Microeconomics Test Questions
Course Introduction
Microeconomics is the study of how individuals, households, and firms make choices regarding the allocation of limited resources and the interactions among these agents within various market structures. This course examines the fundamental concepts of supply and demand, elasticity, consumer and producer behavior, utility maximization, production and cost analysis, and market equilibrium. Students will explore different types of markets, including perfect competition, monopoly, and oligopoly, and analyze the effects of government intervention, taxation, and externalities. By understanding microeconomic principles, learners gain insight into real-world decision-making processes that affect both personal and societal outcomes.
Recommended Textbook
Economics Principles and Applications 6th Edition by Robert E. Hall
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4566 Verified Questions
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Chapter 1: What Is Economics
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Sample Questions
Q1) In one year,a weapons plant can manufacture either 1,000 more guns or 50 more tanks.The plant's opportunity cost of an extra tank is approximately
A) 20 guns
B) 50 guns
C) 50 tanks
D) 1/50 of a tank
E) 1/50 of a gun
Answer: A
Q2) The level of detail in an economic model
A) is as close as possible to the level of detail in reality
B) depends on the purpose of the model
C) is as complex as possible
D) is the same regardless of the purpose of the model
E) is as complex as possible to accomplish its purpose
Answer: B
Q3) Opportunity costs arise because of resource scarcity.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Scarcity,choice,and Economic Systems
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Sample Questions
Q1) The law of increasing opportunity cost is based on the idea that A) wages tend to increase with the level of employment
B) interest rates tend to rise with increasing inflation
C) labor costs for a typical firm are a large and growing proportion of total cost
D) most resources are better suited to producing some goods than others
E) the less of something we produce,the greater is the opportunity cost of producing still more
Answer: D
Q2) Suppose Bob and Tom are writing jokes for a their new TV show.Suppose there are two types of jokes,political jokes and jokes about celebrities.The number of jokes that can be produced by each person in each category are listed in Figure 2-12.From this table they should
A) have Bob specialize in both political and celebrity jokes
B) have Tom specialize in both political and celebrity jokes
C) cooperate on the writing of both political and celebrity jokes
D) have Bob write political jokes and Tom write celebrity jokes
E) have Tom write political jokes and Bob write celebrity jokes
Answer: D
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Chapter 2: Scarcity, choice, and Economic Systems: Part A
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Sample Questions
Q1) The rapid rise in oil prices during 2007-2008 can be explained by noting the fact that
A) the supply of oil increased more rapidly than the demand for oil increased
B) the demand for oil increased more rapidly than the supply for oil increased
C) the demand for oil decreased at the same time that the supply of oil increased
D) the quantity demanded of oil increased more rapidly than the quantity supplied of oil increased
E) the quantity supplied of oil increased more rapidly than the quantity demanded of oil increased
Answer: B
Q2) An increase in demand coupled with a decrease in supply results in a(n)
A) increase in equilibrium price and an ambiguous effect on equilibrium quantity
B) increase in equilibrium quantity and a decrease in equilibrium price
C) decrease in equilibrium quantity and an ambiguous effect on equilibrium price
D) surplus
E) decrease in the equilibrium price and quantity
Answer: A
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Chapter 4: Working With Supply and Demand
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Sample Questions
Q1) Which of the following is an example of a stock variable?
A) The amount of cereal in a person's pantry
B) The amount of cereal a person buys each week
C) The amount of cereal a child consumes each month
D) The amount of cereal produced each day
E) None of these are stock variables
Q2) Within the context of the housing market,what does MBS stand for?
A) Multi-Banking System
B) Mortgage Backed Security
C) Mortgage Bubble System
D) Mixed Bracket Securities
Q3) A $10,000 federal subsidy per student in higher education would benefit
A) a student by exactly $10,000
B) a university by exactly
C) the student and the university in such a way that they would split the $10,000.
D) the student and the university in such a way that they would each get $10,000.
