Question 1

Along an indifference curve for goods X and Y, the vertical and horizontal axes measure the:

Accepted Answer

A)  prices of X and Y. 
B)  total utilities of X and Y. 
C)  quantities of X and Y. 
D)  marginal utilities of X and Y. 
A)  prices of X and Y. 
B)  total utilities of X and Y. 
C)  quantities of X and Y. 
D)  marginal utilities of X and Y.

Question 2

Exhibit 6A-1 Budget line
​
 
​ As shown in Exhibit 6A-1, a rightward shift in the budget line from AB to CD would result from:

Accepted Answer

A)  ​ a price reduction in good X. 
B)  ​ a price reduction in good Y. 
C)  ​ a change in consumer preference. 
D)  ​ an increase in consumer income. 
A)  ​ a price reduction in good X. 
B)  ​ a price reduction in good Y. 
C)  ​ a change in consumer preference. 
D)  ​ an increase in consumer income.

Question 3

Exhibit 10A-6 Aggregate demand and supply model
​
 
Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 10A-6, the real GDP and price level (CPI) in long-run equilibrium will be:

Accepted Answer

A)  $10 billion and 200. 
B)  $4 billion and 150. 
C)  $10 billion and 150. 
D)  $10 billion and 100. 
A)  $10 billion and 200. 
B)  $4 billion and 150. 
C)  $10 billion and 150. 
D)  $10 billion and 100.

Question 4

​ Exhibit 10A-1 Aggregate demand and supply model
 
Given the shift of the aggregate demand curve from AD1 to AD2   in Exhibit 10A-1, the real GDP and price level (CPI) in long-run equilibrium will be:

Accepted Answer

A)  $8 billion and 150. 
B)  $12 billion and 200. 
C)  $8 billion and 250. 
D)  $8 billion and 200. 
A)  $8 billion and 150. 
B)  $12 billion and 200. 
C)  $8 billion and 250. 
D)  $8 billion and 200.

Question 5

​ ​ Exhibit 16A-2 Macro AD/AS Models
​
 
​ In Panel (a) of Exhibit 16A-2, an expansionary Keynesian government stabilization policy designed to move the economy from Y1 to Yp would shift the:

Accepted Answer

A)  ​aggregate demand curve (A
D) to the left. 
B)  ​aggregate demand curve (A
D)  to the right. 
C)  ​SRAS rightward. 
D)  ​LRAS rightward. 
A)  ​aggregate demand curve (A
D) to the left. 
B)  ​aggregate demand curve (A
D)  to the right. 
C)  ​SRAS rightward. 
D)  ​LRAS rightward.

Question 6

A direct relationship exists when:

Accepted Answer

A)  there is no association between two variables. 
B)  one variable increases and there is no change in the other variable. 
C)  one variable increases and the other variable increases. 
D)  one variable increases and the other variable decreases. 
A)  there is no association between two variables. 
B)  one variable increases and there is no change in the other variable. 
C)  one variable increases and the other variable increases. 
D)  one variable increases and the other variable decreases.

Question 7

Assume the price of good Y with its quantity measured on the vertical axis is $100 and the price of good X with its quantity measured on the horizontal axis is $10. If the consumer's budget is $500, then the absolute value of the slope of the budget line is:

Accepted Answer

A)  500. 
B)  1/10. 
C)  10. 
D)  100. 
A)  500. 
B)  1/10. 
C)  10. 
D)  100.

Question 8

Consumer equilibrium occurs where the budget line is ____ to the ____ possible indifference curve.

Accepted Answer

A)  tangent; highest 
B)  equal; lowest 
C)  marginal; maximum 
D)  differential; highest 
A)  tangent; highest 
B)  equal; lowest 
C)  marginal; maximum 
D)  differential; highest

Question 9

Assume the economy is operating at a real GDP above full-employment real GDP. Keynesian economists would prescribe which of the following policies?

Accepted Answer

A)  nonintervention 
B)  fixed rule 
C)  contractionary 
D)  expansionary 
A)  nonintervention 
B)  fixed rule 
C)  contractionary 
D)  expansionary

Question 10

The full-employment level of real GDP is the level which can be produced with:

Accepted Answer

A)  given technology and productive resources. 
B)  frictional and structural unemployment equal to zero. 
C)  cyclical unemployment greater than zero. 
D)  future technology. 
A)  given technology and productive resources. 
B)  frictional and structural unemployment equal to zero. 
C)  cyclical unemployment greater than zero. 
D)  future technology.

