Suppose you know the value of the consumer price index (CPI) in year 1 as well as the
inflation rate in year 2. Which of the following equations is valid for the CPI in year 2?
a. CPI in year 2 =
b. CPI in year 2 =
c. CPI in year 2 =
d. CPI in year 2 =
Figure 9-20
The figure illustrates the market for rice in Vietnam.
Refer to Figure 9-20. With trade, Vietnam will
a. export 1,000 units of rice.
b. export 1,500 units of rice.
c. import 1,000 units of rice.
d. import 1,500 units of rice.
Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Refer to Table 3-1. What is Andia’s opportunity cost of producing one bushel of wheat?
a. 3/5 pound of beef
b. 6/5 pounds of beef
c. 4/3 pounds of beef
d. 5/3 pounds of beef
What is the future value of $375 at an interest rate of 3 percent one year from today?
a. $371.75
b. $386.25
c. $393.33
d. None of the above are correct to the nearest cent.
Which of the following is correct?
a. Nominal GDP is always less than real GDP.
b. Nominal GDP is always greater than real GDP.
c. Nominal GDP equals real GDP in the base year.
d. Nominal GDP equals real GDP in all years but the base year.
What would happen to the equilibrium price and quantity of lattés if the cost to produce
steamed milk, which is used to make lattés, increased, and scientists discovered that
lattés cause heart attacks?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would decrease, and the effect on equilibrium quantity would
be ambiguous.
d. The equilibrium quantity would decrease, and the effect on equilibrium price would
be ambiguous.
In a fractional-reserve banking system with no excess reserves and no currency
holdings, if the central bank buys $100 million worth of bonds,
a. reserves and the money supply increase by less than $100 million.
b. reserves increase by $100 million and the money supply increases by $100 million.
c. reserves increase by $100 million and the money supply increases by more than $100
million.
d. both reserves and the money supply increase by more than $100 million.
Investment in
a. physical capital, unlike investment in human capital, has an opportunity cost.
b. physical capital, like investment in human capital, has an opportunity cost.
c. human capital is particularly attractive because it involves no externalities.
d. human capital has been shown to be relatively unimportant, relative to investment in
physical capital, for a country’s long-run economic success.
The Wagner Act of 1935
a. prevents unions from acting as cartels.
b. allows workers joining a unionized firm to choose not to join the union.
c. prevents employers from interfering when workers try to organize a union.
d. prevents firms from hiring permanent replacements for workers who are on strike.
Figure 8-11
Refer to Figure 8-11. The length of the line segment connecting points A and B
represents
a. the difference between the price paid by buyers after the tax is imposed and the price
received by sellers after the tax is imposed.
b. the size of the tax.
c. the “tax wedge.”
d. All of the above are correct.
In a closed economy, national saving is
a. usually greater than investment.
b. equal to investment.
c. usually less than investment because of the leakage of taxes.
d. always less than investment.
Initially, the economy is in long-run equilibrium. The aggregate demand curve then
shifts $40 billion to the left. The government wants to change its spending to offset this
decrease in demand. The MPC is 0.60. Suppose the effect on aggregate demand from a
change in taxes is 3/5 the size of the change from government expenditures. There is no
crowding out and no accelerator effect. What should the government do if it wants to
offset the decrease in real GDP?
a. Raise both taxes and expenditures by $40 billion dollars.
b. Raise both taxes and expenditures by $40 billion dollars.
c. Reduce both taxes and expenditures by $10 billion dollars.
d. Reduce both taxes and expenditures by $10 billion dollars.
The consequences of the Volcker disinflation demonstrated that when Volcker
announced his intention to reduce inflation quickly, on average the public thought
a. he would try to fool them by raising inflation to decrease unemployment.
b. inflation would be unchanged.
c. inflation would fall but not by as much or as quickly as Volcker claimed.
d. inflation would fall even further than Volcker was willing to admit.
Scenario 11-4
Quinn has job offers in Wrexington and across the country in Charlieville. The
Wrexington job would pay a salary of $50,000 per year, and the Charlieville job would
pay a salary of $40,000 per year. The CPI in Wrexington is 150, and the CPI in
Charlieville is
Refer to Scenario 11-4. The Charlieville salary in Wrexington dollars is
a. $24,000.00.
b. $26,666.67.
c. $60,000.00
d. $66,666.67.
Table 7-6
Refer to Table 7-6. You have two essentially identical extra tickets to the Midwest
Regional Sweet 16 game in the men’s NCAA basketball tournament. The table shows
the willingness to pay of the four potential buyers in the market for a ticket to the game.
You hold an auction to sell the two tickets. Michael and Earvin each offer to pay $360
for a ticket, and you sell them the two tickets. What is the total consumer surplus in the
market?
a. $720
b. $180
c. $140
d. $40
Figure 15-1
Refer to Figure 15-1. If the government imposes a minimum wage of $4, then
unemployment will increase by
a. 0 workers.
b. 2000 workers.
c. 4000 workers.
d. 5000 workers.
If a surplus exists in a market, then we know that the actual price is
a. above the equilibrium price, and quantity supplied is greater than quantity demanded.
b. above the equilibrium price, and quantity demanded is greater than quantity supplied.
c. below the equilibrium price, and quantity demanded is greater than quantity supplied.
d. below the equilibrium price, and quantity supplied is greater than quantity demanded.
In the economy of Ukzten in 2010, consumption was $200, exports were $50, GDP was
$325, government purchases were $100, imports were $125, and investment was $100.
