels of oranges.
C) 2 bushel of oranges.
D) 5 bushels of oranges.
answer
B) 1 bushels of oranges.
question
In input or factor markets,
A) households supply resources.
B) firms supply goods.
C) households demand goods.
D) consumers purchase products.
A) households supply resources.
B) firms supply goods.
C) households demand goods.
D) consumers purchase products.
answer
A) households supply resources.
question
Which of the following will NOT cause a shift in the demand curve for compact discs?
A) a change in income
B) a change in the price of downloadable online music
C) a change in the price of compact discs
D) a change in wealth
A) a change in income
B) a change in the price of downloadable online music
C) a change in the price of compact discs
D) a change in wealth
answer
C) a change in the price of compact discs
question
Refer to Figure 3.3. As your income increased, the demand for X shifted from D1 to D2. Good X is
A) a normal good.
B) an income-neutral good.
C) an inferior good.
D) a luxury good.
A) a normal good.
B) an income-neutral good.
C) an inferior good.
D) a luxury good.
answer
C) an inferior good.
question
A decrease in demand for cameras would likely be caused by
A) an increase in the price of a complementary good.
B) an increase in the price of a substitute good.
C) a decrease in the price of cameras.
D) an increase in the price of cameras.
A) an increase in the price of a complementary good.
B) an increase in the price of a substitute good.
C) a decrease in the price of cameras.
D) an increase in the price of cameras.
answer
A) an increase in the price of a complementary good.
question
Related to the Economics in Practice on p. 55: The Amazon Kindle and the electronic textbooks available for the Kindle are complementary goods. Electronic textbooks and traditional, hard copy textbooks are substitute products. If the price of electronic textbooks for the Kindle decreases,
A) demand for the Kindle decreases, the quantity of electronic textbooks demanded increases, and demand for traditional, hardcopy textbooks decreases.
B) demand for the Kindle increases, demand for electronic textbooks increases, and demand for traditional, hard copy textbooks decreases.
C) demand for the Kindle increases, the quantity of electronic textbooks demanded increases, and demand for traditional, hard copy textbooks decreases.
D) the quantity of Kindles demanded increases, demand for electronic textbooks increases, and the quantity of traditional, hard copy textbooks demanded decreases.
A) demand for the Kindle decreases, the quantity of electronic textbooks demanded increases, and demand for traditional, hardcopy textbooks decreases.
B) demand for the Kindle increases, demand for electronic textbooks increases, and demand for traditional, hard copy textbooks decreases.
C) demand for the Kindle increases, the quantity of electronic textbooks demanded increases, and demand for traditional, hard copy textbooks decreases.
D) the quantity of Kindles demanded increases, demand for electronic textbooks increases, and the quantity of traditional, hard copy textbooks demanded decreases.
answer
C) demand for the Kindle increases, the quantity of electronic textbooks demanded increases, and demand for traditional, hard copy textbooks decreases.
question
Refer to Figure 3.14. A decrease in quantity supplied is represented by a movement from
A) S2 to S1.
B) S2 to S3.
C) Point B to Point A along supply curve S2.
D) Point B to Point C along supply curve S2.
A) S2 to S1.
B) S2 to S3.
C) Point B to Point A along supply curve S2.
D) Point B to Point C along supply curve S2.
answer
D) Point B to Point C along supply curve S2.
question
Refer to Figure 3.17. At a price of $30, there is an excess
A) demand of 450 sunglasses.
B) demand of 300 sunglasses.
C) demand of 750 sunglasses.
D) supply of 300 sunglasses.
A) demand of 450 sunglasses.
B) demand of 300 sunglasses.
C) demand of 750 sunglasses.
D) supply of 300 sunglasses.
answer
A) demand of 450 sunglasses.
question
Refer to Figure 3.19. When the economy moves from Point A to Point B, there has been
A) an increase in quantity demanded and an increase in supply.
B) an increase in quantity demanded and an increase in quantity supplied.
C) an increase in demand and an increase in quantity supplied.
D) an increase in demand and an increase in supply.
A) an increase in quantity demanded and an increase in supply.
B) an increase in quantity demanded and an increase in quantity supplied.
