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 (2221) (17727) Which of the following is not correct?

a. Economists are generally united in their support of free trade.
b. The conclusions of Adam Smith and David Ricardo on the gains from trade have held
up well over time.
c. David Ricardo argued that Britain should not restrict imports of grain.
d. Economists’ opposition to trade restrictions is still based largely on the principle of
absolute advantage.

QN=3 (17753) Refer to Table 3-7. Korea should specialize in the production of
(2217
)

a. cars and import airplanes.

b. airplanes and import cars.
c. both goods and import neither good.
d. neither good and import both goods.

QN=4 (2212) (17719) When an economist points out that you and millions of other people are
interdependent, he or she is referring to the fact that we all
a. rely upon the government to provide us with the basic necessities of life.
b. rely upon one another for the goods and services we consume.
c. have similar tastes and abilities.
d. are concerned about one another’s well-being.

QN=5 (17756) Refer to Table 3-11. Varick has a comparative advantage in the production of
(2229
)

a. wheat.
b. cloth.
c. both goods.
d. neither good.

QN=6 (17736) Refer to Table 3-2. At which of the following prices would both Aruba and Iceland gain from
(2239 trade with each other?
)

a. 2 radios for 4 coolers

b. 2 radio for 6 coolers
c. 2 radio for 10 coolers
d. Aruba and Iceland could not both gain from trade with each other at any price.

QN=7 (2253) (17790) Net exports equal

a. exports plus imports.
b. exports minus imports.
c. imports minus exports.
d. GDP minus imports.

QN=8 (2258) (17789) What word do economists use to refer to the purchase of goods that will be
used in the future to produce more goods and services?
a. capital
b. consumption
c. investment
d. costs

QN=9 (17769) Refer to Table 23-5. In 2008, Batterland’s real GDP was
(2254
)

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

QN=10 (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=11 (2268) (17772) When economists talk about growth in the economy, they measure that
growth as the
a. absolute change in nominal GDP from one period to another.
b. percentage change in nominal GDP from one period to another.
c. absolute change in real GDP from one period to another.
d. percentage change in real GDP from one period to another.

QN=12 (2293) (17817) Table 24-3

The table below pertains to Studious, an economy in which the typical consumer’s
basket consists of 5 books and 10 calculators.

Refer to Table 24-3. The cost of the basket

a. increased from 2006 to 2007 and increased from 2007 to 2008.

b. increased from 2006 to 2007 and decreased from 2007 to 2008.
c. decreased from 2006 to 2007 and increased from 2007 to 2008.
d. decreased from 2006 to 2007 and decreased from 2007 to 2008.

QN=13 (2294) (17793) In the CPI, goods and services are weighted according to
a. how long a market has existed for each good or service.
b. the extent to which each good or service is regarded by the government as a necessity.
c. how much consumers buy of each good or service.
d. the number of firms that produce and sell each good or service.

QN=14 (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=15 (2295) (17797) Arlo is offered a job in Des Moines, where the CPI is 60, and a job in New York,
where the CPI is 125. Arlo's job offer in Des Moines is for $48,000. How much does
the New York job have to pay in order for the two salaries to represent the same
purchasing power?
a. $23,040
b. $52,000
c. $79,200
d. $100,000

QN=16 (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=17 (2314) (17837) All else equal, if there are diminishing returns, then which of the following is
true if a country increases its capital by one unit?
a. Output will rise by more than it did when the previous unit was added.
b. Output will rise but by less than it did when the previous unit was added.
c. Output will fall by more than it did when the previous unit was added.
d. Output will fall but by less than it did when the previous unit was added.

QN=18 (2302) (17818) Scenario 24-2

The price tag on a golf ball in 1975 read $0.20, and the price tag on a golf ball in 2005
read $2.00. The CPI in 1975 was 52.3, and the CPI in 2005 was 191.3.

Refer to Scenario 24-2. The price of a 1975 golf ball in 2005 dollars is
a. $0.05.
b. $0.53.
c. $0.73.
d. $2.00.

