An American retailer purchased 100 pairs of shoes from a company in Mexico in the
second quarter of 2016 but does not sell them to a consumer until the third quarter of
2016. In which quarter(s) does(do) the value of the shoes add to U.S. GDP?
a. the second and third quarters
b. the second quarter but not the third quarter
c. the third but not the second quarter
d. neither the second nor the third quarter
A labor union is similar to a.
When the money market is drawn with the value of money on the vertical axis, if the
Fed sells bonds then
a. the money supply and the price level increase.
b. the money supply and the price level decrease.
c. the money supply increases and the price level decreases.
d. the money supply increases and the price level increases.
The president of the United States receives tax policy advice from economists in the
a. Federal Reserve.
b. Department of Justice.
c. Department of the Treasury.
d. Congressional Budget Office.
When two variables move in the same direction, the curve relating them is downward
sloping, and we say the variables are negatively related.
a. True
b. False
When a relevant variable that is not named on either axis changes,
a. there will be a movement along the curve.
b. the curve will rotate clockwise.
c. the curve will be unaffected since only the variables on the axis affect the curve.
d. the curve will shift.
Baseballs and baseball bats are substitute goods.
a. True
b. False
If a country’s saving rate increases, then in the long run
a. productivity is higher but real GDP per person is not higher.
b. real GDP per person is higher but productivity is not higher.
c. productivity and real GDP per person are both higher.
d. neither productivity nor real GDP per person is higher.
Which of the following is notan important stock exchange in the United States?
a. New York Stock Exchange
b. American Stock Exchange
c. Chicago Mercantile Exchange
d. NASDAQ
If aggregate demand and aggregate supply both shift right, we can be sure that the price
level is higher in the short run.
a. True
b. False
Figure 2-21
RefertoFigure2-21.Which of the following could be an omitted variable in the graph?
a. the price of snowblowers
b. a change in consumers’ incomes
c. a change in the seasons
d. All of the above are correct.
As the aggregate demand curve shifts leftward along a given aggregate supply curve,
a. unemployment and inflation are higher.
b. unemployment and inflation are lower.
c. unemployment is higher and inflation is lower.
d. unemployment is lower and inflation is higher.
Figure 33-4
RefertoFigure33-4. A decrease in taxes would move the economy from C to
a. B in the short run and the long run.
b. D in the short run and the long run.
c. B in the short run and A in the long run.
d. D in the short run and C in the long run.
The second number in any ordered pair is
a. the x-coordinate.
b. the y-coordinate.
c. the horizontal location of the point.
d. the slope.
Figure 2-5
RefertoFigure2-5. Efficient production is represented by which point(s)?
a. A, B
b. A, B, D
c. A, B, C
d. C
In which case can we be sure that real GDP and the price level rise in the short run?
a. foreign economies expand and taxes increase.
b. foreign economies expand and taxes decrease.
c. foreign economies contract and taxes decrease.
d. foreign economies contract and taxes increase.
In an open economy, the source of the demand for loanable funds is
a. national saving
b. national saving + net capital outflow
c. investment + the government budget deficit
d. investment + net capital outflow
Which of the following shifts aggregate supply to the right?
a. a decline in the price of imported natural resources
b. a technological advance
c. an older labor force that leaves jobs less frequently
d. All of the above are correct.
Table 3-33
Chris and Tony’s Production Opportunities
Refer toTable 3-33Chris and Tony both produce tomatoes and pasta sauce. The table
shows their possible production per month if both work the same number of 8 hour
days. Which of the following prices would result in a mutually advantageous trade
between Chris and Tony?
a. 1 lb. of tomatoes for 23 jars of sauce
b. 1 lb. of tomatoes for 27 jars of sauce
c. 1 lb. of tomatoes for 33 jars of sauce
d. Both a and b are correct.
If aggregate demand shifts right then in the short run
a. firms will increase production. In the long run increased price expectations shift the
short-run aggregate supply curve to the right.
b. firms will increase production. In the long run increased price expectations shift the
short-run aggregate supply curve to the left.
c. firms will decrease production. In the long run increased price expectations shift the
short-run aggregate supply curve to the right.
d. firms will decrease production. In the long run increased price expectations shift the
short-run aggregate supply curve to the left.
Based on the available evidence, which of the following groups benefits most from
mandatory seat belt laws?
a. automakers
b. pedestrians
c. drivers
d. owners of collision-repair shops
Which of the following statements does not apply to a market economy?
a. Firms decide whom to hire and what to produce.
b. The “invisible hand” usually maximizes the wellbeing of society as a whole.
c. Households decide which firms to work for and what to buy with their incomes.
d. Government policies are the primary forces that guide the decisions of firms and
households.
Once the demand curve for a product or service is drawn, it
a. remains stable over time.
b. can shift either rightward or leftward.
c. is possible to move along the curve, but the curve will not shift.
d. tends to become steeper over time.
