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If an economy’s exports are $600 billion and its imports are $750 billion, its net exports are a. $1,550 billion b. $150 billion c. -$150 billion d. 1.07. The more institutional constraints that exist in a particular society, a. the […]

At the time of Carol’s 10 year high school reunion she was earning $30,000 and the CPI was 90.Now that it is time for her to attend her 20 year high school reunion, Carol’s income has risen to $65,000 and […]

The sum of durable goods, nondurable goods, and services equals a. investment. b. fixed investment. c. government purchases. d. consumption. e. net exports. Exhibit 2-8 For Maria, the opportunity cost of producing one unit of good Y is ___________ unit(s) […]

The movie “Return of the Jedi” earned $264 million in 1983 when it was released. The CPI in 1983 was 97.8 and the CPI in 2012 was 226.665. Approximately how much did the movie earn in 2012 dollars? a. $590 […]

In 2011, the top 50 percent of income earners in the U.S. paid about __________ percent of the total federal income taxes. a. 57.1 b. 67.1 c. 77.1 d. 87.1 e. 97.1 Simple majority voting will generate the same result […]

Efficiency wage models imply that workers are more productive when they are paid a higher wage, as compared to when they are paid a lower wage. a. True b. False In an economy with 100 million people, 70 million hold […]

The aggregate demand (AD) curve is the graphical representation of production in the short run. a. True b. False When the current state of the economy is such that Real GDP is less than Natural Real GDP, the economy is […]

Which of the following is inconsistent with the burglary crime model presented in the textbook? a. The burglary rate rises during recessions. b. The burglary rate declines during recessions. c. The burglary rate remains does not change because of a […]

The coupon rate is equal to the annual coupon payment a. divided by the face value of the bond. b. divided by the price paid for the bond. c. multiplied by the price paid for the bond. d. divided by […]

According to the Keynesian transmission mechanism, an increase in the money supply causes a(n) __________ in the interest rate and a(n) __________ in investment, which in turn causes a(n) __________ in total expenditures and aggregate demand. a. increase; decrease; decrease […]

Special interest group Q receives a 1/10,000th slice of the economic pie.Its net benefit from either an economic growth policy or a transfer policy is $50,000.In order for group Q to be indifferent between the two policies, the economic growth […]

As the opportunity cost of holding money decreases, the quantity demanded of money a. increases. b. decreases. c. remains unchanged. d. increases, then decreases. e. decreases, then increases. Exhibit 2-1 The PPF illustrates a. constant opportunity costs between guns and […]

In the history of banking, warehouse receipts refer to receipts a. that goldsmiths once issued acknowledging that they held a customer’s gold. b. for storing furniture in a warehouse. c. goldsmiths issued to each other when they borrowed gold. d. […]

According to the textbook, The Wonderful Wizard of Oz is alleged to be a story about a. the California gold strikes of 1849. b. the end of the gold standard in 1934. c. the presidential election of 1896. d. the […]

Increased productivity in the agricultural sector has __________ the output and __________ the prices of agricultural goods. a. increased; reduced b. increased; increased c. decreased; reduced d. decreased; increased e. had no impact on; had no impact on Which set […]

An increase in supply is graphically represented by a leftward shift of the supply curve. a. True b. False If the demand for a particular agricultural product is highly elastic and bad weather causes the supply to decrease, then we […]

A worker is “underemployed” if she is working at a job for which her skills far exceed the requirements for the job. a. True b. False If scarcity didn’t exist, neither would a. rationing devices. b. competition. c. labor. d. […]

A person buys a newly issued bond that matures in 10 years with a face value of $10,000 and a coupon rate of 4%. How much money will the bondholder receive in the tenth year? a. $10,040. b. $10,400. c. […]

If the current Real GDP is less than Natural Real GDP, then the economy is a. in long-run equilibrium. b. in a recessionary gap. c. in an inflationary gap. d. possibly in short-run equilibrium. e. b and d When consumers […]

A tariff on avocadoes ______________ the price of avocadoes, _____________ consumers’ surplus for avocado buyers, _______________ producers’ surplus of avocado growersand __________________ tariff revenue. Because the loss to _____________ is more than the gain to ___________________, there is a net […]

In a situation where two goods can be produced by two different people, it is possible for one person to have a comparative advantage in the production of both goods and the other person to have the comparative advantage in […]

Exhibit 3-9 A wave of immigrants who love to consume X enters the country. An economist would expect a movement in the market for X from a. S1 to S2. b. D2 to D1. c. D1 to D2. d. S2 […]

If an international currency speculator expects that country A will soon be forced to devalue its currency, the speculator will a. buy as much of that currency as possible. b. sell all of his holdings of that currency. c. not […]

Exhibit 7-2 GDP in 1990 is a. $49. b. $51. c. $86. d. $92. e. impossible to calculate without the CPI. Use the information provided in Exhibit 11-4 What is the marginal tax rate on the 23,000th of dollar of […]

The routes or channels that ripple effects created in the money market travel to impact the goods-and-services market are known as a. the transmission lag. b. monetary policy. c. the liquidity trap. d. the transmission mechanism. If GDP is $12,000 […]

If the money market is in the liquidity trap, it is operating in the __________ segment of the __________ demand curve. a. vertical; investment b. vertical; money c. horizontal; investment d. horizontal; money The price of X was $10 in […]

In recent years, the Chinese government€s actions have had an impact on interest rates in the United States. a. True b. False The average tariff rate in the US today is about 40 percent, but it was only 1.6 percent […]

If we assume that the income elasticity of demand for food has been around 0.2 and that agricultural producers have become increasingly more productive, we can conclude that a. prices of food have increased. b. supply increases have been less […]

Suppose the economy goes from a point on its production possibilities frontier (PPF) to a point directly to the left of it. Assuming that the PPF has not shifted, this could be due to a. a gain of resources. b. […]

Which of the following is an example of crowding out? a. A decrease in the rate of growth of the money supply which causes a decrease in Real GDP. b. A budget deficit causes an increase in interest rates, which […]

As the price level rises, ceteris paribus, people holding some of their wealth in monetary form become a. less wealthy and they buy less. b. more wealthy and they buy more. c. less wealthy and they buy more. d. more […]

The term after the bell means after the closing of the stock market. a. True b. False Can a change in the Japanese price level cause the United States to move downward along its J-curve? a. Yes, if the Japanese […]

The demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The supply of seats is fixed. If the university can only charge a single price and wishes to […]

Which of the following statements represents a correct and sequentially accurate economic explanation? a. Goods X and Y are substitutes. The price of X falls, the quantity demanded of X rises, and the demand for Y rises. b. Goods X […]

Which of the following will decrease the money supply? a. an increase in the discount rate (relative to the federal funds rate) b. an increase in the required reserve ratio c. an open market purchase by the Fed d. a […]

Which of the following combinations of factors comes closest to describing the situation in agriculture? a. elastic demand for agricultural products and large swings in supply b. elastic demand for agricultural products and small swings in supply c. inelastic demand […]

In February 2009, Congress passed (and President Obama signed) a $787 billion fiscal stimulus bill in an attempt to improve the economy. a. True b. False When the Federal Open Market Committee (FOMC) votes on policy, they do so a. […]

The real business cycle theory holds that the business cycle a. originates as a result of factors affecting aggregate supply. b. originates as a result of factors affecting aggregate demand. c. is the result of correctly anticipated policies. d. is […]

The __________ rate is the interest rate one bank pays another bank for a loan. a. discount b. mortgage c. reserve requirement d. federal funds e. bank-borrowing Variables X and Y are independent of each other. If we plot X […]

If the PPF for two goods is a downward-sloping straight line, the resources used to produce those goods are equally well suited to the production of both goods. a. True b. False Exhibit 34-8 Assume that the current price of […]

Economists perceive a college applicant’s grade point average and standardized test scores (such as SAT and ACT scores) to be rationing devices. a. True b. False A divisive society is one in which members of society work together for the […]

Exhibit 14-1 What sequence of points shows the short- and long-run consequences of a rise in the money supply under monetarist assumptions? a. A-E-B b. B-D-A c. A-D-B d. B-A Suppose the economy is self-regulating, the price level is 120, […]

Which of the following is not an aspect of Keynesian economics? a. Wages and prices tend to be inflexible downward. b. Supply does not necessarily generate its own demand. c. The interest rate is important in determining the level of […]

The U.S. income tax is currently a __________ tax. a. progressive b. proportional c. regressive d. proactive One reason that helps to explain the law of supply is the law of a. diminishing marginal utility. b. diminishing marginal returns. c. […]

Suppose the dollar appreciates in the foreign exchange markets.What is the impact on U.S. Real GDP? a. It must rise because dollar appreciation shifts the U.S. AD curve leftward. b. It must fall because dollar appreciation shifts the U.S. SRAS […]

Which of the following statements is true? a. National income accountants consider the portion of corporate profits that is used to pay corporate profits taxes to be income earned by households but not received. b. Net domestic product (NDP) is […]

The standard definition of “recession” is a. a period of a positive frictional unemployment rate. b. two consecutive quarters of falling Real GDP. c. the lowest point in a business cycle. d. a period of negative inflation. As a result […]

Exhibit 34-7 The world price of good X is $15. Under a policy of free trade, the U.S. production of good X would be a. 10 units. b. 20 units. c. 25 units. d. 50 units. e. none of the […]

The real balance effect is the change in a. purchasing power that results from a change in income. b. the amount of money one has that results from a change in income. c. purchasing power that results from a change […]

Suppose the market basket consists of 100X, 200Y, and 300Z. Current-year prices are $5 for each unit of X, $2 for each unit of Y, and $3 for each unit of Z. Base-year prices are $2 for each unit of […]

Suppose Congress increases income taxes. This is an example of a. expansionary fiscal policy. b. expansionary monetary policy. c. contractionary fiscal policy. d. contractionary monetary policy. When we speak of expansionary fiscal policy, we are talking about policymakers __________ government […]

In the equation of exchange, GDP divided by the money supply is equal to a. M. b. V. c. P. d. Q. Suppose there are only two countries in the world, Mexico and the United States. In the foreign exchange […]

Exhibit 39-3 If P3 is a target price, the deficiency payment per unit is a. P1. b. P2. c. P3. d. P3 – P1. e. P3 – P2. Exhibit 3-2 Answer: d Good X Suppose equilibrium is at point A. […]

If the demand for agricultural products is price inelastic and the supply is dependent upon weather conditions, then a. price changes are likely to be small, and farm revenues are likely to be highly volatile. b. price changes are likely […]

According to classical economists, if interest rates are flexible, a. saving will equal investment. b. saving may be greater than investment. c. saving may be less than investment. d. any of the above If the money market is in the […]

Suppose that a $4 billion increase in government spending increases Real GDP by $60 billion, and that a $3 billion tax reduction increases Real GDP by $68 billion.In this situation, the tax multiplier is _______________ the government spending multiplier. a. […]

The price of good B has a pattern such that P = $20 on Monday through Thursday of every week, and P = $25 on Fridays.If speculators begin participating in the market for good B, their actions will likely lead […]

Exhibit 12-1 The required reserve ratio is a. 0.10. b. 0.15. c. 0.20. d. 0.25. e. 0.30. Points that lie inside (or below) the PPF are a. unattainable. b. attainable and productive efficient. c. attainable but productive inefficient. d. attainable […]

Exhibit 32-4 If producers of this good engage in rent seeking which results in the government imposing a price floor of P2, then consumers€ surplus ends up being area a. D + E b. A + B + C + […]

Exhibit 3-2 Good X Suppose equilibrium is at point B. Something then changes and equilibrium becomes point C. Which of the following is consistent with the change in equilibrium from point B to C (assuming that good X is a […]

When interest rates in a given economy are reduced, it causes firms to employ __________ capital goods.In terms of the production function (graphed with labor on the horizontal axis and Real GDP on the vertical axis), this then causes____________________ . […]

Exhibit 2-4 The line joining points A and D is called the a. production function frontier. b. utility function. c. production possibilities frontier. d. demand curve. A.W. Phillips collected data on the rate of change in money wages and plotted […]

One reads the following in a newspaper: “Today the president and Congress agreed to impose new restrictive quotas on Japanese cars coming into the country.” As a result, an economist would predict that the a. supply of cars in the […]

Which of the following statements is false? a. An upward-sloping supply curve graphically represents the law of supply. b. A vertical supply curve graphically represents the law of supply. c. If income rises and good X is a normal good, […]

