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Chloe talked to several stockbrokers and made the following conclusions. Which, if any, of Chloe’s conclusions are correct? a. It is relatively easy to reduce firm-specific risk by increasing the number of companies one holds stock in. b. Stock prices, […]

Suppose that over the last twenty-five years a country’s nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person? a. […]

The risk of a portfolio a. increases as the number of stocks in the portfolio increases. b. is usually measured using a statistic called the standarddiversification. c. is positively related to the average return of the portfolio. d. bears no […]

Which of the following does the Federal Reserve not do? a. It controls the supply of money. b. It acts as a lender of last resort to banks. c. It makes loans to any qualified business that requests one. d. […]

If Huedepool Beer runs into financial difficulty, the stockholders as a. part owners of Huedepool are paid before bondholders get paid anything at all. b. part owners of Huedepool are paid after bondholders get paid. c. creditors of Huedepool are […]

The average income in a rich country, such as the United States or Japan, is more than a. 3 times, but less than 5 times, the average income in a poor country, such as Indonesia or Nigeria. b. 5 times, […]

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run? a. both the natural rate of unemployment and the inflation rate b. the natural rate of unemployment, but […]

A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to a. both higher inflation and higher unemployment in the long run. b. higher inflation and no change in unemployment in the long […]

When supply and demand both increase, equilibrium a. price will increase. b. price will decrease. c. quantity may increase, decrease, or remain unchanged. d. price may increase, decrease, or remain unchanged. In 1974, one could buy a theater for $1.25. […]

In the long run import quotas do not affect the size of net exports. a. True b. False Table 28-11 2010 Labor Data for Tajnia RefetoTable28-11.The unemployment rate of Tajnia in 2010 is about 18.4 percent. a. True b. False […]

Table 23-5 The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2015. Prices and Quantities RefertoTable23-5.This country’s output grew a. 31.3% from […]

The rule of 70 can be stated as follows: A variable with a growth rate of Xpercent per year a. doubles every 70/Xyears. b. doubles every 70(1 – 1/X) years. c. doubles every 70/X2 years. d. doubles every 70/(1 – […]

An American retailer purchased 100 pairs of shoes from a company in Mexico in the second quarter of 2016 but does not sell them to a consumer until the third quarter of 2016. In which quarter(s) does(do) the value of […]

A decrease in government spending a. increases the interest rate and so investment spending increases. b. increases the interest rate and so decreases investment spending decreases. c. decreases the interest rate and so investment spending increases. d. decreases the interest […]

According to the Friedman-Phelps analysis, in the long run actual inflation equals expected inflation and unemployment is at its natural rate. a. True b. False Which of the following is correct? a. Managed funds typically have a higher return than […]

Which of the following is not correct? a. Economists use some familiar words in specialized ways. b. Economics has its own language and its own way of thinking, but few other fields of study do. c. Supply, demand, elasticity, comparative […]

If a country’s purchases of foreign assets exceeds foreign purchases of domestic assets, that country has a. positive net exports and positive net capital outflows. b. positive net exports and negative net capital outflows. c. negative net exports and positive […]

Figure 33-4 RefertoFigure33-4. If the economy starts at A, a decrease in the money supply moves the economy a. to A in the long run. b. to C in the long run. c. back to A in the long run. […]

Suppose there is a tax increase. To stabilize output, the Federal Reserve will a. increase government spending. b. increase the money supply. c. decrease government spending. d. decrease the money supply. In the open-economy macroeconomic model, if there is currently […]

What would happen to the equilibrium price and quantity of latts if coffee shops began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make latts, and scientists discovered that latts […]

By definition, imports are a. people who work in foreign countries. b. goods in which a country has an absolute advantage. c. limits placed on the quantity of goods leaving a country. d. goods produced abroad and sold domestically. Unemployment […]

A firm has three different investment options. Option A will give the firm $10 million at the end of one year, $10 million at the end of two years, and $10 million at the end of three years. Option B […]

Suppose that medical technicians and nurses’ aides are not unionized. If the nurses’ aides unionize, then the wages of a. both medical technicians and nurses’ aides will rise. b. both medical technicians and nurses’ aides will fall. c. medical technicians […]

In the economy of Talikastan in 2015, consumption was $600, exports were $300, GDP was $1300, government purchases were $250, and investment was $300. What were Talikastan’s imports in 2015? a. -$150 b. -$200 c. $200 d. $150 The six […]

Disinflation is like a. slowing a car down, whereas deflation is like putting the car into reverse gear. b. maintaining a car’s speed, whereas deflation is like slowing the car down. c. putting a car into reverse gear, whereas deflation […]

Table 26-2 RefertoTable26-2.Which company had the highest dollar dividend per share? a. Boeing Co. b. Eli Lilly and Co. c. Kraft Foods Group d. Kellogg Co. When the money market is drawn with the value of money on the vertical […]

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans. a. True b. False Which of the following statements about GDP is correct? a. GDP measures two things at […]

A corporation’s earnings are the amount of revenue it receives for the sale of its products a. minus its cost of production as measured by its accountants. Earnings must be paid out as dividends. b. minus its cost of production […]

Which of the following is a source of frictional unemployment? a. changes in the composition of demand among industries or regions b. minimum wages c. labor unions d. None of the above is correct. The adult population in the town […]

“When workers already have a large quantity of capital to use in producing goods and services, giving them an additional unit of capital increases their productivity only slightly.” This statement a. represents an unconventional view of the production process. b. […]

Figure 28-2 RefetoFigure28-2. What do the two lines in the figure measure? a. The top line is the labor force participation rate, and the bottom line is the unemployment rate. b. The top line is the labor force participation rates […]

Rational people make decisions at the margin by a. following marginal traditions. b. behaving in a random fashion. c. thinking in black-and-white terms. d. comparing marginal costs and marginal benefits. According to purchasing-power parity, if the Federal Reserve increased the […]

Market failure is the ability of a single person to have a substantial influence on market prices. a. True b. False Table 3-20 Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. […]

When computing the cost of the basket of goods and services purchased by a typical consumer, which of the following changes from year to year? a. the quantities of the goods and services purchased b. the prices of the goods […]

A decrease in the money supply causes the interest rate to rise so that investment falls. a. True b. False According to classical macroeconomic theory, changes in the money supply affect a. unemployment and the price level. b. unemployment but […]

When two variables move in the same direction, the curve relating them is a. upward sloping, and we say the variables are positively related. b. upward sloping, and we say the variables are negatively related. c. downward sloping, and we […]

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, a. there is a surplus so interest rates will rise. b. there is a surplus so interest rates will fall. c. there is a shortage so […]

Which of the following individuals serve a four-year term? a. the members of the Board of Governors b. the Chair of the Board of Governors c. the members of the FOMC d. All of the above are correct. The gains […]

Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar, the dollar has a. appreciated and so buys more Algerian goods. b. appreciated and so buys fewer Algerian goods. […]

Fundamental analysis shows that Quadrangle Company is fairly valued. Then Quadrangle Company unexpectedly improves its production techniques and unexpectedly hires a new CEO away from another very successful competitor. Suppose this has no effect on the price of the stock […]

Other things the same, as the price level rises, a. the interest rate rises causing aggregate demand to shift. b. the interest rate rises causing a movement along a given aggregate-demand curve. c. the interest rate falls causing aggregate demand […]

According to the theory of liquidity preference, a decrease in the price level causes the a. interest rate and investment to rise. b. interest rate and investment to fall. c. interest rate to rise and investment to fall. d. interest […]

In recent decades Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in a. foreign portfolio investment. b. indirect domestic investment. c. foreign direct investment. d. foreign indirect investment. Suppose […]

Figure 28-3 RefetoFigure28-3.If the government imposes a minimum wage of $4, how many workers will be employed? a. 3,000 b. 4,000 c. 5,000 d. 7,000 According to liquidity preference theory, if the quantity of money demanded is greater than the […]

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is a. the $60 she earns working. b. the $60 […]

A policy change that changes the natural rate of unemployment changes a. neither the long-run Phillips curve nor the long-run aggregate supply curve. b. both the long-run Phillips curve and the long-run aggregate supply curve. c. the long-run Phillips curve, […]

Which of the following is notalways correct for a closed economy? a. National saving equals private saving plus public saving. b. Net exports equal zero. c. Real GDP measures both income and expenditures. d. Private saving equals investment. Table24-7.The table […]

If Congress instituted an investment tax credit, the interest rate would a. rise and saving would rise. b. fall and saving would fall. c. rise and saving would fall. d. fall and saving would rise. A car salesperson gives you […]

Real GDP a. moves in the opposite direction as unemployment. b. increases as production falls. c. falls when households save a smaller fraction of their income. d. All of the above are correct. Figure 33-7. RefertoFigure33-7. Suppose the economy starts […]

A yard sale is an example of a market. a. True b. False Suppose that an anti-smoking campaign in Moscow, Russia, is successful so that Muscovites smoke less and chew gum more. Tobacco companies lay off workers, while chewing gum […]

There is no shortage of scarce resources in a market economy because a. the government makes shortages illegal. b. resources are abundant in market economies. c. prices adjust to eliminate shortages. d. quantity supplied is always greater than quantity demanded […]

If the Kenyan nominal exchange rate declines, and prices are unchanged in Kenya and abroad, then the Kenyan real exchange rate a. does not change. b. rises. c. declines d. None of the above is necessarily correct. An increase in […]

Figure26-4.On the horizontal axis of the graph, Lrepresents the quantity of loanable funds in billions of dollars. RefertoFigure26-4. Regard the position of the Supply curve as fixed, as on the graph. If the real interest rate is 8 percent, the […]

A decrease in quantity demanded a. results in a movement downward and to the right along a demand curve. b. results in a movement upward and to the left along a demand curve. c. shifts the demand curve to the […]

The CPI differs from the GDP deflator in that a. the CPI is an inflation index, while the GDP deflator is a price index. b. substitution bias is not a problem with the CPI, but it is a problem with […]

When the price level falls, people want to a. hold more money and the quantity of aggregate goods and services demanded increases. b. hold more money and the quantity of aggregate goods and services demanded decreases. c. hold less money […]

If Pdenotes the price of goods and services measured in terms of money, then a. 1/Prepresents the value of money measured in terms of goods and services. b. Pcan be regarded as the “overall price level.” c. an increase in […]

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, a. its output would stay the same […]

Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power? a. 80 in Kansas City and […]

