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. It more than doubled.
b. It increased, but it less than doubled.
c. It was unchanged.
d. It decreased.
If you put $250 into an account with a 4 percent interest rate, how many years would
you have to wait to have $432.92?
a. 10
b. 14
c. 17
d. 20
The x-coordinate of an ordered pair specifies the
a. diagonal location of the point.
b. vertical location of the point.
c. horizontal location of the point.
d. quadrant location in which the point is located.
The aggregate demand and aggregate supply graph has
a. the price level on the horizontal axis. The price level can be measured by the GDP
deflator.
b. the price level on the horizontal axis. The price level can be measured by real GDP.
c. the price level on the vertical axis. The price level can be measured by the GDP
deflator.
d. the price level on the vertical axis. The price level can be measured by GDP.
Borrowers can (and sometimes do) default on their loans when
a. the dividend yield on their shares of stock reaches zero.
b. they convert their bonds into perpetuities.
c. they declare bankruptcy.
d. they cannot find enough buyers of their bonds to sell all the bonds they wish to sell.
A movement upward and to the left along a given demand curve is called a decrease in
demand.
a. True
b. False
Which of the following is an example of crowding out?
a. An increase in government spending increases interest rates, causing investment to
fall.
b. A decrease in private savings increases interest rates, causing investment to fall.
c. A decrease in the money supply increases interest rates, causing investment to fall.
d. An increase in taxes increases interest rates, causing investment to fall.
Figure 3-20
Refer to Figure3-20. At which of the following prices would both Canada and Mexico
gain from trade with each other?
a. 9 units of Good Y for 6 units of Good X
b. 8 units of Good Y for 20 units of Good X
c. 70 units of Good Y for 30 units of Good X
d. Canada and Mexico could not both gain from trade with each other at any price.
Anna deposited $10,000 into an account three years ago. The first year she earned 12
percent interest, the second year she earned 8 percent interest, and the third year she
earned 4 percent interest. How much money does she have in her account today?
a. $12,579.84
b. $12,596.80
c. $12,597.12
d. None of the above are correct to the nearest cent.
If a government increases its budget deficit, then domestic interest rates
a. and net exports rise.
b. rise and net exports fall.
c. fall and net exports rise.
d. and net exports fall.
In the short run, a decrease in the money supply causes interest rates to
a. increase, and aggregate demand to shift right.
b. increase, and aggregate demand to shift left.
c. decrease, and aggregate demand to shift right.
d. decrease, and aggregate demand to shift left.
The logic of the multiplier effect applies
a. only to changes in government spending.
b. to any change in spending on any component of GDP.
c. only to changes in the money supply.
d. only when the crowding-out effect is sufficiently strong.
Scenario 28-1
Suppose that the Bureau of Labor Statistics reports that the entire adult population of
Mankiwland can be categorized as follows: 25 million people employed, 3 million
people unemployed, 1 million discouraged workers, and 1 million people who are either
students, homemakers, retirees, or other people not seeking employment.
RefetoScenario28-1.What is the total labor force?
a. 25 million
b. 28 million
c. 29 million
d. 30 million
In the circular-flow diagram, which of the following items does not flow from firms to
households?
a. goods
b. services
c. capital
d. profit
Compoundingrefers directly to
a. finding the present value of a future sum of money.
b. finding the future value of a present sum of money.
c. changes in the interest rate over time on a bank account or a similar savings vehicle.
d. interest being earned on previously-earned interest.
When the government budget deficit increases, national saving decreases.
a. True
b. False
A bank’s reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits
amount to
a. $114.
b. $2,166.
c. $2,400.
d. $45,600.
An economic outcome is said to be efficient if the economy is
a. using all of the scarce resources it has available.
b. conserving on resources, rather than using all available resources.
c. getting all it can get from the scarce resources it has available.
d. able to produce more than what is currently being produced without additional
resources.