C) an increase in demand and an increase in quantity supplied.
D) an increase in demand and an increase in supply.
answer
C) an increase in demand and an increase in quantity supplied.
question
An example of an ineffective price ceiling would be the government setting the price of wheat at ________ per bushel when the market price is at $5.00 per bushel.
A) $2.25
B) $3.00
C) $4.75
D) $6.00
A) $2.25
B) $3.00
C) $4.75
D) $6.00
answer
D) $6.00
question
If the market price of coffee is $3.00 per pound but the government will not allow coffee growers to charge more than $2.00 per pound of coffee, which of the following will happen?
A) There will be a shortage of coffee.
B) Supply must eventually increase so that the market will come into equilibrium at a price of $2.50.
C) The market will be in equilibrium at a price of $2.00.
D) Demand must eventually decrease so that the market will come into equilibrium at a price of $2.50.
A) There will be a shortage of coffee.
B) Supply must eventually increase so that the market will come into equilibrium at a price of $2.50.
C) The market will be in equilibrium at a price of $2.00.
D) Demand must eventually decrease so that the market will come into equilibrium at a price of $2.50.
answer
A) There will be a shortage of coffee.
question
Refer to Figure 4.3. If the government will not allow the retailers to charge more than $0.40 for a pencil, which of the following will happen?
A) The market will be in equilibrium at a price of $0.40.
B) Demand must eventually decrease so that the market will come into equilibrium at a price of $0.40.
C) A nonprice rationing system such as queuing must be used to ration the available supply of pencils.
D) Supply must eventually increase so that the market will come into equilibrium at a price of $0.40.
A) The market will be in equilibrium at a price of $0.40.
B) Demand must eventually decrease so that the market will come into equilibrium at a price of $0.40.
C) A nonprice rationing system such as queuing must be used to ration the available supply of pencils.
D) Supply must eventually increase so that the market will come into equilibrium at a price of $0.40.
answer
C) A nonprice rationing system such as queuing must be used to ration the available supply of pencils.
question
If the price floor is set above the equilibrium price,
A) quantity demanded will equal quantity supplied.
B) the floor will be ineffective.
C) there will be a surplus.
D) there will be a shortage.
A) quantity demanded will equal quantity supplied.
B) the floor will be ineffective.
C) there will be a surplus.
D) there will be a shortage.
answer
C) there will be a surplus.
question
Macroeconomics deals with:
A) bits and pieces of the economy.
B) the question of how a business unit should operate profitably.
C) the working of the entire economy or large sectors of it.
D) how individuals make decisions.
A) bits and pieces of the economy.
B) the question of how a business unit should operate profitably.
C) the working of the entire economy or large sectors of it.
D) how individuals make decisions.
answer
C) the working of the entire economy or large sectors of it.
question
Scarcity in economics means:
A) not having sufficient resources to produce all the goods and services we want.
B) the wants of people are limited.
C) there must be poor people in rich countries.
D) shortages exist in nearly all markets.
A) not having sufficient resources to produce all the goods and services we want.
B) the wants of people are limited.
C) there must be poor people in rich countries.
D) shortages exist in nearly all markets.
answer
A) not having sufficient resources to produce all the goods and services we want.
question
Florida schools offered cash bonuses to students who scored high on the state's standardized exams. The cash bonuses are an example of which of the following basic economic principles?
A) Resources are scarce.
B) The real cost of something is what you must give up to get it.
C) There are gains from trade.
D) People respond to incentives (people usually take advantage of opportunities to make themselves better off).
A) Resources are scarce.
B) The real cost of something is what you must give up to get it.
C) There are gains from trade.
D) People respond to incentives (people usually take advantage of opportunities to make themselves better off).
answer
D) People respond to incentives (people usually take advantage of opportunities to make themselves better off).
question
Recently, the government considered adding an excise tax on CDs that can be used to record music and CD players that can record discs. If this tax was enacted, we would expect:
A) that consumers would pay a higher price and producers would sell fewer of these CDs and CD players than before the tax.
B) there to be no effect on consumption or the prices paid by consumers of these CDs and CD players.
C) that consumers would pay a lower price and producers would receive a higher price for these CDs and CD players than before the tax.
