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- 1. Multiple Choice
When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all
rely upon the government to provide us with the basic necessities of life.
rely upon one another for the goods and services we consume.
have similar tastes and abilities
are concerned about one another’s well-being
- 2. Multiple Choice
Refer to Figure 3-3. If Enid must work 0.25 hour to produce each taco, then her production possibilities frontier is based on how many hours of work?
40 hours
100 hours
400 hours
1600 hours
- 3. Multiple Choice
The opportunity cost of an item is
the number of hours that one must work in order to buy one unit of the item.
what you give up to get that item
always less than the dollar value of the item
always greater than the cost of producing the item
- 4. Multiple Choice
Refer to Figure 3-4. The opportunity cost of 1 novel for Jordan is
1/3 poem
3 poems
4 poems
12 poems
- 5. Multiple Choice
Refer to Table 3-9. Barb has an absolute advantage in
both setting up and testing computers and a comparative advantage in setting up computers
both setting up and testing computers and a comparative advantage in testing computers
neither setting up nor testing computers and a comparative advantage in setting up computers
neither setting up nor testing computers and a comparative advantage in testing computers
- 6. Multiple Choice
Refer to Table 3-11. Varick has a comparative advantage in the production of
wheat
cloth
both goods
neither good
- 7. Multiple Choice
The value of the housing services provided by the economy's owner-occupied houses is
included in GDP, and the estimated rental values of the houses are used to place a value on these housing services
included in GDP, and the actual mortgage payments made on the houses are used to estimate the value of these rental services
excluded from GDP since these services are not sold in any market
excluded from GDP since the value of these housing services cannot be estimated with any degree of precision
- 8. Multiple Choice
Def01 stands for GDP deflator in year 1. Def02 stands for GDP deflator in year 2. The inflation rate in year 2 equals
100*(Def02-Def01)/Def01
100*(Def02-Def01)/Def02
100*(Def01-Def02)/Def01
100*(Def01-Def02)/Def02
- 9. Multiple Choice
When economists talk about growth in the economy, they measure that growth as the
absolute change in nominal GDP from one period to another
percentage change in nominal GDP from one period to another
absolute change in real GDP from one period to another
percentage change in real GDP from one period to another
- 10. Multiple Choice
Which of the following items is counted as part of government purchases?
i) The federal government pays the salary of a Navy officer
(ii) The state of Nevada pays a private firm to repair a Nevada state highway
(iii) The city of Las Vegas, Nevada pays a private firm to collect garbage in that city
All (i), (ii), and (iii) are correct
- 11. Multiple Choice
The real interest rate tells you
how fast the number of dollars in your bank account rises over time
how fast the purchasing power of your bank account rises over time
the number of dollars in your bank account today
the purchasing power of your bank account today
- 12. Multiple Choice
Refer to Table 3-6. Assume that Hilda and Carlos each has 90 hours available. Originally, each person divided their time equally between the production of quilts and dresses. Now, each person spends all their time producing the good in which they have a comparative advantage. As a result, the total output of dresses increased by
3.5.
4.5.
5.5
9.0
- 13. Multiple Choice
Assume for Namibia that the opportunity cost of each hut is 200 bowls. Then which of these pairs of points could be on Namibia's production possibilities frontier?
(200 huts, 30,000 bowls) and (150 huts, 35,000 bowls)
(200 huts, 40,000 bowls) and (150 huts, 30,000 bowls)
(300 huts, 50,000 bowl) and (200 huts, 60,000 bowls)
(300 huts, 60,000 bowls) and (200 huts, 80,000 bowls)
- 14. Multiple Choice
If the production possibilities frontier is bowed outward, then “?” could be
50
75
100
125
- 15. Multiple Choice
Refer to Figure 3-9. If Uzbekistan and Azerbaijan switch from each country dividing its time equally between the production of bolts and nails to each country spending all of its time producing the good in which it has a comparative advantage, then total production will increase by
5 bolts and 10 nails
15 bolts and 40 nails
20 bolts and 50 nails
30 bolts and 80 nails
- 16. Multiple Choice
Refer to Table 3-7. Korea should specialize in the production of
cars and import airplanes
airplanes and import cars
both goods and import neither good
neither good and import both goods
- 17. Multiple Choice
Refer to Table 3-2. Aruba’s opportunity cost of one cooler is
0.4 radio and Iceland’s opportunity cost of one cooler is 0.25 radio
0.4 radio and Iceland’s opportunity cost of one cooler is 4 radios
2.5 radios and Iceland’s opportunity cost of one cooler is 0.25 radio
2.5 radios and Iceland’s opportunity cost of one cooler is 4 radios
- 18. Multiple Choice
In the economy of Wrexington in 2008, consumption was 60% of GDP, government purchases were $212, imports were $67 and 67% of the value of exports, investment was one-half of the value of consumption. What was Wrexington’s GDP in 2008?
$1450
$1790
$2450
$2790
- 19. Multiple Choice
Household spending on education is counted in which component or subcomponent of GDP?
consumption of durable goods
consumption of nondurable goods
consumption of services
investment
- 20. Multiple Choice
The consumption component of GDP includes spending on
durable goods and nondurable goods, but not spending on services
durable goods and services, but not spending on nondurable goods
nondurable goods and services, but not spending on durable goods
durable goods, nondurable goods, and services
- 21. Multiple Choice
Gross domestic product is defined as
(i) the quantity of all final goods and services demanded within a country in a given period of time.