A utilities company in the Netherlands buys wind generators made by a U.S. company. It pays from them with previously obtained dollars. By itself, this exchange a. increases both U.S. net exports and U.S. net capital outflow. b. decreases both […]

Fretonia and Libstien are the same except Fretonia has a larger capital stock. Both countries undertake policies that raise their saving rates to the same higher level. We would expect that a. both countries would have permanent increases in their […]

The sooner a payment is received and the higher the interest rate, the greater the present value of a future payment. a. True b. False Suppose that a worker in Boatland can produce either 5 units of wheat or 25 […]

Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase more bonds issued by U.S. corporations. Other things the same, these actions a. raise both U.S. net exports and U.S. net capital outflows. b. raise U.S. net […]

If businesses in general decide that they have overbuilt and so now have too much capital, their response to this would initially shift a. aggregate demand right. b. aggregate demand left. c. aggregate supply right. d. aggregate supply left. Which […]

The inflation rate is the absolute change in the price level from the previous period. a. True b. False Which of the following is included in the investment component of GDP? a. spending to build new houses b. spending to […]

Figure26-5.Figure 26-5 shows the loanable funds market for a closed economy. RefertoFigure26-5.Starting at point A, the enactment of an investment tax credit would likely cause a. the quantity of loanable funds traded to increase to $125 and the interest rate […]

What are the two shortrun effects of increasing the quantity of nation’s money? Write the formula for calculating a GDP deflator using only nominal and real GDP. If the inflation rate decreased from 3.33% to 2.90% between October and November, […]

If the number of sellers in a market increases, then the a. demand in that market will increase. b. supply in that market will increase. c. supply in that market will decrease. d. demand in that market will decrease. The […]

When the real exchange rate for the dollar appreciates, U.S. goods become a. less expensive relative to foreign goods, which makes exports rise and imports fall. b. less expensive relative to foreign goods, which makes exports fall and imports rise. […]

Fundamental analysis shows that stock in Widgets-R-Us has a present value that is lower than its price. a. This stock is overvalued; you should consider adding it to your portfolio. b. This stock is overvalued; you shouldn’t consider adding it […]

Figure 3-5 Refer to Figure3-5. If the production possibilities frontier shown for Merve is for 8 hours of work, then how long does it take Merve to make one purse? a. 1/2 hour b. 2 hours c. 4 hours d. […]

Suppose the government changed the tax laws, with the result that people were encouraged to consume more and save less. Using the loanable funds model, a consequence would be a. lower interest rates and lower investment. b. lower interest rates […]

Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that a. the dollar value of savings increased at 2 percent, and the purchasing power of savings increased […]

The primary purpose of measuring the overall level of prices in the economy is to a. allow for the measurement of GDP. b. allow consumers to know what kinds of prices to expect in the future. c. allow for the […]

A reduction in the inflation rate would make relative prices a. less variable, making it more likely that resources will be allocated to their best use. b. less variable, making it less likely that resources will be allocated to their […]

When a bank loans out $1,000, the money supply a. does not change. b. decreases. c. increases. d. may do any of the above. Figure 33-4 RefertoFigure33-4. In the short run, a favorable shift in aggregate supply would move the […]

Figure 3-3 Refer to Figure3-3. If Dina must work 0.25 hour to produce each taco, then her production possibilities frontier is based on how many hours of work? a. 40 hours b. 100 hours c. 400 hours d. 1600 hours […]

The Federal Open Market Committee meets about a. every six days. b. every six weeks. c. every six months. d. every sixteen months. When Mario’s income decreases, he buys more pasta. For Mario, pasta is a normal good. a. True […]

Microeconomics is the study of a. how money affects the economy. b. how individual households and firms make decisions. c. how government affects the economy. d. how the economy as a whole works. A basic principle of economics is that […]

Figure 2-8 Refer to Figure2-8. For this economy, as more and more hammers are produced, the opportunity cost of an additional hammer produced, in terms of nails, a. remains constant. b. increases. c. decreases. d. This answer cannot be determined […]

A production possibilities frontier is a straight line when a. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. b. an economy is interdependent and engaged in trade […]

Otherwise legal transactions that go unreported or unrecorded are called a. the underground economy. b. the shadow economy. c. the informal economy. d. All of the above are correct. What actions could be taken to stabilize output in response to […]

The Federal Reserve a. does not have an inflation target; if it did it would likely be 1% or less. b. does not have an inflation target; if it did it would likely be in the range of 2%. c. […]

In the long run, a decrease in the money supply growth rate a. shifts both the long-run and the short-run Phillips curves right. b. shifts the long-run Phillips curve left and the short-run Phillips curve right. c. shifts the long-run […]

People who provide you with goods and services a. are acting out of generosity. b. do so because they get something in return. c. have chosen not to become interdependent. d. are required to do so by the government. Which […]

A production possibilities frontier is a graph that shows the combination of outputs that an economy should produce. a. True b. False The supply of loanable funds would shift to the right if either a. tax reforms encouraged greater saving […]

According to the theory of efficiency wages, it may be profitable for firms to keep wages high even in the presence of a surplus of labor. a. True b. False When two variables have a negative correlation, a. when the […]

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, […]

Open-market purchases by the Fed a. make the price level and value of money fall. b. make the price level rise, and make the value of money fall. c. make the price level and make the value of money rise. […]

Someone who has a job but is absent from work because she is on vacation is counted as “employed.” a. True b. False Unions are often thought to cause conflict between different groups of workers — between the insiders who […]

The term hyperinflationrefers to a. the spread of inflation from one country to others. b. a decrease in the inflation rate. c. a period of very high inflation. d. inflation accompanied by a recession. At the equilibrium real interest rate […]

Most studies have found that tobacco and marijuana are substitutes rather than complements. a. True b. False Figure 2-4 Refer to Figure2-4. At which point is this economy producing its maximum possible quantity of doors? a. R b. S c. […]

In June of 2010, the government had a debt of about $8.6 trillion. Over the next year real GDP grew by about 1.6% and inflation was about 2%. What is the largest deficit the government could have run over this […]

If a U.S. citizen buys a dress made in Nepal by a Nepalese firm, then a. U.S. consumption increases, U.S. net exports decrease, and U.S. GDP decreases. b. U.S. consumption increases, U.S. net exports decrease, and U.S. GDP is unaffected. […]

Late in the 2000″2009 decade, real estate prices in the U.S. fell by a greater percentage than they had fallen since the a. 1890s. b. 1930s. c. 1950s. d. 1970s. Adam Smith a. and David Ricardo both opposed free trade. […]

Figure 3-15 RefertoFigure3-15.Jordan should specialize in the production of a. novels. b. poems. c. both goods. d. neither good. If at a given exchange rate U.S. citizens wanted to buy more foreign bonds a. the demand for dollars in the […]

Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit? a. only the one with a low level of output per person. […]

Suppose Turkey increases its saving rate. In the long run a. the growth rates of productivity and real GDP per person increase. b. productivity and real GDP per person increase. c. the growth rate of productivity increases, and real GDP […]

In the open-economy macroeconomic model, if foreign interest rates rise and the U.S interest rate stays the same then, U.S. a. net capital outflow rises, so the supply of dollars in the market for foreign exchange shifts right. b. net […]

The sticky-price theory of the short-run aggregate supply curve says that when the price level is higher than expected, some firms will have a. higher than desired prices, which leads to an increase in the aggregate quantity of goods and […]

Government expenditures on capital goods such as roads could increase aggregate supply. Such effects on aggregate supply are likely to matter more in the short run than in the long run. a. True b. False Figure 3-17 RefertoFigure3-17.Daisy has an […]

Which of the following is notan example of physical capital? a. a new factory building b. a delivery van c. the knowledge of workers d. the office chair in a lawyer’s office According to liquidity preference theory, the money-supply curve […]

An adverse supply shock causes inflation to a. rise and the short-run Phillips curve to shift right. b. rise and the short-run Phillips curve to shift left. c. fall and the short-run Phillips curve to shift right. d. fall and […]

Figure 4-12 RefertoFigure4-12.If these are the only two sellers in the market, then the market quantity supplied at a price of $6 is a. 2 units. b. 10 units. c. 12 units. d. 22 units. Short-term bonds are generally a. […]

Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of a. crystal to be unaffected. b. crystal to decrease. c. crystal to increase. d. lead to increase. […]

International data on the history of real GDP growth rates shows that over the last 120 years or so, rich countries got richer and poor countries got poorer. a. True b. False Which of the following might cause the demand […]

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then a. both the nominal and the real interest rate rise. b. neither the nominal nor the real interest rate rise. c. the […]

When the consumer price index rises, the typical family a. has to spend more dollars to maintain the same standard of living. b. can spend fewer dollars to maintain the same standard of living. c. finds that its standard of […]

Sheri, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included a. in both German GDP and U.S. GDP. b. in German GDP, but is not included in U.S. GDP. c. in U.S. […]

Paul, a U.S. citizen, builds a telescope factory in Israel. His expenditures a. increase U.S. and Israeli net capital outflow. b. increase U.S. net capital outflow, but decrease Israeli net capital outflow. c. decrease U.S. net capital outflow, but increase […]

Each week, the Bureau of Labor Statistics computes and reports the consumer price index. a. True b. False From 1980-1987, U.S. net capital outflow as a percent of GDP became a a. larger positive number. b. smaller positive number. c. […]

Unless two people who are producing two goods have exactly the same opportunity costs, then one person will have a comparative advantage in one good, and the other person will have a comparative advantage in the other good. a. True […]

Economists regard events from the past as a. irrelevant, since history is unlikely to repeat itself. b. of limited interest, since those events seldom provide any useful economic data. c. interesting but not particularly valuable, since those events cannot be […]

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that a. the credit risk associated with Bond A is lower than the […]

Over the last fifty years both real GDP and prices have trended upward in most countries. Continuing real GDP growth and inflation can be explained by a. continuing technological progress alone. b. continuing increases in the money supply alone. c. […]

More than 3 percent of U.S. workers leave their jobs in a typical month. a. True b. False An example of a perfectly competitive market would be the market for a. tennis racquets. b. pizza. c. garbage collection. d. wheat. […]

Figure 3-21 Refer to Figure3-21. Without trade, Uzbekistan produced and consumed 12 bolts and 36 nails and Azerbaijan produced and consumed 14 bolts and 24 nails. Then, each country agreed to specialize in the production of the good in which […]

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs. The growth that arises from capital accumulation is not a free lunch. It requires that society a. conserve resources for future generations. b. sacrifice consumption […]

