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In 2017, an article in the Wall Street Journal on the latest data on U.S. net exports noted that, along with other currencies: "The [the Chinese] yuan has risen this year against the dollar." The article also noted that there had been "Stronger [economic] growth in Asia and Europe..." Source: Josh Mitchell, "U.S. Trade Gap Shrinks as Exports Rise," Wall Street Journal, April 4, 2017. What does the article mean that the yuan had "risen" against the dollar? A. It now takes fewer dollars to buy one yuan. B. It now takes more dollars to buy one yuan. Your answer is correct. C. U.S. goods are more expensive relative to Chinese goods. D. U.S. dollars have more value relative to the Chinese yuan. Briefly explain whether the combination of other currencies rising against the dollar and stronger economic growth in Asia and Europe had led to an increase or a decrease in U.S. net exports. A. Decrease, because more U.S. exports are produced. B. Increase, because U.S. incomes rise. C. Decrease, because U.S. exports are more expensive. D. Increase, because U.S. exports are cheaper. Your answer is correct. Will the outcome you discussed above result in a movement along the U.S. aggregate demand curve or a shift of the aggregate demand curve? Briefly explain. A. Movement along the U.S. aggregate demand curve, because this is a change in the price level. B. Shift of the U.S. aggregate demand curve, because this is a change in the price level. C. Shift of the U.S. aggregate demand curve, because this is not a change in the price level. Your answer is correct. D. Movement along the U.S. aggregate demand curve, because this is not a change in the price level.

B D C

McDonald's eliminateseliminates $1.00 off coupons. This will cause A. demand for McDonald's Big Mac hamburgers to shift to the leftshift to the left. B. demand for McDonald's Big Mac hamburgers to shift to the rightshift to the right. C. a movement along the demand curve for McDonald's Big Mac hamburgers

We often use real GDP per capitaLOADING... as a measure of a country's well-being. Review the definition of real GDP per capita before answering the following question. Today, the typical American works fewer than 40 hours per week. In 1890, the typical American worked 60 hours per week. Would the difference between the real GDP per capita in 1890 and the real GDP per capita today understate or overstate the difference in the population's economic well-being? A. The increase in real GDP per capita between 1890 and today overstates well-being because the value of leisure is not included in GDP. B. The decrease in real GDP per capita between 1890 and today understates well-being because the value of leisure is not included in GDP. C. The decrease in real GDP per capita between 1890 and today overstates well-being because the value of leisure is not included in GDP. D. The increase in real GDP per capita between 1890 and today understates well-being because the value of leisure is not included in GDP.

Is Jill Johnson correct when she says the following: "I am currently producing 10,000 pizzas per month at a total cost of $50 comma 00050,000. If I produce 10,001 pizzas, my total cost will rise to $50 comma 05050,050. Therefore, my marginal cost of producing pizzas must be increasing." A. Jill's average total cost of production is decreasing, so her marginal cost of producing pizzas must be increasing. B. Jill's average total cost of production is decreasing, so her marginal cost of producing pizzas must be decreasing. C. Though Jill's average total cost of production is decreasing, her marginal cost of producing pizzas could be increasing or decreasing. D. Jill's average total cost of production is increasing, so her marginal cost of producing pizzas must be decreasing. E. Jill's average total cost of production is increasing, so her marginal cost of producing pizzas must be increasing.

At one point, Time Warner and the Walt Disney Company discussed merging their news operations. Time Warner owns the Cable News Network (CNN), and Disney owns ABC News. After analyzing the situation, the companies decided that a combined news operation would have higher average costs than either CNN or ABC News had separately. Source: Martin Peers and Joe Flint, "AOL Calls Off CNN-ABC Deal, Seeing Operating Difficulties," Wall Street Journal, February 14, 2003. The long-run average cost curve for Time Warner and the Walt Disney Company must have been A. horizontal. B. U-shaped. Your answer is correct. C. L-shaped. D. downward sloping. Time Warner and Walt Disney did not merge their news companies because doing so would have resulted in diseconomies of scale.

U shaped Diseconomies of scale

In the U.S., gross domestic product (GDPLOADING...) and gross national product (GNPLOADING...) are close in value. Under what circumstances would GNP be much larger than GDP? a, Few foreign citizens currently work in the U.S. and few foreign firms maintain facilities in the U.S. b, Many U.S. citizens currently work in foreign countries while few foreign citizens currently work in the U.S. c, Few foreign firms maintain facilities in the U.S. while many U.S. firms are currently operating abroad. d, All of the above would push GNP above GDP.

d, All of the above would push GNP above GDP.

For Jill Johnson's pizza restaurant, explain whether each of the following is a fixed or variable cost. The payment she makes on her fire insurance policy is a ....cost. The payment she makes to buy pizza dough is a ......cost. The wages she pays her workers is a ........ cost. The lease payment she makes to her landlord who owns the building where her store is located is a .... cost. The $300-per-month payment she makes to her local newspaper for running her weekly advertisements is a ...... cost

fixed variable variable fixed fixed

A person who is in between jobs but actively engaged in a job search is considered to be ...... Experts in hand-drawn animation who remain unemployed due to the film industry's switch to computer-generated animation are considered to be structurally unemployed. When a company reduces production and employment during economic recessions, those employees who lose their jobs are generally considered to be cyclically unemployed.

frictionally unemployed structurally unemployed. cyclically unemployed.

Suppose that Apple and the investors buying the firm's bonds both expect a 22 percent inflation rate for the year. Further, suppose the nominal interest rate on bonds is 66 percent and the expected real interest rate is 44 percent. Now suppose that a year after the investors purchase the bonds, the inflation rate turns out to be 33 percent, rather than the 22 percent that had been expected. In this situation, investors ...and borrowers .....

lose win

Consider each of the following events and then figure out how each of these events will affect the aggregate demandLOADING... curve. a. An increase in the price level will cause a movement up along the aggregate demand curve. b. An increase in government purchases will cause a rightward shift of the aggregate demand curve. c. An increase in state income taxes will cause a leftward shift of the aggregate demand curve. d. An increase in interest rates will cause a leftward shift of the aggregate demand curve. e. A faster income growth in other countries will cause a rightward shift of the U.S. aggregate demand curve.

movement up along rightward shift of leftward shift of leftward shift of rightward shift of

Suppose the amount the federal government collects in personal income taxes decreasesdecreases, while the level of GDP remains the same. What will happen to the values of national income, personal income, and disposable personal income? National income will...... Personal income will ...... Disposable personal income will ........

remain the same. remain the same. increase

According to an article in the Wall Street Journal, KB Home and other builders found demand for new houses increasing in 2017 as a result of an increase in the formation of new households. In the long run, formation of new households depends on population growth. Source: Laura Kusisto and Sarah Chaney, "U.S. Housing Starts Fell in April for Third Time in Four Months," Wall Street Journal, May 16, 2017. Are firms like homebuilders that sell products whose demand depends partly on demographic factors likely to be more or less affected by the business cycle than are other firms whose products are less dependent on these factors (holding constant other factors that affect the demand for new houses)? Briefly explain. A. Less affected, because demographic factors are independent of the business cycle. Your answer is correct. B. More affected, because demographic factors are stable and rely on the business cycle. C. More affected, because it is difficult to measure demographic factors, such as age or income level. D. Less affected, because the products that homebuilders sell are necessities and therefore not subject to the business cycle.

According to an article in the Wall Street Journal, reporting on Coca-Cola's results for the fourth quarter of 2016: "Higher pricing ... drove revenue growth of 8%." Source: Jennifer Maloney and Anne Steele, "Coke's Profit Falls as Restructuring Continues," Wall Street Journal, February 9, 2017. Based on this information, is the demand for the beverages Coke sells price elastic or price inelastic? Briefly explain. A. Inelastic, because a price increase raises Coca-Cola's revenue. Your answer is correct. B. Elastic, because a price increase raises the quantity demanded of Coke. C. Elastic, because a price increase raises Coca-Cola's revenue. D. Inelastic, because a price increase raises the quantity demanded of Coke.

Comic book fans eagerly compete to buy copies of Amazing Fantasy No. 15, which contains the first appearance of the superhero Spider-Man. At the same time the publisher printed copies of the comic for the U.S. market, with the price printed on the cover in cents, it printed copies for the U.K. market, with the price printed on the cover in British pence. About 10 times as many U.S. copies of Amazing Fantasy No. 15 have survived as U.K. copies. Yet in auctions that occurred at about the same time in 2013, a U.S. copy sold for $29,000, while a U.K. copy in the same condition sold for only $10,755. Source: Auction price date from: GPA Analysis for CGC Comics, www.comics.gpanalysis.com. The market supply curve for Amazing Fantasy No. 15 in the U.S. is to the "right" of the supply curve in the U.K. The market demand curve for Amazing Fantasy No. 15 in the U.S. is to the "right" of the demand curve in the U.K. In both countries, the market equilibrium is where A. the demand curve intersects the supply curve. Your answer is correct. B. demand is greater than supply. C. there is a surplus. D. demand is zero.

In recent years, a number of cities have passed taxes on carbonated sodas to help reduce obesity and to raise tax revenues. An article in the New York Times observes that: "With that public momentum, a soda tax may be coming to a city near you." Source: Anahad O'Connor and Margot Sanger-Katznov, "As Soda Taxes Gain Wider Acceptance, Your Bottle May Be Next," New York Times, November 26, 2016. If this forecast is correct, is the demand for premium bottled water likely to increase or decrease? Briefly explain. A. Increase, because premium bottled water and carbonated sodas are substitutes. Your answer is correct. B. Decrease, because premium bottled water and carbonated sodas are substitutes. C. Decrease, because premium bottled water and carbonated sodas are complements. D. Increase, because premium bottled water and carbonated sodas are complements.

State whether each of the following events will result in a movement along the demand curve for McDonald's Big Mac hamburgers or whether it will cause the curve to shift. The price of Burger King's Whopper hamburger increases. This will cause A. demand for McDonald's Big Mac hamburgers to increase. Your answer is correct. B. demand for McDonald's Big Mac hamburgers to decrease. C. a movement along the demand curve for McDonald's Big Mac hamburgers.