(ii) the quantity of all final goods and services supplied within a country in a given period of time.
(iii) the market value of all final goods and services produced within a country in a given period of time.
Both (i) and (ii) are correct.
- 22. Multiple Choice
Table 24-1
The table below pertains to Pieway, an economy in which the typical consumer’s basket consists of 10 bushels of peaches and 15 bushels of pecans.
Refer to Table 24-1. If 2005 is the base year, then the CPI for 2005 was
83.3.
100.0.
120.0
200.0
- 23. Multiple Choice
Refer to Table 3-3. Assume that Zimbabwe and Portugal each has 180 machine minutes available. If each country divides its time equally between the production of toothbrushes and hairbrushes, then total production is
24 toothbrushes and 12 hairbrushes.
48 toothbrushes and 24 hairbrushes
96 toothbrushes and 48 hairbrushes.
720 toothbrushes and 1440 hairbrushes
- 24. Multiple Choice
Which of the following is not correct?
Economists are generally united in their support of free trade
The conclusions of Adam Smith and David Ricardo on the gains from trade have held up well over time
David Ricardo argued that Britain should not restrict imports of grain
Economists’ opposition to trade restrictions is still based largely on the principle of absolute advantage
- 25. Multiple Choice
Net exports equal
exports plus imports
exports minus imports
imports minus exports
GDP minus imports
- 26. Multiple Choice
Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year. There are 30 workers in each country. No trade occurs between the two countries. Boatland produces and consumes 75 units of wheat and 375 units of fish per year while Farmland produces and consumes 375 units of wheat and 75 units of fish per year. If trade were to occur, Boatland would trade 90 units of fish to Farmland in exchange for 80 units of wheat. If Boatland now completely specializes in fish production, how many units of fish could it now consume along with the 80 units of imported wheat?
490 units
500 units
610 units
660 units
- 27. Multiple Choice
Refer to Table 23-5. In 2007, Batterland’s nominal GDP was
$300
$390
$400
$540
- 28. Multiple Choice
The information below was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest?
Kenya, Tanzania, Zimbabwe
Tanzania, Kenya, Zimbabwe
Zimbabwe, Kenya, Tanzania
Zimbabwe, Tanzania, Kenya
- 29. Multiple Choice
The economy's inflation rate is the
price level in the current period
absolute change in the price level from the previous period
change in the gross domestic product from the previous period
percentage change in the price level from the previous period
- 30. Multiple Choice
In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these numbers, the hospital cost about
$2.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars
$2.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars
$2.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars
$2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars
- 31. Multiple Choice
The CPI is more commonly used as a gauge of inflation than the GDP deflator is because
the CPI is easier to measure
the CPI is calculated more often than the GDP deflator is
the CPI better reflects the goods and services bought by consumers.
the GDP deflator cannot be used to gauge inflation
- 32. Multiple Choice
Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket’s cost was $50; in 2004, the basket’s cost was $52; and in 2006, the basket’s cost was $54.60. The value of the CPI in 2004 was
96.2
102.0.
104.0
152.0
- 33. Multiple Choice
Scenario 25-1.
An economy’s production form takes the form Y = AF(L, K, H, N)
Refer to Scenario 25-1. If the production function has the constant-returns-to-scale property, and output is zero whenever some input is zero, then it is possible that the specific form of the production function is
Y = 4L + 2K + 3H + N
Y = (L + K + H + N)/4
Y =2(LKHN)^0.25
Y = 4(L^3 × K^4 × H × N)^0.5
- 34. Multiple Choice
Given that a country’s real output has increased, in which of the following cases can we be sure that its productivity also has increased?
(i) The total number of hours worked rose.
(ii) The total number of hours worked stayed the same
(iii) The total number of hours worked fell
Both (ii) and (iii) are correct
- 35. Multiple Choice
Over the past 100 years, U.S. real GDP per person has doubled about every 35 years. If, in the next 100 years, it doubles every 25 years, then a century from now U.S. real GDP per person will be
4 times higher than it is now
8 times higher than it is now
12 times higher than it is now
16 times higher than it is now
- 36. Multiple Choice
All else equal, if there are diminishing returns, then which of the following is true if a country increases its capital by one unit?
Output will rise by more than it did when the previous unit was added
Output will rise but by less than it did when the previous unit was added.
Output will fall by more than it did when the previous unit was added.
Output will fall but by less than it did when the previous unit was added
- 37. Multiple Choice
When a country saves a larger portion of its GDP than it did before, it will have
more capital and higher productivity.
more capital and lower productivity
less capital and higher productivity
less capital and lower productivity
- 38. Multiple Choice
People who buy newly issued stock in a corporation such as Crate and Barrel provide
debt finance and so become part owners of Crate and Barrel
debt finance and so become creditors of Crate and Barrel
equity finance and so become part owners of Crate and Barrel
equity finance and so become creditors of Crate and Barrel
- 39. Multiple Choice
Which of the following is correct?
In the national income accounts, investment and private saving refer to the same thing
In a closed economy if national saving is greater than zero, then everyone must be saving
The financial system channels funds from savers to borrowers
People whose consumption exceeds their income are savers
- 40. Multiple Choice
Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000. What are private saving, public saving, and national saving?