The Carters’ oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as a. investment. b. government spending. c. consumption of services. d. consumption of durable goods. Based on […]

Two years ago Darryl put $3,000 into an account paying 3 percent interest. How much does he have in the account today? a. $3,180.00 b. $3,182.70 c. $3,183.62 d. None of the above are correct to the nearest cent. If […]

In the late summer of 2005 some regions of the country were suffering from drought. What effect would we expect this to have on the stock of companies such as John Deere that manufacture farm equipment? a. raise the demand […]

A country reported nominal GDP of $200 billion in 2010 and $180 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 105 in 2009. Between 2009 and 2010, a. real output and the price level […]

Minimum wages create unemployment in markets where they create a a. shortage of labor. Minimum wage laws are not the predominant reason for unemployment in the U.S. b. shortage of labor. Minimum wage laws are the predominant reason for unemployment […]

Sirius has just finished high school and started looking for his first job, but has not yet found one. Other things the same, the unemployment rate a. and the labor-force participation rate both increase. b. increases, and the labor-force participation […]

At any meeting of the Federal Open Market Committee, that committee’s voting members consist of a. 5 Federal Reserve Regional Bank Presidents and all the members of the Board of Governors. b. 5 Federal Reserve Regional Bank Presidents and 5 […]

Typical estimates of the sacrifice ratio suggest that a one-percentage-point reduction in the inflation rate requires a. a sacrifice of 5 percent of annual output. b. a sacrifice of 5 percent of government spending. c. an increase in the unemployment […]

Corporations receive no proceeds from the resale of their stock. a. True b. False Table 23-7 The table below contains data for the country of Togogo. The base year is 1974. RefertoTable23-7.From 1976 to 1977, a. inflation was 33.3% and […]

The field of finance primarily studies a. how society manages its scarce resources. b. the implications of time and risk for allocating resources over time. c. firms’ decisions concerning how much to produce and what price to charge. d. how […]

Keynes explained that recessions and depressions occur because of a. excess aggregate demand. b. inadequate aggregate demand. c. excess aggregate supply. d. inadequate aggregate supply. According to studies using international data, an increase in the saving rate a. does not […]

Figure 4-25 The graph below pertains to the supply of paper to colleges and universities. RefertoFigure4-25.All else equal, buyers expecting paper to be more expensive in the future would cause a current move from a. x to y. b. y […]

Figure 3-12 Refer to Figure3-12. If Argentina and Peru each divides its time equally between producing corn and fish, then total production is a. 13 tons of corn and 15 tons of fish. b. 13 tons of corn and 10 […]

Suppose that the real exchange rate between the United States and Brazil is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of […]

Economists would predict that, other things the same, the more generous unemployment compensation a country has, the a. shorter the duration of each spell of unemployment and the higher the unemployment rate. b. shorter the duration of each spell of […]

If the public decides to hold less currency and more deposits in banks, bank reserves a. decrease and the money supply eventually decreases. b. decrease but the money supply does not change. c. increase and the money supply eventually increases. […]

Table 3-22 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. Refer to Table3-22. Assume that Zimbabwe and Portugal each has 60 machine minutes available. Originally, each country divided its time equally […]

In effect, a consumption tax would put all saving automatically into a tax-advantaged savings account similar to an Individual Retirement Account (IRA). a. True b. False In the circular-flow diagram, in the markets for a. goods and services, households and […]

Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to a. decrease consumption, which shifts aggregate supply left. b. decrease consumption, which shifts aggregate demand left. c. increase consumption, which shifts aggregate supply […]

RefertoFigure35-7. The economy would move from C to B a. in the short run if money supply growth increased unexpectedly. b. in the short run if money supply growth decreased unexpectedly. c. in the long run if money supply growth […]

Table 2-1 The following table contains some production possibilities for an economy for a given month. Refer to Table2-1. If the production possibilities frontier is bowed outward, then “?” could be a. 400. b. 450. c. 600. d. 750. Which […]

Which of the following is the correct formula for calculating the unemployment rate? a. b. c. d. An increase in quantity supplied a. results in a movement downward and to the left along a fixed supply curve. b. results in […]

Figure 3-23 The graph below represents the various combinations of ham and cheese (in pounds) that the nation of Bonovia could produce in a given month. Refer to Figure3-23. Whenever Bonovia increases its production of ham by 1 pound per […]

A firm has four different investment options. Option A will give the firm $10 million at the end of one year, $10 million at the end of two years, and $10 million at the end of three years. Option B […]

According to liquidity preference theory, if the price level a. fell, the interest rate would rise, and induce investment spending to rise. b. fell, the interest rate would fall, and induce investment spending to fall. c. rose, the interest rate […]

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal a. cost of leaving was greater than the marginal benefit. b. benefit of […]

If companies from foreign countries build and operate factories in China, then China’s productivity a. and the wages of Chinese workers increase. b. increases but the wages of Chinese workers decrease. c. decreases but the wages of Chinese workers increase. […]

Table 28-4 2010 Labor Data for Adults (ages 16 and older) in Meditor RefetoTable28-4. What is the adult unemployment rate in Meditor? a. 4.2% b. 6.25% c. 6.7% d. 10% The natural rate of unemployment refers to the current unemployment […]

Equilibrium quantity must increase when demand a. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply increase. b. increases and supply does not change, when demand does not change […]

A likely example of substitute goods for most people would be a. tables and chairs. b. bicycles and helmets. c. apple juice and orange juice. d. coffee and sugar. U.S. GDP includes the market value of rental housing, but not […]

According to liquidity preference theory, if the price level decreases, then a. the interest rate falls because money demand shifts right. b. the interest rate falls because money demand shifts left. c. the interest rate rises because money supply shifts […]

Henry can make a bird house in 3 hours and he can make a bird feeder in 1 hour. The opportunity cost to Henry of making a bird house is 1/3 bird feeder. a. True b. False Comparative advantage is […]

The y-coordinate is the a. first number of an ordered pair and represents the point’s horizontal location. b. second number of an ordered pair and represents the point’s horizontal location. c. first number of an ordered pair and represents the […]

If the stock market booms, then a. aggregate demand increases, which the Fed could offset by increasing the money supply. b. aggregate supply increases, which the Fed could offset by increasing the money supply. c. aggregate demand increases, which the […]

Table24-12.Will’s expenditures on food for three consecutive years, along with other values, are presented in the table below. RefertoTable24-12.To the nearest dollar, Will’s 2010 food expenditures in 2009 dollars amount to a. $5,236. b. $5,431. c. $5,524. d. $5,608. Which […]

In 2009, the imaginary nation of Mainland had a population of 7,000 and real GDP of 210,000. In 2010 the population was 7,300 and real GDP of 223,380. Over the year in question, real GDP per person in Mainland grew […]

If the French government increases its expenditures and reduces taxes, then France’s interest rate a. and its exchange rate rise. b. rises and its exchange rate falls. c. falls and its exchange rate rises. d. and its exchange rate fall. […]

Consider three different closed economies with the following national income statistics. Country A has taxes of $40 billion, transfers of $20 billion, and government expenditures on goods and services of $30 billion. County B has private savings of $60 billion, […]

An identity is an equation that a. describes an equilibrium. b. pertains to macroeconomics, not to microeconomics. c. must be true because of how the variables in the equation are defined. d. involves final goods, not intermediate goods. According to […]

Which of the following is always correct? a. Y – I = NCO b. NCO = NX c. NX = I d. All of the above are correct. From the standpoint of the economy as a whole, the role of […]

Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that a. the United States should produce more pork than what it requires and export some of it to Mexico. b. […]

Writing in TheWallStreetJournalin 2009, economist Jeremy Siegel pointed out that the efficient markets hypothesis a. was responsible for the financial crisis of 2008-2009. b. was responsible for the Great Depression of the 1930s. c. claims that prices observed in financial […]

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement. a. It has $25 in reserves and $4,975 in loans. b. It has $250 in reserves and $4,750 […]

In the ordered pair (5, 3), 3 is the a. horizontal location of the point. b. the slope. c. the x-coordinate. d. the y-coordinate. Which of the following is nota reason the aggregate-demand curve slopes downward? As the price level […]

A demand curve shows the relationship between price and a. income. b. quantity demanded. c. production. d. income and quantity demanded. Figure 34-7 RefertoFigure34-7. Which of the following is correct? a. Unemployment rises as the economy moves from point a […]

As the interest rate falls, a. the quantity of money demanded falls, which would reduce a shortage. b. the quantity of money demanded falls, which would reduce a surplus. c. the quantity of money demanded rises, which would reduce a […]

Table 4-13 The demand schedule below pertains to sandwiches demanded per week. RefertoTable4-13.Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following: x = 2. The current price of a sandwich is $3.00. The market […]

Which of the following is correct concerning recessions? a. They come at fairly regular and predictable intervals. b. They are associated with comparatively large increases in investment spending. c. They are any period when real GDP growth is less than […]

If not all prices adjust instantly to changing economic circumstances, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services […]

If the price of Italian shoes imported into the United States increases, then a. both the GDP deflator and the consumer price index will increase. b. neither the GDP deflator nor the consumer price index will increase. c. the GDP […]

The slope of an upward-sloping line is positive, and the slope of a downward-sloping line is negative. a. True b. False Which of the following is correct? a. There is consensus among economists that unions are good for the economy. […]

If over the next year the inflation rate in the euro area is higher than the inflation rate in Japan, then the euro should depreciate relative to the Japanese yen. a. True b. False In the United States in 2012, […]

The classical dichotomy refers to the idea that the supply of money a. is irrelevant for understanding the determinants of nominal and real variables. b. determines nominal variables, but not real variables. c. determines real variables, but not nominal variables. […]

When the Fed lowers the growth rate of the money supply, it must take into account a. only the short-run effect on production. b. only the short-run effects on inflation and production. c. only the long-run effect on inflation. d. […]

The slope of the demand for loanable funds curve represents the a. positive relation between the real interest rate and investment. b. negative relation between the real interest rate and investment. c. positive relation between the real interest rate and […]

Sectoral shifts contribute to structural unemployment. a. True b. False In 1972, one could buy a bag of chips, a pound of hamburger, a package of buns, and a small bag of charcoal for about $2.50. If the same goods […]

Table 28-4 2010 Labor Data for Adults (ages 16 and older) in Meditor RefetoTable28-4. What is the adult female labor force in Meditor? a. 40 million b. 65 million c. 70 million d. 100 million A firm might offer efficiency […]

