QN=1 (2228) (17743) When can two countries gain from trading two goods?

a. (i) when the first country can only produce the first good and the second country can
only produce the second good
b. (ii) when the first country can produce both goods, but can only produce the second
good at great cost, and the second country can produce both goods, but can only
produce the first good at great cost
c. (iii) when the first country is better at producing both goods and the second country is
worse at producing both goods
d. Two countries could gain from trading two goods under all of the conditions in (i), (ii),
and (iii).

QN=2 (17758) Refer to Figure 3-3. Enid has an absolute advantage in the production of
(2206
)

a. burritos and a comparative advantage in the production of tacos.

b. burritos and a comparative advantage in the production of burritos.
c. neither good and a comparative advantage in the production of tacos.
d. neither good and a comparative advantage in the production of burritos.

QN=3 (17748) Refer to Table 3-3. Assume that Zimbabwe and Portugal each has 180 machine minutes
(2232 available. If each country divides its time equally between the production of toothbrushes and
) hairbrushes, then total production is
a. 24 toothbrushes and 12 hairbrushes.
b. 48 toothbrushes and 24 hairbrushes.
c. 96 toothbrushes and 48 hairbrushes.
d. 720 toothbrushes and 1440 hairbrushes.

QN=4 (2225) (17724) Two people can benefit from specialization and trade by obtaining a good at a
price that is
a. lower than his or her opportunity cost of that good.
b. the same as his or her opportunity cost of that good.
c. higher than his or her opportunity cost of that good.
d. different than his or her opportunity cost of that good.

QN=5 (17749) Refer to Table 3-4. The opportunity cost of 1 pound of potatoes for the farmer is
(2227
)

a. 1/5 pound of meat.

b. 2 hours of labor.
c. 5 pounds of meat.
d. 5 hours of labor.

QN=6 (17757) Refer to Figure 3-3. If Enid must work 0.25 hour to produce each taco, then her production
(2241 possibilities frontier is based on how many hours of work?
)

a. 40 hours
b. 100 hours
c. 400 hours
d. 1600 hours

QN=7 (17752) Refer to Table 3-5. Spain should export

(2237
)

a. cheese and import bread.

b. bread and import cheese.
c. both goods and import neither good.
d. neither good and import both goods.

QN=8 (17769) Refer to Table 23-5. In 2008, Batterland’s real GDP was
(2254
)

a. $100.
b. $390.
c. $400.
d. $540.

QN=9 (2263) (17767) Suppose there are only two firms in an economy: Cowhide, Inc. produces
leather and sells it to Couches, Inc., which produces and sells leather furniture. With
each $1,000 of leather that it buys from Cowhide, Inc., Couches, Inc. produces a couch
and sells it for $3,000. Neither firm had any inventory at the beginning of 2009.
During that year, Cowhide produced enough leather for 20 couches. Couches, Inc.
bought 80% of that leather for $16,000 and promised to buy the remaining 20% for
$4,000 in 2010. What was the economy's GDP for the 2009?
a. $48,000
b. $52,000
c. $64,000
d. $68,000

QN=10 (2259) (17783) Which of the following items is counted as part of government purchases?
a. (i) The federal government pays the salary of a Navy officer.
b. (ii) The state of Nevada pays a private firm to repair a Nevada state highway.
c. (iii) The city of Las Vegas, Nevada pays a private firm to collect garbage in that city.
d. All (i), (ii), and (iii) are correct.
QN=11 (2290) (17809) The GDP deflator reflects the
a. level of prices in the base year relative to the current level of prices.
b. current level of prices relative to the level of prices in the base year.
c. level of real output in the base year relative to the current level of real output.
d. current level of real output relative to the level of real output in the base year.

QN=12 (2273) (17779) Spots, Inc. produces ink and sells it to Write on Target, which makes pens. The
ink produced by Spots, Inc. is called
a. an inventory good.
b. a transitory good.
c. a preliminary good.
d. an intermediate good.

QN=13 (2267) (17771) A transfer payment is

a. a payment for moving expenses a worker receives when he or she is transferred by an
employer to a new location.
b. a payment that is automatically transferred from your bank account to pay a bill or
some other obligation.
c. a form of government spending that is not made in exchange for a currently produced
good or service.
d. the benefit that a person receives from an expenditure by government minus the taxes
that were collected by government to fund that expenditure.

