American Economic History
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Course Introduction
American Economic History examines the development of the United States economy from colonial times to the present. The course explores major themes such as industrialization, the evolution of financial institutions, the economic impact of slavery and emancipation, the Great Depression, and postwar growth. Students analyze how historical events, policy decisions, technological innovations, and global forces have shaped economic structures and influenced social inequality in America. Emphasis is placed on interpreting primary sources, quantitative data, and scholarly debates to understand the dynamic relationship between economic change and American society.
Recommended Textbook
Economics USA 8th Edition Edition by Nariman Behravesh
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Page 2
Chapter 1: What is Economics
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Q1) Measurement is necessary in economics to
A) construct diagrams depicting economic models.
B) evaluate the predictions of economic models.
C) help distinguish positive from normative statements.
D) identify the tasks an economy must perform.
E) construct mathematical models of the economy.
Answer: B
Q2) To suggest that the United States should take measures to preserve jobs in the steel industry is an example of ________ economics.
A) positive
B) passive
C) normative
D) mechanical
E) comparative
Answer: C
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Chapter 2: Markets and Prices
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Q1) At the equilibrium price
A) scarcity is eliminated.
B) everyone is content.
C) there is no inflation.
D) price equals quantity.
E) quantity demanded equals quantity supplied.
Answer: E
Q2) A firm is able to purchase 1 unit of raw material for $2 and convert that unit into a finished product that sells for $25.Four production techniques are available,as shown in the table.If labor costs $1 per hour and machine time costs $3 per hour,the firm should A) use technique A.
B) use technique B.
C) use technique C.
D) use technique D.
E) not produce at all.
Answer: C
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Chapter 3: The Business Firm: Organization,motivation,and
Optimal Input Decisions
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Q1) The bulk of goods and services consumed in the United States is produced by A) foreign countries.
B) the U.S. government.
C) households.
D) business firms.
E) the stock market.
Answer: D
Q2) The technical relationship between inputs and outputs is called the A) balance sheet.
B) income statement.
C) production function.
D) technostructure.
E) net worth.
Answer: C
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Page 5
Chapter 4: Getting Behind the Demand and Supply Curves
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Q1) A $1 price increase would reduce the quantity demanded in this market by A) zero.
B) one.
C) two.
D) three.
E) four.
Q2) In the model of consumer behavior
A) individuals can choose whatever market basket they want.
B) individuals are capable of making consistent choices reflecting their preferences.
C) for most commodities, total utility falls steadily as more is consumed.
D) an individual's desire for a specific good in a given time period is infinite.
E) marginal utility at first decreases, then increases.
Q3) Opportunity cost is
A) the variable cost a firm incurs by increasing output 1 unit.
B) the value of the best alternative use of a firm's resources.
C) the output opportunities a firm gains when average fixed costs decline.
D) another name for explicit costs.
E) the difference between fixed cost and variable cost.
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Chapter 5: Market Demand and Price Elasticity
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Q1) In this range,the demand for wheat is
A) perfectly elastic.
B) of unit elasticity.
C) price inelastic.
D) arc elastic.
E) invariant.
Q2) Demand is clearly price elastic between
A) $4.50 and $5.00.
B) $4.00 and $4.50.
C) $3.50 and $4.00.
D) $3.00 and $3.50.
E) There is not enough information to tell.
Q3) A demand-estimating procedure in which a firm changes the price of its product to see the effect on sales is the
A) interview approach.
B) price extrapolation procedure.
C) direct market experiment.
D) derived demand method.
E) open market method.
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Page 7
Chapter 6: Economic Efficiency,market Supply,and Perfect Competition
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Q1) The perfectly competitive firm
A) strives to produce at the lowest total cost possible.
B) is forced to respond to price actions of rival producers.
C) cannot affect the price of its product because of government regulation.
D) is a price maker.
E) is able to sell all it can produce at the prevailing price.
Q2) Which set of characteristics best identifies a monopolistically competitive market?