(i) 1,500, 1,000, and 500, respectively
(ii) 1,000, 500, and 1,500, respectively
(iii) 500, 1,500, and 1,000, respectively
None of (i), (ii), and (iii) is correct
- 41. Multiple Choice
The labor-force participation rate measures the percentage of the
total adult population that is in the labor force
total adult population that is employed
labor force that is employed
labor force that is either employed or unemployed
- 42. Multiple Choice
In one year, you meet 52 people who are each unemployed for one week and eight people who are each unemployed for the whole year. Normally there are 52 weeks in a year. What percentage of the unemployment spells you encountered was short-term, and what percentage of the unemployment you encountered in a given week was long-term?
52 percent and 13.3 percent
52 percent and 88.9 percent
86.7 percent and 13.3 percent
86.7 percent and 88.9 percent
- 43. Multiple Choice
Workers searching for jobs that best suit them is most closely associated with
cyclical unemployment
frictional unemployment
seasonal unemployment
structural unemployment
- 44. Multiple Choice
Collective bargaining refers to
the process by which the government sets exemptions from the minimum wage law
setting the same wage for all employees to prevent conflict among workers
firms colluding to set the wages of employees in order to keep them below equilibrium
the process by which unions and firms agree on the terms of employment
- 45. Multiple Choice
The consumer price index was 225 in 2006 and 236 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period?
1.6 percent
4.9 percent
6.82 percent
11.4 percent
- 46. Multiple Choice
The GDP deflator reflects the
level of prices in the base year relative to the current level of prices
current level of prices relative to the level of prices in the base year
level of real output in the base year relative to the current level of real output
current level of real output relative to the level of real output in the base year
- 47. Multiple Choice
The price of domestically produced DVD players increases dramatically, causing a 1 percent increase in the CPI. The price increase will most likely cause the GDP deflator to increase by
(i) more than 1 percent
(ii) less than 1 percent
(iii) 1 percent
None of (i), (ii), and (iii) is correct; this particular price increase will not affect the GDP deflator
- 48. Multiple Choice
Suppose that real GDP grew more in Country A than in Country B last year.
(i) Country A must have a higher standard of living than country B
(ii) Country A's productivity must have grown faster than country B's
Both (i) and (ii) are correct
None of (i) and (ii) is correct
- 49. Multiple Choice
Which of the following is correct?
Although levels of real GDP per person vary substantially from country to country, the growth rate of real GDP per person is similar across countries
Productivity is not closely linked to government policies
The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress
Productivity may be measured by the growth rate of real GDP per person
- 50. Multiple Choice
Dilbert’s Incorporated produced 6,000,000 units of software in 2005. At the start of 2006 the pointy-haired boss raised employment from 10,000 total annual hours to 14,000 annual hours and production was 7,000,000 units. Based on these numbers what happened to productivity?
It fell by about 16.7%.
It stayed the same
It rose by about 16.7%
It rose by about 40%.
- 51. Multiple Choice
Human capital is the
knowledge and skills that workers acquire through education, training, and experience
stock of equipment and structures that is used to produce goods and services
total number of hours worked in an economy
same thing as technological knowledge
- 52. Multiple Choice
A change in the tax laws that increases the supply of loanable funds will have a bigger effect on investment when
the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic
the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic
both the demand for and supply of loanable funds are more elastic
both the demand for and supply of loanable funds are more inelastic
- 53. Multiple Choice
World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs. We would expect that this would
raise the demand for existing shares of the stock, causing the price to rise
decrease the demand for existing shares of the stock, causing the price to fall
raise the supply of the existing shares of stock, causing the price to rise
raise the supply of the existing shares of stock, causing the price to fall
- 54. Multiple Choice
Which of the following is not always correct for a closed economy?
National saving equals private saving plus public saving
Net exports equal zero
Real GDP measures both income and expenditures
Private saving equals investment
- 55. Multiple Choice
Which of the following lists correctly identifies the four expenditure categories of GDP?
consumption, government purchases, investment, net-exports
consumption, investment, depreciation, net-exports
consumption, saving, investment, depreciation
consumption, government purchases, investment, savings
- 56. Multiple Choice
A person who is counted as unemployed by the Bureau of Labor Statistics
(i) is also in the labor force.
(ii) must have recently looked for work or be on temporary layoff
iii) be at least 16 years old
All of (i), (ii), and (iii) are correct
- 57. Multiple Choice
The efficiency-wage theory of worker health is
more relevant for explaining unemployment in less developed countries than in rich countries
more relevant for explaining unemployment in rich countries than in less developed countries
equally relevant for explaining unemployment in less developed countries and in rich countries
not relevant for explaining unemployment
- 58. Multiple Choice
When a union raises the wage above the equilibrium level, it
reduces both the quantity of labor supplied and the quantity of labor demanded, resulting in unemployment
reduces the quantity of labor supplied and raises the quantity of labor demanded, resulting in unemployment
raises the quantity of labor supplied and reduces the quantity of labor demanded, resulting in unemployment
raises both the quantity of labor supplied and the quantity of labor demanded, resulting in unemployment
- 59. Multiple Choice
The CPI was 120 in 2000 and 132 in 2001. Dorgan borrowed money in 2000 and repaid the loan in 2001. If the nominal interest rate on the loan was 12 percent, then the real interest rate was
2 percent
10 percent
12 percent
22 percent
- 60. Multiple Choice
The consumer price index is used to
convert nominal GDP into real GDP.
turn dollar figures into meaningful measures of purchasing power
characterize the types of goods and services that consumers purchase
measure the quantity of goods and services that the economy produces
- 61. Multiple Choice
The price index was 120 in 2006 and 127.2 in 2007. What was the inflation rate?
