In the economy of Talikastan in 2015, consumption was $600, exports were $300, GDP
was $1300, government purchases were $250, and investment was $300. What were
Talikastan’s imports in 2015?
a. -$150
b. -$200
c. $200
d. $150
The six debates over macroeconomic policy exist mostly because
a. economists disagree over basic issues such as the importance of saving for economic
growth.
b. there are tradeoffs and people disagree about the best way to deal with them.
c. politicians offer misleading information.
d. people fail to clearly see the benefits or the costs of most changes.
Recent changes in methods used to compute the CPI have made the
a. upward bias in the CPI inflation rate more severe than it used to be.
b. upward bias in the CPI inflation rate less severe than it used to be.
c. downward bias in the CPI inflation rate more severe than it used to be.
d. downward bias in the CPI inflation rate less severe than it used to be.
A Guatemalan company exchanges quetzal (Guatemalan currency) for dollars and then
uses the dollars to purchase construction equipment from a U.S. company. These
transactions
a. increase Guatemalan net capital outflow, and increases U.S. net exports.
b. increase Guatemalan capital outflow, and decreases U.S. net exports.
c. decrease Guatemalan net capital outflow, and increases U.S. net exports.
d. decrease Guatemalan net capital outflow, and decreases U.S. net exports.
If in the past Congress had taken additional actions to make saving more rewarding,
then today it is likely that the equilibrium interest rate
a. and the equilibrium quantity of loanable funds both would be lower.
b. and the equilibrium quantity of loanable funds both would be higher.
c. would be higher and the equilibrium quantity of loanable funds would be lower.
d. would be lower and the equilibrium quantity of loanable funds would be higher.
If there is an adverse supply shock and the Federal Reserve responds by increasing the
growth rate of the money
supply, then in the short run the Federal Reserve’s action
a. lowers both inflation and unemployment.
b. lowers inflation but raises unemployment.
c. raises inflation but lowers unemployment.
d. raises both inflation and unemployment.
If a central bank reduces inflation 2 percentage points and this makes output fall 3
percentage points and unemployment rise 5 percentage points for one year, the sacrifice
ratio is
a. 5/2.
b. 3/2.
c. 2/3.
d. 2/5.
Historically, the market prices of most natural resources (adjusted for inflation) have
a. increased.
b. remained stable.
c. remained stable or decreased.
d. decreased.
Marta lends money at a fixed interest rate and then inflation turns out to be higher than
she had expected it to be. The real interest rate she earns is
a. higher than she had expected, and the real value of the loan is higher than she had
expected.
b. higher than she had expected, and the real value of the loan is lower than she had
expected.
c. lower than she had expected, and the real value of the loan is higher than she had
expected.
d. lower then she had expected, and the real value of the loan is lower than she had
expected.
While the scientific method is applicable to studying natural sciences, it is not
applicable to studying a nation’s economy.
a. True
b. False
Accumulating capital
a. requires that society sacrifice consumption goods in the present.
b. allows society to consume more in the present.
c. decreases saving rates.
d. involves no tradeoffs.
Permanent tax cuts have a larger impact on consumption spending than temporary ones.
a. True
b. False
Other things the same, a lower real interest rate decreases the quantity of
a. loanable funds demanded.
b. loanable funds supplied.
c. domestic investment.
d. net capital outflow.
A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out
all it can given the reserve requirement.
a. It has $80 in reserves and $9,920 in loans.
b. It has $800 in reserves and $9,200 in loans.
c. It has $1,250 in reserves and $8,750 in loans.
d. None of the above is correct.
Suppose the price index was 105 in 2017, 126 in 2018, and the inflation rate was lower
between 2018 and 2019 than it was between 2017 and 2018. This means that
a. the price index in 2019 was lower than 126.0.
b. the price index in 2019 was lower than 147.0.
c. the price index in 2019 was lower than 151.2.
d. the inflation rate between 2018 and 2019 was lower than 1.2 percent.
Figure 3-16
RefertoFigure3-16.Hosne’s opportunity cost of one wallet is
a. 4/5 purse and Merve’s opportunity cost of one wallet is 2/3 purse.
b. 4/5 purse and Merve’s opportunity cost of one wallet is 3/2 purses.
c. 5/4 purses and Merve’s opportunity cost of one wallet is 2/3 purse.
d. 5/4 purses and Merve’s opportunity cost of one wallet is 3/2 purses.
Shifts in aggregate demand affect the price level in
a. the short run but not in the long run.
b. the long run but not in the short run.
c. both the short and long run.
d. neither the short nor long run.
A permanent reduction in inflation would
a. permanently reduce menu costs and permanently lower unemployment.
b. permanently reduce menu costs and temporarily raise unemployment.
c. temporarily reduce menu costs and temporarily lower unemployment.
d. temporarily reduce menu costs and temporarily raise unemployment.
Vince says that the present value of $500 to be received one year from today if the
interest rate is 8 percent is more than the present value of $500 to be received two years
from today if the interest rate is 4 percent. Terri says that $500 saved for two years at an
interest rate of 3 percent has a larger future value than $500 saved for one years at an
interest rate of 6 percent.
a. Both Vince and Terri are correct.
b. Only Vince is correct.
c. Only Terri is correct.
d. Neither Vince nor Terri is correct.