An article in the Wall Street Journal about the U.S. economy states that "Fed officials have talked down the need for government tax and spending programs aimed at juicing short-term economic growth, calling instead for policies that would raise the economy's long-term potential growth ratelong dash—the fastest pace it could expand without fueling too much inflation." Source: Harriet Torry, "Yellen Says Family-Friendly Work Policies Can Boost Economy," Wall Street Journal, May 5, 2017. What does "government tax and spending programs" mean? A. Fiscal policy. Your answer is correct. B. International trade. C. Household expectations. D. Monetary policy. What does "juicing short-term economic growth" mean? A. Increasing equilibrium real GDP. Your answer is correct. B. Decreasing full employment. C. Increasing production capacity. D. Increasing potential GDP. Use a basic aggregate demand and aggregate supply graph to explain how government tax and spending programs could "juice short-term economic growth." Assume the economy is initially in long-run equilibrium. The aggregate demand curve will shift to the right. The new short-run equilibrium will be where A. the new aggregate demand curve intersects the original short-run aggregate supply curve. Your answer is correct. B. the new aggregate demand curve intersects the original long-run aggregate supply curve. C. the new aggregate demand curve intersects a new short-run aggregate supply curve. D. the original short-run aggregate supply curve intersects the original long-run aggregate supply curve. As a result of the fiscal policy, real GDP increases. Use a dynamic aggregate demand and aggregate supply graph to explain the effect of policies that raise the economy's long-term potential growth rate without any inflation. The aggregate demand, short-run aggregate supply, and long-run aggregate supply curves will shift to the right. The new long-run equilibrium will be where A. the new aggregate demand curve intersects the new short-run aggregate supply curve at the original long-run aggregate supply curve. B. the original aggregate demand curve intersects the new short-run aggregate supply curve at the original long-run aggregate supply curve. C. the new aggregate demand curve intersects the new short-run aggregate supply curve at a new long-run aggregate supply curve. Your answer is correct. D. the new aggregate demand curve intersects the original short-run aggregate supply curve at the original long-run aggregate supply curve. As a result of the fiscal policy, potential GDP increases.

A A aggregate demand - right A Increase Shift to the right C Increases.

The BLS defines a job quit as a "voluntary separation initiated by an employee." The BLS estimated that there were 3.1 million job quits in March 2017. Source: Bureau of Labor Statistics, "Job Openings and Labor Turnover Surveylong dash—March 2017," May 9, 2017. Unemployment caused by an increase in job quits would be classified as A. frictional unemployment. Your answer is correct. B. cyclical unemployment. C. seasonal unemployment. D. structural unemployment. An increase in the number of job quits would suggest that it is becoming A. more difficult to find jobs because people are unsatified with their work. B. easier to find jobs because employees who leave voluntarily are confident of finding another one. Your answer is correct. C. more difficult to find jobs because employees who leave voluntarily are less confident of finding another one. D. neither easier nor more difficult to find a job.

A B

Indicate whether you agree or disagree with the following statements. "If nominal GDP is less than real GDP, then the price level must have fallen during the year." A. Disagree. Nominal GDP is less than real GDP if the current price level is less than the base year price level. A fall in the price level during the year is neither necessary nor sufficient to cause nominal GDP to be less than real GDP. Your answer is correct. B. Agree. Real GDP will be less than nominal GDP if the price level falls and is lower than the base year's prices. C. Agree. Nominal GDP will be less than real GDP if the price level falls and is higher than the base year's prices. D. Disagree. Real GDP will be equal to nominal GDP if the price level increases and is equal to the base year's prices. "Whenever real GDPLOADING... declines, nominal GDPLOADING... must also decline." A. Agree. Both real GDP and nominal GDP decline if price falls and output remains constant. B. Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices rise. Your answer is correct. C. Agree. Both real GDP and nominal GDP decline if output falls and prices remain constant. D. Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices fall. "If a recession is so severe that the price level declines, then we know that both real GDP and nominal GDP must decline." A. Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices rise. B. Agree. If prices fall, real GDP and nominal GDP will both fall if output increases. C. Disagree. Real GDP falls if output falls. Nominal GDP can increase if output falls and prices fall. D. Agree. If both output and prices are falling, then both real GDP and nominal GDP will fall. Your answer is correct. "If real GDP stayed the same while nominal GDP declined between 2008 and 2009, then the GDP deflator must also have declined." A. Disagree. If nominal GDP declined between 2008 and 2009, then the GDP deflator could have gone up. B. Disagree. If nominal GDP increased between 2008 and 2009, then the GDP deflator must have remained the same. C. Agree. If nominal GDP declined between 2008 and 2009, then the GDP deflator must also have declined. Your answer is correct. D. Disagree. If real GDP declined between 2008 and 2009, then the GDP deflator must also have declined.

A B D C

Assume the economy is in long-run equilibrium. Now assume that there is a large increase in demand for U.S. exports. As a result of increased demand for U.S. exports, the A. aggregate demand curve will shift right. Your answer is correct. B. long-run aggregate supply curve will shift left. C. short-run aggregate supply curve will shift left. D. aggregate demand curve will shift left. The new short-run equilibrium will be A. where the new aggregate demand curve intersects the original aggregate demand curve. B. where the new aggregate demand curve intersects the original short-run aggregate supply curve. Your answer is correct. C. where the original aggregate demand curve intersects the original short-run aggregate supply curve. D. where the new aggregate demand curve intersects the original long-run aggregate supply curve. At the new short run equilibrium, the unemployment rate will be lower compared to the unemployment rate at the initial equilibrium, prior to the increase in exports. Which of the following best explains how the economy will adjust back to long-run equilibrium? A. Short-run aggregate supply will decrease (shift leftward) as firms and workers adjust to the new price level. Your answer is correct. B. Aggregate demand will decrease, restoring the original equilibrium price and quantity. C. Aggregate demand will increase, restoring the original equilibrium price and quantity. D. Short-run aggregate supply will increase (shift rightward) as firms and workers adjust to the new price level. At the new long-run equilibrium, A. real GDP and price level will be higher and the unemployment rate will be lower compared to the initial equilibrium, prior to the increase in exports. B. real GDP, the unemployment rate and the price level all will remain the same compared to the initial equilibrium, prior to the increase in exports. C. real GDP and the price level will be higher but the unemployment rate will remain the same compared to the initial equilibrium, prior to the increase in exports. D. real GDP and the unemployment rate will remain the same, but price level will be higher compared to the initial equilibrium, prior to the increase in exports

A B be lower A D

A study of consumers in Mexico found that the cross-price elasticity of demand between soda and milk was 0.11, while the cross-price elasticity of demand between the soda and candy was minus−0.32. Source: M.A. Colchero, et al., "Price Elasticity of the Demand for Sugar Sweetened Beverages and Soft Drinks in Mexico," Economics and Human Biology, Vol. 19, December 2015, pp. 129-137. Is soda a substitute or a complement for milk? Briefly explain. A. Substitute, because the cross-price elasticity of demand is positive. Your answer is correct. B. Substitute, because the cross-price elasticity of demand is less than 1 in absolute value. C. Complement, because the cross-price elasticity of demand is less than 1 in absolute value. D. Complement, because the cross-price elasticity of demand is positive. Is soda a substitute or a complement for candy? Briefly explain. A. Substitute, because the cross-price elasticity of demand is less than 1 in absolute value. B. Complement, because the cross-price elasticity of demand is less than 1 in absolute value. C. Complement, because the cross-price elasticity of demand is negative. Your answer is correct. D. Substitute, because the cross-price elasticity of demand is negative.

A C

Suppose a house is built and sold in the year 2008. If the house is resold in the year 2019, is the value of the house included in Gross Domestic ProductLOADING... (GDP) for 2019? A. No. GDP for 2019 includes only production that occurs during 2019. Your answer is correct. B. No. GDP for 2019 includes only the market value of final goods. A house resold in 2019 is an intermediate good. C. Yes. The value of the house is included in Personal Consumption Expenditures for 2019. D. Yes. The value of the house is included in Gross Private Domestic Investment for 2019. Would the services of a real estate agent who helped sell (or helped buy) the house be included in GDP for 2019? A. Yes. Real estate services are considered Gross Private Domestic Investment. B. No. GDP for 2019 includes only the market value of final goods. Real estate services are not final goods. C. Yes. GDP for 2019 includes the market value of final goods and services. This includes real estate services. Your answer is correct. D. No. The value of the house is not included in GDP for 2019. Therefore, real estate services are not included either.

A C

An article in the Los Angeles Times about driver-less trucks states that "Trucking will likely be the first type of driving to be fully automatedlong dash—meaning there's no one at the wheel." The article adds that there is a financial incentive for automating trucks because "Trucking is a $700-billion industry, in which a third of costs go to compensating drivers." Source: Natalie Kitroeff, "Robots Could Replace 1.7 Million American Truckers in the Next Decade," Los Angeles Times, September 25, 2016. How are driver-less trucks likely to affect costs to businesses of transporting goods? A. Driver-less trucks would decrease transportation costs by requiring less labor. Your answer is correct. B. Driver-less trucks would increase transportation costs since worker productivity will fall. C. Driver-less trucks would decrease transportation costs since less capital is required. D. Driver-less trucks would increase transportation costs by requiring more labor. How are driver-less trucks likely to affect the short-run aggregate supply curve (SRAS)? A. Using driver-less trucks would result in a movement down along the SRAS curve as prices fall. B. Driver-less trucks would shift the SRAS curve to the left due to an increase in capital. C. Driver-less trucks would shift the SRAS curve to the right due to a technological advance. Your answer is correct. D. Driver-less trucks would shift the SRAS curve to the right due to an increase in labor. How are driver-less trucks likely to affect the long-run aggregate supply curve (LRAS)? A. Driver-less trucks would not affect the LRAS curve because they represent production at capacity. B. Automating trucks would not affect the LRAS curve because it does not represent a change in the business cycle. C. Using driver-less trucks would result in a movement down along the LRAS curve as prices fall. D. Driver-less trucks would shift the LRAS curve to the right due to a technological advance.