Suppose the economy is experiencing an inflationary gap. Based on available data, the Fed starts implementing contractionary monetary policy, but this moves the economy into a recessionary gap. The most probable explanation is that, because of the total lag in […]

A bank has $50,000 in excess reserves and the required reserve ratio is 10 percent. This means the bank could have __________ in checkable deposit liabilities and __________ in (total) reserves. a. $500,000; $90,000 b. $100,000; $20,000 c. $50,000; $25,000 […]

The proponents of fixed exchange rates argue that flexible exchange rates a. hamper international trade because of uncertainty over what the exchange rate will be. b. force a nation to use its domestic macroeconomic policies to maintain an exchange rate. […]

The economist who won the Nobel Prize in Economics in 1995, and whose name is closely connected with rational expectations theory, is a. Robert Solow. b. Paul Samuelson. c. Milton Friedman. d. Robert Lucas. e. John Maynard Keynes. The government […]

Evidence seems to indicate that the demand for many agricultural products a. has increased much more than supply over the years. b. is relatively elastic. c. is relatively inelastic. d. is relatively income elastic. e. b and d With respect […]

Exhibit 14-2 The economy moves from point 1 to 2 to 3 to 4 to 5 to 6 to 7. What explains this? a. an initial decrease in SRAS, followed by alternating rises in AD and decreases in SRAS b. […]

A simultaneous leftward shift in SRAS and rightward shift in AD may come from the dollar _______________ in the aftermath of a ____________________ in United States real interest rates. a. depreciating; rise b. depreciating; fall c. appreciating; rise d. appreciating; […]

If the minimum wage law sets a price floor above the equilibrium wage in the market for unskilled labor, then the a. minimum wage will create a surplus of unskilled labor. b. minimum wage will create a shortage of unskilled […]

If government removes two people from a prisoner’s dilemma setting (and, in the process, requires that the two persons pay taxes for the service that government provides), it holds that on net a. each of the two persons is better […]

If the economy is on the production possibilities frontier (PPF), the economy is a. productive inefficient. b. operating with no unemployed resources. c. productive efficient. d. b and c e. none of the above According to J-curve theory, imports initially […]

Which of the following exchange rates between the dollar and the peso would a Mexican buyer of American goods most prefer? a. $0.10 = 1 peso b. $0.08 = 1 peso c. $0.06 = 1 peso d. $0.04 = 1 […]

Which of the following statements is false? a. Consumers receive more consumers’ surplus when tariffs do not exist. b. Producers receive more producers’ surplus when tariffs do exist. c. A tariff results in a net loss to society. d. With […]

A three-word synonym for the term ceteris paribus is a. “nothing else changes.” b. “in my opinion.” c. “it is proved.” d. “under this assumption.” Government can overcome the free rider problem by collecting taxes and using the funds to […]

Economists who are in favor of smaller government tend to prefer ________________ when expansionary _______________ policy is needed to raise aggregate demand. a. tax cuts; fiscal b. tax cuts; monetary c. more government spending; fiscal d. more government spending; monetary […]

Exhibit 34-2 The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is PW. At this price, consumers’ surplus equals the area of a. PW DE. b. PW AB. c. PW […]

The federal government began issuing inflation-indexed Treasury bonds in a. 1913. b. 1989. c. 1997. d. 2001. Which of the following best describes how the international trade effect works? a. The price level in the U.S. falls relative to foreign […]

Exhibit 38-2 If the closing price of Dancer’s stock on the previous day was $34.25, what value goes in blank (B)? a. 34.85 b. 34.00 c. 34.75 d. 34.50 e. There is not enough information given to answer this question. […]

The M2 money supply a. includes M1. b. is commonly referred to as the broad definition of the money supply. c. includes savings deposits. d. is larger than M1. e. all of the above Samuelson and Solow, in their 1960 […]

At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which pushes the price __________ toward its equilibrium value. a. surplus; downward b. surplus; upward c. shortage; downward d. shortage; upward Attempts to determine “what is” […]

When computing national income, which of the following is included in compensation of employees? a. wages and salaries paid to employees b. employers’ contributions to Social Security and employee benefit plans c. the monetary value of fringe benefits, tips, and […]

The ability to produce a good at a lower opportunity cost than others is called a(n) __________ advantage. a. complementary b. comparative c. natural d. indigenous Starting from short-run equilibrium, the following occurs: the U.S. dollar depreciates and wage rates […]

Suppose that the exchange rate between the U.S. dollar and the Mexican peso starts out at $0.11 per peso.If the exchange rate then changes to $0.08 per peso, there will be a(n) __________ in the quantity demanded of dollars by […]

Suppose that inventory investment is $20 billion and (total) investment is $680 billion.What does purchases of newly produced capital goods equal? a. $715 billion b. $785 billion c. $750 billion d. $35 billion e. There is not enough information to […]

The quantity demanded of money decreases as the supply of money increases. a. True b. False The space on the freeway is fixed at any instant of time. A supply curve that shows this is a. perfectly horizontal. b. upward […]

In the monetarist version of the AD-AS framework, an increase in the money supply produces a __________ shift of the __________ curve. a. rightward; AD b. rightward; SRAS c. leftward; AD d. leftward; SRAS According to real business cycle theorists, […]

If the demand for a good falls by less than the supply of the good rises, then the good€s equilibrium price will __________ and its equilibrium quantity will __________. a. rise; fall b. rise; rise c. fall; fall d. fall; […]

Situation 32-1 In the early 1980s, the U.S. automobile industry managed to influence the government to negotiate a voluntary export restraint agreement with Japan that was in effect from 1981 until 1985. The predictable result was an average increase in […]

Exhibit 39-2 If P1 is a price support, the quantity of wheat purchased by the market would be equal to a. Q2. b. Q0. c. Q1. d. Q2 – Q1. e. Q1 – Q0. As discussed in the textbook, various […]

Exhibit 3-13 —————————–Quantity Demanded————————————- Assume that Jose, Kaitlyn, Leah, and Maria are the only buyers in this market. Each individual consumer€s demand curve is ________________ sloping and the market demand curve is _________________ sloping. a. upward; also upward b. downward; […]

Every time the Fed buys or sells on the open market, the __________ changes. a. budget deficit b. income tax rate c. money supply d. a and b e. a, b, and c A characteristic of a 45-degree line is […]

