During the mid and last part of the 1990’s both inflation and unemployment were low.
In general this could have been the result of
a. adverse supply shocks that shifted the short-run Phillips curve left.
b. adverse supply shocks that shifted the short-run Phillips curve right.
c. favorable supply shocks that shifted the short-run Phillips curve left.
d. favorable supply shocks that shifted the short-run Phillips curve right.
A Swiss watchmaker opens a factory in the United States. This is an example of Swiss
a. exports.
b. imports.
c. foreign portfolio investment.
d. foreign direct investment.
In which case would people desire to borrow the most?
a. the nominal interest rate is 8% and the inflation rate is 7%
b. the nominal interest rate is 7% and the inflation rate is 5%
c. the nominal interest rate is 6% and the inflation rate is 3%
d. the nominal interest rate is 5% and the inflation rate is 1%
A surplus results when a
a. nonbinding price floor is imposed on a market.
b. nonbinding price floor is removed from a market.
c. binding price floor is imposed on a market.
d. binding price floor is removed from a market.
Figure 2-1
Refer to Figure 2-1. Sonia completes her first week of employment working as a
hairdresser at a salon. On Friday of that week, she receives her first paycheck. To which
of the arrows does this transaction directly contribute?
a. B only
b. A and B
c. C only
d. C and D
Consternation Corporation has an agreement with its workers to index completely the
wage of its employees using the CPI. Consternation Corporation currently pays its
production line workers $8.00 an hour and is scheduled to index their wages today. If
the CPI is currently 160 and was 128 a year ago, the firm should increase the hourly
wages of its workers by
a. $0.25.
b. $1.60.
c. $2.00.
d. $2.56.
Which of the following is consistent with the catch-up effect?
a. The United States had a higher growth rate before 1900 than after.
b. After World War II the United States had lower growth rates than war-ravaged
European countries.
c. Although the United States has a relatively high level of output per person, its growth
rate is rather modest compared to some countries.
d. All of the above are correct.
Rational people make decisions at the margin by
a. following marginal traditions.
b. behaving in a random fashion.
c. thinking in black-and-white terms.
d. comparing marginal costs and marginal benefits.
Bill is restoring a car and has already spent $4000 on the restoration. He expects to be
able to sell the car for $6200. Bill discovers that he needs to do an additional $2400 of
work to make the car worth $6200 to potential buyers. He could also sell the car now,
without completing the additional work, for $3800. What should he do?
a. He should sell the car now for $3800.
b. He should keep the car since it wouldn”t be rational to spend $6400 restoring a car
and then sell it for only $6200.
c. He should complete the additional work and sell the car for $6200.
d. It does not matter if Bill sells the car now or completes the work and then sells it at
the higher price because the outcome will be the same either way.
If your firm’s production function has constant returns to scale, and if you double all
your inputs, then your firm’s productivity will
a. not change.
b. increase but not double.
c. double.
d. more than double.
Other things the same, during recessions taxes tend to
a. rise. The rise in taxes stimulates aggregate demand.
b. rise. The rise in taxes contracts aggregate demand.
c. fall. The fall in taxes stimulates aggregate demand.
d. fall. The fall in taxes contracts aggregate demand.
Figure 2-16
In the following graph the x-axis shows the number of times a commuter rail train stops
at a station per hour and the y-axis shows the number of commuter rail passengers per
hour.
Commuter Rail Passengers by Frequency of Service
Refer to Figure 2-16. Which of the following conclusions should not be drawn from
observing this graph?
a. There is a positive correlation between the frequency of service and the number of
passengers.
b. When there are 5 stops per hour, there are approximately 200 passengers.
c. More stops per hour is associated with more passengers per hour.
d. No other factors besides the frequency of service affect the number of passengers.
Figure 8-11
Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then,
when the tax is imposed,
a. consumer surplus decreases by $11.
b. producer surplus decreases by $11.
c. the deadweight loss amounts to $6.
d. All of the above are correct.
If the U.S. government imposes a quota on toy imports, then
a. net capital outflow rises.
b. net exports rise.
c. the exchange rate rises.
d. All of the above are correct.
In a December 2007 New York Times column, Paul Krugman noted that
a. it is difficult to find instances of trade between high-wage countries in the modern
era.
b. it is difficult to find instances of trade between high-wage countries and low-wage
countries in the modern era.
c. the United States now imports more oil and other raw materials from other advanced
countries than from the third world.
d. the United States now imports more manufactured goods from the third world than
from other advanced countries.