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Chapter 5: Elasticity
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Sample Questions
Q1) In general,the more of an individual's total budget that is spent on a given product,the
A) greater the supply-side response
B) less elastic is the demand for that good C) more elastic is the demand for that good
D) more the demand curve will shift when the price changes
E) less the demand curve will shift when the price changes
Q2) Figure 5-4 shows the demand schedule for hockey pucks.What is the price elasticity of demand when the price changes from $2 per puck to $1 per puck (using the midpoint formula)?
A) 0.33
B) 0.15
C) 3.00
D) 1.00
E) none of these
Q3) The price elasticity of demand measures the responsiveness of quantity demanded to changes in price.
A)True
B)False
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Page 7
Chapter 6: Consumer Choice
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Sample Questions
Q1) An increase in the price of the good measured on the vertical axis of a budget line diagram will
A) cause a parallel outward shift of the budget line
B) leave the budget line unchanged
C) cause a parallel inward shift of the budget line
D) make the budget line flatter
E) make the budget line steeper
Q2) The substitution effect of a decrease in the price of an inferior good encourages the consumer to purchase more of the good while the income effect encourages the consumer to purchase less of it.
A)True
B)False
Q3) If income and the prices of both goods all double,the budget line will
A) become flatter
B) become steeper
C) remain unchanged
D) experience a parallel outward shift
E) experience a parallel inward shift
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8
Chapter 7: Production and Cost
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Sample Questions
Q1) The marginal cost curve crosses
A) both the average total cost and average variable cost curves at their respective minimum points
B) the average total cost curve at its minimum point,and the average variable cost curve at its maximum point
C) the average total cost curve and the average variable cost curves at the same output level
D) both the average total cost and average variable cost curves at their respective maximum points
E) the average total cost curve at its maximum point,and the average variable cost curve at its minimum point
Q2) Variable inputs are those whose
A) quantity changes as the level of output changes
B) costs are irreversible
C) quantity remains constant regardless of the level of output
D) costs are considered sunk costs
E) price is continuously changing
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Chapter 8: How Firms Make Decisions: Profit Maximization
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Sample Questions
Q1) Consider the firm in Figure 8-10.The marginal cost of producing the fifth unit of output is
A) $300
B) $1,500
C) $50
D) $40
E) $60
Q2) Figure 8-9 shows the demand schedule faced by an artist for reproductions of his paintings.What is the marginal revenue from expanding from selling reproductions to 400?
A) $3,000
B) $1
C) $0
D) -$1,000
E) -$3,000
Q3) A firm may find it optimal to stay in business in the short run even if total revenue does not cover total cost.
A)True
B)False
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Page 10
Chapter 9: Perfect Competition
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Sample Questions
Q1) A firm maximizes its profit by producing that quantity of output for which
A) marginal revenue equals total revenue
B) marginal revenue exceeds marginal cost by the greatest amount
C) price is the greatest distance above average total cost
D) the difference between total revenue and total cost is the greatest
E) marginal cost equals average cost
Q2) The All-the-Rage microbrewery is represented in Figure 9-9.If the market price is $2.50 per pint,then in the short run,the microbrewery will
A) earn the same profit by producing zero pints as by producing 50 pints per day
B) produce zero pints per day to avoid an economic loss
C) produce 50 pints per day and break even
D) produce between zero and 50 pints per day
E) produce more than 50 pints per day
Q3) In an increasing-cost industry,the long-run market supply curve is
A) horizontal
B) vertical
C) upward sloping
D) downward sloping
E) nonexistent
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Page 11
Chapter 9: Perfect Competition: Part A
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Sample Questions
Q1) One of the defining characteristics of a perfectly competitive market is
A) both buyers and sellers are well informed about the market
B) a small number of buyers
C) high barriers to entry
D) a small number of buyers but a large number of sellers
E) buyers are better informed about the market than sellers
Q2) In perfect competition,technological advances will allow economic profits for
A) all firms.
B) only the firm developing the new technology.
C) early adopters.
D) none of the firms,as the advance will be immediately adopted by all of them.