Suppose buyers of computers and printers regard the two goods as complements. Then an increase in the price of computers will cause a(n) a. decrease in the demand for printers and a decrease in the quantity supplied of printers. b. […]

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is a. 9/5 b. 5/4 c. 4/5 d. None […]

The slope of the supply of loanable funds is based on the logic that an increase in interest rates a. makes saving more attractive. b. makes saving less attractive. c. makes investment more attractive. d. makes investment less attractive. M2 […]

Federal Reserve governors are given long terms to insulate them from politics. a. True b. False Which of the following is notan example of a durable good? a. a refrigerator. b. an automobile. c. a business suit. d. a furnace. […]

A reduction in personal income taxes increases Aggregate Demand through a. an increase in investment spending. b. an increase in national savings. c. an increase in private savings. d. an increase in personal consumption. Which of the following rises when […]

In the long run a reduction in the money supply growth rate affects a. the inflation rate and the natural rate of unemployment. b. the inflation rate but not the natural rate of unemployment. c. neither the inflation rate nor […]

Figure 3-15 RefertoFigure3-15. The opportunity cost of 1 poem for Perry is a. 1/12 novel. b. 1/6 novel. c. 2 novels. d. 6 novels. Figure27-2. The figure shows a utility function for Britney. RefertoFigure27-2. From the appearance of the utility […]

Government-run employment agencies and public training programs are operated by the government to try to facilitate job search and reduce unemployment. a. Almost all economists agree that such programs are of no use. b. Almost all economists agree that such […]

Suppose that M is fixed but that P falls. According to the quantity equation which of the following could both by themselves explain the decrease in P? a. Yrose, Vrose b. Yfell, Vfell c. Yrose, Vfell d. Yfell, Vrose An […]

Most economists believe that in the long run, changes in the money supply a. affect nominal but not real variables. This view that money is ultimately neutral is consistent with classical theory. b. affect nominal but not real variables. This […]

To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant? a. substitution bias b. introduction of new goods c. unmeasured quality change d. income bias If the Fed announced a policy […]

Net capital outflow equals a. the value of domestic assets purchased by foreigners. b. the value of foreign assets purchased by domestic residents. c. the value of domestic assets purchased by foreigners – the value of foreign assets purchased by […]

The Council of Economic Advisers a. was created in 1946. b. advises the president of the United States on economic policy matters. c. writes the annual EconomicReportofthePresident. d. All of the above are correct. Normative statements are a. not usually […]

A movement downward and to the right along a demand curve is called a(n) a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded. Table29-3.An economy starts with $50,000 in currency. All […]

Figure 4-25 The graph below pertains to the supply of paper to colleges and universities. RefertoFigure4-25.All else equal, sellers expecting the price of paper to decrease next month when many college students leave campuses for the summer would cause a […]

Other things the same, if workers and firms expected inflation to be 2%, but it is only 1% then a. employment and production rise. b. employment rises and production falls. c. employment falls and production rises. d. employment and production […]

High and unexpected inflation has a greater cost a. for those who borrow than for those who save. b. for those who hold a little money than for those who hold a lot of money. c. for those whose wages […]

Other things the same,as the price level falls, which of the following increases? a. lending and investment spending b. lending, but not investment spending c. investment spending, but not lending d. neither investment spending nor lending If there are diminishing […]

You have been promised a payment of $400 in the future. In which of the following cases is the present value of this payment the lowest? a. You receive the payment 4 years from now and the interest rate is […]

Suppose Emilio offers you $500 today or $Xin 10 years. If the interest rate is 6 percent, then at what value of X would you be indifferent between the two options? a. X= 809.33 b. X = 855.56 c. X= […]

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow. a. True b. False Which of the following is notcorrect? a. A risk averse person might be willing to hold stocks. b. […]

If a good is normal, then an increase in income will result in a(n) a. increase in the demand for the good. b. decrease in the demand for the good. c. movement down and to the right along the demand […]

Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories. a. True b. False Suppose that the central bank is required to follow a monetary policy rule to stabilize prices. If […]

The most important automatic stabilizer is a. open-market operations. b. the tax system. c. unemployment compensation. d. welfare benefits. In a market economy, supply and demand are important because they a. are direct policy tools used by government agencies to […]

GDP is defined as the a. value of all goods and services produced within a country in a given period of time. b. value of all goods and services produced by the citizens of a country, regardless of where they […]

Investment in human capital has opportunity costs, but investment in physical capital does not. a. True b. False Inflation a. leads people to use more resources to reduce money holdings. There is no way it can make labor markets work […]

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy a. a central bank. b. a charter bank. c. a national bank. d. a state bank. The value of the housing […]

If total spending rises from one year to the next, then which of the following could notbe true? a. the economy is producing a smaller output of goods and services, and goods and services are selling at higher prices. b. […]

A likely example of complementary goods for most people would be a. canoes and paddles. b. snow mobiles and sofas. c. coffee and tea. d. tennis balls and basketballs. The country of Yokovia does not trade with any other country. […]

Interdependence among individuals and interdependence among nations are both based on the gains from trade. a. True b. False In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save equals […]

Figure 2-7 RefertoFigure2-7. Unemployment could cause this economy to produce at which point(s)? a. L, M b. N, O, P, Q c. N, O, P d. Q The CPI is always 1 in the base year. a. True b. False […]

When making investment decisions, investors a. compare the real interest rates offered on different bonds. b. compare the nominal, but not the real, interest rates offered on different bonds. c. purchase the highest-priced bond available. d. All of the above […]

Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at a. prices at and above the equilibrium price. b. prices at and below the equilibrium price. c. prices […]

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink. a. True b. False When an economy is operating at a point on its production possibilities frontier, then a. consumers are content with the mix of goods […]

Which of the following is an argument in favor of a balanced budget rule? a. Some economists believe that rules are better than discretion. b. Per-capita debt is small relative to lifetime income. c. The effect of deficit spending on […]

Actively managed mutual funds usually fail to outperform index funds, and this fact provides evidence in favor of the efficient markets hypothesis. a. True b. False If a rich country reduced subsidies to domestic producers of goods that poor countries […]

From 1980 to 1987 a. foreigners were buying more assets from the United States than Americans were buying abroad. The United States was going into debt. b. Americans were buying more assets abroad than foreigners were buying from the United […]

Economists use the word “money” to refer to a. income generated by the production of goods and services. b. those assets regularly used to buy goods and services. c. financial assets such as stocks and bonds. d. any type of […]

If you are faced with the choice of receiving $500 today or $800 6 years from today, you will be indifferent between the two possibilities if the interest rate is 8.148 percent. a. True b. False Which of the following […]

When a Japanese auto maker opens a factory in the U.S., U.S. net capital outflow a. increases because the foreign company makes a portfolio investment in the U.S. b. declines because the foreign company makes a portfolio investment in the […]

Monetary neutrality means that a change in the money supply a. does not change real GDP. Most economists think this is a good description of the economy in the short run and in the long run. b. does not change […]

If consumer confidence rises, then aggregate demand shifts a. right, making inflation higher than otherwise. b. right, making inflation lower than otherwise. c. left, making inflation higher than otherwise. d. left, making inflation lower than otherwise. Suppose John and Wayne […]

192 Ten Principles of Economics Scenario 1-5 Suppose that you have a choice between going to the movies with a friend for three hours or working at your job. If you go to the movies, you will spend $12 on […]

Ten Principles of Economics Multiple Choice – Section 00: Introduction 1. The English word that comes from the Greek word for “one who manages a household” is a. market. b. consumer. c. producer. d. economy. ANSWER: d POINTS: 1 DIFFICULTY: […]

Ten Principles of Economics 161 65. In the short run, which of the following is not correct? a. Increasing the money supply increases the demand for goods and services. b. Increasing the money supply encourages firms to hire more workers. […]

Ten Principles of Economics 101 47. According to Adam Smith, the success of decentralized market economies is primarily due to a. the basic benevolence of society. b. society’s legal system. c. individuals‘ pursuit of self-interest. d. partnerships that are forged […]

Ten Principles of Economics 121 88. The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its […]

Ten Principles of Economics 181 43. Variations in the standard of living across countries are due almost entirely to differences in each nation’s total output of goods and services. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Difficulty: Moderate […]

Unemployment 6933 23. Refer to Figure 28-3. If the government imposes a minimum wage of $4, how many workers will be unemployed? a. 0 b. 3,000 c. 4,000 d. 7,000 ANSWER: a POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.138 […]

Unemployment 7053 190. It is only among the least skilled and least experienced members of the labor force that minimum-wage laws cause unemployment. a. True b. False ANSWER: True DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.138 – LO: 28–3 NATIONAL STANDARDS: […]

Unemployment 6873 152. Which of the following is not a commonly–cited explanation for the dramatically increasing labor–force participation rates for women from 1950 to the present? a. availability of reliable birth control b. invention of household labor-saving devices such as […]

Unemployment 6913 28. Wanda quit her job because she was unhappy at work. Arnold was fired from his landscaping job because his company was downsizing. Who is eligible for unemployment insurance benefits? a. both Wanda and Arnold b. Wanda but […]

Unemployment 6833 67. President Bigego is running for re-election against Senator Pander. Bigego proclaims that more people are working now than when he took office. Pander says that the unemployment rate is higher now than when Bigego took office. You […]

7072 Unemployment 239. What is the theory of efficiency wages? Provide four reasons that employers might pay efficiency wages. ANSWER: According to the theory of efficiency wages, firms operate more efficiently if wages are above the equilibrium level. Therefore, it […]

Unemployment 7013 70. Data on the unemployment rate in the U.S. since 1960 show that the economy always has some unemployment and that the amount changes from year to year. a. True b. False ANSWER: True DIFFICULTY: Difficulty: Easy LEARNING […]

Unemployment 6853 111. Refer to Table 28-2. The labor-force participation rate of Aridia in 2012 was a. 50%. b. 53.3%. c. 56.25%. d. 88.9%. ANSWER: c POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.136 – LO: 28–1 NATIONAL STANDARDS: United […]

Unemployment 6993 9. The natural rate of unemployment is closely associated with the short-run ups and downs of economic activity. a. True b. False ANSWER: False DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.141 – LO: 28-0 NATIONAL STANDARDS: United States – […]

Unemployment Multiple Choice – Section 00: Introduction 1. To maintain their standard of living, most people rely on a. government assistance. b. their personal savings. c. their labor earnings. d. rental income. ANSWER: c DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.135 […]

Unemployment 6893 194. Which of the following is not an explanation for the existence of unemployment in the long run? a. it takes time for workers to search for the jobs that are best suited for them b. minimum-wage laws […]