D) there to be an increase in economic activity due to the tax.
A) that consumers would pay a higher price and producers would sell fewer of these CDs and CD players than before the tax.
B) there to be no effect on consumption or the prices paid by consumers of these CDs and CD players.
C) that consumers would pay a lower price and producers would receive a higher price for these CDs and CD players than before the tax.
D) there to be an increase in economic activity due to the tax.
answer
A) that consumers would pay a higher price and producers would sell fewer of these CDs and CD players than before the tax.
question
One of the ways rent control is inefficient is that it leads to:
A) higher-quality apartments.
B) high opportunity costs associated with wasted time.
C) markets that maximize total surplus.
D) the construction of more apartments.
A) higher-quality apartments.
B) high opportunity costs associated with wasted time.
C) markets that maximize total surplus.
D) the construction of more apartments.
answer
B) high opportunity costs associated with wasted time.
question
If the minimum wage is a binding price floor, then:
A) the number of workers who want to work will be greater than the number of jobs available.
B) the equilibrium wage will increase.
C) there will be a job for everyone who is willing to work.
D) business owners will hire more workers.
A) the number of workers who want to work will be greater than the number of jobs available.
B) the equilibrium wage will increase.
C) there will be a job for everyone who is willing to work.
D) business owners will hire more workers.
answer
A) the number of workers who want to work will be greater than the number of jobs available.
question
If the labor force is 500 and employment is 450, then the unemployment rate is
A) 100%.
B) 90%.
C) 10%.
D) 0%.
A) 100%.
B) 90%.
C) 10%.
D) 0%.
answer
C) 10%.
question
Which of the following is NOT a topic studied in Macroeconomics?
A) the price of Dell computers
B) the inflation rate
C) gross domestic product
D) the unemployment rate
A) the price of Dell computers
B) the inflation rate
C) gross domestic product
D) the unemployment rate
answer
A) the price of Dell computers
question
The government wants to encourage consumer spending through cutting income taxes. This is an example of
A) a fiscal policy.
B) a monetary policy.
C) a supply-side policy.
D) an incomes policy.
A) a fiscal policy.
B) a monetary policy.
C) a supply-side policy.
D) an incomes policy.
answer
A) a fiscal policy.
question
Policies designed to affect the quantity of money are
A) monetary policies.
B) fiscal policies.
C) supply side or growth policies.
D) government spending policies.
A) monetary policies.
B) fiscal policies.
C) supply side or growth policies.
D) government spending policies.
answer
A) monetary policies.
question
The employment rate is the number of people employed divided by number of people in the
labor force.
A) True
B) False
labor force.
A) True
B) False
answer
A) True
question
Unemployment implies that in the labor market
A) there are too few workers for the jobs available.
B) there is an excess demand for labor.
C) quantity demanded of labor exceeds quantity supplied.
D) there is an excess supply of labor.
A) there are too few workers for the jobs available.
B) there is an excess demand for labor.
C) quantity demanded of labor exceeds quantity supplied.
D) there is an excess supply of labor.
answer
D) there is an excess supply of labor.
question
Macroeconomic policies became more influenced by Keynes' theories starting with,
A) the period of high unemployment and high inflation in the 1970s.
B) the period of high inflation in the early 1980s.
C) the OPEC recession.
D) the Great Depression.
A) the period of high unemployment and high inflation in the 1970s.
B) the period of high inflation in the early 1980s.
C) the OPEC recession.
D) the Great Depression.
answer
D) the Great Depression.
question
Refer to Table 5.1. The period from after the fourth quarter of 2010 until before the first quarter of 2012 can be categorized as a period of
A) low unemployment.
B) high unemployment.
C) high inflation.
D) high production.
A) low unemployment.
B) high unemployment.
C) high inflation.
D) high production.
answer
B) high unemployment.
question
Which of the following is NOT included in 2013's GDP?