Question 11

​ Assume there is a relationship between two variables and the other-variables-held constant assumption (ceteris paribus) is relaxed. We would expect that the line representing this relationship would:

Accepted Answer

A)  ​change from inverse to direct. 
B)  ​change from direct to inverse. 
C)  ​have a greater number of data points. 
D)  ​change its location. 
A)  ​change from inverse to direct. 
B)  ​change from direct to inverse. 
C)  ​have a greater number of data points. 
D)  ​change its location.

Question 12

If an economy is operating at short-run equilibrium below the level of real GDP, the self-correction model result is that:

Accepted Answer

A)  unemployment increases. 
B)  unemployment falls. 
C)  cyclical unemployment increases. 
D)  frictional and structural unemployment increase. 
A)  unemployment increases. 
B)  unemployment falls. 
C)  cyclical unemployment increases. 
D)  frictional and structural unemployment increase.

Question 13

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss
 
As shown in Exhibit 3A-2, if the market is in equilibrium, then total surplus is represented by

Accepted Answer

A)  BGHF 
B)  CBEFDA 
C)  CBEA 
D)  AEFD 
A)  BGHF 
B)  CBEFDA 
C)  CBEA 
D)  AEFD

Question 14

​ In the long run, wages and prices are considered to be:

Accepted Answer

A)  ​fixed. 
B)   sticky. 
C)  ​flexible. 
D)  ​unstable. 
A)  ​fixed. 
B)   sticky. 
C)  ​flexible. 
D)  ​unstable.

Question 15

Consumer surplus:

Accepted Answer

A)  is minimized in market equilibrium. 
B)  measures the value between the actual selling price of a product and the price at which sellers are willing to sell the product. 
C)  measures the value between the price consumers are willing to pay for a product and the price they actually pay. 
D)  measures the price at which sellers extract excess profits from consumers. 
A)  is minimized in market equilibrium. 
B)  measures the value between the actual selling price of a product and the price at which sellers are willing to sell the product. 
C)  measures the value between the price consumers are willing to pay for a product and the price they actually pay. 
D)  measures the price at which sellers extract excess profits from consumers.

Question 16

A drought destroys much of the peach crop. As a result, consumer surplus in the peach market:

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains unchanged. 
D)  equals the deadweight loss increase. 
A)  increases. 
B)  decreases. 
C)  remains unchanged. 
D)  equals the deadweight loss increase.

Question 17

If the price of Good X is $2, the price of Good Y is $10 and the consumer's budget is $100, which of the following combinations of Good X and Good Y would be on the budget line?

Accepted Answer

A)  50 units of Good X and 10 units of Good Y 
B)  10 units of Good X and 6 units of Good Y 
C)  25 units of Good X and 5 units of Good Y 
D)  30 units of Good X and 6 units of Good Y 
A)  50 units of Good X and 10 units of Good Y 
B)  10 units of Good X and 6 units of Good Y 
C)  25 units of Good X and 5 units of Good Y 
D)  30 units of Good X and 6 units of Good Y

Question 18

Which of the following statements is not  correct?

Accepted Answer

A)  Total surplus is the sum of consumer and producer surplus. 
B)  Deadweight loss is the net loss of both consumer and producer surplus resulting from underproduction or overproduction of a product. 
C)  Deadweight loss is a measure of market inefficiency. 
D)  Total surplus is maximized when the actual quantity supplied exceeds the equilibrium quantity. 
A)  Total surplus is the sum of consumer and producer surplus. 
B)  Deadweight loss is the net loss of both consumer and producer surplus resulting from underproduction or overproduction of a product. 
C)  Deadweight loss is a measure of market inefficiency. 
D)  Total surplus is maximized when the actual quantity supplied exceeds the equilibrium quantity.

Question 19

Which of the following causes a leftward shift in the short-run aggregate supply curve?