5.7 percent
6.0 percent
7.2 percent
27.2 percent
- 62. Multiple Choice
In computing the consumer price index, a base year is chosen. Which of the following statements about the base year is correct?
The base year is always the first year among the years for which computations are being made
It is necessary to designate a base year only in the simplest case of two goods; in more realistic cases, it is not necessary to designate a base year
The value of the consumer price index is always 100 in the base year
The base year is always the year in which the cost of the basket was highest among the years for which computations are being made
- 63. Multiple Choice
For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?
$4 trillion and $1 trillion, respectively
$4 trillion and $-1 trillion, respectively
$2 trillion and $1 trillion, respectively
$2 trillion and $-1 trillion, respectively
- 64. Multiple Choice
For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?
4 trillion and $1 trillion, respectively
$4 trillion and $-1 trillion, respectively
$2 trillion and $1 trillion, respectively
$2 trillion and $-1 trillion, respectively
- 65. Multiple Choice
Unemployment that results because the number of jobs available in some labor markets may be insufficient to give a job to everyone who wants one is called
the natural rate of unemployment
cyclical unemployment
structural unemployment
frictional unemployment
- 66. Multiple Choice
Which of the following does not help reduce frictional unemployment?
(i) government-run employment agencies
(ii) public training programs
(iii) unemployment insurance
All of (i), (ii), and (iii) help reduce frictional unemployment
- 67. Multiple Choice
U.S. Department of Labor data show that minimum-wage workers tend to be
young and less educated
young and more educated
old and less educated
old and more educated
- 68. Multiple Choice
The amount of unemployment that an economy normally experiences is called the
average rate of unemployment
natural rate of unemployment
cyclical rate of unemployment
typical rate of unemployment
- 69. Multiple Choice
Most, but not all, athletic apparel sold in the United States is imported from other nations. If the price of athletic apparel increases, the GDP deflator will
increase less than will the consumer price index
increase more than will the consumer price index
not increase, but the consumer price index will increase
increase, but the consumer price index will not increase
- 70. Multiple Choice
A barber shop produces 96 haircuts a day. Each barber in the shop works 8 hours per day and produces the same number of haircuts per hour. If the shop’s productivity is 3 haircuts per hour of labor, then how many barbers does the shop employ?
2
3
4
6
- 71. Multiple Choice
If an economy with constant returns to scale were to double its physical capital stock, its available natural resources, and its human capital, but leave the size of the labor force the same,
(i) its output would stay the same and so would its labor productivity
(ii) its output and labor productivity would increase, but less than double
(iii) its output and labor productivity would increase by more than double
None of (i), (ii), and (iii) is correct
- 72. Multiple Choice
The Peapod Restaurant uses all of the following to produce vegetarian meals. Which of them is an example of physical capital?
the owner's knowledge of how to prepare vegetarian entrees
the money in the owner's account at the bank from which she borrowed money
the tables and chairs in the restaurant
the land the restaurant was built on
- 73. Multiple Choice
Suppose the economy is closed and consumption is 6,500, taxes are 1,500, and government purchases are 2,000. If national saving amounts to 1,000, then what is GDP?
(i) 9,500
(ii) 10,000
(iii) 10,500
None of (i), (ii), and (iii) is correct
- 74. Multiple Choice
In a closed economy, what does (T - G) represent?
national saving
investment
private saving
public saving
- 75. Multiple Choice
What would happen in the market for loanable funds if the government were to increase the tax on interest income?
Interest rates would rise
Interest rates would be unaffected
Interest rates would fall
The effect on the interest rate is uncertain
- 76. Multiple Choice
The natural rate of unemployment
(i) arises from a single problem that has a single solution
(ii) is easy for policymakers to reduce
(iii) Both (i) and (ii) are correct
None of (i), (ii), and (iii) is correct
- 77. Multiple Choice
Refer to Figure 28-1. If the government imposes a minimum wage of $4, then how many workers will be employed?
3000
4000
5000
7000
- 78. Multiple Choice
Suppose that efficiency wages become more common in the economy. Economists would predict that this would
increase the quantity demanded and decrease the quantity supplied of labor, thereby decreasing the natural rate of unemployment
decrease the quantity demanded and increase the quantity supplied of labor, thereby increasing the natural rate of unemployment
increase the quantity demanded and decrease the quantity supplied of labor, thereby increasing the natural rate of unemployment
decrease the quantity demanded and increase the quantity supplied of labor, thereby decreasing the natural rate of unemployment
- 79. Multiple Choice
Consumers decide to buy more computers and fewer typewriters. As a result, computer companies expand production while typewriter companies lay-off workers. This is an example of
frictional unemployment created by efficiency wages
frictional unemployment created by sectoral shifts
structural unemployment created by efficiency wages
structural unemployment created by sectoral shifts
- 80. Multiple Choice
A firm may pay efficiency wages in an attempt to
(i) reduce incentives to shirk
(ii) reduce turnover
(iii) attract a well-qualified pool of applicants
All of (i), (ii), and (iii) are correct
- 81. Multiple Choice
During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits
Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply increase
Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease
The decision to hold relatively more currency would make the money supply increase. The decision to hold relatively more excess reserves would make the money supply decrease
The decision to hold relatively more currency would make the money supply decrease. The decision to hold relatively more excess reserves would make the money supply increase
- 82. Multiple Choice
The measure of the money stock called M1 includes
wealth held by people in their checking accounts
wealth held by people in their savings accounts
wealth held by people in money market mutual funds
everything that is included in M2 plus some additional items
- 83. Multiple Choice
In a system of 100-percent-reserve banking, the purpose of a bank is to
make loans to households
influence the money supply
give depositors a safe place to keep their money
buy and sell gold.
