When supply and demand both increase, equilibrium
a. price will increase.
b. price will decrease.
c. quantity may increase, decrease, or remain unchanged.
d. price may increase, decrease, or remain unchanged.
In 1974, one could buy a theater for $1.25. Today the same theater ticket costs $6.50.
Which pair of CPIs would imply that the cost in today’s dollars was the same for both
tickets?
a. 60 in 1964 and 390 today
b. 75 in 1964 and 390 today
c. 80 in 1964 and 404 today
d. 95 in 1964 and 475 today
Which of the following best illustrates moral hazard?
a. After a person obtains life insurance, she takes up skydiving.
b. A person obtains insurance knowing he is in poor health.
c. A person holds stock only in very risky corporations.
d. A person holds stocks from only a few corporations.
People will buy more if the price level
a. rises because rising prices increase the real value of a dollar.
b. rises because rising prices decrease the real value of a dollar.
c. falls because falling prices increase the real value of a dollar.
d. falls because falling prices decrease the real value of a dollar.
When the money market is drawn with the value of money on the vertical axis, as the
price level increases the quantity of money
a. demanded increases.
b. demanded decreases.
c. supplied increases.
d. supplied decreases.
When the price level rises more than expected, a firm with a sticky price will sell its
output at a price that is
a. less than it desires and increase its production.
b. less than it desires and decrease its production.
c. more than it desires and increase its production.
d. less than it desires and decrease its production.
The word “efficient” in the term “efficient markets hypothesis” refers to the idea that
a. fundamental analysis is an efficient way to go about choosing which stocks to buy or
sell.
b. stock prices move upward and downward “efficiently,” rather than following a
“random walk.”
c. the stock market is “informationally efficient.”
d. companies employ officers and managers who are well-qualified to perform their
jobs.
Which of the following statements about mutualfundis correct?
a. A mutual fund is not a financial intermediary.
b. A disadvantage of buying mutual funds is a lack of diversification
c. People who buy shares from a mutual fund are guaranteed a minimum return.
d. On average index funds outperform managed funds.
If the wage is kept above the equilibrium wage for any reason, the result is
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.
According to Friedman and Phelps’s analysis of the Phillips curve,
a. the unemployment rate will be below its natural rate whenever inflation is negative.
b. the unemployment rate will be below its natural rate whenever inflation is positive.
c. the unemployment rate will be below its natural rate only if inflation is less than
expected.
d. the unemployment rate will be below its natural rate only if inflation is greater than
expected.
Which of the following shifts aggregate demand to the right?
a. a decrease in the money supply
b. increases in the profitability of capital due perhaps to technological progress.
c. the repeal of an investment tax credit
d. a decrease in the price level
In a certain economy, when income is $1000, consumer spending is $800. The value of
the multiplier for this economy is 2.5. It follows that, when income is $1020, consumer
spending is
a. $816. For this economy, an initial increase of $100 in consumer spending translates
into a $250 increase in aggregate demand.
b. $816. For this economy, an initial increase of $100 in consumer spending translates
into a $400 increase in aggregate demand.
c. $812. For this economy, an initial increase of $100 in consumer spending translates
into a $250 increase in aggregate demand.
d. $812. For this economy, an initial increase of $100 in consumer spending translates
into an $800 increase in aggregate demand.
Which of the following is vertical?
a. both the long-run Phillips curve and the long-run aggregate supply curve
b. neither the long-run Phillips curve nor the long-run aggregate supply curve
c. the long-run Phillips curve, but not the long-run aggregate supply curve
d. the long-run Phillips curve, but not the long-run aggregate supply curve
At an annual interest rate of 20 percent, about how many years will it take $100 to triple
in value?
a. 5
b. 6
c. 8
d. 9
Which of the following shifts both short-run and long-run aggregate supply left?
a. a decrease in the actual price level
b. a decrease in the expected price level
c. a decrease in the capital stock
d. a decrease in the money supply
In the circular-flow diagram, firms produce goods and services using the factors of
production.
a. True
b. False
A country purchases $3 billion of foreign-produced goods and services and sells $2
billion dollars of domestically produced goods and services to foreign countries. It has
a. exports of $3 billion and a trade surplus of $1 billion.
b. exports of $3 billion and a trade deficit of $1 billion.
c. exports of $2 billion and a trade surplus of $1 billion.
d. exports of $2 billion and a trade deficit of $1 billion.
Suppose that India has a government budget surplus, and then goes into deficit. This
change would
a. increase India’s national saving and shift its supply of loanable funds left.
b. increase India’s national saving and shift its demand for loanable funds right.
c. decrease India’s national saving and shift its supply of loanable funds left.
d. decrease India’s national saving and shift its demand for loanable funds right.
Other things the same, an increase in the price level makes the dollars people hold
worth
a. more, so they can buy more.
b. more, so they can buy less.
c. less, so they can buy more.
d. less, so they can buy less.
Price will rise to eliminate a shortage.
a. True
b. False
If the government institutes policies that diminish incentives to save, then in the
loanable funds market
a. the demand for loanable funds shifts rightward.
b. the demand for loanable funds shifts leftward.
c. the supply of loanable funds shifts rightward.
d. the supply of loanable funds shifts leftward.
Market economies are distinguished from other types of economies largely on the basis
of
a. the political affiliations of government officials.
b. the process by which government officials are elected or appointed.
c. the ways in which scarce resources are allocated.
d. the number of retail outlets available to consumers.
Because of differences in tax treatment, municipal bonds pay a higher interest rate than
do corporate bonds.
a. True
b. False
According to the theory of liquidity preference, money demand
a. and the money supply are positively related to the interest rate.
b. and the money supply are negatively related to the interest rate.
c. is negatively related to the interest rate, while the money supply is independent of the
interest rate.
d. is independent of the interest rate, while money supply is negatively related to the
interest rate.
If there are constant returns to scale, the production function can be written as
a. xY= 2xAF(L, K, H, N).
b. Y/L= AF(xL, xK,xH, xN).
c. Y/L= AF( 1, K/L, H/L,N/L).
d. L = AF(Y, K, H, N).
Most economists believe that classical theory describes the world in the short run but
not in the long run.
a. True
b. False
RefertoFigure2-9,Panel(a)andPanel(b).A shift of the economy’s production
possibilities frontier from Panel (a) to Panel (b) could be caused by
a. unemployment.
b. an improvement in donut production technology.
c. an improvement in coffee production technology.
d. an improvement in both donut and coffee production technology.
The current price of blue jeans is $30 per pair, but the equilibrium price of blue jeans is
$25 per pair. As a result,
a. the quantity supplied of blue jeans exceeds the quantity demanded of blue jeans at the
$30 price.
b. the equilibrium quantity of blue jeans exceeds the quantity demanded at the $30
price.
c. there is a surplus of blue jeans at the $30 price.
d. All of the above are correct.
Figure 4-14
RefertoFigure4-14.Which of the following would explain a movement from E1 to E2?
a. There is an improvement in the technology used to produce this good.
b. The cost of an input to the production of this good increases.
c. This good becomes very popular.
d. The price of a substitute good decreases.
The Fisher effect says that
a. the nominal interest rate adjusts one for one with the inflation rate.
b. the growth rate of the money supply is negatively related to the velocity of money.
c. real variables are heavily influenced by the monetary system.
d. All of the above are correct.