The short-run aggregate supply curve shows the various amounts of real output that producers are willing to a. sell at different profit levels. b. sell at different price levels. c. buy at different income levels. d. buy at different price […]

Exhibit 3-4 At a price of $2 _______________ units will be exchanged. a. 5 b. 10 c. 15 d. 20 A simultaneous rightward shift in SRAS and leftward shift in AD may come from the dollar _______________ in the aftermath […]

In 2013, the U.S. federal government spent approximately ___________ trillion. a. $4.9 b. $7.3 c. $3.7 d. $2.1 Suppose the real exchange rate of 115 Japanese yen to the dollar changes to 105 yen to the dollar. In this situation, […]

In year 1 the CPI is 180, and in year 2 the CPI is 192. From year 1 to year 2, Javier’s salary rises from $40,000 to $42,000, and Tom’s salary rises from $55,000 to $57,000. Who is “more than […]

According to the new classical theory, if the public correctly anticipates a government policy to increase aggregate demand, then a. there will be a short-run tradeoff between inflation and unemployment, but there will not be a long-run tradeoff. b. there […]

When a production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, a rise in capital________________________, and a rise in the technology coefficient __________________. a. shifts the production function upward; also shifts the […]

The point where the PPF intersects the horizontal axis is a. unattainable. b. attainable and productive efficient. c. attainable but productive inefficient. d. attainable and neither productive efficient nor productive inefficient. Which of the following statements is true? a. To […]

Look at the following data: The frictional unemployment rate is 2 percent, the structural unemployment rate is 3.5 percent, and the actual unemployment rate is 9.5 percent.The natural unemployment rate is ____________ percent and the cyclical unemployment rate is __________ […]

Which of the following statements is false? a. In recent years, the Chinese government has bought U.S. government bonds, raising interest rates in the United States. b. Among the key features of globalization is the growing integration of the national […]

In the long run, the purchasing power parity theory predicts exchange rates accurately, particularly when there is a large difference in inflation rates across countries. a. True b. False If income tax rates are cut, the size of the budget […]

Harvard University admits a larger percentage of applicants than does India€s Indian Institute of Technology. a. True b. False Exhibit 8-3 A shift in aggregate demand from AD1 to AD2could have been the result of a. a decrease in the […]

When the United States moves upward along the J-curve, it is because a depreciation of the dollar is having the _____________ effect of _____________ the number of dollars spent on imports. a. long-run; increasing b. long-run; reducing c. short-run; increasing […]

The economy is currently on its production possibilities frontier (PPF). A politician says that it is possible to get more of everything—more infrastructure, more schools, more national defense, more spending on social programs, and so on. The politician is a. […]

In year 1 the CPI is 181, and in year 2 the CPI is 195. If Dennis’s salary was $95,000 in year 1, what is the minimum salary he must earn in year 2 to “keep up with inflation”? a. […]

If Jorge is temporarily absent from his regular job because of an industrial dispute, the Bureau of Labor Statistics will classify him as unemployed. a. True b. False Those economists who view the AS curve as being vertical see more […]

When the government decides to increase income taxes, this is an example of contractionary fiscal policy. a. True b. False If the economy is in a recessionary gap, a. Real GDP is greater than Natural Real GDP. b. Real GDP […]

To a bank, checkable deposits are classified as a liability. a. True b. False Why would a candidate for political office speak in general instead of specific terms? a. Because he or she believes voters want to hear generalities, not […]

If the economy is self-regulating and in a recessionary gap, a. wages and prices will fall. b. wages will fall, but prices will rise. c. neither wages nor prices will change. d. wages will rise, but prices will fall. e. […]

The economy is in a recessionary gap and a Keynesian economist advocates expansionary fiscal policy. What is a likely reason this economist advocates expansionary fiscal policy? a. The economist believes the economy is stuck in a recessionary gap and crowding […]

A stock with a price-earnings ratio of 11.2 means that the stock is selling for a closing share price that is 11.2 times its latest available net earnings per share. a. True b. False If labor is immobile between two […]

The sum of the unemployment rate and the employment rate always equals 100 percent. a. True b. False Exhibit 1-1 If the student whose study habits are illustrated here is currently studying for the 2nd hour she should a. cut […]

One example of one-shot inflation occurs when the SRAS curve shifts leftward. a. True b. False The PPF between goods X and Y will be a downward-sloping a. straight line if increasing opportunity costs exist. b. straight line if decreasing […]

Exhibit 39-8 Assume that E1 represents the initial equilibrium in the market for grain X. If all the farmers agree to restrict production and abide by the agreement, a. the price of X increases. b. the equilibrium quantity decreases. c. […]

Persons who choose not to become informed on political and governmental matters because they feel that the costs of becoming informed exceed the benefits of becoming informed are a. rationally ignorant. b. not acting in their own best interests. c. […]

Here is a consumption function: C = C0 + MPC(Yd). If MPC is 0.95, then we know that a. as Yd rises by $1, Co rises by $0.95. b. as Yd rises by $1, C rises by $0.95. c. Yd […]

The economy is in a recessionary gap, wages are inflexible downward, and there is complete crowding out. Which of the following is consistent with this state of affairs? a. The economy will soon self-regulate and produce Natural Real GDP. b. […]

If the Fed raises the discount rate at the same time it conducts an open market sale, it follows that the money supply will a. fall. b. rise. c. remain unchanged. d. There is not enough information to answer the […]

Exhibit 34-1 Considering the data, which of the following terms of trade would both countries agree to? a. 1 unit of Y for 1 unit of X b. 1 unit of Y for 0.75 units of X c. 1 unit […]

If goods are not rationed according to price, if follows that a. they won’t get rationed at all. b. some non-price rationing device will be used to ration the goods. c. first-come-first-served will necessarily be the rationing device used in […]

The coordinates of point A are 400 units of X and 40 units of Y. The coordinates of point B are 480 units of X and 60 units of Y. With X on the horizontal axis and Y on the […]

A farmer has 500 acres on which he has previously grown corn. His yield per acre is 100 bushels of corn. If his production flexibility contract payment is $21,250, then what is the corn payment rate? a. $0.45 b. $0.67 […]

Exhibit 11-5 Assume that the farmer grows wheat and sells it to the miller, the miller turns the wheat into flour and sells it to the baker, and the baker turns the flour into bread and sells it to the […]

