Suppose there is a tax increase. To stabilize output, the Federal Reserve will
a. increase government spending.
b. increase the money supply.
c. decrease government spending.
d. decrease the money supply.
In the open-economy macroeconomic model, if there is currently a surplus in the
foreign exchange market, the quantity of desired net exports will increase as the market
moves to equilibrium.
a. True
b. False
Economists speaking like policy advisers make
a. positive statements.
b. descriptive statements.
c. claims about how the world is.
d. claims about how the world should be.
Absolute advantage is found by comparing different producers’
a. opportunity costs.
b. payments to land, labor, and capital.
c. input requirements per unit of output.
d. locational and logistical circumstances.
Table29-6.
RefetoTable29-6. From the table it follows that the Bank of Pleasantville operates in a
a. fractional-reserve banking system, since its reserves are less than its deposits.
b. fractional-reserve banking system, since its reserves are less than its loans.
c. 100-percent-reserve banking system, since its assets are equal to its liabilities.
d. 100percentreserve banking system if the Fed’s reserve requirement is 10 percent;
otherwise, it operates in a fractional-reserve banking system.
Table 3-35
RefertoTable3-35.Which good(s) does Denmark have an absolute advantage
producing?
a. both eggs and ham.
b. eggs but not ham.
c. ham but not eggs.
d. neither ham nor eggs.
Thomas Malthus’s predictions turned out to be wrong due to
a. technological advances such as those during the Industrial Revolution.
b. smaller populations now than in the time of Malthus.
c. the effects of brain-drain.
d. unlimited natural resources.
Figure 2-3
RefertoFigure2-3.Which of the following is an activity undertaken by the actors in
rectangle 2?
a. produce and sell goods and services
b. hire and use factors of production
c. own and sell factors of production
d. exchange goods and services between firms and households
If a country has a positive net capital outflow, then
a. on net it is purchasing assets from abroad. This adds to its demand for domestically
generated loanable funds.
b. on net it is purchasing assets from abroad. This subtracts from its demand for
domestically generated loanable funds.
c. on net other countries are purchasing assets from it. This adds to its demand for
domestically generated loanable funds.
d. on net other countries are purchasing assets from it. This subtracts from its demand
for domestically generated loanable funds.
Imagine two economies that are identical except that for a long time, economy A has
had a money supply of $1,000 billion while economy B has had a money supply of
$500 billion. It follows that
a. real GDP and the price level are lower in country B.
b. real GDP, but not the price level, is lower in country B.
c. the price level, but not real GDP is lower in country B.
d. neither the price level or real GDP is lower in country B.
Crowding out occurs when
a. investment declines because a budget deficit makes interest rates rise.
b. investment declines because a budget deficit makes interest rates fall.
c. investment increases because a budget surplus makes interest rates rise.
d. investment increases because a budget surplus makes interest rates fall.
Figure 33-9.
RefertoFigure33-9. Suppose the economy starts where LRAS= AD1= SRAS1. A
decrease in short-run aggregate supply would be consistent with the movement to
a. P1, Y1.
b. P2, Y1.
c. P1, Y2.
d. P3, Y2.
Figure 32-1
RefertoFigure32-1. The loanable funds market is in equilibrium at
a. 2 percent, $20 billion.
b. 4 percent, $40 billion.
c. 6 percent, $60 billion.
d. None of the above is correct.
The position of the long-run aggregate supply curve
a. is determined by resource usage and technology.
b. is at the point where the unemployment rate is zero.
c. shifts to the right when the money supply increases.
d. is at the point where the economy would cease to grow.
Suppose that the money supply decreases. In the short run, this increases prices
according to
a. both the short-run Phillips curve and the aggregate demand and aggregate supply
model.
b. neither the short-run Phillips curve nor the aggregate demand and aggregate supply
model.
c. the short-run Phillips curve, but not according to the aggregate demand and aggregate
supply model.
d. the aggregate demand and aggregate supply model but not according to the short-run
Phillips curve.