Accepted Answer

A)  An increase of goods prices while nominal incomes are unchanged. 
B)  An increase in nominal incomes. 
C)  An increase of full-employment real GDP. 
D)  An increase of personal consumption expenditures while the price level is unchanged. 
A)  An increase of goods prices while nominal incomes are unchanged. 
B)  An increase in nominal incomes. 
C)  An increase of full-employment real GDP. 
D)  An increase of personal consumption expenditures while the price level is unchanged.

Question 20

Exhibit 1A-7 Straight line relationship
 
Using the relationship shown in Exhibit 1A-7, suppose the price of air travel increases. How would you revise the graph to show this change?

Accepted Answer

A)  Draw a new point on the graph upward and to the left. 
B)  Draw a new point on the graph downward and to the right. 
C)  Draw a new line on the graph. 
D)  Change the current line so that its slope is flatter. 
A)  Draw a new point on the graph upward and to the left. 
B)  Draw a new point on the graph downward and to the right. 
C)  Draw a new line on the graph. 
D)  Change the current line so that its slope is flatter.

Exam 31: Understanding Direct and Inverse Relationships between Variables

Along an indifference curve for goods X and Y, the vertical and horizontal axes measure the:

Exhibit 6A-1 Budget line ​ ​ As shown in Exhibit 6A-1, a rightward shift in the budget line from AB to CD would result from:

Exhibit 10A-6 Aggregate demand and supply model ​ Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 10A-6, the real GDP and price level (CPI) in long-run equilibrium will be:

​ Exhibit 10A-1 Aggregate demand and supply model Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 10A-1, the real GDP and price level (CPI) in long-run equilibrium will be:

​ ​ Exhibit 16A-2 Macro AD/AS Models ​ ​ In Panel (a) of Exhibit 16A-2, an expansionary Keynesian government stabilization policy designed to move the economy from Y1 to Yp would shift the:

A direct relationship exists when:

Assume the price of good Y with its quantity measured on the vertical axis is $100 and the price of good X with its quantity measured on the horizontal axis is $10. If the consumer's budget is $500, then the absolute value of the slope of the budget line is:

Consumer equilibrium occurs where the budget line is ____ to the ____ possible indifference curve.

Assume the economy is operating at a real GDP above full-employment real GDP. Keynesian economists would prescribe which of the following policies?

The full-employment level of real GDP is the level which can be produced with:

​ Assume there is a relationship between two variables and the other-variables-held constant assumption (ceteris paribus) is relaxed. We would expect that the line representing this relationship would:

If an economy is operating at short-run equilibrium below the level of real GDP, the self-correction model result is that:

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the market is in equilibrium, then total surplus is represented by

​ In the long run, wages and prices are considered to be:

Consumer surplus:

A drought destroys much of the peach crop. As a result, consumer surplus in the peach market:

If the price of Good X is $2, the price of Good Y is $10 and the consumer's budget is $100, which of the following combinations of Good X and Good Y would be on the budget line?

Which of the following statements is not correct?

Which of the following causes a leftward shift in the short-run aggregate supply curve?

Exhibit 1A-7 Straight line relationship Using the relationship shown in Exhibit 1A-7, suppose the price of air travel increases. How would you revise the graph to show this change?

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Filters

Exhibit 6A-1 Budget line As shown in Exhibit 6A-1, a rightward shift in the budget line from AB to CD would result from:

Exhibit 10A-6 Aggregate demand and supply model Given the shift of the aggregate demand curve from AD₁ to AD₂ in Exhibit 10A-6, the real GDP and price level (CPI) in long-run equilibrium will be:

Exhibit 10A-1 Aggregate demand and supply model Given the shift of the aggregate demand curve from AD₁ to AD₂ in Exhibit 10A-1, the real GDP and price level (CPI) in long-run equilibrium will be:

Exhibit 16A-2 Macro AD/AS Models In Panel (a) of Exhibit 16A-2, an expansionary Keynesian government stabilization policy designed to move the economy from Y₁ to Y_p would shift the:

Consumer equilibrium occurs where the budget line is to the possible indifference curve.

Assume there is a relationship between two variables and the other-variables-held constant assumption (ceteris paribus) is relaxed. We would expect that the line representing this relationship would:

In the long run, wages and prices are considered to be: