Figure 33-4
RefertoFigure33-4. If the economy starts at A, a decrease in the money supply moves
the economy
a. to A in the long run.
b. to C in the long run.
c. back to A in the long run.
d. to D in the long run.
Monetary policy and fiscal policy influence
a. output and prices in the short run and the long run.
b. output and prices in the short run only.
c. output in the short run and the long run.
d. output in the short run only.
Economic variables whose values are measured in monetary units are called
a. dichotomous variables.
b. nominal variables.
c. classical variables.
d. real variables.
An increase in the budget deficit causes net capital outflow to
a. rise, because the supply of loanable funds shifts right.
b. rise, because the demand for loanable funds shifts right.
c. fall, because the supply of loanable funds shifts left.
d. fall, because the demand for loanable funds shifts right.
If wages are sticky, then a greater than expected increase in the price level
a. raises the real costs of production, so the short-run aggregate supply curve shifts left.
b. raises the real costs of production, so the aggregate quantity of goods and services
declines.
c. reduces the real costs of production, so the short-run aggregate supply curve shifts
right.
d. reduces the real costs of production, so the aggregate quantity of goods and services
rises.
If the demand for dollars in the market for foreign-currency exchange shifts right, then
the exchange rate
a. rises and the quantity of dollars exchanged rises.
b. rises and the quantity of dollars exchanged does not change.
c. falls and the quantity of dollars exchanged falls.
d. falls and the quantity of dollars exchanged does not change.
If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and
services from foreign countries, then it has
a. $7.2 billion of exports and $4.8 billion of imports.
b. $7.2 billion of imports and $4.8 billion of exports.
c. $4.8 billion of exports and $2.4 billion of imports.
d. $4.8 billion of imports and $2.4 billion of exports.
Which of the following events must result in a higher price in the market for cigars?
a. Demand for cigars increases, and supply of cigars decreases.
b. Demand for cigars and supply of cigars both decrease.
c. Demand for cigars decreases, and supply of cigars increases.
d. Demand for cigars and supply of cigars both increase
Figure 4-26
RefertoFigure4-26.Which of the following movements would illustrate the effect in the
market for convertible automobiles of an increase in the price of steel?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
The large trade deficits in the U.S. during the 1990’s were primarily associated with a
rise in domestic investment spending rather than a rise in the budget deficit.
a. True
b. False
Which of the following is nota typical justification for running a budget deficit?
a. financing a war
b. dealing with a recession
c. fighting inflation
d. dealing with unemployment
Table 3-28
Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim
can switch between setting up and testing computers at a constant rate. The following
table applies.
RefertoTable3-28.Jim has an absolute advantage in
a. both setting up and testing computers and a comparative advantage in setting up
computers.
b. both setting up and testing computers and a comparative advantage in testing
computers.
c. neither setting up nor testing computers and a comparative advantage in setting up
computers.
d. neither setting up nor testing computers and a comparative advantage in testing
computers.
Figure 3-17
Refer to Figure3-17. Suppose Maxine decides to increase her production of tarts by 5.
What is the opportunity cost of this decision?
a. 2/5 pie
b. 2 pies
c. 5/2 pies
d. 10 pies
An increase in the interest rate causes investment to
a. rise and the exchange rate to appreciate.
b. fall and the exchange rate to depreciate.
c. rise and the exchange rate to depreciate.
d. fall and the exchange rate to appreciate.
The normal rate of unemployment around which the unemployment rate fluctuates is
called the natural rate of unemployment.
a. True
b. False
Between the two ordered pairs (3, 6) and (7, 18), the slope is a. 1/3
b. -1/3.
c. 3.
d. -3.
Other things the same, if the exchange rate changes from 6 Chinese yuan per dollar to 7
Chinese yuan per dollar, then the dollar
a. appreciates and buys more Chinese goods.
b. appreciates and buys fewer Chinese goods.
c. depreciates and buys more Chinese goods.
d. depreciates and buys fewer Chinese goods.
GDP includes the value of all
a. final goods and services produced within a country using primarily market prices to
measure the value of goods and services.
b. final goods and services produced within a country using primarily a survey of
consumers to measure the value of goods and services.
c. goods and services produced within a country using primarily market prices to
measure the value of goods and services.
d. goods and services produced within a country using primarily a survey of consumers
to measure the value of goods and services.
Who is notincluded in the labor force by the Bureau of Labor Statistics?
a. Anita, who is on temporary layoff
b. Lauren, who has retired and is not looking for work
c. Raymond, who does not have a job but has applied for several in the last week
d. None of the above is correct.