A) the value of a motor that is used in the production of a lawn mower
B) the value of a motorcycle produced in the United States and exported to Japan
C) the commission earned by a headhunter when she locates a job for a client
D) the profit earned in 2013 from selling a stock that you purchased in 2008
A) the value of a motor that is used in the production of a lawn mower
B) the value of a motorcycle produced in the United States and exported to Japan
C) the commission earned by a headhunter when she locates a job for a client
D) the profit earned in 2013 from selling a stock that you purchased in 2008
answer
A) the value of a motor that is used in the production of a lawn mower
question
Profits earned in the United States by foreign-owned companies are included in
A) the U.S. GNP but not GDP.
B) the U.S. GDP but not GNP.
C) both the U.S. GDP and GNP.
D) neither the U.S. GDP nor GNP
A) the U.S. GNP but not GDP.
B) the U.S. GDP but not GNP.
C) both the U.S. GDP and GNP.
D) neither the U.S. GDP nor GNP
answer
B) the U.S. GDP but not GNP.
question
Gross domestic product measures
A) the value of all output in the economy.
B) the total spending of everyone in the economy.
C) the total income of everyone in the economy.
D) all of the above
A) the value of all output in the economy.
B) the total spending of everyone in the economy.
C) the total income of everyone in the economy.
D) all of the above
answer
D) all of the above
question
The equation for GDP using the expenditure approach is
A) GDP = C +I +G - EX - IM.
B) GDP = C +I +G +EX - IM.
C) GDP = C +I +G +EX +IM.
D) GDP = C +I +G + (IM- EX).
A) GDP = C +I +G - EX - IM.
B) GDP = C +I +G +EX - IM.
C) GDP = C +I +G +EX +IM.
D) GDP = C +I +G + (IM- EX).
answer
B) GDP = C +I +G +EX - IM.
question
A company produced 8 dishwasher machines in 2012. The company sold 6 in 2012 and added 2 to its inventories. The market value of the dishwasher machines in 2012 was $200 per unit. What is the value of this company's output that will be included in the 2012 GDP?
A) $400.
B) $1,400.
C) $1,600.
D) $2,000.
A) $400.
B) $1,400.
C) $1,600.
D) $2,000.
answer
C) $1,600.
question
If receipts of factor income from the rest of the world exceed payments of factor income to the rest of the world, then
A) GNP is greater than GDP.
B) GNP equals NNP.
C) GDP equals GNP.
D) GDP is greater than GNP
A) GNP is greater than GDP.
B) GNP equals NNP.
C) GDP equals GNP.
D) GDP is greater than GNP
answer
A) GNP is greater than GDP.
question
Refer to Table 6.5. 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 2 is
A) $168.
B) $179.
C) $202.
D) $214.
A) $168.
B) $179.
C) $202.
D) $214.
answer
A) $168.
question
If the GDP deflator is greater than 100, then
A) nominal GDP is lower than real GDP.
B) nominal GDP equals real GDP.
C) prices decreased by more than half between the current and the base years.
D) nominal GDP is greater than real GDP
A) nominal GDP is lower than real GDP.
B) nominal GDP equals real GDP.
C) prices decreased by more than half between the current and the base years.
D) nominal GDP is greater than real GDP
answer
D) nominal GDP is greater than real GDP
question
Refer to Table 7.1. The labor force equals
A) 14,000 people.
B) 17,000 people.
C) 18,000 people.
D) 21,000 people.
A) 14,000 people.
B) 17,000 people.
C) 18,000 people.
D) 21,000 people.
answer
B) 17,000 people.
question
Refer to Table 7.1. The labor-force participation rate is
A) 66.7%.
B) 75.0%.
C) 77.8%.
D) 80.9%.
A) 66.7%.
B) 75.0%.
C) 77.8%.
D) 80.9%.
answer
D) 80.9%.
question
Structural unemployment is the
A) unemployment that results when people become discouraged about their chances of finding a job so they stop looking for work.
B) portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries.
C) portion of unemployment that is due to the normal working of the labor market.
D) unemployment that occurs during recessions and depressions.
A) unemployment that results when people become discouraged about their chances of finding a job so they stop looking for work.
B) portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries.
C) portion of unemployment that is due to the normal working of the labor market.
D) unemployment that occurs during recessions and depressions.
answer
B) portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries.
question
Refer to Table 7.3. Suppose 2010 is the base year. The price index in 2010 is
A) 1,000.
B) 100.
C) 10.
D) 1.