Q3) Which of the following is not a characteristic of a perfectly competitive market
A) buyers and sellers are well informed about the market
B) standardized product
C) many buyers and few sellers
D) easy exit out of the industry
E) easy entry into the industry
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Chapter 10: Monopoly
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Sample Questions
Q1) A market which only allows only one firm to operate at lowest average cost is called a(n)
A) natural monopoly.
B) scale industry.
C) increasing returns industry.
D) large scale industry.
Q2) A single-price monopoly with the same market demand and cost structure as a perfectly competitive market will produce
A) the same output level at the same price as the perfectly competitive market
B) less because the monopolist will not produce all units for which marginal revenue exceeds its marginal cost
C) less since the monopolist's marginal revenue curve lies below its demand curve
D) more because the monopolist will be more efficient
E) more because the monopolist's marginal cost curve slopes upward
Q3) The marginal revenue curve coincides with the demand curve of a firm that engages in perfect price discrimination.
A)True
B)False
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13
Chapter 11: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) Compared to the market demand curve,a demand curve facing a monopolistically competitive firm would be
A) more elastic.
B) vertical.
C) horizontal.
D) the same as the market demand curve.
E) less elastic.
Q2) Excess capacity arises when firms cannot sell all of their output at the current market price.
A)True
B)False
Q3) Oligopoly
A) is a market structure of many small firms
B) is the only seller of a good or service
C) is a market structure of a few consumers of a product
D) is a market structure of a few interdependent firms
E) is a more efficient market structure than perfect competition
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Chapter 12: Labor Markets
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Sample Questions
Q1) The wage premium for the average college graduate (vs.the average high school graduate)has gone down significantly in recent years.
A)True
B)False
Q2) For a firm producing in a perfectly competitive product market,the marginal revenue product of labor eventually
A) falls due to diminishing marginal returns to labor
B) rises due to diminishing marginal returns to labor
C) falls due to a falling product price
D) falls due to a rising product price
E) rises due to falling marginal productivity of labor
Q3) The labor market for ultrasound technicians in Cleveland is initially in equilibrium.Which of the following would lead to a lower wage rate and higher employment in that market?
A) a drop in demand for diagnostic services at Cleveland hospitals
B) a drop in the price of ultrasound equipment
C) an increase in the length of training required for ultrasound technicians
D) a shift in potential workers' tastes away from hospital and clinical work
E) a wage decrease for ultrasound technicians in nearby cities
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Page 15
Chapter 12: labor Markets: Part A
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Sample Questions
Q1) Which of the following would most likely cause a job to command a compensating wage differential?
A) There are barriers to the entry of new workers into the job market.
B) The job is more dangerous than most other occupations.
C) Wage rigidity prevents the wage rate from falling to the equilibrium level.
D) There has been an increase in the price of another input that is substitutable for labor.
E) The job market is dominated by one large firm.
Q2) Wages typically vary among individuals for all of the following reasons,except one.Which is the exception?
A) differences in ability
B) geographical differences in the cost of living
C) differences in educational attainment
D) differences in labor market experience
E) differences in the prices of the goods produced by labor
Q3) All else constant,the quantity of labor supplied is inversely related to the amount of training required for a job.
A)True
B)False
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Chapter 13: Capital and Financial Markets
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Sample Questions
Q1) A pizza shop owner needs to buy a new pizza oven and he is trying to decide between two different used ones.Whichever oven he buys,it will generate $3,000 net revenue per year.The older use oven has a useful life of only 2 years and the newer oven has a useful life of 4 years.If the interest rate is 8% per year,what is the difference in value between the two ovens? (Assume that each year's revenue is received at the end of the year. )
A) $4,586.58
B) $5,349.79
C) $2,205.09
D) $2,777.78
E) $3,000
Q2) Any long-lasting tool that people use to produce goods and services is called
A) a product
B) machinery
C) capital
D) equipment
E) labor assistance
Q3) The supply curve for a particular bond is horizontal.