QN=1 (17770) Refer to Table 23-5. In 2007, Batterland’s nominal GDP was
4
(2278)
a. $300.
b. $390.
c. $400.
d. $540.

QN=15 (2291) (17795) The real interest rate tells you

a. how fast the number of dollars in your bank account rises over time.
b. how fast the purchasing power of your bank account rises over time.
c. the number of dollars in your bank account today.
d. the purchasing power of your bank account today.

QN=16 (2306) (17810) Indexation refers to

a. a process of adjusting the nominal interest rate so that it is equal to the real interest
rate.
b. using a law or contract to automatically correct a dollar amount for the effects of
inflation.
c. using a price index to deflate dollar values.
d. an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in
line with the GDP deflator.

QN=17 (2310) (17825) If a production function has constant returns to scale, output can be doubled if
a. (i) labor alone doubles.
b. (ii) all inputs but labor double.
c. (iii) all of the inputs double.
d. None of (i), (ii), and (iii) is correct.
QN=18 (2303) (17792) When the consumer price index rises, the typical family
a. has to spend more dollars to maintain the same standard of living.
b. can spend fewer dollars to maintain the same standard of living.
c. finds that its standard of living is not affected.
d. can offset the effects of rising prices by saving more.

QN=19 (2318) (17827) If there are diminishing returns to capital, then

a. capital produces fewer goods as it ages.
b. old ideas are not as useful as new ones.
c. increases in the capital stock eventually decrease output.
d. increases in the capital stock increase output by ever smaller amounts.

QN=20 (2307) (17811) The consumer price index is used to

a. monitor changes in the level of wholesale prices in the economy.
b. monitor changes in the cost of living over time.
c. monitor changes in the level of real GDP over time.
d. monitor changes in the stock market.

QN=21 (2327) (17829) Which of the following is a determinant of productivity?

a. (i) human capital per worker
b. (ii) physical capital per worker
c. (iii) natural resources per worker
d. All of (i), (ii), and (iii) are correct.

QN=22 (2335) (17822) Perry accumulated a lot of mathematical skills while in high school, college,
and graduate school. Economists include these skills as part of Perry’s
a. standard of learning.
b. technological knowledge.
c. physical capital.
d. human capital.

QN=23 (2351) (17854) Two of the economy’s most important financial intermediaries are
a. suppliers of funds and demanders of funds.
b. banks and the bond market.
c. the stock market and the bond market.
d. banks and mutual funds.

QN=2 (17857) Refer to Table 26-1. What was Hershey's earnings per share?
4
(2347)
a. $38
b. $1.64
c. $1.31
d. $0.61

QN=25 (2349) (17855) If the government's expenditures exceeded its receipts, it would likely
a. lend money to a bank or other financial intermediary.
b. borrow money from a bank or other financial intermediary.
c. buy bonds directly from the public.
d. sell bonds directly to the public.

QN=26 (2367) (17884) Workers searching for jobs that best suit them is most closely associated with
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.

QN=27 (2370) (17891) The amount of unemployment that an economy normally experiences is called
the
a. average rate of unemployment.
b. natural rate of unemployment.
c. cyclical rate of unemployment.
d. typical rate of unemployment.

QN=28 (2361) (17886) The natural rate of unemployment

a. (i) arises from a single problem that has a single solution.
b. (ii) is easy for policymakers to reduce.
c. (iii) Both (i) and (ii) are correct.
d. None of (i), (ii), and (iii) is correct.

QN=29 (2373) (17873) Consumers decide to buy more computers and fewer typewriters. As a result,
computer companies expand production while typewriter companies lay-off workers.
This is an example of
a. frictional unemployment created by efficiency wages.
b. frictional unemployment created by sectoral shifts.
c. structural unemployment created by efficiency wages.
d. structural unemployment created by sectoral shifts.

QN=30 (2360) (17888) The efficiency-wage theory of worker health is

a. more relevant for explaining unemployment in less developed countries than in rich
countries.
b. more relevant for explaining unemployment in rich countries than in less developed
countries.
c. equally relevant for explaining unemployment in less developed countries and in rich
countries.
d. not relevant for explaining unemployment.

