Question 1

The earnings difference between single men and women is

Accepted Answer

A)  significantly more than the earnings difference between married men and women. 
B)  significantly less than the earnings difference between married men and women. 
C)  about the same as the earnings difference between married men and women. 
D)  none of the above. 
A)  significantly more than the earnings difference between married men and women. 
B)  significantly less than the earnings difference between married men and women. 
C)  about the same as the earnings difference between married men and women. 
D)  none of the above.

Question 2

Social Security

Accepted Answer

A)  collects taxes from current workers and invests this money to repay the workers when they retire. 
B)  is based on the same principles as private insurance programs. 
C)  is an intergenerational transfer program that takes money from current workers and transfers it to current retirees. 
D)  is designed so that administrative decisions can be made independent of political concerns. 
A)  collects taxes from current workers and invests this money to repay the workers when they retire. 
B)  is based on the same principles as private insurance programs. 
C)  is an intergenerational transfer program that takes money from current workers and transfers it to current retirees. 
D)  is designed so that administrative decisions can be made independent of political concerns.

Question 3

To the extent that unions can transfer profits from unionized employers to union workers, they will

Accepted Answer

A)  reduce the incentive of unionized employers to invest in fixed capital and research. 
B)  increase employment in the unionized sector. 
C)  reduce the incentive of nonunion firms to invest and expand their output. 
D)  increase the productivity of labor in the long run. 
A)  reduce the incentive of unionized employers to invest in fixed capital and research. 
B)  increase employment in the unionized sector. 
C)  reduce the incentive of nonunion firms to invest and expand their output. 
D)  increase the productivity of labor in the long run.

Question 4

In countries such as Canada that have socialized health care, the government operates hospitals, and health-care services are financed through tax revenue. In these countries,

Accepted Answer

A)  the government is able to provide as much health care, free of charge, as citizens would like. 
B)  methods other than price, such as political rules and waiting lists, must be utilized to allocate health-care services. 
C)  a large number of services, such as MRIs, that involve expensive equipment are performed. 
D)  citizens are usually so satisfied with their health-care system that they never travel to other countries to purchase health-care services. 
A)  the government is able to provide as much health care, free of charge, as citizens would like. 
B)  methods other than price, such as political rules and waiting lists, must be utilized to allocate health-care services. 
C)  a large number of services, such as MRIs, that involve expensive equipment are performed. 
D)  citizens are usually so satisfied with their health-care system that they never travel to other countries to purchase health-care services.

Question 5

When the government both provides education and covers its costs through taxation,

Accepted Answer

A)  public schools have a strong incentive to supply a high quality education at a low cost. 
B)  parents are in a weak position to either discipline poorly performing schools or alter the quantity or quality of schooling provided. 
C)  competition between schools is greatly enhanced relative to a system of privately produced and funded education. 
D)  public school administrators are driven to care more about pleasing parents than about pleasing teachers' unions. 
A)  public schools have a strong incentive to supply a high quality education at a low cost. 
B)  parents are in a weak position to either discipline poorly performing schools or alter the quantity or quality of schooling provided. 
C)  competition between schools is greatly enhanced relative to a system of privately produced and funded education. 
D)  public school administrators are driven to care more about pleasing parents than about pleasing teachers' unions.

Question 6

Stock market analysts often argue that lower interest rates are good for the stock market. Does this argument make sense?

Accepted Answer

A)  No; lower interest rates will tend to slow down the economy, and this will be bad for the stock market. 
B)  Yes; the lower rates of interest will increase the value of future income (and capital gains), and stock prices will rise to reflect this factor. 
C)  No; the lower rates of interest will reduce the value of future income (and capital gains), and this will cause stock prices to fall. 
D)  Yes; the lower interest rates will cause inflation, and inflation is generally good for the stock market. 
A)  No; lower interest rates will tend to slow down the economy, and this will be bad for the stock market. 
B)  Yes; the lower rates of interest will increase the value of future income (and capital gains), and stock prices will rise to reflect this factor. 
C)  No; the lower rates of interest will reduce the value of future income (and capital gains), and this will cause stock prices to fall. 
D)  Yes; the lower interest rates will cause inflation, and inflation is generally good for the stock market.