A C D

The marginal product of labor is A. initially increasing and then decreases. Your answer is correct. B. upward sloping. C. a straight line. D. L-shaped. The average product of labor is A. a straight line. B. L-shaped. C. initially increasing and then decreases. Your answer is correct. D. downward sloping. The marginal product of labor curve A. is always below the average product of labor curve. B. intersects the average product of labor curve when the marginal product of labor is at a maximum. C. is always above the average product of labor curve. D. intersects the average product of labor curve when the average product of labor is at a maximum.

A C D

Suppose James and Frank both retire this year. For income from retirement, James will rely on a pension from his company that pays him a fixed $2,500 per month for as long as he lives. James hasn't saved anything for retirement. Frank has no pension but has saved a considerable amount, which he has invested in certificates of deposit (CDs) at his bank. Currently, Frank's CDs pay him interest of $2,300 per month. a. Ten years from now, A. Frank will have a higher real income although he has a lower nominal income because his interest income is likely to increase with inflation. Your answer is correct. B. James will have a higher real income because he is subject to a lower CPI than Frank. C. Frank will have a higher real income since he has a lot of money invested in CDs. D. James will have a higher real income since he has a higher nominal income and their incomes are not adjusted for inflation. Real income is defined as the following: A. Real Income equals Nominal Income times CPI Subscript current year Baseline times 100Real Income=Nominal Income×CPIcurrent year×100 B. Real Income equals Nominal Income minus Rate of InflationReal Income=Nominal Income−Rate of Inflation C. Real Income equals StartFraction Nominal Income plus CPI Subscript current year Over 100 EndFractionReal Income =Nominal Income+CPIcurrent year100 D. Real Income equals StartFraction Nominal Income Over CPI Subscript current year EndFraction times 100Real Income=Nominal IncomeCPIcurrent year×100 Your answer is correct. b. Now suppose that instead of being a constant amount, James's pension increases each year by the same percentage as the CPI. For example, if the CPI increases by 5 percent in the first year after James retires, then his pension in the second year equals $2,500 + ($2,500 × 0.05) = $2,625. In this case, 10 years from now, A. James will have a higher real income because he has a higher nominal income and his income is indexed with the CPI. Your answer is correct. B. James will have a higher real income because it is his pension payment. C. Frank will have a higher real income since his interest income is compounded over time. D. Frank will have a higher real income because he has substantial savings.

A D A

According to an article in the Wall Street Journal, the Reserve Bank of India lowered its key policy interest rate in 2015, "citing weakness in parts of the economy as well as favorable inflation figures." The article notes that the central bank lists constraints to further interest rate cuts, including the "risk that inflation could flare again." Source: Gabriele Parussini, "India Cuts Key Interest Rate for Second Time This Year," Wall Street Journal, March 4, 2015. Use the dynamic aggregate demand and aggregate supply model to explain where the Reserve Bank of India expected the country's economy to be in 2015 without the interest rate cut. Assume, for simplicity, that real GDP in India in 2014 equaled potential GDP. India expected A. aggregate demand and short-run aggregate supply to shift to the right but by less than long-run aggregate supply. Your answer is correct. B. aggregate demand to shift to the right but by less than short-run aggregate supply and long-run aggregate supply. C. aggregate demand and short-run aggregate supply to shift to the right by more than long-run aggregate supply. D. aggregate demand, short-run aggregate supply, and long-run aggregate supply to shift to the right by the same amounts. Next, determine the desired equilibrium the central bank is trying to achieve with the interest rate cut. The central bank's desired equilibrium is where the new short-run equilibrium is A. on the original long-run aggregate supply curve. B. to the right of the new long-run aggregate supply curve. C. to the left of the new long-run aggregate supply curve. D. on the new long-run aggregate supply curve. Your answer is correct. The Reserve Bank of India might be afraid that additional interest rate cuts would cause inflation to increase because it would A. decrease aggregate supply sufficiently to increase the price level. B. increase aggregate demand sufficiently to increase the price level. Your answer is correct. C. increase long-run aggregate supply sufficiently to increase the price level. D. increase aggregate supply sufficiently to increase the price level.

A D B

An article in the Economist discussing the 2007-2009 recession states that "employers found it difficult to reduce the cash value of the wages paid to their staff. (Foisting a pay cut on your entire workforce hardly boosts morale.)" Source: "Careful Now," Economist, April 11, 2015. During a recession, some firms lay off some of their workers, while not cutting the wages of the workers they continue to employ, because the workers they continue to employ A. would likely react by becoming less productive if their wages are cut. Your answer is correct. B. negotiated this arrangement. C. have fixed contracts so their wages cannot be cut. D. would likely quit if their wages are cut. Could these firms have reduced their labor costs by the same, or possibly more, if they laid off fewer workers while cutting wages? A. Yes, but they chose not to do that because they wanted to reduce their workforce anyway. B. No, because labor contracts specify the terms of workforce changes during economic slowdowns. C. Yes, but this could cost more in the long run because some workers would have been idle. D. No, because workers would become disgruntled with wage cuts and reduce their productivity, resulting in higher production costs. Your answer is correct. What does the article mean by firms reducing the "cash value" of workers' wages? A. It means firms found it difficult to cut real wages by more than prices. B. It means firms found it difficult to cut nominal wages. Your answer is correct. C. It means firms found it difficult to cut nominal wages by more than prices. D. It means firms found it difficult to cut real wages. If firms want to reduce workers wages over time, they have to reduce A. the cash or average value, of wages. B. the cash or nominal value, of wages. Your answer is correct. C. the cash or marginal value, of wages. D. the cash or real value, of wages.

A D B B

The European Central Bank (ECB) issued the following statement after its June 2017 monetary policy meeting on monetary policy: Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of euro€60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. Source: European Central Bank, "Monetary Policy Decisions," Press Release, June 8, 2017, www.ecb.europa.eu/press/pr/date/2017/html/ecb.mp170608.en.html. What is this non-standard monetary policy of net asset purchases called? A. Quantitative easing. Your answer is correct. B. Open market operations. C. Fiscal policy. D. Discount policy. The Federal Reserve has attempted to use this non-standard monetary policy of net asset purchases you identified above. Based on the European Central Bank's statement do you expect that the inflation rate is above or below the ECB's inflation target? Briefly explain. A. Above, because the ECB's statement indicates that it is using contractionary monetary policy to achieve its policy goals. B. Below, because the ECB's use of this non-standard monetary policy is intended to increase the money supply. Your answer is correct. C. Below, because the ECB's use of this non-standard monetary policy is designed to raise the discount rate. D. Above, because the ECB's use of this non-standard monetary policy is aimed at slowing economic growth.

A has B

According to an article in the New York Times, in early 2015, Walmart received bad customer reviews: "They complained of dirty bathrooms, empty shelves, endless checkout lines and impossible-to-find employees." Shortly thereafter, Walmart announced that it was changing its employment practice, by among other things, increasing wages. A year and a half later, the article noted that: "[Walmart store] managers describe a big shift in the kind of workers they can bring in by offering $10 an hour with a solid path to $15 an hour." Source: Neil Irwin, "How Did Walmart Get Cleaner Stores and Higher Sales? It Paid Its People More," New York Times, October 15, 2016. Wouldn't raising wages from $10 per hour to $15 per hour reduce Walmart's profits? Why would they have adopted such a policy? A. Yes, paying higher wages is a good way for firms to lower profits, so the new wage policy must have been the result of government intervention. B. No, the higher wage would not decrease profits if it motivates workers to work harder and be more productive. Your answer is correct. C. No, it would not reduce profits, since Walmart would be required to monitor its workers more closely, resulting in less shirking. D. Yes, it would lower profits, but by paying employees an efficiency wage, Walmart would be able to improve its customer reviews.

An article discusses the market for autographs by Mickey Mantle, the superstar centerfielder for the New York Yankees during the 1950s and 1960s: "At card shows, golf outings, charity dinners, Mr. Mantle signed his name over and over." One expert on sport autographs is quoted as saying: "He was a real good signer ... He is not rare." Yet the article quotes another expert as saying: "Mr. Mantle's autograph ranks No. 3 of most-popular autographs, behind Babe Ruth and Muhammad Ali." A baseball signed by Mantle is likely to sell for the relatively high price of $250 to $400. By contrast, baseballs signed by Whitey Ford, a teammate of Mantle's on the Yankees, typically sell for less than $150. Source: Beth DeCarbo, "Mantle Autographs Not Rare, but Collectors Don't Care," Wall Street Journal, August 4, 2008. Explain how the price of baseballs signed by Mantle could be higher than the price of baseballs signed by Ford. The supply curve for baseballs signed by Mantle should be an upward-sloping line that is to the right of the supply curve for baseballs signed by Ford. In order for the price of baseballs signed by Mantle to be higher than the price of baseballs signed by Ford, the demand curve for baseballs signed by Mantle must be a downward-sloping line that is A. only slightly to the right of the demand curve for baseballs signed by Ford. B. significantly to the right of the demand curve for baseballs signed by Ford. Your answer is correct. C. to the left of the demand curve for baseballs signed by Ford. D. equivalent to the demand curve for baseballs signed by Ford.

An article in the Wall Street Journal notes that although U.S. oil production has increased rapidly in recent years, the increase has still amounted to only 5 percent of world production. Still, that increase has been "enough to help trigger a price collapse." Source: Georgi Kantchev and Bill Spindle, "Shale-Oil Producers Ready to Raise Output," Wall Street Journal, May 13, 2015. A small increase in supply can lead to a large decline in equilibrium price when A. demand is perfectly elastic. B. demand is relatively inelastic. Your answer is correct. C. supply is perfectly elastic. D. demand is relatively elastic.

Sally looks at her college transcript and says to you, "How is this possible? My grade point average (GPA) for this semester's courses is higher than my GPA for last semester's courses, but my cumulative GPA still went down from last semester to this semester." Explain to Sally how this is possible. A. Sally took more courses last semester than this semester. B. Sally's GPA for this semester is lower than her cumulative GPA. Your answer is correct. C. Sally's GPA for last semester was equal to her cumulative GPA. D. This is not possible, and Sally's cumulative GPA has been calculated incorrectly. E. Sally's GPA for this semester is higher than her cumulative GPA.