QN=19 (2319) (17833) An economy’s production function has the constant-returns-to-scale property.
If the economy’s labor force doubled and all other inputs stayed the same, then real
GDP would
a. stay the same.
b. increase by exactly 50 percent.
c. increase by exactly 100 percent.
d. increase, but not necessarily by either 50 percent or 100 percent.
QN=20 (2301) (17820) Scenario 24-4
Quinn has job offers in Wrexington and across the country in Charlieville. The
Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would
pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in
Charlieville is 90.

Refer to Scenario 24-4. If Quinn only cares about maximizing her purchasing power,
then she should
a. take the Charlieville job.
b. take the Wrexington job.
c. take either job because they both have the same purchasing power.
d. The answer cannot be determined from the information given because a salary is not
the same as purchasing power.

QN=2 (17836) Refer to Figure 25-1. The curve becomes flatter as the amount of capital per worker
1 increases because of
(2331)

a. increasing returns to capital.

b. increasing returns to labor.
c. diminishing returns to capital.
d. diminishing returns to labor.

QN=22 (2342) (17852) The supply of loanable funds would shift to the right if either
a. tax reforms encouraged greater saving or the budget deficit became smaller.
b. tax reforms encouraged greater saving or investment tax credits were increased.
c. the budget deficit became larger or investment tax credits were increased.
d. the budget deficit became larger or tax reforms discouraged saving.

QN=23 (2333) (17832) In the past there have been violent protests against the World Bank and the
World Trade Organization. The protesters argued that these institutions promote free
trade and also encourage corporations in rich countries to invest in poor countries. The
protesters contended that these practices make rich countries richer and poor
countries poorer. An economist would
a. disagree with the protesters because these practices will help make both rich and poor
countries richer.
b. disagree with the protesters about free trade, but would agree with the protesters
about corporate investment.
c. disagree with the protesters about corporate investment, but would agree with the
protesters about free trade.
d. agree with the protesters.

QN=24 (2354) (17860) If the government instituted an investment tax credit, then which of the
following would be higher in equilibrium?
a. saving and the interest rate
b. saving but not the interest rate
c. the interest rate but not saving
d. neither saving nor the interest rate

QN=25 (2326) (17847) Scenario 25-1.

An economy’s production form takes the form Y = AF(L, K, H, N)

Refer to Scenario 25-1. If the production function has the constant-returns-to-scale

property, and output is zero whenever some input is zero, then it is possible that the
specific form of the production function is
a. Y = 4L + 2K + 3H + N
b. Y = (L + K + H + N)/4
c. Y =2(LKHN)^0.25
d. Y = 4(L^3 × K^4 × H × N)^0.5

QN=26 (2371) (17882) Suppose that efficiency wages become more common in the economy.
Economists would predict that this would
a. increase the quantity demanded and decrease the quantity supplied of labor, thereby
decreasing the natural rate of unemployment.
b. decrease the quantity demanded and increase the quantity supplied of labor, thereby
increasing the natural rate of unemployment.
c. increase the quantity demanded and decrease the quantity supplied of labor, thereby
increasing the natural rate of unemployment.
d. decrease the quantity demanded and increase the quantity supplied of labor, thereby
 decreasing the natural rate of unemployment.

QN=27 (2385) (17896) 1. If all workers and all jobs were the same such that all workers were
equally well suited for all jobs, then there would be no
a. cyclical unemployment.
b. frictional unemployment.
c. natural rate of unemployment.
d. structural unemployment.

QN=28 (2362) (17892) A person who is counted as unemployed by the Bureau of Labor Statistics
a. (i) is also in the labor force.
b. (ii) must have recently looked for work or be on temporary layoff.
c. (iii) be at least 16 years old.
d. All of (i), (ii), and (iii) are correct.

QN=29 (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=30 (2376) (17883) Unemployment that exists because it takes time for workers to search for the
jobs that suit them best is
a. frictional unemployment, which contributes to the natural rate of unemployment.
b. frictional unemployment, which does not contribute to the natural rate of
unemployment.
c. structural unemployment, which contributes to the natural rate of unemployment.
d. structural unemployment, which does not contribute to the natural rate of
unemployment.

