According to the Friedman-Phelps analysis, in the long run actual inflation equals
expected inflation and unemployment is at its natural rate.
a. True
b. False
Which of the following is correct?
a. Managed funds typically have a higher return than indexed funds. This tends to refute
the efficient market hypothesis.
b. Managed funds typically have a higher return than indexed funds. This tends to
support the efficient market hypothesis.
c. Index funds typically have a higher rate of return than managed funds. This tends to
refute the efficient market hypothesis.
d. Index funds typically have a higher rate of return than managed funds. This tends to
support the efficient market hypothesis.
Some countries win in international trade, while other countries lose.
a. True
b. False
The return to schooling for society is higher than the return to schooling for the
individual if
a. the concept of diminishing returns applies to education.
b. the concept of constant returns to scale applies to education.
c. human capital conveys positive externalities.
d. investment in human capital involves no opportunity costs.
The open-economy macroeconomic model takes
a. GDP, but not the price level as given.
b. the price level, but not GDP as given.
c. both the price level and GDP as given.
d. the price level and GDP as variables to be determined by the model.
In 2009 Congress and President Obama approved tax cuts and increased government
spending. According to the short-run Phillips curve these policies should have
a. raised unemployment and inflation.
b. raised unemployment and reduced inflation.
c. reduced unemployment and raised inflation.
d. reduced unemployment and inflation.
A U.S. fast food restaurant chain sells dollars for Argentinean pesos and then uses the
pesos to buy Argentinean beef. Which of the following do these transactions increase?
a. Argentinean net capital outflow and Argentinean net exports
b. only Argentinean net exports
c. only Argentinean net capital outflow
d. neither Argentinean net exports nor Argentinean capital outflow
In examining the national income accounts of the closed economy of Nepotocracy you
see that this year it had taxes of $100 billion, transfers of $20 billion, and government
purchases of goods and services of $70 billion. You also notice that last year it had
private saving of $70 billion and investment of $50 billion. In which year did
Nepotocracy have a budget deficit of $20 billion?
a. this year and last year
b. this year but not last year
c. last year but not this year
d. neither this year nor last year
While a television news reporter might state that “Today the Fed raised the federal
funds rate from 1 percent to
1.25 percent,” a more precise account of the Fed’s action would be as follows:
a. “Today the Fed told its bond traders to conduct openmarket operations in such a way
that the equilibrium federal funds rate would increase to 1.25 percent.”
b. “Today the Fed raised the discount rate by a quarter of a percentage point, and this
action will force the federal funds rate to rise by the same amount.”
c. “Today the Fed took steps to increase the money supply by an amount that is
sufficient to increase the federal funds rate to 1.25 percent.”
d. “Today the Fed took a step toward expanding aggregate demand, and this was done
by raising the federal funds rate to 1.25 percent.”
Increased output and prices in the United States in the early 1940s were mostly the
result of increased government expenditures.
a. True
b. False
What would happen in the market for loanable funds if the government were to increase
the tax on interest income?
a. Interest rates would rise.
b. Interest rates would be unaffected.
c. Interest rates would fall.
d. The effect on the interest rate is uncertain.
Commodity money cannot be used as a unit of account.
a. True
b. False
An increase in the number of corporations in a portfolio from 110 to 120 reduces
a. market risk by more than an increase from 1 to 10.
b. market risk by less than an increase from 1 to 10.
c. firm-specific risk by more than an increase from 1 to 10.
d. firm-specific risk by less than an increase from 1 to 10.
The GDP deflator reflects the
a. level of prices in the base year relative to the current level of prices.
b. current level of prices relative to the level of prices in the base year.
c. level of real output in the base year relative to the current level of real output.
d. current level of real output relative to the level of real output in the base year.
Data from the Bureau of Labor Statistics show that apparel makes up 14 percent of the
typical consumer’s budget.
a. True
b. False
Which of these activities will most likely impose an external cost?
a. Betty plants flowers in her garden.
b. Bonnie gets a flu vaccine.
c. Bridget drives her car after having too much alcohol to drink.
d. Becky buys a new flat screen television.
Countries that grew the fastest over the last 100 or so years had average growth rates of
real income per person of about
a. 1.5 percent per year.
b. 2.0 percent per year.
c. 2.5 percent per year.
d. 3.0 percent per year.
Figure26-4.On the horizontal axis of the graph, Lrepresents the quantity of loanable
funds in billions of dollars.
RefertoFigure26-4. The position and/or slope of the Supply curve are influenced by
a. the level of public saving.
b. the level of national saving.
c. decisions made by people who have extra income they want to save and lend out.
d. All of the above are correct.
Figure 33-5.
RefertoFigure33-5. Starting from point B and assuming that aggregate demand is held
constant, in the long run the economy is likely to experience
a. a falling price level and a falling level of output, as the economy moves to point C.
b. a falling price level and a rising level of output, as the economy moves to point A.
c. a rising price level and a falling level of output, as the economy moves to point A.
d. a rising price level and a rising level of output, as the economy moves to point C.