From 1979 to 2015, China had a policy that allowed couples to have only one child. (Since 2016, couples have been allowed to have two children.) The one-child policy caused a change in the demographics of China. Between 1980 and 2015, the share of the population aged 14 and under decreased from 36 percent to 17 percent. And, as parents attempted to ensure that the lone child was a son, the number of male children relative to female children increased. Sources: World Bank, World Development Indicators, April 2016; and "China New 'Two Child' Policy Increases Births by 7.9 Percent, Government Says," cbsnews.com, January 23, 2017. How has the one-child policy changed the relative demand for goods and services in China? A. The sheer number of consumers in China, coupled with that country's very rapid growth, renders relative demand shifts totally insignificant. B. It has undoubtedly shifted away from goods and services appealing to youthful buyers, particularly youthful female buyers. Your answer is correct. C. The Chinese economy is still largely a command economy; market forces, and hence relative demands, are insignificant. D. One would only expect the relative demand for baby related products to be reduced.

In early 2009, Christina Romer, who was then the chair of the Council of Economic Advisers, and Jared Bernstein, who was then an economic adviser to Vice President Joseph Biden, forecast how long they expected it would take for real GDP to return to potential GDP, assuming that Congress passed fiscal policy legislation proposed by President Obama: It should be understood that all of the estimates presented in this memo are subject to significant margins of error. There is the obvious uncertainty that comes from modeling a hypothetical package rather than the final legislation passed by the Congress. But, there is the more fundamental uncertainty that comes with any estimate of the effects of a program. Our estimates of economic relationships . . . are derived from historical experience and so will not apply exactly in any given episode. Furthermore, the uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity. Source: Christina Romer and Jared Bernstein, The Job Impact of the American Recovery and Reinvestment Plan, January 9, 2009. Why would the causes of a recession and its severity affect the accuracy of forecasts of when the economy would return to potential GDP? A. Federal policymakers disagree about whether to use monetary or fiscal policy to correct a recession. B. Models used for forecasting are based on historical experience and the relationships in the model can change. Your answer is correct. C. The equations have been statistically estimated using economic data. D. Economists disagree that an automatic mechanism brings the economy back to potential GDP in the long run.

List the errors in the graph to the right (where AFC is average fixed cost, AVC is average variable cost, ATC is average total cost, and MC is marginal cost). A. AFC should be MC, ATC should be AVC, and AVC should be AFC. B. AFC should be MC, ATC should be AVC, and AVC should be ATC. Your answer is correct. C. AFC should be MC, ATC should be AFC, and AVC should be ATC. D. AFC should be MC. E. ATC should be AVC and AVC should be ATC.

Michael Burda of Humboldt University in Germany and Daniel Hamermesh of the University of Texas examined how workers in the United States who lost their jobs between 2003 and 2006 spent their time. They discovered that during the period when they were unemployed, the reduction in the number of hours of paid work was almost completely replaced by an increase in the number of hours spent on household production. Source: Michael Burda and Daniel S. Hamermesh, "Unemployment and Household Production," National Bureau of Economic Research working paper 14676, January 2009. Based on these findings, what can we predict about total productionlong dash—whether or not that production is included in the calculation of GDPlong dash—in the economy when these workers became unemployed? A. When workers lose their jobs, total production falls since workers are no longer earning wages. B. If the workers had been paying other people to perform the household activities prior to unemployment, then total production will fall. Your answer is correct. C. If the workers had been paying other people to perform the household activities prior to unemployment, then total production will rise. D. Since household production is not calculated in GDP, there is a decrease in total production that comes due to unemployment.

The U.S. economy enters a period of rapid growthrapid growth in incomes. This will cause A. demand for McDonald's Big Mac hamburgers to shift to the rightshift to the right if they are inferior goods. B. demand for McDonald's Big Mac hamburgers to shift to the leftshift to the left if they are inferior goods. Your answer is correct. C. a movement along the demand curve for McDonald's Big Mac hamburgers if they are normal goods.

The price elasticity of demand in the United States for crude oil has been estimated to be minus−0.061 in the short run and minus−0.453 in the long run. Source: John C. B. Cooper, "Price Elasticity of Demand for Crude Oil: Estimate for 23 Countries," OPEC Review, March, 2003, pp. 1-8. The demand for crude oil A. is equally price inelastic in both the short and long run as there are not many substitutes for crude oil. B. is more price elastic in the long run than in the short run because in the long run a substitute for crude oil may be found. Your answer is correct. C. is more price inelastic in the long run than in the short run because in the short run a substitute for crude oil may be found. D. is price elastic in both the short and long run as there exists many substitutes for crude oil.

The price of fries ..This will A. increase the demand for McDonald's Big Mac hamburgersincrease the demand for McDonald's Big Mac hamburgers. B. decrease the demand for McDonald's Big Mac hamburgersdecrease the demand for McDonald's Big Mac hamburgers. Your answer is correct. C. cause a movement along the demand curve for McDonald's Big Mac hamburgers

During a discussion with a reporter, former Microsoft CEO Steve Ballmer discussed the data compiled on the usafacts.org Web site. Ballmer asked if the reporter knew how many people the government employed and provided the answer: "Almost 24 million. Would you have guessed that?" Source: Andrew Ross Sorkin, "Steve Ballmer Serves Up a Fascinating Data Trove," New York Times, April 17, 2017. Is local, state, and federal government spending on salaries and benefits for these employees considered production as measured by GDP? Briefly explain. A. No, spending on salaries and benefits is not part of GDP since government workers do not produce a good. B. Yes, because the government purchases component of GDP includes spending on salaries and benefits for government employees. Your answer is correct. C. No, this spending would not be measured by GDP because government workers are an input to production. D. Yes, but this would only be considered production measured by GDP if the workers are federal employees. According to data on the usafacts.org site, in 2014 the federal government spent $850.5 billion on Social Security payments to retired and disabled people. Is this federal government spending considered production as measured by GDP? Briefly explain. A. No, because Social Security payments do not result in the production of new goods and services. Your answer is correct. B. Yes, Social Security payments are part of GDP because the payments provide a service to retirees. C. No, Social Security payments are not part of GDP since the payments are financed with government borrowing. D. Yes, because Social Security payments are spent on household consumption, which is a component of GDP.

B A

Assume that the economy is in long-run equilibrium. Now, assume that there is an unexpected increase in the price of oil. As a result of higher oil prices, the A. long-run aggregate supply curve will shift left. B. short-run aggregate supply curve will shift left. Your answer is correct. C. short-run aggregate supply curve will shift right. D. aggregate demand curve will shift left. The new short-run equilibrium will be A. where the new short-run aggregate supply curve intersects the original aggregate demand curve. Your answer is correct. B. where the new short-run aggregate supply curve, the original aggregate demand curve, and a new long-run aggregate supply curve intersect. C. where the new short-run aggregate supply curve, the original aggregate demand curve, and original long-run aggregate supply curve intersect. D. where the original short-run aggregate supply curve intersects the original aggregate demand curve. In the new short-run equilibrium, the unemployment rate is higher than the unemployment rate in the initial equilibrium prior to the increase in the price of oil. Which of the following best explains how and why the economy will adjust back to long-run equilibrium? A. Aggregate demand will decrease, restoring the original equilibrium price and quantity. B. Aggregate demand will increase, restoring the original equilibrium price and quantity. C. Short-run aggregate supply will increase (shift rightward) as the recession makes firms and workers willing to accept lower wages and prices. Your answer is correct. D. Short-run aggregate supply will decrease (shift leftward) as firms and workers adjust to the new, higher price level. After the adjustment of aggregate supply is complete, the economy returns to equilibrium at The image is a graph that shows the aggregate demand and aggregate supply model. The horizontal axis is labeled Real GDP, Y. The vertical axis is labeled Price level. There is a downward-sloping straight line labeled AD subscript 1. There is an upward-sloping straight line labeled SRAS subscript 1. SRAS subscript 1 intersects AD subscript 1 at a point labeled A. There is another upward-sloping straight line, labeled SRAS subscript 2. SRAS subscript 2 is parallel to SRAS subscript 1. SRAS subscript 2 lies above and to the left of SRAS subscript 1. There is an arrow from SRAS subscript 1 pointing toward SRAS subscript 2. The arrow shows the shift from SRAS subscript 1 to SRAS subscript 2. SRAS subscript 2 intersects AD subscript 2 at a point labeled B. B lies above and to the left of A. The vertical intercept of B lies above the vertical intercept of A. There is a vertical line labeled LRAS that passes through A and intercepts the horizontal axis. A. a point lower than (i.e., south-east of) A. B. in between points A and B. C.A Your answer is correct. D. b When the economy returns to long-run equilibrium again A. real GDP and the unemployment rate will be the same but the price level will be higher compared to the initial equilibrium value prior to the increase in the price of oil. B. real GDP, the unemployment rate, and the price level will be the same as the initial equilibrium values prior to the increase in the price of oil. Your answer is correct. C. the unemployment rate will be the same, but real GDP will be lower and the price level higher compared to the initial equilibrium value prior to the increase in the price of oil. D. real GDP will be lower and the unemployment rate and the price level will be higher compared to the initial equilibrium value prior to the increase in the price of oil.

B A C C B

An article in the Wall Street Journal noted that many economists believe that GDP data for India are unreliable because "most enterprises are tiny and unregistered, and most workers are employed off the books. The government's infrequent surveys represent only a best guess of the value being added in back-alley workshops, outdoor markets and other cash-based corners of the economy." Source: Raymond Zhong, "On Close Inspection, India's Sharp Growth Picture Gets Fuzzy," Wall Street Journal, May 1, 2016. Working "off the books" refers to A. working in exchange for goods and services. B. earning income that is not reported for tax purposes. Your answer is correct. C. volunteering. D. reporting false income paid to workers. The problems of small firms working off the books and far from major cities would make it difficult for the Indian government to accurately measure GDP because the A. firms do not employ enough people to report accurately to government. B. measures of value added will be distorted. C. measures of GDP will be understated if these practices are common. Your answer is correct. D. measures of GDP will be overstated if these practices are common. If government cannot accurately measure GDP, A. they will be unable to make a case for foreign aid. B. there will be little impact if the size of the overall economy is large, rather than small. C. businesses will not be able to correctly gauge the market, and the government will be unable to design efficient tax policies. Your answer is correct. D. there will be little impact in the short run, and even less in the long run, so long as the inaccuracies are consistent.