A)True
B)False
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Chapter 14: Economic Efficiency and the Competitive Ideal
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Sample Questions
Q1) In Figure 14-1,which area represents consumer surplus?
A) A
B) B
C) C
D) D
E) E
Q2) Suppose that a perfectly competitive market is in equilibrium.Then,
A) the equilibrium quantity provides the maximum possible benefit to buyers
B) the equilibrium quantity provides the maximum possible benefit to buyers and sellers combined
C) total (producer + consumer)surplus is equal to price x quantity.
D) an additional unit,if produced,would produce a benefit that exceeds its cost of production
E) an additional unit could be produced at a cost to some producer that is less than the benefit to some consumer
Q3) In order for a Pareto improvement to occur,someone must suffer a loss so that others may benefit from the improvement.
A)True
B)False
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Page 18
Chapter 15: Governments Role in Economic Efficiency
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Sample Questions
Q1) When a negative externality exists,the marginal social cost curve
A) is the same as the market supply curve
B) is the same as the market demand curve
C) lies above the market demand curve
D) lies below the market supply curve
E) lies above the market supply curve.
Q2) A good is nonexcludable if the benefits derived from consuming it cannot be easily denied to those who do not purchase it.
A)True
B)False
Q3) Suppose that production of the product in Figure 14-2 imposes a cost on society of $7.00 per unit.If the free market equilibrium is at the intersection of demand curve D and supply curve S,what should the government do to internalize the externality?
A) impose a tax of $2.50 per unit
B) reduce the market output level by approximately 39 units
C) impose a tax of $350 per period
D) impose a tax of $7.00 per unit
E) impose a tax of $175 per period
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Chapter 16: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) Which of the following must be true in order to engage in advantageous international trade?
A) It must be producing at a point on its production possibilities frontier.
B) It must be economically efficient.
C) It must have a comparative advantage in producing one of the goods being traded.
D) There must be no potential Pareto improvements available in the economy.
E) It must have an absolute advantage in producing one good being traded.
Q2) Mutually beneficial trade between two countries is possible only as long as
A) unit costs of production are the same no matter how many units are being produced
B) marginal costs rise as production increases
C) marginal costs are equal to average total costs
D) one country has an absolute advantage in the production of one good,while the other country enjoys a similar advantage in making another good
E) one country has a comparative advantage in the production of one good,while the other country enjoys a comparative advantage in making another good
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Page 20
Chapter 17: What Macroeconomics Tries to Explain
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Sample Questions
Q1) If real GDP is increasing at a 2 percent annual rate while the unemployment rate is 7 percent,the economy is
A) not achieving full economic potential
B) experiencing an increase of 2 percent in real annual per capita GDP
C) experiencing a slump
D) experiencing high prices and low inflation
E) producing along its production possibilities frontier
Q2) If the unemployment rate is 6 percent,that means that 6 percent of
A) the population is not working
B) potential workers do not have jobs
C) the workforce is searching for work but has not found a job at that time
D) the individuals who are looking for work cannot find jobs
E) the population is not looking for a job
Q3) Which of the following is a major macroeconomic goal?
