As the opportunity cost of holding money decreases, the quantity demanded of money
a. increases.
b. decreases.
c. remains unchanged.
d. increases, then decreases.
e. decreases, then increases.
Exhibit 2-1
The PPF illustrates
a. constant opportunity costs between guns and butter.
b. that guns are more important than butter.
c. increasing opportunity costs between guns and butter.
d. the opportunity cost of one unit of guns is four units of butter.
e. none of the above
Exhibit 5-1
which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Which
toll creates equilibrium at 11 p.m.?
a. P2
b. P1
c. 0
d. It is not constant.
Colleges and universities use such things as grade point averages and standardized test
scores as
a. a measure of consumer utility.
b. non-price rationing devices.
c. a means to shift the supply curve for a college education.
d. solely to frustrate prospective students.
Which of the following would not be included in the measurement of GDP?
a. a bill from a car mechanic
b. wages of a card dealer working in a Las Vegas casino
c. commissions of a stockbroker
d. the increased value of shares of stock
e. c and d
Which of the following might break the link in the Keynesian transmission mechanism
between the expansionary monetary policy and the goods-and-services market?
a. a downward-sloping investment demand curve
b. a vertical money supply curve
c. a belief on the part of individuals that bond prices are extraordinarily low
d. all of the above
e. none of the above
According to the textbook, in 2011 the top 1 percent of income earners in the U.S.
earned more than $388,905.
a. True
b. False
A $40 billion reduction in taxes increases Real GDP by $150 million.Assuming a
constant price level, what does the tax multiplier equal?
a. 3.75
b. 3.00
c. 37.50
d. 0.27
e.0.73
Exhibit 3-10
300 units of X will be exchanged in this market if the price is
a. $30.
b. $20.
c. $10.
d. none of the above
A person’s real wage will fall if the
a. nominal wage falls.
b. price level rises.
c. nominal wage rises.
d. price level falls.
e. a and b
An open market __________ by the Fed increases the money supply; a(n) __________
in the required reserve ratio increases the money supply.
a. sale; decrease
b. purchase; increase
c. sale; increase
d. purchase; decrease
Exhibit 11-5
Assume that the farmer grows wheat and sells it to the miller, the miller turns the wheat
into flour and sells it to the baker, and the baker turns the flour into bread and sells it to
the final consumer. Which summarizes the situation prior to the value added tax
(VAT).If the government imposes a VAT rate of 10 percent, the government will receive
___________ in VAT revenue per loaf of bread sold and the final consumer will find
that he has to pay _______________ more for a loaf of bread than he did prior to the
VAT tax.
a. $0.25; $2.53
b. $0.11; $2.75
c. $0.25; $0.25
d. $0.03; $2.75
If some of a person’s wealth is in cash, it follows that
a. this person’s monetary wealth will change as the price level changes.
b. this person’s monetary wealth will not change as the price level changes.
c. this person is wealthier than a person who holds all his wealth in nonmonetary form.
d. a and c
e. b and c
Exhibit 6-2
The unemployment rate in year 3 is
a. 12 1/2 percent.
b. 33 1/3 percent.
c. 50 percent.
d. 66 2/3 percent.
e. 25 percent.
Stagflation is the simultaneous occurrence of
a. low inflation and high unemployment.
b. high inflation and low unemployment.
c. low inflation and low unemployment.
d. high inflation and high unemployment.
Exhibit 35-4
Under a fixed exchange rate system, at the exchange rate of E1, the dollar is
__________ and there is a __________ of pesos.
a. overvalued; surplus
b. undervalued; surplus
c. overvalued; shortage
d. undervalued; shortage
The economy was in long-run equilibrium when aggregate demand increased. At this
point in time, the expected inflation has started to adjust to the new higher actual
inflation rate. According to the (Friedman) natural rate theory, this means the
unemployment rate in the economy must currently be
a. decreasing.
b. increasing.
c. higher than it was in long-run equilibrium.
d. equal to what it was in long-run equilibrium.
e. There is not enough information to answer the question.
If investment changes because of a change in a factor other than the price level, then the
a. economy moves from one point on an AD curve to another point on the same curve.
b. AD curve shifts.
c. economy moves from one point on a short-run aggregate supply (SRAS) curve to
another point on the same curve.
d. SRAS curve shifts.
e. none of the above