If a country’s budget deficit decreases, then the exchange rate
a. rises, which raises net exports.
b. rises, which reduces net exports.
c. falls, which raises net exports.
d. falls, which reduces net exports.
In the open-economy macroeconomic model, the key determinant of net capital outflow
is the
a. nominal exchange rate.
b. nominal interest rate.
c. real exchange rate.
d. real interest rate.
Figure 2-2
Refer to Figure2-2. Carla regularly buys fruits and vegetables at a grocery store.
Roberto regularly pays a lawn- care company to mow his lawn. If the flow of fruits and
vegetables from the grocery store to Carla is represented by an arrow from Box C to
Box B of this circular-flow diagram, then the money paid by Roberto to the lawn-care
company is represented by an arrow
a. from Box A to Box D.
b. from Box B to Box C.
c. from Box C to Box B.
d. from Box D to Box A.
A decrease in government expenditures serves as an example of an adverse supply
shock.
a. True
b. False
A person who believes strongly in the use of fundamental analysis to choose a portfolio
of stocks
a. has a better chance of outperforming the market if stock prices follow a random walk
than if they do not follow a random walk.
b. almost always chooses to hold index funds in his or her portfolio rather than
actively-managed funds.
c. is spending his or her time wisely if the efficient markets hypothesis is correct.
d. is interested in the likely ability of a corporation to pay dividends in the future.
It once took 90 percent of our population to grow our food. It now takes only 3 percent
of the population to grow our food. Which of the following statements is true?
a. This loss of jobs has been detrimental to our economy.
b. The government should provide subsidies to encourage more people to become
farmers.
c. This reduction in the number of farmers explains the increase in the price of food.
d. This is progress because freed-up labor is used to produce other goods.
Which of the following changes would notshift the demand curve for a good or service?
a. a change in income
b. a change in the price of the good or service
c. a change in expectations about the future price of the good or service
d. a change in the price of a related good or service
Figure 28-3
RefetoFigure28-3.If the government imposes a minimum wage of $4, then
unemployment will increase by
a. 0 workers.
b. 2,000 workers.
c. 4,000 workers.
d. 5,000 workers.
Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A
year later, Bob withdraws his $105. If deflation was 5 percent during the year the
money was deposited, then Bob’s purchasing power has not changed.
a. True
b. False
The highest form of competition is called
a. absolute competition.
b. cutthroat competition.
c. perfect competition.
d. market competition.
Changes in one variable on a graph might be caused by the other variable on the graph
or by a third omitted variable.
a. True
b. False
Minimum-wage laws affect all workers.
a. True
b. False
Table 2-5
Refer to Table2-5. Table 2-5 shows one set of production possibilities. Which of the
following statements is correct?
a. The opportunity cost of a bushel of corn does not depend on how many bushels of
wheat are being produced.
b. The opportunity cost of a bushel of corn increases as more corn is produced.
c. The opportunity cost of a bushel of corn decreases as more corn is produced.
d. The opportunity cost of a bushel of wheat decreases as more wheat is produced.
The quantity supplied of a good or service is the amount that sellers are willing and able
to sell at a particular price.
a. True
b. False
A firm might offer efficiency wages in order to reduce shirking.
a. True
b. False
We would expect the interest rate on Bond A to be higher than the interest rate on Bond
B if the two bonds have identical characteristics except that
a. Bond A was issued by a financially weak corporation and Bond B was issued by a
financially strong corporation.
b. Bond A was issued by the Exxon Mobil Corporation and Bond B was issued by the
state of New York.
c. Bond A has a term of 20 years and Bond B has a term of 1 year.
d. All of the above are correct.
Other things the same, if a country raises its saving rate, when is productivity growth
higher?
a. as the economy moves toward the long run and in the long run.
b. as the economy moves toward the long run, but not in the long run.
c. in the long run, but not as the economy moves toward the long run.
d. neither as the economy moves toward the long run, nor in the long run.