A) 1,000.
B) 100.
C) 10.
D) 1.
answer
B) 100.
question
Refer to Table 7.3. If 2010 is the base year, the inflation rate between 2010 and 2011 is
A) 3.9%.
B) 6.1%.
C) 7.4%.
D) 10.2%.
A) 3.9%.
B) 6.1%.
C) 7.4%.
D) 10.2%.
answer
B) 6.1%.
question
If the price index in period 2 is 109 and the price index in period 3 is 125, the rate of inflation between period 2 and period 3 is
A) 16.0%.
B) 14.7%.
C) 9.0%.
D) 8.7%.
A) 16.0%.
B) 14.7%.
C) 9.0%.
D) 8.7%.
answer
B) 14.7%.
question
Dean borrows $400 from Tim. Tim wants to make a 10% real return on his money, so they both agree on a 10% interest rate paid next year. Dean and Tim did not anticipate any inflation, yet the actual inflation turned out to be 4% next year. In this case,
A) Tim is better off.
B) Tim will receive more than 10% of real rate of return a year from now.
C) Dean will pay $56 a year from now on.
D) Dean is better off.
A) Tim is better off.
B) Tim will receive more than 10% of real rate of return a year from now.
C) Dean will pay $56 a year from now on.
D) Dean is better off.
answer
D) Dean is better off.
question
In which of the following conditions is the inflation rate likely to fall and the unemployment rate likely to rise?
A) recession
B) boom
C) hyperinflation
D) stagflation
A) recession
B) boom
C) hyperinflation
D) stagflation
answer
A) recession
question
Refer to Figure 8.4. Suppose the consumption function for C1 = 20 + 0.5Y, the consumption function that best fits C3 is
A) C3 = 20 + 0.4Y.
B) C3 = 20 + 0.8Y.
C) C3 = 40 + 0.4Y.
D) C3 = 40 + 0.5Y.
A) C3 = 20 + 0.4Y.
B) C3 = 20 + 0.8Y.
C) C3 = 40 + 0.4Y.
D) C3 = 40 + 0.5Y.
answer
B) C3 = 20 + 0.8Y.
question
The Jackson Tool Company manufactures only tools. In 2012 Jackson Tools manufactured 20,000 tools, but sold 21,000 tools. In 2012 Jackson Tools' change in inventory was
A) -2,000 tools.
B) -1,000 tools.
C) 1,000 tools.
D) 3,000 tools
A) -2,000 tools.
B) -1,000 tools.
C) 1,000 tools.
D) 3,000 tools
answer
B) -1,000 tools.
question
Without the government or the foreign sector in the income-expenditure model, planned aggregate expenditure equals
A) consumption minus planned investment.
B) consumption plus planned investment.
C) consumption plus inventory adjustment.
D) consumption plus actual investment.
A) consumption minus planned investment.
B) consumption plus planned investment.
C) consumption plus inventory adjustment.
D) consumption plus actual investment.
answer
B) consumption plus planned investment.
question
The economy can be in equilibrium if, and only if,
A) actual investment is zero.
B) planned investment is greater than actual investment.
C) planned investment equals actual investment.
D) planned investment is zero.
A) actual investment is zero.
B) planned investment is greater than actual investment.
C) planned investment equals actual investment.
D) planned investment is zero.
answer
C) planned investment equals actual investment.
question
Refer to Figure 8.9. Equilibrium output equals
A) 100.
B) 150.
C) 200.
D) 300.
A) 100.
B) 150.
C) 200.
D) 300.
answer
C) 200.
question
Refer to Figure 8.11. The equation for the aggregate expenditure function AE0 is
A) AE0 = 50 + 0.75Y.
B) AE0 = 50 + 0.6Y.
C) AE0 = 50 + 0.4Y.
D) AE0 = 80 + 0.6Y.
A) AE0 = 50 + 0.75Y.
B) AE0 = 50 + 0.6Y.
C) AE0 = 50 + 0.4Y.
D) AE0 = 80 + 0.6Y.
answer
A) AE0 = 50 + 0.75Y.
question
Refer to Figure 8.11. The value of the multiplier is
A) 2.
B) 2.5.
C) 3.