Unemployment 6813 27. Who of the following would be included in the Bureau of Labor Statistics’ “unemployed” category? a. Miguel, who is on temporary layoff b. Reta, who worked only 15 hours last week c. Marisa, who neither has a […]

Unemployment 6973 6. Suppose that efficiency wages become more common in the economy. Imposing efficiency wages a. increases the quantity demanded and decreases the quantity supplied of labor. b. decreases the quantity demanded and increases the quantity supplied of labor. […]

Unemployment 7033 130. The Bureau of Labor Statistics’ household survey and establishment survey both yield the same results about total employment. a. True b. False ANSWER: False DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.136 – LO: 28-1 NATIONAL STANDARDS: United States […]

Unemployment 6953 14. When a union raises the wage above the equilibrium level, it a. reduces both the quantity of labor supplied and the quantity of labor demanded. b. reduces the quantity of labor supplied and raises the quantity of […]

7310 The Monetary System © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Monetary System 7311 70. During the early 1930s there […]

The Monetary System 7291 21. Credit cards are a medium of exchange. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.15.143 – LO: 29-1 NATIONAL STANDARDS: United States – BUSPROG: Analytic TOPICS: DISC: Money Money Supply […]

The Monetary System 7151 Multiple Choice – Section 02: The Federal Reserve System 1. Which of the following institutions is a central bank? a. the Bank of Japan b. the Bank of England c. the Federal Reserve System d. All […]

The Monetary System 7251 60. The Fed increases the reserve requirement, but it wants to offset the effects on the money supply. Which of the following should it do? a. sell bonds to increase reserves b. sell bonds to decrease […]

The Monetary System 7211 75. Refer to Table 29-3. If all banks in the economy have the same reserve ratio as this bank, then an increase in reserves of $150 for this bank has the potential to increase deposits for […]

The Monetary System 7171 44. An open-market sale a. increases the number of dollars and the number of bonds in the hands of the public. b. increases the number of dollars in the hands of the public and decreases the […]

The Monetary System 7191 34. If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it a. must increase required reserves by $50. b. will initially see […]

The Monetary System 7111 25. Treasury Bonds are a. liquid, but not a store of value. b. a store of value, but not liquid. c. both liquid and a store of value. d. neither liquid nor a store of value. […]

The Monetary System 7271 100. Refer to Scenario 29-2. Suppose that the Bank of Tazi changes the reserve requirement to 3 percent. Assuming that the banks still want to hold the same percentage of excess reserves what is the value […]

The Monetary System 7231 15. When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by a. more than $1000. b. exactly $1000. c. less than $1000. d. None of the above […]

The Monetary System 7131 66. Which of the following is not included in M1? a. a $5 bill in your wallet b. $100 in your checking account c. $500 in your savings account d. All of the above are included […]

The Monetary System Multiple Choice – Section 00: Introduction 1. You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency a. has no intrinsic value. The exchange is an example of barter. b. […]

Money Growth and Inflation 7541 19. The quantity equation is expressed as _____. The rate at which money changes hands is known as _____. ANSWER: M x V = P x Y, velocity POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.15.148 […]

Money Growth and Inflation 7389 96. Economic variables whose values are measured in goods are called a. dichotomous variables. b. nominal variables. c. classical variables. d. real variables. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.15.148 – LO: 30-1 […]

Money Growth and Inflation 7529 60. According to the classical dichotomy, what changes nominal variables? What changes real variables? ANSWER: The classical dichotomy argues that nominal variables are determined primarily by developments in the monetary system such as changes in […]

Money Growth and Inflation Multiple Choice – Section 00: Introduction 1. Over the past 80 years, prices in the U.S. have risen on average about a. 2 percent per year. b. 4 percent per year. c. 3.6 percent per year. […]

Money Growth and Inflation 7449 218. If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate? a. 4 percent b. 6 percent c. 8 […]

Money Growth and Inflation 7369 60. Open-market purchases by the Fed a. make the price level and value of money fall. b. make the price level rise, and make the value of money fall. c. make the price level and […]

Money Growth and Inflation 7409 137. The principle of monetary neutrality implies that an increase in the money supply will a. increase real GDP and the price level. b. increase real GDP, but not the price level. c. increase the […]

Money Growth and Inflation 7429 177. During the 2008 financial crisis velocity decreased. This means that the rate at which money changed hands a. decreased. Other things the same, a decrease in velocity decreases the price level. b. decreased. Other […]

Money Growth and Inflation 7509 5. In the 1990s, U.S. prices rose at about the same rate as in the 1970s. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.15.151 – LO: 30-0 NATIONAL STANDARDS: United […]

Money Growth and Inflation 7469 12. The shoeleather cost of inflation refers to a. the redistributional effects of unexpected inflation. b. the time spent searching for low prices when inflation rises. c. the waste of resources used to maintain lower […]

Money Growth and Inflation 7349 20. In the long run, money demand and money supply determine a. the value of money and the real interest rate. b. the value of money but not the real interest rate. c. the real […]

Open-Economy Macroeconomics: Basic Concepts 7593 104. A Japanese bank buys U.S. government bonds, this purchase a. increases U.S. net capital outflow and has no affect on Japanese net capital outflow. b. increases U.S. net capital outflow and increases Japanese net […]

Open-Economy Macroeconomics: Basic Concepts 7613 158. A utilities company in the Netherlands buys wind generators made by a U.S. company. It pays from them with previously obtained dollars. By itself, this exchange a. increases both U.S. net exports and U.S. […]

Open-Economy Macroeconomics: Basic Concepts 7633 209. In an open economy, gross domestic product equals $1,970 billion, government expenditure equals $300 billion, investment equals $500 billion, and net capital outflow equals $280 billion. What is consumption expenditure? a. $280 billion b. […]

Open-Economy Macroeconomics: Basic Concepts 7733 33. To increase domestic investment, a country must increase its saving. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.156 – LO: 31-1 NATIONAL STANDARDS: United States – BUSPROG: Analytic […]

7750 Open-Economy Macroeconomics: Basic Concepts Problems 1. Last month a country sold more goods and services to residents of foreign countries than it purchased from them. What does this imply about this country’s trade balance? ANSWER: This country had a […]

Open-Economy Macroeconomics: Basic Concepts 7653 25. Other things the same, the real exchange rate between American and Chinese goods would be higher if a. prices of Chinese goods were higher, or the number of yuan a dollar purchased was higher. […]

Open-Economy Macroeconomics: Basic Concepts 7693 31. A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is a. .867 […]

Open-Economy Macroeconomics: Basic Concepts Multiple Choice – Section 00: Introduction 1. Which type(s) of economies interact with other economies? a. only closed economies b. only open economies c. closed economies and open economies d. neither closed nor open economies ANSWER: […]

Open-Economy Macroeconomics: Basic Concepts 7713 71. If the Kenyan nominal exchange rate declines, and prices are unchanged in Kenya and abroad, then the Kenyan real exchange rate a. does not change. b. rises. c. declines d. None of the above […]

Open-Economy Macroeconomics: Basic Concepts 7573 50. If a country had a trade surplus of $100 billion and then its exports rose by $40 billion and its imports rose by $30 billion, its net exports would now be a. $110 billion […]

Open-Economy Macroeconomics: Basic Concepts 7673 65. Other things the same, which of the following could be a consequence of an appreciation of the U.S. real exchange rate? a. John, a French citizen, decides that Iowa pork is now relatively less […]

A Macroeconomic Theory of the Open Economy 7847 13. A decrease in the budget deficit causes domestic interest rates a. and investment to rise. b. to rise and investment to fall. c. to fall and investment to rise. d. and […]

A Macroeconomic Theory of the Open Economy 7867 63. Refer to Figure 32-5. Starting from 3% and .75, an increase in the government budget surplus can be illustrated as a move to a. 4% and 1 b. 4% and .5 […]

A Macroeconomic Theory of the Open Economy 7787 47. If interest rates rise in the U.S., then other things the same a. foreigners would buy more U.S. bonds which increases the quantity of loanable funds demanded in the U.S. b. […]

A Macroeconomic Theory of the Open Economy 7941 16. In the market for foreign-currency exchange, the source of the supply of dollars is _________. The supply curve is _________ because _____________. ANSWER: net capital outflow, vertical, net capital outflow does […]

A Macroeconomic Theory of the Open Economy 7927 42. In the long run import quotas do not affect the size of net exports. a. True b. False ANSWER: True DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.162 – LO: 32-3 NATIONAL STANDARDS: […]

A Macroeconomic Theory of the Open Economy 7887 112. A large and sudden movement of funds out of a country is called a. arbitrage. b. capital flight. c. crowding out. d. capital mobility. ANSWER: b DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: […]

A Macroeconomic Theory of the Open Economy 7827 8. In the open–economy macroeconomic model, which of the following increases net capital outflow? a. a fall in the real exchange rate, but not a fall in the real interest rate b. […]

A Macroeconomic Theory of the Open Economy 7907 162. Which of the following will decrease U.S. net capital outflow? a. capital flight from the United States b. the government budget deficit increases c. the U.S. imposes import quotas d. None […]

A Macroeconomic Theory of the Open Economy 7807 98. In the open-economy macroeconomic model, if net capital outflow increases then a. the demand for dollars in the market for foreign-currency exchange shifts right. b. the demand for dollars in the […]

A Macroeconomic Theory of the Open Economy Multiple Choice – Section 00: Introduction 1. Over the past three decades, the United States has a. generally had, or been very near to a trade balance. b. had trade deficits in about […]

Aggregate Demand and Aggregate Supply Multiple Choice – Section 00: Introduction 1. Which of the following explains why production rises in most years? a. increases in the labor force b. increases in the capital stock c. advances in technological knowledge […]

Aggregate Demand and Aggregate Supply 8075 22. A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. increase immigration from abroad 2. make trade more […]

Aggregate Demand and Aggregate Supply 8155 82. Which of the following would cause stagflation? a. aggregate demand shifts right b. aggregate demand shifts left c. aggregate supply shifts right d. aggregate supply shifts left ANSWER: d POINTS: 1 DIFFICULTY: Easy […]

Aggregate Demand and Aggregate Supply 8055 131. If countries that imported goods and services from the United States went into recession, we would expect that U.S. net exports would a. rise, making aggregate demand shift right. b. rise, making aggregate […]

Aggregate Demand and Aggregate Supply 8095 63. Other things the same, if the price level is lower than expected, then some firms believe that the relative price of what they produce has a. decreased, so they increase production. b. decreased, […]

Aggregate Demand and Aggregate Supply 8195 54. Stagflation results from continued decreases in aggregate demand. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: ECON.MANK.15.169 – LO: 33-5 NATIONAL STANDARDS: United States – BUSPROG: Analytic TOPICS: DISC: […]

Aggregate Demand and Aggregate Supply 8175 120. According to the “In the News” article, macroprudential tools a. allow a central bank to alter lending for specific industries. b. allow a central bank to alter taxes. c. limit a central bank’s […]

Aggregate Demand and Aggregate Supply 8209 21. Misperceptions theory helps explain what feature of the aggregate demand and aggregate supply model? ANSWER: why the short run aggregate–supply curve slopes upward POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.167 – LO: […]

Aggregate Demand and Aggregate Supply 8015 45. Other things the same, when the price level falls, interest rates a. rise, which means consumers will want to spend more on homebuilding. b. rise, which means consumers will want to spend less […]

Aggregate Demand and Aggregate Supply 8035 91. Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce people to a. decrease consumption, shown as a movement to the left along a given aggregate-demand curve. […]

Aggregate Demand and Aggregate Supply 8135 42. Refer to Optimism. In the long run, the change in price expectations created by optimism shifts a. long–run aggregate supply right. b. long–run aggregate supply left. c. short-run aggregate supply right. d. short-run […]

Aggregate Demand and Aggregate Supply 7975 33. Which of the following is correct concerning recessions? a. They come at fairly regular and predictable intervals. b. They are associated with comparatively large increases in investment spending. c. They are any period […]

Aggregate Demand and Aggregate Supply 7995 40. The model of aggregate demand and aggregate supply a. is different from the model of supply and demand for a particular market, in that we cannot focus on the substitution of resources between […]

Aggregate Demand and Aggregate Supply 8115 6. Which of the following would cause prices and real GDP to rise in the short run? a. an increase in the expected price level b. an increase in the money supply c. a […]

8454 The Influence of Monetary and Fiscal Policy on Aggregate Demand 22. If the Federal Reserve’s goal is to stabilize aggregate demand, then in response to an increase in money demand, the Federal Reserve will _____ the money supply. ANSWER: […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand 8443 51. Explain the logic according to liquidity preference theory by which an increase in the money supply changes the aggregate demand curve. ANSWER: When the money supply increases, the […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand 8383 112. If Congress increases taxes to balance the federal budget, then to prevent unemployment and a recession the Fed will a. reduce interest rates by increasing the money supply. […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand 8423 69. According to a 2009 article in The Economist, the multiplier effect and crowding-out effect would exactly offset each other when the economy is a. operating at full capacity. […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand 8363 71. If the MPC is 0, then the multiplier is a. 0. b. 1. c. infinite. d. None of the above is correct. ANSWER: b POINTS: 1 DIFFICULTY: Moderate […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand 8343 Figure 34-6. On the left-hand graph, MS represents the supply of money and MD represents the demand for money; on the right-hand graph, AD represents aggregate demand. The usual […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand 8263 71. Refer to Figure 34-2. Assume the money market is always in equilibrium, and suppose r1 = 0.08; r2 = 0.12; Y1 = 13,000; Y2 = 10,000; P1 = […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand 8243 34. According to liquidity preference theory, the money-supply curve is a. upward sloping. b. downward sloping. c. vertical. d. horizontal. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: ECON.MANK.15.171 […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand Multiple Choice – Section 00: Introduction 1. Shifts in the aggregate-demand curve can cause fluctuations in a. neither the level of output nor the level of prices. b. the level […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand 8403 Figure 34-7 31. Refer to Figure 34-7. The aggregate-demand curve could shift from AD1 to AD2 as a result of a. an increase in government purchases. b. a decrease […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand 8303 155. The Fed is concerned about stock market booms because the booms a. increase consumption spending. b. increase investment spending. c. increase both consumption and investment spending. d. None […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand 8283 113. According to liquidity preference theory, an increase in the price level shifts the a. money demand curve rightward, so the interest rate increases. b. money demand curve rightward, […]

The Influence of Monetary and Fiscal Policy on Aggregate Demand 8323 194. The Fed can influence the money supply by a. changing how much it lends to banks. b. changing the interest rate it pays banks on the reserves they […]

The Short-Run Trade-off between Inflation and Unemployment 8525 30. A policy change that changes the natural rate of unemployment changes a. neither the long–run Phillips curve nor the long–run aggregate supply curve. b. both the long–run Phillips curve and the […]

The Short-Run Trade-off between Inflation and Unemployment 8545 71. Refer to Figure 35-7. Starting from C and 3, in the long run, an increase in money supply growth moves the economy to a. A and 1. b. back to C […]

The Short-Run Trade-off between Inflation and Unemployment 8485 33. In the long run, policy that changes aggregate demand changes a. both unemployment and the price level. b. neither unemployment nor the price level. c. only unemployment. d. only the price […]

The Short-Run Trade-off between Inflation and Unemployment 8505 70. When aggregate demand shifts left along the short-run aggregate supply curve, a. unemployment and prices rise. b. unemployment rises and prices fall. c. unemployment falls and prices rise. d. unemployment and […]

The Short–Run Trade-off between Inflation and Unemployment Multiple Choice – Section 00: Introduction 1. Closely watched indicators such as the inflation rate and unemployment are released each month by the a. Bureau of the Budget. b. Bureau of Labor Statistics. […]

The Short-Run Trade-off between Inflation and Unemployment 8565 114. In the long run, a decrease in the money supply growth rate a. shifts the short-run Phillips curve left so inflation returns to its original rate. b. shifts the short-run Phillips […]

The Short-Run Trade-off between Inflation and Unemployment 8585 155. The long–run Phillips curve would shift to the left if a. the money supply growth rate increased or labor markets become more flexible. b. the money supply growth rate increased but […]

Six Debates over Macroeconomic Policy 8823 20. Proponents of zero-inflation policies acknowledge that the public is unconcerned about the inflation rate. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.183 – LO: 36-4 NATIONAL STANDARDS: […]

Six Debates over Macroeconomic Policy 8763 23. Inflation reduction has the highest cost when the efforts are a. credible so that the sacrifice ratio is low. b. credible so that the sacrifice ratio is high. c. unexpected so that the […]

Six Debates over Macroeconomic Policy 8783 14. Which of the programs below would not transfer wealth from young to old generations? a. Taxes are reduced as a result of cutting expenditures on education. b. Taxes are raised to improve government […]

Thinking Like an Economist 423 22. A circular-flow diagram is a visual model of the economy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.6 – LO: 2-1 NATIONAL STANDARDS: United States – BUSPROG: Analytic […]

Thinking Like an Economist 283 158. A production possibilities frontier shifts outward when a. the economy experiences economic growth. b. the desires of the economy’s citizens change. c. at least one of the basic principles of economics is violated. d. […]

Thinking Like an Economist 223 38. An example of a price that changes only infrequently is the price of a. stocks on the New York Stock Exchange. b. crude oil. c. residential real estate. d. magazines sold at newsstands. ANSWER: […]

Thinking Like an Economist 243 79. In the circular-flow diagram, another name for goods and services produced by firms is a. factors of production. b. output. c. inputs. d. resources. ANSWER: b POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.6 […]

Thinking Like an Economist 463 133. Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes. a. On the graph, identify the area of feasible outcomes and the area of infeasible outcomes. b. On the […]

Thinking Like an Economist 263 118. Refer to Figure 2-2. If households are buyers in the markets represented by Box C of this circular-flow diagram, then a. Box C must represent the markets for the factors of production. b. Box […]

Thinking Like an Economist 303 194. Refer to Figure 2-7. If this economy devotes all of its resources to the production of engines, then it will produce a. 0 engines and 40 tvs. b. 10 engines and 35 tvs. c. […]

Thinking Like an Economist 363 53. The president of the United States receives tax policy advice from economists in the a. Federal Reserve. b. Department of Justice. c. Department of the Treasury. d. Congressional Budget Office. ANSWER: c POINTS: 1 […]

Thinking Like an Economist 343 10. Normative statements are not a. descriptive. b. prescriptive. c. claims about how the world should be. d. made by economists speaking as policy advisers. ANSWER: a POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.7 […]

Thinking Like an Economist 443 81. The effects of borrowing by the federal government would be studied by a microeconomist rather than a macroeconomist. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.6 – LO: […]

Thinking Like an Economist Multiple Choice – Section 00: Introduction 1. Which of the following is not correct? a. Economists use some familiar words in specialized ways. b. Economics has its own language and its own way of thinking, but […]

Thinking Like an Economist 475 24. Refer to Figure 2-14. What is the opportunity cost of moving from point R to point Q? ANSWER: 80 bushels of apples POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: ECON.MANK.15.6 – LO: 2-1 NATIONAL […]

Thinking Like an Economist 403 50. A relatively steep demand curve indicates that a. quantity demanded will adjust only slightly to a price change. b. quantity demanded will adjust significantly to a price change. c. quantity demanded will not adjust […]

Thinking Like an Economist 323 230. Refer to Figure 2-13. Which of the following combinations of points are both efficient and attainable for this economy? a. G, H b. F, I, L c. F, G, H, I, L d. J, […]

Thinking Like an Economist 383 2. Which of the following is not an example of a graph of a single variable? a. a pie chart b. a bar graph c. a time-series graph d. a scatterplot ANSWER: d POINTS: 1 […]

Interdependence and the Gains from Trade 687 245. Which of the following is not correct? a. Economists are generally united in their support of free trade. b. The conclusions of Adam Smith and David Ricardo on the gains from trade […]

Interdependence and the Gains from Trade 607 96. Refer to Table 3-24. At which of the following prices would both England and Spain gain from trade with each other? a. 16 units of bread for 16 units of cheese b. […]

Interdependence and the Gains from Trade 547 99. Refer to Figure 3-7. If Bintu must work 2 hours to make each cup, then her production possibilities frontier is based on how many hours of work? a. 2 hours b. 4 […]

Interdependence and the Gains from Trade 527 67. Refer to Table 3-17. If the production possibilities frontier is a straight line, then “?” must be a. 180. b. 200. c. 220. d. 240. ANSWER: b POINTS: 1 DIFFICULTY: Difficulty: Moderate […]

Interdependence and the Gains from Trade 587 57. Refer to Table 3-20. Brad has a comparative advantage in the production of a. wheat and Theresa has a comparative advantage in the production of beef. b. beef and Theresa has a […]