QN=31 (2378) (17875) In one year, you meet 52 people who are each unemployed for one week and
eight people who are each unemployed for the whole year. Normally there are 52
weeks in a year. What percentage of the unemployment spells you encountered was
short-term, and what percentage of the unemployment you encountered in a given
week was long-term?
a. 52 percent and 13.3 percent
b. 52 percent and 88.9 percent
c. 86.7 percent and 13.3 percent
d. 86.7 percent and 88.9 percent

QN=32 (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=33 (2400) (17923) During wars the public tends to hold relatively more currency and relatively
fewer deposits. This decision makes reserves
a. and the money supply increase.
b. and the money supply decrease.
c. increase, but leaves the money supply unchanged.
d. decrease, but leaves the money supply unchanged.

QN=34 (2396) (17903) In a system of 100-percent-reserve banking, the purpose of a bank is to

a. make loans to households.
b. influence the money supply.
c. give depositors a safe place to keep their money.
d. buy and sell gold.

QN=3 (17932) Refer to Figure 30-3. What quantity is measured along the vertical axis?
5
(2443)

a. the price level

b. the velocity of money
c. the value of money
d. the quantity of money

QN=3 (17958) Figure 30-2. On the graph, MS represents the money supply and MD represents money
6 demand. The usual quantities are measured along the axes.
(2440)
Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also
suppose the economy’s real GDP is 30,000 for the year. If the money market is in equilibrium, then
how many times per year is the typical dollar bill used to pay for a newly produced good or service?

a. 4
b. 6
c. 8
d. 12

QN=37 (2419) (17942) You put money into an account and earn an after-tax real interest rate of 2.5
percent. If the nominal interest rate on the account is 8 percent and the inflation rate
is 2 percent, then what is the tax rate?
a. 28.00 percent
b. 36.25 percent
c. 43.75 percent
d. 67.50 percent
QN=38 (2423) (17944) When deciding how much to save, people care most about
a. after-tax nominal interest rates.
b. after-tax real interest rates.
c. before-tax real interest rates.
d. before-tax nominal interest rates.

QN=39 (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=4 (17946) Refer to Figure 30-2. Which of the following events could explain a shift of the money-
0 demand curve from MD1 to MD2?
(2433)

a. (i) an increase in the value of money

b. (ii) a decrease in the price level
c. (iii) an open-market purchase of bonds by the Federal Reserve
d. None of (i), (ii), and (iii) is correct.

QN=41 (2468) (17963) If the exchange rate is 50 Bangladesh taka per dollar and a bushel of rice costs
 180 taka in Bangladesh and $3 in the United States, then the real exchange rate of the
US dollar is
a. greater than one and arbitrageurs could profit by buying rice in the United States and
selling it in Bangladesh.
b. greater than one and arbitrageurs could profit by buying rice in Bangladesh and selling
it in the United States.
c. less than one and arbitrageurs could profit by buying rice in the United States and
selling it in Bangladesh.
d. less than one and arbitrageurs could profit by buying rice in Bangladesh and selling it in
the United States.

QN=42 (2450) (17981) The nominal exchange rate is 2 Thai baht for one U.S. dollar. A sub sandwich
combo deal in the U.S. costs $6 dollars in the U.S. and 8 baht in Thailand. The real
exchange rate for the US dollar is
a. 3/8
b. 2/3
c. 3/2
d. 8/3

QN=43 (2446) (17982) If it took as many dollars to buy goods in the United States as it did to buy
enough currency to buy the same goods in India, the real exchange rate would be
computed as how many Indian goods per U.S. goods?
a. (i) one
b. (ii) the number of dollars needed to buy U.S. goods divided by the number of rupees
needed to buy Indian goods
c. (iii) the number of rupees needed to buy Indian goods divided by the number of
dollars needed to buy U.S. goods
d. None of (i), (ii), and (iii) is correct.