D) 4
A) 2.
B) 2.5.
C) 3.
D) 4
answer
D) 4
question
If autonomous consumption increases, the size of the multiplier would
A) decrease.
B) either increase or decrease depending on the size of the change in autonomous consumption.
C) remain constant.
D) increase.
A) decrease.
B) either increase or decrease depending on the size of the change in autonomous consumption.
C) remain constant.
D) increase.
answer
C) remain constant.
question
Money is
A) anything that is generally accepted as a medium of exchange.
B) backed by gold in Fort Knox.
C) the same as income.
D) the value of all coins and currency in circulation at any time
A) anything that is generally accepted as a medium of exchange.
B) backed by gold in Fort Knox.
C) the same as income.
D) the value of all coins and currency in circulation at any time
answer
A) anything that is generally accepted as a medium of exchange.
question
Ruby transfers $700 from her saving account to her checking account. This transaction will
A) increase M1 and not change M2.
B) decrease both M1 and M2.
C) not change M1 and decrease M2.
D) increase both M1 and M2
A) increase M1 and not change M2.
B) decrease both M1 and M2.
C) not change M1 and decrease M2.
D) increase both M1 and M2
answer
A) increase M1 and not change M2.
question
Crescent City Bank has $200 million in deposits. Crescent City Bank is meeting its reserve requirement and has no excess reserves. It has $40 million in reserves. Crescent City Bank faces a required reserve ratio of
A) 4%.
B) 5%.
C) 20%.
D) 25%.
A) 4%.
B) 5%.
C) 20%.
D) 25%.
answer
C) 20%.
question
Refer to Scenario 10.1. If the required reserve ratio were changed to 10%, total loans of Bank No. 2 will change to
A) 77,400.
B) 81,000.
C) 85,000.
D) 90,000.
A) 77,400.
B) 81,000.
C) 85,000.
D) 90,000.
answer
B) 81,000.
question
Refer to Scenario 10.1. What is the money multiplier in this economy?
A) 10
B) 16.67
C) 20
D) 50
A) 10
B) 16.67
C) 20
D) 50
answer
C) 20
question
Which of the following is NOT a tool available to the Fed to change the supply of money?
A) the income tax rate
B) the discount rate
C) the required reserve ratio
D) open market operations
A) the income tax rate
B) the discount rate
C) the required reserve ratio
D) open market operations
answer
A) the income tax rate
question
A bond with a face value of $1,000
A) will always sell for less than the face value.
B) will sell for the market determined price.
C) will always sell for exactly the face value.
D) will always sell for more than the face value
A) will always sell for less than the face value.
B) will sell for the market determined price.
C) will always sell for exactly the face value.
D) will always sell for more than the face value
answer
B) will sell for the market determined price.
question
An increase in the interest rate will
A) lower the optimal money balance.
B) either increase or decrease the optimal money balance depending on the level of current household wealth.
C) increase the optimal money balance.
D) have no impact on the optimal money balance.
A) lower the optimal money balance.
B) either increase or decrease the optimal money balance depending on the level of current household wealth.
C) increase the optimal money balance.
D) have no impact on the optimal money balance.
answer
A) lower the optimal money balance.
question
If interest rates are lower than what individuals consider normal, they will
A) increase their speculative money demand.
B) increase their transaction money demand.
C) decrease their speculative money demand.
D) decrease their transaction money demand.
A) increase their speculative money demand.
B) increase their transaction money demand.
C) decrease their speculative money demand.
D) decrease their transaction money demand.
answer
A) increase their speculative money demand.
question
Refer to Figure 11.1. A movement from Point B to Point A can be caused by
A) a decrease in the interest rate.
B) an increase in the interest rate.
C) a decrease in income.
D) an increase in the price level.
A) a decrease in the interest rate.
B) an increase in the interest rate.
C) a decrease in income.
D) an increase in the price level.
answer
B) an increase in the interest rate.
question
Refer to Figure 11.4. At an interest rate of 8%, there is
A) an excess demand for money of $800 billion.
B) an excess supply of money of $400 billion.
C) an excess demand for money of $400 billion.
D) an excess supply of money of $800 billion
A) an excess demand for money of $800 billion.