Interdependence and the Gains from Trade 707 19. Refer to Table 3-37. Iceland should export a. coolers and import radios. b. radios and import coolers. c. both goods and import neither good. d. neither good and import both goods. ANSWER: […]

Interdependence and the Gains from Trade Multiple Choice – Section 00: Introduction 1. People who provide you with goods and services a. are acting out of generosity. b. do so because they get something in return. c. have chosen not […]

Interdependence and the Gains from Trade 647 171. Refer to Figure 3-17. Suppose Maxine decides to increase her production of tarts by 5. What is the opportunity cost of this decision? a. 2/5 pie b. 2 pies c. 5/2 pies […]

Interdependence and the Gains from Trade 567 16. Travis can mow a lawn in two hours or he can trim a tree in one hour. Ricardo can mow a lawn in three hours or he can trim a tree in […]

Interdependence and the Gains from Trade 727 37. Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Difficulty: Moderate […]

Interdependence and the Gains from Trade 627 136. Refer to Table 3-30. Varick has a comparative advantage in the production of a. wheat. b. cloth. c. both goods. d. neither good. ANSWER: b POINTS: 1 DIFFICULTY: Difficulty: Moderate LEARNING OBJECTIVES: […]

Interdependence and the Gains from Trade 507 31. Refer to Table 3-6. Which of the following represents Zimbabwe’s and Portugal’s production possibilities frontiers when each country has 60 minutes of machine time available? a. Zimbabwe Portugal b. Zimbabwe Portugal c. […]

Interdependence and the Gains from Trade 667 207. Refer to Figure 3-21. Suppose Uzbekistan decides to increase its production of bolts by 10. What is the opportunity cost of this decision? a. 1/2 nail b. 2 nails c. 5 nails […]

742 Interdependence and the Gains from Trade 7. Refer to Scenario 3-1. Which if any good(s) does Greg have an absolute advantage producing? ANSWER: Greg has an absolute advantage in both the production of ice cream and cake. POINTS: 1 […]

The Market Forces of Supply and Demand 935 6. Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at a. prices at and above the equilibrium price. b. […]

The Market Forces of Supply and Demand 995 122. If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of […]

The Market Forces of Supply and Demand 915 83. Suppose there is a decrease in the price of corn. If corn is an input into the production of ethanol, we would expect the supply curve for ethanol to a. shift […]

The Market Forces of Supply and Demand 815 67. Refer to Figure 4-3. If these are the only two consumers in the market, then the market quantity demanded at a price of $15 is a. 0 units. b. 10 units. […]

The Market Forces of Supply and Demand 1055 62. Individual supply curves are summed vertically to obtain the market supply curve. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.19 – LO: 4-3 NATIONAL STANDARDS: […]

The Market Forces of Supply and Demand 795 33. When we move along a given demand curve, a. only price is held constant. b. income and price are held constant. c. all nonprice determinants of demand are held constant. d. […]

The Market Forces of Supply and Demand 1015 158. Refer to Figure 4-25. All else equal, the return of college students to campus in the fall would cause a move from a. x to y. b. y to x. c. […]

The Market Forces of Supply and Demand Multiple Choice – Section 00: Introduction 1. The two words most often used by economists are a. prices and quantities. b. resources and allocation. c. supply and demand. d. efficiency and equity. ANSWER: […]

The Market Forces of Supply and Demand 835 106. Two goods are substitutes when a decrease in the price of one good a. decreases the demand for the other good. b. decreases the quantity demanded of the other good. c. […]

The Market Forces of Supply and Demand 1075 ANSWER: © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1076 The Market Forces of […]

The Market Forces of Supply and Demand 975 83. Refer to Figure 4-20. If price is $25, then quantity demanded and quantity supplied, respectively, are a. 500 units and 500 units. b. 500 units and 800 units. c. 600 units […]

The Market Forces of Supply and Demand 1035 2. In a market economy, supply and demand determine both the quantity of each good produced and the price at which it is sold. a. True b. False ANSWER: True POINTS: 1 […]

The Market Forces of Supply and Demand 775 41. Which of the following characteristics is required for a perfectly competitive market? a. The goods offered for sale are exactly the same. b. There are so many buyers and sellers that […]

The Market Forces of Supply and Demand 895 47. Which of the following events would cause a movement upward and to the right along the supply curve for mangos? a. The number of sellers of mangos increases. b. There is […]

The Market Forces of Supply and Demand 955 46. Which of the following would cause price to increase? a. an increase in supply b. a decrease in demand c. a surplus of the good d. a shortage of the good […]

The Market Forces of Supply and Demand 855 Figure 4-5 146. Refer to Figure 4-5. Which of the following would cause the demand curve to shift from Demand B to Demand C in the market for mattresses? a. a decrease […]

Measuring a Nation’s Income 5671 6. Consumption consists of spending by households on goods and services, with the exception of a. purchases of intangible services. b. purchases of durable goods. c. purchases of new houses. d. spending on education. ANSWER: […]

Measuring a Nation’s Income 5611 3. Which of the following is a way to compute GDP? a. total income earned. b. total expenditures on final goods. c. add up the market values of all final goods and services. d. All […]

Measuring a Nation’s Income 5771 5. GDP does not reflect a. the value of leisure. b. the value of goods and services produced at home. c. the quality of the environment. d. All of the above are correct. ANSWER: d […]

Measuring a Nation’s Income 5751 57. Refer to Table 23-5. In 2017, this country’s a. real GDP was $900, and the GDP deflator was 138.9. b. real GDP was $1250, and the GDP deflator was 128.0. c. real GDP was […]

Measuring a Nation’s Income 5711 88. In the economy of Talikastan in 2015, consumption was $3000, exports were $400, GDP was $5000, imports were $500, and investment was $1400. What were Talikastan’s government purchases in 2015? a. $60 b. $500 […]

Measuring a Nation’s Income Multiple Choice – Section 00: Introduction 1. Macroeconomists study a. the decisions of individual households and firms. b. the interaction between households and firms. c. economy-wide phenomena. d. regulations imposed on firms and unions. ANSWER: c […]

Measuring the Cost of Living 141 23. Refer to Scenario 24-1. In 1975 dollars, a 1975 tennis ball cost $0.10 and a 2005 tennis ball cost a. $0.27, so tennis balls were cheaper in 1975. b. $0.27, so tennis balls […]

Measuring the Cost of Living 181 105. If the nominal interest rate is 4 percent and the real interest rate is 7 percent, then the inflation rate is a. –3 percent. b. 0.75 percent. c. 3 percent. d. 11 percent. […]

Measuring the Cost of Living 21 28. If the consumer price index was 96 in 2012, 100 in 2013, and 102 in 2014, then the base year must be a. 2012. b. 2013. c. 2014. d. The base year cannot […]

Measuring the Cost of Living 81 158. The consumer price index tries to gauge how much incomes must rise to maintain a. an increasing standard of living. b. a constant standard of living. c. a decreasing standard of living. d. […]

Measuring the Cost of Living 161 63. Refer to Table 24–13. Suppose Olivia’s 2009 clothing expenditure in 2010 dollars amounts to $1,440. Then X, the consumer price index for 2009, has a value of a. 120. b. 130. c. 140. […]

Measuring the Cost of Living 121 10. Which of the following statements is true? a. Even if we know the values of the consumer price index for the years 2009 and 2010, we cannot calculate the inflation rate for 2010 […]

Production and Growth 6151 121. Amy discovers a way to produce water heaters so they are less expensive and use less natural gas. Amy’s discovery is a. physical capital. If Amy’s discovery leads to lower natural gas prices, it has […]

Production and Growth 6091 34. The United Kingdom is a. an advanced economy, and over the past century its rate of economic growth has been higher than that of the United States. b. an advanced economy, and over the past […]

Production and Growth 6191 57. The catch-up effect refers to the idea that a. saving will always catch-up with investment spending. b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor. […]

Production and Growth 6111 24. In one day Portal Computer Company made 400 laptops with 1200 hours of labor. What was its productivity? a. 1/3 laptop per hour b. 3 hours per laptop c. 1200 laptops d. 400 laptops ANSWER: […]

Production and Growth 6171 11. The traditional view of the production process is that capital is subject to a. constant returns. b. increasing returns. c. diminishing returns. d. diminishing returns for low levels of capital, and increasing returns for high […]

Production and Growth 6265 15. Why do we refer to physical capital as a produced factor of production? ANSWER: Physical capital originates as an output from the production process, and is subsequently used as an input into the production process. […]

Saving, Investment, and the Financial System 6399 63. A budget surplus a. occurs when the government has debt equal to zero. b. causes government debt to increase. c. exists when government spending is greater than tax revenues. d. reduces the […]

Saving, Investment, and the Financial System 6339 121. Bay City Mining, Inc. has a price of $20 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a […]

Saving, Investment, and the Financial System 6459 89. A government budget deficit affects the supply of loanable funds, rather than the demand for loanable funds, because a. in our model of the loanable funds market, we define “loanable funds” as […]

Saving, Investment, and the Financial System 6319 80. Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. Other things the same we would expect a. the demand for existing shares of stock in this company […]

Saving, Investment, and the Financial System 6379 22. Which of the following equations represents GDP for an open economy? a. Y = C + I + G + NX b. NX = I – G c. I = Y – […]

Saving, Investment, and the Financial System 6519 61. Suppose that you are a broker and people tell you the following about themselves. What sort of bond would you recommend to each? Defend your choices. a. “I am in a high […]

Saving, Investment, and the Financial System 6439 48. Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed. The result would be that the interest rate a. and investment […]

Saving, Investment, and the Financial System 6299 37. Two bonds have the same term to maturity. The first was issued by a state government and the probability of default is believed to be low. The other was issued by a […]

Saving, Investment, and the Financial System 6419 6. Other things the same, when the interest rate rises, a. people would want to lend more, making the supply of loanable funds increase. b. people would want to lend less, making the […]

6530 Saving, Investment, and the Financial System 17. and are the two most important financial intermediaries. ANSWER: Banks, Mutual Funds Mutual Funds, banks POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.126 – LO: 26-1 NATIONAL STANDARDS: United States – BUSPROG: […]

Saving, Investment, and the Financial System 6499 4. When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling shares of stock. a. True b. False ANSWER: False POINTS: […]

Saving, Investment, and the Financial System Multiple Choice – Section 00: Introduction 1. When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures a. capital investment. b. investment in human capital. […]

