When opening a print shop you need to buy printers, computers, furniture, and similar
items. Economists call these expenditures
a. capital investment.
b. investment in human capital.
c. business consumption expenditures.
d. personal saving.
The sale of stocks
a. and bonds to raise money is called debt finance.
b. and bonds to raise money is called equity finance.
c. to raise money is called debt finance, while the sale of bonds to raise funds is called
equity finance.
d. to raise money is called equity finance, while the sale of bonds to raise funds is called
debt finance.
If a country has Y > C + I + G, then it has
a. positive net capital outflow and positive net exports.
b. positive net capital outflow and negative net exports.
c. negative net capital outflow and positive net exports.
d. negative net capital outflow and negative net exports.
Since the 1940’s U.S. union membership has
a. fallen. This decline should have reduced structural unemployment.
b. fallen. This decline should not have reduced structural unemployment.
c. risen. This increase should have raised structural unemployment.
d. risen. This increase should not have raised structural unemployment.
Suppose over the last year that the price of copper increased from ore increased from
$1.70 a pound to $1.79 per pound. Over the same time a measure of the overall price
level increased from 300 to 309. The price of copper increased by
a. less than inflation, and this means it became relatively less scarce.
b. less than inflation, and this means it became scarcer.
c. more than inflation, and this means it became scarcer.
d. more than inflation, but this doesn”t necessarily mean that it become scarcer.
In the long run, technological progress
a. and increases in the money supply both make the price level rise.
b. and increases in the money supply both make the price level fall.
c. makes the price level rise, while increases in the money supply make prices fall.
d. makes the price level fall, while increases in the money supply make prices rise.
Purchasing-power parity theory does not hold at all times because
a. many goods are not easily transported.
b. the same goods produced in different countries may be imperfect substitutes for each
other.
c. Both a and b are correct.
d. prices are different across countries.
In response to the deep economic downturn in the US in 2008 and 2009, the US
a. reduced taxes.
b. increased government spending.
c. increased the supply of money.
d. All of the above are correct.
During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation
was 1 percent, but people had been expecting 1.5 percent . This difference between
actual and expected inflation
a. transferred wealth from the borrower to you and caused your after-tax real interest
rate to be 0.5 percentage points higher than what you had expected.
b. transferred wealth from the borrower to you and caused your after-tax real interest
rate to be more than 0.5 percentage points higher than what you had expected.
c. transferred wealth from you to the borrower and caused your after-tax real interest
rate to be 0.5 percentage points lower than what you had expected.
d. transferred wealth from you to the borrower and caused your after-tax real interest
rate to be more than 0.5 percentage points lower than what you had expected.
Minimum-wage laws can keep wages
a. above equilibrium and cause a surplus of labor.
b. above equilibrium and cause a shortage of labor.
c. below equilibrium and cause a surplus of labor.
d. below equilibrium and cause a shortage of labor.
In a closed economy, public saving is the amount of
a. income that households have left after paying for taxes and consumption.
b. income that businesses have left after paying for the factors of production.
c. tax revenue that the government has left after paying for its spending.
d. spending that the government undertakes in excess of the taxes it collects.
The primary economic function of the financial system is to
a. keep interest rates low.
b. provide expert advice to savers and investors.
c. match one person’s consumption expenditures with another person’s capital
expenditures.
d. match one person’s saving with another person’s investment.
Economics deals primarily with the concept of
a. scarcity.
b. money.
c. poverty.
d. banking.
If net exports are positive, then
a. net capital outflow is positive, so foreign assets bought by Americans are greater than
American assets bought by foreigners.
b. net capital outflow is positive, so American assets bought by foreigners are greater
than foreign assets bought by Americans.
c. net capital outflow is negative, so foreign assets bought by Americans are greater
than American assets bought by foreigners.
d. net capital outflow is negative, so American assets bought by foreigners are greater
than foreign assets bought by Americans.
Suppose that in a particular market, the supply curve is highly elastic and the demand
curve is highly inelastic. If a tax is imposed in this market, then the
a. buyers will bear a greater burden of the tax than the sellers.
b. sellers will bear a greater burden of the tax than the buyers.
c. buyers and sellers are likely to share the burden of the tax equally.
d. buyers and sellers will not share the burden equally, but it is impossible to determine
who will bear the greater burden of the tax without more information.
Other things being constant, when a firm sells new shares of stock, the
a. supply of the stock increases and the price decreases.
b. supply of the stock decreases and the price increases.
c. demand for the stock increases and the price increases.
d. demand for the stock decreases and the price decreases.
Figure 9-5
Refer to Figure 9-5. If this country allows free trade in wagons,
a. consumers will gain and producers will lose.
b. consumers will lose and producers will gain.
c. both consumers and producers will gain.
d. both consumers and producers will lose.