Question 7

Since 1802, the American stock market has yielded an average annual real return (the return adjusted for inflation) of approximately

Accepted Answer

A)  3 percent. 
B)  5 percent. 
C)  7 percent 
D)  11 percent. 
A)  3 percent. 
B)  5 percent. 
C)  7 percent 
D)  11 percent.

Question 8

"If a union is only able to organize a few of the firms in an industry, it is unlikely that the union can substantially increase the wages of its members." This statement is

Accepted Answer

A)  false; unions tend to be stronger when they concentrate on only a few producers in an industry. 
B)  false; the demand for unionized workers will be more inelastic if only a few firms in the industry are unionized. 
C)  false; all unions can increase the wages of their members. 
D)  essentially correct. 
A)  false; unions tend to be stronger when they concentrate on only a few producers in an industry. 
B)  false; the demand for unionized workers will be more inelastic if only a few firms in the industry are unionized. 
C)  false; all unions can increase the wages of their members. 
D)  essentially correct.

Question 9

Based on estimates from the U.S. Treasury Department, the federal tax structure is

Accepted Answer

A)  highly regressive. 
B)  roughly proportional. 
C)  highly progressive. 
D)  regressive at lower incomes and progressive at higher incomes. 
A)  highly regressive. 
B)  roughly proportional. 
C)  highly progressive. 
D)  regressive at lower incomes and progressive at higher incomes.

Question 10

In which of the following occupations is union membership the highest?

Accepted Answer

A)  sales 
B)  transportation 
C)  construction 
D)  government 
A)  sales 
B)  transportation 
C)  construction 
D)  government

Question 11

The bonds held in the Social Security Trust Fund

Accepted Answer

A)  are a valuable asset of the federal government. 
B)  will generate a future stream of net income for the federal government. 
C)  are an IOU from one government agency (the U.S. Treasury) to another (the Social Security Administration). 
D)  are necessary to provide retirement benefits for future retirees. 
A)  are a valuable asset of the federal government. 
B)  will generate a future stream of net income for the federal government. 
C)  are an IOU from one government agency (the U.S. Treasury) to another (the Social Security Administration). 
D)  are necessary to provide retirement benefits for future retirees.

Question 12

The incentive of schools to provide a high quality education at a low cost and the incentive of parents and students to shop around for the best schools will be weakest when education is produced

Accepted Answer

A)  privately but paid for by taxpayers and provided free of charge. 
B)  by public schools and the cost of education is covered by taxes. 
C)  privately and parents must purchase it with their own money. 
D)  by public schools and parents purchase it with their own money. 
A)  privately but paid for by taxpayers and provided free of charge. 
B)  by public schools and the cost of education is covered by taxes. 
C)  privately and parents must purchase it with their own money. 
D)  by public schools and parents purchase it with their own money.

Question 13

Which of the following factors will make it easier for a labor union to increase the wages of its members?

Accepted Answer

A)  a highly inelastic demand for the products produced by the union labor 
B)  a readily available supply of similar products produced by nonunion labor 
C)  low tariffs and strong competition from foreign firms producing the products supplied by the union labor 
D)  a reduction in the demand for the products produced by the union labor 
A)  a highly inelastic demand for the products produced by the union labor 
B)  a readily available supply of similar products produced by nonunion labor 
C)  low tariffs and strong competition from foreign firms producing the products supplied by the union labor 
D)  a reduction in the demand for the products produced by the union labor

Question 14

Why do nations impose trade barriers, such as those instituted during the Great Depression, that make it difficult for their own citizens to trade with people in other countries?