B C C

Recall that "securitization" is the process of turning a loan, such as a mortgage, into a bond that can be bought and sold in secondary markets. An article in the Economist notes: That securitization caused more subprime mortgages to be written is not in doubt. By offering access to a much deeper pool of capital, securitization helped to bring down the cost of mortgages and made home-ownership more affordable for borrowers with poor credit histories. Source: "Ruptured Credit," Economist, May 15, 2008. What is a "subprime mortgage," and would a subprime borrower be likely to pay a higher or a lower interest rate than a borrower with a better credit history? A. Loans granted to borrowers with the best credit histories; a lower interest rate. B. Loans granted to borrowers with flawed credit histories; a higher interest rate. Your answer is correct. C. Loans granted to borrowers with the best credit histories; a higher interest rate. D. Loans granted to borrowers with flawed credit histories; a lower interest rate. Why would securitization give mortgage borrowers access to a deeper pool of capital? A. Securitization allowed banks to borrow funds from the Fed, deepening the pool of capital available. B. Since banks could make more risky loans, there were more borrowers wishing to obtain funds. C. Securitization allowed banks to borrow funds from the Treasury, deepening the pool of capital available. D. Since banks could resell mortgages to investors, they had access to more funds than just their own deposits.

B D

In early 2017, according to the Wall Street Journal President Donald Trump said: "the U.S. dollar 'is getting too strong' and he would prefer the Federal Reserve keep interest rates low." The article also quoted the president as saying: "It's very, very hard to compete when you have a strong dollar..." Source: Gerard Baker, Carol E. Lee, and Michael C. Bender, "Trump Says Dollar 'Getting Too Strong,' Won't Label China a Currency Manipulator," Wall Street Journal, April 12, 2017. What did President Trump mean by a "strong dollar"? A. A "strong dollar" means that other currencies can be traded for more dollars. B. A "strong dollar" is when it takes more units of a foreign currency to buy a dollar. Your answer is correct. C. This would mean that the value of a dollar in terms of foreign currencies is stable. D. This occurs when U.S. prices in dollars are higher than prices in foreign currencies. Is there an economic connection between the president's desire for a weaker dollar and his desire that the Federal Reserve keep interest rates low? Briefly explain. A. Yes, when the Federal Reserve keeps interest rates low, it makes the dollar weaker because firms are less likely to invest in new factories and equipment. B. Yes, when the Federal Reserve keeps interest rates low, it makes the dollar weaker because foreigners demand more dollars. C. No, because the Fed does not have the ability to affect interest rates in a way that would impact the foreign exchange value of the dollar. D. Yes, when the Federal Reserve keeps interest rates low, it makes the dollar weaker because investing in the United States is less attractive. Your answer is correct. Why would a strong dollar make it hard for U.S. firms to compete? A. A strong dollar causes the U.S. trade deficit with other countries to become larger. B. A strong dollar raises the cost of U.S. goods to buyers in foreign countries. Your answer is correct. C. A strong dollar increases the quality of foreign goods relative to U.S. goods. D. When the dollar is strong, the cost of production in the United States rises.

B D B

Corruption has been a significant problem in Iraq. Opening and running a business in Iraq usually requires paying multiple bribes to government officials. We can think of there being a demand and supply for bribes, with the curves having the usual shapes: The demand for bribes will be downward sloping because the smaller the bribe, the more business owners will be willing to pay it. The supply of bribes will be upward sloping because the larger the bribe, the more government officials will be willing to run the risk of breaking the law by accepting the bribe. Suppose that the Iraqi government introduces a new policy to reduce corruption that raises the cost to officials of accepting bribeslong dash—perhaps by increasing the jail term for accepting a bribe. As a result, the supply curve for bribes will shift to the left. If we measure the burden on the economy from corruption by the total value of the bribes paid, what must be true of the demand for bribes if the government policy is to be effective? Source: Frank Gunter, "Corruption in Iraq: Poor Data, Questionable Policies," Working Paper, March 2009. Suppose a figure illustrating the market for bribes has the following attributes: Upper S 1S1 is the initial supply curve for bribes and Upper D 1D1 is the demand curve for bribes. The corresponding equilibrium price for bribes is initially Upper P 1P1 and the equilibrium quantity is Upper Q 1Q1. Then, the supply curve for bribes shifts to the left to Upper S 2S2 as the cost to officials of accepting bribes increases, as described. The new equilibrium price is Upper P 2P2 and the new equilibrium quantity is Upper Q 2Q2. Determine the area representing the burden of corruption before the government policy is enacted. Then, determine the area representing the burden of corruption after the government policy is enacted. The economic burden of corruption before the government policy is enacted is equal to A. the area of a rectangle with a height of Upper P 2P2 and a base of Upper Q 2Q2. B. the area of a rectangle with a height of Upper P 1P1 and a base of Upper Q 1Q1. Your answer is correct. C. the area of a rectangle with a height of Upper P 1P1 and a base of Upper Q 2Q2. D. the area of a rectangle with a height of Upper P 2P2 and a base of Upper Q 1Q1. The economic burden of corruption after the government policy is enacted is equal to A. the area of a rectangle with a height of Upper P 1P1 and a base of Upper Q 2Q2. B. the area of a rectangle with a height of Upper P 2P2 and a base of Upper Q 1Q1. C. the area of a rectangle with a height of Upper P 1P1 and a base of Upper Q 1Q1. D. the area of a rectangle with a height of Upper P 2P2 and a base of Upper Q 2Q2. Your answer is correct. The government policy to reduce corruption will be A. effective because the equilibrium quantity of corruption will decrease. B. ineffective because the equilibrium price of corruption will increase. C. ineffective if the percentage change in the quantity of corruption demanded is large relative to the percentage change in the price of corruption. D. effectiveeffective if the demand for corruption is elasticelastic. Your answer is correct. E. effectiveeffective if the demand for corruption is inelasticinelastic.

B D D

In his autobiography, T. Boone Pickens, a geologist, entrepreneur, and oil company executive, wrote: It's unusual to find a large corporation that's efficient ... When you get an inside look, it's easy to see how inefficient big business really is. Most corporate bureaucracies have more people than they have work. Source: T. Boone Pickens, The Luckiest Man in the World, Washington, DC: Beard Books, 2000, p. 275. Pickens was describing A. diminishing returns, because he is referring to the decrease in marginal output when another worker is added. B. diminishing returns, because he is referring to the inefficieny of a large scale business operation. C. diseconomies of scale, because he is referring to the inefficieny of a large scale business operation. Your answer is correct. D. diseconomies of scale, because he is referring to the decrease in marginal output when another worker is added.

Older oil wells that produce fewer than 10 barrels of oil a day are called "stripper" wells. Suppose that you and a partner own a stripper well that can produce eight barrels of oil per day and you estimate that the marginal cost of producing another barrel of oil is $80. In making your calculation, you take into account the cost of labor, materials and other inputs that increase when you produce more oil. Your partner looks over your calculation of marginal cost and says: "You forgot about that bank loan we received two years ago. If we take into account the amount we pay on that loan, its adds $10 per barrel to our marginal cost of production." Which of the following statements is most true? A. The bank loan should not be included in marginal cost because a loan has to be paid back. B. The bank loan should be included in marginal cost because the interest to service the loan is an ongoing cost. C. The bank loan should not be included in marginal cost because it cannot be avoided by not producing another barrel. Your answer is correct. D. The bank loan should be included in marginal cost because this cost can be avoided by not producing another barrel.

The following appears in a Federal Reserve publication: "In practice, monetary policymakers do not have up-to-the-minute, reliable information about the state of the economy and prices. Information is limited because of lags in the publication of data. Also, policymakers have less-than-perfect understanding of the way the economy works, including the knowledge of when and to what extent policy actions will affect aggregate demand. The operation of the economy changes over time, and with it the response of the economy to policy measures. These limitations add to uncertainties in the policy process and make determining the appropriate setting of monetary policy...more difficult." Source: Board of Governors of the Federal Reserve System, The Federal Reserve System: Purposes and Functions, Washington, DC, 1994. If the Fed itself admits that there are many obstacles in the way of effective monetary policy, why does it still engage in active monetary policy rather than use a monetary growth rule, as suggested by Milton Friedman and his followers? Policymakers at the Fed believe that A. although it is not perfect, active monetary policy is still a destabilizing force in the economy. B. although it is not perfect, passive monetary policy is still a stabilizing force in the economy. C. although it is not perfect, active monetary policy is still a stabilizing force in the economy. Your answer is correct. D. the current practice of monetary policy is perfect.

The unemployment rate declined from 4.5 percent in March 2017 to 4.4 percent in April. The labor force participation rate also declined from March to April, from 63.0 percent to 62.9 percent. Holding constant the number of people employed in April 2017, if the labor force participation rate had increased instead of decreased, the unemployment rate for April 2017 would be A. less than 4.4 percent because the value in the numerator of the formula for the unemployment rate would increase more than the value in the denominator. B. less than 4.4 percent because the value in the numerator of the formula for the unemployment rate would increase less than the value in the denominator. C. greater than 4.4 percent because adding the same number to both the numerator and the denominator of a fraction that is less than one increases the value of the fraction. Your answer is correct. D. greater than 4.4 percent because the value in the numerator of the formula for the unemployment rate would increase less than the value in the denominator.

Which of the following statements is correct if real GDP in the United States declined by more during the 2007minus−2009 recession than did real GDP in Canada, China, and other trading partners of the United States? A. U.S. exports fell more than the imports, leading to an increase in net exports. B. U.S. exports fell more than the imports, leading to a fall in net exports. C. Imports to the United States fell more than the U.S. exports, leading to an increase in net exports. Your answer is correct. D. Imports to the United States fell more than the U.S. exports, leading to a decrease in net exports.