Which of the following restrictions implies that saving and investment are equal for a
closed economy?
a. Private saving is equal to zero.
b. Public saving is equal to zero.
c. The economy’s government is running neither a surplus nor a deficit.
d. No restriction is necessary; saving and investment are equal for all closed economies.
When there is a reserve requirement, banks
a. must hold exactly the required quantity of reserves.
b. may hold more than, but not less than, the required quantity of reserves.
c. may hold less than, but not more than, the required quantity of reserves.
d. must seek the Fed’s permission whenever they wish to expand or contract their loans
to customers.
Monetary Policy in Highland
Highland has had inflation of 15% for many years. Highland establishes a new central
bank, the Bank of Highland, with the hopes of reducing the inflation rate.
Refer to Monetary Policy in Highland. The Bank of Highland publicizes that it
intends to reduce the inflation rate to 5%. If it actually reduces inflation to 3% and
people were expecting inflation to fall only to 8%, then
a. unemployment falls but it would have fallen by more if the Bank of highland had
reduced inflation to 5% rather than 3%.
b. unemployment falls but it would have fallen by less if the Bank of highland had
reduced inflation to 5% rather than 3%.
c. unemployment rises but it would have risen by more if the Bank of highland had
reduced inflation to 5% rather than 3%.
d. unemployment rises but it would have risen by less if the Bank of highland had
reduced inflation to 5% rather than 3%.
One bag of oranges is sold for $6.00 to a company that turns them into juice which is
sold to consumers for $12.00. Another bag of oranges is purchased by a grocery store
for $6.00 who then sells it to a consumer for $7. Taking these four transactions into
account, how much is added to GDP?
a. $31
b. $25
c. $19
d. None of the above is correct.
Money
a. is more efficient than barter.
b. makes trades easier.
c. allows greater specialization.
d. All of the above are correct.
A leftward shift of a demand curve is called a(n)
a. increase in demand.
b. decrease in demand.
c. decrease in quantity demanded.
d. increase in quantity demanded.
Aggregate demand includes
a. both the quantity of goods and services the government and customers abroad want to
buy.
b. neither the quantity of goods and services the government wants to buy nor the
quantity of goods and services customers abroad want to buy.
c. the quantity of goods and service the government wants to buy, but not the quantity
of goods and services customers abroad want to buy.
d. the quantity of goods and services customers abroad want to buy, but not the quantity
of goods and services the government wants to buy.
When OPEC raised the price of crude oil in the 1970s, it caused the United States’
a. nonbinding price floor on gasoline to become binding.
b. binding price floor on gasoline to become nonbinding.
c. nonbinding price ceiling on gasoline to become binding.
d. binding price ceiling on gasoline to become nonbinding.
Figure 2-5
Refer to Figure 2-5. The opportunity cost of this economy moving from point D to
point B is
a. zero.
b. 50 soccer balls.
c. 60 sweaters.
d. 50 soccer balls and 60 sweaters.
In the open-economy macroeconomic model, if the supply of loanable funds shifts left
a. the interest rate rises and the supply of dollars in the market for foreign currency
exchange shifts right.
b. the interest rate rises and the supply of dollars in the market for foreign currency
exchange shifts left.
c. the interest rate falls and the demand for dollars in the market for foreign currency
exchange shifts right.
d. the interest rate falls and the demand for dollars in the market for foreign currency
exchange shifts left.
To decrease the money supply, the Fed could
a. sell government bonds.
b. increase the discount rate.
c. increase the reserve requirement.
d. All of the above are correct.
The average cost per seat on the 75-passenger Get-There-Safe Bus company’s trip from
Milwaukee to Minneapolis, on which no refreshments are served, is $37. In advance of
a particular trip, three seats remain unsold. The bus company could increase its profit
only if it
a. charged any ticket price above $0 for the three remaining seats.
b. charged at least $18.50 for each of the three remaining seats.
c. charged at least $37 for each of the three remaining seats.
d. paid three people to occupy the three remaining seats.
If you put $400 into a bank account today and it promises to pay 5% interest for 6
years, how much is in the account at the end of the six years?
a.
b.
c.
d.
The price of imported oil rises. If the government wanted to stabilize output, which of
the following could it do?
a. increase government expenditures or increase the money supply
b. increase government expenditures or decrease the money supply
c. decrease government expenditures or increase the money supply
d. decrease government expenditures or decrease the money supply
If the government wants to reduce the burning of fossil fuels, it should impose a tax on
a. buyers of gasoline.
b. sellers of gasoline.
c. either buyers or sellers of gasoline.
d. whichever side of the market is less elastic.
If Kenya experienced capital flight, the supply of Kenyan schillings in the market for
foreign-currency exchange would shift
a. left, which would make the real exchange rate of the Kenyan schilling appreciate.
b. left, which would make the real exchange rate of the Kenyan schilling depreciate.
c. right, which would make the real exchange rate of the Kenyan schilling appreciate.
d. right, which would make the real exchange rate of the Kenyan schilling depreciate.