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 not the inflation rate
c. the inflation rate, but not the natural rate of unemployment
d. neither the natural unemployment rate nor the inflation rate
A decrease in the money supply creates an excess
a. supply of money that is eliminated by rising prices.
b. supply of money that is eliminated by falling prices.
c. demand for money that is eliminated by rising prices.
d. demand for money that is eliminated by falling prices.
Figure 2-8
RefertoFigure2-8.To reach point L, the economy would have to
a. acquire more resources or experience a technological advance.
b. begin using its available resources more efficiently than it is currently using them.
c. shift resources away from the production of nails and toward the production of
hammers.
d. None of the above are correct; the economy will never be able to reach point L.
Changes in monetary policy aimed at reducing aggregate demand involve decreasing
the money supply or increasing the interest rate.
a. True
b. False
Capital flight refers to
a. the movement of workers across international borders in response to exchange rate
changes.
b. the movement of funds between financial intermediaries when interest rates change.
c. the ability of foreign direct investment to lift a country out of poverty.
d. a large and sudden movement of funds out of a country.
At which interest rate is the present value of $145.80 two years from today equal to
$125 today?
a. 2 percent
b. 4 percent
c. 6 percent
d. 8 percent
A statistical discrepancy
a. exists because data sources are not perfect, so measures of expenditures and income
are not equal.
b. insures that GDP will approximately equal GNP.
c. explains the close association between GDP and quality of life measures such as
literacy and life expectancy.
d. explains the inadequacy of GDP in capturing the value of leisure and the value of a
clean environment.
Janelle earned a salary of $62,000 in 2004 and $80,000 in 2014. The consumer price
index was 126 in 2004 and 170 in 2014. Janelle’s 2004 salary in 2014 dollars is
a. $45,953.
b. $89,280.
c. $107,953.
d. $83,651.
The income that households and noncorporate businesses receive is called
a. personal income.
b. net national product.
c. disposable personal income.
d. national income.
On a bowed production possibilities frontier, as you move down along the curve
a. more of one good must be given up to receive one unit of the other good.
b. the available production technology does not change.
c. the opportunity cost increases.
d. All of the above are correct.
If an economy uses silver as money, then that economy’s money
a. serves as a store of value but not as a medium of exchange.
b. serves as a medium of exchange but not as a unit of account.
c. is commodity money.
d. has no intrinsic value.
According to classical macroeconomic theory,
a. output is determined by the supplies of capital and labor and the available production
technology.
b. for any given level of output, the interest rate adjusts to balance the supply of, and
demand for, loanable funds.
c. given output and the interest rate, the price level adjusts to balance the supply of, and
demand for, money.
d. All of the above are correct.
Despite its status as one of the richest countries in the world, Japan
a. has a very low level of productivity.
b. has few natural resources.
c. has very little human capital.
d. engages in a relatively small amount of international trade.
A shortage will occur at any price below equilibrium price and a surplus will occur at
any price above equilibrium price.
a. True
b. False
Paine Pharmaceuticals produces medicines in the U.S. Its overseas sales
a. are an export of the U.S. and increase U.S. net exports.
b. are an export of the U.S. and decrease U.S. net exports.
c. are an import of the U.S. and increase U.S. net exports.
d. are an import of the U.S. and decrease U.S. net exports.
Which of the following is correct?
a. A higher price level shifts money demand rightward.
b. When money demand shifts rightward, the interest rate rises.
c. A higher interest rate reduces the quantity of goods and services demanded.
d. All of the above are correct.
Other things the same,as the price level rises, exchange rates
a. and interest rates rise.
b. and interest rates fall.
c. fall and interest rates rise.
d. rise and interest rates fall.
When two variables have a positive correlation,
a. when the x-variable increases, the y-variable decreases.
b. when the x-variable decreases, the y-variable increases.
c. when the x-variable increases, the y-variable increases.
d. More than one of the above is correct.
Table 4-2
RefertoTable4-2. Suppose Abby, Brandi, Carrie, and DeeDee are the only four buyers
in the market. If the price is $8, then the market quantity demanded is
a. 4 units.
b. 6 units.
c. 24 units.
d. 32 units.
Net exports must equal zero for any economy
a. that is closed.
b. for which Y = C+ I+ G.
c. for which S= Y– C– G.
d. All of the above are correct.
According to the classical dichotomy, which of the following is notinfluenced by
monetary factors?
a. unemployment
b. the price level
c. nominal interest rates
d. All of the above are correct.
If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real
value of output is
a. 2,000.
b. 200,000.
c. 12,500.
d. 32,000.
What would happen to the equilibrium price and quantity of latts if consumers’ incomes
rise and latts are a normal good?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.
Suppose the quality of beef changes over time, but the quality change goes unmeasured
for the purpose of computing the consumer price index. In which of the following
instances would the bias resulting from the unmeasured quality change be leastsevere?
a. The quality of beef deteriorates and beef becomes more expensive relative to other
goods.
b. The quality of beef deteriorates and beef becomes less expensive relative to other
goods.
c. The quality of beef improves and beef becomes more expensive relative to other
goods.
d. The quality of beef improves and the price of beef relative to other prices remains
unchanged.
Table 23-6
The table below contains data for the country of Batterland, which produces only
waffles and pancakes. The base year is 2013.
RefertoTable23-6.In 2013, this country’s GDP deflator was
a. 1.0.
b. 100.0.
c. 171.4.
d. 240.0.
Consider two people who are currently out of work. Tim is not looking for work
because there have been many job cuts where he lives, and he doesn’t think it likely that
he will find work. Bev is not currently looking for work, but she would like a job, and
she has looked for work in the past. The Bureau of Labor Statistics considers
a. both Tim and Bev to be marginally attached workers.
b. neither Tim nor Bev to be marginally attached workers.
c. only Tim to be a marginally attached worker.
d. only Bev to be a marginally attached worker.
If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.
a. sells more overseas then it buys from overseas; it has a trade deficit.
b. sells more overseas then it buys from overseas; it has a trade surplus.
c. buys more from overseas then it sells overseas; it has a trade deficit.
d. buys more from overseas then it sells overseas; it has a trade surplus.
Risk aversion simply means that people dislike bad things to happen.
a. True
b. False
The basic tools of supply and demand are
a. useful only in the analysis of economic behavior in individual markets.
b. useful in analyzing the overall economy, but not in analyzing individual markets.
c. central to microeconomic analysis, but seldom used in macroeconomic analysis.
d. central to macroeconomic analysis as well as to microeconomic analysis.
When the government goes from running a balanced budget to running a budget
surplus,
a. national saving decreases, the interest rate rises, and the economy’s longrun growth
rate is likely to decrease.
b. national saving increases, the interest rate falls, and the economy’s longrun growth
rate is likely to decrease.
c. national saving decreases, the interest rate rises, and the economy’s longrun growth
rate is likely to increase.
d. national saving increases, the interest rate falls, and the economy’s longrun growth
rate is likely to increase.
Scenario 26-1. Assume the following information for an imaginary, closed economy.
GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving =
$15,000.
RefertoScenario26-1.For this economy, investment amounts to
a. $38,000.
b. $18,000.
c. $12,000.
d. $15,000.
The prices of stock traded on exchanges are determined by
a. the Corporate Stock Administration.
b. the administrators of NASDAQ.
c. the supply of, and demand for, the stock.
d. All of the above are correct.