Substitution bias occurs because the CPI ignores the possibility of consumer
substitution toward goods that have become relatively less expensive.
a. True
b. False
If the Federal Reserve increases the rate at which it increases the money supply, then
unemployment is lower
a. in the long run and the short run.
b. in the long run but not the short run.
c. in the short run but not the long run.
d. in neither the short run nor the long run.
Rocket Energy Drink Company buys sugar to produce energy drinks. At the end of a
quarter both its inventory of sugar and its inventory of energy drinks has increased.
Investment for the quarter will include
a. both the increased inventory of sugar and the increased inventory of energy drinks.
b. the increased inventory of sugar, but not the increased inventory of energy drinks.
c. the increased inventory of energy drinks, but not the increased inventory of sugar.
d. neither the increased inventory of sugar nor the increased inventory of energy drinks.
Table 23-2
The table below contains data for country A for the year 2010.
RefertoTable23-2.What was country A’s GDP in 2010?
a. $6359
b. $7136
c. $7253
d. $8147
Which of the following is an example of U.S. foreign direct investment and by itself
increases U.S. net capital outflow?
a. A Swedish bank buys a bond issued by the U.S. government.
b. A German company builds a car factory in the U.S.
c. A U.S. mutual fund purchases stock issued by a corporation in Bolivia.
d. A U.S. grocery chain builds and operates a new warehouse in Honduras.
Other things the same, if the price level rises, then domestic interest rates
a. rise, so domestic residents will want to hold more foreign bonds.
b. rise, so domestic residents will want to hold fewer foreign bonds.
c. fall, so domestic residents will want to hold more foreign bonds.
d. fall, so domestic residents will want to hold fewer foreign bonds.
Suppose you win a small lottery and you are given the following choice: You can
receive (1) an immediate payment of $5,000 or (2) two annual payments, each in the
amount of $2,700, with the first payment coming one year from now, and the second
payment coming two years from now. You would choose to take the two annual
payments if the interest rate is
a. 2 percent, but not if the interest rate is 3 percent.
b. 3 percent, but not if the interest rate is 4 percent.
c. 4 percent, but not if the interest rate is 5 percent.
d. 5 percent, but not if the interest rate is 6 percent.
If the central bank increases the money supply, in the short run, output
a. rises so unemployment rises.
b. rises so unemployment falls.
c. falls so unemployment rises.
d. falls so unemployment falls.
If a nation is selling more goods and services to foreigners than it is buying from them,
then on net it must be buying assets abroad.
a. True
b. False
What is the future value of $500 one year from today if the interest rate is 6 percent?
a. $515
b. $520
c. $530
d. None of the above is correct.
The CPI assumes a fixed basket of goods over time. In fact, consumers are likely to
change purchasing behavior over time by purchasing less of the goods whose prices
have risen by relatively large amounts and by buying more of the goods whose prices
have risen less or maybe even fallen. What problem does this cause for measuring the
cost of living?
Inflation distorts relative prices. What does this mean and why does it impose a cost on
society?
In addition to investment in physical and human capital, what other public policies
might a country adopt to increase productivity?
A group of buyers and sellers of a particular good or service is called a
You hear an economist state the following: “The increase in the money supply will
causes price to rise in the long run and will have no effect on output or any other real
factors.” This economist is expressing the principle of _____.
Explain how the following apparently contradictory statement can be true: Most spells
of unemployment are short, and most unemployment observed at any given time is
long-term.
For the economy as a whole, how does income compare to expenditures? Explain.
Figure 2-14
Consider the production possibilities curve for a country that can produce sweaters,
apples (in bushels), or a combination of the two.
RefertoFigure2-14.Which point(s) on the graph is(are) efficient production
possibilities?
A recession with inflation is known by what term?
Nominal GDP is $15 trillion and real GDP is $10 trillion. What is the GDP deflator?
Show your work.
Some economists argue that policymakers can use monetary and fiscal policy to reduce
the severity of economic fluctuations. In practice, however, there are obstacles to the
use of such policies. What are the primary difficulties with using monetary and fiscal
policy to stabilize the economy?
Mitch makes payments on a car loan. If the price level a year ago was 120 and people
expected it to rise to 125 but it actually rose to 128, what happened to the real value of
Mitch’s payment as opposed to what he was expecting to happen? Express your answer
to the nearest 100th.
Charlotte can produce pork and beans and can switch between producing them at a
constant rate. If it takes her 10 hours to produce a pound of pork and 5 hours to produce
a pound of beans, what is her opportunity cost of pork and what is her opportunity cost
of beans?
Economists at which administrative department help design tax policy?
Consumption is $7 trillion, investment is $1.5 trillion, government expenditures are $2
trillion, government transfer payments are $1 trillion, exports are $1.50 trillion and
imports are $1.25 trillion. What is GDP?
Why do Federal Reserve Board of Governors have long (14 year) terms?
Economists use the term to refer to fluctuations in economic activity, such as
employment and production.
Table 24-14
The table below lists the per pound prices of meat and potatoes for the months of
January, February, and March. Assume that the typical consumer buys 25 pounds of
meat and 15 pounds of potatoes each month, and that January is the base period.
RefertoTable24-14. Calculate the inflation rate for February.