Suppose there are 200 million persons in the population, 120 million persons in the civilian labor force, and 90 million persons are employed.The number of persons unemployed is _______ million and the unemployment rate is ___________ percent. a. 30; 25 […]

The Real GDP of country X doubled in 20 years. It follows that the annual growth rate in country X during this time period was a. 4.0 percent. b. 5.0 percent. c. 2.8 percent. d. 3.5 percent. Suppose government spending […]

Between 1940 and 2000, income per person in China a. doubled. b. tripled. c. quadrupled. d. decreased by 5 percent. Here is a consumption function: C = C0 + MPC(Yd). If MPC is 0.80, then we know that a. as […]

Real GDP is GDP a. in current-year prices. b. in base-year prices. c. in GDP-prices. d. in that year’s prices. A candidate who understands that in a two-person race the person closer to the center of the voter distribution will […]

Suppose that for a given good, demand decreases and supply decreases at the same time. If demand decreases by a greater amount than supply decreases, then equilibrium price __________ and equilibrium quantity __________ for that good. a. rises; rises b. […]

As income taxes rise, disposable income __________, causing __________ the AD curve. a. increases; movement down along b. increases; a rightward shift of c. decreases; movement up along d. decreases; a leftward shift of As interest rates rise, the____________ curve […]

If the economy is operating at a point beyond its institutional production possibilities frontier (institutional PPF), then the economy is a. producing Natural Real GDP and operating at the natural unemployment rate. b. producing less than Natural Real GDP and […]

Exhibit 2-5 “In order to produce one more television set, we must forfeit the production of one fax machine.” This statement describes a movement from a. point C to point D. b. point D to point E. c. point E […]

An “increase in demand” means that a. the demand curve has shifted to the left. b. price has declined and consumers want to purchase more of the good. c. the demand curve has shifted to the right. d. the price […]

Exhibit 4-7 How many fewer persons work in the unskilled labor market at the minimum wage (WM) than at the equilibrium wage (W1)? a. (N2 – N1) persons b. (N1 – N3) persons c. (N2 – N3) persons d. N3 […]

Implied in new Keynesian theory is that when policy is correctly anticipated, there is a tradeoff between inflation and unemployment in a. neither the short run nor the long run. b. both the short run and the long run. c. […]

If Germany’s Real GDP falls, this tends to ______________ United States exports, shifting the United States AD curve to the ________________. a. raise; right b. raise; left c. lower; right d. lower; left The interest rate that the Fed charges […]

One major reason for the law of demand is that a. one price changing requires at least one other price to change in the opposite direction. b. people substitute relatively lower-priced goods for relatively higher-priced goods. c. a higher price […]

When the economy is in an inflationary gap, the labor market is experiencing a _____________.In a self-regulating economy, wage rates will then ___________ and the ______________ curve will shift __________________. a. shortage; rise; SRAS; leftward b. shortage; fall; SRAS; leftward […]

China has intervened in the foreign exchange market to maintain the value of its currency vis–vis other countries. a. True b. False An American good with a price tag of $89 costs 809 pesos. The exchange rate must be approximately […]

If expectations are formed rationally, wages and prices are completely flexible in the short run and policy is correctly anticipated, increases in aggregate demand will a. cause lower short-run price level increases than a Keynesian would expect. b. cause higher […]

The major way that the government supports crop prices is by granting nonrecourse loans to farmers. a. True b. False Exhibit 39-2 Given a target price of P1, what is the total deficiency payment made by the government? a. (P1 […]

Exhibit 17-5Applying the concept of a production function to your learning, assume that the amount of learning you acquire can be summarized by the following equation (and that your motivation to learn and the quality of instruction are both rated […]

Exhibit 34-9 For country Y, the opportunity cost of producing one unit of good B is __________ unit(s) of good A. a. 1.5 b. 2 c. 2/3 d. 1/3 e. 3 The AD curve shifts to the right with a […]

Exhibit 2-6 Which graph depicts the result of an increase in the number of illegal immigrants entering the country? a. (1) b. (2) c. (3) d. (4) e. none of the above When a production function is graphed with Real […]

Suppose U.S. peanut butter producers are facing increased foreign competition. Which argument is least likely to be used by the U.S. firms’ lobbyists to urge legislation to restrict imports of peanut butter? a. Peanut butter is important in military rations, […]

If checkable deposits rise, it follows that the a. required reserve ratio will fall. b. dollar amount of reserves will rise. c. dollar amount of vault cash will rise. d. required reserve ratio will rise. e. none of the above […]

The change in the interest rate due to a change in the supply of loanable funds is referred to as the __________ effect. a. income b. expectations c. liquidity d. real In 2000, the top 100 transnational companies produced about […]

According to public choice theorists, people in the market sector and people in the public sector have __________, and (but) sometimes act differently because of different __________ arrangements in the two sectors. a. different motives; institutional b. the same motives; […]

The civilian non-institutional population consists of everyone in the population who is a. at least 16 years of age, in the armed forces, or institutionalized. b. at least 16 years of age. c. not in the armed forces. d. not […]

If the U.S. dollar appreciates in the foreign exchange market, U.S. exports will be __________ and U.S. imports will be __________. a. relatively less expensive; relatively less expensive b. relatively less expensive; relatively more expensive c. relatively more expensive; relatively […]

Based on information provided in the textbook, which of the following statements is true regarding taxing millionaires and the budget deficit in 2012? a. If the government had taxed all income earners who earned more than $1 million a 100 […]

Most economists think that the Keynesian position is that a. the wage rate will never fall and the price level will never adjust downward if the economy is in a recessionary gap. b. the time required before wages and prices […]

The classical economists believed that wages, prices, and interest rates were flexible in both the upward and the downward direction. a. True b. False The U.S. real interest rate rises relative to Japan’s. As a result, a. the yen will […]

The short-run aggregate supply (SRAS) curve shows the quantity a. demanded of all goods and services at different price levels, ceteris paribus. b. supplied of all goods and services at a particular price level, ceteris paribus. c. supplied of all […]

Underground activities are not counted in GDP because a. some underground activities are illegal and the government doesn’t want to place, for instance, drug dealers on an equal footing with small businesses. b. there are no written records of underground […]

A decrease in Japanese real interest rates causes the dollar to _____________ which tends to _______________ U.S. Real GDP. a. appreciate; raise b. appreciate; lower c. depreciate; raise d. depreciate; lower Countries that engage in specialization and trade can consume […]