Accepted Answer

A)  Trade restrictions are a good way for a country to increase the total employment and income level of its citizens. 
B)  As the experience during the 1930s illustrates, trade restrictions are an effective way to increase exports and tax revenues. 
C)  Trade restrictions provide gains to domestic residents at the expense of foreigners. 
D)  Trade restrictions often provide benefits to highly visible special interest groups while imposing a less visible cost on the general populace. 
A)  Trade restrictions are a good way for a country to increase the total employment and income level of its citizens. 
B)  As the experience during the 1930s illustrates, trade restrictions are an effective way to increase exports and tax revenues. 
C)  Trade restrictions provide gains to domestic residents at the expense of foreigners. 
D)  Trade restrictions often provide benefits to highly visible special interest groups while imposing a less visible cost on the general populace.

Question 15

Public elementary and secondary school administrators have a strong incentive to

Accepted Answer

A)  attempt to increase their funding levels. 
B)  be efficient since their budgets are determined by politicians. 
C)  cater to the preferences of students and parents. 
D)  do all of the above. 
A)  attempt to increase their funding levels. 
B)  be efficient since their budgets are determined by politicians. 
C)  cater to the preferences of students and parents. 
D)  do all of the above.

Question 16

Spending per elementary student in the United States is ____ than that of most developed countries, and real spending per student in American public elementary and secondary schools has ____ between 1970 and 2009.

Accepted Answer

A)  greater; fallen 
B)  greater; risen 
C)  less; risen 
D)  less; fallen 
A)  greater; fallen 
B)  greater; risen 
C)  less; risen 
D)  less; fallen

Question 17

Which of the following is an example of how incentive structures contributed to the collapse of investment banks?

Accepted Answer

A)  The bonus structures of most executives were tied to short-term profitability. 
B)  The rating agencies acted independently in assigning ratings to mortgage-backed securities and had no incentive to understate the risks. 
C)  Mortgage-backed securities were closely scrutinized in order to minimize risk and obtain higher ratings. 
D)  Despite SEC regulations, investment banks kept leverage ratios low in order to increase profits. 
A)  The bonus structures of most executives were tied to short-term profitability. 
B)  The rating agencies acted independently in assigning ratings to mortgage-backed securities and had no incentive to understate the risks. 
C)  Mortgage-backed securities were closely scrutinized in order to minimize risk and obtain higher ratings. 
D)  Despite SEC regulations, investment banks kept leverage ratios low in order to increase profits.

Question 18

Which of the following describes the relationship between interest rates and interest-sensitive goods, such as housing?

Accepted Answer

A)  As interest rates decline, the demand for interest-sensitive goods increases. 
B)  As interest rates decline, the demand for interest-sensitive goods decreases. 
C)  As interest rates increase, the demand for interest-sensitive goods increases, driving prices upward. 
D)  As interest rates increase, the demand for interest-sensitive goods decreases, driving prices upward. 
A)  As interest rates decline, the demand for interest-sensitive goods increases. 
B)  As interest rates decline, the demand for interest-sensitive goods decreases. 
C)  As interest rates increase, the demand for interest-sensitive goods increases, driving prices upward. 
D)  As interest rates increase, the demand for interest-sensitive goods decreases, driving prices upward.

Question 19

What prompted the large increase in tax rates in 1932 in the midst of an economic recession?

Accepted Answer

A)  concern that inflation would rise due to increases in real output and aggregate demand 
B)  expansionary fiscal policy designed to stimulate aggregate demand 
C)  the Keynesian view that taxes should be increased during a recession 
D)  the view that the federal government should maintain a balanced budget 
A)  concern that inflation would rise due to increases in real output and aggregate demand 
B)  expansionary fiscal policy designed to stimulate aggregate demand 
C)  the Keynesian view that taxes should be increased during a recession 
D)  the view that the federal government should maintain a balanced budget