- 84. Multiple Choice
If the reserve ratio for all banks is 5 percent, then $2,500 of additional reserves can create up to
$62,500 of new money
$50,000 of new money
$45,600 of new money
$37,500 of new money
- 85. Multiple Choice
High and unexpected inflation has a greater cost
for those who save than for those who borrow
for those who hold a little money than for those who hold a lot of money
for those whose wages increase by as much as inflation, than those who are paid a fixed nominal wage
for savers in low income tax brackets than for savers in high income tax brackets
- 86. Multiple Choice
Refer to Figure 30-3. What quantity is measured along the vertical axis?
the price level
the velocity of money
the value of money
the quantity of money
- 87. Multiple Choice
According to the quantity theory of money, a 2 percent increase in the money supply
causes the price level to fall by 2 percent
leaves the price level unchanged
causes the price level to rise by less than 2 percent
causes the price level to rise by 2 percent
- 88. Multiple Choice
Suppose that velocity rises while the money supply stays the same. It follows that
P*Y must rise
P*Y must fall
P*Y must be unchanged
the effects on P*Y are uncertain
- 89. Multiple Choice
Which type(s) of economies interact with other economies?
only closed economies
only open economies
closed economies and open economies
neither closed nor open economies
- 90. Multiple Choice
The increase in international trade in the United States is partly
due to
(i) improvements in transportation
(ii) advances in telecommunications
(iii) increased trade of goods with a high value per pound
All of (i), (ii), and (iii) are correct
- 91. Multiple Choice
Paine Pharmaceuticals produces medicines in the U.S. Its overseas sales
are an export of the U.S. and increase U.S. net exports
are an export of the U.S. and decrease U.S. net exports
are an import of the U.S. and increase U.S. net exports
are an import of the U.S. and decrease U.S. net exports
- 92. Multiple Choice
If Saudi Arabia had positive net exports last year, then it
sold more abroad than it purchased abroad and had a trade surplus
sold more abroad than it purchased abroad and had a trade deficit
bought more abroad than it sold abroad and had a trade surplus
bought more abroad than it sold abroad and had a trade deficit
- 93. Multiple Choice
Which of the following will decrease U.S. net capital outflow?
(i) capital flight from the United States
(ii) the government budget deficit increases
(iii) the U.S. imposes import quotas
None of (i), (ii), and (iii) is correct.
- 94. Multiple Choice
In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate
income
tastes
Price
Expectations
- 95. Multiple Choice
Unemployment insurance
(i) reduces the hardship of unemployment, but it also increases the amount of unemployment
ii) reduces the incentive for the unemployed to find and take new jobs
(iii) causes workers to be less likely to seek guarantees of job security when they negotiate with employers over the terms of employment
All of (i), (ii), and (iii) are correct
- 96. Multiple Choice
If an economy used gold as money, its money would be
commodity money, but not fiat money
fiat money, but not commodity money
both fiat and commodity money
functioning as a store of value and as a unit of account, but not as a medium of exchange
- 97. Multiple Choice
To decrease the money supply, the Fed could
(i) sell government bonds
ii) increase the discount rate
(iii) increase the reserve requirement
All of (i), (ii) and (iii) are correct
- 98. Multiple Choice
If the public decides to hold more currency and fewer deposits in banks, bank reserves
decrease and the money supply eventually decreases
decrease but the money supply does not change
increase and the money supply eventually increases
increase but the money supply does not change
- 99. Multiple Choice
The manager of the bank where you work tells you that your bank has $5 million in excess reserves. She also tells you that the bank has $300 million in deposits and $255 million dollars in loans. Given this information you find that the reserve requirement must be
50/255
40/255
50/300
40/300
- 100. Multiple Choice
According to monetary neutrality and the Fisher effect, an increase in the money supply growth rate eventually increases
inflation, nominal interest rates, and real interest rates
inflation and nominal interest rates, but does not change real interest rates
inflation and real interest rates, but does not change nominal interest rates.
neither inflation, nominal interest rates, nor real interest rates
- 101. Multiple Choice
Refer to Figure 30-1. If the money supply is MS2 and the value of money is 2, then
the value of money is lower than its equilibrium level.
the price level is higher than its equilibrium level
the quantity of money demanded is greater than the quantity of money supplied
the quantity of money supplied is greater than the quantity of money demanded.
- 102. Multiple Choice
When deciding how much to save, people care most about
after-tax nominal interest rates
after-tax real interest rates
before-tax real interest rates
before-tax nominal interest rates
- 103. Multiple Choice
When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a
movement to the right along the money demand curve
movement to the left along the money demand curve
shift to the right of the money supply curve
shift to the left of the money supply curve
- 104. Multiple Choice
If a dollar currently purchases 10 pesos and someone forecasts that in a year it will be 11 pesos, then the forecast is given in
real terms and implies the dollar will appreciate
real terms and implies the dollar will depreciate
nominal terms and implies the dollar will appreciate
nominal terms and implies the dollar will depreciate
- 105. Multiple Choice
When Claudia, a U.S. citizen, purchases a handbag made in France, the purchase is
both a U.S. and French import
a U.S. export and a French import
a U.S. import and a French export
neither an export nor an import for either country
- 106. Multiple Choice
One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.
its trade surplus fell
its trade surplus rose
its trade deficit fell
its trade deficit rose
- 107. Multiple Choice
Suppose that the nominal exchange rate is 120 yen per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would
appreciate which by itself would make U.S. net exports fall
appreciate which by itself would make U.S. net exports rise
depreciate which by itself would make U.S. net exports fall
depreciate which by itself would make U.S. net exports rise
- 108. Multiple Choice
Refer to this diagram to answer the questions below.