A) many firms, homogeneous product, significant barriers to entry, significant nonprice competition, and considerable power over price
B) few firms, differentiated product, no barriers to entry, the absence of nonprice competition, and considerable advertising
C) one firm producing a product with no close substitutes, significant barriers to entry, and considerable power over price
D) many firms, differentiated product, few barriers to entry, and nonprice competition
E) few firms, differentiated product, significant barriers to entry, and significant amounts of nonprice competition
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Chapter 7: Monopoly and Its Regulation
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Q1) The monopolist faces a demand curve that is
A) horizontal.
B) less elastic than the market demand curve for the product.
C)upward sloping to the right.
D)equal to its marginal revenue curve.
E)identical to the industry demand curve.
Q2) The approach to natural monopolies in the United States is to
A) nationalize them.
B) break them up into small competitive businesses.
C) give them franchises and subject them to regulation.
D) require them to merge with existing perfectly competitive business firms.
E) leave them alone.
Q3) A firm produces heavy machinery and can sell 10 units per month at a price of $50,000.To increase sales to 11 units per month,the firm must cut its price to $46,000.The marginal revenue for selling one extra unit per month is
A) $363.
B) $4,000.
C) $4,182.
D) $6,000.
E) $46,000.
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Chapter 8: Monopolistic Competition,oligopoly,and Antitrust Policy
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Q1) The rule of reason concept
A) made conduct, rather than market structure, the test of illegality.
B) implied that merely having a large share of an industry's market constituted an offense.
C) gained importance after the ALCOA case.
D) was the Supreme Court interpretation of antitrust laws that prevailed before 1910.
E) was a procedural criterion adopted by the Antitrust Division of the Justice Department under Thurman Arnold.
Q2) This short-run equilibrium price
A) is also the long-run equilibrium price.
B) is not profitable for the monopolistic competitor.
C) requires the firm to advertise to avoid continuing to lose money.
D) equals marginal cost.
E) will not be sustained because there is an incentive for entry.
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Chapter 9: Pollution and the Environment
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Q1) Environmental pollution is an economic problem because A) levels of pollution decline as the rate of economic growth increases.
B) firms that maximize profits rarely pollute.
C) capitalist market economies normally minimize pollution-causing activities.
D) firms and individuals that pollute pay less than the true social cost of disposing of their wastes.
E) it is a sign that the price system is functioning in an optimal way.
Q2) The table above shows the cost to society of allowing a given pollution level (in terms of polluted stream miles)and the cost of pollution control (in millions of dollars).How many polluted stream miles should be tolerated to minimize the total costs of pollution?
A) 0
B) 1,000
C) 2,000
D) 3,000
E) 4,000
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Chapter 10: The Supply and Demand for Labor
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Q1) The purpose of right-to-work laws is to outlaw
A) yellow dog contracts.
B) open shops.
C) union shops.
D) closed shops.
E) lockouts.
Q2) Approximately ________ percent of nonfarm workers in the United States are union members.
A) 80
B) 60
C) 40
D) 20
E) 10
Q3) A court action that minimizes union power is the A) checkoff.
B) yellow dog contract.
C) lockout.
D) injunction.
E) strike.
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Page 12
Chapter 11: Interest,rent,and Profit
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Q1) Economic rent is a
A) payment above the minimum necessary to make an input available to the economy.
B) price of an apartment or other leased building.
C) tax imposed by the government on property.
D) payment for free resources such as air and water.
E) payment for an input that has many close substitutes readily available.
Q2) Assume that the economy is in equilibrium with the pure rate of interest at 7 percent per year and an investment of funds in a particular project would return 11 percent per year.Frank Knight would argue that most of the 4 percent differential is
A) a reward for innovation in this area.
B) a premium for the risk inherent in this project.
C) the result of monopoly profits due to contrived scarcity in this area.
D) an indication that society should allocate more resources to this area.
E) the result of exploitation of labor in this area.
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Chapter 12: Poverty,income Inequality,and Discrimination
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Q1) Those who argue against income inequality say that
A) inequality does not help the rich very much and may well reduce society's output.
