If a country’s purchases of foreign assets exceeds foreign purchases of domestic assets,
that country has
a. positive net exports and positive net capital outflows.
b. positive net exports and negative net capital outflows.
c. negative net exports and positive net capital outflows.
d. negative net exports and negative net capital outflows.
College-age athletes who drop out of college to play professional sports
a. are not rational decision makers.
b. are well aware that their opportunity cost of attending college is very high.
c. are concerned more about present circumstances than their future.
d. underestimate the value of a college education.
If M= 12,000, P= 3, and Y= 32,000, then velocity =
a. 1.125. Velocity will rise if money changes hands more frequently.
b. 1.125. Velocity will rise if money changes hands less frequently.
c. 8. Velocity will rise if money changes hands more frequently.
d. 8. Velocity will rise if money changes hands less frequently.
Table 3-1
Assume that John and Jane can switch between producing bread and wine at a constant
rate.
Refer to Table3-1. Assume that John and Jane each work 24 hours. What happens to
total production if instead of each person spending 12 hours producing each good, Jane
spends 21 hours producing wine and 3 hours producing bread and John spends 3 hours
producing wine and 21 hours producing bread?
a. The total production of bread and wine each rise.
b. The total production of bread rises and the total production of wine falls.
c. The total production of bread falls and the total production of wine rises.
d. The total production of bread and wine each fall.
The country of Bienmundo does not trade with any other country. Its GDP is $30
billion. Its government purchases $5 billion worth of goods and services each year and
collects $6 billion in taxes. Private saving in Bienmundo amounts to $5 billion. What
are consumption and investment in Bienmundo?
a. $17 billion and $8 billion, respectively.
b. $19 billion and $6 billion, respectively.
c. $19 billion and $8 billion, respectively.
d. $17 billion and $6 billion, respectively.
An increase in government spending on goods to build or repair infrastructure
a. shifts the aggregate demand curve to the right.
b. has a multiplier effect.
c. shifts the aggregate supply curve to the right, but this effect is likely more important
in the long run.
d. All of the above are correct.
According to research by Robert Fogel, what proportion of the British population in
1780 was so malnourished that they could not perform manual labor?
a. 5 percent
b. 10 percent
c. 20 percent
d. 25 percent
Which of the following lists includes only changes that shift aggregate demand to the
right?
a. repeal of an investment tax credit, an increase in the money supply
b. repeal of an investment tax credit, a decrease in the money supply
c. passing of an investment tax credit, an increase in the money supply
d. passing of an investment tax credit, a decrease in the money supply
Three people go to the bank to cash in their accounts. Amy had her money in an
account for 25 years at 4 percent interest. Bill had his money in an account for 20 years
at 5 percent interest. Celia had her money in an account for 5 years at 20 percent
interest. If each of them originally deposited $500 in their accounts, which of them gets
the most money when they cash in their accounts?
a. Amy
b. Bill
c. Celia
d. They each get the same amount.
A group of buyers and sellers of a particular good or service is called a(n)
a. coalition.
b. economy.
c. market.
d. competition.
Other things the same, a higher real interest rate raises the quantity of
a. domestic investment.
b. net capital outflow.
c. loanable funds demanded.
d. loanable funds supplied.
The president of Suldinia, a developing country, proposes that his country needs to help
domestic firms by reducing trade restrictions.
a. These are outward-oriented policies and most economists believe they would have
beneficial effects on growth in Suldinia.
b. These are outward-oriented policies and most economists believe they would have
adverse effects on growth in Suldinia.
c. These are inward-oriented policies and most economists believe they would have
beneficial effects on growth in Suldinia.
d. These are inward-oriented policies and most economists believe they would have
adverse effects on growth in Suldinia.
A shortage is the same as an excess demand.
a. True
b. False
As aggregate demand shifts left along the short-run aggregate supply curve,
a. inflation and unemployment are higher.
b. inflation is higher and unemployment is lower.
c. unemployment is higher and inflation is lower.
d. unemployment and inflation are lower.
Table 3-25
Assume that Maya and Miguel can switch between producing mixers and producing
toasters at a constant rate.
RefertoTable3-25.Maya should specialize in the production of
a. mixers and Miguel should specialize in the production of toasters.
b. toasters and Miguel should specialize in the production of mixers.
c. both goods and Miguel should specialize in the production of neither good.
d. neither good and Miguel should specialize in the production of both goods.
Higher inflation makes relative prices
a. more variable, making it more likely that resources will be allocated to their best use.
b. more variable, making it less likely that resources will be allocated to their best use.
c. less variable, making it more likely that resources will be allocated to their best use.
d. less variable, making it less likely that resources will be allocated to their best use.
Periods during which real GDP rises are called recessions.
a. True
b. False
In the short-run, society faces a tradeoff between inflation and unemployment.
a. True
b. False
If the Federal Reserve accommodates an adverse supply shock,
a. inflation expectations may rise which shifts the short-run Phillips curve shifts right.
b. inflation expectations may rise which shifts the short-run Phillips curve shifts left.
c. inflation expectations may fall which shifts the short-run Phillips curve shifts right.
d. inflation expectations may fall which shifts the short-run Phillips curve shifts left
Table 28-6
RefetoTable28-6.What is the U-3 measure of labor underutilization?
a. 4.7%
b. 6.2%
c. 7.0%
d. 10.9%
In the late 1800’s deflation caused farmers to suffer as the fall in crop prices reduced
their income and thus their ability to pay off their debts.
a. True
b. False
Figure 2-12
Refer to Figure2-12. Which of the following would most likely have caused the
production possibilities frontier to shift outward from A to B?
a. a decrease in unemployment
b. a technological advance in the consumer goods industries
c. a general technological advance
d. an increase in the availability of capital-producing resources
Monetary Policy in Mokania
Mokania has had inflation of 15% for many years. Mokania establishes a new central
bank, the Bank of Mokania, with the hopes of reducing the inflation rate.