B) an excess supply of money of $400 billion.
C) an excess demand for money of $400 billion.
D) an excess supply of money of $800 billion
answer
B) an excess supply of money of $400 billion.
question
Refer to Figure 11.6. The demand for money curve will shift from Md1 to Md0 if
A) the price level decreases.
B) the Fed sells government securities on the open market.
C) the interest rate increases.
D) the nominal aggregate output increases
A) the price level decreases.
B) the Fed sells government securities on the open market.
C) the interest rate increases.
D) the nominal aggregate output increases
answer
D) the nominal aggregate output increases
question
If the economy is operating on the relatively vertical segment of the aggregate supply curve, an increase in aggregate demand causes a ________ change in the price level and a ________ change
in output.
A) big; big
B) small; small
C) big; small
D) small; big
in output.
A) big; big
B) small; small
C) big; small
D) small; big
answer
C) big; small
question
Refer to Figure 12.3. Hurricane Katrina destroyed a large portion of the infrastructure along the Gulf of Mexico coast. This caused
A) the short-run aggregate supply curve to shift from AS1 to AS0.
B) the short-run aggregate supply curve to shift from AS1 to AS2.
C) the economy to move from Point B to Point A along AS1.
D) the economy to move from Point C to Point B along AS1.
A) the short-run aggregate supply curve to shift from AS1 to AS0.
B) the short-run aggregate supply curve to shift from AS1 to AS2.
C) the economy to move from Point B to Point A along AS1.
D) the economy to move from Point C to Point B along AS1.
answer
B) the short-run aggregate supply curve to shift from AS1 to AS2.
question
In an economy, when the price level falls, consumers and firms buy more goods and services. This relationship is represented by the
A) long-run aggregate supply curve.
B) aggregate expenditures curve.
C) aggregate demand curve.
D) short-run aggregate supply curve
A) long-run aggregate supply curve.
B) aggregate expenditures curve.
C) aggregate demand curve.
D) short-run aggregate supply curve
answer
C) aggregate demand curve.
question
Other things equal, an increase in government spending shifts
A) the AD curve to the right.
B) the AS curve to the left.
C) the AS curve to the right.
D) the AD curve to the left.
A) the AD curve to the right.
B) the AS curve to the left.
C) the AS curve to the right.
D) the AD curve to the left.
answer
A) the AD curve to the right.
question
Refer to Figure 12.7. Which of the following statements characterizes an output level of $800 billion?
A) It can be achieved only if investment is independent of the interest rate.
B) It is sustainable over the long run without inflation.
C) It is attainable in the short run but it is associated with increases in the price level.
D) It is achievable only in the long run.
A) It can be achieved only if investment is independent of the interest rate.
B) It is sustainable over the long run without inflation.
C) It is attainable in the short run but it is associated with increases in the price level.
D) It is achievable only in the long run.
answer
C) It is attainable in the short run but it is associated with increases in the price level.
question
Refer to Figure 12.8. Suppose the economy is currently at Point A producing potential output Y0. If the government increases spending, the economy moves to Point ________ in the short-run and to Point ________ in the long-run.
A) B; C
B) B; D
C) D; E
D) C; B
A) B; C
B) B; D
C) D; E
D) C; B
answer
C) D; E
question
Firms can finance capital spending by doing all of the following EXCEPT
A) borrowing from a bank.
B) selling stock in the company.
C) issuing bonds
D) paying dividends.
A) borrowing from a bank.
B) selling stock in the company.
C) issuing bonds
D) paying dividends.
answer
D) paying dividends.
question
If the risk associated with a company goes up, you would expect the price of its stock to
A) rise.
B) fall.
C) be unaffected.
D) fall to zero.
A) rise.
B) fall.
C) be unaffected.
D) fall to zero.
answer
B) fall.
question
The implementation lag for fiscal policy is longer than for monetary policy because
A) it takes longer for the Fed to act than Congress.
B) it takes longer for Congress to act than the Fed.
C) monetary policy changes more quickly affect behavior than fiscal policy changes.
D) fiscal policy changes more quickly affect behavior than monetary policy changes
A) it takes longer for the Fed to act than Congress.