B) a more equal distribution of income raises the productivity of society because the rich do not want to work and the poor cannot.
C) the poor are important patrons of new and high quality products that benefit the entire society.
D) capital formation would be greater because the poor save more since they spend only on necessities, while the rich squander their incomes on conspicuous consumption of useless goods.
E) income inequality leads to political inequality and reduced opportunity for advanced education and training.
Q2) Which of the following countries had the lowest per capita income in 2012?
A) Russia
B) France
C) Japan
D) Canada
E) Sweden
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Page 14
Chapter 13: Economic Growth
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Q1) Significant government involvement in stimulating economic growth became more common
A) before the Civil War.
B) between the Civil War and World War I.
C) during the 1920s.
D) during the 1930s.
E) after World War II.
Q2) During the past century,the rate of return on investment in new plant equipment in the United States has
A) fluctuated around a fairly constant level.
B) steadily declined.
C) steadily increased.
D) increased as the marginal product of capital has declined.
E) decreased as the capital-output ratio has decreased.
Q3) Intended investment in a given year
A) leads to stagflation in a subsequent year.
B) reduces the productivity of the labor force.
C) raises the following year's full-employment level of GDP.
D) reduces the amount of investment possible in a future year.
E) is higher when consumption represents a higher percentage of GDP.
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Chapter 14: Public Goods and the Role of the Government
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Q1) Which of the following best describes the concept of a marginal tax rate?
A) the amount of income divided by the amount of taxes
B) the tax rate divided by total income
C) the change in taxes divided by the amount of taxes
D) the change in taxes divided by the change in income
E) the amount of before-tax income divided by the amount of after-tax income
Q2) Two general principles of taxation are the ________ principle and the ________ principle.
A) income; revenue
B) public; private
C) Republican; Democratic
D) demand-side; supply-side
E) ability-to-pay; benefit
Q3) A sales or excise tax
A) shifts the supply curve upward by the amount of the tax.
B) is rarely paid by the consumer if demand is insensitive to price.
C) is another name for a supply-side tax.
D) increases the quantity sold in the market.
E) has a very high collection cost relative to its yield.
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Page 16
Chapter 15: National Income and Product
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Q1) The best example of an indirect business tax is
A) an excise tax on alcoholic beverages.
B) the personal income tax.
C) depreciation.
D) the corporate income tax.
E) retained earnings.
Q2) Social Security payments by the government are NOT included in GDP because
A) Social Security was not yet in place when procedures for calculating GDP were devised.
B) Social Security is counted as an economic cost and subtracted from output in determining GDP.
C) income received through Social Security is not directly related to contributions to production.
D) income received through Social Security is too small to affect GDP.
E) these payments are in current dollars and GDP is measured in constant dollars.
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Chapter 16: Business Fluctuations and Unemployment
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Q1) Say's law
A) states that the total amount paid out for resources must equal the value of the goods produced.
B) states that all income spent must have been earned.
C) is the intellectual basis for the Keynesian model of income and employment.
D) is an integral part of the Marxian analysis of capitalism.
E) requires the assumption of wage and price rigidity.
Q2) If the money supply is fixed,increases in the price level
A) raise the purchasing power of the money supply and increase the amount people spend.
B) reduce the average money cost of each transaction, thus lowering total spending.
C) reduce interest rates; thus, the cost of borrowing money falls, leading to more consumption and investment.
D) raise the incentive for people to spend on big-ticket items such as appliances, automobiles, and houses.
E) increase the size of the money balances people want in order to maintain the real value of their purchases, thus causing interest rates to rise.
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Page 18
Chapter 17: The Determination of National Output and the Keynesian Multiplier
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Q1) The expression 1/MPS is called
A) the marginal propensity to consume.
B) the saving function.
C) induced saving.
D) the multiplier.
E) the paradox of thrift.
Q2) If the marginal propensity to consume is 0.6,a $1.2 billion increase in intended investment will increase equilibrium GDP by ________ billion.
A) $0.4
B) $0.6
C) $1.2
D) $2.5
E) $3
Q3) If the interest rate is 7 percent,the number of projects undertaken would be
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.
