1. An example of a negative externality is _____
a public park that has litter, dead grass, and broken benches.
paying one's taxes on time.
voting for a candidate who loses an election or 'throwing away one's vote'.
all of the above
2. Economists strongly support which of the following arguments in favor of protectionism?
National Security. It is imperative that established industries be supported, in order to protect
our way of life.
Infant Industry. Critical new industries must be given a chance to mature, before they face
brutal international competition.
Unfair Competition. When foreign exporters undercut domestic consumers, they hurt the
economy.
Breathing Room. Large and robust nations need room to expand, and require accommodations
from their lesser developed neighbors.
none of the above
3. Human capital is _____
skills and personal qualities that enable individuals to earn more income and to enjoy life more
than they would without those skills and qualities.
one's material wealth minus the amount of debt that one owes.
the material wealth at one's disposal, regardless of the debt that one owes.
the value of the tools of one's trade that one owns.
4. All other things being equal, an additional unit of capital invested in a capital-rich economy will lead
to _____ increase in output as compared with a unit of capital invested in a capital-poor economy.
a smaller
a larger
about the same sized
an unknowable
5. Foreign investment _____
is very beneficial to an economy, by increasing the amount of capital available.
is a tool of imperialism and colonialism.
decreases the amount of capital available and increases local interest rates.
none of the above
6. Immigration is _____
harmful to an economy, because it increases the demand for resources, leaving less for each.
harmful to an economy, because it increases the number of individuals, who do not fully
support our way of life.
beneficial to an economy, because human ingenuity offsets the demand for resources.
beneficial to an economy, because it maintains an underclass of cheap labor.
7. Bonds are _____
money posted by politicians and corporate executives to stay out of jail.
financial ties that prevent wealthy individuals from expatriating.
debt issued by firms and governments, when they borrow money from the public.
money placed in escrow by corporations as insurance against lawsuits.
8. Stock is _____
a share of ownership in a corporation.
another name for bond.
a legal fiction created by capitalists to deprive workers of the fruits of their labors.
a very large amount of cash.
9. Financial intermediaries include _____
salesmen and brokers.
regulatory agencies.
depository institutions and investment funds.
none of the above
10. Increased spending by the public leads to _____
a larger output of new goods.
inflation.
higher prices.
some combination of a larger output and higher prices.
11. Saving is _____
the source of the supply of loanable funds.
the source of the demand for loanable funds.
not a relevant macroeconomic topic, because it is related to microeconomic decision making by
individuals and households.
none of the above
12. Investment is _____
the source of the supply of loanable funds.
the source of the demand for loanable funds.
not a relevant macroeconomic topic, because it is related to microeconomic decision making by
individuals and households.
none of the above
13. Why would an economist say that the US government has never made a choice or a decision?
Economists often deny the most obvious facts.
The US government does not make choices; only firms make decisions and choices.
Individuals within an organization, rather than the organization itself, make choices.
Economists' worldview is influenced by the interests of their social class.
14. The Consumer Price Index is _____
a measure of stock market activity that investors use to help make investment decisions.
a measure of the aggregate price level that is used to estimate the rate of inflation.
set by the Bureau of Labor Statistics as a signal to producers, telling them how much to supply.
none of the above
15. _____ is widely recognized as the father of modern economics.
John Maynard Keynes
Adam Smith
Ben Bernanke
N. Gregory Mankiw
16. All other things being equal, when the demand for money decreases _____
interest rates decrease.
interest rates increase.
the government prints more money.
the government takes money out of circulation.
17. The principle of comparative advantage states that individuals, firms, and national economies should
produce _____
what they are able to produce most efficiently.
only those things that they can produce more efficiently than anyone else.
whatever they want for their own consumption.
enough necessities to ensure self-sufficiency.
18. Economists argue that communism fails, because _____
it is an immoral system that violates fundamental human rights.
it is established by force and not through democratic processes.
people are not yet civilized or enlightened enough to fully appreciate its advantages over
wasteful market processes
it does not allow prices to adjust freely, leading to misallocation of resources
19. Tastes affect prices, because _____
changes in taste lead to changes in demand.
people with superior taste are role models for individuals who have inferior taste.
marginal utility increases as more individuals embrace new fashions.
taste is subjective and cannot be compared between any two individuals.
20. The law of supply asserts that _____
market prices often are unfair, and government must set limits on how much sellers can charge
for necessities.
human wants are insatiable.
there is a negative relationship between the amount of anything that people will purchase and
the quantity that sellers will bring to market.
there is a positive relationship between the amount of anything that people will purchase and
the quantity that sellers will bring to market.
21. Intelligent policy-making requires the making of trade-offs, which means _____
accepting unethical but unavoidable compromises.
giving up what is less valuable for what is more valuable.
putting one's own interests ahead of the interests of others.
violating someone's rights.
22. According to our textbook, which is more likely to reduce drug-related crime: drug interdiction or
public education?
Interdiction, because then more criminals would be sent to prison.
Interdiction, because reduced supply would cause prices to fall.
Education, because reduced demand would cause prices to fall.
Education, because reduced prices would cause shortages and there would be less drugs
available to buy.
a higher demand for all goods in general