Diversifying
a. increases the standard deviation of the value of a portfolio indicating its risk has
increased.
b. increases the standard deviation of the value of a portfolio indicating its risk has
decreased.
c. decreases the standard deviation of the value of a portfolio indicating its risk has
increased.
d. decreases the standard deviation of the value of a portfolio indicating its risk has
decreased.
U.S. net capital outflow
a. is a source of the supply of loanable funds, and the source of the supply of dollars in
the foreign exchange market.
b. is a source of the supply of loanable funds, and a source of the demand for dollars in
the foreign exchange market.
c. is a part of the demand for loanable funds, and the source of the supply of dollars in
the foreign exchange market.
d. is a part of the demand for loanable funds, and a source of the demand for dollars in
the foreign exchange market.
If an unemployed person quits looking for work, then, eventually the unemployment
rate
a. decreases, and the labor-force participation rate is unaffected.
b. and the labor-force participation rate both decrease.
c. is unaffected, and the labor-force participation rate decreases.
d. and the labor-force participation rate are both unaffected.
A good is produced by a firm in 2009, added to the firm’s inventory in 2010, and sold to
a household in 2010. As a result, on net,
a. 2009 GDP increased and 2010 GDP decreased.
b. 2009 GDP decreased and 2010 GDP increased.
c. 2009 GDP did not change and 2010 GDP increased.
d. 2009 GDP increased and 2010 GDP did not change.
Suppose that because of the popularity of the low-carb diet, bakeries need fewer
workers and steak houses need more workers. The unemployment created by this
change is
a. frictional unemployment created by efficiency wages.
b. frictional unemployment created by sectoral shifts.
c. structural unemployment created by efficiency wages.
d. structural unemployment created by sectoral shifts.
Scenario34-2.The following facts apply to a small, imaginary economy.
Consumption spending is $6,720 when income is $8,000.
Consumption spending is $7,040 when income is $8,500.
RefertoScenario34-2. For this economy, an initial increase of $500 in government
purchases translates into a
a. $1,388.89 increase in aggregate demand in the absence of the crowding-out effect.
b. $3,125.00 increase in aggregate demand in the absence of the crowding-out effect.
c. $1,135 increase in aggregate demand when the crowding-out effect is taken into
account.
d. $3,125.00 increase in aggregate demand when the crowding-out effect is taken into
account.
If there is inflation, then a firm that has kept its price fixed for some time will have a
a. high relative price. Relative-price variability rises as the inflation rate rises.
b. high relative price. Relative-price variability falls as the inflation rate rises.
c. low relative price. Relative-price variability rises as the inflation rate rises.
d. low relative price. Relative-price variability falls as the inflation rate rises.
The sticky-wage theory of the short-run aggregate supply curve says that when the price
level is lower than expected,
a. relative to prices wages are higher and employment rise.
b. relative to prices wages are higher and employment falls.
c. relative to prices wages are lower and employment rises.
d. relative to prices wages are lower and employment falls.
Suppose an increase in the price of rubber coincides with an advance in the technology
of tire production. As a result of these two events, the demand for tires
a. decreases, and the supply of tires increases.
b. is unaffected, and the supply of tires decreases.
c. is unaffected, and the supply of tires increases.
d. None of the above is necessarily correct.
When each person specializes in producing the good in which he or she has a
comparative advantage, total production in the economy
a. falls.
b. stays the same.
c. rises.
d. may fall, rise, or stay the same.
As compared to government spending, a tax cut is likely to affect aggregate demand
a. more quickly but is more likely to be spent on projects with little benefit.
b. more quickly and is less likely to be spent on projects with little benefit.
c. less quickly but is less likely to be spent on projects with little benefit.
d. less quickly and is more likely to be spent on projects with little benefit.
Figure 35-2
Use the pair of diagrams below to answer the following questions.
RefertoFigure35-2. If the economy starts at C and 1, then in the short run, a decrease
in the money supply moves the economy to
a. E and 1.
b. D and 2.
c. D and 3.
d. None of the above is correct.
A low price-earnings ratio indicates that either the stock is
a. undervalued or people are relatively optimistic about the corporation’s prospects.
b. overvalued or people are relatively optimistic about the corporation’s prospects.
c. overvalued or people are relatively pessimistic about the corporation’s prospects.
d. undervalued or people are relatively pessimistic about the corporation’s prospects.
Michigan Cranberry Company sold $10 million worth of cranberries it produced. In
producing cranberries, it purchased $1 million dollars worth of supplies from foreign
countries and paid workers who reside in Canada but commute to the U.S. $1 million.
How much did these transactions add to U.S. GDP?
a. $12 million
b. $11 million
c. $10 million
d. $9 million