Refer to Figure 32-3. National saving is represented by the
demand curve in panel a
demand curve in panel c
supply curve in panel a
supply curve in panel c
- 109. Multiple Choice
If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate
rises and the quantity of dollars exchanged rises
rises and the quantity of dollars exchanged does not change
falls and the quantity of dollars exchanged falls
falls and the quantity of dollars exchanged does not change
- 110. Multiple Choice
In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then
M1 would increase
M1 would decrease
M1 would not change
M1 might rise or fall
- 111. Multiple Choice
Which of the following functions of money is also a common function of most other financial assets?
(i) a unit of account
(ii) a store of value
iii) medium of exchange
None of (i), (ii), and (iii) is correct
- 112. Multiple Choice
Which of the following is not included in M1?
(i) a $5 bill in your wallet
(ii) $100 in your checking account
(iii) $500 in your savings account
All of (i), (ii), and (iii) are included in M1
- 113. Multiple Choice
The claim that increases in the growth rate of the money supply increase nominal interest rates but not real interest rates is known as the
(i) Friedman Effect
(ii) Hume Effect
(iii) Fisher Effect
None of (i), (ii), and (iii) is correct
- 114. Multiple Choice
If M = 3,000, P = 2, and Y = 12,000, what is velocity?
1/2
2
4
8
- 115. Multiple Choice
You put money into an account and earn an after-tax real interest rate of 2.5 percent. If the nominal interest rate on the account is 8 percent and the inflation rate is 2 percent, then what is the tax rate?
28.00 percent
36.25 percent
43.75 percent
67.50 percent
- 116. Multiple Choice
The term hyperinflation refers to
the spread of inflation from one country to others.
a decrease in the inflation rate
a period of very high inflation
inflation accompanied by a recession
- 117. Multiple Choice
Refer to Figure 30-3. Suppose the relevant money-supply curve is the one labeled MS2; also suppose the economy’s real GDP is 45,000 for the year. If the money market is in equilibrium, then the velocity of money is approximately
4.5
6.0
9.0
12.0
- 118. Multiple Choice
Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions
raise both U.S. net exports and U.S. net capital outflows
raise U.S. net exports and lower U.S. net capital outflows
lower both U.S. net exports and U.S. net capital outflows
lower U.S. net exports and raise U.S. net capital outflows
- 119. Multiple Choice
A Japanese firm buys lumber from the United States and pays for it with yen. Other things the same, Japanese
net exports increase, and U.S. net capital outflow increases
net exports increase, and U.S. net capital outflow decreases
net exports decrease, and U.S. net capital outflow increases
net exports decrease, and U.S. net capital outflow decreases
- 120. Multiple Choice
Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,
the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow.
the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow
the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow.
the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow
- 121. Multiple Choice
A Swiss company sells chocolates to a retailer in the United States. These sales by themselves
decrease U.S. net export and Swiss net exports
decrease U.S. net exports and increase Swiss net exports
increase U.S. and Swiss net exports
increase U.S. net exports and decrease Swiss net exports
- 122. Multiple Choice
Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to
rise because net capital outflow and domestic investment rise
rise because national saving rises
fall because net capital outflow and domestic investment rise
fall because national saving falls
- 123. Multiple Choice
Which of the following is not included in M1?
Currency
demand deposits
savings deposits
travelers' checks
- 124. Multiple Choice
Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the
money supply to fall. To reduce the impact of this the Fed could lower the discount rate.
money supply to fall. To reduce the impact of this the Fed could raise the discount rate
money supply to rise. To reduce the impact of this the Fed could lower the discount rate.
money supply to rise. To reduce the impact of this the Fed could raise the discount rate
- 125. Multiple Choice
When the Fed conducts open-market sales,
it sells Treasury securities, which increases the money supply
it sells Treasury securities, which decreases the money supply
it borrows from member banks, which increases the money supply
it lends money to member banks, which decreases the money supply
- 126. Multiple Choice
If you deposit $100 of currency into a demand deposit at a bank, this action by itself
does not change the money supply.
increases the money supply.
decreases the money supply
has an indeterminate effect on the money supply
- 127. Multiple Choice
An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below.
Refer to Table 29-2. If all banks in the economy have the same reserve ratio as this bank, then a new deposit of $150 into this bank has the potential to increase deposits for all banks by
$866.67
$1,666.67
$2,000.00
an infinite amount.
- 128. Multiple Choice
The classical dichotomy argues that changes in the money supply
affect both nominal and real variables
affect neither nominal nor real variables
affect nominal variables, but not real variables
do not affect nominal variables, but do affect real variables
- 129. Multiple Choice
Sonya, a citizen of Denmark, produces boots and shoes that she sells to department stores in the United States. Other things the same, these sales
increase U.S. net exports and have no effect on Danish net exports
decrease U.S. net exports and have no effect on Danish net exports
increase U.S. net exports and decrease Danish net exports
decrease U.S. net exports and increase Danish net exports
- 130. Multiple Choice
Stacey, a U.S. citizen, buys a bond issued by an Italian pasta manufacturer.