QN=31 (2372) (17889) Unemployment that results because the number of jobs available in some
labor markets may be insufficient to give a job to everyone who wants one is called
a. the natural rate of unemployment.
b. cyclical unemployment.
c. structural unemployment.
d. frictional unemployment.

QN=32 (2388) (17908) An increase in the money supply might indicate that the Fed had
a. purchased bonds in an attempt to increase the federal funds rate.
b. purchased bonds in an attempt to reduce the federal funds rate.
c. sold bonds in an attempt to increase the federal funds rate.
d. sold bonds in an attempt to reduce the federal funds rate.

QN=33 (2398) (17910) Credit cards

a. defer payments.
b. are a store of value.
c. have led to wider use of currency.
d. are part of the money supply.

QN=34 (2410) (17913) Suppose banks decide to hold more excess reserves relative to deposits. Other
things the same, this action will cause the
a. money supply to fall. To reduce the impact of this the Fed could lower the discount
rate.
b. money supply to fall. To reduce the impact of this the Fed could raise the discount
rate.
c. money supply to rise. To reduce the impact of this the Fed could lower the discount
rate.
d. money supply to rise. To reduce the impact of this the Fed could raise the discount
rate.

QN=35 (2420) (17940) According to the classical dichotomy, which of the following is affected by
 monetary factors?
a. (i) nominal wages
b. (ii) the price level
c. (iii) nominal GDP
d. All of (i), (ii), and (iii) are correct.

QN=36 (2421) (17952) You bought some shares of stock and, over the next year, the price per share
increased by 5 percent and the price level increased by 8 percent. Before taxes, you
experienced
a. both a nominal gain and a real gain, and you paid taxes on the nominal gain.
b. both a nominal gain and a real gain, and you paid taxes only on the real gain.
c. a nominal gain and a real loss, and you paid taxes on the nominal gain.
d. a nominal gain and a real loss, and you paid no taxes on the transaction.

QN=37 (2444) (17930) When the money market is drawn with the value of money on the vertical axis,
a decrease in the price level causes a
a. movement to the right along the money demand curve.
b. movement to the left along the money demand curve.
c. shift to the right of the money supply curve.
d. shift to the left of the money supply curve.

QN=38 (2416) (17938) If M = 3,000, P = 2, and Y = 12,000, what is velocity?

a. 1/2
b. 2
c. 4
d. 8

QN=39 (2431) (17950) Tara deposits money into an account with a nominal interest rate of 6 percent.
She expects inflation to be 2 percent. Her tax rate is 20 percent. Tara’s after-tax real
rate of interest
a. will be 2.8 percent if inflation turns out to be 2 percent; it will be higher if inflation
turns out to be higher than 2 percent.
b. will be 2.8 percent if inflation turns out to be 2 percent; it will be lower if inflation
turns out to be higher than 2 percent.
c. will be 3.2 percent if inflation turns out to be 2 percent; it will be higher if inflation
turns out to be higher than 2 percent.
d. will be 3.2 percent if inflation turns out to be 2 percent; it will be lower if inflation
turns out to be higher than 2 percent.

QN=40 (2436) (17951) According to the classical dichotomy, which of the following is affected by
monetary factors?
a. (i) nominal wages
b. (ii) the price level
c. (iii) nominal GDP
d. All of (i), (ii), and (iii) are correct.

QN=41 (2451) (17979) The increase in international trade in the United States is partly due to
a. (i) improvements in transportation.
b. (ii) advances in telecommunications.
c. (iii) increased trade of goods with a high value per pound.
d. All of (i), (ii), and (iii) are correct.

QN=42 (2474) (17962) Purchasing-power parity describes the forces that determine
a. prices in the short run.
b. prices in the long run.
c. exchange rates in the short run.
d. exchange rates in the long run.

QN=43 (2475) (18011) If a government started with a budget deficit and moved to a surplus,
domestic investment
a. and the real exchange rate would rise.
b. and the real exchange rate would fall.
c. would rise and the real exchange rate would fall.
d. would fall and the real exchange rate would rise.