A voter will tend to be more informed if the issue in question a. affects everyone very little. b. is complicated and difficult to understand. c. has an intense and a direct effect on the voter. d. is of special […]

In moving along a demand curve, everything is held constant except buyers’ income. a. True b. False If the government legalizes the purchase and sale of marijuana, the equilibrium quantity would then _________ and the price would then ________ if […]

1. The author of the textbook defines economics as the a. science of efficiency. b. science of scarcity. c. study of markets. d. study of human activity. 2. When economists speak of scarcity, they are referring to the a. condition […]

d. There is no relationship between variables X and Y. 118. A theory is a. built on the major factors or variables that the theorist believes explain some event. b. a simplified abstract representation of the real world. c. used […]

d. bad. e. none of the above 70. A good provides __________ and a bad provides __________. a. utility; satisfaction b. disutility; utility c. dissatisfaction; satisfaction d. utility; disutility e. satisfaction; utility ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: […]

True / False 1. A decrease in unemployment causes the PPF to shift outward (to the right). a. True b. False 2. The law of increasing opportunity cost results from the varying ability of resources to adapt to the production […]

c. be a bowed-inward curve. d. not exist. 69. A PPF is bowed outward as a result of a. constant opportunity costs. b. increasing opportunity costs. c. decreasing opportunity costs. d. scarcity. e. choice. ANSWER: b POINTS: 1 DIFFICULTY: Easy […]

114. If the law of increasing opportunity costs is operable, and currently the opportunity cost of producing the 101st unit of good X is 5Y, then the opportunity cost of producing the 201st unit of good is X is most […]

True / False 1. A federal budget surplus occurs when government expenditures exceed tax revenues. a. True b. False 2. When the government decides to increase income taxes, this is an example of contractionary fiscal policy. a. True b. False […]

b. $3.3 c. $2.7 d. $1.3 127. In 2011, the top 25 percent of income earners in the U.S. (by the size of their taxable incomes) paid about __________ percent of the total federal income taxes. a. 25 b. 30 […]

a. decreasing; decreasing b. increasing; increasing c. increasing; decreasing d. decreasing; increasing 72. Suppose the economy’s current AD and SRAS curves intersect to the right of Natural Real GDP. Keynesians might advise a policy of tax __________ to shift __________. […]

True / False 1. To an economist, the terms “money” and “wealth” are synonyms. a. True b. False 2. Changing from a barter economy to a money economy can reduce transaction costs. a. True b. False ANSWER: True POINTS: 1 […]

d. different kinds of money are exchanged for each other. e. none of the above 69. The unit of account function of money refers to the a. fact that money and income are the same thing. b. common denominator of […]

True / False 1. The Board of Governors of the Federal Reserve serves on a larger policy-making group called the House Banking Committee. a. True b. False 2. To expand the money supply the Fed could lower the required reserve […]

KEYWORDS: Bloom’s: Comprehension 77. When the Fed sells government securities to a bank, the a. bank’s reserves increase. b. bank’s reserves decrease. c. bank’s reserves do not change. d. securities are an asset for the bank. e. b and d […]

136. Why does the president of the Federal Reserve Bank of New York hold a permanent seat on the FOMC? a. The New York Fed is responsible for executing open market operations. b. A substantial amount of financial activity takes […]

1. Monetarists can be described as a group of macroeconomists who a. emphasize the importance of the federal government’s involvement in the economy to dampen the harmful effects of the business cycle. b. emphasize the importance of the money supply […]

64. Refer to Exhibit 14-1. What sequence of points shows the short- and long-run consequences of a rise in the money supply under monetarist assumptions? a. A-E-B b. B-D-A c. A-D-B d. B-A ANSWER: a POINTS: 1 DIFFICULTY: Challenging NATIONAL […]

Exhibit 15-2 72. Refer to Exhibit 15-2. A(n)__________ in the money supply from S1 to S2 would have a tendency to __________ the amount of investment, assuming investment is sensitive to changes in the interest rate. a. decrease; raise b. […]

135. Suppose that a rules-based monetary policy proposal specifies that the money supply will grow 3 percent each year. If velocity grows 1 percent this year and Real GDP grows 2 percent, the price level will __________ by __________ percent. […]

True / False 1. The Keynesian transmission mechanism could be blocked by either interest-insensitive investment or by the liquidity trap. a. True b. False 2. The price of old (or existing) bonds and interest rates have an inverse relationship. a. […]

63. The main difference between new classical and new Keynesian theory is with respect to the assumption of a. how expectations are formed. b. how flexible wages and prices are. c. the slope of the SRAS curve. d. the slope […]

1. A.W. Phillips collected data on the rate of change in money wages and plotted it against unemployment rates in the United Kingdom. The curve he fit to the data showed that a. the rate of change of money wage […]

108. A rise in the expected price level leads to an expectation that real wages will ____________, which will cause people to work __________, shifting the SRAS curve _______________. a. rise; more; rightward b. rise; less; leftward c. fall; more; […]

True / False 1. If the annual growth rate in Real GDP is 2 percent, then it will take 50 years for the economy to double in size. a. True b. False 2. The term economic growth can be used […]

KEYWORDS: Bloom’s: Comprehension 52. A production function specifies the relation between ____________ and the ___________ to ____________________. a. technology; output; Real GDP b. technology; the factor inputs; Real GDP c. price; quantity; Real GDP d. Real GDP; the factor inputs; […]

True / False 1. If the value of a bank’s assets is rising, a high leverage ratio increases the percentage rise in its capital. a. True b. False 2. The downside to a bank having a high leverage ratio is […]

39. Which of the following is an example of a participant in the financial sector? a. commercial banks b. investment banks c. hedge funds d. brokerage firms e. all of the above 40. During the early 2000s the Fed’s __________ […]

True / False 1. It is a fact that the government spending multiplier is always greater than the tax multiplier. a. True b. False 2. Tax revenues can rise as a result of a decrease in income tax rates, as […]

a. the economy can get stuck in a recessionary gap. b. wages and prices are inflexible downward. c. wages and prices are flexible. d. government should enact expansionary fiscal policy when the economy is in a recessionary gap. e. none […]