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Chapter 18: Fiscal Policy and National Output
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Q1) A basic objection to increased public works spending when serious unemployment appears likely to develop is that
A) such spending would lead to a budget deficit.
B) such spending would lead to a decline in GDP.
C) all public works projects are wasteful.
D) there is a long lag between authorizing a program and actually spending the money.
E) stabilization policy is more important than the long-run desirability of public works.
Q2) The greatest source of revenue for most state governments is the ________ tax.
A) personal income
B) corporate income
C) estate and gift.
D) general sales
E) property
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Chapter 19: Inflation
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Q1) In 1997,weekly payrolls in manufacturing were $553,while the consumer price index was 161 (1982-84 = 100).In terms of base-period dollars,real weekly earnings for the quarter were
A) identical to real weekly earnings in 1982-84.
B) greater than $553.
C) equal to $553.
D) less than $553.
E) impossible to determine from the information given.
Q2) One adverse effect of unexpectedly high rates of inflation is that such inflation
A) redistributes income away from those with fixed money incomes.
B) redistributes income to lenders.
C) increases the value of savings.
D) encourages productive rather than speculative uses of saving.
E) causes real incomes to rise more rapidly than money incomes.
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21
Chapter 20: Money and the Banking System
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Q1) A primary function of investment bankers is to
A) help firms sell their securities to the public.
B) create money and promote economic growth.
C) pay interest and provide customers with economic security.
D) set interest rates and support the Federal Reserve.
E) collect taxes and hold government deposits.
Q2) Some economists include time or savings deposits in the money supply because
A) these deposits can be readily transformed into cash.
B) these deposits can be used as collateral for loans.
C) the value of time deposits is measured in dollars.
D) there is no difference between the various types of bank deposits.
E) savings and loan institutions have the same status as commercial banks.
Q3) Our money supply,narrowly defined,consists of
A) currency, checking accounts, savings accounts, and money market mutual funds.
B) money created by the commercial banks.
C) coins, currency, demand deposits, and other checkable deposits.
D) cash, checks, and near money.
E) coins, paper money, all checkable deposits, and gold.
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Chapter 21: The Federal Reserve and Monetary Policy
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Q1) In the United States today,which of the following functions as the central bank?
A) the Federal Reserve System
B) the IMF
C) the Bank of America
D) the treasurer of the United States
E) There is no central bank in the United States.
Q2) In general,the discount rate is kept close to short-term market interest rates to
A) enable commercial banks to operate profitably.
B) reduce the government cost to borrow money.
C) discourage commercial banks from excessive use of the borrowing privilege.
D) avoid the possibility that monetary actions affect financial market expectations.
E) keep interest rates stable over long periods of time.
Q3) The major liability of the Federal Reserve System is
A) gold certificates.
B) government securities.
C) loans to commercial banks.
D) Federal Reserve notes.
E) treasury deposits.
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23
Chapter 22: Supply Shocks and Inflation
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Q1) The concept of the natural rate of unemployment
A) states that higher inflationary rates are necessary to substantially reduce its value.
B) is credited to A. W. Phillips.
C) reflects, in part, the willingness of workers to remain voluntarily unemployed rather than take unattractive or lower-paying jobs.
D) reflects the fact that people are lazy and will not work unless they have to.
E) denotes workers temporarily unemployed as a result of expansionary monetary and fiscal policies.
Q2) The basic argument against wage and price controls is that
A) they can be used only during periods of all-out war.
B) as a solution to inflation, they are popular with economists, not with politicians or the general public.
C) they require labor to take wage reductions before firms can reduce their prices.
D) they are not helpful as a short-run remedy, although they do work effectively over the long run.
E) they necessitate implementing other allocation schemes that often impair economic efficiency.
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Page 24
Chapter 23: Productivity,growth,and Technology Policy
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Q1) In the Stagflation video,economist Laffer argued that
A) a penny saved is a penny earned.
B) people do not work to pay taxes.
C) demand creates its own supply.
D) output per worker is a poor measure of productivity.