EOG, a Texas-based producer of oil and gas, is called the "Apple of oil" because of the company's history of developing innovative methods to extract energy from shale rock. Using one of EOG's innovations, called iSteer, the company can navigate through thousands of feet of rock with a drill bit that allows for greater recovery of oil and gas than methods the company previously used. Source: Erin Ailworth, "Fracking 2.0: Shale Drillers Pioneer New Ways to Profit in Era of Cheap Oil," Wall Street Journal, March 30, 2017. Briefly explain why economists would consider EOG's use of iSteer an example of technological change. A. The company's use of iSteer enables it to recover oil and gas using different combinations of inputs. B. The company's use of iSteer allows it to recover both oil and gas. C. EOG's use of iSteer enables it to recover more oil and gas with a certain quantity of inputs. Your answer is correct. D. EOG is able to recover oil and gas with less labor by using more capital.

Peter Reinhardt, CEO of Segment.com, made the following comment on his blog when discussing how the firm's noisy open office was lowering the productivity of its engineers: "We can't immediately ditch our open floor plan (although we're looking at various options for our next office.)" Source: Peter Reinhardt, "Improving Our Focus by Measuring Sound Levels," segment.com, October 19, 2016. Why can't the firm immediately ditch its open floor plan? A. Changing a floor plan requires the appropriate technology. B. Changing its floor plan would require more money. C. Segment considers its current open floor plan to be a fixed cost. Your answer is correct. D. Segment considers its current open floor plan to be an implicit cost. Is Reinhardt's remark about Segment.com's economic short run or its economic long run? Briefly explain. A. Long run, because changing the floor plan is expensive. B. Short run, because the floor plan is fixed. Your answer is correct. C. Long run, because other inputs can be changed. D. Short run, because the floor plan impacts production now.

C B

An article in the Wall Street Journal in 2015 reported that the interest rate on five-year German government bonds had become negative: "The negative yield means investors are effectively paying the German state for holding its debt." The article quoted an investment analyst as saying: "The negative yield is not scaring investors away." Source: Emese Bartha and Ben Edwards, "Germany Sells Five-Year Debt at Negative Yield for First Time on Record," Wall Street Journal, February 25, 2015. The interest rate on German government bonds became negative when A. the economy slowed and unemployment exceeded the natural rate. B. the government engaged in a policy of quantitative easing to keep interest rates high. C. the inflation rate exceeded the nominal interest rate. Your answer is correct. D. the government sold securities other than the short-term government securities that are usually involved in open market operations. Investors were willing to buy bonds with a negative interest rate because A. the real interest rate was positive, it was the nominal rate that was negative. B. banks tied the interest rates they charged on loans to the interest rates on government bonds. C. interest rates on all bonds and on bank deposits were more negative. D. they believed there was no chance that the government would default.

C D

In response to problems in financial markets and a slowing economy, the Federal Open Market Committee (FOMC) began lowering its target for the federal funds rate from 5.25 percent in September 2007. Over the next year, the FOMC cut its federal funds rate target in a series of steps. Writing in the New York Times, economist Steven Levitt observed, "The Fed has been pouring more money into the banking system by cutting the target federal funds rate to 0 to 0.25 percent in December 2008." Source: Steven D. Levitt, "The Financial Meltdown Now and Then," New York Times, May 12, 2009. What is the relationship between the federal funds rate falling and the money supply increasing? A. Cutting the federal funds rate increases bank reserves, which increases the money supply. B. Cutting the federal funds rate increases the money supply. C. To decrease the federal funds rate, the Fed must increase the money supply. Your answer is correct. D. Cutting the federal funds rate increases saving, which increases the money supply. How does lowering the target for the federal funds rate "pour money" into the banking system? A. To increase the money supply, the Fed sells bonds on the open market, which increases bank reserves. B. To increase the money supply, the Fed decreases taxes, which increases consumer spending. C. To increase the money supply, the Fed increases government spending, which increases aggregate demand. D. To increase the money supply, the Fed buys bonds on the open market, which increases bank reserves.

C D

In 2015, Richard Fuld, the last CEO of Lehman Brothers, gave a talk in which according to an article in the Wall Street Journal, "He outlined what he called the 'perfect storm' of events that led to the financial crisis, saying 'it all started with the government' and policies that subsidized cheap loans for people to buy homes in order to help them chase the American dream." Source: Maureen Farrell, "Lehman's Fuld Says It Wasn't His Fault," Wall Street Journal, May 28, 2015. The events that led to the financial crisis include A. investment bank fraud resulting from the creation of complex packagings of mortgages. B. an increase in interest rates which led to mortgage defaults, and a disruption of the financial system. C. a burst in a housing bubble in 2006 which led to mortgage defaults, and a disruption of the financial system resulting from the creation of complex packagings of mortgages. Your answer is correct. D. a rise in gasoline prices that reduced income and caused many people to default on their home mortgages, and banks to go bankrupt. Government policies that could have been said to have been subsidizing cheap loans included A. expansionary fiscal policy and the low interest rates following the 2001 recession. B. expansionary fiscal policy following the 2001 recession and government encouragement of subprime loans. C. government encouragement of low-risk loans and the creation of a secondary mortgage market through Fannie Mae and Freddie Mac. D. the creation of a secondary mortgage market through Fannie Mae and Freddie Mac, and the low interest rates following the 2001 recession.

C D

In late 2012, the U.S. Treasury sold the last of the stock it purchased in the insurance company AIG. The Treasury earned a profit on the $22.7 billion it had invested in AIG in 2008. An article in Wall Street Journal noted that: "This step in AIG's turnaround, which essentially closes the book on one of the most controversial bailouts of the financial crisis, seemed nearly unattainable in 2008, when the insurer's imminent collapse sent shockwaves through the global economy." . Source: Jeffrey Sparshott and Erik Holm, "End of a Bailout: U.S. Sells Last AIG Shares," New York Times, December 11, 2012. The federal government bailed out AIG because A. the Federal Reserve insisted that this was the best course of action. B. it was a government-subsidized insurance company so they were obligated to bail the company out. C. it was the largest insurance company in the nation and the government feared the repercussions of a failure of AIG. Your answer is correct. D. AIG promised to help bail out other companies if they needed it. The government bailout was controversial because A. the Federal Reserve excerised powers that it rarely uses. B. AIG got off the hook with no consequences. C. the bailout caused income tax rates to rise. D. it was expensive, and other companies suffered through bankruptcy and failure. Your answer is correct. Even though the federal government earned a profit on its investment in AIG, economists and policymakers who opposed the bailout were A. wrong because it is the proper role of government to bailout businesses about to go bankrupt. B. not necessarily wrong because taxes rose as a result. C. not necessarily wrong, because it was an expensive and risky solution. Your answer is correct. D. wrong because it turned out to be a good investment.

C D C

Indicate which component of GDP will be affected by each of the following transactions involving the Ford Motor Company. a. You purchase a new Ford Escape Hybrid from a Ford dealer. .... b. You purchase a 2013 (preowned) Ford Escape Hybrid from a friend. ..... c. Ford purchases door handles for the Escape from an auto parts manufacturer in Indiana. ..... d. Ford produces 1,000 Escapes in a factory in Missouri and ships them to a car dealer in Shanghai, China. .... e. Ford purchases new machine tools to use in its Missouri Escape factory. ..... f. The state of Missouri builds a new highway to help improve access to the Ford Escape plant....

Consumption Expenditure Not included in GDP calculation Not included in GDP calculation Net Export Expenditure Investment Expenditure Government Expenditure

A writer for the Wall Street Journal discussing the relatively poor performance of HSBC, a global bank with headquarters in the United Kingdom, noted that: "[The poor performance] is further reason to ask whether the structure of such a large, global bank is working against it... There remains a legitimate question whether the group is too big to manage." Reading this article, a student remarks: "It seems that firm is suffering from diminishing returns." Source: Paul J. Davies, "HSBC Shows the Diminished Value of Global Banks," Wall Street Journal, February 23, 2015. Briefly explain whether you agree with this remark. A. Agree, because the article is describing the long run. B. Disagree, because the size of the bank is fixed in the long run. C. Agree, because the minimum efficient scale for banks is smaller. D. Disagree, because the article is describing diseconomies of scale.

An article in the Wall Street Journal discussed the views of Canadian Minister of Finance Joe Oliver on the effect of falling oil prices on the Canadian economy. According to the article, Oliver argued that "lower oil prices would have a broadly neutral impact on real ... gross domestic product, but have a negative effect on nominal GDP." Source: Reuters, "Canada Pushes Back Budget to April Due to Market Instability," New York Times, January 15, 2015. Oliver must be expecting the effect of lower oil prices to A. raise the inflation rate, which would raise real GDP. B. raise the inflation rate, which would offset the reduction nominal GDP. C. not affect the inflation rate, which would keep real GDP the same. D. lower the inflation rate, which would offset the reduction in nominal GDP.

An article on fortune.com estimated that the cost of materials in Apple's iPhone 7 with 32 gigabytes of memory was $225. Apple was selling the iPhone 7 for $649. Source: Don Reisinger, "Here's How Much the iPhone 7 Cost to Manufacture," fortune.com, September 20, 2016. Can we conclude from this information that Apple is making a profit of about $424 per iPhone? Briefly explain. Apple's profit is A. likely equal to $424 per iPhone because Apple only has fixed costs of production. B. likely equal to $424 per iPhone because Apple's other costs are implicitimplicit costs. C. likely greater than $424 per iPhone because Apple also has nonmonetary opportunitynonmonetary opportunity costs. D. likely less than $424 per iPhone because Apple also has fixed costs of production. Your answer is correct. E. likely less than $424 per iPhone because Apple also has variable costs of production.

Is Jill Johnson correct when she says the following: "I am currently producing 20,000 pizzas per month at a total cost of $50 comma 00050,000. If I produce 20,001 pizzas, my total cost will rise to $50 comma 00250,002. Therefore, my marginal cost of producing pizzas must be increasing." A. Jill's average total cost of production is decreasing, so her marginal cost of producing pizzas must be decreasing. B. Jill's average total cost of production is decreasing, so her marginal cost of producing pizzas must be increasing. C. Jill's average total cost of production is increasing, so her marginal cost of producing pizzas must be increasing. D. Though Jill's average total cost of production is decreasing, her marginal cost of producing pizzas could be increasing or decreasing. Your answer is correct. E. Jill's average total cost of production is increasing, so her marginal cost of producing pizzas must be decreasing.