A) Low prices
B) Fair prices
C) Pure competition
D) Low unemployment
E) High prices
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Page 21
Chapter 18: Production, income, and Employment
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Sample Questions
Q1) If output rises,then income
A) drops by an equal amount
B) remains stable
C) rises twice as fast as output
D) rises slowly
E) rises by an equal amount
Q2) The approach to calculating GDP that measures the contribution of each firm to GDP is referred to as the
A) expenditures approach to measuring GDP
B) factor payments approach to measuring GDP
C) value added approach to measuring GDP
D) productivity approach to measuring GDP
E) output approach to measuring GDP
Q3) Using dollar values to calculate GDP is advantageous because
A) people can most easily understand dollar amounts
B) it employs a common unit of measurement for very different things
C) less valuable goods count the same as more valuable goods
D) other methods of calculating production are not as intuitively clear
E) money is a universal yardstick for measurement
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Page 22
Chapter 19: The Price Level and Inflation
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Sample Questions
Q1) Suppose the economy includes two distinct groups of people: wage earners and goods sellers.If the price level falls by 10 percent and nominal wages remain unchanged, A) there will be no redistribution of purchasing power because all wage earners in the U.S.economy receive indexed wages
B) income will be redistributed from wage earners to goods sellers
C) income will be redistributed from goods sellers to wage earners
D) real wages will fall by 10 percent
E) real wages will remain unchanged
Q2) Jim is negotiating a contract for a labor union.The union wants to increase members' real wages by 4 percent.The inflation rate is predicted to be 7 percent.To attain the union's goal,Jim needs to negotiate a raise in the nominal
A) wage of 4 percent
B) wage of 7 percent
C) wage of 11 percent
D) rate of 3 percent
E) rate of 28 percent
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Chapter 20: The Classical Long-Run Model
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Sample Questions
Q1) What is the relationship between household saving and taxes?
A) taxes = income - consumption - household saving
B) household saving = income + taxes - consumption
C) taxes = income + consumption + household saving
D) household saving = consumption + income - taxes
E) taxes = household saving - income + consumption
Q2) The labor demand curve slopes downward because
A) firms wish to hire fewer workers as the wage rate increases
B) households wish to hire fewer workers as the wage rate decreases
C) firms wish to hire more workers as the wage rate increases
D) firms wish to supply fewer workers as the wage rate increases
E) households wish to provide fewer hours of work as the wage rate decreases
Q3) The Classical model
A) is now discredited
B) was developed by John Maynard Keynes
C) has been completely displaced by the short-run macro model
D) helps us to understand the performance of the economy in the long run
E) is most useful in helping us to predict when an economic downturn will occur
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Chapter 20: Part A: The Classical Model in an Open Economy
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Sample Questions
Q1) In the classical model with an open economy,an increase in government purchases may not cause complete crowding out,but crowding out will be complete worldwide.
A)True
B)False
Q2) When a country runs a trade deficit,
A) it must be running a budget surplus.
B) its imports will become injections instead of leakages.
C) its exports will become leakages instead of injections.
D) foreigners will demand loanable funds from the country.
E) foreigners will supply loanable funds to the country equal to its trade deficit
Q3) In the classical model,when an open economy has balanced trade,Say's law holds. A)True B)False
Q4) In the classical model,when an open economy has balanced trade,Say's law does not hold.
A)True B)False
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Chapter 21: Economic Growth and Rising Living Standards
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Sample Questions
Q1) The main tradeoff to be considered when judging pro-growth policies is
A) foregone current consumption versus the current benefits of technological progress
B) foregone current consumption versus the future benefits of technological progress
C) foregone future consumption versus the future benefits of technological progress
D) foregone future consumption versus the current benefits of technological progress
E) government surpluses versus deficits in the future
Q2) In less-developed countries with rapid population growth,
A) the standard of living will always rise because population is the key to rising living standards
B) the standard of living will always fall
C) the standard of living will always remain constant
D) the standard of living will fall if population grows faster than output
E) will be independent of population growth due to foreign aid payments by rich countries
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Chapter 22: Economic Fluctuations
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Sample Questions
Q1) Which of the following is a common reaction to a decrease in the interest rate?
A) An increase in oil prices.
B) A decrease in stock market prices.
C) An increase in spending on new homes.
D) An increase in military spending.
E) An increase in federal highway spending.
Q2) Say's law will prevent recessions only if a critical assumption of the classical model holds: That the interest rate adjusts until saving is equal to business and government borrowing.
A)True
B)False
Q3) Since a long run consists of many short runs,the classical model is A) incorrect every time we look at output data
B) accurate during the short run
C) paradoxically quite accurate in the long run;however,it is not very accurate in the short run
D) our best guide to fluctuations in the economy
E) paradoxically quite accurate in the short run;however,it is not very accurate in the long run
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Page 27
Chapter 23: The Short-Run Macro Model
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Sample Questions
Q1) Consider Figure 11-10 above.If the full employment level of output is $9 trillion,which of the following is true?