E) expected rates of return on R&D are positively correlated with the rate of inflation.
Q2) Excluded from a list of reasons often cited as responsible for the slowdown in U.S.productivity during the 1970s is the
A) increase in the proportion of youths and women in the labor force.
B) reduction in the rate of growth of the capital-labor ratio.
C) presence of increased amounts of government regulation.
D) reduction in the proportion of GDP devoted to research and development.
E) price stability and stable interest rates over that period, which reduced profit opportunities.
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Chapter 24: Surpluses,deficits,public Debt,and the Federal Budget
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Q1) About what percentage of national output does the United States' current national debt represent?
A) between 10 and 25 percent
B) between 25 and 40 percent
C) between 40 and 55 percent
D) between 55 and 70 percent
E) over 70 percent
Q2) The difference between tax revenues and government expenditures that would result if GDP were at its potential level is called the
A) permanent income budget balance.
B) net relative expenditure differential.
C) Ricardian equivalence.
D) balanced budget shortfall.
E) structural deficit.
Q3) The national debt differs from consumer debt in that
A) no interest is paid on the national debt.
B) the national debt is of no economic consequence.
C) most of the national debt is held by foreigners.
D) the national debt influences the amount of aggregate spending.
Page 26
E) the national debt need never be paid off if it is held internally.
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Chapter 25: Monetary Policy,interest Rates,and Economic Activity
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Q1) Over the last 45 years,the price level has
A) been cut in half.
B) remained constant.
C) doubled.
D) risen fivefold.
E) risen and fallen frequently.
Q2) Our money has value because
A) it is backed by gold.
B) its supply is unlimited.
C) it is guaranteed by banks.
D) people accept it in payment for goods and services.
E) it is the result of public and private debt.
Q3) In addition to the level of real GDP,the transactions demand for money is positively related to the
A) capital output ratio.
B) exchange rate.
C) expected rate of return.
D) interest rate.
E) price level.
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Chapter 26: Controversies Over Stabilization Policy
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Q1) A contemporary economist closely associated with the hypothesis of rational expectations is
A) Milton Friedman.
B) John Muth.
C) John Maynard Keynes.
D) Franco Modigliani.
E) Paul Samuelson.
Q2) Opponents of policy activism argue that even if intended private spending is NOT stable,economic stability nonetheless occurs because of
A) large government budget deficit spending.
B) the willingness of banks to hold excess reserves.
C) offsetting fluctuations in the velocity of circulation.
D) flexible wages and prices.
E) the acceleration effect.
Q3) Costs incurred by a firm when it changes its prices are called ________ costs.
A) opportunity
B) fixed
C) menu
D) variable
E) advertising
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Chapter 27: International Trade
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Q1) When foreign trade is permitted,the eventual price of a given item will reflect the level where
A) maximum resources are utilized.
B) worldwide demand cannot go higher.
C) the exporting country's demand curve is the same as its supply curve.
D) the amount one country wants to export equals the amount the other wants to import.
E) the importing country's demand equals that of the exporting country.
Q2) The Trigger Price Mechanism
A) raised tariffs on imported steel.
B) was used by U.S. steel makers as a noncollusive way to set their prices.
C) is used to establish currency prices in foreign exchange markets.
D) tied imported steel prices to U.S. unemployment rates in the steel industry.
E) used the Japanese costs of producing steel as the guide for starting dumping investigations.
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29
Chapter 28: Exchange Rates and the Balance of Payments
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Q1) Under a system of fixed exchange rates,a balance-of-payments deficit means that a country's currency is
A) partially valued.
B) undervalued.
C) overvalued.
D) devalued.
E) revalued.
Q2) On June 1,2004,the following foreign exchange rates were quoted.For 1 U.S.dollar you would receive 8.28 Chinese renminbi,110.64 Japanese yen,11.48 Mexican pesos,29.04 Russian roubles,or 0.544 British pounds.A unit of which country's currency would give you the fewest U.S.dollars?
A) China
B) Japan
C) Mexico
D) Russia
E) Great Britain
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