This purchase is foreign direct investment. By itself it increases U.S. net capital outflow
This purchase is foreign direct investment. By itself it decreases U.S. net capital outflow
This purchase is foreign portfolio investment. By itself it increases U.S. net capital outflow
This purchase is foreign portfolio investment. By itself it decreases U.S. net capital outflow
- 131. Multiple Choice
Clear Brook Farms, a U.S. manufacturer of frozen vegetarian entrees, sells cases of its product to stores overseas. Its sales
decrease U.S. exports but increase U.S. net exports
decrease both U.S. exports and U.S. net exports.
increase both U.S. exports and U.S. net exports.
increase U.S. exports but decrease U.S. net exports
- 132. Multiple Choice
When Mexico suffered from capital flight in 1994, U.S. demand for loanable funds
and U.S. net capital outflow rose
and U.S. net capital outflow fell
fell and U.S. net capital outflow rose
rose and U.S. net capital outflow fell
- 133. Multiple Choice
If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate
increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases
increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.
decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases
decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases
- 134. Multiple Choice
Refer to Figure 32-6. Which of the following shifts show the effects of an import quota?
(i) shifting the middle supply curve in panel c to the one to its left
(ii) shifting the demand curve from the right to the left in panel c
iii) shifting the demand curve from the left to the right in panel c
None of (i), (ii), and (iii) is correct.
- 135. Multiple Choice
Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, then in the short-run
real GDP will rise and the price level might rise, fall, or stay the same
real GDP will fall and the price level might rise, fall, or stay the same
the price level will rise, and real GDP might rise, fall, or stay the same
the price level will fall, and real GDP might rise, fall, or stay the same
- 136. Multiple Choice
The model of short-run economic fluctuations focuses on the price level and
(i) real GDP
(ii) economic growth
iii) the neutrality of money
None of (i), (ii), and (iii) is correct
- 137. Multiple Choice
The classical dichotomy refers to the separation of
variables that move with the business cycle and variables that do not
changes in money and changes in government expenditures.
decisions made by the public and decisions made by the government
real and nominal variables.
- 138. Multiple Choice
Which of the following shifts both the short-run and long-run aggregate supply right?
i) an increase in the actual price level
(ii) an increase in the expected price level
(iii) an increase in the capital stock
None of (i), (ii), and (iii) is correct
- 139. Multiple Choice
According to liquidity preference theory, equilibrium in the money market is achieved by adjustments in
the price level.
the interest rate
the exchange rate
real wealth
- 140. Multiple Choice
Suppose the MPC is 0.75. There are no crowding out or investment accelerator effects. If the government increases its expenditures by $200 billion, then by how much does aggregate demand shift to the right? If the government decreases taxes by $200 billion, then by how far does aggregate demand shift to the right?
$800 billion and $800 billion
$800 billion and $600 billion
$600 billion and $600 billion
$600 billion and $450 billion
- 141. Multiple Choice
In the long run, fiscal policy primarily affects
aggregate demand. In the short run, it affects primarily aggregate supply
aggregate supply. In the short run, it affects primarily saving, investment, and growth
saving, investment, and growth. In the short run, it affects primarily aggregate demand.
saving, investment, and growth. In the short run, it affects primarily aggregate supply
- 142. Multiple Choice
A reduction in U.S net exports would shift U.S. aggregate demand
rightward. In an attempt to stabilize the economy, the government could raise taxes
rightward. In an attempt to stabilize the economy, the government could cut taxes
leftward. In an attempt to stabilize the economy, the government could raise taxes
leftward. In an attempt to stabilize the economy, the government could cut taxes
- 143. Multiple Choice
A tax on imported goods is called an
(i) excise tax
ii) tariff
(iii) import quota
None of (i), (ii), and (iii) is correct
- 144. Multiple Choice
When Mexico suffered from capital flight in 1994, Mexico's net capital outflow
and net exports decreased
and net exports increased
increased while net exports decreased
decreased while net exports increased
- 145. Multiple Choice
Which of the following can explain the upward slope of the short-run aggregate supply curve?
nominal wages are slow to adjust to changing economic conditions
as the price level falls, the exchange rate falls
an increase in the money supply lowers the interest rate
an increase in the interest rate increases investment spending
- 146. Multiple Choice
Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run,
real GDP will rise and the price level might rise, fall, or stay the same. In the long-run, real GDP will rise and the price level might rise, fall, or stay the same
the price level will fall, and real GDP might rise, fall, or stay the same. In the long-run, real GDP and the price level will be unaffected
the price level will rise, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall
the price level will fall, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall
- 147. Multiple Choice
Other things the same, if the price level falls, people
increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange increases
increase foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases
decrease foreign bond purchases, so the supply of dollars in market for foreign-currency exchange increases
decrease foreign bond purchases, so the supply of dollars in the market for foreign-currency exchange decreases
- 148. Multiple Choice
Refer to Figure 33-1. If the economy starts at C, an increase in the money supply moves the economy
to A in the long run
to B in the long run
back to C in the long run
to D in the long run
- 149. Multiple Choice
According to the theory of liquidity preference,
(i) if the interest rate is below the equilibrium level, then the quantity of money people want to hold is less than the quantity of money the Fed has created
(ii) if the interest rate is above the equilibrium level, then the quantity of money people want to hold is greater than the quantity of money the Fed has created
(iii) the demand for money is represented by a downward-sloping line on a supply-and-demand graph
All of (i), (ii), and (iii) are correct
- 150. Multiple Choice
Permanent tax cuts shift the AD curve
farther to the right than do temporary tax cuts
not as far to the right as do temporary tax cuts
farther to the left than do temporary tax cuts
not as far to the left as do temporary tax cuts
- 151. Multiple Choice
Suppose there were a large increase in net exports. If the Fed wanted to stabilize output, it could
buy bonds to increase the money supply
buy bonds to decrease the money supply
sell bonds to increase the money supply
sell bonds to decrease the money supply
- 152. Multiple Choice
According to the liquidity preference theory, which of the following events would shift money demand to the left?