B) it takes longer for Congress to act than the Fed.
C) monetary policy changes more quickly affect behavior than fiscal policy changes.
D) fiscal policy changes more quickly affect behavior than monetary policy changes
answer
B) it takes longer for Congress to act than the Fed.
question
Refer to Figure 15.1. If the economy is actually at Point C but policy makers think that it is still at Point B, this is an example of
A) recognition lag.
B) response lag.
C) implementation lag.
D) economic policies ineffectiveness
A) recognition lag.
B) response lag.
C) implementation lag.
D) economic policies ineffectiveness
answer
A) recognition lag.
question
If the Fed buys U.S. Treasury bills and bonds to finance deficits, this means that the government is financing the deficit by
A) raising interest rates.
B) printing money.
C) lowering inflation.
D) selling capital.
A) raising interest rates.
B) printing money.
C) lowering inflation.
D) selling capital.
answer
B) printing money.
question
While targeting the deficit, which of the following is likely to occur after a negative aggregate demand shock?
A) AD↓ ⇒Y↓ ⇒T↓ ⇒ deficit↑ ⇒G↑ ⇒AD↑ ⇒Y↑
B) AD↓ ⇒Y↓ ⇒T↓ ⇒ deficit↑ ⇒G↓ ⇒AD↓ ⇒Y↓
C) AD↓ ⇒Y↓ ⇒T↑ ⇒ deficit↑ ⇒G↑ ⇒AD↓ ⇒Y↓
D) AD↓ ⇒Y↓ ⇒T↓ ⇒ deficit↑ ⇒G↓ ⇒AD↑ ⇒Y↑
A) AD↓ ⇒Y↓ ⇒T↓ ⇒ deficit↑ ⇒G↑ ⇒AD↑ ⇒Y↑
B) AD↓ ⇒Y↓ ⇒T↓ ⇒ deficit↑ ⇒G↓ ⇒AD↓ ⇒Y↓
C) AD↓ ⇒Y↓ ⇒T↑ ⇒ deficit↑ ⇒G↑ ⇒AD↓ ⇒Y↓
D) AD↓ ⇒Y↓ ⇒T↓ ⇒ deficit↑ ⇒G↓ ⇒AD↑ ⇒Y↑
answer
A) AD↓ ⇒Y↓ ⇒T↓ ⇒ deficit↑ ⇒G↑ ⇒AD↑ ⇒Y↑
question
Refer to Figure 17.1. Economic growth is represented by
A) a movement from Point A to Point B along ppf1.
B) a shift in the production possibilities frontier from ppf2 to ppf1.
C) a movement from Point B to Point A.
D) a movement from Point B to Point C.
A) a movement from Point A to Point B along ppf1.
B) a shift in the production possibilities frontier from ppf2 to ppf1.
C) a movement from Point B to Point A.
D) a movement from Point B to Point C.
answer
D) a movement from Point B to Point C.
question
Economic growth allows a society to consume
A) more goods per person.
B) more than is sustainable.
C) exactly what it needs.
D) more than it should.
A) more goods per person.
B) more than is sustainable.
C) exactly what it needs.
D) more than it should.
answer
A) more goods per person.
question
If a society acquires more human capital, per capita production will fall unless it gets more physical capital too.
A) True
B) False
A) True
B) False
answer
B) False
question
The aggregate production function is Y = 2K0.5L0.5. If there are 225 units of capital and 196 units of labor, aggregate output is
A) 420 units.
B) 508 units.
C) 700 units.
D) 842 units
A) 420 units.
B) 508 units.
C) 700 units.
D) 842 units
answer
A) 420 units.
question
If the capital stock remains fixed while the supply of labor increases, it is likely that
A) the productivity of labor will not change.
B) the productivity of labor will rise.
C) output per capita will rise.
D) the productivity of labor will fall
A) the productivity of labor will not change.
B) the productivity of labor will rise.
C) output per capita will rise.
D) the productivity of labor will fall
answer
D) the productivity of labor will fall
question
Refer to Figure 17.2. The highest unemployment rate occurs when the economy is at Point
A) A.
B) B.
C) C.
D) D.
A) A.
B) B.
C) C.
D) D.
answer
A) A.
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