Which of the following is a store of value?
a. cash and stocks
b. cash but not stocks
c. stocks but not cash
d. neither cash nor stocks
“Ensuring that Social Security is financially sound for future generations is an
important use of taxpayer dollars” is an example of a
a. normative economic statement.
b. positive economic statement.
c. statement made by an economist working as a scientist.
d. judgment based on evaluation of evidence, not values.
Figure 33-15.
RefertoFigure33-15. Suppose the economy begins at point A. Decreases in what four
variables could result in a movement to point D?
In 1998 the Russian government defaulted on its bonds. According to the
open-economy macroeconomic model, this should have
a. increased Russian interest rates and net exports.
b. reduced Russian interest rates and net exports.
c. increased Russian interest rates and reduced Russian net exports.
d. reduced Russian interest rates and increased Russian net exports.
In the nineteenth century, some countries were on a gold standard so that on average the
money supply growth rate was close to zero and expected inflation was more or less
constant. For these countries during this time period, we find that increases in actual
inflation were generally associated with falling unemployment. These findings
a. are consistent with Friedman and Phelps’s theories, because they argued that when
inflation was higher than expected, unemployment would fall.
b. are consistent with Friedman and Phelps’s theories, because they argued that when
prices rose unemployment would fall whether actual inflation was higher than expected
or not.
c. are inconsistent with Friedman and Phelps’s theories, because they argued that higher
inflation would increase unemployment.
d. are inconsistent with Friedman and Phelps’s theories, because they argued that
inflation and unemployment are unrelated.
A debit card is more similar to a credit card than to a check.
a. True
b. False
According to the open-economy macroeconomic model, if the U.S. government budget
deficit decreases, then both U.S. domestic investment and net capital outflow increase.
a. True
b. False
The principle of comparative advantage does not provide answers to certain questions.
One of those questions is
a. Is it possible for specialization and trade to benefit more than one party to a trade?
b. Is it possible for specialization and trade to increase total output of traded goods?
c. Do opportunity costs play a role in people’s decisions to specialize in certain
activities?
d. What determines the price at which trade takes place?
According to 2012 data on the U.S. population, which of the following was correct for
the adult population of prime working age, ages 25-54?
a. Black males had higher labor-force participation rates and lower unemployment rates
compared to white males.
b. Black males had both higher labor-force participation rates and higher unemployment
rates compared to white males.
c. Black males had both lower labor-force participation rates and lower unemployment
rates compared to white males.
d. Black males had lower labor-force participation rates and higher unemployment rates
compared to white males.
If output is above its natural rate, then according to sticky-wage theory
a. workers and firms will strike bargains for lower wages. In response to the lower
wages firms will produce less at any given price level.
b. workers and firms will strike bargains for lower wages. In response to the lower
wages firms will produce more at any given price level.
c. will strike bargains for higher wages. In response to the higher wages firms will
produce less at any given price level.
d. workers and firms will strike bargains for higher wages. In response to the higher
wages firms will produce more at any given price level.
The CPI is a measure of the overall cost of the goods and services bought by
a. a typical firm.
b. the government.
c. a typical consumer.
d. All of the above are correct.
Which of the following is accurate?
a. Monetary policy is neutral in both the short run and the long run.
b. Though monetary policy is neutral in the long run, it may have effects on real
variables in the short run.
c. Monetary policy has profound effects on real variables in both the short run and the
long run.
d. Monetary policy has profound effects on real variables in the long run, but is neutral
in the short run.
The recession of 2008-2009 was associated with a fall in housing prices which shifted
aggregate demand to the left.
a. True
b. False
Table 3-23
Assume that the farmer and the rancher can switch between producing pork and
producing tomatoes at a constant rate.
Refer to Table3-23. Without trade, the farmer produced and consumed 2 pounds of
pork and 4 pounds of tomatoes and the rancher produced and consumed 4 pounds of
pork and 2 pounds of tomatoes. Then, each person agreed to specialize in the
production of the good in which he has a comparative advantage and trade 4 pounds of
pork for 6 pounds of tomatoes. As a result,
a. the farmer gained 3 hours worth of production and the rancher gained 4 hours worth
of production.
b. the farmer gained 4 hours worth of production and the rancher gained 6 hours worth
of production.
c. the farmer gained 6 hours worth of production and the rancher gained 8 hours worth
of production.
d. the farmer gained 8 hours worth of production and the rancher gained 10 hours worth
of production.
A U.S. bakery buys wheat from Canada and pays for it with US dollars. This transaction
a. increases Canadian net exports, and increases U.S. net capital outflow.
b. increases Canadian net exports, and decreases U.S. net capital outflow.
c. decreases Canadian net exports, and increases U.S. net capital outflow.
d. decreases Canadian net exports, and decreases U.S. net capital outflow.