an increase in the price level
a decrease in the price level
an increase in the interest rate
a decrease in the interest rate
- 153. Multiple Choice
The real exchange rate measures the
(i) price of domestic currency relative to foreign currency.
ii) price of domestic goods relative to the price of foreign goods
(iii) rate of domestic and foreign interest
None of (i), (ii), and (iii) is correct.
- 154. Multiple Choice
If a country institutes policies that lead domestic firms to desire more capital stock
net capital outflows rise and the real exchange rate rises
net capital outflows rise and the real exchange rate falls
net capital outflows fall and the real exchange rate rises
net capital outflows and the real exchange rate falls.
- 155. Multiple Choice
Which of the following can explain the upward slope of the short-run aggregate supply curve?
nominal wages are slow to adjust to changing economic conditions
as the price level falls, the exchange rate falls
an increase in the money supply lowers the interest rate
an increase in the interest rate increases investment spending
- 156. Multiple Choice
The aggregate quantity of goods and service demanded changes as the price level falls because
real wealth rises, interest rates rise, and the dollar appreciates
real wealth rises, interest rates fall, and the dollar depreciates.
real wealth falls, interest rates rise, and the dollar appreciates
real wealth falls, interest rates fall, and the dollar depreciates
- 157. Multiple Choice
Other things the same, automatic stabilizers tend to
raise expenditures during expansions and recessions
lower expenditures during expansions and recessions
raise expenditures during recessions and lower expenditures during expansions
raise expenditures during expansions and lower expenditures during recessions
- 158. Multiple Choice
Initially, the economy is in long-run equilibrium. The aggregate demand curve then shifts $80 billion to the left. The government wants to change spending to offset this decrease in demand. The MPC is 0.75. Suppose the effect on aggregate demand of a tax change is 3/4 as strong as the effect of a change in government expenditure. There is no crowding out and no accelerator effect. What should the government do if it wants to offset the decrease in real GDP?
Raise both taxes and expenditures by $80 billion dollars
Raise both taxes and expenditures by $10 billion dollars
Reduce both taxes and expenditures by $80 billion dollars
Reduce both taxes and expenditures by $10 billion dollars
- 159. Multiple Choice
If foreigners want to buy more U.S. bonds, then in the market for foreign-currency exchange the exchange rate
and the quantity of dollars traded rises
rises and the quantity of dollars traded falls
falls and the quantity of dollars traded rises
and the quantity of dollars traded falls
- 160. Multiple Choice
Refer to Figure 32-5. Starting from r2 and E3, an increase in the budget deficit can be illustrated as a move to
r1 and E4
r1 and E2
r3 and E4
r3 and E2
- 161. Multiple Choice
In the open-economy macroeconomic model, if investment demand increases, then
the supply of dollars in the market for foreign-currency exchange shifts left
the supply of dollars in the market for foreign-currency exchange shifts righ
the demand for dollars in the market for foreign-currency exchange shifts left
the demand for dollars in the market for foreign-currency exchange shifts right
- 162. Multiple Choice
Which of the following shifts both the short-run and long-run aggregate supply right?
(i) people flee to other countries as a civil war breaks out
(ii) an increase in the actual price level
(iii) an improvement in overall production technology
None of (i), (ii), and (iii) is correct
- 163. Multiple Choice
From 2001 to 2005 there was a dramatic rise in the price of houses. If this made people feel wealthier, then it would shift
aggregate demand right
aggregate demand left
aggregate supply right
aggregate supply left
- 164. Multiple Choice
In which case can we be sure aggregate demand shifts left overall?
people want to save more for retirement and the government raises taxes
people want to save more for retirement and the government cuts taxes
people want to save less for retirement and the government raises taxes
people want to save less for retirement and the government cuts taxes
- 165. Multiple Choice
At a given price level, an increase in which of the following shifts aggregate demand to the right?
i) consumption
(ii) investment
(iii) government expenditures
All of (i), (ii), and (iii) are correct
- 166. Multiple Choice
As the price level rises,
the real exchange rate falls, so net exports fall
the real exchange rate falls, so net exports rise
the real exchange rate rises, so net exports fall
the real exchange rate rises, so net exports rise
- 167. Multiple Choice
According to liquidity preference theory, the opportunity cost of holding money is
the interest rate on bonds
the inflation rate
the cost of converting bonds to a medium of exchange
the difference between the inflation rate and the interest rate on bonds
- 168. Multiple Choice
In the long run, changes in the money supply affect
(i) prices
ii) output
iii) unemployment rates
All of (i), (ii), and (iii
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