Refer to Figure 9-12. Assume that a nation can slow its population growth rate so that it
now requires only N’ worth of investment in capital to maintain current capital per
worker. If the nation adopts such a policy but maintains investment in capital at N, what
would be the likely effect?
a. Economic growth will slow because the nation would not be producing the optimal
amount of capital; it would be over-investing.
b. The nation would produce inside the production possibilities frontier; that is, there
will be inefficiencies in production.
c. The production possibilities frontier would shift inward because of the decrease in
population.
d. The production possibilities frontier would shift outward at the same rate as it would
have in the absence of the policy, but the mix of capital and consumer goods produced
would change.
e. The production possibilities frontier would shift outward more than it would have in
the absence of the policy.
If the inflation rate is higher than expected, real income is redistributed from lenders to
borrowers.
In the supply and demand for socks schedules in Figure 3-10, a price of $10 per pair
results in
a. equilibrium
b. excess demand of 6 pairs
c. excess supply of 14 pairs
d. excess supply of 6 pairs
e. excess demand of 14 pairs
An open market purchase of bonds by the Fed
a. will shift the money supply curve to the left.
b. will drain reserves from the banking system and shift the money supply curve to the
right.
c. will inject reserves into the banking system and shift the money supply curve to the
left.
d. will shift the money supply curve to the right.
e. will change the slope of the money supply curve.
What is true of both expansions and recessions?
a. There is a poorer than normal match between workers and their jobs.
b. The labor market clears.
c. The economy operates at its potential output.
d. Cyclical unemployment is zero.
e. None of the above.
Which of the following events led to the debate over the applicability of the classical
model?
a. World War II
b. World War I
c. Korean War
d. The Great Depression
e. The Great Society
Which of the following is not an example of a commercial bank’s liabilities?
a. Checking account deposits.
b. Any type of demand deposit.
c. Loans.
d. a and b.
e. None of the above.
The aggregate demand curve identifies the level of aggregate production corresponding
to a change in the price level.
For which of the following would purchasing power parity have the least relevance?
a. Pens
b. Toothpicks
c. Paper clips
d. Pencils
e. Shoe shines.
World War II led to a dramatic increase in economic growth in the United States
because
a. the war caused the U.S. to move along its production possibilities frontier away from
consumer goods and towards military goods
b. the economy was already at close to full employment
c. there were unemployed resources in the U.S. economy prior to the war
d. the economy shifted production towards more profitable consumer goods during the
war
e. the opportunity cost of producing military goods increased considerably during the
war years
Which of the following would lead to a decrease of the U.S. demand for euros?
a. A decrease in the U.S. interest rate, with no change in the European interest rate
b. An increase in U.S. GDP
c. Resurgence of interest in European precision tools
d. Expectations of a rise in the dollar price of the euro
e. A sudden increase in anti- European sentiment.
If the demand for British pounds increases,
a. the equilibrium price of the pound will increase
b. the equilibrium price of the pound will decrease
c. the equilibrium price of the pound will not change
d. the equilibrium price of the pound will change, but we need additional information to
predict the direction of the change
e. no one can predict what will happen
The system of resource allocation in the United States is a
a. pure market system
b. market system with elements of tradition and command
c. market system with elements of tradition, but not command
d. traditional system with elements of market, but not command
e. pure tradition system