Suppose a tax cut affects aggregate demand and aggregate supply. Which of the shifts
raise the price level?
a. both the shift of aggregate demand and the shift of aggregate supply
b. the shift of aggregate demand, but not the shift of aggregate supply
c. the shift of aggregate supply, but not the shift of aggregate demand
d. neither the shift of aggregate demand nor the shift of aggregate supply
Because the price level does not affect the long-run determinants of real GDP, the
long-run aggregate-supply is vertical.
a. True
b. False
In the open-economy macroeconomic model, if the U.S. interest rate rises, then U.S.
a. net capital outflow rises, so the supply of dollars in the market for foreign exchange
shifts right.
b. net capital outflow rises, so the demand for dollars in the market for foreign
exchange shifts right.
c. net capital outflow falls, so the supply of dollars in the market for foreign exchange
shifts left.
d. net capital outflow falls, so the demand for dollars in the market for foreign exchange
shifts left.
If the Federal Open Market Committee decides to decrease the money supply, it will
a. sell government bonds.
b. purchase corporate bonds.
c. purchase government bonds.
d. reduce interest rates.
For a number of years country A had inflation of 3% but for the last five years has had
inflation of 6%. Country B had inflation of 4% for many years, but very recently
inflation unexpectedly rose to 9%. Other things the same, in which of the countries
would the higher inflation rate be more likely to reduce unemployment?
a. both country A and country B
b. neither country A nor country B
c. country A but not country B
d. country B but not country A
Other things the same, an increase in the nominal exchange rate raises the real exchange
rate.
a. True
b. False
Which of the following statistics is usually regarded as the best single measure of a
society’s economic wellbeing?
a. the unemployment rate
b. the inflation rate
c. gross domestic product
d. the trade deficit
Table 24-5
The table below pertains to Wrexington, an economy in which the typical consumer’s
basket consists of 20 pounds of meat and 10 toys.
RefertoTable24-5.If the base year is 2004, then the inflation rate in 2006 was
a. 44.4%.
b. 50%.
c. 62.5%.
d. 80%.
Suppose in some country that the first $5,000 of interest income is exempt from income
tax. If the government then removed this exemption
a. the interest rate and investment would rise.
b. the interest rate would rise and investment would fall.
c. the interest rate would fall and investment would rise.
d. the interest rate and investment would fall.
Table 28-11
2010 Labor Data for Tajnia
RefetoTable28-11.The unemployment rate of Tajnia in 2010 is about 7.5 percent.
a. True
b. False
Who in the adult population is counted as “employed” in U.S. labor statistics?
a. people who are temporarily absent from their job and people who work without pay
in a family member’s business
b. people who are temporarily absent from their job but not people who work without
pay in a family member’s business
c. people who work without pay in a family member’s business but not people who are
temporarily absent from their job
d. neither people who are temporarily absent from their job nor people who work
without pay in a family member’s business
Table 23-4
The table below reports nominal and real GDP for the U.S. from 1929 to 1932.
RefertoTable23-4.What are the GDP deflator and the inflation rate for 1932?
a. 8.09, -11.7
b. 8.09.16, -13.3
c. 1236.46, 11.7
d. 1236.46, 13.3
Which of the following correctly lists what is included in the consumption component
of GDP?
a. household purchases of services and household purchases of nondurable goods but
not any household purchases of durable goods
b. household purchases of nondurable goods and durable goods other than residential
construction but not household purchases of services
c. household purchases of services, nondurable goods, and all durable goods
d. household purchases of services, nondurable goods, and durable goods other than
residential construction
A country has net capital outflow of $40 billion. Which of the following is consistent
with this net capital outflow?
a. It has -$40 billion of net exports.
b. Purchases of foreign assets by domestic residents exceed purchases of domestic
assets by foreign residents by $40 billion.
c. Its saving is $35 billion and its domestic investment is $5 billion.
d. All of the above are consistent with a net capital outflow of $40 billion.
Figure 3-16
RefertoFigure3-16.Hosne should specialize in the production of
a. purses.
b. wallets.
c. both goods.
d. neither good.
Which of the following is an example of a durable good?
a. a hair dryer.
b. a suit.
c. a pair of shoes.
d. All of the above are correct.