Question 20

Measured as a share of the economy, government spending

Accepted Answer

A)  has been between 10 and 15 percent of the U.S. economy since 1930. 
B)  has been between 20 and 25 percent of the U.S. economy since 1930. 
C)  rose from less than 10 percent in 1929 to over 35 percent in 2010. 
D)  declined from more than 50 percent in 1929 to approximately 25 percent in 2010. 
A)  has been between 10 and 15 percent of the U.S. economy since 1930. 
B)  has been between 20 and 25 percent of the U.S. economy since 1930. 
C)  rose from less than 10 percent in 1929 to over 35 percent in 2010. 
D)  declined from more than 50 percent in 1929 to approximately 25 percent in 2010.

The earnings difference between single men and women is

Social Security

To the extent that unions can transfer profits from unionized employers to union workers, they will

In countries such as Canada that have socialized health care, the government operates hospitals, and health-care services are financed through tax revenue. In these countries,

When the government both provides education and covers its costs through taxation,

Stock market analysts often argue that lower interest rates are good for the stock market. Does this argument make sense?

Since 1802, the American stock market has yielded an average annual real return (the return adjusted for inflation) of approximately

"If a union is only able to organize a few of the firms in an industry, it is unlikely that the union can substantially increase the wages of its members." This statement is

Based on estimates from the U.S. Treasury Department, the federal tax structure is

In which of the following occupations is union membership the highest?

The bonds held in the Social Security Trust Fund

The incentive of schools to provide a high quality education at a low cost and the incentive of parents and students to shop around for the best schools will be weakest when education is produced

Which of the following factors will make it easier for a labor union to increase the wages of its members?

Why do nations impose trade barriers, such as those instituted during the Great Depression, that make it difficult for their own citizens to trade with people in other countries?

Public elementary and secondary school administrators have a strong incentive to

Spending per elementary student in the United States is than that of most developed countries, and real spending per student in American public elementary and secondary schools has between 1970 and 2009.

Which of the following is an example of how incentive structures contributed to the collapse of investment banks?

Which of the following describes the relationship between interest rates and interest-sensitive goods, such as housing?

What prompted the large increase in tax rates in 1932 in the midst of an economic recession?

Measured as a share of the economy, government spending

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Filters

Exam 16: Applying the Basics: Special Topics in Economics

The earnings difference between single men and women is

Social Security

To the extent that unions can transfer profits from unionized employers to union workers, they will

In countries such as Canada that have socialized health care, the government operates hospitals, and health-care services are financed through tax revenue. In these countries,

When the government both provides education and covers its costs through taxation,

Stock market analysts often argue that lower interest rates are good for the stock market. Does this argument make sense?

Since 1802, the American stock market has yielded an average annual real return (the return adjusted for inflation) of approximately

"If a union is only able to organize a few of the firms in an industry, it is unlikely that the union can substantially increase the wages of its members." This statement is

Based on estimates from the U.S. Treasury Department, the federal tax structure is

In which of the following occupations is union membership the highest?

The bonds held in the Social Security Trust Fund

The incentive of schools to provide a high quality education at a low cost and the incentive of parents and students to shop around for the best schools will be weakest when education is produced

Which of the following factors will make it easier for a labor union to increase the wages of its members?

Why do nations impose trade barriers, such as those instituted during the Great Depression, that make it difficult for their own citizens to trade with people in other countries?

Public elementary and secondary school administrators have a strong incentive to

Spending per elementary student in the United States is ____ than that of most developed countries, and real spending per student in American public elementary and secondary schools has ____ between 1970 and 2009.

Which of the following is an example of how incentive structures contributed to the collapse of investment banks?

Which of the following describes the relationship between interest rates and interest-sensitive goods, such as housing?

What prompted the large increase in tax rates in 1932 in the midst of an economic recession?

Measured as a share of the economy, government spending

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Filters

Spending per elementary student in the United States is than that of most developed countries, and real spending per student in American public elementary and secondary schools has between 1970 and 2009.