When the DuPont chemical company first attempted to enter the paint business, it was not successful. According to a company report, in one year it "lost nearly $500,000 in actual cash in addition to an expected return on investment of nearly $500,000, which made a total loss of income to the company of nearly a million." Why did this report include as part of the company's loss the amount it had expected to earn -- but didn't -- on its investment in manufacturing paint? Source: Alfred D. Chandler, Jr., Thomas K. McCraw, and Richard Tedlow, Management Past and Present, Cincinnati: South-Western, 2000, pp. 3-92. A. The report sought to include variable costs because DuPont could have invested its money elsewhere and earned $500,000. B. The report sought to include explicit costs because this is standard accounting practice. C. The report sought to include explicit costs because DuPont could have invested its money elsewhere and earned $500,000. D. The report sought to include implicit costs because DuPont could have invested its money elsewhere and earned $500,000. Your answer is correct. E. The report sought to include implicit costs because this is standard accounting practice.

Currently, the Bureau of Labor Statistics does not include homemakers in its employment and labor force totals. What would happen to the unemployment rate and the labor force participation rateLOADING... if homemakers were included in these numbers? A. Both the unemployment rate and the labor force participation rate would increase. B. Both the unemployment rate and the labor force participation rate would decrease. C. The unemployment rate would increase and the labor force participation rate would decrease. D. The unemployment rate would decrease and the labor force participation rate would increase.

August 2017 was the sixty-fourth consecutive month that the rate of inflation as measured by the core personal consumption expenditures (PCE) price index was below the Federal Reserve's target of 2 percent. The consumer price index (CPI) might yield a rate of inflation different from that found using the core PCE price index because A. the CPI is updated more frequently than the core PCE price index. B. the CPI includes the prices of more goods and services than the core PCE price index. C. the core PCE price index is updated more frequently than the CPI. D. the core PCE does not measure food and energy prices, which are measured by the CPI. Your answer is correct. The choice of the price index the Federal Reserve uses to measure inflation can affect monetary policy because A. one goal of monetary policy is price stability and, if the price index used to measure inflation is consistently wrong, monetary policies based on that information will be wrong. Your answer is correct. B. the various price indexes the Federal Reserve can use to measure inflation are reported with differing frequencies, which can influence the process of determining the best monetary policy. C. the various price indexes the Federal Reserve can use to measure inflation are related to different sectors of the economy, and the Fed wants to use the one that best represents the sector they are most concerned with. D. one goal of monetary policy is the stability of financial markets and institutions, and if the price index used to measure inflation is inaccurate, monetary policies based on that information will disrupt financial markets.

D A

Segment.com reorganized its office as part of its "anti-distraction campaign." According to an article in the Wall Street Journal, the company cut back on its internal text messaging service and moved "some of its communication back to email to reduce the number of notifications employees were receiving." Source: Rachel Feintzeig, "How One Firm Lowered Its Open-Office Noise," Wall Street Journal, November 15, 2016. Does this movement from a new technologylong dash—text messaginglong dash—to an older technologylong dash—emaillong dash—represent positive or negative technological change at Segment? Briefly explain. A. Negative technological change, because output from a given quantity of inputs may decline. B. Positive technological change, because output can be produced at a lower cost. C. Negative technological change, because the old technology had already been available. D. Positive technological change, because more output can be produced using the same inputs. Your answer is correct. Suppose that competition for software engineers results in Segment.com having to pay them higher salaries. Would the fact that the firm will now face an increased cost of providing its services be an example of negative technological change? Briefly explain. A. No, this would not represent technological change because the same output can be produced using the same inputs. Your answer is correct. B. No, this would not represent technological change because the output's price will rise with workers' wages. C. Yes, this is an example of negative technological change because fewer workers will be hired, reducing output. D. Yes, this represents negative technological change because the cost of producing the same output has increased.

D A

Small business owner Jay Goltz described several decisions he made to reduce the fixed costs of his businesses, including replacing halogen lamps with LED lamps. Goltz noted, "...I'm guessing that many business owners could save a lot more than pennies on their fixed costs, and those savings...fall right to the bottom line." Source: Jay Goltz, "Not All Fixed Costs Are Truly Fixed," New York Times, May 25, 2011. a. The cost of electricity used to power the lights used in Mr. Goltz' businesses are fixed costs because these costs A. cannot be negotiated. B. are unpredictable. C. are paid to one provider. D. must be paid regardless of the volume of output. Your answer is correct. b. Goltz wrote that reducing fixed costs results in savings that "fall right to the bottom line" because A. profit, the bottom line, is revenue minus fixed costs minus variable costs, so a reduction in fixed costs increases profit. Your answer is correct. B. the bottom line equals fixed costs plus variable costs, so a reduction in fixed costs reduces the bottom line. C. profit, the bottom line, is revenue minus variable costs, and since variable costs include fixed costs, a reduction in fixed costs increases profit. D. revenue, the bottom line, is made up of fixed and variable costs, so a reduction in fixed costs increases revenue.

D A

The Toyota Prius is a gasoline-electric hybrid car that gets 54 miles to the gallon. An article in the Wall Street Journal notes that sales of the Prius have been hurt by low gasoline prices and that: "Americans are now more likely to trade in a hybrid or an electric vehicle for an SUV...." Does the article indicate that gasoline-powered cars and gasoline are substitutes or complements? Briefly explain. A. Substitutes, because the more consumers buy of one good, the less they will buy of the other good. B. Substitutes, because the more consumers buy of one good, the more they will buy of the other good. C. Complements, because they are used for the same purpose. D. Complements, because they are used together. Your answer is correct. Does it indicate that gasoline-powered cars and hybrids are substitutes or complements? A. Substitutes, because the more consumers buy of one good, the less they will buy of the other good. Your answer is correct. B. Complements, because they are used for the same purpose. C. Complements, because they are used together. D. Substitutes, because the more consumers buy of one good, the more they will buy of the other good.

D A

The entrance fee into Yellowstone National Park in northwestern Wyoming is "$30 for a private, noncommercial vehicle; $25 for a motorcycle or a snowmobile; or $15 for each visitor 16 and older entering by foot, bike, ski, etc." The fee provides the visitor with a seven-day entrance permit into Yellowstone and nearby Grand Teton National Park. Source: National Park Service, "Yellowstone National Park: Basic Information," www.nps.gov/yell/planyourvisit/basicinfo.htm. The demand for entry into Yellowstone National Park for visitors in private, noncommercial vehicles is A. unit elastic as the prospective park visitors will want to go to the park regardless of the entrance fee. B. perfectly inelastic because the prospective park visitors will enter the park no matter what the cost of the entry fee. C. perfectly elastic because the prospective park visitors will refuse to enter the park if the entry fee is raised even by one cent. D. elastic because when the price is high and the quantity demanded is low, demand is elastic. Your answer is correct. Of the three ways to enter the parklong dash—in a private, noncommercial vehicle; on a motorcycle; and by foot, bike, or skilong dash—which way would you expect to have the largest price elasticity of demand, and which would you expect to have the smallest price elasticity of demand? A. The private, noncommercial vehicle has the largest price elasticity of demand and visitors 16 and older entering by foot, bike, ski, etc. have the smallest price elasticity of demand. Your answer is correct. B. The private, noncommercial vehicle has the smallest price elasticity of demand and visitors 16 and older entering by foot, bike, ski, etc. have the largest price elasticity of demand. C. The private, noncommercial vehicle has the largest price elasticity of demand and snowmobile or motorcycle has the smallest price elasticity of demand. D. The snowmobile or motorcycle has the largest price elasticity of demand and visitors 16 and older entering by foot, bike, ski, etc. have the smallest price elasticity of demand.

D A

Source: T. C. Skeat,"The Length of the Standard Papyrus Roll and the Cost-Advantage of the Codex,"Zeitschrift fur Papyrologie and Epigraphik, 1982, p 175; and David Trobisch, The First Edition of the New Testament, New York: Oxford University Press, 2000, p 73. a. Suppose that the fixed cost of preparing a codex was 58 drachmas and that there was no similar fixed cost for a scroll. Would an ancient book publisher who intended to sell 5 copies of a book be likely to publish it as a scroll or as a codex? What if he intended to sell 10 copies? Briefly explain. A. If a publisher intended to sell 5 or 10 copies, he would publish the book as a codex because the average cost would be lower than as a scroll. B. If a publisher intended to sell 5 copies, he would publish the book as a scroll because the marginal cost would be lower than as a codex. If he intended to sell 10 copies, he would publish the book as a codex because the marginal cost would be lower than as a scroll. C. If a publisher intended to sell 5 or 10 copies, he would publish the book as a codex because the marginal cost would be lower than as a scroll. D. If a publisher intended to sell 5 copies, he would publish the book as a scroll because the average cost would be lower than as a codex. If he intended to sell 10 copies, he would publish the book as a codex because the average cost would be lower than as a scroll. Your answer is correct. E. If a publisher intended to sell 5 copies, he would publish the book as a codex because the average cost would be lower than as a scroll. If he intended to sell 10 copies, he would publish the book as a scroll because the average cost would be lower than as a codex. b. Although most books were published as scrolls in the first century A.D., by the third century, most were published as codices. Considering only the factors mentioned in this problem, explain why this change may have taken place. A. By the third century, enough books were being published such that the total cost of producing a book as a scroll was lower than the total cost of producing a book as a codex. B. By the third century, enough books were being published such that the average cost of producing a book as a codex was lower than the average cost of producing a book as a scroll. Your answer is correct. C. By the third century, enough books were being published such that the marginal cost of producing a book as a codex was lower than the marginal cost of producing a book as a scroll. D. By the third century, so few books were being published that the average cost of producing a book as a codex was lower than the average cost of producing a book as a scroll. E. By the third century, enough books were being published such that the average cost of producing a book as a scroll was lower than the average cost of producing a book as a codex.