What were Ukzten’s net exports in 2010?
a. -$75
b. -$50
c. $50
d. $75
If the tax on a good is increased from $0.15 per unit to $0.60 per unit, the deadweight
loss from the tax
a. remains constant.
b. increases by a factor of 4.
c. increases by a factor of 9.
d. increases by a factor of 16.
Over the period 1900-2008, which of the following countries experienced the highest
average annual growth rate of real GDP per person?
a. Indonesia
b. India
c. Pakistan
d. Brazil
When a minimum-wage law forces the wage to remain above the level that balances
supply and demand, it
a. raises the quantity of labor supplied and raises the quantity of labor demanded
compared to the equilibrium level.
b. raises the quantity of labor supplied and reduces the quantity of labor demanded
compared to the equilibrium level.
c. reduces the quantity of labor supplied and raises the quantity of labor demanded
compared to the equilibrium level.
d. reduces the quantity of labor supplied and reduces the quantity of labor demanded
compared to the equilibrium level.
If a firm’s price-earnings ratio is relatively low, then it might be an indication that
a. the demand for the stock is relatively high.
b. the supply of the stock is relatively low.
c. people expect the firm’s earnings to rise.
d. people expect the firm’s earnings to fall.
Table 10-4
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 2008.
Prices and Quantities
Refer to Table 10-4. In 2009, this country’s
a. real GDP was $660, and the GDP deflator was 113.4
b. real GDP was $670, and the GDP deflator was 115.2
c. real GDP was $660, and the GDP deflator was 115.2.
d. real GDP was $670, and the GDP deflator was 113.4.
Nemo rents 5 movies per month when the price is $3.00 per rental and 7 movies per
month when the price is $2.50 per rental. Nemo’s demand demonstrates the law of
a. price.
b. supply.
c. demand.
d. income.
Table 11-3
The table below pertains to Studious, an economy in which the typical consumer’s
basket consists of 5 books and 10 calculators.
Refer to Table 11-3. If 2008 is the base year, then the consumer price index was
a. 64.5 in 2006, 87.1 in 2007, and 100 in 2008.
b. 64.5 in 2006, 270 in 2007, and 310 in 2008.
c. 200 in 2006, 87.1 in 2007, and 100 in 2008.
d. 200 in 2006, 270 in 2007, and 310 in 2008.
All else equal, if there are diminishing returns, then if a country raised its capital by 100
units last year and by 100 units this year,
a. the increase in output was greater for this year than last year.
b. the increase in output was greater last year than this year.
c. the increase in output is the same in both years.
d. None of the above is necessarily correct.
Figure 2-9
Panel (a) Panel (b)
Refer to Figure 2-9, Panel (a). In order to gain 2 printers by moving from point C to
point D, society must sacrifice
a. 6 computers.
b. employment.
c. efficiency.
d. More than one of the above is correct.
Higher inflation
a. causes firms to change prices less frequently and makes relative prices less variable.
b. causes firms to change prices less frequently and makes relative prices more variable.
c. causes firms to change prices more frequently and makes relative prices less variable.
d. causes firms to change prices more frequently and makes relative prices more
variable.
The bond market, the stock market, banks, pension funds, and insurance companies are
all financial
a. systems.
b. markets.
c. institutions.
d. intermediaries.
Figure 22-3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve
and two aggregate-demand (AD) curves. On the left-hand diagram, Y represents output
and on the right-hand diagram, U represents the unemployment rate.
Refer to Figure 22-3. What is measured along the vertical axis of the right-hand graph?
a. the interest rate
b. the inflation rate
c. the government’s budget deficit as a percent of GDP
d. the growth rate of the nominal money supply
Figure 6-17
Refer to Figure 6-17. How is the burden of the tax shared between buyers and sellers?
Buyers bear
a. three-fourths of the burden, and sellers bear one-fourth of the burden.
b. two-thirds of the burden, and sellers bear one-third of the burden.
c. one-half of the burden, and sellers bear one-half of the burden.
d. one-fourth of the burden, and sellers bear three-fourths of the burden.
When the interest rate decreases, the opportunity cost of holding money
a. increases, so the quantity of money demanded increases.
b. increases, so the quantity of money demanded decreases.
c. decreases, so the quantity of money demanded increases.
d. decreases, so the quantity of money demanded decreases.
In an ideal labor market, wages would adjust to balance the quantity of labor supplied
and the quantity of labor demanded, ensuring that all workers are always fully
employed.
How do the nominal exchange rate and the real exchange rate differ?
Every month, the Bureau of Labor Statistics surveys 160,000 business establishments to
help determine the number of jobs the economy has gained or lost.
As banks create money, they create wealth.
An increase in demand will cause an increase in price, which will cause an increase in
quantity supplied.
When a country keeps its workers as fully employed as possible, it achieves a higher
level of GDP than if many of its workers were idle.
During recessions, the government tends to run a budget deficit.
Other things the same, a decrease in the price level makes the interest rate decrease,
which leads to a depreciation of the dollar in the market for foreign-currency exchange.
GDP includes the value of paper clips but does not also count the value of the metal
used to make them.
If policymakers impose import restrictions on clothing, the U.S. trade deficit will
shrink.
If prices in Thailand rise less than prices in the United States, then according to the
doctrine of purchasing-power parity the U.S. nominal exchange rate should rise.
Samuelson and Solow believed that the Phillips curve offered policymakers a menu of
possible economic outcomes.
While the scientific method is applicable to studying natural sciences, it is not
applicable to studying a nation’s economy.
Short-run outcomes in the economy can be expressed in terms of output and the price
level, or in terms of unemployment and inflation.
In the open-economy macroeconomic model, if there is currently a surplus in the
foreign exchange market, the quantity of desired net exports will increase as the market
moves to equilibrium.