Roughly what percentage of growth in real GDP per person in Britain between 1790
and 1980 was accounted for by improved nutrition according to the estimates of Robert
Fogel?
a. 30 percent
b. 20 percent
c. 10 percent
d. 5 percent
According to the rule of 70, if a person’s saving doubles in 10 years, what interest rate
were they earning?
a. 3.5
b. 7
c. 14
d. None of the above is correct.
The term tax incidencerefers to
a. whether buyers or sellers of a good are required to send tax payments to the
government.
b. whether the demand curve or the supply curve shifts when the tax is imposed.
c. the distribution of the tax burden between buyers and sellers.
d. widespread view that taxes (and death) are the only certainties in life.
Optimism
Imagine that the economy is in long-run equilibrium. Then, perhaps because of
improved international relations and increased confidence in policy makers, people
become more optimistic about the future and stay this way for some time.
Refer to Optimism. In the short run what happens to the price level and real GDP?
a. both the price level and real GDP rise.
b. both the price level and real GDP fall.
c. the price level rises and real GDP falls.
d. the price level falls and real GDP rises.
Figure 9-5
Refer to Figure 9-5. The horizontal line at the world price of wagons represents the
a. demand for wagons from the rest of the world.
b. supply of wagons from the rest of the world.
c. level of inefficiency in the domestic market caused by trade.
d. surplus in the domestic wagon market.
Which of the following would we not expect if government policy moved the economy
up along a given short-run Phillips curve?
a. Louise reads in the newspaper that the central bank recently raised the money supply.
b. Eric gets fewer job offers
c. Jack makes larger increases in the prices at his health food store.
d. Maria’s nominal wage increase is larger.
The Fisher effect
a. says the government can generate revenue by printing money.
b. says there is a one for one adjustment of the nominal interest rate to the inflation rate.
c. explains how higher money supply growth leads to higher inflation.
d. explains how prices adjust to obtain equilibrium in the money market.
Figure 4-22
Panel (a) Panel (b)
Panel (c) Panel (d)
Refer to Figure 4-22. Which of the four panels represents the market for cars as a
result of the adoption of new technology on assembly lines?
a. Panel (a)
b. Panel (b)
c. Panel (c)
d. Panel (d)
Consider the money market drawn with the value of money on the vertical axis. If
money demand is unchanged and the price level rises, then
a. the money supply must have increased, perhaps because the Fed bought bonds.
b. the money supply must have increased, perhaps because the Fed sold bonds.
c. the money supply must have decreased, perhaps because the Fed bought bonds.
d. the money supply must have decreased, perhaps because the Fed sold bonds.
If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price
results in a
a. 0.4 percent decrease in the quantity demanded.
b. 2.5 percent decrease in the quantity demanded.
c. 4 percent decrease in the quantity demanded.
d. 40 percent decrease in the quantity demanded.
If the U.S. government increased its deficit, then
a. U.S. bonds would pay higher interest but a dollar would purchase fewer foreign
goods.
b. U.S. bonds would pay higher interest and a dollar would purchase more foreign
goods.
c. U.S. bonds would pay lower interest and a dollar would purchase fewer foreign
goods.
d. U.S. bonds would pay lower interest but a dollar would purchase more foreign goods.
Table 15-3
2010 Labor Data for Adults (age 16 and older) in Meditor
Refer to Table 15-3. What is the adult male labor force in Meditor?
a. 50 million
b. 85 million
c. 90 million
d. 130 million
If the reserve ratio is 4 percent, then the money multiplier is
a. 25.
b. 20.
c. 4.
d. 2.
Which of the following is not a characteristic of a perfectly competitive market?
a. Different sellers sell identical products.
b. There are many sellers.
c. Sellers must accept the price the market determines.
d. All of the above are characteristics of a perfectly competitive market.
The infant-industry argument
a. is based on the belief that protecting industries when they are young will pay off later.
b. is based on the belief that protecting industries producing goods and services for
infants is necessary if a country is to have healthy children.
c. has the support of most economists.
d. is an argument that is advanced by advocates of free trade.
Suppose the Fed increased the growth rate of the money supply. Which of the following
would be higher 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
There is a temporary adverse supply shock. Given the effects of this shock, if the
central bank chooses to return unemployment closer to its previous rate it would
a. raise the rate at which it increases the money supply. In the long run this will shift the
short-run Phillips curve right.
b. raise the rate at which it increases the money supply. In the long run this will shift the
short-run Phillips curve left.
c. reduce the rate at which it increases the money supply. In the long run this will shift
the short-run Phillips curve right.
d. reduce the rate at which it increases the money supply. In the long run this will shift
the short-run Phillips curve left.