D B

In discussing the Taylor rule, John Taylor wrote: "I realize that there are differences of opinion about what is the best rule to guide policy and that some at the Fed (including Janet Yellen) now prefer a rule with a higher coefficient [on the output gap]." Source: John Taylor, "Cross Checking 'Checking in on the Taylor Rule'," www.economicsone.com, July 16, 2013. If the Taylor rule was changed to have a higher coefficient on the output gap, then during a recession the federal funds rate would be A. lower, because more weight would be given to the inflation gap. B. higher, because more weight would be given to the output gap. C. higher, because more weight would be given to the inflation gap. D. lower, because more weight would be given to the output gap. Your answer is correct. Economists and policymakers might disagree over the best rule to guide monetary policy because A. economists usually have one view and policymakers take the opposite view. B. they usually disagree about most aspects of the economy. C. of differing views about the significance of inflation and unemployment. Your answer is correct. D. most policymakers are not subject to elections while most economists are.

D C

Jared Bernstein, an economist at the Center on Budget and Policy Priorities, has stated: "I want to see receipt of unemployment insurance...go up in recessions." If government unemployment insurance payments didn't go up, he explains, it "would be a sign that something's very wrong." Source: Jared Bernstein, "Lessons of the Great Recession: How the Safety Net Performed," New York Times, June 24, 2013. If government unemployment insurance payments did not rise during a recession, A. the government would instead provide subsidized health care for the unemployed. B. the government would instead provide food stamps for the unemployed. C. the economy would improve faster as the government used the money saved to pay down the national debt. D. the economy would suffer as purchasing power of consumers would suffer. Your answer is correct. Government unemployment payments can increase the unemployment rate by A. lowering consumer spending resulting in a wave of new lay-offs. B. stigmatizing the unemployed making it harder for them to find new jobs. C. allowing the unemployed to be more picky about taking a new job. Your answer is correct. D. encouraging workers to quit their jobs to get free money.

D C

Suppose Jill Johnson operates her pizza restaurant in a building she owns in the center of the city. Similar buildings in the neighborhood rent for $4,000 per month. Jill is considering selling her building and renting space in the suburbs for $3,000 per month. Jill decides not to make the move. She reasons, "I would like to have a restaurant in the suburbs, but I pay no rent for my restaurant now, and I don't want to see my costs rise by $3,000 per month." What do you think of Jill's reasoning? A. Jill is correctly attempting to limit her explicit costs of production. B. Jill is incorrectly failing to consider her fixed costs of production. C. Jill is incorrectly failing to account for the cost of renting in the suburbs. D. Jill is incorrectly overestimating her variable costs of production. E. Jill is incorrectly ignoring the opportunity cost of using the building she owns.

According to one observer of the lobster market: "After Labor Day, when the vacationers have gone home, the lobstermen usually have a month or more of improved fishing conditions, except for the occasional hurricane." Use demand and supply analysis to explain whether lobster prices are likely to be higher or lower during the fall than during the summer. Source: Jay Harlow, "Lobster: An Affordable Luxury," Sallybernstein.com. The supply curve for lobster in the fall is likely to be to the .... of the supply curve for lobster in the summer. The demand curve for lobster in the fall is likely to be to the..... of the demand curve for lobster in the summer. The result of this is that the equilibrium price of lobster in the fall is..... than the equilibrium price of lobster in the summer.

Right Left Lower

In describing the optimal size of an investment fund, a writer for the Wall Street Journal observed: ...at first, bigger is better for both investors and managers.... Managing money is expensive. Small funds have many fixed costs... If a fund is small, it can't generate enough fees to cover costs... The result is that in terms of performance, funds should want to get big to cover costs and maximize returns, but not so big that diseconomies of scale erode returns. Source: Wesley Gray, "Why Your Fund Manager May Not Have the Same Goal as You," Wall Street Journal, May 16, 2016. A typical long-run average cost curve will be ...... . A quantity for an investment fund that has not reached minimum efficient scale occurs where the average cost curve is .......; a quantity for an investment fund that has reached minimum efficient scale occurs where the average cost curve is .......; a quantity for an investment fund that experiences diseconomies of scale occurs where the average cost curve is ........; and a quantity for an investment fund that experiences constant returns to scale occurs where the average cost curve is .........

U shaped decreasing horizontal increasing horizontal

A Wall Street Journal article described how Gemfields, a mining company in Mozambique, increased its production of rubies in response to a growing demand for these gems. Mozambique has only recently become a major supplier of rubies. For centuries, the ruby trade...[was] centered in Southeast Asia, with stones plucked from the earth...by small, artisanal miners... Because rubies have in the past been so rare, Thai cutters and polishers rarely focused on volumes or economies of scale. Gemfields looks to operate on a larger basis. Source: Alexandra Wexler, "Sitting on a Trove of Rubies, Gemfields Looks to Create Fresh Demand," Wall Street Journal, April 17, 2017. The long-run average cost curve should be ........ The short-run average cost curves should be A. L shaped, with average costs for Gemfields that are higher than for the typical Asian ruby producer. B. U shaped, with a minimum point for Gemfields that is at a lower quantity than for the typical Asian ruby producer. C. horizontal, with average costs for Gemfields that are higher than for the typical Asian ruby producer. D. U shaped, with a minimum point for Gemfields that is at a higher quantity than for the typical Asian ruby producer. Your answer is correct. The short-run average cost curve for Gemfields will ..... be lower (for a given level of output) than the short-run average cost curve for a typical Asian producer.

U shaped D Not always

According to a study by the U.S. Centers for Disease Control and Prevention, the price elasticity of demandLOADING... for cigarettes is negative 0.25 .−0.25. Americans purchase about 480 billion cigarettes each year. Source: "Response to Increases in Cigarette Prices by Race/Ethnicity, Income, and Age Groupslong dash—United States, 1976—1993," Morbidity and Mortality Weekly Report, July 31, 1998. a. If the federal tax on cigarettes were increased enough to raise the price of cigarettes by 4040 percent, the quantity of cigarettes demanded would decrease by 4848 billion per year (enter your numeric response rounded to the nearest integer). b. If the demand for cigarettes is elastic, then the price increase resulting from a tax increase will cause a larger decline in quantity demanded in percentage terms.

a, Decrease - 48 b, elastic

Explain how each of the following events would affect the short-run aggregate supply curve a. An increase in the price level will not change the SRAS curve because this is a change in the price level. b. An increase in what the price level is expected to be in the future will decrease (shift leftward) the SRAS curve because this is a change in expectations about future prices. c. The price level that is currently higher than expected will decrease (shift leftward) the SRAS curve because this is a change in an adjustment to past errors in expectations about future prices. d. An unexpected increase in the price of an important raw material will decrease (shift leftward) the SRAS curve because this is a change in the price of an important natural resource. e. An increase in the labor force will increase (shift rightward) the SRAS curve because this is a change in the productive capacity of the economy.

a, not change - the price level. b, decrease (shift leftward) - expectations about future prices. c, decrease (shift leftward) - an adjustment to past errors in expectations about future prices d, decrease (shift leftward) - the price of an important natural resource. e, increase (shift rightward) - the productive capacity of the economy.

If the Fed wants to keep real GDP at its potential level in 2019, it should use an expansionary policy. Explain the effects of this monetary policy action consistent with the data for the year 2019 in the table above. The long-run aggregate supply curve will shift to the right. The aggregate demand curve without the policy will A. not shift. B. shift to the right by the same amount as the long-run aggregate supply curve. C. shift to the right but by more than the long-run aggregate supply curve. D. shift to the right but by less than the long-run aggregate supply curve. Your answer is correct. The aggregate demand curve with the policy will A. shift to the right but by more than the long-run aggregate supply curve. B. shift to the right but by less than the long-run aggregate supply curve. C. shift to the right by the same amount as the long-run aggregate supply curve. Your answer is correct. D. not shift.

an expansionary policy right D C

Which of the following are likely to increase the measured level of GDP. and which are likely to reduce it? a. When the number of people working outside the home decreases, the measured level of GDP ..... b. When there is a sharp decrease in the crime rate, the measured level of GDP...... c. If higher tax rates cause more people to hide the income they earn, the measured GDP.....

decreases may increase or decrease Decrease

On most days, the price of a rose is $1, and 8,000 roses are purchased. On Valentine's Day, the price of a rose jumps to $2, and 30,000 roses are purchased. The effect of Valentine's Day is to change the market .....for roses. In particular, the demand curve shifts to the ...... Based on this information, we do not know much about the price elasticity of demand for roses because the demand curve was not constant. However, we do have constant supply. The price elasticity of supply is..... (Enter your response rounded to two decimal places.)

demand right 1.74

The following problem is somewhat advanced. Using symbols, we can write that the marginal product of labor is equal to Upper Delta Upper Q divided by Upper Delta Upper LΔQ/ΔL. Marginal cost is equal to Upper Delta TC divided by Upper Delta Upper QΔTC/ΔQ. Because fixed costs by definition don't change, marginal cost is also equal to Upper Delta VC divided by Upper Delta Upper QΔVC/ΔQ. If Jill Johnson's only variable cost is labor cost, then her variable cost is just the wage times the quantity of workers hired, or wtimes×L. If the wage Jill pays is constant, then what is Upper Delta VCΔVC in terms of w and L? w times Upper Delta Upper Lw×ΔL Use your answer above and the expressions given for the marginal product of labor and the marginal cost of output to find an expression for marginal cost, Upper Delta TC divided by Upper Delta Upper QΔTC/ΔQ, in terms of the wage, w, and the marginal product of labor, Upper Delta Upper Q divided by Upper Delta Upper LΔQ/ΔL. Marginal cost equals w divided by left parenthesis Upper Delta Upper Q divided by Upper Delta Upper L right parenthesisw/(ΔQ/ΔL). Use your answer above to determine Jill's marginal cost of producing pizzas if the wage is $750750 per week and the marginal product of labor is 150150. The marginal cost of production is $55. (Enter your response rounded to two decimal places.) If the wage falls to $650650 per week and the marginal product of labor is unchanged, then Jill's marginal cost decreases. If instead the wage is unchanged at $750750 per week and the marginal product rises to 200200, then Jill's marginal cost decreases

w x ΔL w/(ΔQ/ΔL) 5 decrease decrease

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