Saving, Investment, and the Financial System 6479 122. For an imaginary economy, when the real interest rate is 7 percent, the quantity of loanable funds demanded is $500 and the quantity of loanable funds supplied is $500. Currently, the nominal […]

Saving, Investment, and the Financial System 6359 161. Index funds a. buy all the stocks in a given stock index. b. promise to beat the market by a certain percentage known as an index. c. provide a return that is […]

The Basic Tools of Finance 6741 66. Writing in The Wall Street Journal in 2009, economist Jeremy Siegel pointed out that the efficient markets hypothesis a. was responsible for the financial crisis of 2008-2009. b. was responsible for the Great […]

The Basic Tools of Finance 6621 156. According to the rule of 70, if the interest rate is 5 percent, how long will it take for the value of a savings account to double? a. about 3.5 years b. about […]

The Basic Tools of Finance 6701 102. Suppose interest of 5% for two years can be earned on $1,000 saved today with no risk. What is the least amount a person would need to have a 50% chance of winning […]

The Basic Tools of Finance 6661 23. Refer to Figure 27-3. Suppose Paul begins with $900 in wealth. Starting from there, a. Paul would be willing to accept a coin-flip bet that would result in him winning $200 if the […]

The Basic Tools of Finance Multiple Choice – Section 00: Introduction 1. Most financial decisions involve two related elements: a. advice and consent. b. investment and taxes. c. time and risk. d. saving and consumption. ANSWER: c POINTS: 1 DIFFICULTY: […]

The Basic Tools of Finance 6581 78. Al, Ralph, and Stan are all intending to retire. Each currently has $1 million in assets. Al will earn 16% interest and retire in two years. Ralph will earn 8% interest and retire […]

The Basic Tools of Finance 6681 61. Tami knows that people in her family die young, and so she buys life insurance. Preston knows he is a reckless driver and so he applies for automobile insurance. a. These are both […]

The Basic Tools of Finance 6777 24. Thompson Corporation is considering the purchase of a new piece of machinery. Thompson expects the new machinery to increase its revenues by $70,000 at the end of year 1, $60,000 at the end […]

The Basic Tools of Finance 6721 25. If stock prices follow a random walk, then stock investors can make large profits by a. buying stocks whose prices have been falling for several days. b. buying stocks whose prices have been […]

The Basic Tools of Finance 6601 118. Which, if any, of the present values below are computed correctly? a. A payment of $100 to be received one year from today, with a 2 percent interest rate, has a present value […]

The Basic Tools of Finance 6761 43. Managed mutual funds usually outperform mutual funds that are supposed to follow some stock index. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Difficulty: Easy LEARNING OBJECTIVES: ECON.MANK.15.133 – LO: 27-3 NATIONAL […]

The Basic Tools of Finance 6561 38. You put $150 in the bank two years ago and forgot about it. The bank sends you a notice that you now have $169.34 in your account. What interest rate did you earn? […]

Money a. is more efficient than barter. b. makes trades easier. c. allows greater specialization. d. All of the above are correct. The market for diamond rings is closely linked to the market for high-quality diamonds. If a large quantity […]

The nominal interest rate is the a. interest rate corrected for inflation. b. interest rate as usually reported by banks. c. real rate of return to the lender. d. real cost of borrowing to the borrower. An increase in the […]

Figure 2-23 RefertoFigure2-23. The opportunity cost of moving from point B to point D is 15 doghouses. a. True b. False It is claimed that mutual funds have two advantages. The first is that mutual funds allow people with small […]

If people in countries that have had persistently high inflation are skeptical about efforts to reduce inflation, the short- run Phillips curve will remain far to the a. left, and the sacrifice ratio will be low. b. left, and the […]

The price index was 150 in the first year, 142.5 in the second year, and 138.2 in the third year. The economy experienced a. 5.0 percent deflation between the first and second years, and 3.0 percent deflation between the second […]

According to classical macroeconomic theory, changes in the money supply affect a. real GDP and the price level. b. real GDP but not the price level. c. the price level, but not real GDP. d. neither the price level nor […]

Money a. is a perfect store of value. b. is the most liquid asset. c. has intrinsic value, regardless of which form it takes. d. All of the above are correct. Bert put $75 into an account and one year […]

Figure 4-23 RefertoFigure4-23.In this market for watermelons, a severe drought occurs which affects the watermelon crop. The equilibrium price a. increases and the equilibrium quantity decreases. b. decreases and the equilibrium quantity is ambiguous. c. and quantity both increase. d. […]

At the original exchange rate an import quota a. creates a surplus in the market for foreign-currency exchange, so the exchange rate rises. b. creates a surplus in the market for foreign-currency exchange, so the exchange rate falls. c. creates […]

According to purchasing-power parity, when a country’s central bank decreases the money supply, a unit of money a. gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it […]

One prominent debate over macroeconomic policy centers on the question of whether monetary and fiscal policy should be used to try to stabilize the economy. a. True b. False Which of the following is an example of a produced factor […]

Over the past six decades, the U.S. economy has experienced a dramatic increase in the relative importance of international trade and finance. a. True b. False Table 23-6 The table below contains data for the country of Batterland, which produces […]

A “lean against the wind” policy says the government should not use stabilization policy and simply let the economy “weather the storm.” a. True b. False Exceptionally favorable growing conditions in the vineyards of Napa Valley would cause a(n) a. […]

In conducting their research, economists face an obstacle that not all scientists face; specifically, in economics, it is often impractical to a. make use of theory and observation. b. rely upon the scientific method. c. conduct laboratory experiments. d. find […]

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Japan, then which of the following falls? a. the U.S. real exchange rate, but not the U.S. nominal exchange […]

Svetlana is risk averse. Which of the following is correct about Svetlana? a. Her marginal utility of wealth increases as her income increases. b. She will always accept a bet if the probability of winning a dollar is the same […]

Figure 3-21 Refer to Figure3-21. If Uzbekistan and Azerbaijan each spends all its time producing the good in which it has a comparative advantage and trade takes place at a price of 12 bolts for 36 nails, then a. neither […]

The value of net exports equals the value of a. national saving. b. public saving. c. national saving – net capital outflow. d. national saving – domestic investment. The adult population must equal the sum of the employed and the […]

In the basket of goods that is used to compute the consumer price index, which of the following categories of consumer spending is the smallest? a. education & communication b. apparel c. medical care d. recreation Suppose the number of […]

Consider the market for new DVDs. If DVD players became cheaper, buyers expected DVD prices to fall next year, used DVDs became more expensive, and DVD production technology improved, then the equilibrium price of a new DVD would a. rise. […]

A U.S. grocery store chain bought $800,000 worth of Kenyan currency from a bank in Kenya. It then used these funds to buy $800,000 worth of coffee from Kenyan coffee growers. As a result of this exchange, by how much […]

Todays demand curve for gasoline could shift in response to a change in a. todays price of gasoline. b. the expected future price of gasoline. c. the number of sellers of gasoline. d. All of the above are correct. When […]

Imagine that someone offers you $Xtoday or $1,500 in 5 years. If the interest rate is 4 percent, then you would prefer to take the $X today if and only if a. X> 1,055.56. b. X> 1,120.89. c. X> 1,232.89. […]

If the U.S. real exchange rate is greater than 1, then there is the possibility of arbitraging by buying foreign goods to sell in the U.S. a. True b. False Which of the following is an example of a normative […]

Other things the same, continued technological progress and continued increases in the money supply would unambiguously lead to a. rising prices only. b. rising real GDP only. c. rising prices and rising real GDP. d. neither rising prices nor rising […]

AA Appliances sells refrigerators. In 2015 it added $100,000 to its inventory. $10,000 of this addition was from used refrigerators, and the remaining $90,000 was from their purchases of newly manufactured refrigerators. How much of AA’s inventory is included in […]

If a country has a trade surplus a. it has positive net exports and positive net capital outflow. b. it has positive net exports and negative net capital outflow. c. it has negative net exports and positive net capital outflow. […]

Price indexes allow comparisons of dollar figures over time and provide us a sense of how the economy is changing. a. True b. False If purchasing-power parity holds, then the value of the a. real exchange rate is equal to […]

Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen? a. People who held money would feel poorer. b. Prices would rise. c. People who had lent money at […]

If the consumer price index is 120 in 2009 and 139.2 in 2010, then the rate of inflation for 2010 is 39.2 percent. a. True b. False Which of the following is an example of a normative, as opposed to […]

When a union bargains successfully with employers, in that industry, a. both wages and unemployment increase. b. wages increase and unemployment decreases. c. wages decrease and unemployment increases. d. both wages and unemployment decrease. People who are risk averse dislike […]

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply? a. $50 b. $100 […]

U.S. exports are $300 billion, U.S. imports are $500 billion. Which of the following are consistent with the level of net exports? a. The U.S has a trade surplus. The U.S. purchases $800 billion worth of foreign assets and foreign […]

When the market price is above the equilibrium price, the quantity of the good demanded exceeds the quantity supplied. a. True b. False Real Foods produced 400,000 cans of diced tomatoes last year and 460,000 cans of diced tomatoes this […]

When an economist is asked a question like “why is unemployment higher for teenagers than for older workers?” the economist a. is asked to explain the cause of an economic event. b. is asked to recommend a policy to improve […]

The opportunity cost of holding money a. decreases when the interest rate decreases, so people desire to hold more of it. b. decreases when the interest rate decreases, so people desire to hold less of it. c. increases when the […]

The interest-rate effect a. depends on the idea that decreases in interest rates increase the quantity of goods and services demanded. b. depends on the idea that decreases in interest rates decrease the quantity of goods and services demanded. c. […]

Suppose that in some tax year you earned a nominal interest rate of 6 percent. During the time you held these funds inflation was 1 percent. You compute that you made a real after-tax interest rate of 3 percent. What […]

Tom Brady should probably not mow his own lawn because a. his opportunity cost of mowing his lawn is higher than the cost of paying someone to mow it for him. b. he has a comparative advantage in mowing his […]

In which of the following cases would there be an effect on the value of the U.S. consumer price index, but not on the value of the U.S. GDP deflator? a. All of the truck tires that are produced by […]

For the U.S. economy, money holdings are a a. large part of household wealth, and so the interest-rate effect is large. b. large part of household wealth, and so the wealth effect is large. c. small part of household wealth, […]

Trade allows a person to obtain goods at prices that are less than that person’s opportunity cost because each person specializes in the activity for which he or she has the lower opportunity cost. a. True b. False Ken and […]