True / False 1. Most voters choose not to be informed about political and governmental issues because they are not smart enough to really understand the issues. a. True b. False 2. Political candidates tend to identify themselves as being […]

b. never gain from public policies that are not in accord with the interests of the general public. c. always gain from public policies that are not in accord with the interests of the general public. d. never lobby for […]

Good Y 73. Refer to Exhibit 3-3. A movement from point Z to point W would have been the result of a. a reduction in the price of good Y. b. an increase in taxes paid by the producers of […]

186. Supply curves are ________________ upward sloping. a. always b. usually c. rarely d. never 187. Resource X is necessary to the production of good Y. If the price of resource X falls, the equilibrium price of Y will ______________ […]

133. In the supply-and-demand diagram of the market for peanut butter, the equilibrium point has moved up and to the right. What could have caused this? a. a fall in the price of peanuts b. a rise in the price […]

True / False 1. When the price of Toyota Corollas rises, ceteris paribus, the demand for Corollas falls. a. True b. False 2. A surplus will occur in a market when the price of the product is above the equilibrium […]

True / False 1. A theory is a perfect description of reality. a. True b. False 2. Theories should be judged based upon how consistently and precisely they predict and how well they explain things. a. True b. False ANSWER: […]

112. A French firm sells its good at a lower price in England than in France. It follows that the French firm is necessarily a. dumping. b. saving domestic jobs. c. being subsidized by the French government. d. part of […]

True / False 1. Consumers receive more consumers’ surplus when tariffs exist than when they do not exist. a. True b. False 2. As a result of a quota, both consumers’ surplus and producers’ surplus fall. a. True b. False […]

66. The effects of tariffs and quotas are: a(n) __________ in consumers’ surplus, and a(n) __________ in producers’ surplus. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease ANSWER: c POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United […]

True / False 1. If Japanese real interest rates fall relative to real interest rates in the U.S., the yen will likely appreciate and the dollar will likely depreciate. a. True b. False 2. If world markets change so that […]

a. goods and services of different countries are exchanged. b. currencies of different countries are exchanged. c. transportation services for foreign goods are contracted. d. either a or c e. none of the above 65. If the income of U.S. […]

curve __________________. a. rises; rightward b. rises; leftward c. falls; rightward d. falls; leftward 74. As the dollar depreciates, the foreign price of United States goods _________________, ultimately shifting the United States AD curve _____________. a. rises; rightward b. rises; […]

True / False 1. With globalization, the world is moving from hundreds of national economies toward one large world economy. a. True b. False 2. In recent years, the Chinese government’s actions have had an impact on interest rates in […]

d. they end up in a position from which each would prefer to move away. e. none of the above 42. If government removes two people from a prisoner’s dilemma setting (and, in the process, requires that the two persons […]

1. Suppose that for Jim the marginal benefit (MB) of producing is $60 and that the marginal cost (MC) of producing is $10. Suppose also that his marginal benefit of stealing is $50 and the marginal cost of stealing is […]

61. In reading the stock market quotes in the newspaper, the column with the heading “Ticker” gives the a. number of shares of the stock traded that day. b. the full name of the company whose stock is being studied. […]

True / False 1. The issuer of a bond is a lender. a. True b. False 2. When an investor buys shares of stock, those stocks must be held for a specified period of time before they can be sold. […]

LOCAL STANDARDS: United States – OH – Default City – DISC: The role of government KEYWORDS: Bloom’s: Comprehension 67. A government agricultural policy that sets a limit on the quantity of a product that a farmer is allowed to bring […]

1. During the twentieth century, the U.S. farm sector experienced a. large increases in its ability to produce output. b. relatively little improvement in its ability to produce output. c. a marked decrease in its ability to produce output. d. […]

c. spend at least 10 percent of their budgets to advertise their products. d. b and c e. a and c 106. Studies shows that income elasticity of demand for food is a. less than 1, but greater than 0. […]

1. A price ceiling is a government-mandated a. minimum price below which legal trades cannot be made. b. maximum price above which legal trades cannot be made. c. minimum price above which legal trades cannot be made. d. maximum price […]

53. The number of unskilled workers employed before and after a change in the minimum wage is found to be the same. This means a. the minimum wage change did not affect the unskilled labor market. b. nothing, unless we […]

42. Suppose that a television studio has two shows, X and Z, and that tickets for viewing the taping of each show is free. The equilibrium price for a ticket to view the taping of show X is $25 and […]

1. Colleges and universities use such things as grade point averages and standardized test scores as a. a measure of consumer utility. b. non-price rationing devices. c. a means to shift the supply curve for a college education. d. solely […]

1. The CPI was 238 in one year and 244 the following year. How much did prices rise between these two years? a. 2.46 percent b. 5.50 percent c. 2.52 percent d. 0.03 percent 2. If the CPI is 100 […]

65. Suppose that the price index in 1999 was 170 and your salary was $44,000. Suppose in 2016 the consumer price index will be 290. What salary will you have to earn in 2016 in order to equal your 1999 […]

1. Gross Domestic Product (GDP) is the total market value of all a. final goods and services produced annually within a country’s borders. b. final and intermediate goods and services produced annually within a country’s borders. c. intermediate goods and […]

b. -$200. c. $600. d. -$1,400. e. $1,400 105. Refer to Exhibit 7-3. GDP is equal to a. $13,050. b. $11,550. c. $8,600. d. $11,450. e. $14,000. ANSWER: d POINTS: 1 DIFFICULTY: Moderate NATIONAL STANDARDS: United States – BUSPROG: Analytic […]

69. Suppose you have data on durable goods, nondurable goods, fixed investment, government purchases, exports, and imports. Can you compute GDP? a. No, since data on services and profits are missing. b. No, since data on inventory investment and profits […]

169. Refer to Exhibit 8-3. A movement from point A to point B on AD1 would have been the result of a. a decrease in the price level. b. an increase in the price level. c. an increase in income […]

KEYWORDS: Bloom’s: Comprehension 69. The short-run aggregate supply curve shows the various amounts of real output that producers are willing to a. sell at different profit levels. b. sell at different price levels. c. buy at different income levels. d. […]

1. An aggregate demand (AD) curve shows the a. amount of a particular good people are willing and able to buy at a particular price, ceteris paribus. b. real output (Real GDP) people are willing and able to sell at […]