A) The economy is currently operating at the full employment level
B) The economy is currently operating below than the full employment level
C) The economy is currently operating above the full employment level
D) The economy is operating neither at equilibrium nor full employment
E) Prices are rising
Q2) A movement along the consumption-function line would most likely be caused by a(n)
A) increase in net taxes
B) decrease in net taxes
C) increase in income
D) decrease in productivity
E) change in autonomous consumption
Q3) Automatic stabilizers do not include
A) taxes
B) interest rates
C) transfer payments
D) forward-looking behavior
E) enhancing the multiplier effect
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Chapter 24: Fiscal Policy
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Sample Questions
Q1) Government outlays
A) are the same as "G" in the short-run macro model.
B) do not include transfer payments.
C) are always smaller than government purchases.
D) are always greater than government purchases.
E) tend to decline in the long run.
Q2) If the MPC is 0.6 and if government purchases and net taxes both increase by $20 billion,by how much will equilibrium output change?
A) It will increase by $80 billion.
B) It will increase by $20 billion.
C) It will not change because the changes in government purchases and net taxes will cancel each other out.
D) It will decrease by $20 billion.
E) It will decrease by $80 billion.
Q3) When positive spending shocks occur,transfer payments automatically fall.
A)True B)False
Q4) The total debt includes amounts one government agency owes to another.
A)True
B)False
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Chapter 25: Money,banks,and the Federal Reserve
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Sample Questions
Q1) Suppose the Federal Reserve wants to decrease the money supply by $100,000.If the required reserve ratio is 0.1,which of the following actions will achieve the Fed's goal?
A) The Fed must purchase $100,000 in bonds.
B) The Fed must sell $100,000 in bonds.
C) The Fed must purchase $10,000 in bonds.
D) The Fed must sell $10,000 in bonds.
E) The Fed must sell $90,000 in bonds.
Q2) Which of the following is the result of a banking panic?
A) A decrease in the demand deposit multiplier
B) An increase in the money supply
C) An increase in bank reserves
D) A decrease in the money supply
E) An increase in the demand deposit multiplier
Q3) The primary reason that U.S.money has value is that it
A) is backed by gold
B) is fiat money
C) is accepted by others in exchange for goods and services
D) is commodity money
E) has a fixed value established by the Federal Reserve.
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Page 30
Chapter 26: The Money Market and Monetary Policy
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Sample Questions
Q1) Open market sales of bonds by the Federal Reserve drain reserves from the banking system and shift
A) the allocation of wealth between bonds and stocks
B) the economy toward a trough in the business cycle
C) the money supply curve leftward
D) reserves to nonmember banks
E) the demand for money curve leftward
Q2) An individual's wealth constraint is determined by
A) the individual's level of education
B) the facts that wealth is given and so she must give up one kind of wealth in order to acquire another
C) overall conditions in the economy
D) the amount of wealth the individual chooses to hold in the form of money
E) the value of corporate stock
Q3) The federal funds rate is
A) determined in a market but targeted by the Fed.
B) chosen by the Fed and enforced on the banks.
C) chosen by Congress and enforced on the Fed.
D) chosen by Congress and enforced on the banks.
E) determined in the market and beyond the control of the Fed.
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Chapter 26: Feedback Effects From GDP to the Money
Market
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Sample Questions
Q1) If the federal government announces a tax cut,which of the following is most likely in the short run?
A) A decrease in output,an increase in money demand,and an increase in the interest rate
B) An increase in output,a decrease in money demand,and a decrease in the interest rate
C) A decrease in output,a decrease in money demand,and a decrease in the interest rate
D) An increase in output,an increase in money demand,and a decrease in the interest rate
E) An increase in output,an increase in money demand,and an increase in the interest rate.
Q2) The rise in equilibrium GDP shifts the money demand curve to the left.
