Table 6.10
Refer to Table 6.10. If 1999 is the base year, then the inflation rate (i.e., the growth rate
of the price index) between 2000 and 2001 is:
A) about 11 percent.
B) about 13 percent.
C) about 9 percent.
D) about 7 percent.
Recall Application 1, “Falling Home Prices, the Wealth Effect, and Decreased
Consumer Spending,” to answer the following questions:
According to the application, from 1997-2006, the largest increase in net wealth for
most families in the U.S. came from:
A) credit card debt.
B) home equity.
C) auto loans.
D) bankruptcy.
If potential output exceeds actual output, ________ shifts downward over time.
A) the short-run AS curve
B) the short-run AD curve
C) the long-run AS curve
D) the long-run AD curve
Which of the following is an example of a market failure caused by the existence of a
public good?
A) A levee is not built because no one wants to pay for it, even though everyone agrees
that it is important.
B) We send a chimpanzee to space. You think it would be better if we send a lemur.
C) We spend $300 billion for national defense. You think it is too much.
D) McDonalds is your favorite restaurant. Other people think the food they serve is
unappealing.
When an economy is experiencing a “liquidity trap,” monetary policy to bring the
economy back to full employment
A) has too large of an effect.
B) changes wages, but prices remain unchanged.
C) changes prices but not wages.
D) no longer works.
Which of the following is true when the US dollar appreciates against the euro?
A) It takes fewer dollars to buy the euro.
B) It becomes more expensive for Americans to buy goods from Germany.
C) It takes fewer euros to buy the dollar.
D) All of the above are correct.
Suppose you have $1000 that you deposited into a savings account that pays 5 percent
per year. According to reports you hear in the news, the inflation rate this year is about
6 percent.
(a) What is the nominal value of the savings account after 1 year?
(b) In real terms, what is the value of the gain of your savings account, relative to the
original $1000 deposit?
Figure 18.1 Refer to Figure 18.2. The terms of trade for Pizzaland is:
A) 1 tomato for .167 cheeses.
B) 1 tomato for .6 cheese.
C) 1 tomato for .4 cheese.
D) 1 tomato for 2.5 cheeses.
If Andrew is paid an interest rate of 10% on his savings, but the inflation rate is 20%,
the real interest rate is:
A) 10%.
B) -20%.
C) -10%.
D) 20%.
Weighing the benefits and costs of the different speeds at which to sail an ocean cargo
ship addresses the economic concept known as
A) the principle of opportunity cost.
B) the marginal principle.
C) the principle of voluntary exchange.
D) the principle of diminishing returns.
The real business cycle theory emphasizes that in today’s modern age, ________
technology plays a significant role in causing economic fluctuations.
A) shocks to
B) advances in
C) obsolete ideas in
D) duplications in
The exchange rate is
A) the rate at which banks can borrow from the Fed.
B) the slope of the investment function.
C) the price at which one currency trades for another currency.
D) the rate at which one can translate money into consumption goods.
What is the threshold age for individuals to be considered as being in the “labor force”
for statistical purposes?
A) 16
B) 18
C) 21
D) Over 21
The size of the multiplier depends on the:
A) marginal propensity to consume.
B) level of equilibrium output.
C) level of investment.
D) All of the above are true.
Figure 9.3 Refer to Figure 9.3. Which of the following causes the economy to move
from Point A to Point E in the short run?
A) an oil embargo that increases the price of oil sharply
B) technological progress
C) an influx of immigrants
D) an increase in the price level
In the short run, a decrease in the price of a major input such as oil will:
A) decrease the price level and increase the level of output.
B) increase the price level and increase the level of output.
C) increase the price level and decrease the level of output.
D) decrease both the price level and the level of output.
An increase in U.S. exports to Russia ________ the demand for U.S. dollars and
________ the supply of Russian rubles.
A) increases; increases
B) decreases; increases
C) increases; decreases
D) decreases; decreases
The U.S. federal government had a budget ________ over the entire 1970 to 1997
period; by historical standards, it was particularly ________ in the 1980s.
A) deficit; small
B) surplus; large
C) surplus; small
D) deficit; large
Saving time by driving faster is an example of a ________ of driving faster. Increasing
the severity of injuries from a potential accident due to driving faster is a(n) ________
of driving faster.
A) nominal cost; real cost
B) marginal cost; nominal cost
C) marginal benefit; marginal cost
D) normative benefit; opportunity cost