133. Which of the following is consistent with the sticky-wage explanation of the upward-sloping SRAS curve? a. The price level rises, the real wage falls, and the quantity demanded of labor declines. b. The price level falls, the real wage […]

1. When the economy is producing the level of output equal to natural Real GDP, the unemployment rate is equal to a. zero. b. the natural unemployment rate. c. the frictional unemployment rate. d. the structural unemployment rate. 2. An […]

b. C c. E or F d. F e. G 60. Refer to Exhibit 9-5. Imagine an AD curve intersecting an SRAS curve at Point K on graph (1). Which point(s) would this correspond to on graph (2)? a. A […]

115. Refer to Exhibit 9-6. If the economy is self-regulating and currently at point 1, it follows that a. there is a surplus of labor in the labor market. b. the economy is currently on its institutional PPF. c. the […]

1. According to Keynes, what households plan to save a. always equals what firms plan to invest. b. sometimes equals what firms plan to invest. c. is always greater than what firms plan to invest. d. is always less than […]

c. directly related to investment. d. less than disposable income. e. both b and d Exhibit 10-3 Disposable Income Yd Consumption C $2,000 $2,040 2,100 2,120 2,200 2,200 2,300 2,280 2,400 2,360 68. Refer to Exhibit 10-3. When disposable income […]

129. According to Keynes, the private sector (by itself) a. can always move the economy out of a recessionary gap in a timely manner. b. cannot always move the economy out of a recessionary gap in a timely manner. c. […]

blank (G) and the value of the multiplier that would correctly fill in blank (H)? a. 0.80; 20 b. 0.80; 5 c. 0.20; 0.80 d. 0.50; 0.50 e. There is not enough information given to answer this question. 164. Which […]

The law of increasing opportunity costs states that as a. less of a good is produced, the higher the opportunity costs of producing that good. b. more of a good is produced, the lower the opportunity costs of producing that […]

If income elasticity of demand for food is 1.55 it follows that a. a 10 percent rise in the price of food lowers the quantity demanded of food by 15.5 percent. b. if income rises by 10 percent, consumption of […]

The tax multiplier is the number that, when multiplied by the a. budget deficit, gives us the change in total spending. b. budget deficit, gives us the change in the public debt. c. change in taxes, gives us the change […]

Which of the following statements is true? a. A person who buys a bond always pays the face value for the bond. b. If a corporation issues a bond and Dennis buys it, Dennis becomes one of the owners of […]

The horizontal investment curve used to derive the TE curve implies that investment is a. directly related to Real GDP. b. indirectly related to Real GDP. c. independent of Real GDP. d. sometimes directly and sometimes indirectly related to Real […]

As the U.S. dollar appreciates and the Japanese yen depreciates, a. U.S.-produced goods become more expensive for the Japanese and Japanese-produced goods become cheaper for Americans. b. U.S.-produced goods become cheaper for the Japanese and Japanese-produced goods become more expensive […]

Exhibit 8-3 A shift in aggregate demand from AD1 to AD2could have been the result of a. a decrease in the price level. b. an increase in the price level. c. a decrease in interest rates (which was not prompted […]

Exhibit 10-2 At M, a. TP = TE. b. TP > TE. c. TE > TP. d. the relationship between TP and TE cannot be determined. Between 1890 and 1914, the gold stock of the world _______________ and world prices […]

Exhibit 15-1 A Keynesian monetary policy to eliminate a recessionary gap can be portrayed as a move between points a. A and B. b. B and C. c. C and D. d. D and A. You turn to the Treasury […]

Exhibit 9-5 Imagine an AD curve intersecting an SRAS curve at Point L on graph (1).Which point(s) would this correspond to on graph (2)? a. A or B b. C c. D or E d. F e. G When the […]

Exhibit 2-7 Which of the following statements is true? a. Points B and D are more efficient than points A and C. b. If the economy’s PPF is represented by PPF1, points A and B are productive efficient, while C […]

As the dollar price of the Mexican peso falls, the __________ Mexican goods will be for Americans to purchase and the __________ Mexican goods Americans will buy; thus __________ pesos will be demanded. a. less expensive; more, more b. more […]

In the short run following a depreciation of the dollar, the United States may move downward along the J-curve since it is likely that the United States a. spends more dollars on imports. b. spends fewer dollars on imports. c. […]

Productive efficiency implies a. the possibility of gains in one area without losses in another. b. that more output has been produced. c. the impossibility of gains in one area without losses in another. d. that prices are stable. e. […]

The simple deposit multiplier is a. the reciprocal of the required reserve ratio. b. always 1. c. the same as the required reserve ratio. d. different from bank to bank even if the required reserve ratio is the same for […]

Exhibit 34-3 The world price is PW. At this price, Americans purchase Q1 from U.S. producers and import the quantity __________ from foreign producers. a. Q4 – Q1 b. Q2 – Q1 c. Q2 – Q4 d. Q2 – Q3 […]

Exhibit 8-4 A movement from point A to point B on SRAS1could have been the result of a. a decrease in the price level. b. an increase in the price level. c. an adverse supply shock. d. a beneficial supply […]

Price serves as a a. rationing device. b. transmitter of information. c. means of determining who gets what of the available limited resources and goods. d. a and b e. all of the above When the Fed purchases securities from […]

Which of the following is false? a. It is impossible for a person to be uninformed on who is running for president, what the candidates stand for, and on everything else connected with presidential politics and still be rational. b. […]

According to the textbook, L. Frank Baum, the author of The Wonderful Wizard of Oz, blamed ____________________ for the economic depression of 1893 and the related hardships faced by farmers and workers. a. the gold standard b. the silver standard […]

If, under a fixed exchange rate system, the dollar price of a Mexican peso is above its equilibrium level, then the a. dollar is overvalued. b. peso is overvalued. c. dollar has appreciated. d. peso has depreciated. Which of the […]

An increase in the price of a nonlabor input such as oil will cause a. a movement down the SRAS curve. b. a movement up the SRAS curve. c. a leftward shift in the SRAS curve. d. a rightward shift […]

Small-denomination time deposits are part of M2, but not part of M1. a. True b. False The ability of banks to get insurance from______________ encourages banks to take on a little bit _________ risk than they would in the absence […]

Economist Charles Kindleberger (a proponent of fixed exchange rates mentioned in the text) would agree with which of the following statements? a. It is better to leave the international value of the domestic currency to the free market forces than […]