A)True B)False
Q3) An increase in government spending can lead to a decrease in GDP if the interest rate changes enough.
A)True
B)False
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Chapter 27: Aggregate Demand and Aggregate Supply
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Sample Questions
Q1) The vertical aggregate supply curve is consistent with A) the classical model
B) the short run macro model
C) a typical firm's supply curve
D) a positive demand shock
E) a negative demand shock
Q2) Which of the following would cause the aggregate demand curve to shift to the right?
A) An increase in the price level
B) A decrease in the price level
C) An increase in government purchases
D) An increase in taxes
E) An increase in the interest rate
Q3) Which of the following will cause a movement along the aggregate demand curve?
A) A decrease in the price level
B) An increase in government purchases
C) A decrease in taxes
D) An increase in investment spending
E) An increase in the interest rate
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Chapter 28: Inflation and Monetary Policy
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Q1) In the long run,there is a tradeoff between inflation and unemployment.
A)True
B)False
Q2) Ongoing inflation has its own momentum because
A) prices rise whenever firms see other prices rising
B) the public learns to expect inflation and adjusts its decisions in response
C) public officials are unwilling to stop prosperity
D) more and more people now have jobs
E) we are always playing catch up,trying to get what we lost when others raise prices
Q3) If there is a sudden increase in government spending,which of the following should the Fed do if it wants to keep output unchanged?
A) Do nothing,since the self-correcting mechanism will adjust the economy
B) Sell bonds in the open market
C) Wait,since output usually does not change when government spending increases
D) Decrease the required reserve ratio
E) Buy bonds in the open market
Q4) If unemployment is below the natural rate,GDP is below potential output.
A)True
B)False
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Chapter 29: Exchange Rates and Macroeconomic Policy
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Q1) A managed float
A) is an attempt to maintain a stable exchange rate
B) is invariably unsuccessful
C) is invariably successful
D) is an attempt to let the price level float upward
E) is an attempt to get the interest rate to float upward
Q2) Suppose that equilibrium in the dollar-pound market occurs where 300 million pounds are demanded at a price of $1.75 per pound.If the current exchange rate is $1.60 per pound,we know that
A) the dollar-pound market is in equilibrium
B) there is an excess demand for pounds,so the dollar price of the pound will rise
C) there is an excess demand for pounds,and the pound is overvalued
D) there is an excess supply of pounds,and the dollar price of the pound will rise
E) there is an excess supply of pounds,and the dollar price of the pound will fall
Q3) Managed floats are equivalent to fixed exchange rates.
A)True
B)False
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Chapter 30: Appendix-finding Equilibrium GDP
Algebraically
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Sample Questions
Q1) If autonomous consumption is $5,000,the MPC is 0.7,net taxes are $2,000,investment spending is $4,000,and government purchases equal $2,500,and NX = $0,what is equilibrium GDP?
A) $14,428.6
B) $33,666.7
C) $40,800
D) $43,000
E) $45,000
Q2) If I = $2,000,G = $4,000,T = $1,000,NX = $0,autonomous consumption = $1,000 and the marginal propensity to consume is 0.6,what is the equilibrium value of output?
A) $16,000
B) $7,000
C) $6,400
D) $3,840
E) $8,000
Q3) If net taxes are included in the model,the equation that shows consumption at each level of income is: C = a + b(Y - T)or C = a + bY - bT.
A)True
B)False
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Chapter 31: Appendix: Capital and Leverage
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Q1) Deleveraging is the process of reducing leverage,and therefore increasing the risk to capital from any further declines in asset prices.
A)True
B)False
Q2) It was the rapid and system-wide deleveraging that contributed to the downward spiral of the 2008 financial crisis.
A)True
B)False
Q3) Just as greater leverage multiplies a bank's potential profits,it also multiplies a bank's potential losses.
A)True
B)False
Q4) Deleveraging is the process of reducing leverage,and therefore reducing the risk to capital from any further declines in asset prices.
A)True
B)False
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