Question: If a nation has high and persistent inflation, the most likely explanation is _______.
Answer Choices:
a. unions bargaining for excessively high wages
b. the government imposing excessive levels of taxation
c. firms using their market power to enforce excessive price hikes
d. the government creating excessive amounts of money
Answer: D. the government creating excessive amounts of money
Question: Because people respond to incentives, ________.
Answer Choices:
a. policymakers can alter outcomes by changing punishments or rewards
b. policies can have unintended consequences
c. society faces a trade-off between efficiency and equality
d. all of the answer choices are correct
Answer: D. all of the answer choices are correct
Question: A point inside the production possibilities frontier is _______.
Answer Choices:
a. efficient but not feasible
b. feasible but not efficient
c. both efficient and feasible
d. neither efficient nor feasible
Answer: B. feasible but not efficient
Question: All of the following topics fall within the study of microeconomics except _______.
Answer Choices:
a. the influence of the government budget deficit on economic growth
b. the impact of cigarette taxes on the smoking behavior of teenagers
c. the effectiveness of antipoverty programs in reducing homelessness
d. the role of Microsoft’s market power in the pricing of software
Answer: A. the influence of the government budget deficit on economic growth
Question: The main reason that some nations have higher average living standards than others is that _______.
Answer Choices:
a. the richer nations have exploited the poorer ones
b. some nations have higher levels of productivity
c. some nations have stronger laws protecting worker rights
d. the governments of some nations have created more money
Answer: B. some nations have higher levels of productivity
Question: Your opportunity cost of going to a movie is ________.
Answer Choices:
a. the total cash expenditure needed to go to the movie plus the value of your time
b. zero, as long as you enjoy the movie and consider it a worthwhile use of time and money
c. the price of the ticket
d. the price of the ticket plus the cost of any soda and popcorn you buy at the theater
Answer: A. the total cash expenditure needed to go to the movie plus the value of your time
Question: A marginal change is one that ________.
Answer Choices:
a. incrementally alters an existing plan
b. does not influence incentives
c. makes an outcome inefficient
d. is not important for public policy
Answer: A. incrementally alters an existing plan
Question: Which of the following is a positive, rather than a normative, statement?
Answer Choices:
a. Congress ought to pass law X.
b. The president should veto law X.
c. Law X is a good piece of legislation.
d. Law X will reduce national income
Answer: D. Law X will reduce national income
Question: An economic model is _______.
Answer Choices:
a. a computer program that predicts the future of the economy
b. a fully detailed, realistic description of the economy
c. a mechanical machine that replicates the functioning of the economy
d. a simplified representation of some aspect of the economy
Answer: D. a simplified representation of some aspect of the economy
Question: Governments may intervene in a market economy in order to ________.
Answer Choices:
a. protect property rights
b. correct a market failure due to externalities
c. achieve a more equal distribution of income
d. all of the answer choices are correct
Answer: D. all of the answer choices are correct
Question: Adam Smith’s “invisible hand” refers to ________.
Answer Choices:
a. the ability of government regulation to benefit consumers even if the consumers are unaware of the regulations
b. the ability of free markets to reach desirable outcomes, despite the self-interest of market participants
c. the way in which producers or consumers in unregulated markets impose costs on innocent bystanders
d. the subtle and often hidden methods that businesses use to profit at consumers’ expense
Answer: B. the ability of free markets to reach desirable outcomes, despite the self-interest of market participants
Question: The following parts of government regularly rely on the advice of economists: _______.
Answer Choices:
a. Department of Treasury
b. Office of Management and Budget
c. Department of Justice
d. all of the answer choices are correct
Answer: D. all of the answer choices are correct
Question: Economics is best defined as the study of ________.
Answer Choices:
a. how to predict inflation, unemployment, and stock prices
b. how the government can stop the harm from unchecked self-interest
c. how to run a business most profitably
d. how society manages its scarce resources
Answer: D. how society manages its scarce resources
Question: Suppose the Fed raises the target for the federal funds rate from 2% to 2.5%. This change of _______ percentage points means that the Fed raised its target by approximately _______%.
Answer Choices:
0.5 percentage points; 0.5%
0.5 percentage points; 25%
Answer: 0.5 percentage points; 25%
Question: International trade benefits a nation when ________.
Answer Choices:
a. its revenue from selling abroad exceeds its outlays from buying abroad
b. its trading partners experience reduced economic well-being
c. all nations are specializing in producing what they do best
d. no domestic jobs are lost because of trade
Answer: C. all nations are specializing in producing what they do best
Question: The circular-flow diagram illustrates that, in markets for the factors of production, _______.
Answer Choices:
a. households are sellers, and firms are buyers
b. households and firms are both buyers
c. households and firms are both sellers
d. households are buyers, and firms are sellers
Answer: A. households are sellers, and firms are buyers
Question: If a government uses the tools of monetary policy to reduce the demand for goods and services, the likely result is ________ inflation and ________ unemployment in the short run.
Answer Choices:
a. lower; higher
b. lower; lower
c. higher; lower
d. higher; higher
Answer: A. lower; higher