The money supply decreases if the Fed
a. sells Treasury bonds. The larger the reserve requirement, the larger the decrease will
be.
b. sells Treasury bonds. The smaller the reserve requirement, the larger the decrease
will be.
c. buys Treasury bonds. The larger the reserve requirement, the larger the decrease will
be.
d. buys Treasury bonds. The smaller the reserve requirement, the larger the decrease
will be.
In the late 1960s, Milton Friedman and Edmund Phelps argued that
a. the trade-off between inflation and unemployment did not apply in the long run This
claim is consistent with monetary neutrality in the long run.
b. the trade-off between inflation and unemployment did not apply in the long run. This
claim is inconsistent with monetary neutrality in the long run.
c. the trade-off between inflation and unemployment applied in both the short run and
the long run. This claim is consistent with monetary neutrality in the long run.
d. the trade-off between inflation and unemployment applied in both the short run and
the long run. This claim is inconsistent with monetary neutrality in the long run.
According to the efficient market hypothesis, which of the following statements is
notcorrect?
a. Stock market prices tend to rise today if they rose yesterday.
b. As judged by the typical person in the market, all stocks are fairly valued all the time.
c. At the market price, the number of shares being offered for sale matches the number
of shares people want to buy.
d. All of the above statements are incorrect.
One study found that unemployment is the economic term mentioned most often in U.S.
newspapers.
a. True
b. False
Table 28-8
Below is data about the labor market in the state of Northwoods.
RefetoTable28-8.If the state government imposed a minimum wage of $8, how many
people would be unemployed?
a. 0
b. 10,000
c. 20,000
d. 40,000
When the government budget deficit rises, national saving is reduced, interest rates rise,
and investment falls.
a. True
b. False
Figure 3-21
RefertoFigure3-21.Azerbaijan has an absolute advantage in the production of
a. bolts and a comparative advantage in the production of bolts.
b. bolts and a comparative advantage in the production of nails.
c. nails and a comparative advantage in the production of bolts.
d. nails and a comparative advantage in the production of nails.
If people decide to hold less money, then
a. money demand decreases, there is an excess supply of money, and interest rates rise.
b. money demand decreases, there is an excess supply of money, and interest rates fall.
c. money demand increases, there is an excess demand for money, and interest rates fall.
d. money demand increases, there is an excess demand for money, and interest rates
rise.
In the simple circular-flow diagram, the participants in the economy are
a. firms and government.
b. households and firms.
c. households and government.
d. households, firms, and government.
Table 3-2
Assume that England and Holland can switch between producing milk and oats at a
constant rate.
Refer to Table3-2. We could use the information in the table to draw a production
possibilities frontier for England and a second production possibilities frontier for
Holland. If we were to do this, measuring milk along the horizontal axis, then
a. the slope of England’s production possibilities frontier would be 10/4 and the slope of
Holland’s production possibilities frontier would be -4/3.
b. the slope of England’s production possibilities frontier would be 4/10 and the slope of
Holland’s production possibilities frontier would be -3/4.
c. the slope of England’s production possibilities frontier would be 10/4 and the slope of
Holland’s production possibilities frontier would be 4/3.
d. the slope of England’s production possibilities frontier would be 4/10 and the slope of
Holland’s production possibilities frontier would be 3/4.
Wealth is redistributed from debtors to creditors when inflation is
a. high, whether it is expected or not.
b. low, whether it is expected or not.
c. unexpectedly high.
d. unexpectedly low.
Figure 34-1
RefertoFigure34-1. Which of the following is correct?
a. If the interest rate is 4 percent, there is excess money demand, and the interest rate
will fall.
b. If the interest rate is 3 percent, there is excess money supply, and the interest rate will
rise.
c. Starting with an interest rate of 4 percent, the demand for goods and services will
increase until the money market reaches a new equilibrium.
d. None of the above is correct.
Prices direct economic activity in a market economy by
a. influencing the actions of buyers and sellers.
b. reducing scarcity of the goods and services produced.
c. eliminating the need for government intervention.
d. allocating goods and services in the most equitable way.
Economists
a. agree that the costs of reducing inflation to zero are worth the benefits. The increase
in unemployment from reducing inflation will be smaller if inflation expectations
remain high.
b. agree that the costs of reducing inflation to zero are worth the benefits. The increase
in unemployment from reducing inflation will be larger if inflation expectations remain
high.
c. disagree about whether the costs of reducing inflation to zero are worth the benefits.
The increase in unemployment from reducing inflation will be smaller if inflation
expectations remain high.
d. disagree about whether the costs of reducing inflation to zero are worth the benefits.
The increase in unemployment from reducing inflation will be larger if inflation
expectations remain high.
According to the theory of liquidity preference, if the interest rate rises
a. people want to hold more money. This response is shown by moving to the right
along the money demand curve.
b. people want to hold more money. This response is shown by shifting the money
demand curve right.
c. people want to hold less money. This response is shown by moving to the left along
the money demand curve.
d. people want to hold less money. This response is shown by shifting the money
demand curve left.