Refer to MonetaryPolicyinMokania. The Bank of Mokania publicizes that it intends to
reduce the inflation rate to 5%. If Mokanians lower their inflation expectations, which
curve shifts to the left?
a. both the short-run and the long-run Phillips curves
b. neither the short-run nor the long-run Phillips curves
c. only the short-run Phillips curve
d. only the long-run Phillips curve
Refer to Figure3-4. If Lisa and Bryce each divides his or her time equally between
producing jackets and producing sweaters, then total production is
a. 2 sweaters and 8 jackets.
b. 3 sweaters and 13 jackets.
c. 5 sweaters and 8 jackets.
d. 6 sweaters and 26 jackets.
Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal,
international tensions, and loss of confidence in policymakers, people become
pessimistic regarding the future and retain that level of pessimism for some time.
RefertoPessimism.What happens to the expected price level and what’s the result for
wage bargaining?
a. The expected price level rises. Bargains are struck for higher wages.
b. The expected price level rises. Bargains are struck for lower wages.
c. The expected price level falls. Bargains are struck for higher wages.
d. The expected price level falls. Bargains are struck for lower wages.
According to the open-economy macroeconomic model, import quotas increase which
of the following
a. net exports and net capital outflow
b. net exports but not net capital outflow.
c. net capital outflow but not net exports.
d. neither net exports nor net capital outflow.
In the markets for goods and services in the circular-flow diagram,
a. households and firms are both buyers.
b. households and firms are both sellers.
c. households are buyers and firms are sellers.
d. households are sellers and firms are buyers.
When deflation exists,
a. the real interest rate is less than the nominal interest rate.
b. the real interest rate is greater than the nominal interest rate.
c. the real interest rate and inflation are less than the nominal interest rate.
d. prices rise.
Which of the following is an example of barter?
a. A parent gives a teenager a $10 bill in exchange for her babysitting services.
b. A homeowner gives an exterminator a check for $50 in exchange for extermination
services.
c. A barber gives a plumber a haircut in exchange for the plumber fixing the barber’s
leaky faucet.
d. All of the above are examples of barter.
Figure 4-3
RefertoFigure4-3.If these are the only two consumers in the market, then the market
quantity demanded at a price of $10 is
a. 0 units.
b. 5 units.
c. 8.33 units.
d. 25 units.
Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10
empty seats on a flight. The average cost per seat is
a. $50.
b. $500.
c. $50,000.
d. This cannot be determined from the information given.
Opportunity cost refers to how many inputs a producer requires to produce a good.
a. True
b. False
When society gets the most it can from its scarce resources, then the outcome is called
a. equitable.
b. efficient.
c. normal.
d. efficacious.
In the markets for goods and services in the circular flow diagram, households act as
Explain how tax cuts can increase aggregate supply.
Public saving is the difference between and .
Scenario 24-5
Suppose the residents of Mediaville spend all of their income on books, CDs, and
DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for
$900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for
$1,250. Assume that the market basket for the CPI is defined in the base year.
RefertoScenario24-5.Using 2010 as the base year, what is the inflation rate in 2010?
A payment of $10,000 is to be made in the future. The interest rate 3%. Is this payment
worth more if it is paid in 5 years or 10 years? How much more is it worth?
Economists use the term to refer to the ability to produce a good at a lower opportunity
cost than another producer.
Draw and label a graph showing equilibrium in the market for loanable funds.
When the money supply increases, there is an excess _____ of money. As a result,
interest rates _____ and aggregate demand _____.
Scenario 1-5
Suppose that you have a choice between going to the movies with a friend for three
hours or working at your job. If you go to the movies, you will spend $12 on a ticket
and $6 on popcorn. If you choose to work, you will earn $10 an hour.
RefertoScenario1-5.What is your opportunity cost of going to the movies?
Explain how a recession differs from a depression.
Scenario 1-3
It costs a company $35,000 to produce 700 graphing calculators. The company’s cost
will be $35,070 if it produces an additional graphing calculator. The company is
currently producing 700 graphing calculators.
Refer to Scenario1-3. A customer is willing to pay $60 for the 701thcalculator. Should
the company produce and sell it? Explain.
List the factors that might influence a country’s exports, imports, and trade balance.
Briefly state the three key facts about economic fluctuations.
Describe three costs of inflation.
A country had a net capital outflow of $1.5 trillion and imports of $0.5 trillion. What
was the value of its exports?
What are menu costs and why does high inflation increase menu costs?
Scenario 1-2
Suppose that you have a choice between going to the movies with a friend for two
hours or working at your job. If you go to the movies, you will spend $7 on a ticket and
$5 on popcorn. If you choose to work, you will earn $10 an hour.
RefertoScenario1-2.What is your opportunity cost of working?