QN=44 (2481) (18005) When a country experiences capital flight its

a. net capital outflow increases and its real exchange rate rises.
b. net capital outflow increases and its real exchange rate falls.
c. net capital outflow decreases and its real exchange rate rises.
d. net capital outflow decreases and its real exchange rate falls.

QN=45 (2499) (18013) Refer to Figure 32-6. Which of the following shifts show the effects of an
import quota?
a. (i) shifting the middle supply curve in panel c to the one to its left.
b. (ii) shifting the demand curve from the right to the left in panel c.
c. (iii) shifting the demand curve from the left to the right in panel c.
d. None of (i), (ii), and (iii) is correct.

QN=46 (2512) (18032) Suppose the economy is in long-run equilibrium. If there is a tax cut at the
same time that major new sources of oil are discovered in the country, then in the
short-run
a. real GDP will rise and the price level might rise, fall, or stay the same.
b. real GDP will fall and the price level might rise, fall, or stay the same.
c. the price level will rise, and real GDP might rise, fall, or stay the same.
d. the price level will fall, and real GDP might rise, fall, or stay the same.

QN=47 (2509) (18036) The classical dichotomy refers to the separation of

a. variables that move with the business cycle and variables that do not.
b. changes in money and changes in government expenditures.
c. decisions made by the public and decisions made by the government.
d. real and nominal variables.

QN=48 (2507) (18021) Recessions in China and India would cause

a. the U.S. price level and real GDP to rise.
b. the U.S. price level and real GDP to fall.
c. the U.S. price level to rise and real GDP to fall.
d. the U.S. price level to fall and real GDP to rise.

QN=49 (2551) (18053) In the long run, changes in the money supply affect
a. (i) prices.
b. (ii) output.
c. (iii) unemployment rates.
d. All of (i), (ii), and (iii).

QN=50 (2540) (18069) According to liquidity preference theory, the money-supply curve would shift if
the Fed
a. (i) engaged in open-market transactions.
b. (ii) changed the discount rate.
c. (iii) changed the reserve requirement.
d. did any of (i), (ii), or (iii).
[id=2228, Mark=1]1. D

[id=2221, Mark=1]2. D

[id=2217, Mark=1]3. B

[id=2212, Mark=1]4. B

[id=2229, Mark=1]5. B

[id=2239, Mark=1]6. B

[id=2253, Mark=1]7. B

[id=2258, Mark=1]8. C

[id=2254, Mark=1]9. D

[id=2263, Mark=1]10. B

[id=2268, Mark=1]11. D

[id=2293, Mark=1]12. A

[id=2294, Mark=1]13. C

[id=2291, Mark=1]14. B

[id=2295, Mark=1]15. D

[id=2310, Mark=1]16. C

[id=2314, Mark=1]17. B

[id=2302, Mark=1]18. C

[id=2319, Mark=1]19. D

[id=2301, Mark=1]20. A

[id=2331, Mark=1]21. C

[id=2342, Mark=1]22. A

[id=2333, Mark=1]23. A

[id=2354, Mark=1]24. A

[id=2326, Mark=1]25. C

[id=2371, Mark=1]26. B

[id=2385, Mark=1]27. B

[id=2362, Mark=1]28. D

[id=2361, Mark=1]29. D
[id=2376, Mark=1]30. A

[id=2378, Mark=1]31. D

[id=2398, Mark=1]32. A

[id=2400, Mark=1]33. B

[id=2396, Mark=1]34. C

[id=2443, Mark=1]35. C

[id=2440, Mark=1]36. D

[id=2419, Mark=1]37. C

[id=2423, Mark=1]38. B

[id=2420, Mark=1]39. D

[id=2433, Mark=1]40. D

[id=2468, Mark=1]41. C

[id=2450, Mark=1]42. C

[id=2446, Mark=1]43. A

[id=2481, Mark=1]44. B

[id=2499, Mark=1]45. C

[id=2512, Mark=1]46. A

[id=2509, Mark=1]47. D

[id=2507, Mark=1]48. B

[id=2551, Mark=1]49. A

[id=2540, Mark=1]50. D