QN=44 (2505) (18022) The aggregate demand and aggregate supply graph has
a. the price level on the horizontal axis. The price level can be measured by the GDP
deflator.
b. the price level on the horizontal axis. The price level can be measured by real GDP.
c. the price level on the vertical axis. The price level can be measured by the GDP
deflator.
d. the price level on the vertical axis. The price level can be measured by GDP.

QN=45 (2496) (17991) A trade policy is a government policy

a. directed toward the goal of improving the tradeoff between equity and efficiency.
b. that directly influences the quantity of goods and services that a country imports or
exports.
c. intended to exploit the tradeoff between inflation and unemployment by altering the
budget deficit.
d. concerning employment laws.

QN=46 (2517) (18039) Which of the following can explain the upward slope of the short-run
aggregate supply curve?
a. nominal wages are slow to adjust to changing economic conditions
b. as the price level falls, the exchange rate falls
c. an increase in the money supply lowers the interest rate
d. an increase in the interest rate increases investment spending

QN=47 (2529) (18019) The classical dichotomy and monetary neutrality are represented graphically
by
a. an upward-sloping long-run aggregate-supply curve.
b. a vertical long-run aggregate-supply curve.
c. an upward-sloping short-run aggregate-curve.
d. a downward-sloping aggregate-demand curve.

QN=48 (2515) (18017) The model of short-run economic fluctuations focuses on the price level and
a. (i) real GDP.
b. (ii) economic growth.
c. (iii) the neutrality of money.
d. None of (i), (ii), and (iii) is correct.

QN=49 (2536) (18049) Suppose the MPC is 0.75. There are no crowding out or investment accelerator
effects. If the government increases its expenditures by $200 billion, then by how
much does aggregate demand shift to the right? If the government decreases taxes by
$200 billion, then by how far does aggregate demand shift to the right?
a. $800 billion and $800 billion
b. $800 billion and $600 billion
c. $600 billion and $600 billion
d. $600 billion and $450 billion

QN=50 (2554) (18064) Assume the MPC is 0.75. Assuming only the multiplier effect matters, a
decrease in government purchases of $100 billion will shift the aggregate demand
curve to the
a. (i) left by $200 billion.
b. (ii) left by $400 billion.
c. (iii) right by $800 billion.
d. None of (i), (ii), and (iii) is correct.
[id=2228, Mark=1]1. D

[id=2206, Mark=1]2. C

[id=2232, Mark=1]3. B

[id=2225, Mark=1]4. A

[id=2227, Mark=1]5. A

[id=2241, Mark=1]6. B

[id=2237, Mark=1]7. B

[id=2254, Mark=1]8. D

[id=2263, Mark=1]9. B

[id=2259, Mark=1]10. D

[id=2290, Mark=1]11. B

[id=2273, Mark=1]12. D

[id=2267, Mark=1]13. C

[id=2278, Mark=1]14. A

[id=2291, Mark=1]15. B

[id=2306, Mark=1]16. B

[id=2310, Mark=1]17. C

[id=2303, Mark=1]18. A

[id=2318, Mark=1]19. D

[id=2307, Mark=1]20. B

[id=2327, Mark=1]21. D

[id=2335, Mark=1]22. D

[id=2351, Mark=1]23. D

[id=2347, Mark=1]24. B

[id=2349, Mark=1]25. D

[id=2367, Mark=1]26. B

[id=2370, Mark=1]27. B

[id=2361, Mark=1]28. D

[id=2373, Mark=1]29. B
[id=2360, Mark=1]30. A

[id=2372, Mark=1]31. C

[id=2388, Mark=1]32. B

[id=2398, Mark=1]33. A

[id=2410, Mark=1]34. A

[id=2420, Mark=1]35. D

[id=2421, Mark=1]36. C

[id=2444, Mark=1]37. B

[id=2416, Mark=1]38. D

[id=2431, Mark=1]39. B

[id=2436, Mark=1]40. D

[id=2451, Mark=1]41. D

[id=2474, Mark=1]42. D

[id=2475, Mark=1]43. C

[id=2505, Mark=1]44. C

[id=2496, Mark=1]45. B

[id=2517, Mark=1]46. A

[id=2529, Mark=1]47. B

[id=2515, Mark=1]48. A

[id=2536, Mark=1]49. B

[id=2554, Mark=1]50. B